ANCHOR SAVINGS BANK (FORMERLY ANCHOR FINANCE

AND INVESTMENT CORPORATION),Petitioner, v. HENRY H.

FURIGAY, GELINDA C. FURIGAY, HERRIETTE C. FURIGAY
and HEGEM C. FURIGAY, Respondents.

WHEREFORE, judgment is hereby rendered in favor of plaintiff

Anchor Savings Bank ordering defendants Ciudad Transport
Services, Inc., Henry H. Furigay and Genilda C. Furigay to pay
the following:chanroblesvirtualawlibrary

DECISION

1) The amount of Eight Million Six Hundred Ninety Five Thousand

Two
Hundred
Two
pesos
and
Fifty
Nine
centavos
(Php8,695,202.59) as PRINCIPAL OBLIGATION as of 12 April
1999;cralawlibrary

MENDOZA, J.:
This concerns a petition for review_ on certiorari filed by
petitioner Anchor Savings Bank (ASB) under Rule 45 of the 1997
Rules of Civil Procedure, assailing the May 28, 2009
Decision1 and the January 22, 2010 Resolution 2 of the Court of
Appeals (CA), in CA-G.R. CV No. 90123, dismissing the
appeal.3chanroblesvirtualawlibrary
The assailed resolution denied
reconsideration of both parties.

the

separate

motions

for

The Facts
On April 21, 1999, ASB filed a verified complaint for sum of
money and damages with application for replevin against Ciudad
Transport Services, Inc. (CTS), its president, respondent Henry
H. Furigay; his wife, respondent Gelinda C. Furigay; and a "John
Doe." The case was docketed as Civil Case No. 99-865 and
raffled to Branch 143 of the Regional Trial Court of Makati City
(RTC).4chanroblesvirtualawlibrary
On November 7, 2003, the RTC rendered its Decision 5 in favor of
ASB,
the
dispositive
portion
of
which
reads:chanroblesvirtualawlibrary

2) An INTEREST of Twelve per cent (12%) per annum until fully

paid;cralawlibrary
3) PENALTY CHARGE of Twelve per cent (12%) per annum until
fully paid;cralawlibrary
4) LIQUIDATED DAMAGES of Ten (10%) per cent of the total
amount due;cralawlibrary
5) One Hundred Thousand pesos as reasonable ATTORNEY'S
FEES;cralawlibrary
6) Costs of suit.
SO ORDERED.6chanroblesvirtualawlibrary
While Civil Case No. 99-865 was pending, respondent spouses
donated their registered properties in Alaminos, Pangasinan, to
their minor children, respondents Hegem G. Furigay and
Herriette C. Furigay. As a result, Transfer Certificate of Title
(TCT) Nos. 21743,7 21742,8 21741,9 and 2174010were issued in
the names of Hegem and Herriette Furigay.

Claiming that the donation of these properties was made in fraud

of creditors, ASB filed a Complaint for Rescission of Deed of
Donation, Title and Damages11 against the respondent spouses
and their children. The case was docketed as Civil Case No. A3040 and raffled to Branch 55 of the RTC of Alaminos,
Pangasinan. In its Complaint, ASB made the following
allegations:chanroblesvirtualawlibrary
xxx
4. That Ciudad Transport Services, Inc., Henry H. Furigay and
Gelinda C. Furigay obtained a loan from Anchor Savings Bank
and subsequently the former defaulted from their loan obligation
which prompted Anchor Savings Bank to file the case entitled
"Anchor Savings Bank vs. Ciudad Transport Services, Inc., Henry
H. Furigay and Gelinda C. Furigay" lodged before Makati City
Regional Trial Court Branch 143 and docketed as Civil Case No.
99-865. On 7 November 2003 the Honorable Court in the
aforesaid case issued a Decision the dispositive portion of which
reads as follows:chanroblesvirtualawlibrary
xxx
5. That defendants Sps. Henry H. Furigay and Gelinda C. Furigay
are the registered owners of various real properties located at
the Province of Pangasinan covered by Transfer Certificate of Title
Nos. 19721, 21678, 21679, and 21682. x x x
6. That on 8 March 2001 defendants Sps. Henry H. Furigay and
Gelinda C. Furigay executed a Deed of Donation in favor of their
children herein defendants Hegem C. Furigay and Herriette C.
Furigay donating to them all of the above-mentioned properties.

Hence, the following titles were issued under their names to wit:
Transfer Certificate of Title Nos. 21743, 21742, 21741, and
21740. x x x
7. That the donation made by defendants Sps. Henry H. Furigay
and Gelinda C. Furigay were done with the intention to defraud
its creditors particularly Anchor Savings Bank. Said transfer or
conveyance is the one contemplated by Article 1387 of the New
Civil Code, which reads:chanroblesvirtualawlibrary
xxx
8. x x x In the instant case, Sps. Furigay donated the properties
at the time there was a pending case against them. x x x. In the
instant case, the Sps. Furigay donated the properties to their son
and daughter. Moreover, the transfer or donation was executed in
2001 when both donees Hegem C. Furigay and Herriette C.
Furigay are minors.
9. Clearly, the Donation made by defendants Sps. Furigay was
intended to deprive plaintiff Anchor Savings Bank from going
after the subject properties to answer for their due and
demandable obligation with the Bank. The donation being
undertaken in fraud of creditors then the same may be rescinded
pursuant to Article 1381 of the New Civil Code. The said
provision provides that: x x x
Consequently, Transfer Certificate of Title Nos. 21743, 21742,
21741, and 21740 issued under the names of defendants
Herriette C. Furigay and Hegem C. Furigay should likewise be
cancelled and reverted to the names of co-defendants Henry and
Gelinda Furigay.

10. That because of the fraud perpetrated by defendants,

plaintiff suffered the following damages.
11. Plaintiff suffered actual and compensatory damages as a
result of the filing of the case the bank has spent a lot of manhours of its employees and officers re-evaluating the account of
defendant Sps. Furigay. Such man-hour when converted into
monetary consideration represents the salaries and per diems of
its employees particularly the CI/Appraiser, Head Office Lawyer
and Bank Auditor;cralawlibrary
12. Said claim likewise represents administrative expenses such
as transportation expenses, reproduction of documents, and
courier expenses among others;cralawlibrary
13. Defendants should be made to pay plaintiff Anchor Savings
Bank the amount of PESOS: ONE MILLION (P1,000,000.00) as
moral damages for the damage it caused to the latter's business
goodwill and reputation;cralawlibrary
14. By way of example for the public and to deter others from
the malicious filing of baseless (sic) suit, defendants should be
ordered to pay [plaintiff] the amount of PESOS: TWO HUNDRED
THOUSAND (P200,000.00) as exemplary damages.
15. Attorneys fees equivalent to twenty-five percent (25%) of
the
total
amount
that
can
be
collected
from
defendant;cralawlibrary
16. Defendants should also be held liable to pay for the cost of
suit.12chanroblesvirtualawlibrary

Instead of filing an answer, respondents sought the dismissal of

the complaint, principally arguing that the RTC failed to acquire
jurisdiction over their persons as well as over the subject matter
in view of the failure of the ASB to serve the summons properly
and to pay the necessary legal fees.
RTC Resolutions
On September 29, 2006, the RTC issued an Order 13 denying the
motion to dismiss. Respondents sought reconsideration of the
Order adding that the ASB's action for rescission had already
prescribed.
Upon filing of ASB's opposition to the motion for reconsideration,
on February 27, 2007, the RTC reconsidered its earlier
pronouncement and dismissed the complaint for failure of ASB to
pay
the
correct
docket
fees
and
for
prescription.14chanroblesvirtualawlibrary
RTC explained that the service of summons by publication made
by ASB was valid because respondents' whereabouts could not
have been ascertained with exactitude and because Section 14,
Rule 14 of the Rules of Court did not distinguish what kind of
action it would apply.
On the issue of lack of jurisdiction over the subject matter of the
case, the RTC ruled that the complaint was actually a real action
as it affected title to or possession of real property. Accordingly,
the basis for determining the correct docket fees was the fair
market value of the real property under litigation as stated in its
current tax declaration or its current zonal valuation, whichever
was higher. Considering that ASB did not state the current tax

declaration or current zonal valuation of the real properties

involved, as well as the amount of actual damages and attorney's
fees it prayed for, the trial court was of the view that ASB
purposely evaded the payment of the correct filing fees.
On the issue of prescription, the RTC ruled that the action for
rescission had already prescribed. It stated that an action for
rescission grounded on fraud should be filed within four (4) years
from the discovery of fraud. ASB filed the action for rescission
only on October 14, 2005 or after four (4) years from the time
the Deed of Donation was registered in the Register of Deeds of
Alaminos, Pangasinan, on April 4, 2001. The four-year
prescriptive period should be reckoned from the date of
registration of the deed of donation and not from the date of the
actual discovery of the registration of the deeds of donation
because registration is considered notice to the whole world.
Thus, the RTC disposed:chanroblesvirtualawlibrary
WHEREFORE, premises considered, the Order dated September
29, 2006 is hereby reconsidered and set aside, in lieu thereof,
the instant complaint is hereby ordered dismissed on the account
of lack of jurisdiction over the subject matter of the case for
failure of the plaintiff to pay the correct docket fees upon its
institution attended by bad faith and on the ground of
prescription.

On appeal, the CA agreed with ASB that its complaint should not
have been dismissed on the ground that it failed to pay the
correct docket fees. It stated that the lack of specific amount of
actual damages and attorney's fees in ASB's complaint did not,
by itself, amount to evident bad faith. The CA noted that ASB
had previously manifested before the trial court that it was
willing to pay additional docket fees should the same be found
insufficient.
On the issue of prescription, however, the CA saw things
differently. Considering the subsidiary nature of an action for
rescission, the CA found that the action of ASB had not yet
prescribed, but was premature. The CA noted that ASB failed to
allege in its complaint that it had resorted to all legal remedies to
obtain
satisfaction
of
its
claim.
The
CA
wrote:chanroblesvirtualawlibrary
After a thorough examination of the foregoing precepts and the
facts engirding this case, this court opines that plaintiffappellant's action for rescission has not yet prescribed for it must
be emphasized that it has not even accrued in the first place. To
stress, an action for rescission or accion pauliana accrues only if
all five requisites are present, to wit:chanroblesvirtualawlibrary
1) That the plaintiff asking for rescission, has a credit prior to the
alienation, although demandable later;cralawlibrary

SO ORDERED.15chanroblesvirtualawlibrary
ASB
sought
reconsideration,
avail.16chanroblesvirtualawlibrary
Ruling of the CA

but

to

no

2) That the debtor has made a subsequent contract conveying a

patrimonial benefit to a third person;cralawlibrary

3) That the creditor has no other legal remedy to satisfy his

claim, but would benefit by rescission of the conveyance to the
third person;cralawlibrary
4) That the act being impugned is fraudulent; and
5) That the third person who received the property conveyed, if
by onerous title, has been an accomplice in the fraud.
In the instant case, the plaintiff-appellant failed to satisfy the
third requirement considering that it did not allege in its
complaint that it has resorted to all legal remedies to obtain
satisfaction of his claim. It did not even point out in its complaint
if the decision in Civil Case No. 99-865 has already become final
and executory and whether the execution thereof yielded
negative result in satisfying its claims. Even the skip tracing
allegedly done by the plaintiff-appellant to locate the properties
of the defendant-appellees was not mentioned. And although the
skip tracing reports were subsequently presented by the plaintiffappellant, such reports are not sufficient to satisfy the third
requirement. First, they are not prepared and executed by the
sheriff, and second, they do not demonstrate that the sheriff
failed to enforce and satisfy the judgment of the court and that
the plaintiff-appellant has exhausted the property of the
defendant-appellees. Perforce, the action for rescission filed by
the plaintiff-appellant is dismissible.17chanroblesvirtualawlibrary
As stated at the outset, both parties sought reconsideration but
were rebuffed.
Issue

Hence, this recourse of ASB to the Court, presenting the lone

issue of:chanroblesvirtualawlibrary
WHETHER OR NOT THE COURT OF APPEALS, IN CA G.R. CV NO
90123, HAS DECIDED A QUESTION OF SUBSTANCE, NOT
HERETOFORE DETERMINED BY THE SUPREME COURT, OR HAS
DECIDED IT IN A WAY PROBABLY NOT IN ACCORDANCE WITH
LAW OR THE APPLICABLE DECISIONS OF THE SUPREME COURT,
WHEN IT RENDERED THE DECISION DATED 28 MAY 2009, AND
RESOLUTION DATED 22 JANUARY 2010, IN FINDING THAT
PETITIONER FAILED TO PROVE THAT IT HAS RESORTED TO ALL
LEGAL REMEDIES TO OBTAIN SATISFACTION OF ITS CLAIM,
WITHOUT GIVING PETITIONER THE OPPORTUNITY TO BE HEARD
OR THE CHANCE TO PRESENT EVIDENCE TO SUPPORT ITS
ACTION, THEREBY DEPRIVING THE LATTER OF THE RIGHT TO
DUE PROCESS.18chanroblesvirtualawlibrary
ASB argues that, considering that its action was still in its
preliminary stages, the CA erred in dismissing its action on the
ground that it failed to allege in its complaint the fact that it had
resorted to all other legal remedies to satisfy its claim, because it
is a matter that need not be alleged in its complaint, but, rather,
to be proved during trial. It asserts that its action is not yet
barred by prescription, insisting that the reckoning point of the
four
(4)-year prescriptive period should be counted from September
2005, when it discovered the fraudulent donation made by
respondent spouses.

The basic issue in this case is whether the CA was correct in

dismissing ASB's complaint on the ground that the action against
respondents was premature.

complied with before commencing the action, unless the conduct

of the adverse party has been such as to prevent or waive
performance or excuse non-performance of the condition."

Ruling of the Court

Moreover, it is not enough that a party has, in effect, a cause of

action.

The Court finds the petition bereft of merit.

Section 1 of Rule 2 of the Revised Rules of Court requires that
every ordinary civil action must be based on a cause of action.
Section 2 of the same rule defines a cause of action as an act or
omission by which a party violates the right of another. In order
that one may claim to have a cause of action, the following
elements must concur: (1) a right in favor of the plaintiff by
whatever means and under whatever law it arises or is created;
(2) an obligation on the part of the named defendant to respect
or not to violate such right; and (3) an act or omission on the
part of such defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the
plaintiff for which the latter may maintain an action for recovery
of damages or other appropriate relief.19 In other words, "a cause
of action arises when that should have been done is not done, or
that
which
should
not
have
been
done
is
done."20chanroblesvirtualawlibrary
In Philippine American General Insurance Co., Inc. v. Sweet
Lines, Inc.,21 it was held that "before an action can properly be
commenced, all the essential elements of the cause of action
must be in existence, that is, the cause of action must be
complete. All valid conditions precedent to the institution of the
particular action, whether prescribed by statute, fixed by
agreement of the parties or implied by law must be performed or

The rules of procedure require that the complaint must contain a

concise statement of the ultimate or essential facts constituting
the plaintiff's cause of action. "The test of the sufficiency of the
facts alleged in the complaint is whether or not, admitting the
facts alleged, the court can render a valid judgment upon the
same in accordance with the prayer of plaintiff." 22 The focus is on
the sufficiency, not the veracity, of the material allegations.
Failure to make a sufficient allegation of a cause of action in the
complaint warrants its dismissal.23chanroblesvirtualawlibrary
In relation to an action for rescission, it should be noted that the
remedy of rescission is subsidiary in nature; it cannot be
instituted except when the party suffering damage has no other
legal means to obtain reparation for the same.24 Article 1177 of
the New Civil Code provides:chanroblesvirtualawlibrary
The creditors, after having pursued the property in possession of
the debtor to satisfy their claims, may exercise all the rights and
bring all the actions of the latter for the same purpose, save
those which are inherent in his person; they may also impugn
the actions which the debtor may have done to defraud them.
(Emphasis added)
Consequently, following the subsidiary nature of the remedy of
rescission, a creditor would have a cause of action to bring an

action for rescission, if it is alleged that the following successive

measures have already been taken: (1) exhaust the properties of
the debtor through levying by attachment and execution upon all
the property of the debtor, except such as are exempt by law
from execution; (2) exercise all the rights and actions of the
debtor, save those personal to him (accion subrogatoria); and (3)
seek rescission of the contracts executed by the debtor in fraud
of their rights (accion pauliana).25chanroblesvirtualawlibrary

before the same may be instituted. ASB, without availing of the

first and second remedies, that is, exhausting the properties of
CTS, Henry H. Furigay and Genilda C. Furigay or their
transmissible rights and actions, simply undertook the third
measure and filed an action for annulment of the donation. This
cannot be done. The Court hereby quotes with approval the
thorough
discourse
of
the
CA
on
this
score:27chanroblesvirtualawlibrary

With respect to an accion pauliana, it is required that the

ultimate facts constituting the following requisites must all be
alleged in the complaint, viz.:chanroblesvirtualawlibrary

To answer the issue of prescription, the case of Khe Hong Cheng

vs. Court of Appeals (G.R. NO. 144169, March 28, 2001) is
pertinent. In said case, Philam filed an action for collection
against Khe Hong Cheng. While the case was still pending, or on
December 20, 1989, Khe Hong Cheng, executed deeds of
donations over parcels of land in favor of his children, and on
December 27, 1989, said deeds were registered. Thereafter, new
titles were issued in the names of Khe Hong Cheng's children.
Then, the decision became final and executory. But upon
enforcement of writ of execution, Philam found out that Khe
Hong Cheng no longer had any property in his name. Thus, on
February 25, 1997, Philam filed an action for rescission of the
deeds of donation against Khe Hong Cheng alleging that such
was made in fraud of creditors. However, Khe Hong Cheng
moved for the dismissal of the action averring that it has already
prescribed since the four-year prescriptive period for filing an
action for rescission pursuant to Article 1389 of the Civil Code
commenced to run from the time the deeds of donation were
registered on December 27, 1989. Khe Hong Cheng averred that
registration amounts to constructive notice and since the
complaint was filed only on February 25, 1997, or more than four
(4) years after said registration, the action was already barred by
prescription. The trial court ruled that the complaint had not yet

1) That the plaintiff asking for rescission, has credit prior to the
alienation, although demandable later;cralawlibrary
2) That the debtor has made a subsequent contract conveying a
patrimonial benefit to a third person;cralawlibrary
3) That the creditor has no other legal remedy to satisfy his
claim, but would benefit by rescission of the conveyance to the
third person;cralawlibrary
4) That act being impugned is fraudulent; and
5) That the third person who received the property conveyed, if
by
onerous
title,
has
been
an
accomplice
in
the
fraud.26chanroblesvirtualawlibrary
A cursory reading of the allegations of ASB's complaint would
show that it failed to allege the ultimate facts constituting its
cause of action and the prerequisites that must be complied

prescribed since the prescriptive period began to run only from

December 29, 1993, the date of the decision of the trial court.
Such decision was affirmed by this court but reckoned the
accrual of Philam's cause of action in January 1997, the time
when it first learned that the judgment award could not be
satisfied because the judgment creditor, Khe Hong Cheng, had no
more properties in his name. Hence, the case reached the
Supreme Court which ruled that the action for rescission has not
yet prescribed, ratiocinating as follows:chanroblesvirtualawlibrary
"Essentially, the issue for resolution posed by petitioners is this:
When did the four (4) year prescriptive period as provided for in
Article 1389 of the Civil Code for respondent Philam to file its
action for rescission of the subject deeds of donation commence
to run?
The petition is without merit.
Article 1389 of the Civil Code simply provides that, The action to
claim rescission must be commenced within four years. Since this
provision of law is silent as to when the prescriptive period would
commence, the general rule, i.e, from the moment the cause of
action accrues, therefore, applies. Article 1150 of the Civil Code
is particularly instructive:chanroblesvirtualawlibrary
ARTICLE 1150. The time for prescription for all kinds of actions,
when there is no special provision which ordains otherwise, shall
be counted from the day they may be brought.
Indeed, this Court enunciated the principle that it is the legal
possibility of bringing the action which determines the starting
point for the computation of the prescriptive period for the

action. Article 1383 of the

follows:chanroblesvirtualawlibrary

Civil

Code

provides

as

ARTICLE 1383. An action for rescission is subsidiary; it cannot be

instituted except when the party suffering damage has no other
legal means to obtain reparation for the same.
It is thus apparent that an action to rescind or an accion pauliana
must be of last resort, availed of only after all other legal
remedies have been exhausted and have been proven futile. For
an accion pauliana to accrue, the following requisites must
concur:chanroblesvirtualawlibrary
1) That the plaintiff asking for rescission, has a credit prior to the
alienation, although demandable later; 2) That the debtor has
made a subsequent contract conveying a patrimonial benefit to a
third person; 3) That the creditor has no other legal remedy to
satisfy his claim, but would benefit by rescission of the
conveyance to the third person; 4) That the act being impugned
is fraudulent; 5) That the third person who received the property
conveyed, if by onerous title, has been an accomplice in the
fraud.
We quote with approval the following disquisition of the CA on
the matter:chanroblesvirtualawlibrary
An accion pauliana accrues only when the creditor discovers that
he has no other legal remedy for the satisfaction of his claim
against the debtor other than an accion pauliana. The accion
pauliana is an action of a last resort. For as long as the creditor
still has a remedy at law for the enforcement of his claim against
the debtor, the creditor will not have any cause of action against

the creditor for rescission of the contracts entered into by and

between the debtor and another person or persons. Indeed, an
accion pauliana presupposes a judgment and the issuance by the
trial court of a writ of execution for the satisfaction of the
judgment and the failure of the Sheriff to enforce and satisfy the
judgment of the court. It presupposes that the creditor has
exhausted the property of the debtor. The date of the decision of
the trial court against the debtor is immaterial. What is important
is that the credit of the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all, the decision of
the trial court against the debtor will retroact to the time when
the debtor became indebted to the creditor.
Petitioners, however, maintain that the cause of action of
respondent Philam against them for the rescission of the deeds
of donation accrued as early as December 27, 1989, when
petitioner Khe Hong Cheng registered the subject conveyances
with the Register of Deeds. Respondent Philam allegedly had
constructive knowledge of the execution of said deeds under
Section 52 of Presidential Decree No. 1529, quoted infra, as
follows:chanroblesvirtualawlibrary

this imply that the specific provisions of the former may be all
together ignored. To count the four year prescriptive period to
rescind an allegedly fraudulent contract from the date of
registration of the conveyance with the Register of Deeds, as
alleged by the petitioners, would run counter to Article 1383 of
the Civil Code as well as settled jurisprudence. It would likewise
violate the third requisite to file an action for rescission of an
allegedly fraudulent conveyance of property, i.e., the creditor has
no other legal remedy to satisfy his claim.
An accion pauliana thus presupposes the following: 1) A
judgment; 2) the issuance by the trial court of a writ of
execution for the satisfaction of the judgment, and 3) the failure
of the sheriff to enforce and satisfy the judgment of the court. It
requires that the creditor has exhausted the property of the
debtor. The date of the decision of the trial court is immaterial.
What is important is that the credit of the plaintiff antedates that
of the fraudulent alienation by the debtor of his property. After
all, the decision of the trial court against the debtor will retroact
to the time when the debtor became indebted to the creditor.
xxx

SECTION 52. Constructive knowledge upon registration. Every

conveyance, mortgage, lease, lien, attachment, order, judgment,
instrument or entry affecting registered land shall, if registered,
filed or entered in the Office of the Register of Deeds for the
province or city where the land to which it relates lies, be
constructive notice to all persons from the time of such
registering, filing, or entering.
Petitioners argument that the Civil Code must yield to the
Mortgage and Registration Laws is misplaced, for in no way does

Even if respondent Philam was aware, as of December 27, 1989,

that petitioner Khe Hong Cheng had executed the deeds of
donation in favor of his children, the complaint against Butuan
Shipping Lines and/or petitioner Khe Hong Cheng was still
pending before the trial court. Respondent Philam had no inkling,
at the time, that the trial court's judgment would be in its favor
and further, that such judgment would not be satisfied due to the
deeds of donation executed by petitioner Khe Hong Cheng during
the pendency of the case. Had respondent Philam filed his

complaint on December 27, 1989, such complaint would have

been dismissed for being premature. Not only were all other legal
remedies for the enforcement of respondent Philam's claims not
yet exhausted at the time the deeds of donation were executed
and registered. Respondent Philam would also not have been
able to prove then that petitioner Khe Hong Cheng had no more
property other than those covered by the subject deeds to satisfy
a favorable judgment by the trial court.
xxx
As mentioned earlier, respondent Philam only learned about the
unlawful conveyances made by petitioner Khe Hong Cheng in
January 1997 when its counsel accompanied the sheriff to
Butuan City to attach the properties of petitioner Khe Hong
Cheng. There they found that he no longer had any properties in
his name. It was only then that respondent
Philam's action for rescission of the deeds of donation accrued
because then it could be said that respondent Philam had
exhausted all legal means to satisfy the trial court's judgment in
its favor. Since respondent Philam filed its complaint for accion
pauliana against petitioners on February 25, 1997, barely a
month from its discovery that petitioner Khe Hong Cheng had no
other property to satisfy the judgment award against him, its
action for rescission of the subject deeds clearly had not yet
prescribed."
From the foregoing, it is clear that the four-year prescriptive
period commences to run neither from the date of the
registration of the deed sought to be rescinded nor from the date
the trial court rendered its decision but from the day it has

become clear that there are no other legal remedies by which the
creditor can satisfy his claims. [Emphases in the original]
In all, it is incorrect for ASB to argue that a complaint need not
allege all the elements constituting its cause of action since it
would simply adduce proof of the same during trial. "Nothing is
more settled than the rule that in a motion to dismiss for failure
to state a cause of action, the inquiry is "into the sufficiency, not
the veracity, of the material allegations."28 The inquiry is confined
to
the
four
comers
of
the
complaint,
and
no
29
other. Unfortunately for ASB, the Court finds the allegations of
its complaint insufficient in establishing its cause of action and in
apprising the respondents of the same so that they could defend
themselves intelligently and effectively pursuant to their right to
due process. It is a rule of universal application that courts of
justice are constituted to adjudicate substantive rights. While
courts should consider public policy and necessity in putting an
end to litigations speedily they must nevertheless harmonize
such necessity with the fundamental right of litigants to due
process.
WHEREFORE, the petition is DENIED.
SO ORDERED.

vs.
CHARLES J. ESTEBAN, Respondent.
Republic
SUPREME
Manila

of

the

Philippines
COURT

DECISION
PEREZ, J.:

SECOND DIVISION
For decision are the following petitions for review on certiorari: 1
G.R. No. 141809

April 8, 2013

JOSEFINA F. INGLES, JOSE F. INGLES, JR., HECTOR F. INGLES,

JOSEFINA I. ESTRADA, and TERESITA I. BIRON, Petitioners,
vs.
HON. ESTRELLA T. ESTRADA, in her capacity as former EXECUTIVE
JUDGE, Regional Trial Court of QUEZON CITY, and CHARLES J.
ESTEBAN, Respondents.
x-----------------------x
G.R. No. 147186

1. G.R. No. 141809, which assails the Resolutions 2 dated 28

December 1999 and 28 January 2000 of the Court of Appeals in
CA-G.R. SP. No. 56292; ,
2. G.R. No. 147186, which assails the Resolutions 3 dated 29
November 2000 and 16 February 2001 of the Court of Appeals in
CA-G.R. SP No. 58790; and
3. G.R. No. 173641, which assails the Decision 4 dated 31 March
2006 and Resolution5 dated 19 July 2006 of the Court of Appeals
in CA-G.R. SP No. 84738.
These petitions share the same facts:

JOSEFINA F. INGLES, JOSE F. INGLES, JR., HECTOR F. INGLES,

JOSEFINA I. ESTRADA and TERESITA I. BIRON, Petitioners,
vs.
HON. ARSENIO J. MAGPALE, Judge, Presiding over Branch 225,
Regional Trial Court, QUEZON CITY, and CHARLES J.
ESTEBAN, Respondents.

The Land, Loan and Mortgage

Jose D. Ingles, Sr. (Jose) and his wife, petitioner Josefina F. Ingles
(Josefina), were the registered owners of a 2,265 square meter parcel of
land in Quezon City per Transfer Certificate of Title (TCT) No. 125341 PR17485.6TCT No. 125341 PR-17485 contains the following technical
description of the land of Jose and Josefina:7

x-----------------------x
G.R. No. 173641
JOSEFINA F. INGLES, JOSE F. INGLES, JR., HECTOR INGLES,
JOSEFINA I. ESTRADA and TERESITA I. BIRON, Petitioners,

A parcel of land (lot 13, block W-35 of the subd. plan Psd-7365-D, being a
portion of Lot R.P. 3-D-2-B of Plan BSD-7365-D, G.L.R.O. Rec. No. 7681)
situated in the District of Diliman, Quezon City. Bounded on the NW., along
line 1-2 by lot 14, block W-35; on the NE., along line 2-3-4-5-6, by R-285;
on the SE., along line 6-7-8-9, by R-283; on the SW., along line 9-10 by lot
13, block Q-35; and on the NW., along line 10-1 by lot 15 block W-35; all of

the subd. plan x x x x beginning, containing an area of TWO THOUSAND

TWO HUNDRED SIXTY FIVE (2,265) SQUARE METERS, more or less.

THOUSAND TWO HUNDRED SIXTY FIVE (2,265) SQUARE METERS,

more or less. (Emphasis and underscoring supplied).

On 14 April 1993, Jose and Josefina obtained a loan in the amount

of P6,200,000.00 from respondent Charles J. Esteban (Charles). As
collateral for such loan, Jose and Josefina mortgaged their abovedescribed land in favor of Charles. A Promissory Note 8 and a Deed of Real
Estate Mortgage,9 evidencing both such loan and mortgage, were
accordingly executed between Jose, Josefina and Charles on the same
day.

Moreover, the Deed of Real Estate Mortgage contained the following

stipulation: "upon the failure of the MORTGAGOR/S Jose and Josefina to
pay their loan at maturity date x x x the MORTGAGOR/S Jose and
Josefina may elect or choose to foreclose the mortgage judicially or
extrajudicially x x x."13 The deed provided further that: "in the event of
extrajudicial foreclosure of themortgage x x x the MORTGAGOR/S Jose
and Josefina name, constitute and appoint the MORTGAGEE Charles as
attorney-in-fact without further formality, with full power and authority to
dispose the mortgaged property in accordance with the provision of Act
3135 as amended."14

The Deed of Real Estate Mortgage, the mortgaged land was mistakenly
referred to as being covered by TCT No. 125141 PR- 17485 instead of
TCT No. 125341 PR-17485.10 Nevertheless, the deed identified the
mortgaged land exactly in accordance with the technical description of
TCT No. 125341 PR-17485.11 The pertinent part of the Deed of Real
Estate Mortgage thus read:12
For and in consideration of a loan in the amount of SIX MILLION TWO
HUNDRED THOUSAND PESOS (P6,200,000.00), Philippine Currency, in
hand given by the MORTGAGEE Charles to the MORTGAGOR/S Jose
and Josefina, the receipt, of the said amount is hereby acknowledged and
confessed x x x, the MORTGAGOR/S Jose and Josefina hereby cede,
transfer and convey, BY WAY OF FIRST MORTGAGE, unto and favor of
the MORTGAGEE Charles, his heirs, successors and assigns, a parcel of
land located at ____________, together with the residential house
constructed on the said land, which is more particularly described in
Transfer Certificate of Title No. 125141 PR-17485, Registry of Deeds of
__________ as follows:
A parcel of land (lot 13, block W-35 of the subd. plan Psd-7365-D, being a
portion of Lot R.P. 3-D-2-B of Plan Bsd-7365-D, G.L.R.O. Rec. No. 7681)
situated in District of Diliman, Quezon City. Bounded on the NW., along
line 1-2 by lot 14, block W-35; on the NE., along line 2-3-4-5-6, by R-285;
on the SE., along line 6-7-8-9, by R-283; on the SW., along line 9-10 by lot
13, block W-35; and on the NW., along line 10-1 by lot 15, block W-35; all
of the subd. plan x x x x beginning, containing an area of TWO

On 26 April 1993, Jose and Josefina requested the Register of Deeds of

Quezon City for the division of their land into ten (10) lots. 15 The request
eventually led to the cancellation of TCT No. 125341 PR-17485 and the
issuance of separate Torrens titles for each of the 10 lots, namely, TCT
Nos. 85825-34.16
Upon maturity of their loan on 29 May 1993, Jose and Josefina issued to
Charles a check for P6,200,000.00 as payment. Unfortunately, that check
bounced.17
On 30 October 1993, Jose died. 18 He was survived by Josefina and herein
petitioners Jose F. Ingles, Jr., Hector Ingles, Josefina I. Estrada and
Teresita Biron (collectively, the Ingleses).
On 13 July 1994, Charles sent to Josefina a letter demanding for the
payment of her and her late husbands loan. Charles, in the same letter,
also threatened to foreclose the mortgage in his favor should Josefina fail
to heed the demand for payment within ten (10) days from her receipt of
the letter.19 To these, Josefina responded with her own letter asking
Charles for an extension of time, i.e., until 30 October 1994, within which
to pay for all of her obligations. 20 Despite the extension, however, Josefina
still failed to pay.21

The Extrajudicial Foreclosure

On 12 July 1997, Charles petitioned 22 Executive Judge Estrella T. Estrada
(Executive Judge Estrada) of the Regional Trial Court (RTC) of Quezon
City for the extrajudicial foreclosure of the mortgage in his favor. Invoking
the provisions of Act No. 3135 23 and the Deed of Real Estate Mortgage,
Charles sought for the sale at public auction of the ten (10) lots originally
subsumed in TCT No. 125341 PR-17485 but which are now separately
covered by TCT Nos. 85825-34 in the names of Josefina and her late
husband.
On 8 October 1997, Executive Judge Estrada issued an Order 24 directing
Atty. Mercedes Gatmaytan (Atty. Gatmaytan), the Clerk of Court and ExOfficio Sheriff of the Quezon City RTC, to proceed with the extrajudicial
sale of the ten (10) lots covered by TCT Nos. 85825-34. 25 Against such
Order, the Ingleses filed a motion for reconsideration on 13 October 1997.
On 20 November 2007, however, Executive Judge Estrada issued an
Order26 denying such motion for reconsideration.
On 1 December 1997, Atty. Gatmaytan issued a Notice of Sale 27 setting
the public auction on 6 January 1998.
At the public auction, Charles was declared the highest bidder for all of the
ten (10) lots. On 7 January 1998, Atty. Gatmaytan issued to Charles a
corresponding Certificate of Sale.28
The Legal Challenges of the Ingleses and the Petition for the Issuance of
Writ of Possession of Charles
On 23 January 1998, the Ingleses filed with the Quezon City RTC a
complaint for the Annulment of the Deed of Real Estate Mortgage 29 against
Charles. In this complaint, the Ingleses claim that Jose and Josefina never
actually consented to any mortgage on their land and that their signatures
in the Deed of Real Estate Mortgage were obtained thru Charles
deception.30 The Ingleses allege that Charles had deceived Jose and
Josefina into signing blank documents, one of which eventually becoming
the Deed of Real Estate Mortgage and another becoming the Promissory

Note, on the pretense that such documents were required in a business

venture that they had.31 This complaint was docketed as Civil Case No. Q98-3327732 and was raffled to Branch 225.
On 24 July 1998, Charles registered his Certificate of Sale with the
Register of Deeds of Quezon City.33
On 15 September 1998, Charles filed an Ex-Parte Petition for Issuance of
a Writ of Possession34 before the Quezon City RTC,35 wherein he asked to
immediately be placed in possession of the ten (10) lots foreclosed in his
favor in lieu of their current possessors, the
Ingleses.36 This petition was docketed as LRC Case No. Q-10766 (98) and
was raffled to Branch 92.
On 23 February 1999, Branch 92 of the Quezon City RTC issued an
Order37 directing LRC Case No. Q-10766 (98) to be consolidated with Civil
Case No. Q-98-3327738 under Branch 225. As a consequence of the
consolidation, the records of LRC Case No. Q-10766 (98) were transferred
to Branch 225.
On 17 December 1999, on the other hand, the Ingleses filed before the
Court of Appeals a petition for Annulment of Final Orders 39 pursuant to
Rule 47 of the Rules of Court. In it, the Ingleses sought the nullification of
the Orders dated 8 October 1997, 20 November 1997 and 27 July
199840 of Executive Judge Estrada, which allowed Charles to
extrajudicially foreclose the mortgage on the ten (10) lots as well as to
register the resulting Certificate of Sale. The Ingleses argue that Executive
Judge Estrada was bereft of any jurisdiction to issue the assailed Orders in
light of the provisions in the Deed of Real Estate Mortgage: (a) referring to
the mortgaged property as being covered by TCT No. 125141 PR-17485
rather than TCT No. 125341 PR-17485, and (b) giving to Jose and
Josefina, not to Charles, the right to choose whether the mortgage may be
extrajudicially foreclosed or not.41 In issuing the assailed Orders, therefore,
the Ingleses accuse Executive Judge Estrada of "amending," "altering,"
and "revising" the terms of the Deed of Real Estate Mortgage that could
not be done in a mere extrajudicial proceeding. 42 This petition was
docketed as CA-G.R. SP No. 56292.

CA-G.R. SP No. 56292: Annulment of Final Orders

On 28 December 1999, the Court of Appeals in CA-G.R. SP. No. 56292
issued a Resolution43 dismissing the petition for Annulment of Final Orders
on grounds of non-compliance with Section 4, Rule 47 44 and Section 3,
Rule 4645 of the Rules of Court. The Ingleses filed a motion for
reconsideration.
On 28 January 2000, the Court of Appeals issued a Resolution 46 denying
the motion for reconsideration. In this later Resolution, however, the Court
of Appeals used a different, albeit a more fundamental rationale to
maintain its dismissal of the petition for Annulment of Final Orders.
In the later Resolution, the Court of Appeals dismissed the petition for
Annulment of Final Orders on the ground of lack of jurisdiction. According
to the Court of Appeals, it cannot take original cognizance of the Ingleses
petition as the same does not qualify either as an action under Rule 47 or,
for that matter, as any other case that would fall within its original
jurisdiction under Rule 46 of the Rules of Court. 47 The Court of Appeals
pointed out that the petition for Annulment of Final Orders assails orders
issued by an executive judge in a proceeding merely for the extrajudicial
foreclosure of a mortgage whereas the Rules of Court 48 clearly prescribes
that only judgments, final orders and resolutions issued by a "Regional
Trial Court" in "civil actions" may be the subject of annulment under Rule
47.49 The Court of Appeals further added that, at any rate, the principle of
hierarchy of courts dictates that the Ingleses should have first challenged
the validity of the Orders of Executive Judge Estrada in an appropriate
case before the RTC instead of resorting to a direct action before it. 50
Unconvinced, the Ingleses appealed 51 both Resolutions of the Court of
Appeals before this Court in what would be the first of the three petitions
consolidated herein. This appeal by certiorari is currently G.R. No. 141809.
The Proceedings in Quezon City RTC, Branch 225
Meanwhile, as LRC Case No. Q-10766 (98) had already been
consolidated with Civil Case No. Q-98-33277, Charles filed a Motion for

Issuance of a Writ of Possession52 before Branch 225 of the Quezon City

RTC on 9 September 1999. Branch 225 was then presided by Judge
Arsenio J. Magpale (Judge Magpale).
In his Motion for Issuance of [a] Writ of Possession, Charles reiterated his
plea to be put in possession of the ten (10) lots. 53 But in order to show all
the more his entitlement to a writ of possession, Charles also raised
therein the fact that he now had consolidated title over the ten (10) lots as
a consequence of the failure of the Ingleses to exercise their right of
redemption within the period allowed by law.54
On 19 November 1999, the RTC denied for lack of merit Charles Motion
for Issuance of a Writ of Possession. Four days after, Charles filed a
motion for reconsideration.
On 7 February 2000, the RTC issued a resolution 55 on granting Charles
motion for reconsideration. The dispositive portion of the resolution
allowed Charles to present ex parte evidence in support of his application
for a writ of possession before the Branch Clerk of Court, viz:
IN VIEW OF THE FOREGOING, petitioner Charles J. Estebans Motion for
Reconsideration is GRANTED. For this purpose, the petitioner is hereby
directed to present evidence ex-parte before Atty. Arlene V. Mancao,
Branch Clerk of Court, the appointed commissioner within five (5) days
from receipt of this order and for the said commissioner to submit to the
Court her report as soon as the presentation of ex-parte evidence is
through.56
On 29 February 2000, the Ingleses filed a motion for reconsideration
against the 7 February 2000 resolution of the RTC.
On 1 March 2000, the Branch Clerk of Court received, in an ex-parte
hearing, the testimony of Charles in support of his application for a writ of
possession.57 After which, Charles submitted a Formal Offer of
Evidence58 for his documentary exhibits.
On 10 May 2000, the RTC denied the Ingleses motion for reconsideration.

Aggrieved, the Ingleses filed a certiorari petition 59 before the Court of

Appeals contesting the 7 February 2000 resolution and 10 May 2000 order
of the RTC. In the said petition, the Ingleses argue that the RTC gravely
abused its discretion in allowing Charles to present ex-parte evidence on
his application for a writ of possession despite the consolidation of LRC
Case No. Q-10766 (98) with Civil Case No. Q-98-33277. 60 The Ingleses
posit that the consolidation of LRC Case No. Q-10766 (98) and Civil Case
No. Q-98-33277 effectively tied the resolution of Charles application for a
writ of possession with the resolution of their action for annulment of
mortgage.61 For the Ingleses then, the RTC cannot simply allow Charles to
present ex-parte evidence on his application for a writ possession without
first laying to rest, in a judicial proceeding for that purpose, other related
issues raised in Civil Case No. Q-98-33277.62 This certiorari petition, which
was accompanied by a prayer for a temporary restraining order, was
docketed before the Court of Appeals as CA-G.R. SP No. 58790.
On account of the pendency of CA-G.R. SP No. 58790, the RTC issued
another resolution63 on 10 July 2000 holding in abeyance any action and
resolution on Charles Motion for Issuance of a Writ of Possession.
Subsequently, however, Judge Magpale inhibited himself from further
hearing LRC Case No. Q-10766 (98) and Civil Case No. Q-9833277.64 The two (2) consolidated cases were thus re-raffled and were
eventually assigned to Branch 97 of the Quezon City RTC, which was then
presided by Judge Oscar L. Leviste (Judge Leviste).65
CA-G.R. SP No. 58790: Certiorari Petition
In CA-G.R. SP No. 58790, on the other hand, the Court of Appeals issued
a Resolution66 on 29 November 2000 dismissing outright the certiorari
petition of the Ingleses on the ground of non-compliance with Section 1 of
Rule 6567 in relation to Section 3 of Rule 46 68 of the Rules of Court. The
Court of Appeals condemned the certiorari petition as its verification and
certificate against forum Shopping 69 was signed by only two (2) out of its
five (5) named petitioners. As it turns out, only Josefina and Hector F.
Ingles signed the verification and certificate of non-forum shopping, while
Jose F. Ingles, Jr., Josefina I. Estrada and Teresita Biron did not. 70

On 11 December 2000, the Ingleses filed before the Court of Appeals a

motion for reconsideration. On 16 February 2001, the Court of Appeals
issued a Resolution71 denying the Ingleses motion for reconsideration.
The denial of their motion for reconsideration prompted the Ingleses to
lodge an appeal72 before this Court that, in turn, became the second of
three petitions consolidated herein. This appeal by certiorari is currently
G.R. No. 147186.
The Proceedings in Quezon City RTC, Branch 97 and 98
Back in Branch 97 of the Quezon City RTC, proceedings in LRC Case No.
Q-10766 (98) and Civil Case No. Q-98-33277 continued. On 2 April 2001,
the RTC issued an Order73 requiring Charles to submit a memorandum in
support of his application for a writ of possession. The same order also
required the Ingleses to file a comment on Charles memorandum.
On 12 July 2001, after evaluating Charles memorandum and the Ingleses
comment thereon, the RTC issued an Order 74 granting the Ex Parte
Petition for Issuance of a Writ of Possession. The order directed the
issuance of a writ of possession in favor of Charles. 75
On 19 July 2001, the Ingleses filed a Motion For Reconsideration 76 from
the above order. The Ingleses also submitted a Supplemental Motion For
Reconsideration77 on 23 July 2001.
On 24 July 2001, the RTC issued an Order 78 directing Charles: (1) to
submit an opposition to the Ingleses Motion for Reconsideration and
Supplemental Motion for Reconsideration within ten (10) days from receipt
of the order, and (2) should the Ingleses find it necessary to file a reply in
response to his opposition, to submit a rejoinder within ten (10) days from
his receipt of such reply.79
On 24 July 2001, Charles filed his Opposition 80 to the Ingleses Motion For
Reconsideration and Supplemental Motion For Reconsideration. On 2
August 2001, the Ingleses filed their Reply81 to Charles opposition.

On 26 September 2001, the Ingleses also filed a Motion To

Dismiss82 asking for the dismissal of the Ex-Parte Petition for Issuance of a
Writ of Possession. For his part, Charles filed an Opposition 83 to the
Motion To Dismiss.

CA-G.R. SP No. 84738: Mandamus Petition

Unfortunately, at about that time, Judge Leviste retired without being able
to resolve the Ingleses Motion For Reconsideration, Supplemental Motion
For Reconsideration and Motion To Dismiss. 84 The retirement of Judge
Leviste eventually85 led to a re-raffle of LRC Case No. Q-10766 (98) and
Civil Case No. Q-98-33277 on 16 January 2003 that transferred the two (2)
consolidated cases to Branch 98presided by Judge Evelyn CorpuzCabochan (Judge Corpuz-Cabochan).86

WHEREFORE, above premises all considered, the petition is hereby

GRANTED. Public respondent Judge [Judge Corpuz-Cabochan] is hereby
DIRECTED to resolve with dispatch the

On 23 June 2004, or more than a year after LRC Case No. Q-10766 (98)
and Civil Case No. Q-98-33277 were raffled to Branch 98, Charles filed a
mandamus petition87 before the Court of Appeals. In it, Charles asked the
Court of Appeals to compel Judge Corpuz-Cabochan to rule on the
Ingleses Motion For Reconsideration, Supplemental Motion For
Reconsideration and Motion To Dismiss that have remained unresolved
well beyond the period prescribed for its resolution under Supreme Court
Administrative Circular No. 01-28.88 This petition was docketed before the
Court of Appeals as CA-G.R. SP No. 84738.
During the pendecy of CA-G.R. SP No. 84738, the RTC
2004 Order89 signed by Judge Corpuz-Cabochan)
proceedings in LRC Case No. Q-10766 (98) and Civil
33277. As rationale for the suspension, the RTC cited
G.R. Nos. 141809 and 147186 before this Court, to wit:

(thru an 18 June
suspended the
Case No. Q-98the pendency of

WHEREFORE, premises considered, it is hereby ordered that the

proceedings in these consolidated cases are suspended until after the
Honorable Supreme Court shall have resolved the pending petitions before
it, docketed as G.R. No. (sic) 141809 and 147186.90
As a response to the issuance of the above order, Charles filed a
supplemental petition91 to his mandamus petition.

On 31 March 2006, the Court of Appeals rendered a Decision 92 granting

Charles mandamus petition. The Court of Appeals thus disposed:

pending incidents in LRC Case No. Q-10766 (98), i.e. Motion for
Reconsideration dated July 19, 2001, Supplemental Motion for
Reconsideration dated July 23, 2001 and Motion to Dismiss, dated
September 21, 2001.93
In its Decision, the Court of Appeals found that the Ingleses Motion For
Reconsideration, Supplemental Motion For Reconsideration and Motion To
Dismiss were already due to be resolved pursuant to Section 15, Article
VIII of the 1987 Constitution94 and Supreme Court Administrative Circular
No. 01-28,95 which mandates trial courts to decide or resolve all cases or
matters pending before them within three (3) months from the time they
were submitted for decision or resolution.96
Moreover, the Court of Appeals held that no justifiable reason exists why
the Ingleses Motion For Reconsideration, Supplemental Motion For
Reconsideration and Motion To Dismiss should remain unresolved. 97The
Court of Appeals was not convinced that either the consolidation of LRC
Case No. Q-10766 (98) with Civil Case No. Q-98-33277 or the pendency
of G.R. Nos. 141809 and 147186 may be used as a valid excuse to delay
resolution of the subject motions.98
The Ingleses filed a motion for reconsideration, but the Court Appeals
remained steadfast in its Resolution99dated 19 July 2006.
Feeling slighted, the Ingleses filed an appeal 100 before this Courtthe third
of three petitions consolidated herein. This appeal by certiorari is currently
G.R. No. 173641.

OUR RULING
We deny all three petitions.
G.R. No. 141809
The sole issue presented in G.R. No. 141809 was whether the Court of
Appeals erred in dismissing the Ingleses petition for Annulment of Final
Orders.101
The Ingleses would have us answer in the affirmative; adamant that their
petition for Annulment of Final Orders is an action validly instituted under
Rule 47 of the Rules of Court. 102 They argue that the Court of Appeals
could have still taken cognizance of their petition even though the orders
assailed therein were issued merely by an executive judge in an
extrajudicial foreclosure proceeding. 103 The Ingleses posit that the assailed
Orders dated 8 October 1997, 20 November 1997 and 27 July 1998 of
Executive Judge Estrada may, in view of their peculiar nature, be treated
as final orders issued in a "civil action" by a "Regional Trial Court" itself. 104
On that note, the Ingleses claim that the assailed Orders of Executive
Judge Estrada are not the usual orders issued in proceedings for
extrajudicial foreclosure of mortgages.105 According to the Ingleses,
Executive Judge Estrada had to practically assume and exercise powers
otherwise reserved only to an RTC judge presiding over a civil action when
she issued the assailed Orders.106 As the Ingleses further explain:
1. The assailed Orders allowed the extrajudicial foreclosure on
their ten (10) lots despite the express provision in the Deed of
Real Estate Mortgage referring to the mortgaged property as being
covered by TCT No. 125141 PR-17485 and not by TCT No.
125341 PR-17485 i.e., the mother title of the ten (10) lots. 107 In
issuing the assailed Orders, therefore, Executive Judge Estrada
acted as if she was a judge in an action for Reformation of
Contract by interpreting that what the Deed of Real Estate
Mortgage really meant was that the mortgaged property was
covered by TCT No. 125341 PR-17485.108

2. The assailed Orders also allowed the extrajudicial foreclosure

on their ten (10) lots even though Jose and Josefina never
exercised their prerogative under the Deed of Real Estate
Mortgage to have the mortgage on their property extrajudicially
foreclosed.109 In issuing the assailed Orders, therefore, Executive
Judge Estrada acted as if she was a judge in some justiciable
case by essentially setting aside the above prerogative of Jose
and Josefina under the Deed of Real Estate Mortgage. 110
Hence, the Ingleses conclude, the assailed Orders of Executive Judge
Estrada are basically as good as a final orders issued in a "civil action" by
a "Regional Trial Court."111
We disagree.
The
Exclusive
of the Court of Appeals and Rule 47

Original

Jurisdiction

Section 9(2) of Batas Pambansa Blg. 129 or the Judiciary Reorganization

Act of 1980, vests the Court of Appeals with exclusive original jurisdiction
over actions for "annulment of judgments of Regional Trial Courts." The
remedy by which such jurisdiction may be invoked is provided under Rule
47 of the Rules of Court.
Conformably, Rule 47 sanctions the filing of a petition for the Annulment of
Judgments, Final Orders and Resolutions before the Court of Appeals.
Section 1 of Rule 47, however, defines the scope and nature of this
petition:
RULE
ANNULMENT OF
RESOLUTIONS

JUDGMENTS

OR

FINAL

ORDERS

47
AND

SECTION 1. Coverage.This Rule shall govern the annulment by the

Court of Appeals of judgments or final orders and resolutions in civil
actions of Regional Trial Courts for which the ordinary remedies of new

trial, appeal, petition for relief or other appropriate remedies are no longer
available through no fault of the petitioner. (Emphasis supplied)
The above-quoted section sets forth in no unclear terms that only
judgments, final orders and resolutions in "civil actions" of "Regional Trial
Courts" may be the subject of a petition for annulment before the Court of
Appeals. Against this premise, it becomes apparent why the Ingleses
petition for Annulment of Final Orders must fail. We substantiate:
Proceedings
Foreclosure
Civil Actions

for
of

the
Mortgages

are

Extrajudicial
not

The subject of the Ingleses petition for Annulment of Final Orders are not
the proper subjects of a petition for annulment before the Court of Appeals.
The assailed Orders dated 8 October 1997, 20 November 1997 and 27
July 1998 of Executive Judge Estrada are not the final orders in "civil
actions" of "Regional Trial Courts" that may be the subject of annulment by
the Court of Appeals under Rule 47. There is a clear-cut difference
between issuances made in a "civil action" on one hand and orders
rendered in a proceeding for the extrajudicial foreclosure of a mortgage on
the other.
"Civil actions" are suits filed in court involving either the enforcement or
protection of a right, or the prevention or redress of a wrong. 112 They are
commenced by the filing of an original complaint before an appropriate
court113and their proceedings are governed by the provisions of the Rules
on Court on ordinary or special civil actions. 114Civil actions are adversarial
in nature; presupposing the existence of disputes defined by the parties
that are, in turn, submitted before the court for disposition. Issuances
made therein, including and most especially judgments, final orders or
resolutions, are therefore rendered by courts in the exercise of their judicial
function.
In contrast, proceedings for the extrajudicial foreclosure of mortgages, as
the name already suggests, are not suits filed in a court. 115 They are
commenced not by the filing of a complaint, but by submitting an
application before an executive judge 116 who, in turn, receives the same

neither in a judicial capacity nor on behalf of the court. 117 The conduct of
such proceedings is not governed by the rules on ordinary or special civil
actions, but by Act No. 3135, as amended, and by special administrative
orders issued by this Court. 118 Proceedings for the extrajudicial foreclosure
of mortgages are also not adversarial; as the executive judge merely
performs therein an administrative function to ensure that all requirements
for the extrajudicial foreclosure of a mortgage are satisfied before the clerk
of court, as the ex-officio sheriff, 119 goes ahead with the public auction of
the mortgaged property.120 Necessarily, the orders of the executive judge in
such proceedings, whether they be to allow or disallow the extrajudicial
foreclosure of the mortgage, are not issued in the exercise of a judicial
function but, in the words of First Marbella Condominium Association, Inc.
v. Gatmaytan:
x x x issued by the RTC Executive Judge in the exercise of his
administrative function to supervise the ministerial duty of the Clerk of
Court as Ex Officio Sheriff in the conduct of an extrajudicial foreclsoure
sale x x x.121(Emphasis supplied)
Verily, the Orders dated 8 October 1997, 20 November 1997 and 27 July
1998 of Executive Judge Estrada cannot be the subject of a petition for
annulment before the Court of Appeals. Such orders, issued as they were
by an executive judge in connection with a proceeding for the extrajudicial
foreclosure of a mortgage, evidently do not fall within the type of issuances
so carefully identified under Section 1 of Rule 47. The Court of Appeals
was, therefore, correct in postulating that the annulment of the assailed
Orders is not within their exclusive original jurisdiction per Section 9(2) of
Batas Pambansa Blg. 129.
Allegation
that
were
Rendered
is Immaterial, Baseless

the

Assailed
Without

Orders
Jurisdiction

The allegation of the Ingleses that Executive Judge Estrada overstepped

her jurisdiction in issuing the assailed Orders is immaterial to the issue of
whether the Court of Appeals may assume jurisdiction over their petition.
Assuming arguendo that Executive Judge Estrada did exceed her
jurisdiction in issuing the assailed Orders, the nature of such orders and

the circumstances under which they were issued would still remain the
same. The mere fact, nay, the mere allegation, that the assailed Orders
have been issued without jurisdiction do not make them, even by the limits
of either the strongest reasoning or the most colourful imagination, final
orders in a "civil action" by a "Regional Trial Court." Clearly, a petition
under Rule 47 even then would still not be a viable remedy.
At any rate, this Court finds that Executive Judge Estrada did not actually
"exceed" her jurisdiction when she issued the assailed Orders. All that
Executive Judge Estrada did was to render an interpretation of the Deed of
Real Estate Mortgage on its facewhich is something that she is lawfully
entitled, if not obliged, to do in an extrajudicial foreclosure proceeding.
After all, an executive judge has the administrative duty in such
proceedings to ensure that all the conditions of the law have been
complied with before authorizing the public auction of any mortgaged
property122 and this duty, by necessity, includes facially examining the
mortgage agreement as to whether it adequately identified the land to be
auctioned or whether it contains sufficient authorization on the part of the
mortgagee to push forth with an extrajudicial sale. Of course, an executive
judge may err in the exercise of such administrative function and, as a
result, may improvidently sanction an extrajudicial sale based on a faulty
construction of a mortgage agreementbut those are not errors of
jurisdiction inasmuch as they relate only to the exercise of jurisdiction.

The Ingleses point out that the two (2) of them who were actually able to
sign the verification and certificate against forum shopping, i.e., Josefina
and Hector F. Ingles, are mother and brother, respectively, to the rest of
them who were unable to sign. 124 Hence, the Ingleses argue, the
signatures of only two (2) of them in the verification and certification of
non-forum shopping ought to be enough to be considered as substantial
compliance with the requirements thereon per Section 1 of Rule 65 and
Section 3 of Rule 46.125
We find that the Court of Appeals did err in dismissing the Ingleses
certiorari petition on the ground of non-compliance with the requirements
on verification and certification against forum shopping. The Court of
Appeals ought to have given due course to the certiorari petition because
there was, in this case, substantial compliance with the said requirements
by the Ingleses.
However, instead of remanding the Ingleses certiorari petition to the Court
of Appeals, this Court opted to exercise its sound discretion to herein
resolve the merits of the same. This was done for the sole purpose of
finally putting an end to a pervading issue responsible for delaying the
proceedings in LRC Case No. Q-10766 (98) and Civil Case No. Q-9833277, i.e., the effect of the consolidation of the two cases to Charles
entitlement to a writ of possession.

In fine, therefore, We see no reversible error on the part of the Court of

Appeals in dismissing the Ingleses petition for Annulment of Final Orders.

On that end, We find that the Ingleses certiorari petition to be without

merit. Ultimately, We deny G.R. No. 147186.

G.R. No. 147186

At the core of G.R. No. 147186, on the other hand, is the solitary issue of
whether the Court of Appeals erred in dismissing the Ingleses certiorari
petition.

We begin with the Court of Appeals erroneous dismissal based on

techicality.

The Ingleses submit that the Court of Appeals erred. They contend that the
failure of some of them to sign the subject verification and certification of
non-forum shopping may be excused given the fact that all of them are
members of only one family and, as such, share but a common interest in
the cause of their petition.123

The
Requirements
and
Certification
Shopping and the Altres126
Ruling

of
Against

Verification
Forum

A certiorari petition under Rule 65 of the Rules of Court is one where the
pleadings required to be both verified and accompanied by a certification
against forum shopping when filed before a court. 127
While both verification and certification against forum shopping are
concurring requirements in a certiorari petition, one requirement is distinct
from the other in terms of nature and purpose.
In the seminal case of Altres v. Empleo, this Court laid out guiding
principles that synthesized the various jurisprudential pronouncements
regarding non-compliance with the requirements on, or submission of a
defective, verification and certification against forum shopping. We quote
them at length:
1) A distinction must be made between non-compliance with the
requirement on or submission of defective verification, and noncompliance with the requirement on or submission of defective
certification against forum shopping.

compliance" or presence of "special circumstances or compelling

reasons."130
5) The certification against forum shopping must be signed by all
the plaintiffs or petitioners in a case;131otherwise, 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.132
6) Finally, the certification against forum shopping must be
executed by the party-pleader, not by his counsel. 133 If, however,
for reasonable or justifiable reasons, the party-pleader is unable to
sign, he must execute a Special Power of Attorney [citation
omitted] designating his counsel of record to sign on his
behalf.134 (Emphasis and underscoring supplied)

2) 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.128

Guided by the Altres precedent, We find that the dismissal by the RTC of
the Ingleses certiorari petition on the ground of a defective verification and
certification against forum shopping to be incorrect. We substantiate:

3) 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.129

The Ingleses certiorari petition was properly verified even though not all of
them were able to sign the same. As related by Altres, the requirement of
verification is deemed substantially complied with if "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."

4) As to certification against forum shopping, non-compliance

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 Rule on the ground of "substantial

The
Ingleses
with the Requirement of Verification

Substantially

Complied

The pronouncement in Altres is based on the recognition that the purpose

of verifying a petition or complaint, i.e., to assure the court that such
petition or complaint was filed in good faith; and that the allegations therein
are true and correct and not the product of the imagination or a matter of

speculation,135 can sufficiently be achieved even if only one of the several

petitioners or plaintiffs signs the verification. 136 As long the signatory of the
verification is competent, there is already substantial compliance with the
requirement.
Verily, the signatures of all of the Ingleses were not required to validly
verify their certiorari petition. It suffices, according to Altres, that the
verification was signed by at least one of the Ingleses who was competent
to do so. In this case, the certiorari petition was verified by Josefina and
Hector F. Inglesboth of whom this Court finds competent to attest to the
truth of the allegations of their petition, considering that they are
unquestionably
principal
parties-in-interest
to
their
certiorari
petition.137 Hence, their certiorari petition contains a substantially valid
verification.
The
Ingleses
Substantially
with
the
Requirement
of
Against Forum Shopping

Complied
Certification

The Ingleses certiorari petition likewise contains a substantially complaint

certificate against forum shopping. Altres articulates the rule where a
certification against forum shopping is required to be attached in a petition
or complaint that names several petitioners or plaintiffs, as follows:
5) The certification against forum shopping must be signed by all the
plaintiffs or petitioners in a case;138otherwise, 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.139 (Emphasis and underscoring
supplied).
The rule exposes the fault of the Court of Appeals:
First. To begin with, the mere fact that only some and not all of the
Ingleses signed the certification against forum shopping attached to their

certiorari petitionis not a valid ground for the outright dismissal of such
petition as to all of the Ingleses.140 As Altres elucidates, the most that the
Court of Appeals could have done in such a case is to dismiss the
certiorari petition only with respect to the Ingleses who were not able to
sign.
Second. Nevertheless, the certiorari petition should be sustained as to all
of the Ingleses since substantial compliance with the requirement of a
certification against forum shopping may be appreciated in their favor.
Jurisprudence clearly recognizes that "under reasonable or justifiable
circumstances x x x as when all the plaintiffs or petitioners share a
common interest and invoke a common cause of action or defense" the
rule requiring all such petitioners or plaintiffs to sign the certification
against forum shopping may be relaxed.141
In this case, the "reasonable or justifiable circumstance" that would
warrant a relaxation of the rule on the certification against forum shopping
consists in the undeniable fact that Ingleses are immediate relatives of
each other espousing but only one cause in their certiorari petition. A
circumstance similar to that of the Ingleses was already recognized as
valid by this Court in cases such as Traveno v. Bobongon Banana Growers
Multi-Purpose Cooperative142 and in Cavile v. Heirs of Cavile, 143 just to
name a few.
Given the above, no other conclusion can be had other than that the Court
of Appeals erred in dismissing the Ingleses certiorari petition based on
technicality.
II
Rather than remanding the Ingleses certiorari petition to the Court of
Appeals, however, this Court chooses to herein resolve the merits of the
same. This Court finds that a prompt resolution of the issue raised in the
Ingleses certiorari petition is necessary, for it will ultimately determine the
progress of the proceedings in LRC Case No. Q-10766 (98) and Civil Case
No. Q-98-33277. Hence, to avoid any further delay and to prevent the
possibility of conflicting decisions between the Court of Appeals and the
RTC, We resolve the Ingleses certiorari petition.

The pivotal issue in the Ingleses certiorari petition is whether the RTC,
thru Judge Magpale, committed grave abuse of discretion in allowing
Charles to present ex-parte evidence in support of his application for the
issuance of a writ of possession despite the consolidation of LRC Case
No. Q-10766 (98) with Civil Case No. Q-98-33277.
The Ingleses submit an affirmative stance. The Ingleses posit that the
consolidation of LRC Case No. Q-10766 (98) and Civil Case No. Q-9833277 effectively tied the resolution of Charles application for a writ of
possession with the resolution of their action for annulment of
mortgage.144 For the Ingleses then, the RTC cannot simply allow Charles
to present ex-parte evidence on his application for a writ possession
without first laying to rest, in a judicial proceeding for that purpose, other
related issues raised in Civil Case No. Q-98-33277.145
We deny the petition. The entire stance of the Ingleses hinges on the
propriety of the consolidation of LRC Case No. Q-10766 (98) with Civil
Case No. Q-98-33277. On that, this Court does not agree.
Consolidation
Issuance
of
with
an
Active
Subsequent Cases

of
a
Ordinary
Woods

Petition

for

the
Writ
of
Possession
Civil
Action,
the
Doctrine
and

As a rule, a petition for the issuance of a writ possession may not be

consolidated with any other ordinary action. It is well-settled that a petition
for the issuance of a writ of possession is ex-parte, summary and nonlitigious by nature; which nature would be rendered nugatory if such
petition was to be consolidated with any other ordinary civil action. 146
The exception to the foregoing rule is the case of Active Wood Products,
Co., Inc. vs. Court of Appeals. 147 In Active Wood, this Court allowed the
consolidation of a petition for the issuance of a writ of possession with an
ordinary action for the annulment of mortgage. In doing so, Active Wood
justified such consolidation as follows:

It is true that a petition for a writ of possession is made ex-parte to facilitate

proceedings,
being
founded
on
a
presumed
right
of
ownership.1avvphi1 Be that as it may, when this presumed right of
ownership is contested and made the basis of another action, then the
proceedings for writ of possession would also become seemingly
groundless. The entire case must be litigated and if need be as in the case
at bar, must be consolidated with a related case so as to thresh out
thoroughly all related issues. (Emphasis supplied).
The unbridled construction of Active Wood, however, led to a deplorable
practice where mortgagors aggrieved by the result of an extrajudicial
foreclosure would prevent possession by the successful purchaser by
simply filing an action contesting the latters "presumed right of ownership"
either by an annulment of mortgage or of the extrajudicial sale, and then
asking the court for their consolidation with the petition for the issuance of
a writ of possession. Needless to state, this abusive practice have reached
the attention of this Court that, in turn, led to subsequent decisions refining
the application of the Active Wood doctrine.
Hence, in Sps. De Vera v. Hon. Agloro,148 this Court held that the
consolidation of an action for the annulment of mortgage and extrajudicial
sale with a petition for the issuance of a writ of possession, is not
mandatory but still rests within the discretion of the trial court to allow. De
Vera opined that "when the rights of a purchaser in an extrajudicial
foreclosure sale would be prejudiced x x x especially since the latter
already adduced its evidence in support of his application for a writ of
possession" consolidation of the two cases may rightfully be denied. 149
Amplifying further on Sps. De Vera is the case of Philippine National Bank
v. Gotesco Tyan Ming Development, Inc. 150 In Philippine National Bank,
this Court held that consolidation of an action for annulment of extrajudicial
sale and a petition for the issuance of a writ of possession should not be
allowed when doing so would actually lead to more delay in the
proceedings and thus "defeat the very rationale of consolidation." 151 In the
same case, this Court even ordered the separation of the then already
consolidated action for the annulment of extrajudicial sale and petition for
the issuance of a writ of possession.152

But perhaps the most crucial refinement of Active Wood was in the case of
Espinoza v. United Overseas Bank Phils. 153 Espinoza declared that the
mere fact that the purchasers "presumed right of ownership is contested
and made the basis of another action" does not mean that such action
ought to be consolidated with the petition for the issuance of a writ of
possession.154 For Espinoza, the application of the Active Wood doctrine
must be limited only to cases with the same factual circumstances under
which the latter was rendered.
Espinoza called attention to the fact that in Active Wood the petition for the
issuance of a writ of possession was "filed before the expiration of the oneyear redemption period" and that "the litigated property had not been
consolidated in the name of the mortgagee."155
Hence, Espinoza invalidated the consolidation of an action for the
annulment of the extrajudicial sale with a petition for the issuance of a writ
of possession after finding that the latter petition was filed after the
expiration of the one-year redemption period and after the purchaser had
already consolidated his title over the auctioned property. This must be,
Espinoza explained, because when:
x x x title to the litigated property had already been consolidated in the
name of respondent, x x x the issuance of a writ of possession becomes a
matter of right. Consequently, the consolidation of the petition for the
issuance of a writ of possession with the proceedings for nullification of
foreclosure would be highly improper. Otherwise, not only will the very
purpose of consolidation (which is to avoid unnecessary delay) be
defeated but the procedural matter of consolidation will also adversely
affect the substantive right of possession as an incident of
ownership.156 (Emphasis supplied).

Charles
Has
His
Title
Over
No
Grave
Abuse
Allowing
Charles
Parte Evidence

Already
the
of
to

Consolidated
Mortgaged
Lots;
Discretion
in
Present
Ex-

The ruling in Espinoza applies. It is uncontested that by the time he filed

his Motion for Issuance of a Writ of Possession, which was before the RTC
allowed him to present ex-parte evidence in support of his application for
the issuance of a writ of possession, Charles had already consolidated his
title over the ten (10) lots. 157 At that time, Charles was already the absolute
owner of the ten (10) lots and, as such, his right to possess the same
becomes a matter of right on his part.158 Charles claim of possession is no
longer merely based on a "presumed right of ownership" as the Ingleses
have evidently failed to exercise their right of redemption within the period
provided by law. By then, the consolidation of Charles application for a writ
of possession with the Ingleses action for the annulment of mortgage had
already lost its basis and, therefore, ceased to become proper.
Consequently, no grave abuse of discretion may be imputed on the part of
the RTC in allowing Charles to present ex-parte evidence in support of his
application for the issuance of a writ of possession.
Even though Charles filed his original Ex-Parte Petition for Issuance of a
Writ Possession still within the redemption period, Espinoza would
nevertheless apply. Charles subsequent filing of his Motion for Issuance of
a Writ of Possession at a time that he was already absolute owner of the
auctioned lots supplemented his earlier Ex-Parte Petition for Issuance of a
Writ Possessionthus making his application for a writ of possession
similar to that in the Espinoza case.
All in all, the Ingleses certiorari petition must therefore be dismissed.

Applying the foregoing judicial pronouncements to the case at bar, this

Court discerns that the consolidation of LRC Case No. Q-10766 (98) and
Civil Case No. Q-98-33277 had already ceased to become proper by the
time the RTC allowed him to present ex-parte evidence in support of his
application for the issuance of a writ of possession. Separation of the two
cases is moreover warranted. We substantiate:

Consolidation
of
LRC
and
Civil
Case
No.
Than
Expedited
Cases;
Separation
Order

Case
No.
Q-98-33277
Resolution
of
Both

Q-10766
Delayed
of
Cases

(98)
Rather
Both
In

In addition, this Court finds that the consolidation of LRC Case No. Q10766 (98) and Civil Case No. Q-98-33277 had actually been counterproductive for the resolution of the two cases. It may not be amiss to point
out that from the time LRC Case No. Q-10766 (98) and Civil Case No. Q98-33277 were consolidated159 up to time the RTC ordered a halt to their
proceedings on 18 July 2004, more than four (4) years have already
lapsed. Yet in all those years, the records were still silent as to whether
presentation of the evidence on the Ingleses annulment of the Deed of
Real Estate Mortgage had already started. This circumstance alone casts
immense doubt as to just how effective the consolidation of LRC Case No.
Q-10766 (98) and Civil Case No. Q-98-33277 was, in terms of finding an
expeditious resolution for both cases. This Court cannot sanction such
kind of procedure.
Considering that the consolidation of LRC Case No. Q-10766 (98) and
Civil Case No. Q-98-33277 serves no other useful purpose, this Court
finds their separation to be in order.
G.R. No. 173641
We thus come to G.R. No. 173641, which poses the lone issue of whether
the Court of Appeals erred in granting Charles mandamus petition praying
for the immediate resolution by the RTC of the Ingleses Motion For
Reconsideration,160 Supplemental
Motion
ForReconsideration161 and
162
Motion To Dismiss.
The Ingleses argue in the affirmative and goes even further by saying that
a suspension of the entire proceedings in LRC Case No. Q-10766 (98) and
Civil Case No. Q-98-33277 is called for.163 The Ingleses stand behind the
18 July 2004 Order of the RTC, thru Judge Corpuz-Cabochan, which
ordered the suspension of the proceedings in view of the pendency of G.R.
Nos. 141809 and 147186 before this Court.164
In view of our above discussions in G.R. Nos. 141809 and 147186, there is
no longer any legal reason on which the suspension of the proceedings
before the RTC in LRC Case No. Q-10766 (98) and Civil Case No. Q-9833277 may be anchored on. The two cases are ordered deconsolidated.
Civil Case No. Q-98-33277 should proceed and be resolved with dispatch.

In LRC Case No. Q-10766 (98), the Writ of Possession in favor of Charles
J. Esteban should be issued immediately. This is line with the order issued
on 12 July 2001 by the Regional Trial Court granting the Ex Parte Petition
for Issuance of a Writ of Possession after evaluating Charles
Memorandum and the Ingleses comment thereon.
Hence, We deny this petition.
WHEREFORE, premises considered, the consolidated petitions are
hereby DENIED. Accordingly, We hereby render a Decision:
1. AFFIRMING the Resolutions dated 28 December 1999 and 28
January 2000 of the Court of Appeals in CA-G.R. SP. No. 56292;
2. AFFIRMING the Resolutions dated 29 November 2000 and 16
February 2001 of the Court of Appeals in CA-G.R. SP No. 58790,
insofar as they effectively dismissed the lngleses' certiorari
petition;
3. AFFIRMING the Decision dated 31 March 2006 and Resolution
dated 19 July 2006 of the Court of Appeals in CA-G.R. SP No.
84738; and
4. ORDERING the deconsolidation of Civil Case No. Q-98-33277
and LRC Case No. Q-10766 (98); the resolution of Civil Case No.
Q-98-33277 with dispatch; and the issuance of the Writ of
Possession in favor of private respondent Charles J. Esteban in
LRC Case No. Q-10766 (98).
Costs against petitioners.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 188633

April 10, 2013

SANDOVAL SHIPYARDS, INC. and RIMPORT INDUSTRIES, INC.

represented by ENGR. REYNALDO G. IMPORTANTE, Petitioners,
vs.
PHILIPPINE MERCHANT MARINE ACADEMY (PMMA), Respondent.

Respondent, for its part, would pay petitioners P1,685,200 in installments

based on the progress accomplishment of the work as stated in the
contract.6
As agreed upon, respondent paid petitioners P236,694.00 on 08 March
1995 as mobilization fund for the lifeboats;P504,947.20 on 15 March 1995
for its first progress billing; and P386,600.00 on 25 March 1995 as final
payment for the lifeboats.7 On 10 August 1995, Angel Rosario (Rosario), a
faculty member of respondent who claimed to have been verbally
authorized by its president, allegedly received the lifeboats at the
Philippine Navy Wharf in good order and condition.8

In this Petition for Review on Certiorari 1 under Rule 45, petitioners come
before us seeking a reversal of the Decision 2 dated 26 February 2009 and
Resolution3 dated 06 July "2009 of the Court of Appeals (CA) in CA-G.R.
CV No. 88094. The CA Decision partly granted the appeal of petitioners by
deleting the attorney's fees awarded to respondent by the Regional Trial
Court, Branch 146, Makati City (RTC) in Civil Case No. 99-052. 4 The CA
Resolution denied their Motion for Reconsideration of its Decision. 5

In November 1995, respondent sent an inspection team to where the two

lifeboats were docked to check whether the plans and work specifications
had been complied with. The team found that petitioners had installed
surplus Japan-made Isuzu C-240 diesel engines with plates marked "Isuzu
Marine diesel engine" glued to the top of the cylinder heads instead of the
agreed upon 45-HP Gray Marine diesel engines; that for the electric
starting systems of the engines, there was no manual which was
necessary in case the systems failed; and that the construction of the
engine compartment was not in conformity with the approved plan. For
these reasons, respondents dean submitted a report and recommendation
to the president of petitioners stating the latters construction violations and
asking for rectification.

Philippine Merchant Marine Academy (respondent) entered into a Ship

Building Contract (contract) with Sandoval Shipyards, Inc. through the
latter's agent, Rimport Industries, Inc. (petitioners) on 19 December 1994.
The contract states that petitioners would construct two units of 9.1 0meter lifeboats (lifeboats) to be used as training boats for the students of
respondent. These lifeboats should have 45-HP Gray Marine diesel
engines and should be delivered within 45 working days from the date of
the contract-signing and payment of the mobilization/organization fund.

Consequently, a meeting was held between representatives of respondent

and petitioners on 01 December 1995. The latter were reminded that they
should strictly comply with the agreed plan and specifications of the
lifeboats, as there were no authorized alterations thereof. Petitioners were
also advised to put into writing their request for an extension of time for the
delivery of the lifeboats.9 In compliance, they wrote a letter dated 18
December 1995, requesting an extension of time for the delivery, from 01
December 1995 to January 1996.10

DECISION
SERENO, CJ.:

On 18 July 1996, the Commission on Audit (COA), through its technical

audit specialist Benedict S. Guantero (Guantero), conducted an ocular
inspection of the lifeboats. His report indicated that the lifeboats were
corroded and deteriorating because of their exposure to all types of
weather elements; that the plankings and the benches were also
deteriorating, as they were not coated with fiberglass; that the lifeboats
had no mast sails or row locks installed on the boats; that the installed
prime mover was an Isuzu engine, contrary to the agreed plans and
specifications; and that the lifeboats had been paid in full except for the 10
percent retention.11
Despite repeated demands from respondent, petitioners refused to deliver
the lifeboats that would comply with the agreed plans and specifications.
As a result, respondent filed a Complaint for Rescission of Contract with
Damages against petitioners before the RTC,12 and trial ensued.
The RTC in its Decision13 dated 10 April 2006 held that although the
caption of the Complaint was "Rescission of Contract with Damages," the
allegations in the body were for breach of contract. Petitioners were found
to have violated the contract by installing surplus diesel engines, contrary
to the agreed plan and specifications. Thus, petitioners were made jointly
and severally liable for actual damages in the amount of P1,516,680 and
were awarded a penalty of one percent of the total contract price for every
day of delay. The RTC also directed petitioners to pay P200,000 as
attorneys fees plus the costs of suit, because their unjustified refusal to
pay respondent compelled it to resort to court action for the protection and
vindication of its rights. It also ruled that petitioners were estopped from
questioning respondents noncompliance with mediation proceedings,
because they nevertheless actively participated in the trial of the case. 14
As a result, petitioners brought an ordinary appeal to the CA via Rule
41.15 They opined that the RTC committed reversible errors when it ruled
that, first, the case was one for breach of contract and not for rescission;
second, when it did not dismiss the case as a sanction for respondents

deliberate failure to attend the mediation session; third, when it found that
petitioners had not fully complied with their obligations in the contract; and
fourth, when it awarded attorneys fees without explanation. 16
The CA ruled that petitioners indeed committed a clear substantial breach
of the contract, which warranted its rescission. Rescission requires a
mutual restoration of benefits received. However, petitioners failed to
deliver the lifeboats; their alleged delivery to Rosario was invalid, as he
was not a duly authorized representative named in the contract. Hence,
petitioners could not compel respondent to return something it never had
possession or custody of. Nonetheless, the CA deleted the award of
attorneys fees, as it found that the RTC failed to cite any specific factual
basis to justify the award.17
Dissatisfied, petitioners filed a Motion for Reconsideration 18 dated 20
March 2009, arguing that respondent had agreed to substitute engines of
equivalent quality in the form of surplus engines that were not secondhand
or used, but were rather old stock kept in their warehouse. 19 Furthermore,
they asserted that the acceptance of the lifeboats was implied by the act of
respondents president, who christened them with the names MB Amihan
and MB Habagat.20
In its Resolution21 dated 06 July 2009 the CA denied petitioners Motion,
ruling that the fact that the engines installed were different from what had
been agreed was a breach of the specifications in the contract. 22
Additionally, documentary and testimonial evidenced proffered by both
parties established that the lifeboats remained docked at Navotas in the
possession of petitioners.23
Hence, this Rule 45 Petition before us. Petitioners rehash the arguments
they posited before the CA with the additional contention that the judge
who wrote the Decision was not present during the trial and did not have
the advantage of firsthand assessment of the testimonies of the witnesses.

For this reason, the Court should reconsider Rosarios testimony and
progress report, as well as the delivery receipt for the lifeboats. We
required respondent to comment,24 which it did.25 Thereafter, petitioners
filed their Reply.26

(5) When the findings of fact are conflicting;

(6) When the Court of Appeals, in making its findings, went beyond
the issues of the case and the same is contrary to the admissions
of both appellant and appellee;

The issues brought before us by petitioners are as follows:

(7) When the findings are contrary to those of the trial court;
I. Whether a factual review is warranted, considering that the trial
judge who penned the Decision was different from the judge who
received the evidence of the parties;
II. Whether the case is for rescission and not damages/breach of
contract;
III. Whether failure to attend mediation proceedings warrants a
dismissal of the case.
We deny the Petition.
In a Rule 45 Petition, parties may only raise questions of law, because this
Court is not a trier of facts. 27Generally, this court will not review findings of
fact of lower courts, unless the case falls under any of the following
recognized exceptions:
(1) When the conclusion is a finding grounded entirely on
speculation, surmises and conjectures;
(2) When the inference made is manifestly mistaken, absurd or
impossible;
(3) Where there is a grave abuse of discretion;
(4) When the judgment is based on a misapprehension of facts;

(8) When the findings of fact 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
petitioners main and reply briefs are not disputed by the
respondents; and
(10) When the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted
by the evidence on record.28
The fact that the trial judge who penned the Decision was different from
the one who received the evidence is not one of the exceptions that
warrant a factual review of the case. Petitioners cannot carve out an
exception when there is none. We have already addressed this matter in
Decasa v. CA,29 from which we quote:
x x x we have held in several cases that the fact that the judge who heard
the evidence is not the one who rendered the judgment; and that for the
same reason, the latter did not have the opportunity to observe the
demeanor of the witnesses during the trial but merely relied on the records
of the case does not render the judgment erroneous. Even though the
judge who penned the decision was not the judge who heard the
testimonies of the witnesses, such is not enough reason to overturn the
findings of fact of the trial court on the credibility of witnesses. It may be

true that the trial judge who conducted the hearing would be in a better
position to ascertain the truth or falsity of the testimonies of the witnesses,
but it does not necessarily follow that a judge who was not present during
the trial cannot render a valid and just decision. The efficacy of a decision
is not necessarily impaired by the fact that its writer only took over from a
colleague who had earlier presided at the trial. That a judge did not hear a
case does not necessarily render him less competent in assessing the
credibility of witnesses. He can rely on the transcripts of stenographic
notes of their testimony and calibrate them in accordance with their
conformity to common experience, knowledge and observation of ordinary
men. Such reliance does not violate substantive and procedural due
process of law.30 (Citations omitted)

benefits received.33 An injured party who has chosen rescission is also

entitled to the payment of damages. 34 The factual circumstances, however,
rendered mutual restitution impossible. Both the RTC and the CA found
that petitioners delivered the lifeboats to Rosario. Although he was an
engineer of respondent, it never authorized him to receive the lifeboats
from petitioners. Hence, as the delivery to Rosario was invalid, it was as if
respondent never received the lifeboats.1wphi1 As it never received the
object of the contract, it cannot return the object. Unfortunately, the same
thing cannot be said of petitioners. They admit that they received a total
amount of P1,516,680 from respondent as payment for the construction of
the lifeboats. For this reason, they should return the same amount to
respondent.

Petitioners also claim that the CA erred in upholding the RTCs substitution
of respondents cause of action from rescission to breach of contract. Had
it not done so, then it would have merely ordered mutual restoration of
what each of them received the two lifeboats in exchange
for P1,516.680.

Petitioners are likewise mistaken in their assertion that the trial court
should have dismissed the Complaint for respondents failure to attend the
mediation session. In Chan Kent v. Micarez, 35 in which the trial court
dismissed the case for failure of the plaintiff and her counsel to attend the
mediation proceedings, this Court held:

The RTC did not substitute the cause of action. A cause of action is an act
or omission which violates the rights of another.31 In the Complaint before
the RTC, the respondent alleged that petitioners failed to comply with their
obligation under the Ship Building Contract. Such failure or breach of
respondents contractual rights is the cause of action. Rescission or
damages are part of the reliefs. 32 Hence, it was but proper for the RTC to
first make a determination of whether there was indeed a breach of
contract on the part of petitioners; second, if there was a breach, whether it
would warrant rescission and/or damages.

To reiterate, A.M. No. 01-10-5-SC-PHILJA regards mediation as part of

pre-trial where parties are encouraged to personally attend the
proceedings. The personal non-appearance, however, of a party may be
excused only when the representative, who appears in his behalf, has
been duly authorized to enter into possible amicable settlement or to
submit to alternative modes of dispute resolution. To ensure the
attendance of the parties, A.M. No. 01-10-5-SC-PHILJA specifically
enumerates the sanctions that the court can impose upon a party who fails
to appear in the proceedings which includes censure, reprimand,
contempt, and even dismissal of the action in relation to Section 5, Rule 18
of the Rules of Court. The respective lawyers of the parties may attend the
proceedings and, if they do so, they are enjoined to cooperate with the
mediator for the successful amicable settlement of disputes so as to
effectively reduce docket congestion.

Both the RTC and the CA found that petitioners violated the terms of the
contract by installing surplus diesel engines, contrary to the agreed plans
and specifications, and by failing to deliver the lifeboats within the agreed
time. The breach was found to be substantial and sufficient to warrant a
rescission of the contract. Rescission entails a mutual restitution of

Although the RTC has legal basis to order the dismissal of Civil Case No.
13-2007, the Court finds this sanction too severe to be imposed on the
petitioner where the records of the case is devoid of evidence of willful or
flagrant disregard of the rules on mediation proceedings. There is no clear
demonstration that the absence of petitioner's representative during
mediation proceedings on March 1, 2008 was intended to perpetuate delay
in the litigation of the case. Neither is it indicative of lack of interest on the
part of pe.titioner to enter into a possible amicable settlement of the
case.36 (Citations omitted)
Here, there was no finding that the absence of respondent was in willful or
flagrant disregard of the rules on mediation, that the absence was intended
to effect a delay in litigation, or that respondent lacked interest in a
possible amicable settlement of the case. In fact, the CA found that all
efforts had been exerted by the parties to amicably settle the case during
the pretrial.37 Thus, RTC's nondismissal of respondent's Complaint was but
appropriate.
WHEREFORE, in view of the foregoing, we DENY the Petition for Review
on Certiorari dated 21 August 2009 and AFFIRM the Decision dated 26
February 2009 and Resolution dated 06 July 2009 of the Court of Appeals
in CA-G.R. CV No. 88094.
SO ORDERED.

SECOND DIVISION
G.R. Nos. 175277 & 175285

September 11, 2013

UNICAPITAL, INC., UNICAPITAL REALTY, INC., and JAIME J.

MARTINEZ, Petitioners,
vs.
RAFAEL JOSE CONSING, JR., and THE PRESIDING JUDGE OF THE
REGIONAL
TRIAL
COURT
OF
PASIG
CITY,
BRANCH
168, Respondents.
x-----------------------x
G.R. No. 192073
RAFAEL
JOSE
CONSING,
JR., Petitioner,
vs.
HON. MARISSA MACARAIG-GUILLEN, in her capacity as the
Presiding Judge of the Regional Trial Court of Makati City, Branch 60
and UNICAPITAL, INC., Respondents.
DECISION
PERLAS-BERNABE, J.:
Before the Court are consolidated petitions for review on
certiorari1 assailing separate issuances of the Court of Appeals (CA) as
follows:

Republic
SUPREME
Manila

of

the

Philippines
COURT

(a) The petitions in G.R. Nos. 175277 and 175285 filed by

Unicapital, Inc., (Unicapital), Unicapital Realty, Inc. (URI), and
Unicapital Director and Treasurer Jaime J. Martirez
(Martirez)assail the CAs Joint Decision2dated October 20, 2005

and Resolution3 dated October 25, 2006 in CA-G.R. SP Nos.

64019and 64451 which affirmed the Resolution 4 dated September
14,1999 and Order5 dated February 15, 2001 of the Regional Trial
Court (RTC) of Pasig City, Branch 68 (RTC-Pasig City) in SCA No.
1759, upholding the denial of their motion to dismiss; and
(b) The petition in G.R. No. 192073 filed by Rafael Jose Consing,
Jr. (Consing, Jr.) assails the CAs Decision 6 dated September 30,
2009 and Resolution7 dated April 28, 2010 inCA-G.R. SP No.
101355 which affirmed the Orders dated July16, 2007 8 and
September 4, 20079 of the RTC of Makati City, Branch 60 (RTCMakati City) in Civil Case No. 99-1418,upholding the denial of his
motion for consolidation.
The Facts
In 1997, Consing, Jr., an investment banker, and his mother, Cecilia Dela
Cruz
(Dela
Cruz),
obtained
anP18,000,000.00
loan
from
Unicapital,P12,000,000.00 of which was acquired on July 24, 1997 and the
remainingP6,000,000.00 on August 1, 1997. The said loan was secured by
Promissory Notes10 and a Real Estate Mortgage 11 over a 42,443 square
meter-parcel of land located at Imus, Cavite, registered in the name of
Dela Cruz as per Transfer Certificate of Title (TCT) No. T-687599 (subject
property).12 Prior to these transactions, Plus Builders, Inc. (PBI), a real
estate company, was already interested to develop the subject property
into a residential subdivision.13 In this regard, PBI entered into a joint
venture agreement with Unicapital, through its real estate development
arm, URI. In view of the foregoing, the loan and mortgage over the subject
property was later on modified into an Option to Buy Real Property 14 and,
after further negotiations, Dela Cruz decided to sell the same to Unicapital
and PBI. For this purpose, Dela Cruz appointed Consing, Jr. as her
attorney-in-fact.15

Eventually, Unicapital, through URI, purchased one-half of the subject

property for a consideration ofP21,221,500.00 (against which Dela Cruzs
outstanding loan obligations were first offset), while PBI bought the
remaining half for the price of P21,047,000.00.16 In this relation, Dela Cruz
caused TCT No. T-687599 to be divided into three separate titles as
follows: (a) TCT No. T-851861 for URI; 17 (b) TCT No. T-851862 for
PBI;18 and (c)TCT No. T-51863 which was designated as a road
lot.19 However, even before URI and PBI were able to have the titles
transferred to their names, Juanito Tan Teng (Teng) and Po Willie Yu (Yu)
informed Unicapital that they are the lawful owners of the subject property
as evidenced by TCT No.T-114708; 20 that they did not sell the subject
property; and that Dela Cruzs title, i.e., TCT No. T-687599, thereto was a
mere forgery.21 Prompted by Teng and Yus assertions, PBI conducted
further investigations on the subject property which later revealed that Dela
Cruz's title was actually of dubious origin. Based on this finding, PBI and
Unicapital sent separate demand letters 22 to Dela Cruz and Consing, Jr.,
seeking the return of the purchase price they had paid for the subject
property.
From the above-stated incidents stemmed the present controversies as
detailed hereunder.
The Proceedings Antecedent to G.R. Nos. 175277 & 175285
On May 3, 1999, Consing, Jr. filed a complaint, denominated as a
Complex Action for Declaratory Relief23 and later amended to Complex
Action for Injunctive Relief24 (Consing, Jr.s complaint) before the RTCPasig City against Unicapital, URI, PBI, Martirez, PBI General Manager
Mariano Martinez (Martinez), Dela Cruz and Does 1-20, docketed as SCA
No. 1759. In his complaint, Consing, Jr. claimed that the incessant
demands/recovery efforts made upon him by Unicapital and PBI to return
to them the purchase price they had paid for the subject property
constituted harassment and oppression which severely affected his
personal and professional life.25 He also averred that he was coerced to

commit a violation of Batas Pambansa Blg. 22 26 as Unicapital and PBI,

over threats of filing acase against him, kept on forcing him to issue a postdated check in the amount sought to be recovered, notwithstanding their
knowledge that he had no funds for the same. 27 He further alleged that
Unicapital and URI required him to sign blank deeds of sale and transfers
without cancelling the old one sin violation of the laws on land registration
and real estate development.28 Likewise, Consing, Jr. added that
Unicapital and PBIs representatives were" speaking of him in a manner
that was inappropriate and libelous," 29 and that some John Does
"deliberately engaged in a fraudulent scheme to compromise Consing, Jr.s
honor, integrity and fortune x x x consisting of falsifying or causing to be
falsified, or attempting to present as falsified certain transfers of Land
Titles and Deeds for profit," 30 classifying the foregoing as ultra vires acts
which should warrant sanctions under the corporation law, Revised
Securities Act and related laws.31 Accordingly, Consing, Jr. prayed that: (a)
he be declared as a mere agent of Dela Cruz, and as such, devoid of any
obligation to Unicapital, URI, and PBI for the transactions entered into
concerning the subject property; (b) Unicapital, URI, and PBI be enjoined
from harassing or coercing him, and from speaking about him in a
derogatory fashion; and (c) Unicapital, URI, and PBI pay him actual and
consequential damages in the amount of P2,000,000.00, moral damages
of at least P1,000,000.00, exemplary damages of P1,000,000.00, all per
month, reckoned from May 1, 1999 and until the controversy is resolved,
and attorney's fees and costs of suit.32
For their part, Unicapital, URI, and Martirez (Unicapital, et al.) filed
separate Motions to Dismiss33 Consing, Jr.s complaint (Unicapital, et al.s
motion to dismiss) on the ground of failure to state a cause of action,
considering that: (a) no document was attached against which Consing, Jr.
supposedly derived his right and against which his rights may be as
certained; (b) the demands to pay against Consing, Jr. and for him to
tender post-dated checks to cover the amount due were well within the
rights of Unicapital as an unpaid creditor, as Consing, Jr. had already
admitted his dealings with them; (c) the utterances purportedly constituting

libel were not set out in the complaint; and (d) the laws supposedly
violated were not properly identified. Moreover, Unicapital, et al. posited
that the RTC-PasigCity did not acquire jurisdiction over the case given that
Consing, Jr. failed to pay the proper amount of docket fees. In the same
vein, they maintained that the RTC-Pasig City had no jurisdiction over their
supposed violations of the Corporation Code and Revised Securities Act,
which, discounting its merits, should have been supposedly lodged with
the Securities and Exchange Commission. Finally, they pointed out that
Consing, Jr.s complaint suffers from a defective verification and, thus,
dismissible.34
Similar to Unicapital et al.s course of action, PBI and its General Manager,
Martinez (Unicapital and PBI, et al.), sought the dismissal of Consing, Jr.s
complaint on the ground that it does not state a cause of action. They also
denied having singled out Consing, Jr. because their collection efforts were
directed at both Consing, Jr. and Dela Cruz, which should be deemed as
valid and, therefore, should not be restrained.35
On September 14, 1999, the RTC-Pasig City issued a
Resolution36 denying the above mentioned motions to dismiss, holding that
Consing, Jr.s complaint sufficiently stated a cause of action for tort and
damages pursuant to Article 19 of the Civil Code. It ruled that where there
is abusive behavior, a complainant, like Consing, Jr., has the right to seek
refuge from the courts. It also noted that the elements of libel in a criminal
case are not the same as those for a civil action founded on the provisions
of the Civil Code, and therefore, necessitates a different treatment. It
equally refused to dismiss the action on the ground of non-payment of
docket fees, despite Consing, Jr.s escalated claims for damages therein,
as jurisdiction was already vested in it upon the filing of the original
complaint. Moreover, it resolved to apply the liberal construction rule as
regards the subject complaints verification and certification, despite its
improper wording, considering further that such defect was not raised at
the first opportunity. Consequently, it ordered Unicapital and PBI, et al. to
file their Answer and, in addition, to submit" any Comment or Reaction

within five (5) days from receipt hereof on the allegations of Consing, Jr. in
his rejoinder of September 9, 1999regarding the supposed filing of an
identical case in Makati City," 37 i.e., Civil Case No. 99-1418. Unperturbed,
Unicapital and PBI, et al. moved for reconsideration therefrom which was,
however, denied by the RTC-Pasig City in an Order38 dated February 15,
2001 for lack of merit. Aggrieved, they elevated the denial of their motions
to dismiss before the CA via a petition for certiorari and
prohibition,39 docketed as CA-G.R. SP Nos. 64019 and 64451.
On October 20, 2005, the CA rendered a Joint Decision 40 holding that no
grave abuse of discretion was committed by the RTC-Pasig City in
refusing to dismiss Consing, Jr.'s complaint.1wphi1 At the outset, it ruled
that while the payment of the prescribed docket fee is a jurisdictional
requirement, its non-payment will not automatically cause the dismissal of
the case. In this regard, it considered that should there be any deficiency
in the payment of such fees, the same shall constitute a lien on the
judgment award.41 It also refused to dismiss the complaint for lack of
proper verification upon a finding that the copy of the amended complaint
submitted to the RTC-Pasig City was properly notarized. 42 Moreover, it
upheld the order of the RTC-Pasig City for Unicapital and PBI, et al. to
submit their comment due to the alleged existence of a similar case filed
before the RTC-Makati City.43
Anent the substantive issues of the case, the CA concurred with the RTCPasig City that Consing Jr.'s complaint states a cause of action. It found
that Unicapital and PBI, et al.s purportedly abusive manner in enforcing
their claims against Consing, Jr. was properly constitutive of a cause of
action as the same, if sufficiently proven, would have subjected him to
"defamation of his name in business circles, the threats and coercion
against him to reimburse the purchase price, fraud and falsification and
breach of fiduciary obligation." It also found that the fact that Consing Jr.'s
complaint contains "nebulous" allegations will not warrant its dismissal as
any vagueness therein can be clarified through a motion for a bill of
particulars."44 Furthermore, it noted that Consing, Jr. does not seek to

recover his claims against any particular provision of the corporation code
or the securities act but against the actions of Unicapital and PBI, et al.;
hence, Consing, Jr.s complaint was principally one for damages over
which the RTC has jurisdiction, and, in turn, there lies no misjoinder of
causes of action.45
Dissatisfied, only Unicapital, et al. sought reconsideration therefrom but
the same was denied by the CA in a Resolution 46 dated October 25,2006.
Hence, the present petitions for review on certiorari in G.R. Nos.175277
and 175285.
The Proceedings Antecedent to G.R. No. 192073
On the other hand, on August 4, 1999, Unicapital filed a complaint 47 for
sum of money with damages against Consing, Jr. and Dela Cruz before
the RTC-Makati City, docketed as Civil Case No. 99-1418, seeking to
recover (a) the amount of P42,195,397.16, representing the value of their
indebtedness based on the Promissory Notes (subject promissory notes)
plus interests; (b) P5,000,000.00 as exemplary damages; (c) attorney's
fees; and (d) costs of suit.48
PBI also filed a complaint for damages and attachment against Consing,
Jr. and Dela Cruz before the RTC of Manila, Branch 12, docketed as Civil
Case No. 99-95381, also predicated on the same set of facts as above
narrated.49 In its complaint, PBI prayed that it be allowed to recover the
following: (a) P13,369,641.79, representing the total amount of installment
payments made as actual damages plus interests; (b) P200,000.00 as
exemplary damages; (c) P200,000.00 as moral damages; (d) attorney's
fees; and (e) costs of suit.50 Civil Case No. 99-95381 was subsequently
consolidated with SCA No. 1759 pending before the RTC-Pasig City.51
For his part, Consing, Jr. filed a Motion to Dismiss Civil Case No. 99-1418
which was, however, denied by the RTC-Makati City in an Order 52 dated
November
16,
1999.
Thereafter,
he
filed
a
Motion
for

Consolidation53(motion for consolidation) of Civil Case No. 99-1418 with

his own initiated SCA No. 1759 pending before the RTC-Pasig City.
In an Order54 dated July 16, 2007, the RTC-Makati City dismissed
Consing, Jr.s motion for consolidation and, in so doing, ruled that the
cases sought to be consolidated had no identity of rights or causes of
action and the reliefs sought for by Consing, Jr. from the RTC-Pasig City
will not bar Unicapital from pursuing its money claims against him.
Moreover, the RTC-Makati City noted that Consing, Jr. filed his motion only
as an after thought as it was made after the mediation proceedings
between him and Unicapital failed. Consing, Jr.'s motion for
reconsideration therefrom was denied in an Order 55 dated September 4,
2007. Hence, he filed a petition for certiorari before the CA, docketed as
CA-G.R. SP No. 101355, ascribing grave abuse of discretion on the part of
the RTC-Makati City in refusing to consolidate Civil Case No. 99-1418 with
SCA No. 1759 in Pasig City.
On September 30, 2009, the CA rendered a Decision 56 sustaining the
Orders dated July 16, 2007 and September 4, 2007 of the RTC-Makati
City which denied Consing, Jr.s motion for consolidation. It held that
consolidation is a matter of sound discretion on the part of the trial court
which could be gleaned from the use of the word "may" in Section 1,
Rule38 of the Rules of Court. Considering that preliminary steps (such as
mediation) have already been undertaken by the parties in Civil Case
No.99-1418 pending before the RTC-Makati City, its consolidation with
SCA No. 1759 pending before the RTC-Pasig City "would merely result in
complications in the work of the latter court or squander the resources or
remedies already utilized in the Makati case." 57 Moreover, it noted that the
records of the consolidated Pasig and Manila cases, i.e., SCA No. 1759
and Civil Case No. 99-95381, respectively, had already been elevated to
the Court, that joint proceedings have been conducted in those cases and
that the pre-trial therein had been terminated as early as October 23,
2007.Therefore, due to these reasons, the consolidation prayed for would
be impracticable and would only cause a procedural faux pas. Undaunted,

Consing, Jr. filed a motion for reconsideration therefrom but was denied by
the CA in a Resolution58 dated April 28, 2010. Hence, the present petition
for review on certiorari in G.R. No. 192073.
The Proceedings Before the Court
After the filing of the foregoing cases, the parties were required to file their
respective comments and replies. Further, considering that G.R.
No.192073 (Makati case) involves the same parties and set of facts with
those in G.R. Nos. 175277 & 175285 (Pasig case), these cases were
ordered consolidated per the Court's Resolution 59dated November 17,
2010. On March 9, 2011, the Court resolved to give due course to the
instant petitions and required the parties to submit their respective
memoranda.60
The Issues Before the Court
The essential issues in these cases are as follows: (a) in G.R. Nos.175277
and 175285, whether or not the CA erred in upholding the RTC-Pasig
Citys denial of Unicapital, et al.s motion to dismiss; and (b) in G.R. No.
192073, whether or not the CA erred in upholding the RTC-Makati Citys
denial of Consing, Jr.s motion for consolidation.
The Courts Ruling
A.
Propriety
Unicapital,
et
dismiss and ancillary issues.

of

the
al.s

denial
motion

of
to

A cause of action is defined as the act or omission by which a party

violates a right of another.61 It is well-settled that the existence of a cause
of action is determined by the allegations in the complaint. 62 In this relation,
a complaint is said to sufficiently assert a cause of action if, admitting what

appears solely on its face to be correct, the plaintiff would be entitled to the
relief prayed for.63 Thus, if the allegations furnish adequate basis by which
the complaint can be maintained, then the same should not be dismissed,
regardless of the defenses that may be averred by the defendants. 64 As
edified in the case of Pioneer Concrete Philippines, Inc. v. Todaro, 65 citing
Hongkong
and
Shanghai
Banking
Corporation,
Limited.
v.
66
Catalan (HSBC):
The elementary test for failure to state a cause of action is whether the
complaint alleges facts which if true would justify the relief demanded.
Stated otherwise, may the court render a valid judgment upon the facts
alleged therein? The inquiry is into the sufficiency, not the veracity of the
material allegations. If the allegations in the complaint furnish sufficient
basis on which it can be maintained, it should not be dismissed regardless
of the defense that may be presented by the defendants. 67 (Emphasis
supplied)
Stated otherwise, the resolution on this matter should stem from an
analysis on whether or not the complaint is able to convey a cause of
action; and not that the complainant has no cause of action. Lest it be
misunderstood, failure to state a cause of action is properly a ground for a
motion to dismiss under Section 1(g), Rule 16 68 of the Rules of
Court(Rules), while the latter is not a ground for dismissal under the same
rule.
In this case, the Court finds that Consing, Jr.s complaint in SCA No.1759
properly states a cause of action since the allegations there insufficiently
bear out a case for damages under Articles 19 and 26 of the Civil Code.
Records disclose that Consing, Jr.s complaint contains allegations which
aim to demonstrate the abusive manner in which Unicapital and PBI, et al.
enforced their demands against him. Among others, the complaint states
that Consing, Jr. "has constantly been harassed and bothered by
Unicapital and PBI, et al.; x x x besieged by phone calls from them; x x x

has had constant meetings with them variously, and on a continuing basis,
such that he is unable to attend to his work as an investment banker." 69 In
the same pleading, he also alleged that Unicapital and PBI, et al.s act of
"demanding a postdated check knowing fully well that he does not have
the necessary funds to cover the same, nor is he expecting to have them
is equivalent to asking him to commit a crime under unlawful coercive
force."70 Accordingly, these specific allegations, if hypothetically admitted,
may result into the recovery of damages pursuant to Article 19 of the Civil
Code which states that "every person must, in the exercise of his rights
and in the performance of his duties, act with justice, give everyone his
due, and observe honesty and good faith." As explained in the HSBC
case:
When a right is exercised in a manner which does not conform with the
norms enshrined in Article 19 and results in damage to another, a legal
wrong is thereby committed for which the wrongdoer must beheld
responsible. But a right, though by itself legal because it is recognized or
granted by law as such, may nevertheless become the source of some
illegality. A person should be protected only when he acts in the legitimate
exercise of his right, that is, when he acts with prudence and in good faith;
but not when he acts with negligence or abuse. There is an abuse of right
when it is exercised for the only purpose of prejudicing or injuring another.
The exercise of a right must be in accordance with the purpose for which it
was established, and must not be excessive or unduly harsh; there must
be no intention to injure another.71 (Emphasis supplied)
Likewise, Consing, Jr.s complaint states a cause of action for damages
under Article 26 of the Civil Code which provides that:
Article 26. Every person shall respect the dignity, personality, privacy and
peace of mind of his neighbors and other persons. The following and
similar acts, though they may not constitute a criminal offense, shall
produce a cause of action for damages, prevention and other relief:

(1) Prying into the privacy of another's residence;

(2) Meddling with or disturbing the private life or family relations of
another;

and reputation which, after all, is the most sacred and valuable wealth he
possesses - especially considering that he is an investment banker." 76 In
similar regard, the hypothetical admission of these allegations may result
into the recovery of damages pursuant to Article 26, and even
Article2219(10), of the Civil Code.

(3) Intriguing to cause another to be alienated from his friends;

(4) Vexing or humiliating another on account of his religious
beliefs, lowly station in life, place of birth, physical defect, or other
personal condition.
The rationale therefor was explained in the case of Manaloto v. Veloso
III,72 citing Concepcion v. CA,73 to wit:
The philosophy behind Art. 26 underscores the necessity for its inclusion in
our civil law. The Code Commission stressed in no uncertain terms that the
human personality must be exalted. The sacredness of human personality
is a concomitant consideration of every plan for human amelioration. The
touchstone of every system of law, of the culture and civilization of every
country, is how far it dignifies man. If the statutes insufficiently protect a
person from being unjustly humiliated, in short, if human personality is not
exalted - then the laws are indeed defective. Thus, under this article, the
rights of persons are amply protected, and damages are provided for
violations of a person's dignity, personality, privacy and peace of mind. 74
To add, a violation of Article 26 of the Civil Code may also lead to the
payment of moral damages under Article 2219(10)75 of the Civil Code.
Records reveal that Consing, Jr., in his complaint, alleged that "he has
come to discover that Unicapital and PBI, et al. are speaking of him in a
manner that is inappropriate and libelous; and that they have spread their
virulent version of events in the business and financial community such
that he has suffered and continues to suffer injury upon his good name

Corollary thereto, Unicapital, et al.s contention 77 that the case should be

dismissed on the ground that it failed to set out the actual libelous
statements complained about cannot be given credence. These incidents,
as well as the specific circumstances surrounding the manner in which
Unicapital and PBI, et al. pursued their claims against Consing, Jr. may be
better ventilated during trial. It is a standing rule that issues that require the
contravention of the allegations of the complaint, as well as the full
ventilation, in effect, of the main merits of the case, should not be within
the province of a mere motion to dismiss,78 as in this case. Hence, as what
is only required is that the allegations furnish adequate basis by which the
complaint can be maintained, the Court in view of the above-stated
reasons finds that the RTC-Pasig Citys denial of Unicapital, et al.s
motion to dismiss on the ground of failure to state a cause of action was
not tainted with grave abuse of discretion which would necessitate the
reversal of the CAs ruling. Verily, for grave abuse of discretion to exist, the
abuse of discretion must be patent and gross so as to amount to an
evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law, or to act at all in contemplation of law.79 This the Court does not
perceive in the case at bar.
Further, so as to obviate any confusion on the matter, the Court equally
finds that the causes of action in SCA No. 1759 were not as Unicapital,
et al. claim misjoined even if Consing, Jr. averred that Unicapital and
PBI, et al. violated certain provisions of the Corporation Law and the
Revised Securities Act.80
The rule is that a partys failure to observe the following conditions under
Section 5, Rule 2 of the Rules results in a misjoinder of causes of action: 81

SEC. 5. Joinder of causes of action . - A party may in one pleading assert,

in the alternative or otherwise, as many causes of action as he may have
against an opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the
rules on joinder of parties;
(b) The joinder shall not include special civil actions governed by
special rules;
(c) Where the causes of action are between the same parties but
pertain to different venues or jurisdictions, the joinder may be
allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction of said court and the venue lies
therein; and
(d) Where the claims in all the causes of action are principally for
recovery of money the aggregate amount claimed shall be the test
of jurisdiction. (Emphasis supplied)
A careful perusal of his complaint discloses that Consing, Jr. did not seek
to hold Unicapital and PBI, et al. liable for any specific violation of the
Corporation Code or the Revised Securities Act. Rather, he merely sought
damages for Unicapital and PBI, et al.s alleged acts of making him sign
numerous documents and their use of the same against him. In this
respect, Consing, Jr. actually advances an injunction and damages
case82 which properly falls under the jurisdiction of the RTC-Pasig
City.83 Therefore, there was no violation of Section 5, Rule 2 of the Rules,
particularly, paragraph (c) thereof. Besides, even on the assumption that
there was a misjoinder of causes of action, still, such defect should not
result in the dismissal of Consing, Jr.s complaint. Section 6, Rule 2 of the
Rules explicitly states that a "misjoinder of causes of action is not a ground
for dismissal of an action" and that "a misjoined cause of action may, on

motion of a party or on the initiative of the court, be severed and

proceeded with separately."
Neither should Consing, Jr.s failure to pay the required docket fees lead to
the dismissal of his complaint.1wphi1 It has long been settled that while
the court acquires jurisdiction over any case only upon the payment of the
prescribed docket fees, its non-payment at the time of the filing of the
complaint does not automatically cause the dismissal of the complaint
provided that the fees are paid within a reasonable period. 84 Consequently,
Unicapital, et al.s insistence that the stringent rule on non-payment of
docket fees enunciated in the case of Manchester Development
Corporation v. CA85 should be applied in this case cannot be sustained in
the absence of proof that Consing, Jr. intended to defraud the government
by his failure to pay the correct amount of filing fees. As pronounced in the
case of Heirs of Bertuldo Hinog v. Hon. Melicor:86
Plainly, while the payment of the prescribed docket fee is a jurisdictional
requirement, even its
non-payment at the time of filing does not automatically cause the
dismissal of the case, as long as the fee is paid within the applicable
prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such
payment.
Thus, when insufficient filing fees were initially paid by the plaintiffs and
there was no intention to defraud the government, the Manchester rule
does not apply.87 (Emphasis and italics in the original)
Indeed, while the Court acknowledges Unicapital, et al.'s apprehension
that Consing, Jr.'s "metered" claim for damages to the tune of
around P2,000,000.00 per month88 may balloon to a rather huge amount
by the time that this case is finally disposed of, still, any amount that may
by then fall due shall be subject to assessment and any additional fees

determined shall constitute as a lien against the judgment as explicitly

provided under Section 2,89Rule 141 of the Rules.
Finally, on the question of whether or not Consing, Jr.'s complaint was
properly verified, suffice it to state that since the copy submitted to the trial
court was duly notarized by one Atty. Allan B. Gepty and that it was only
Unicapital, et al.s copy which lacks the notarization, then there was
sufficient compliance with the requirements of the rules on pleadings. 90
In fine, the Court finds no reversible error on the part of the CA in
sustaining the RTC-Pasig Citys denial of Unicapital et al.s motion to
dismiss. As such, the petitions in G.R. Nos. 175277 and 175285 must be
denied.
B.
Propriety
Consing,
consolidation.

of
Jr.s

the

denial
motion

of
for

The crux of G.R. No. 192073 is the propriety of the RTC-Makati Citys
denial of Consing, Jr.s motion for the consolidation of the Pasig case, i.e.,
SCA No. 1759, and the Makati case, i.e., Civil Case No. 99-1418.Records
show that the CA upheld the RTC-Makati Citys denial of the foregoing
motion, finding that the consolidation of these cases was merely
discretionary on the part of the trial court. It added that it was
"impracticable and would cause a procedural faux pas
"if it were to "allow the RTC-Pasig City to preside over the Makati case." 91
The CAs ruling is proper.
It is hornbook principle that when or two or more cases involve the same
parties and affect closely related subject matters, the same must be
consolidated and jointly tried, in order to serve the best interest of the

parties and to settle the issues between them promptly, thus, resulting in a
speedy and inexpensive determination of cases. In addition, consolidation
serves the purpose of avoiding the possibility of conflicting decisions
rendered by the courts in two or more cases, which otherwise could be
disposed of in a single suit.92 The governing rule is Section 1, Rule 31 of
the Rules which provides:
SEC. 1. Consolidation. - When actions involving a common question of law
or fact are pending before the court, it may order a joint hearing or trial of
any or all the matters in issue in the actions; it may order all the actions
consolidated; and it may make such orders concerning proceedings
therein as may tend to avoid unnecessary costs or delay.
In the present case, the Court observes that the subject cases, i.e., SCA
No. 1759 and Civil Case No. 99-1418, although involving the same parties
and proceeding from a similar factual milieu, should remain unconsolidated
since they proceed from different sources of obligations and, hence, would
not yield conflicting dispositions. SCA No. 1759 is an injunction and
damages case based on the Civil Code provisions on abuse of right and
defamation, while Civil Case No. 99-1418 is a collection and damages suit
based on actionable documents, i.e., the subject promissory notes. In
particular, SCA No. 1759 deals with whether or not Unicapital and BPI, et
al, abused the manner in which they demanded payment from Consing,
Jr., while Civil Case No. 99-1418 deals with whether or not Unicapital may
demand payment from Consing, Jr. based on the subject promissory
notes. Clearly, a resolution in one case would have no practical effect as
the core issues and reliefs sought in each case are separate and distinct
from the other.
Likewise, as the CA correctly pointed out, the RTC-Makati City could not
have been failured in retaining Civil Case No. 99-1418 in its dockets since
pre-trial procedures have already been undertaken therein and, thus, its
consolidation with SCA No. 1759 pending before the RTC-Pasig City
would merely result in complications on the part of the latter court or

squander the resources or remedies already utilized in Civil Case No. 991418.93 In this light, aside from the perceived improbability of having
conflicting decisions, the consolidation of SCA No. 1759 and Civil Case
No. 99-1418 would, contrary to its objective, only delay the proceedings
and entail unnecessary costs.
All told, the Court finds the consolidation of SCA No. 1759 and Civil Case
No. 99-1418 to be improper, impelling the affirmance of the CAs ruling.
Consequently, the petition in G.R. No. 192073 must also be denied.
WHEREFORE, the petitions in G.R. Nos. 175277, 175285 and 192073 are
DENIED. Accordingly, the Court of Appeals Joint Decision dated October
20, 2005 and Resolution dated October 25, 2006 in CA-G.R. SP Nos.
64019 and 64451 and the Decision dated September 30, 2009 and
Resolution dated April 28, 2010 in CA-G.R. No. 101355 are hereby
AFFIRMED.
ESTELA
Associate Justice
Republic
SUPREME
Manila

M.

of

PERLAS-BERNABE

the

Philippines
COURT

THIRD DIVISION
G.R. No. 181416

November 11, 2013

MEDICAL PLAZA MAKATI CONDOMINIUM CORPORATION, Petitioner,

vs.
ROBERT H. CULLEN, Respondent.
DECISION

PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of
Court assailing the Court of Appeals (CA) Decision1 dated July 10, 2007
and Resolution2 dated January 25, 2008 in CA-G.R. CV No. 86614. The
assailed decision reversed and set aside the September 9, 2005 Order 3 of
the Regional Trial Court (RTC) of Makati, Branch 58 in Civil Case No. 031018; while the assailed resolution denied the separate motions for
reconsideration filed by petitioner Medical Plaza Makati Condominium
Corporation (MPMCC) and Meridien Land Holding, Inc. (MLHI).

Hence, the Complaint for Damages 8 filed by respondent against petitioner

and MLHI, the pertinent portions of which read:
xxxx
6. Thereafter, plaintiff occupied the said condominium unit no.
1201 and religiously paid all the corresponding monthly
contributions/association dues and other assessments imposed on
the same. For the years 2000 and 2001, plaintiff served as
President and Director of the Medical Plaza Makati Condominium
Corporation;

The factual and procedural antecedents are as follows:

Respondent Robert H. Cullen purchased from MLHI condominium Unit No.
1201 of the Medical Plaza Makati covered by Condominium Certificate of
Title No. 45808 of the Register of Deeds of Makati. Said title was later
cancelled and Condominium Certificate of Title No. 64218 was issued in
the name of respondent.
On September 19, 2002, petitioner, through its corporate secretary, Dr.
Jose Giovanni E. Dimayuga, demanded from respondent payment for
alleged unpaid association dues and assessments amounting
to P145,567.42. Respondent disputed this demand claiming that he had
been religiously paying his dues shown by the fact that he was previously
elected president and director of petitioner.4 Petitioner, on the other hand,
claimed that respondents obligation was a carry-over of that of
MLHI.5 Consequently, respondent was prevented from exercising his right
to vote and be voted for during the 2002 election of petitioners Board of
Directors.6Respondent thus clarified from MLHI the veracity of petitioners
claim, but MLHI allegedly claimed that the same had already been
settled.7 This prompted respondent to demand from petitioner an
explanation why he was considered a delinquent payer despite the
settlement of the obligation. Petitioner failed to make such explanation.

7. Nonetheless, on September 19, 2002, plaintiff was

shocked/surprised to receive a letter from the incumbent
Corporate Secretary of the defendant Medical Plaza Makati,
demanding payment of alleged unpaid association dues and
assessments arising from plaintiffs condominium unit no. 1201.
The said letter further stressed that plaintiff is considered a
delinquent member of the defendant Medical Plaza Makati.
x x x;
8. As a consequence, plaintiff was not allowed to file his certificate
of candidacy as director. Being considered a delinquent, plaintiff
was also barred from exercising his right to vote in the election of
new members of the Board of Directors x x x;
9. x x x Again, prior to the said election date, x x x counsel for the
defendant [MPMCC] sent a demand letter to plaintiff, anent the
said delinquency, explaining that the said unpaid amount is a
carry-over from the obligation of defendant Meridien. x x x;

10. Verification with the defendant [MPMCC] resulted to the

issuance of a certification stating that Condominium Unit 1201 has
an outstanding unpaid obligation in the total amount
of P145,567.42 as of November 30, 2002, which again, was
attributed by defendant [MPMCC] to defendant Meridien. x x x;
11. Due to the seriousness of the matter, and the feeling that
defendant Meridien made false representations considering that it
fully warranted to plaintiff that condominium unit 1201 is free and
clear from all liens and encumbrances, the matter was referred to
counsel, who accordingly sent a letter to defendant Meridien, to
demand for the payment of said unpaid association dues and
other assessments imposed on the condominium unit and being
claimed by defendant [MPMCC]. x x x;
12. x x x defendant Meridien claimed however, that the obligation
does not exist considering that the matter was already settled and
paid by defendant Meridien to defendant [MPMCC]. x x x;
13. Plaintiff thus caused to be sent a letter to defendant [MPMCC]
x x x. The said letter x x x sought an explanation on the fact that,
as per the letter of defendant Meridien, the delinquency of unit
1201 was already fully paid and settled, contrary to the claim of
defendant [MPMCC]. x x x;
14. Despite receipt of said letter on April 24, 2003, and to date
however, no explanation was given by defendant [MPMCC], to the
damage and prejudice of plaintiff who is again obviously being
barred from voting/participating in the election of members of the
board of directors for the year 2003;
15. Clearly, defendant [MPMCC] acted maliciously by insisting that
plaintiff is a delinquent member when in fact, defendant Meridien
had already paid the said delinquency, if any. The branding of

plaintiff as delinquent member was willfully and deceitfully

employed so as to prevent plaintiff from exercising his right to vote
or be voted as director of the condominium corporation; 16.
Defendant [MPMCC]s ominous silence when confronted with
claim of payment made by defendant Meridien is tantamount to
admission that indeed, plaintiff is not really a delinquent member;
17. Accordingly, as a direct and proximate result of the said acts of
defendant [MPMCC], plaintiff experienced/suffered from mental
anguish, moral shock, and serious anxiety. Plaintiff, being a doctor
of medicine and respected in the community further suffered from
social humiliation and besmirched reputation thereby warranting
the grant of moral damages in the amount of P500,000.00 and for
which defendant [MPMCC] should be held liable;
18. By way of example or correction for the public good, and as a
stern warning to all similarly situated, defendant [MPMCC] should
be ordered to pay plaintiff exemplary damages in the amount
of P200,000.00;
19. As a consequence, and so as to protect his rights and
interests, plaintiff was constrained to hire the services of counsel,
for an acceptance fee of P100,000.00 plus P2,500.00 per every
court hearing attended by counsel;
20. In the event that the claim of defendant [MPMCC] turned out to
be true, however, the herein defendant Meridien should be held
liable instead, by ordering the same to pay the said delinquency of
condominium unit 1201 in the amount of P145,567.42 as of
November 30, 2002 as well as the above damages, considering
that the non-payment thereof would be the proximate cause of the
damages suffered by plaintiff;9

Petitioner and MLHI filed their separate motions to dismiss the complaint
on the ground of lack of jurisdiction.10MLHI claims that it is the Housing
and Land Use Regulatory Board (HLURB) which is vested with the
exclusive jurisdiction to hear and decide the case. Petitioner, on the other
hand, raises the following specific grounds for the dismissal of the
complaint: (1) estoppel as respondent himself approved the assessment
when he was the president; (2) lack of jurisdiction as the case involves an
intra-corporate controversy; (3) prematurity for failure of respondent to
exhaust all intra-corporate remedies; and (4) the case is already moot and
academic, the obligation having been settled between petitioner and
MLHI.11

I.

On September 9, 2005, the RTC rendered a Decision granting petitioners

and MLHIs motions to dismiss and, consequently, dismissing respondents
complaint.

THE COURT A QUO HAS DECIDED THE INSTANT CASE IN A WAY NOT
IN ACCORD WITH LAW OR WITH THE APPLICABLE DECISIONS OF
THE SUPREME COURT WHEN IT TOOK COGNIZANCE OF THE
APPEAL WHILE RAISING ONLY PURE QUESTIONS OF LAW.17

The trial court agreed with MLHI that the action for specific performance
filed by respondent clearly falls within the exclusive jurisdiction of the
HLURB.12 As to petitioner, the court held that the complaint states no
cause of action, considering that respondents obligation had already been
settled by MLHI. It, likewise, ruled that the issues raised are intra-corporate
between the corporation and member.13
On appeal, the CA reversed and set aside the trial courts decision and
remanded the case to the RTC for further proceedings. Contrary to the
RTC conclusion, the CA held that the controversy is an ordinary civil action
for damages which falls within the jurisdiction of regular courts. 14 It
explained that the case hinged on petitioners refusal to confirm MLHIs
claim that the subject obligation had already been settled as early as 1998
causing damage to respondent.15 Petitioners and MLHIs motions for
reconsideration had also been denied.16
Aggrieved, petitioner comes before the Court based on the following
grounds:

THE COURT A QUO HAS DECIDED A QUESTION OF SUBSTANCE,

NOT THERETOFORE DETERMINED BY THE SUPREME COURT, OR
HAS DECIDED IT IN A WAY NOT IN ACCORD WITH LAW OR WITH THE
APPLICABLE DECISIONS OF THE SUPREME COURT WHEN IT
DECLARED THE INSTANT CASE AN ORDINARY ACTION FOR
DAMAGES INSTEAD OF AN INTRA-CORPORATE CONTROVERSY
COGNIZABLE BY A SPECIAL COMMERCIAL COURT.
II.

The petition is meritorious.

It is a settled rule that jurisdiction over the subject matter is determined by
the allegations in the complaint. It is not affected by the pleas or the
theories set up by the defendant in an answer or a motion to dismiss.
Otherwise, jurisdiction would become dependent almost entirely upon the
whims of the defendant.18 Also illuminating is the Courts pronouncement
in Go v. Distinction Properties Development and Construction, Inc.: 19
Basic as a hornbook principle is that jurisdiction over the subject matter of
a case is conferred by law and determined by the allegations in the
complaint which comprise a concise statement of the ultimate facts
constituting the plaintiffs cause of action. The nature of an action, as well
as which court or body has jurisdiction over it, is determined based on the
allegations contained in the complaint of the plaintiff, irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the

claims asserted therein. The averments in the complaint and the character
of the relief sought are the ones to be consulted. Once vested by the
allegations in the complaint, jurisdiction also remains vested irrespective of
whether or not the plaintiff is entitled to recover upon all or some of the
claims asserted therein. x x x20

Applying the two tests, we find and so hold that the case involves intracorporate controversy. It obviously arose from the intra-corporate relations
between the parties, and the questions involved pertain to their rights and
obligations under the Corporation Code and matters relating to the
regulation of the corporation.26

Based on the allegations made by respondent in his complaint, does the

controversy involve intra-corporate issues as would fall within the
jurisdiction of the RTC sitting as a special commercial court or an ordinary
action for damages within the jurisdiction of regular courts?

Admittedly, petitioner is a condominium corporation duly organized and

existing under Philippine laws, charged with the management of the
Medical Plaza Makati. Respondent, on the other hand, is the registered
owner of Unit No. 1201 and is thus a stockholder/member of the
condominium corporation. Clearly, there is an intra-corporate relationship
between the corporation and a stockholder/member.

In determining whether a dispute constitutes an intra-corporate

controversy, the Court uses two tests, namely, the relationship test and the
nature of the controversy test.21
An intra-corporate controversy is one which pertains to any of the following
relationships: (1) between the corporation, partnership or association and
the public; (2) between the corporation, partnership or association and the
State insofar as its franchise, permit or license to operate is concerned; (3)
between the corporation, partnership or association and its stockholders,
partners, members or officers; and (4) among the stockholders, partners or
associates themselves.22 Thus, under the relationship test, the existence of
any of the above intra-corporate relations makes the case intracorporate.23
Under the nature of the controversy test, "the controversy must not only be
rooted in the existence of an intra-corporate relationship, but must as well
pertain to the enforcement of the parties correlative rights and obligations
under the Corporation Code and the internal and intra-corporate regulatory
rules of the corporation."24 In other words, jurisdiction should be
determined by considering both the relationship of the parties as well as
the nature of the question involved.25

The nature of the action is determined by the body rather than the title of
the complaint.1wphi1 Though denominated as an action for damages, an
examination of the allegations made by respondent in his complaint shows
that the case principally dwells on the propriety of the assessment made
by petitioner against respondent as well as the validity of petitioners act in
preventing respondent from participating in the election of the corporations
Board of Directors. Respondent contested the alleged unpaid dues and
assessments demanded by petitioner.
The issue is not novel. The nature of an action involving any dispute as to
the validity of the assessment of association dues has been settled by the
Court in Chateau de Baie Condominium Corporation v. Moreno. 27 In that
case, respondents therein filed a complaint for intra-corporate dispute
against the petitioner therein to question how it calculated the dues
assessed against them, and to ask an accounting of association dues.
Petitioner, however, moved for the dismissal of the case on the ground of
lack of jurisdiction alleging that since the complaint was against the
owner/developer of a condominium whose condominium project was
registered with and licensed by the HLURB, the latter has the exclusive
jurisdiction. In sustaining the denial of the motion to dismiss, the Court held
that the dispute as to the validity of the assessments is purely an intra-

corporate matter between petitioner and respondent and is thus within the
exclusive jurisdiction of the RTC sitting as a special commercial court.
More so in this case as respondent repeatedly questioned his
characterization as a delinquent member and, consequently, petitioners
decision to bar him from exercising his rights to vote and be voted for.
These issues are clearly corporate and the demand for damages is just
incidental. Being corporate in nature, the issues should be threshed out
before the RTC sitting as a special commercial court. The issues on
damages can still be resolved in the same special commercial court just
like a regular RTC which is still competent to tackle civil law issues
incidental to intra-corporate disputes filed before it. 28
Moreover, Presidential Decree No. 902-A enumerates the cases over
which the Securities and Exchange Commission (SEC) exercises
exclusive jurisdiction:
xxxx
b) Controversies arising out of intra-corporate or partnership
relations, between and among stockholders, members or
associates; between any or all of them and the corporation,
partnership or association of which they are stockholders,
members, or associates, respectively; and between such
corporation, partnership or association and the State insofar as it
concerns their individual franchise or right to exist as such entity;
and
c) Controversies in the election or appointment of directors,
trustees, officers, or managers of such corporations, partnerships,
or associations.29
To be sure, this action partakes of the nature of an intra-corporate
controversy, the jurisdiction over which pertains to the SEC. Pursuant to
Section 5.2 of Republic Act No. 8799, otherwise known as the Securities

Regulation Code, the jurisdiction of the SEC over all cases enumerated
under Section 5 of Presidential Decree No. 902-A has been transferred to
RTCs designated by this Court as Special Commercial Courts. 30 While the
CA may be correct that the RTC has jurisdiction, the case should have
been filed not with the regular court but with the branch of the RTC
designated as a special commercial court. Considering that the RTC of
Makati City, Branch 58 was not designated as a special commercial court,
it was not vested with jurisdiction over cases previously cognizable by the
SEC.31 The CA, therefore, gravely erred in remanding the case to the RTC
for further proceedings.
Indeed, Republic Act (RA) No. 9904, or the Magna Carta for Homeowners
and Homeowners Associations, approved on January 7, 2010 and
became effective on July 10, 2010, empowers the HLURB to hear and
decide inter-association and/or intra-association controversies or conflicts
concerning homeowners associations. However, we cannot apply the
same in the present case as it involves a controversy between a
condominium unit owner and a condominium corporation. While the term
association as defined in the law covers homeowners associations of
other residential real property which is broad enough to cover a
condominium corporation, it does not seem to be the legislative intent. A
thorough review of the deliberations of the bicameral conference
committee would show that the lawmakers did not intend to extend the
coverage of the law to such kind of association. We quote hereunder the
pertinent portion of the Bicameral Conference Committees deliberation, to
wit:
THE CHAIRMAN (SEN. ZUBIRI). Lets go back, Mr. Chair, very quickly on
homeowners.
THE ACTING CHAIRMAN (REP. ZIALCITA). Ang sa akin lang, I think our
views are similar, Your Honor, Senator Zubiri, the entry of the condominium
units might just complicate the whole matters. So wed like to put it on
record that were very much concerned about the plight of the

Condominium Unit Homeowners Association. But this could very well be

addressed on a separate bill that Im willing to co-sponsor with the
distinguished Senator Zubiri, to address in the Condominium Act of the
Philippines, rather than address it here because it might just create a red
herring into the entire thing and it will just complicate matters, hindi ba?
THE CHAIRMAN (SEN. ZUBIRI). I also agree with you although I
sympathize with them---although we sympathize with them and we feel
that many times their rights have been also violated by abusive
condominium corporations. However, there are certain things that we have
to reconcile. There are certain issues that we have to reconcile with this
version.
In the Condominium Code, for example, they just raised a very peculiar
situation under the Condominium Code --- Condominium Corporation Act.
Its five years the proxy, whereas here, its three years. So there would
already be violation or there will be already a problem with their version
and our version. Sino ang matutupad doon? Will it be our version or their
version?
So I agree that has to be studied further. And because they have a law
pertaining to the condominium housing units, I personally feel that it would
complicate matters if we include them. Although I agree that they should
be looked after and their problems be looked into.
Probably we can ask our staff, Your Honor, to come up already with the bill
although we have no more time. Hopefully we can tackle this again on the
15th Congress. But I agree with the sentiments and the inputs of the
Honorable Chair of the House panel.
May we ask our resource persons to also probably give comments?
Atty. Dayrit.

MR. DAYRIT.
Yes I agree with you. There are many, I think, practices in their provisions
in the Condominium Law that may be conflicting with this version of ours.
For instance, in the case of, lets say, the condominium, the so-called
common areas and/or maybe so called open spaces that they may have,
especially common areas, they are usually owned by the condominium
corporation. Unlike a subdivision where the open spaces and/or the
common areas are not necessarily owned by the association. Because
sometimes --- generally these are donated to the municipality or to the city.
And it is only when the city or municipality gives the approval or the
conformity that this is donated to the homeowners association. But
generally, under PD [Presidential Decree] 957, its donated. In the
Condominium Corporation, hindi. Lahat ng mga open spaces and common
areas like corridors, the function rooms and everything, are owned by the
corporation. So thats one main issue that can be conflicting.
THE CHAIRMAN (SEN. ZUBIRI). Ill just ask for a one-minute suspension
so we can talk.
THE ACTING CHAIRMAN (REP. ZIALCITA). Unless you want to put a
catchall phrase like what we did in the Senior Citizens Act. Something like,
to the extent --- paano ba iyon? To the extent that it is practicable and
applicable, the rights and benefits of the homeowners, are hereby
extended to the --- mayroon kaming ginamit na phrase eh...to the extent
that it be practicable and applicable to the unit homeoweners, is hereby
extended, something like that. Its a catchall phrase. But then again, it
might create a...
MR. JALANDONI. It will become complicated. There will be a lot of conflict
of laws between the two laws.

THE ACTING CHAIRMAN (REP. ZIALCITA). Kaya nga eh. At saka, I dont
know. I think the --- mayroon naman silang protection sa ano eh, di ba?
Buyers decree doon sa Condominium Act. Im sure there are provisions
there eh. Huwag na lang, huwag na lang.
MR. JALANDONI. Mr. Chairman, I think it would be best if your previous
comments that youd be supporting an amendment.1wphi1 I think that
would be --- Well, that would be the best course of action with all due
respect.
THE ACTING CHAIRMAN (REP. ZIALCITA). Yeah. Okay. Thank you. So
iyon na lang final proposal naming yung catchall phrase, "With respect to
the..."32
xxxx
THE CHAIRMAN (SEN. ZUBIRI). xxx And so, what is their final decision
on the definition of homeowners?
THE ACTING CHAIRMAN (REP. ZIALCITA).
We stick to the original, Mr. Chairman. Well just open up a whole can of
worms and a whole new ball game will come into play. Besides, I am not
authorized, neither are you, by our counterparts to include the
condominium owners.
THE CHAIRMAN (SEN. ZUBIRI).
Basically that is correct. We are not authorized by the Senate nor
because we have discussed this lengthily on the floor, actually, several
months on the floor. And we dont have the authority as well for other
Bicam members to add a provision to include a separate entity that has
already their legal or their established Republic Act tackling on that

particular issue. But we just like to put on record, we sympathize with the
plight of our friends in the condominium associations and we will just
guarantee them that we will work on an amendment to the Condominium
Corporation Code. So with that we skipped, that is correct, we have to go
back to homeowners association definition, Your Honor, because we had
skipped it altogether. So just quickly going back to Page 7 because there
are amendments to the definition of homeowners. If it is alright with the
House Panel, adopt the opening phrase of Subsection 7 of the Senate
version as opening phrase of Subsection 10 of the reconciled version.
x x x x33
To be sure, RA 4726 or the Condominium Act was enacted to specifically
govern a condominium. Said law sanctions the creation of the
condominium corporation which is especially formed for the purpose of
holding title to the common area, in which the holders of separate interests
shall automatically be members or shareholders, to the exclusion of
others, in proportion to the appurtenant interest of their respective
units.34 The rights and obligations of the condominium unit owners and the
condominium corporation are set forth in the above Act.
Clearly, condominium corporations are not covered by the amendment.
Thus, the intra-corporate dispute between petitioner and respondent is still
within the jurisdiction of the RTC sitting as a special commercial court and
not the HLURB. The doctrine laid down by the Court in Chateau de Baie
Condominium Corporation v. Moreno35 which in turn cited Wack Wack
Condominium Corporation, et al v. CA36 is still a good law.
WHEREFORE, we hereby GRANT the petition and REVERSE the Court of
Appeals Decision dated July 10, 2007 and Resolution dated January 25,
2008 in CA-G.R. CV No. 86614. The Complaint before the Regional Trial
Court of Makati City, Branch 58, which is not a special commercial court,
docketed as Civil Case No. 03-1018 is ordered DISMISSED for lack of
jurisdiction. Let the case be REMANDED to the Executive Judge of the

Regional Trial Court of Makati City for re-raffle purposes among the
designated special commercial courts.
SO ORDERED.
DIOSDADO
Associate Justice

M.

PERALTA

WE CONCUR:

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 183035

January 9, 2013

OPTIMA
REALTY
CORPORATION, Petitioner,
vs.
HERTZ PHIL. EXCLUSIVE CARS, INC., Respondent.

November and December of 2005 and January and February of 2006, 12 or

a total of four months.

DECISION
SERENO, CJ.:
1

Before us is a Rule 45 Petition assailing the Decision and Resolution of

the Court of Appeals (CA) in CA-GR SP No. 99890, which reversed the
Decision3 and Resolution4 of the Regional Trial Court (RTC), Branch 13 7,
Makati City in Civil Case No. 06-672. The RTC had affirmed in toto the 22
May 2006 Decision5 of the Metropolitan Trial Court (MeTC), Branch 64,
Makati City in Civil Case No. 90842 evicting respondent Hertz Phil.
Exclusive Cars, Inc. (Hertz) and ordering it to pay back rentals and other
arrearages to petitioner Optima Realty Corporation (Optima).
Optima is engaged in the business of leasing and renting out commercial
spaces and buildings to its tenants. On 12 December 2002, it entered into
a Contract of Lease with respondent over a 131-square-meter office unit
and a parking slot in the Optima Building for a period of three years
commencing on 1 March 2003 and ending on 28 February 2006. 6 On 9
March 2004, the parties amended their lease agreement by shortening the
lease period to two years and five months, commencing on 1 October
2003 and ending on 28 February 2006.7
Renovations in the Optima Building commenced in January and ended in
November 2005.8 As a result, Hertz alleged that it experienced a 50% drop
in monthly sales and a significant decrease in its personnels productivity.
It then requested a 50% discount on its rent for the months of May, June,
July and August 2005.9
On 8 December 2005, Optima granted the request of Hertz. 10 However, the
latter still failed to pay its rentals for the months of August to December of
2005 and January to February 2006,11 or a total of seven months. In
addition, Hertz likewise failed to pay its utility bills for the months of

On 8 December 2005, Optima wrote another letter to Hertz, 13 reminding

the latter that the Contract of Lease could be renewed only by a new
negotiation between the parties and upon written notice by the lessee to
the lessor at least 90 days prior to the termination of the lease period. 14 As
no letter was received from Hertz regarding its intention to seek
negotiation and extension of the lease contract within the 90-day period,
Optima informed it that the lease would expire on 28 February 2006 and
would not be renewed.15
On 21 December 2005, Hertz wrote a letter belatedly advising Optima of
the formers desire to negotiate and extend the lease. 16 However, as the
Contract of Lease provided that the notice to negotiate its renewal must be
given by the lessee at least 90 days prior to the expiration of the contract,
petitioner no longer entertained respondents notice.
On 30 January 2006, Hertz filed a Complaint for Specific Performance,
Injunction and Damages and/or Sum of Money with prayer for the issuance
of a Temporary Restraining Order (TRO) and Writ of Preliminary Injunction
(Complaint for Specific Performance) against Optima. In that Complaint,
Hertz prayed for the issuance of a TRO to enjoin petitioner from
committing acts that would tend to disrupt respondents peaceful use and
possession of the leased premises; for a Writ of Preliminary Injunction
ordering petitioner to reconnect its utilities; for petitioner to be ordered to
renegotiate a renewal of the Contract of Lease; and for actual, moral and
exemplary damages, as well as attorneys fees and costs.
On 1 March 2006, Optima, through counsel, wrote Hertz a letter requiring
the latter to surrender and vacate the leased premises in view of the
expiration of the Contract of Lease on 28 February 2006. 17 It likewise
demanded payment of the sum of 420,967.28 in rental arrearages,
unpaid utility bills and other charges. 18 Hertz, however, refused to vacate

the leased premises.19 As a result, Optima was constrained to file before

the MeTC a Complaint for Unlawful Detainer and Damages with Prayer for
the Issuance of a TRO and/or Preliminary Mandatory Injunction (Unlawful
Detainer Complaint) against Hertz.20
On 14 March 2006, Summons for the Unlawful Detainer Complaint was
served on Henry Bobiles, quality control supervisor of Hertz, who complied
with the telephone instruction of manager Rudy Tirador to receive the
Summons.21
On 28 March 2006, or 14 days after service of the Summons, Hertz filed a
Motion for Leave of Court to file Answer with Counterclaim and to Admit
Answer with Counterclaim (Motion for Leave to File Answer). 22 In that
Motion, Hertz stated that, "in spite of the defective service of summons, it
opted to file the instant Answer with Counterclaim with Leave of Court." 23 In
the same Motion, it likewise prayed that, in the interest of substantial
justice, the Answer with Counterclaim attached to the Motion for Leave to
File Answer should be admitted regardless of its belated filing, since the
service of summons was defective.24

2. the defendant corporation to pay the plaintiff the amount of Four

Hundred Twenty Thousand Nine Hundred Sixty Seven Pesos and
28/100 (P420,967.28) representing its rentals arrearages and
utility charges for the period of August 2005 to February 2006,
deducting therefrom defendants security deposit;
3. the defendant corporation to pay the amount of Fifty Four
Thousand Two Hundred Pesos (P54,200.00) as a reasonable
monthly compensation for the use and occupancy of the premises
starting from March 2006 until possession thereof is restored to
the plaintiff; and
4. the defendant corporation to pay the amount of Thirty Thousand
Pesos (P30,000.00) as and for attorneys fees; and
5. the cost of suit.
SO ORDERED.27
Hertz appealed the MeTCs Decision to the RTC.28

On 22 May 2006, the MeTC rendered a Decision, 25 ruling that petitioner

Optima had established its right to evict Hertz from the subject premises
due to nonpayment of rentals and the expiration of the period of
lease.26 The dispositive portion of the Decision reads:

Finding no compelling reason to warrant the reversal of the MeTCs

Decision, the RTC affirmed it by dismissing the appeal in a
Decision29 dated 16 March 2007.

WHEREFORE, premises considered, the Court hereby renders judgment

for the plaintiff and against the defendant, ordering:

On 18 June 2007, the RTC denied

Reconsideration of its assailed Decision.30

1. the defendant corporation and all persons claiming rights from it

to immediately vacate the leased premises and to surrender
possession thereof to the plaintiff;

respondents

Motion

for

Hertz thereafter filed a verified Rule 42 Petition for Review on Certiorari

with the CA.31
On appeal, the CA ruled that, due to the improper service of summons, the
MeTC failed to acquire jurisdiction over the person of respondent Hertz.

The appellate court thereafter reversed the RTC and remanded the case
to the MeTC to ensure the proper service of summons. Accordingly, the CA
issued its 17 March 2008 Decision, the fallo of which reads:
WHEREFORE, premises considered, the May 22, 2006 Decision of the
Metropolitan Trial Court of Makati City, Branch 64, in Civil Case No. 90842,
and both the March 16, 2007 Decision, as well as the June 18, 2007
Resolution, of the Regional Trial Court of Makati City, Branch 137, in Civil
Case No. 06-672, are hereby REVERSED, ANNULLED and SET ASIDE
due to lack of jurisdiction over the person of the defendant corporation
HERTZ. This case is hereby REMANDED to the Metropolitan Trial Court of
Makati City, Branch 64, in Civil Case No. 90842, which is DIRECTED to
ensure that its Sheriff properly serve summons to only those persons listed
in Sec. 11, Rule 14 of the Rules of Civil Procedure in order that the MTC
could acquire jurisdiction over the person of the defendant corporation
HERTZ.

2. Whether the unlawful detainer case is barred by litis pendentia;

and
3. Whether the ejectment of Hertz and the award of damages,
attorneys fees and costs are proper.
THE COURTS RULING
We grant the Petition and reverse the assailed Decision and Resolution of
the appellate court.
I
The MeTC acquired jurisdiction over the person of respondent Hertz.

SO ORDERED.32

In civil cases, jurisdiction over the person of the defendant may be

acquired either by service of summons or by the defendants voluntary
appearance in court and submission to its authority.35

Petitioners Motion for Reconsideration of the CAs Decision was denied in

a Resolution dated 20 May 2008.33

In this case, the MeTC acquired jurisdiction over the person of respondent
Hertz by reason of the latters voluntary appearance in court.

Aggrieved by the ruling of the appellate court, petitioner then filed the
instant Rule 45 Petition for Review on Certiorari with this Court. 34

In Philippine Commercial International Bank v. Spouses Dy,36 we had

occasion to state:

THE ISSUES

Preliminarily, jurisdiction over the defendant in a civil case is acquired

either by the coercive power of legal processes exerted over his person, or
his voluntary appearance in court. As a general proposition, one who
seeks an affirmative relief is deemed to have submitted to the jurisdiction
of the court. It is by reason of this rule that we have had occasion to
declare that the filing of motions to admit answer, for additional time to file
answer, for reconsideration of a default judgment, and to lift order of
default with motion for reconsideration, is considered voluntary submission

As culled from the records, the following issues are submitted for
resolution by this Court:
1. Whether the MeTC properly acquired jurisdiction over the
person of respondent Hertz;

to the court's jurisdiction. This, however, is tempered by the concept of

conditional appearance, such that a party who makes a special
appearance to challenge, among others, the court's jurisdiction over his
person cannot be considered to have submitted to its authority.
Prescinding from the foregoing, it is thus clear that:
(1) Special appearance operates as an exception to the general
rule on voluntary appearance;

and lack of cause of action.38 Finally, it even asserted its own counterclaim
against Optima.39
Measured against the standards in Philippine Commercial International
Bank, these actions lead to no other conclusion than that Hertz voluntarily
appeared before the court a quo. We therefore rule that, by virtue of the
voluntary appearance of respondent Hertz before the MeTC, the trial court
acquired jurisdiction over respondents.
II

(2) Accordingly, objections to the jurisdiction of the court over the

person of the defendant must be explicitly made, i.e., set forth in
an unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the
jurisdiction of the court, especially in instances where a pleading
or motion seeking affirmative relief is filed and submitted to the
court for resolution. (Emphases supplied)

The instant ejectment case is not barred by litis pendentia. Hertz contends
that the instant case is barred by litis pendentia because of the pendency
of its Complaint for Specific Performance against Optima before the RTC.
We disagree.
Litis pendentia requires the concurrence of the following elements:

In this case, the records show that the following statement appeared in
respondents Motion for Leave to File Answer:

(1) Identity of parties, or at least their representation of the same

interests in both actions;

In spite of the defective service of summons, the defendant opted to file

the instant Answer with Counterclaim with Leave of Court, upon inquiring
from the office of the clerk of court of this Honorable Court and due to its
notice of hearing on March 29, 2005 application for TRO/Preliminary
Mandatory Injunction was received on March 26, 2006. (Emphasis
supplied)37

(2) Identity of rights asserted and reliefs prayed for, the relief being
founded on the same facts; and

Furthermore, the Answer with Counterclaim filed by Hertz never raised the
defense of improper service of summons. The defenses that it pleaded
were limited to litis pendentia, pari delicto, performance of its obligations

(3) Identity with respect to the two preceding particulars in the two
cases, such that any judgment that may be rendered in the
pending case, regardless of which party is successful, would
amount to res judicata in the other case.40
Here, while there is identity of parties in both cases, we find that the rights
asserted and the reliefs prayed for under the Complaint for Specific

Performance and those under the present Unlawful Detainer Complaint

are different. As aptly found by the trial court:
The Complaint for Specific Performance] seeks to compel plaintiff-appellee
Optima to: (1) renegotiate the contract of lease; (2) reconnect the utilities
at the leased premises; and (3) pay damages. On the other hand, the
unlawful detainer case sought the ejectment of defendant-appellant Hertz
from the leased premises and to collect arrears in rentals and utility bills. 41
As the rights asserted and the reliefs sought in the two cases are different,
we find that the pendency of the Complaint for Specific Performance is not
a bar to the institution of the present case for ejectment.
III
The eviction of respondent and the award of damages,
attorneys fees and costs were proper.
We find that the RTCs ruling upholding the ejectment of Hertz from the
building premises was proper. First, respondent failed to pay rental
arrearages and utility bills to Optima; and, second, the Contract of Lease
expired without any request from Hertz for a renegotiation thereof at least
90 days prior to its expiration.
On the first ground, the records show that Hertz failed to pay rental
arrearages and utility bills to Optima. Failure to pay timely rentals and
utility charges is an event of default under the Contract of Lease, 42 entitling
the lessor to terminate the lease.
Moreover, the failure of Hertz to pay timely rentals and utility charges
entitles the lessor to judicially eject it under the provisions of the Civil
Code.43

On the second ground, the records likewise show that the lease had
already expired on 28 February 2006 because of Hertzs failure to request
a renegotiation at least 90 days prior to the termination of the lease period.
The pertinent provision of the Contract of Lease reads:
x x x. The lease can be renewed only by a new negotiation between the
parties upon written notice by the LESSEE to be given to the LESSOR at
least 90 days prior to termination of the above lease period. 44
As the lease was set to expire on 28 February 2006, Hertz had until 30
November 2005 within which to express its interest in negotiating an
extension of the lease with Optima. However, Hertz failed to communicate
its intention to negotiate for an extension of the lease within the time
agreed upon by the parties. Thus, by its own provisions, the Contract of
Lease expired on 28 February 2006.1wphi1
Under the Civil Code, the expiry of the period agreed upon by the parties is
likewise a ground for judicial ejectment.45
As to the award of monthly compensation, we find that Hertz should pay
adequate compensation to Optima, since the former continued to occupy
the leased premises even after the expiration of the lease contract. As the
lease price during the effectivity of the lease contract was P54,200 per
month, we find it to be a reasonable award.
Finally, we uphold the award of attorney's fees in the amount of P30,000
and judicial costs in the light of Hertz's unjustifiable and unlawful retention
of the leased premises, thus forcing Optima to file the instant case in order
to protect its rights and interest.

From the foregoing, we find that the MeTC committed no reversible error in
its 22 May 2006 Decision, and that the RTC committed no reversible error
either in affirming the MeTC's Decision.
WHEREFORE, in view of the foregoing, the instant Rule 45 Petition for
Review is GRANTED. The assailed Decision and Resolution of the Court
of Appeals in CA-G.R. SP No. 99890 are hereby REVERSED and SET
ASIDE. The Decision of the Regional Trial Court, Branch 13 7, Makati City
in Civil Case No. 06-672 affirming in toto the Decision of the Metropolitan
Trial Court, Branch 64, Makati City in Civil Case No. 90842 is hereby
REINSTATED and AFFIRMED.
SO ORDERED.
Republic
SUPREME
Manila

of

the

Philippines
COURT

Challenged in this petition are the January 28, 2010 Decision 1 of the Court
of Appeals (CA) and its October 27, 2010 Resolution, 2 in CA-G.R. SP No.
101066, which affirmed the March 16, 2007 Decision 3 and June 29, 2007
Resolution4 of the National Labor Relations Com;nission (NLRC),
reversing the decision5 of the Labor Arbiter (LA) in this illegal dismissal
case, entitled "Marian Brigitte Contreras v. A1axiCare PCJB CJGNA Health
Care, et. al."
The Facts
Sometime in March 2003, Maxicare Healthcare Corporation (Maxicare)
hired Dr. Marian Brigitte A. Contreras (Dr. Contreras) as a retainer doctor
at the Philippine National Bank (PNB) Head Office, Macapagal Avenue,
Roxas Boulevard, Manila. Under their verbal agreement, Dr. Contreras
would render medical services for one year atP250.00 per hour. Her
retainer fee would be paid every 15th and 30th of each month based on
her work schedule which was every Tuesday, Thursday and Friday from
6:00 oclock in the morning to 5:00 oclock in the afternoon. 6

THIRD DIVISION
G.R. No. 194352

January 30, 2013

MAXICARE
PCIB
CIGNA HEALTHCARE
(now
MAXICARE
HEALTHCARE CORPORATION), ERIC S. NUBLA, JR. M.D. and RUTH
A.
ASIS,
M.D., Petitioners,
vs.
MARIAN BRIGITTE A. CONTRERAS, M.D., Respondent.
DECISION
MENDOZA, J.:

The controversy started when, on July 3, 2003, Dr. Ruth A. Asis,

Maxicares medical specialist on Corporate Accounts, informed Dr.
Contreras that she was going to be transferred to another account after a
month. On August 4, 2003, the Service Agreement between Dr. Contreras
and Dr. Eric S. Nubla, Maxicares Vice-President for Medical Services, was
executed, effecting the transfer of the former to Maybank Philippines
(Maybank) for a period of four (4) months, from August 5, 2003 to
November 29, 2003, with a retainer fee of P168.00 per hour.
Dr. Contreras reported to Maybank for one (1) day only. On August 8,
2003, she filed a complaint before the LA claiming that she was
constructively dismissed. Maxicare, on the other hand, insisted that there
was no constructive dismissal.
Ruling of the Labor Arbiter

On November 29, 2005, the LA rendered a decision dismissing the

complaint of Dr. Contreras for lack of merit. The pertinent portions of the
LAs ruling read:
If indeed complainant was forced to sign the contract of August 4, 2003,
she could not have reported to that assignment under it in the first place. In
reporting so, she not only ratified the contract of service she signed but
also waived all her rights under their previous agreement she is supposed
to be entitled to enforce. It may be that there present under the
circumstance of a breach of contractual obligation under the previous
undertaking which partakes the nature of constructive dismissal based on
evidence at hand. At that then, complainant should have at such point
ventilated the matter before this forum. She did not. Instead, she
proceeded to sign or execute the questioned Service Agreement with the
respondent under the terms and conditions therein stated. To a
professional like her, a Doctor, complainant should have refused as she is
at liberty, in refusing to sign even if what she claimed there appears a
threat of dismissal. In this case, she even confirmed what she signed by
reporting to duty thereafter. And only after examining what she signed that
she realized she thought of initiating the present complaint. In this regard,
absent any showing that she was forced to execute the disputed service
agreement of August 4, 2003, complainants complaint for constructive
dismissal can hardly be sustained by a later change of heart.
Finding substantial basis to support the validity of the Service Agreement
of August 4, 2003 entered into by the parties, the present complaint for
constructive dismissal must necessarily fail. Consequent claim as relief
therefor has no basis.7
Ruling of the NLRC
On March 16, 2007, upon appeal, the NLRC rendered a
decision8 reversing and setting aside the LAs decision. It declared that Dr.
Contreras was illegally dismissed and ordered her reinstatement to her

former or substantially equivalent position and the payment of her

backwages.
The NLRC explained that the "execution of a Service Agreement for
another retainership with lower salary does not negate constructive
dismissal arising from the termination of complainants PNB retainership
without either just or authorized cause but simply is anchored on alleged
complaints which even Dr. Eric Nubla recognize to be fictitious." 9 Dr.
Contreras signed the Service Agreement on August 4, 2003, and later
repudiated it with a notice to Maxicare that she could not go on serving
under such a disadvantageous situation. The disadvantage she was
referring to was the disparity in remuneration between the PNB
retainership with 250.00 per hour and that of Maybank with 168.00 per
hour. The clear economic prejudice validated her claim of having
reservation on the Service Agreement prior to her signature. She signed
the new agreement because it, being a contract of adhesion, gave her no
realistic chance to haggle for her job. Thus, the NLRC disposed:
WHEREFORE, premises considered, the Decision appealed from is
hereby REVERSED and SET ASIDE and a new one entered declaring
complainant was illegally dismissed. Accordingly, respondents are hereby
ordered to reinstate complainant to her former or substantially equivalent
position and to pay her backwages from the time her PNB retainership was
terminated until the finality of this Decision.
SO ORDERED.10
Ruling of the Court of Appeals
On January 28, 2010, the CA affirmed the conclusions reached by the
NLRC.

On the issue regarding the existence or non-existence of an employeremployee relationship, the CA ruled that Maxicare could not raise the said
issue for the first time on appeal. Nonetheless, the CA ruled that the
records showed that there existed an employer-employee relationship
between Maxicare and Dr. Contreras for the following reasons: 1] Maxicare
exercised significant control in her hiring and the conduct of her work; 2]
Maxicare was the one who engaged her services; 3] Maxicare determined
and prepared her work assignments, like attending to PNB members
needing medical consultation and performing such other duties as may be
assigned by

that not only was her transfer made for valid or legitimate grounds, such as
genuine business necessity, but also that such transfer was not
unreasonable, inconvenient, or prejudicial to her.14
Maxicare filed a motion for reconsideration but it was denied by the CA in
its Resolution,15 dated October 27, 2010.
Not in conformity with the adverse decision, Maxicare filed this petition
anchored on the following
GROUNDS

Maxicare to her from time to time; 4] Maxicare determined her specific

work schedules, which was for her to render services from 1:00 to 5:00
oclock in the afternoon "every Tuesday and Thursday;" 11 and 5] Maxicare
prescribed the conditions of work for her, which were a) that she had to
abide by the company rules and regulations, b) that she would keep
inviolate all company records, documents, and properties and from
disclosing or reproducing these records and documents to anyone without
proper authority, c) that she had to surrender upon request for, or upon
termination of her services, such records, documents, and properties to
Maxicare; d) that Maxicare, through its Customer Care coordinator, Ms.
Cecile Samonte, would monitor her work; and e) that she was
compensated not according to the result of her efforts, but according to the
amount of time she spent at the PNB clinic.12
The CA added that Maxicare impliedly admitted that an employeremployee relationship existed between both parties by arguing that she
was not constructively dismissed. Hence, Maxicare was estopped from
questioning her status as its employee.13
On the issue of whether or not Dr. Contreras was constructively dismissed,
the CA ruled that her transfer to Maybank, which resulted in a diminution of
her salary, was prejudicial to her interest and amounted to a constructive
dismissal. It stated that Maxicare, as employer, had the burden of proving

I
THE COURT OF APPEALS, IN RENDERING THE ASSAILED
DECISION,
ERRONEOUSLY
SET
ASIDE,
EVEN
CONTRADICTED, A PLETHORA OF JURISPRUDENCE THAT
LACK OR ABSENCE OF JURISDICTION MAY BE RAISED FOR
THE FIRST TIME EVEN ON APPEAL.
II
THE COURT OF APPEALS MISAPPLIED THE 4-TIERED TEST
TO DETERMINE THE EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP WITHOUT CONCRETE BASIS.16
Maxicares position
Maxicare argues that questions on jurisdiction "may be raised at any stage
of the proceedings, even on appeal, and the right to do so is not lost by
waiver or by estoppel." Maxicare likewise asserts that "if the issue on
jurisdiction may be resolved by an appellate tribunal motu propio when the
same has not been raised in the courts below, with more reason that the

same should be allowed to be considered and decided upon by the

appellate court when, as in the present petition, the said issue has been
raised in the pleadings before the appellate court." 17
Considering that Dr. Contreras submitted evidence to support not only her
claim of constructive dismissal but also the existence of an employeremployee relationship, its act of raising said issue should be sufficient
ground for the CA to consider and rule on the issue of jurisdiction. 18

Dr. Contrerass position

On the other hand, Dr. Contreras basically counters that Maxicare did not
raise the issue of the existence of an employer-employee relationship
before the LA. It also did not question such point in the NLRC. Maxicare
brought up the matter for the first time only in the CA.
The Courts Ruling

Maxicare claims that there could have been no employer-employee

relationship arising from the oral medical retainership agreement between
the parties. It contends that it could not have effectively exercised control
over the means and method adopted by Dr. Contreras in accomplishing
her work as a medical retainer; that it did not determine the manner in
which she conducted physical examination, immunized, diagnosed, or
treated her patients; that Dr. Contreras confirmed that it paid her retainer
fees and deducted only 10% "withholding tax payable-expanded;" that she
was not in the list of Maxicares payroll; and that Maxicare did not deduct
SSS contributions from the retainer fees that Dr. Contreras received.
Hence, the above circumstances disprove the presence of employeremployee relationship. On the contrary, they strongly indicate a case of an
independent contractor.19

The petition has no merit at all.

Maxicare went on further by stating that Dr. Contreras was an independent

contractor because she rendered services for a few hours a week, giving
her free time to pursue her private practice as a physician and that upon
the terms of their agreement, either party could terminate the arrangement
upon one months advance notice.20

Indeed, Maxicare is already estopped from belatedly raising the issue of

lack of jurisdiction considering that it has actively participated in the
proceedings before the LA and the NLRC. The Court has consistently held
that "while jurisdiction may be assailed at any stage, a partys active
participation in the proceedings before a court without jurisdiction will estop
such party from assailing the lack of it." It is an undesirable practice of a
party to participate in the proceedings, submit his case for decision and
then accept the judgment, if favorable, but attack it for lack of jurisdiction,
when adverse.23

Finally, Maxicare contends that Dr. Contreras is a highly educated person

who freely, willingly and voluntarily signed the new Medical Retainership
Agreement.21 Therefore, there is no truth to her claim that she was forced
to sign said agreement.22

As a rule, a party who deliberately adopts a certain theory upon which the
case is tried and decided by the lower court, will not be permitted to
change theory on appeal. Points of law, theories, issues and arguments
not brought to the attention of the lower court need not be, and ordinarily
will not be, considered by a reviewing court, as these cannot be raised for
the first time at such late stage. It would be unfair to the adverse party who
would have no opportunity to present further evidence material to the new
theory, which it could have done had it been aware of it at the time of the
hearing before the trial court. To permit Maxicare in this case to change its
theory on appeal would thus be unfair to Dr. Contreras, and would offend
the basic rules of fair play, justice and due process.

In the case at bench, it may be recalled that Dr. Contreras filed a complaint
for illegal dismissal against Maxicare before the LA. Maxicare was given
the chance to defend its case before the LA. In fact, the LA decision
favored Maxicare when it ruled that there was no illegal dismissal. On
appeal, however, the NLRC reversed and set aside the LAs decision and
ordered Dr. Contrerass reinstatement with payment of backwages. Upon
the denial of its motion for reconsideration, Maxicare elevated its case to
the CA raising the issue of jurisdiction for the first time.
Undeniably, Maxicare never questioned the LAs jurisdiction from the very
beginning and never raised the issue of employer-employee relationship
throughout the LA proceedings. Surely, Maxicare is not unaware of Article
217 of the Labor Code which enumerates the cases where the LA has
exclusive and original jurisdiction. Maxicare definitely knows the basic rule
that the LA can exercise jurisdiction over cases only when there is an
employer-employee relationship between the parties in dispute.
If Maxicare was of the position that there was no employer-employee
relationship existing between Maxicare and Dr. Contreras, it should have
questioned the jurisdiction of the LA right away. Surprisingly, it never did.
Instead, it actively participated in the LA proceedings without bringing to
the LAs attention the issue of employer-employee relationship.
On appeal before the NLRC, the subject issue was never raised either.
Maxicare only raised the subject issue for the first time when it filed a
petition in the CA challenging the adverse decision of the NLRC. It is,
therefore, estopped from assailing the jurisdiction of the LA and the NLRC.
It is true that questions of jurisdiction may be raised at any stage. It is also
true, however, that in the interest of fairness, questions challenging the
jurisdiction of courts will not be tolerated if the party questioning such
jurisdiction actively participates in the court proceedings and allows the
court to pass judgment on the case, and then questions the propriety of
said judgment after getting an unfavorable decision. It must be noted that

Maxicare had two (2) chances of raising the issue of jurisdiction: first, in
the LA level and second, in the NLRC level. Unfortunately, it remained
silent on the issue of jurisdiction while actively participating in both
tribunals. It was definitely too late for Maxicare to open up the issue of
jurisdiction in the CA.
The Court cannot tolerate this kind of procedural strategy on Maxicares
part because it would be unfair to Dr. Contreras who would no longer be
able to present further evidence material to the new issue raised on
appeal. Maxicares lapse in procedure has proved fatal to its cause and
therefore, it should suffer the consequences. The Court has been
consistent in its ruling in a long line of cases, the latest of which is Duty
Free Philippines Services, Inc., v. Manolito Q. Tria,24 where it was written:
It was only in petitioners Petition for Certiorari before the CA did it impute
liability on DFP as respondents direct employer and as the entity who
conducted the investigation and initiated respondents termination
proceedings. Obviously, petitioner changed its theory when it elevated the
NLRC decision to the CA. The appellate court, therefore, aptly refused to
consider the new theory offered by petitioner in its petition. As the object of
the pleadings is to draw the lines of battle, so to speak, between the
litigants, and to indicate fairly the nature of the claims or defenses of both
parties, a party cannot subsequently take a position contrary to, or
inconsistent, with its pleadings. It is a matter of law that when a party
adopts a particular theory and the case is tried and decided upon that
theory in the court below, he will not be permitted to change his theory on
appeal. The case will be reviewed and decided on that theory and not
approached and resolved from a different point of view.
The review of labor cases is confined to questions of jurisdiction or grave
abuse of discretion. The alleged absence of employer-employee
relationship cannot be raised for the first time on appeal. The resolution of
this issue requires the admission and calibration of evidence and the LA
and the NLRC did not pass upon it in their decisions. We cannot permit

petitioner to change its theory on appeal. It would be unfair to the adverse

party who would have no more opportunity to present further evidence,
material to the new theory, which it could have done had it been aware
earlier of the new theory before the LA and the NLRC. More so in this case
as the supposed employer of respondent which is DFP was not and is not
a party to the present case.
In Pamplona Plantation Company v. Acosta, petitioner therein raised for
the first time in its appeal to the NLRC that respondents therein were not
its employees but of another company. In brushing aside this defense, the
Court held:
x x x Petitioner is estopped from denying that respondents worked for
it.1wphi1 In the first place, it never raised this defense in the proceedings
before the Labor Arbiter. Notably, the defense it raised pertained to the
nature of respondents' employment, i.e., whether they are seasonal
employees, contractors, or worked under the pakyaw system. Thus, in its
Position Paper, petitioner alleged that some of the respondents are
coconut filers and copra hookers or sakadors; some are seasonal
employees who worked as scoopers or lugiteros; some are contractors;
and some worked under the pakyaw system. In support of these
allegations, petitioner even presented the company's payroll which will
allegedly prove its allegations.
By setting forth these defenses, petitioner, in effect, admitted that
respondents worked for it, albeit in different capacities. Such allegations
are negative pregnant - denials pregnant with the admission of the
substantial facts in the pleading responded to which are not squarely
denied, and amounts to an acknowledgment that respondents were indeed
employed by petitioner.
Also in Telephone Engineering & Service Co., Inc. v. WCC, et al., the Court
held that the lack of employer-employee relationship is a matter of defense
that the employer should properly raise in the proceedings below. The

determination of this relationship involves a finding of fact, which is

conclusive and binding and not subject to review by this Court.
In this case, petitioner insisted that respondent was dismissed from
employment for cause and after the observance of the proper procedure
for termination. Consequently, petitioner cannot now deny that respondent
is its employee. While indeed, jurisdiction cannot be conferred by acts or
omission of the parties, petitioner's belated denial that it is the employer of
respondent is obviously an afterthought, a devise to defeat the law and
evade its obligations.
It is a fundamental rule of procedure that higher courts are precluded from
entertaining matters neither alleged in the pleadings nor raised during the
proceedings below, but ventilated for the first time only in a motion for
reconsideration or on appeal. Petitioner is bound by its submissions that
respondent is its employee and it should not be permitted to change its
theory. Such change of theory cannot be tolerated on appeal, not due to
the strict application of procedural rules, but as a matter of fairness.
[Emphases supplied]
WHEREFORE, the petition is DENIED.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 196907

March 13, 2013

NIPPON
EXPRESS
(PHILIPPINES)
CORPORATION, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE, Respondent.
DECISION
MENDOZA, J.:
Before this court is a Petition for Review on Certiorari under Rule 45 of the
Revised Rules of Court, seeking to set aside the May 13, 2011
Resolution1 of the Court of Tax Appeals (CTA) En Bane in C.T.A. E. B. No.
505 (C.T.A. Case No. 6688) entitled Commissioner of Internal Revenue v.
Nippon Express (Philippines) Corporation.
The Facts
Petitioner Nippon Express (Philippines) Corporation (petitioner) is a
corporation duly organized and registered with the Securities and

Exchange Commission. It is also a value-added tax (VAT)-registered entity

with the Large Taxpayer District of the Bureau of Internal Revenue
(BIR).2 For the year 2001, it regularly filed its amended quarterly VAT
returns. On April 24, 2003, it filed an administrative claim for refund
of P20,345,824.29 representing excess input tax attributable to its
effectively zero-rated sales in 2001, computed as follows: 3
Output VAT from Taxable Sales (10%)

P 5,827,022.20

Less: Input VAT from Taxable Sales

(1,789,111.32)

Input VAT from Zero-rated Sales

(24,383,735.17)

Refundable Excess Input VAT

(P 20,345,824.29)

Pending review by the BIR, on April 25, 2003, petitioner filed a petition for
review with the CTA, requesting for the issuance of a tax credit certificate
in the amount of P20,345,824.29.4
On January 26, 2009, the First Division of the CTA denied the petition for
insufficiency of evidence.5 Upon motion for reconsideration, however, the
CTA First Division promulgated its Amended Decision, 6 dated March 24,
2009, ordering the respondent, Commissioner of Internal Revenue (CIR) to
issue a tax credit certificate in favor of petitioner in the amount
of P10,928,607.31 representing excess or unutilized input tax for the
second, third and fourth quarters of 2001. The CTA First Division took
judicial notice of the records of C.T.A. Case No. 6967, also involving
petitioner, to show that the claim of input tax had not been applied against
any output tax in the succeeding quarters. As to the timeliness of the filing
of petitioners administrative and judicial claims, the CTA First Division
ruled that while the administrative application for refund was made within
the two-year prescriptive period, petitioners immediate recourse to the
court was a premature invocation of the courts jurisdiction due to the nonobservance of the procedure in Section 112(D) 7 of the National Internal
Revenue Code (NIRC) providing that an appeal may be made with the
CTA within 30 days from the receipt of the decision of the CIR denying the
claim or after the expiration of the 120-day period without action on the
part of the CIR. Considering, however, that the CIR did not register his

objection when he filed his Answer, he is deemed to have waived his

objection thereto.8 The CIR sought reconsideration but his motion was
denied in the June 16, 2009 Resolution9 of the CTA First Division.
The CIR elevated the case to the CTA En Banc which, on June 11, 2010,
reversed and set aside the March 24, 2009 Amended Decision and the
June 16, 2009 Resolution of the CTA First Division. 10 Accordingly,
petitioners claim for refund or issuance of a tax credit certificate was
denied for lack of merit. The CTA En Banc ruled that the sales invoices
issued by petitioner were insufficient to establish its zero-rated sale of
services. Without the proper VAT official receipts issued to its clients, the
payments received by petitioner could not qualify for zero-rating for VAT
purposes. As a result, the claimed input VAT payments allegedly
attributable to such sales could not be granted.
The CTA En Banc later changed its position on September 22, 2010 when
it issued its Amended Decision11granting petitioners motion for
reconsideration, setting aside its own June 11, 2010 Decision and affirming
the March 24, 2009 Amended Decision of the CTA First Division. In view of
the pronouncement of the Court in the case of AT&T Communications
Services Philippines, Inc. v. Commissioner of Internal Revenue, 12 that
Section 113 of the NIRC did not distinguish between a sales invoice and
an official receipt, the CTA En Banc found petitioners sales invoices to be
acceptable proof to support its claim for refund or issuance of a tax credit
certificate representing its excess or unutilized input VAT arising from zerorated or effectively zero-rated sales.
The CIR filed a motion for reconsideration, arguing that the sales invoice,
which supported the sale of goods, was not the same as the official
receipt, which must support the sale of services. In addition, it pointed out
that the CTA had no jurisdiction over the petition for review because it was
filed before the lapse of the 120-day period accorded to the CIR to decide
on its administrative claim for input VAT refund.13
In another reversal of opinion, the CTA En Banc set aside the March 24,
2009 Amended Decision and the June 16, 2009 Resolution of the CTA
First Division and dismissed the petition for review for lack of jurisdiction.
In its May 13, 2011 Resolution, 14 the CTA En Banc held that the 120-day

period under Section 112(D) of the NIRC, which granted the CIR the
opportunity to act on the claim for refund, was jurisdictional in nature such
that petitioners failure to observe the said period before resorting to
judicial action warranted the dismissal of its petition for review for having
been prematurely filed, in accordance with the ruling in Commissioner of
Internal Revenue v. Aichi Forging Company of Asia, Inc. 15 With respect to
the use of official receipts interchangeably with sales invoices, the tax
court cited the ruling of the Court in Kepco Philippines Corporation v.
Commissioner of Internal Revenue16 which concluded that a VAT invoice
and a VAT receipt should not be confused as referring to the same thing. A
VAT invoice was the sellers best proof of the sale of the goods or services
to the buyer while the VAT receipt was the buyers best evidence of the
payment of goods and services received from the seller.

the respondents Supplemental Motion for Reconsideration, dated

December 3, 2010, which was filed after the promulgation of the
September 22, 2010 Amended Decision of the CTA En Banc. Finally,
petitioner insists that it cannot be faulted for relying on prevailing CTA
jurisprudence requiring that both administrative and judicial claims for
refund be filed within two (2) years from the date of the filing of the return
and the payment of the tax due. Because this case was filed more than
seven years prior to Aichi, the doctrine espoused therein cannot be applied
retroactively as it would impair petitioners substantial rights and will
deprive it of its right to refund.19
Petitioner is mistaken.

Hence, this petition.

The provision in question is Section 112(D) (now subparagraph C) of the

NIRC:

The Issues

Sec. 112. Refunds or Tax Credits of Input Tax

Petitioner raises the following questions:

xxx

WHETHER OR NOT THE COURT OF TAX APPEALS HAS NO

JURISDICTION TO ENTERTAIN THE INSTANT CASE. WHETHER OR
NOT THE PETITIONERS VAT INVOICES ARE INSUFFICIENT PROOF
TO SUPPORT ITS ZERO-RATED SALES.17

(D) Period within which Refund or Tax Credit of Input Taxes shall be Made.
In proper cases, the Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one hundred twenty (120)
days from the date of submission of complete documents in support of the
application filed in accordance with Subsections (A) and (B) hereof.

The Court's Ruling

The Court finds the petition to be without merit.
As regards the first issue, petitioner argues that the non-exhaustion of
administrative remedies is not a jurisdictional defect as to prevent the tax
court from taking cognizance of the case. 18 It merely renders the filing of
the case premature and makes it susceptible to dismissal for lack of cause
of action, if invoked. Considering, however, that the CIR failed to
seasonably object to the filing of the case by petitioner with the CTA, it is
deemed to have waived any defect in the petition for review. In fact,
petitioner points out that the this issue was only raised for the first time in

In case of full or partial denial of the claim for tax refund or tax credit, or
the failure on the part of the Commissioner to act on the application within
the period prescribed above, the taxpayer affected may, within thirty (30)
days from the receipt of the decision denying the claim or after the
expiration of the one hundred twenty day-period, appeal the decision or
the unacted claim with the Court of Tax Appeals. (Emphasis Supplied)
A simple reading of the abovequoted provision reveals that the taxpayer
may appeal the denial or the inaction of the CIR only within thirty (30) days
from receipt of the decision denying the claim or the expiration of the 120day period given to the CIR to decide the claim. Because the law is

categorical in its language, there is no need for further interpretation by the

courts and non-compliance with the provision cannot be justified. 20 As
eloquently stated in Rizal Commercial Banking Corporation v. Intermediate
Appellate Court and BF Homes, Inc.:21
It bears stressing that the first and fundamental duty of the Court is to
apply the law. When the law is clear and free from any doubt or ambiguity,
there is no room for construction or interpretation. As has been our
consistent ruling, where the law speaks in clear and categorical language,
there is no occasion for interpretation; there is only room for application
(Cebu Portland Cement Co. vs. Municipality of Naga, 24 SCRA-708
[1968]).
Where the law is clear and unambiguous, it must be taken to mean exactly
what it says and the court has no choice but to see to it that its mandate is
obeyed (Chartered Bank Employees Association vs. Ople, 138 SCRA 273
[1985]; Luzon Surety Co., Inc. vs. De Garcia, 30 SCRA 111 [1969]; Quijano
vs. Development Bank of the Philippines, 35 SCRA 270 [1970]).
Only when the law is ambiguous or of doubtful meaning may the court
interpret or construe its true intent. Ambiguity is a condition of admitting
two or more meanings, of being understood in more than one way, or of
referring to two or more things at the same time. A statute is ambiguous if it
is admissible of two or more possible meanings, in which case, the Court
is called upon to exercise one of its judicial functions, which is to interpret
the law according to its true intent.22
Moreover, contrary to petitioners position, the 120+30-day period is
indeed mandatory and jurisdictional, as recently ruled in Commissioner of
Internal Revenue v. San Roque Power Corporation. 23 Thus, failure to
observe the said period before filing a judicial claim with the CTA would not
only make such petition premature, but would also result in the nonacquisition by the CTA of jurisdiction to hear the said case.
Because the 120+30 day period is jurisdictional, the issue of whether
petitioner complied with the said time frame may be broached at any
stage, even on appeal. Well-settled is the rule that the question of

jurisdiction over the subject matter can be raised at any time during the
proceedings.
Jurisdiction cannot be waived because it is conferred by law and is not
dependent on the consent or objection or the acts or omissions of the
parties or any one of them. 24 Consequently, the fact that the CIR failed to
immediately express its objection to the premature filing of the petition for
review before the CTA is of no moment.1wphi1
As to petitioners contention that it relied on the previous decisions of the
CTA on the matter, the Court finds it apt to quote its ruling in San Roque:
There is also the claim that there are numerous CTA decisions allegedly
supporting the argument that the filing dates of the administrative and
judicial claims are inconsequential, as long as they are within the two-year
prescriptive period. Suffice it to state that CTA decisions do not constitute
precedents, and do not bind this Court or the public.1wphi1 That is why
CTA decisions are appealable to this Court, which may affirm, reverse or
modify the CTA decisions as the facts and the law may warrant. Only
decisions of this Court constitute binding precedents, forming part of the
Philippine legal system.25
Pursuant to the ruling of the Court in San Roque, the 120+30-day period is
mandatory and jurisdictional from the time of the effectivity of Republic Act
(R.A.) No. 8424 or the Tax Reform Act of 1997. The Court, however, took
into consideration the issuance by the BIR of Ruling No. DA-489-03, which
expressly stated that the taxpayer need not wait for the lapse of the 120day period before seeking judicial relief. Because taxpayers cannot be
faulted for relying on this declaration by the BIR, the Court deemed it
reasonable to allow taxpayers to file its judicial claim even before the
expiration of the 120-day period. This exception is to be observed from the
issuance of the said ruling on December 10, 2003 up until its reversal by
Aichi on October 6, 2010. In the landmark case of Aichi, this Court made a
definitive statement that the failure of a taxpayer to wait for the decision of
the CIR or the lapse of the 120-day period will render the tiling of the
judicial claim with the CTA premature.26 As a consequence, its
promulgation once again made it clear to the taxpayers that the 120+ 30day period must be observed.

As laid down in San Roque, judicial claims filed from January 1, 1998 until
the present should strictly adhere to the 120+ 30-day period referred to in
Section 112 of the NIRC. The only exception is the period from December
10, 2003 until October 6, 2010, during which, judicial claims may be tiled
even before the expiration of the 120-day period granted to the CIR to
decide on the claim for refund.
Based on the foregoing discussion and the ruling in San Roque, the
petition must fail because the judicial claim of petitioner was filed on April
25, 2003, only one day after it submitted its administrative claim to the
CIR. Petitioner failed to wait for the lapse of the requisite 120-day period or
the denial of its claim by the CIR before elevating the case to the CT A by
a petition for review. As its judicial claim was filed during which strict
compliance with the 120+ 30-day period was required, the Court cannot
but declare that the filing of the petition for review with the CT A was
premature and that the CTA had no jurisdiction to hear the case.
Having thus concluded, the Court sees no need to discuss other issues
which may have been raised in the petition. WHEREFORE, the petition is
DENIED.SO ORDERED
Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 176838

DECISION
REYES, J.:
This resolves the Petition for Review 1 filed by petitioner Department of
Agrarian Reform (DAR) to assail the Decision 2 dated Oct8ber 12, 2006
and Resolution3 dated January 10, 2007 of the Court of Appeals (CA) in
CA-G.R. SP No. 89693, which granted Paramount Holdings Equities, Inc.,
Jimmy Chua, Rojas Chua, Benjamin Sim, Santos C. Tan, William C. Lee
and Stewart C. Lim's (respondents) appeal from the rulings of the
Department of Agrarian Reform Adjudication Board (DARAB) in DARAB
Case No. 12284.
The Antecedents
The case stems from the petition 4 docketed as DARAB Case No. R 04030009-02, filed with the Office of the Provincial Adjudicator (PARAD) by the
DAR through Provincial Agrarian Reform Officer (PARO) Felixberto Q.
Kagahastian. The petition sought to nullify the sale to the respondents of
several parcels of land, with details of the sale as follows:
Area
Covered

New
Title

Jimmy C. Chua Tand

37140
Rojas Chua

71,517
square
meters

T196706

Golden
Mountain
Agricultural
Development
Corporation

Paramount
Holdings
Equities, Inc.

T37141

14,634
m

sq T196705

Golden
Mountain
Agricultural
Development
Corporation

Paramount
Holdings
Equities,
Inc.

T37139

17,203
m

sq T196704

Golden
Mountain
Agricultural
Development
Corporation

Vendee

Title
No.

June 13, 2013

DEPARTMENT OF AGRARIAN REFORM, as represented by Fritzi C.

Pantoja, in her capacity as the Provincial Agrarian Reform Officer,
DAR-Laguna, Petitioner,
vs.
PARAMOUNT HOLDINGS EQUITIES, INC., JIMMY CHUA, ROJAS
CHUA, BENJAMIN SIM, SANTOS C. TAN, WILLIAM C. LEE and
STEWART C. LIM, Respondents.

Vendor

William C. Lee Tand

37137
Steward C. Lim

68,078
m

sq T196707

Green
Mountain
Agricultural
Development
Corporation

Benjamin
Sim Tand
37138
Santos C. Tan

66,114
m

sq T196708

Green
Mountain
Agricultural
Development
Corporation

The PARO argued that the properties were agricultural land yet their sale
was effected without DAR Clearance as required under Republic Act No.
6657 (R.A. No. 6657), otherwise known as the Comprehensive Agrarian
Reform Law (CARL). Allegedly, the PARO came to know of the
transactions only after he had received a directive from the Secretary of
Agrarian Reform to investigate the matter, following the latters receipt of a
letter-request from persons5 who claimed to be the tenant-farmers of the
properties previous owners.6
The respondents opposed the petition, contending that since the matter
involves an administrative implementation of R.A. No. 6657, the case is
cognizable by the Secretary of Agrarian Reform, not the DARAB. They
also sought the petitions dismissal on the grounds of prescription, litis
pendentia, res judicata and forum shopping.
The Ruling of the PARAD

laws which definitely refers to land already placed under the

Comprehensive Agrarian Reform Program under R.A. 6657, lands already
placed under Presidential Decree 27, landed estate acquired by Land
Bank of the Philippines and administered by the Department of Agrarian
Reform pursuant to the Provision of R.A. 3844 as amended and lands
under the Settlement and Resettlement Project also administered by the
Department of Agrarian Reform for the simple reason that disputes and
controversies arising from these areas are agrarian reform matters. It does
not include the sale, disposition or alienation of private lands not
administered by the DAR to private individuals such as in this instant case.
Petitioner also argued that jurisdiction of the Adjudication Board also
covers violation of the Rules and Guidelines in the implementation of the
Comprehensive Agrarian Reform Program. This is true but such violation is
only confined to violations committed by beneficiaries of the program not
like in the instant case, otherwise, jurisdiction lies on the Regional Trial
Court acting as Special Agrarian Court as clearly provided by
law.8 (Underscoring ours)
Furthermore, PA Sorita cited the absence of any showing that the petition
was filed with the knowledge and authority of the Solicitor General, as the
official counsel of the government being the aggrieved party in the dispute.
The DARs motion for reconsideration was denied, prompting the filing of
an appeal with the DARAB.
The Ruling of the DARAB

On October 16, 2002, Provincial Adjudicator Virgilio M. Sorita (PA Sorita)

issued a Resolution7 dismissing the petition for lack of jurisdiction. He
explained:

The DARAB granted the appeal via a Decision 9 dated August 18, 2004.
The dispositive portion of the Decision reads:

Petitioner further argued that the jurisdiction of the Department of Agrarian

Reform Adjudication Board includes and is not limited to those involving
sale, alienation, mortgage, foreclosure, preemption and redemption of
agricultural lands under the coverage of CARP or other agrarian laws.
These provisions were originally lifted from Presidential Decree 946. The
emphasis is on the phrase under the coverage of CARP or other agrarian

WHEREFORE, premises considered, the assailed Decision is hereby

REVERSED and/or SET ASIDE. A new judgment is rendered nullifying the
Deeds of Sale in question dated September 5, 1989 and ordering the
Register of Deeds of Laguna to cancel the aforesaid Deeds of Sale, as
well as the Transfer Certificates of Title issued to the respective private
respondents concerned.

SO ORDERED.10

The Present Petition

Contrary to the findings of PA Sorita, the DARAB ruled that: first, the failure
of the parties to the sale to obtain the required clearance indicates that
their transactions were fraudulent;11 second, the PARO had the personality
to file the petition even in the absence of the Solicitor Generals
assistance, citing Memorandum Circular No. 2, series of 2001 (Circular
No. 2), and the policy of DAR to "acquire and distribute all lands covered
by RA 6657, including those subject of illegal transfers x x x"; 12 and third,
the DARAB has the jurisdiction over the case, since its jurisdiction under
Circular No. 2 covers the cancellation of deeds of conveyance and
corresponding transfer certificates of title over agricultural lands. 13

The Court has issued on June 6, 2007 a Resolution 18 denying the petition
on the following grounds: (a) DARs failure to attach proof of service of the
petition upon the CA as required by Section 3, Rule 45 in relation to
Section 5(d), Rule 56 of the Rules of Court; (b) the DARs failure to
accompany the petition with clearly legible duplicate original or certified
true copies of the assailed CA decision and resolution, in violation of
Sections 4(d) and 5 of Rule 45, in relation to Section 5(d) of Rule 56; (c)
the petition was prepared by the DAR Region IV-Legal Assistance Division
without the concurrence of the Office of the Solicitor General (OSG); and
(d) the petition failed to sufficiently show that the appellate court committed
any reversible error in the challenged decision and resolution as to warrant
the exercise by the Court of its discretionary appellate jurisdiction.

The denial14 of the respondents motion for reconsideration led to the filing
of a petition with the CA.
The Ruling of the CA
On October 12, 2006, the CA rendered the assailed Decision, 15 the
dispositive portion of which reads:
WHEREFORE, the instant petition is GRANTED. The appealed Decision
(dated August 18, 2004) and Resolution (dated March 16, 2005) of the
Department of Agrarian Reform Adjudication Board-Central Office,
Elliptical Road, Diliman, Quezon City are ANNULLED and SET ASIDE.
The Petition in DARAB Case No. R-0403-0009-02 is hereby DISMISSED.
No pronouncement as to costs.
SO ORDERED.

16

The CA emphasized that the DARABs jurisdiction over the dispute should
be determined by the allegations made in the petition. Since the action
was essentially for the nullification of the subject properties sale, it did not
involve an agrarian suit that is within the DARABs jurisdiction.
DARs motion for reconsideration was denied in a Resolution 17 dated
January 10, 2007. Hence, this petition.

On October 15, 2007,19 the Court resolved to grant DARs motion to

reconsider the dismissal, after it filed its compliance and the OSG, its
appearance and manifestation that it was adopting the petition and motion
for reconsideration filed by DAR.
On December 10, 2008, the Court again resolved to deny the petition on
the ground of the OSGs failure to obey a lawful order of the Court,
following its failure to file the required reply despite the Courts grant of its
several motions for extension.20 On April 20, 2009, the Court resolved to
grant DARs motion for reconsideration and accordingly, reinstate the
petition.21
The main issue for the Courts resolution is: Whether or not the DARAB
has jurisdiction over the dispute that seeks the nullification of the subject
properties sale.
This Courts Ruling
The Court answers in the negative.
The jurisdiction of the DARAB is limited under the law, as it was created
under Executive Order (E.O.) No. 129-A specifically to assume powers and

functions with respect to the adjudication of agrarian reform cases under

E.O. No. 229 and E.O. No. 129-A. 22 Significantly, it was organized under
the Office of the Secretary of Agrarian Reform. The limitation on the
authority of it to mere agrarian reform matters is only consistent with the
extent of DARs quasi-judicial powers under R.A. No. 6657 and E.O. No.
229, which read:
SECTION 50 [of R.A. No. 6657]. Quasi-Judicial Powers of the DAR.The
DAR is hereby vested with the primary jurisdiction to determine and
adjudicate agrarian reform matters and shall have exclusive original
jurisdiction over all matters involving the implementation of agrarian reform
except those falling under the exclusive jurisdiction of the Department of
Agriculture (DA) and the Department of Environment and Natural
Resources (DENR).
SECTION 17 [of E.O. No. 229]. Quasi-Judicial Powers of the DAR.The
DAR is hereby vested with quasi-judicial powers to determine and
adjudicate agrarian reform matters, and shall have exclusive original
jurisdiction over all matters involving implementation of agrarian reform,
except those falling under the exclusive original jurisdiction of the DENR
and the Department of Agriculture (DA).
Thus, Sections 1 and 2, Rule II of the DARAB New Rules of Procedure,
which was adopted and promulgated on May 30, 1994 and came into
effect on June 21, 1994, identify the specific extent of the DARABs and
PARADs jurisdiction, as they read:
SECTION 1. Primary and Exclusive Original and Appellate Jurisdiction.
The Board shall have primary and exclusive jurisdiction, both original and
appellate, to determine and adjudicate all agrarian disputes involving the
implementation of the Comprehensive Agrarian Reform Program (CARP)
under Republic Act No. 6657, Executive Order Nos. 228, 229 and 129-A,
Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential
Decree No. 27 and other agrarian laws and their implementing rules and
regulations. Specifically, such jurisdiction shall include but not be limited to
cases involving the following:

a) The rights and obligations of persons, whether natural or

juridical, engaged in the management, cultivation and use of all
agricultural lands covered by the CARP and other agrarian laws;
b) The valuation of land, and the preliminary determination and
payment of just compensation, fixing and collection of lease
rentals, disturbance compensation, amortization payments, and
similar disputes concerning the functions of the Land Bank of the
Philippines (LBP);
c) The annulment or cancellation of lease contracts or deeds of
sale or their amendments involving lands under the administration
and disposition of the DAR or LBP;
d) Those cases arising from, or connected with membership or
representation in compact farms, farmers cooperatives and other
registered farmers associations or organizations, related to lands
covered by the CARP and other agrarian laws;
e) Those involving the sale, alienation, mortgage, foreclosure, preemption and redemption of agricultural lands under the coverage
of the CARP or other agrarian laws;
f) Those involving the issuance, correction and cancellation of
Certificates of Land Ownership Award (CLOAs) and Emancipation
Patents (EPs) which are registered with the Land Registration
Authority;
g) Those cases previously falling under the original and exclusive
jurisdiction of the defunct Court of Agrarian Relations under
Section 12 of Presidential Decree No. 946, except sub-paragraph
(q) thereof and Presidential Decree No. 815.
It is understood that the aforementioned cases, complaints or petitions
were filed with the DARAB after August 29, 1987.

Matters involving strictly the administrative implementation of Republic Act

No. 6657, otherwise known as the Comprehensive Agrarian Reform Law
(CARL) of 1988 and other agrarian laws as enunciated by pertinent rules
shall be the exclusive prerogative of and cognizable by the Secretary of
the DAR.
h) And such other agrarian cases, disputes, matters or concerns referred
to it by the Secretary of the DAR.
SECTION 2. Jurisdiction of the Regional and Provincial Adjudicator.The
RARAD and the PARAD shall have concurrent original jurisdiction with the
Board to hear, determine and adjudicate all agrarian cases and disputes,
and incidents in connection therewith, arising within their assigned
territorial jurisdiction. (Emphasis supplied)
Consistent with the aforequoted legal provisions, we emphasized in Heirs
of Candido Del Rosario v. Del Rosario 23that the jurisdiction of the PARAD
and the DARAB is only limited to cases involving agrarian disputes,
including incidents arising from the implementation of agrarian laws.
Section 3(d) of R.A. No. 6657 defines an agrarian dispute in this manner:
(d) Agrarian dispute refers to any controversy relating to tenurial
arrangements, whether leasehold, tenancy, stewardship or otherwise, over
lands devoted to agriculture, including disputes concerning farmworkers
associations or representation of persons in negotiating, fixing,
maintaining, changing or seeking to arrange terms or conditions of such
tenurial arrangements. It includes any controversy relating to
compensation of lands acquired under R.A. 6657 and other terms and
conditions of transfer of ownership from landowners to farmworkers,
tenants and other agrarian reform beneficiaries, whether the disputants
stand in the proximate relation of farm operator and beneficiary, landowner
and tenant, or lessor and lessee.
Basic is the rule that the "jurisdiction of a tribunal, including a quasi-judicial
office or government agency, over the nature and subject matter of a
petition or complaint is determined by the material allegations therein and
the character of the relief prayed for irrespective of whether the petitioner
or complainant is entitled to any or all such reliefs." 24 Upon the Courts

perusal of the records, it has determined that the PAROs petition with the
PARAD failed to indicate an agrarian dispute.
Specifically, the PAROs petition failed to sufficiently allege any tenurial or
agrarian relations that affect the subject parcels of land. Although it
mentioned a pending petition for coverage filed with DAR by supposed
farmers-tillers, there was neither such claim as a fact from DAR, nor a
categorical statement or allegation as to a determined tenancy relationship
by the PARO or the Secretary of Agrarian Reform. The PAROs petition
merely states:
3.3 That the Provincial Office only came to know very recently about such
transaction when the Office received on two separate occasions a
memorandum directive dated 22 October and 25 April 2002 from the Office
of the DAR Secretary to investigate and if warranted file a corresponding
petition for nullification of such transaction anent the petition for coverage
of the actual occupants farmers-tillers led by spouses Josie and Lourdes
Samson who informed the Office of the DAR Secretary about such
transaction. x x x25 (Emphasis ours)
It is also undisputed, that even the petition filed with the PARAD failed to
indicate otherwise, that the subject parcels of land had not been the
subject of any notice of coverage under the Comprehensive Agrarian
Reform Program (CARP). Clearly, the PAROs cause of action was merely
founded on the absence of a clearance to cover the sale and registration
of the subject parcels of land, which were claimed in the petition to be
agricultural.
Given the foregoing, the CA correctly ruled that the DARAB had no
jurisdiction over the PAROs petition. While the Court recognizes the legal
requirement for clearances in the sale and transfer of agricultural lands,
the DARABs jurisdiction over such disputes is limited by the qualification
under Rule II, Section 1, paragraphs (c) and (e) of the DARAB New Rules
of Procedure, which read:
c) The annulment or cancellation of lease contracts or deeds of sale or
their amendments involving lands under the administration and disposition
of the DAR or LBP;

xxxx
e) Those involving the sale, alienation, mortgage, foreclosure, pre emption
and redemption of agricultural lands under the coverage of the CARP or
other agrarian laws. (Emphasis ours)
Even Circular No. 2 cited in the Decision 26 dated August 18, 2004 on the
authority of the PARO to file petitions with the PARAD in case of illegal
transfers presupposes the fulfillment of the conditions in the cited Section
1, paragraphs (c) and (e), Rule II of the DARAB Rules and Section 50 of
R.A. No. 6657. The pertinent provisions of Circular No. 2 read:
SECTION 4. Operating Procedures.The procedures for annulment of
deeds of conveyance executed in violation of RA 6657 are as follows:
b) The Chief, Legal Division, of the Provincial Agrarian Reform Office, shall
have the following responsibilities:
2. If there was illegal transfer, file a petition for annulment of the deed of
conveyance in behalf of the PARO before the Provincial Agrarian Reform
Adjudicator (PARAD). The petition shall state the material facts constituting
the violation and pray for the issuance of an order from the PARAD
directing the ROD to cancel the deed of conveyance and the TCT
generated as a result thereof. As legal basis therefor, the petition shall cite
Section 50 of RA 6657 and Rule II, Section 1(c) and (e) of the DARAB
New Rules of Procedure;
6. In the event of an adverse decision or a denial of the petition, file a
Notice of Appeal within the 15-day reglementary period with the DARAB,
and, thereafter, transmit the records of the case to the Director, Bureau of
Agrarian Legal Assistance (BALA), for prosecution of the appeal.
Clearly, not every sale or transfer of agricultural land would warrant
DARABs exercise of its jurisdiction. The law is specific that the property
must be shown to be under the coverage of agrarian reform laws. As the
CA correctly ruled:

It is easily discernable x x x that the cause of action of the DAR sufficiently

established a suit for the declaration of the sale of the subject landholdings
null and void (in violation of Administrative Order No. 1, Series of 1989).
Obviously, it does not involve an agrarian suit, hence, does not fall under
the jurisdiction of the DARAB. It must be emphasized that, "(t)here must
be a tenancy relationship between the party litigants for the DARAB to
validly take cognizance of a controversy." (Suarez vs. Saul, 473 SCRA
628). Also, it is necessary that the controversy must relate to "tenurial
arrangements, whether leasehold, tenancy, stewardship or otherwise, over
lands devoted to agriculture, including disputes concerning farmworkers
associations or representation of persons in negotiating, fixing,
maintaining, changing or seeking to arrange terms or conditions of such
tenurial arrangements," (Section 3 (d), Chapter I in relation to Section 50,
Chapter XII, R.A. 6657 and Section 1, Rule II, DARAB Rules of
[Procedure]). Here, an allegation to declare null and void a certain sale of
a landholding does not ipso facto make the case an agrarian
dispute.27 (Emphasis ours)
Our finding on the DARABs lack of jurisdiction over the PAROs petition
renders it needless for the Court to discuss the other issues that are raised
in the petition. In any case, the Court finds it worthy to discuss that the
original petition remains dismissible on the merits.
Even during the proceedings before the PARAD, the respondents have
raised the pendency with the Regional Trial Court of Bian, Laguna of Civil
Case No. B-5862, an appeal from the decision of the Municipal Trial Court
of Santa Rosa, Laguna in Civil Case No. 2478. The records indicate that
when the matter was elevated to the CA via the petition docketed as CA
G.R. SP No. 68110, the appellate court declared the subject properties to
have long been reclassified from "agricultural" to "industrial". Thus, the CA
Decision dated September 23, 2002 in CA-G.R. SP No. 68110 reads in
part:
As to the nature of the subject lands, the tax declarations of real property,
the annual receipts for real estate taxes paid, and zoning ordinance,
providing for the Town Comprehensive Land Use Plan of Sta. Rosa,
Laguna, have always classified the lands as "industrial". Moreover, as
certified by the Municipal Agrarian Reform Office of Sta. Rosa, Laguna,

there is no record of tenancy or written agricultural leasehold contract with

respect to the subject lands, nor are the same covered by Operation Land
Transfer pursuant to P.D. 27. Thus, for being industrial in nature, the
subject lands are outside the ambit of existing agricultural tenancy
laws.28 (Citations omitted)
An appeal from the CAs decision was denied by the Court in a Resolution
dated June 18, 2003.29
The Housing Land Use Regulatory Board has affirmed through a
Certification30 dated May 22, 1991 that the zoning ordinance referred to
was approved on December 2, 1981. Thus, the respondents correctly
argued that since the subject properties were already classified as
"industrial" long before the effectivity of the CARL, their sale could not
have been covered by the CARP and the requirement for a clearance.
Significantly, DAR failed to refute said allegation, which the Court finds
duly supported by documents that form part of the case records.
WHEREFORE, premises considered, the petition is DISMISSED. The
Decision dated October 12, 2006 and Resolution dated January 10, 2007
of the Court of Appeals in CA-G.R. SP No. 89693 are AFFIRMED.
SO ORDERED.
Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 167484

September 9, 2013

HERNANDO BORRA, JOHN PACHEO, DANILO PEREZ, FELIZARDO

SIMON, RAMON BUENACOSA, JR., FELIX BELADOR, WILFREDO
LUPO, RONALD VILLARIAS, ARSENIO MINDANAO, MAX NONALA,
SIMPLICIO DE ERIT, NOEL DONGUINES, JULIO BORRA, MELCHOR

JAVIER, JOHNNY ENRICO VARGAS, PAQUITO SONDIA, JOSE

SALAJOG, ELMER LUPO, RAZUL ARANEZ, NELSON PEREZ,
BALBINO ABLAY, FERNANDO SIMON, JIMMY VILLARTA, ROMEO
CAINDOC, SALVADOR SANTILLAN, ROMONEL JANEO, ERNESTO
GONZALUDO, JOSE PAJES, ROY TAN, FERNANDO SANTILLAN, JR.,
DEMETRIO SEMILLA, RENE CORDERO, EDUARDO MOLENO, ROMY
DINAGA, HERNANDO GUMBAN, FEDERICO ALVARICO, ELMER
CATO, ROGELIO CORDERO, RODNEY PAJES, ERNIE BAYER,
ARMANDO TABARES, NOLI AMADOR, MARIO SANTILLAN, ALANIL
TRASMONTE, VICTOR ORTEGA, JOEVING ROQUERO, CYRUS
PINAS, DANILO PERALES, and ALFONSO COSAS, JR., Petitioners,
vs.
COURT OF APPEALS SECOND AND NINETEENTH DIVISIONS and
HAWAIIAN PHILIPPINE COMPANY,Respondents.
DECISION
PERALTA, J.:
Before the Court is a special civil action for certiorari under Rule 65of the
Rules of Court seeking the nullification of the November 14,
2003Resolution,1 as
well
as
the
subsequent
Decision 2 and
3
Resolution, dated June22, 2004 and January 14, 2005, respectively, of
the Court of Appeals (CA) in CA-G.R. SP No. 78729. The November 14,
2003 Resolution granted private respondent's motion for the issuance of a
preliminary mandatory injunction. The assailed CA Decision, on the other
hand, set aside the Order of the Labor Arbiter, dated August 12, 2003, and
dismissed RAB Case No. 09-10698-97, while the January 14, 2005 CA
Resolution denied petitioners' motion for reconsideration.
The factual and procedural antecedents of the case are as follows:
On September 12, 1997, herein petitioners filed with the National Labor
Relations Commission (NLRC) Regional Arbitration Branch No. VIin

Bacolod City two separate complaints which were docketed as RAB Case
No. 06-09-10698-97 and RAB Case No. 06-09-10699-97. RAB Case
No.06-09-10698-97 was filed against herein private respondent alone,
while RAB Case No. 06-09-10699-97 impleaded herein private respondent
and a certain Fela Contractor as respondents. In RAB Case No. 06-0910698-97,herein petitioners asked that they be recognized and confirmed
as regular employees of herein private respondent and further prayed that
they be awarded various benefits received by regular employees for three
(3) years prior to the filing of the complaint, while in RAB Case No. 06-0910699-97,herein petitioners sought for payment of unpaid wages, holiday
pay, allowances, 13th month pay, service incentive leave pay, moral and
exemplary damages also during the three (3) years preceding the filing of
the complaint.
On October 16, 1997, private respondent filed a Motion to Consolidate 4 the
above mentioned cases, but the Labor Arbiter in charge of the case denied
the said Motion in its Order5 dated October 20, 1997.
On January 9, 1998, private respondent filed a Motion to Dismiss 6 RAB
Case No. 06-09-0698-97 on the ground of res judicata. Private respondent
cited an earlier decided case entitled " Humphrey Perez, et al. v. Hawaiian
Philippine Co. et al. "(Perez case) and docketed as RAB Case No.06-0410169-95, which was an action for recovery of 13th month pay and service
incentive leave pay, and it includes herein petitioners among the
complainants and herein private respondent and one Jose Castillon
(Castillon) as respondents. Private respondent contended that the Perez
case, which has already become final and executory, as no appeal was
taken there from, serves as a bar to the litigation of RAB Case No. 06-0910698-97, because it was ruled therein that petitioners are not employees
of private respondent but of Castillon.
In an Order7 dated July 9, 1998, the Labor Arbiter granted private
respondent's Motion to Dismiss.

Petitioners appealed to the NLRC which set aside the Order of the Labor
Arbiter, reinstated the complaint in RAB Case No. 06-09-10698-97and
remanded the same for further proceedings.8
Private respondent appealed to the CA. On January 12, 2001, the CA
rendered judgment, affirming the Decision of the NLRC and denied the
subsequent motion for reconsideration.
Aggrieved, private respondent filed a petition for review on certiorari before
this Court. The case was entitled as "Hawaiian Philippine Company v.
Borra" and docketed as G.R. No. 151801. On November 12, 2002, this
Court rendered its Decision denying the petition and affirming the Decision
of the CA. Quoting with approval, the assailed Decision of the CA, this
Court held, thus:
The Court of Appeals committed no reversible error. The two cases in
question indeed involved different causes of action. The previous case of
"Humphrey Perez vs. Hawaiian Philippine Company" concerned a money
claim and pertained to the years 1987 up until 1995. During that period,
private respondents were engaged by contractor Jose Castillon to work for
petitioner at its warehouse. It would appear that the finding of the Labor
Arbiter, to the effect that no employer-employee relationship existed
between petitioner and private respondents, was largely predicated on the
absence of privity between them. The complaint for confirmation of
employment, however, was filed by private respondents on 12 September
1997, by which time, Jose Castillon was no longer the contractor. The
Court of Appeals came out with these findings; viz.:
At first glance, it would appear that the case at bench is indeed barred by
Labor Arbiter Drilons findings since both petitioner and private
respondents are parties in Perez and the issue of employer-employee
relationship was finally resolved therein.

However, the factual milieu of the Perez case covered the period
November 1987 to April 6, 1995 (date of filing of the complaint), during
which time private respondents, by their own admission, were engaged by
Castillon to work at petitioners warehouse.
In contrast, the instant case was filed on September 12, 1997, by which
time, the contractor involved was Fela Contractor; and private
respondents prayer is for confirmation of their status as regular employees
of petitioner.
Stated differently, Perez pertains to private respondents employment from
1987 to 1995, while the instant case covers a different (subsequent)
period. Moreover, in Perez, the finding that no employer-employee
relationship existed between petitioner and private respondents was
premised on absence of privity between Castillon and petitioner.
Consequently, Perez and the instant case involve different subject matters
and causes of action.
On the other hand, resolution of the case at bench would hinge on the
nature of the relationship between petitioner and Fela Contractor. In other
words, private respondents action for declaration as regular employees of
petitioner will not succeed unless it is established that Fela Contractor is
merely a "labor-only" contractor and that petitioner is their real employer.
Indeed, it is pure conjecture to conclude that the circumstances obtaining
in Perez subsisted until the filing of the case at bench as there is no
evidence supporting such conclusion. There is, as yet, no showing that
Fela Contractor merely stepped into the shoes of Castillon. Neither has
Fela Contractors real principal been shown: petitioner or the sugar
traders/planters?
Consequently, factual issues must first be ventilated inappropriate
proceedings before the issue of employer-employee relationship between

petitioner and private respondents [herein private respondent and

petitioners] can be determined.
It is premature to conclude that the evidence in Perez would determine the
outcome of the case at bench because as earlier pointed out, there is still
no showing that the contractor (Fela contractor) in this case can be
considered as on the same footing as the previous contractor (Castillon).
Such factual issue is crucial in determining whether petitioner is the real
employer of private respondents.9
In the meantime, on December 21, 1998, the Labor Arbiter rendered a
Decision10 in RAB Case No. 06-09-10699-97 holding that there is no
employer-employee relations between private respondent and petitioners.
The Labor Arbiter held as follows:
x x x Fela Contractor as may be noted happened to replace Jose Castillon,
as Contractor of the traders or sugar planters, who absorbed the workers
of the erstwhile contractor Castillon.
The complainants herein, who were the workers of Castillon, formally
applied for employment with respondent Jose Castillon, the owner of Fela
Contractor, the new handler and hauler of the sugar planters and traders.
Thus, on February 15, 1996, respondent Jardinico, representative of
respondent Fela Contractor, wrote a letter to the Administrative Manager of
respondent Hawaiian informing the latter that as of March 1, 1996,the
former workers of Castillon the previous contractor, who under took the
handling and withdrawal of the sugar of the traders and planters, have
been absorbed and employed by Fela, with a request to allow them to
enter the premises of the company.
In this suit, the same complainants now seek monetary benefits arising
from the employment and they again impleaded respondent Hawaiian.

We, thus resolve to dismiss the complaint against respondent Hawaiian,

who as we have found in an earlier pronouncement has no employeremployee relations with the complainant, let alone, any privity of
relationship, except for the fact that it is the depository of sugar where the
sugar of the planters and traders are hauled by the workers of the
contractor, like respondent herein Fela Contractor/Jardinico. 11
No appeal was taken from the above quoted Decision. Thus, the same
became final and executory.12
As a consequence of the finality of the Decision in RAB Case No. 06-0910699-97, herein private respondent again filed a Motion to Dismiss 13 RAB
Case No. 06-09-10698-97 on the ground, among others, of res judicata.
Private respondent contended that the final and executory Decision of the
Labor Arbiter in RAB Case No. 06-09-10699-97, which found no employeremployee relations between private respondent and petitioners, serves as
a bar to the further litigation of RAB Case No. 06-09-10698-97.
On August 12, 2003, the Labor Arbiter handling RAB Case No. 06-0910698-97 issued an Order
14

denying private respondent's Motion to Dismiss.

Private respondent then filed a petition for certiorari and prohibition with
the CA assailing the August 12, 2003 Order of the Labor Arbiter.
On June 22, 2004, the CA rendered its questioned Decision, the
dispositive portion of which reads, thus:
WHEREFORE, foregoing premises considered, the petition is GRANTED.
Accordingly, the Order dated August 12, 2003 of public respondent is
hereby ANNULLED and SET ASIDE. RAB Case No. 09-10698-97 is
ordered DISMISSED.

SO ORDERED.15
Petitioners filed a Motion for Reconsideration, but the CA denied it in its
Resolution16 dated January 14, 2005.
Hence, the present petition for certiorari based on the following grounds:
I. THE COURT OF APPEALS ACTED ABSOLUTELY
WITHOUTANY JURISDICTION WHEN IT TOOK COGNIZANCE
OF THE 2nd PETITION OF HPCO DESPITE THE ABSOLUTE
LACK OF ANYINTERVENING OR SUPERVENING EVENT THAT
WOULD RENDER THE ORDERS OF THE SUPREME COURT
AND COURT OFAPPEALS INAPPLICABLE AND THE CLEAR
AND ESTABLISHEDDECISION LAID DOWN BY THE FIRST
DIVISION OF THE SUPREME COURT UNDER CHIEF JUSTICE
HILARIO G. DAVIDE,JR., ASSOCIATE JUSTICES JOSE C.
VITUG, CONSUELO YNARES-SANTIAGO, ANTONIO T.
CARPIO, AND ADOLFO S. AZCUNA ANDBY THE COURT OF
APPEALS UNDER JUSTICES EDGARDO P.CRUZ, RAMON
MABUTAS, JR., ROBERTO A. BARRIOS, MA.ALICIA AUSTRIAMARTINEZ AND HILARION L. AQUINO,RULING THAT
FURTHER HEARINGS AND TRIAL MUST BECONDUCTED BY
THE LABOR ARBITER WHICH SIGNIFICANTLYFOUND THE
EXISTENCE OF EMPLOYER-EMPLOYEERELATIONSHIP IN HIS
DECISION DATED SEPTEMBER 25, 2003.
II. THE COURT OF APPEALS HAD SERIOUSLY ERRED, IF
NOTGRAVELY ABUSED ITS DISCRETION WHEN IT CHOSE
TODELIBERATELY IGNORE AND/OR ENTIRELY DISREGARD
THECLEAR AND ESTABLISHED FACTS ON RECORD AS TO
THEEXISTENCE OF THE IDENTITY OF SUBJECT MATTER
ANDCAUSE OF ACTION BETWEEN HPCO VS. BORRA & 48
OTHERS/NLRC, ET. AL., C.A. G.R. NO. 59132 AND HPCO VS.
NLRC,BORRA, ET AL., G.R. NO. 151801 ON ONE HAND AND

HPCO VS.HON. PHEBUN PURA/BORRA & 48 OTHERS C.A.

G.R. NO. 78729ON THE OTHER HAND.
III. THE COURT OF APPEALS SERIOUSLY ERRED IN
TAKINGCOGNIZANCE OF THE SECOND PETITION OF HPCO
DESPITE THECLEAR AND ESTABLISHED FACT ON RECORD
THAT HPCO HADSIMULTANEOUSLY AND SUCCESSIVELY
FILED AN (sic)IDENTICAL THREE (3) MOTIONS TO DISMISS IN
THE SALA OFLABOR ARBITERS AND TWO (2) PETITIONS FOR
CERTIORARI INTHE COURT OF APPEALS WHICH IS A
FLAGRANT VIOLATION ONTHE LAW OF FORUM SHOPPING.17
The petition lacks merit.
This Court is not persuaded by petitioners' argument that the CA has no
jurisdiction over private respondent's petition for certiorari because this
Court, in G.R. No. 151801, lodged jurisdiction in the Labor Arbiter by
directing the remand of RAB Case No. 06-09-10698-97 thereto for further
proceedings.
It is settled that jurisdiction over the subject matter is conferred by law and
it is not within the courts, let alone the parties, to themselves determine or
conveniently set aside.18
In this regard, it should be reiterated that what has been filed by private
respondent with the CA is a special civil action for certiorari assailing the
Labor Arbiter's Order which denied its motion to dismiss.
Section 3, Rule V of the NLRC Rules of Procedure, which was then
prevailing at the time of the filing of private respondent's petition for
certiorari with the CA, clearly provides:
SECTION 3.

MOTION TO DISMISS. - On or before the date set for the conference, the
respondent may file a motion to dismiss. Any motion to dismiss on the
ground of lack of jurisdiction, improper venue, or that the cause of action is
barred by prior judgment, prescription or forum shopping, shall be
immediately resolved by the Labor Arbiter by a written order. An order
denying the motion to dismiss or suspending its resolution until the final
determination of the case is not appealable.19
In the case of Metro Drug Distribution, Inc. v. Metro Drug Corporation
Employees Association-Federation of Free Workers,20 this Court held that:
x x x The NLRC rule proscribing appeal from a denial of a motion to
dismiss is similar to the general rule observed in civil procedure that an
order denying a motion to dismiss is interlocutory and, hence, not
appealable until final judgment or order is rendered. The remedy of the
aggrieved party in case of denial of the motion to dismiss is to file an
answer and interpose, as a defense or defenses, the ground or grounds
relied upon in the motion to dismiss, proceed to trial and, in case of
adverse judgment, to elevate the entire case by appeal in due course. In
order to avail of the extraordinary writ of certiorari, it is incumbent upon
petitioner to establish that the denial of the motion to dismiss was tainted
with grave abuse of discretion.21
In this regard, Rule 41 of the Rules of Court, which is applied in a
suppletory character to cases covered by the NLRC Rules, provides that in
all the instances enumerated under the said Rule, where the judgment or
final order is not appealable, the aggrieved party may file an appropriate
special civil action under Rule 65. 22 Thus, this Court has held that when
the denial of a motion to dismiss is tainted with grave abuse of discretion,
the grant of the extraordinary remedy of certiorari may be justified. 23 On
the basis of the foregoing, it is clear that the CA has jurisdiction over the
special civil action for certiorari filed by private respondent as the latter
was able to allege and establish that the denial of its motion to dismiss
was tainted with grave abuse of discretion. Petitioners are wrong to argue

that this Court's directive in G.R. No. 151801 to remand RAB Case No. 0609-10698-97 to the Labor Arbiter for further proceedings deprives the CA
of its jurisdiction over private respondent's petition for certiorari. The
essence of this Court's ruling in G.R. No. 151801 is simply to require
resolution of the factual issue of whether or not Fela Contractor has
stepped into the shoes of Castillon and, thus, has taken petitioners in its
employ. In other words, this Court called for a prior determination as to
who is the real employer of petitioners. This issue, however, was already
settled as will be discussed below.
At the outset, the underlying question which has to be resolved in both
RAB Case Nos. 06-09-10698-97 and 06-09-10699-97, before any other
issue in these cases could be determined, is the matter of determining
petitioners' real employer. Is it Fela Contractor, or is it private respondent?
Indeed, the tribunals and courts cannot proceed to decide whether or not
petitioners should be considered regular employees, and are thus entitled
to the benefits they claim, if there is a prior finding that they are, in the first
place, not employees of private respondent. Stated differently, and as
correctly held by the CA, petitioners' prayer for regularization in RAB Case
No. 06-09-10698-97 is essentially dependent on the existence of
employer-employee relations between them and private respondent,
because one cannot be made a regular employee of one who is not his
employer. In the same vein, petitioners' prayer in RAB Case No. 06-0910699-97 for the recovery of backwages,13th month pay, holiday pay and
service incentive leave pay from private respondent likewise rests on the
determination of whether or not the former are, indeed, employees of the
latter.
As earlier mentioned, this issue has already been settled. In the already
final and executory decision of the Labor Arbiter in RAB Case No.06-0910699-97, it was ruled therein that no employer-employee relationship
exists between private respondent and petitioners because the latter's real
employer is Fela Contractor. Thus, insofar as the question of employer and
employee relations between private respondent and petitioners is

concerned, the final judgment in RAB Case No. 06-09-10699-97 has the
effect and authority of res judicata by conclusiveness of judgment.
Discussing the concept of res judicata, this Court held in Antonio v.Sayman
Vda. de Monje24
that:
x x x Res judicata is defined as "a matter adjudged; a thing judicially acted
upon or decided; a thing or matter settled by judgment." According to the
doctrine of res judicata, an existing final judgment or decree rendered on
the merits, and without fraud or collusion, by a court of competent
jurisdiction, upon any matter within its jurisdiction, is conclusive of the
rights of the parties or their privies, in all other actions or suits in the same
or any other judicial tribunal of concurrent jurisdiction on the points and
matters in issue in the first suit. To state simply, a final judgment or decree
on the merits by a court of competent jurisdiction is conclusive of the rights
of the parties or their privies in all later suits on all points and matters
determined in the former suit.
The principle of res judicata is applicable by way of (1) "bar by prior
judgment" and (2) "conclusiveness of judgment." This Court had occasion
to explain the difference between these two aspects of res judicata as
follows:
There is "bar by prior judgment" when, as between the first case where the
judgment was rendered and the second case that is sought to be barred,
there is identity of parties, subject matter, and causes of action. In this
instance, the judgment in the first case constitutes an absolute bar to the
second action. Otherwise put, the judgment or decree of the court of
competent jurisdiction on the merits concludes the litigation between the
parties, as well as their privies, and constitutes a bar to a new action or
suit involving the same cause of action before the same or other tribunal.

But where there is identity of parties in the first and second cases, but no
identity of causes of action, the first judgment is conclusive only as to
those matters actually and directly controverted and determined and not as
to matters merely involved therein. This is the concept of res judicata
known as "conclusiveness of judgment." Stated differently, any right, fact
or matter in issue directly adjudicated or necessarily involved in the
determination of an action before a competent court in which judgment is
rendered on the merits is conclusively settled by the judgment therein and
cannot again be litigated between the parties and their privies whether or
not the claim, demand, purpose, or subject matter of the two actions is the
same.1wphi1
Stated differently, 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 cannot again be litigated in any future
or other action between the same parties or their privies and successorsin-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.25
Hence, there is no point in determining the main issue raised in RAB Case
No. 06-09-10698-97,
i.e., whether petitioners may be considered regular employees of private
respondent, because, in the first place, they are not even employees of the
latter. As such, the CA correctly held that the Labor Arbiter committed
grave abuse of discretion in denying private respondent's motion to
dismiss RAB Case No. 06-09-10698-97.

The question that follows is whether private respondent is guilty of forum

shopping, considering that it already filed a motion to dismiss RAB Case
No. 06-09-10698-97 in 1998? The Court answers in the negative.
In Pentacapital Investment Corporation v. Mahinay,26 this
discussion on forum shopping is instructive, to wit:

Court's

Forum-shopping is the act of a litigant who repetitively availed of several

judicial remedies in different courts, simultaneously or successively, all
substantially founded on the same transactions and the same essential
facts and circumstances, and all raising substantially the same issues,
either pending in or already resolved adversely by some other court, to
increase his chances of obtaining a favorable decision if not in one court,
then in another.
What is important in determining whether forum-shopping exists is the
vexation caused the courts and parties-litigants by a party who asks
different courts and/or administrative agencies to rule on the same or
related causes and/or grant the same or substantially the same reliefs, in
the process creating the possibility of conflicting decisions being rendered
by the different fora upon the same issues.
Forum-shopping can be committed in three ways: (1) by filing multiple
cases based on the same cause of action and with the same prayer, the
previous case not having been resolved yet (where the ground for
dismissal is litis pendentia); (2) by filing multiple cases based on the same
cause of action and with the same prayer, the previous case having been
finally resolved (where the ground for dismissal is res judicata); and (3) by
filing multiple cases based on the same cause of action but with different
prayers (splitting of causes of action, where the ground for dismissal is
also either litis pendentia or res judicata).
More particularly, the elements of forum-shopping are: (a) identity of
parties or at least such parties that represent the same interests in both

actions; (b) identity of rights asserted and reliefs prayed for, the relief being
founded on the same facts; (c) identity of the two preceding particulars,
such that any judgment rendered in the other action will, regardless of
which party is successful, amount to res judicata in the action under
consideration.27

of the issue involved in the present suit it should only be logical and
proper that for purposes of abating separate and inconsistent verdicts by
two distinct arbitration salas of this Commission that the present suit be
accordingly consolidated for joint hearing and resolution with said RAB
Case No. 06-09-10699-97 x x x.28

In the instant case, there can be no forum shopping, because the grounds
cited by private respondent in its motions to dismiss filed in 1998and in the
present case are different. In 1998, the motion to dismiss is based on the
argument that the final and executory decision in the

Under Section 3, Rule IV of the then prevailing, as well as in the presently

existing, NLRC Rules of Procedure, it is clearly provided that:

Perez case serves as res judicata and, thus, bars the re-litigation of the
issue of employer-employee relations between private respondent and
petitioners. In the instant case, private respondent again cites res judicata
as a ground for its motion to dismiss. This time, however, the basis for
such ground is not Perez but the final and executory decision in RAB Case
No. 06-09-10699-97. Thus, the relief prayed for in private respondent's
motion to dismiss subject of the instant case is founded on totally different
facts and issues.
As a final note, this Court cannot help but call the attention of the Labor
Arbiter regarding Our observation that the resolution of RAB Case No. 0609-10698-97 has been unnecessarily pending for almost sixteen (16)years
now. The resulting delay in the resolution of the instant case could have
been avoided had the Labor Arbiter granted private respondent's Motion to
Consolidate RAB Case Nos. 06-09-10698-97 and 06-09-10699-97. This
Court quotes with approval the contention of private respondent in its
Motion, to wit:
3. That in light of the fact that the question as to whether or not there exists
employer-employee relations as between complainants [herein petitioners]
and herein respondent HPCO will indispensably have to be resolved in
light of the presence of an independent contractor (FELA Contractors) in
RAB Case No. 06-09-10699-97 which should otherwise be determinative

Section 3. Consolidation of Cases. Where there are two or more cases

pending before different Labor Arbiters in the same Regional Arbitration
Branch involving the same employer and issues, or the same parties and
different issues, whenever practicable, the subsequent easels shall be
consolidated with the first to avoid unnecessary costs or delay. x x x
In the same manner, Section 1, Rule 31 of the 1997 Rules of Civil
Procedure, allows consolidation, thus:
SECTION 1. Consolidation. When actions involving a common question
of law or fact are pending before the court, it may order a joint hearing or
trial of any or all the matters in issue in the actions; it may order all the
actions consolidated; and it may make such orders concerning
Proceedings therein as may tend to avoid unnecessary costs or delay.
Considering that the above mentioned cases involved essentially the same
parties and the basic issue of employer-employee relations between
private respondent and petitioners, the Labor Arbiter should have been
more circumspect and should have allowed the cases to be consolidated.
This would be in consonance with the parties' constitutional right to a
speedy disposition of cases as well as in keeping with the orderly and
efficient disposition of cases.

WHEREFORE, the petition is DISMISSED. The assailed Decision and

Resolutions of the Court of Appeals in CA-G.R. SP No. 78729 are
AFFIRMED.

DECISION

SO ORDERED.

This Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeks the reversal of the 11 February 2009 Decision 1 of the Court of
Appeals in CA-G.R. CV No. 87588, setting aside the 28 October 2005
Decision2 of the Regional Trial Court (RTC), Branch 10 of Malolos City,
Bulacan, which rendered a favorable finding for the petitioners in a
complaint for recovery of possession docketed as Civil Case No. 180-M98.

PEREZ, J.:

The Facts
This case emanated from a complaint for Recovery of Possession 3 filed on
6 March 1998 by the petitioners against Reynaldo De Belen, herein
respondent, before the RTC, Branch 10 of Malolos, Bulacan, involving a
parcel of land covered by Original Certificate of Title (OCT) No. RO-487
(997) registered in the name of the late Jose, married to Lucila Tinio and
Apolonia Fernando, wife of Felipe Galvez, consisting of 124,994 square
meters, more or less, which is situated in Baliuag, Bulacan.
Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 186366

July 3, 2013

HEIRS
OF
JOSE
FERNANDO, PETITIONERS,
vs.
REYNALDO DE BELEN, RESPONDENT.

In the said complaint, it was alleged that petitioners are the children of the
late Jose and they are in the process of partitioning their inheritance.
However, they could not properly accomplish the partition due to the
presence of the respondent who intruded into a portion of their property
and conducted quarrying operations in its immediate vicinity for so many
years, without their knowledge and permission.4
Petitioners, therefore, wrote a letter5 dated 8 April 1997 to the respondent
which was unheeded; thus, a barangay conciliation was resorted to. For
failure of the respondent to appear, a Certification 6 was issued by the
Barangay Lupon that led to the filing of the complaint before the RTC of

Malolos, Bulacan docketed as Civil Case No. 180-M-98 to assert and

defend their right over the subject property and for the respondent to
vacate the premises and pay rental arrearages in the amount
of P24,000.00, attorneys fees of P10,000.00 and exemplary damages
ofP20,000.00
Instead of filing an Answer, respondent Reynaldo De Belen filed a Motion
to Dismiss7 dated 22 June 1998, setting forth the following grounds: (1)
lack of jurisdiction; (2) lack of cause of action; (3) ambiguity as to the
portion of the lot De Belen occupies; and, (4) incomplete statement of
material facts, the complaint having failed to state the identity, location and
area of the lot sought to be recovered.
The petitioners filed their Opposition 8 on 17 July 1998, averring that the
complaint states a cause of action and respondent need not be confused
because the estate under OCT No. RO-487 (997) is actually known as
Psu-39080 with an area of 124,994 square meters divided into Lot 1
(80,760 square meters), Lot 2 (22,000 square meters), and Lot 3 (21,521
square meters). Likewise, petitioners also stated that their father, Jose and
the latters sister, Antonia A. Fernando, were co-owners pro-indiviso of the
subject property and that as indicated in their demand letter, they
represent the heirs of Jose and Antonia A. Fernando, both deceased many
years ago. Although, a matter of proof to be presented in the course of the
trial, petitioners nonetheless advanced that Antonia Fernando
predeceased her brother Jose and she died without issue; thus, her
undivided share was consolidated with that of her brother.
Finding lack of merit, the motion was denied in an Order 9 dated 3
November 1998, with the trial court ordering herein petitioners to amend
the complaint by indicating the details desired by the respondent in order
for the latter to file a responsive pleading.
On 12 February 1999, the Amended Complaint 10 with its attachment was
filed to which the respondent moved for a Bill of Particulars, 11 specifically

questioning the legal basis for the complaint since the entire property
appears to be co-owned by Jose and Antonia Fernando and it was not
particularized in the complaint as to what specific portion belongs to each
of the co-owners.
In addition, the respondent, in his Answer,12 claimed that even the Bill of
Particulars13 did not clearly show the exact identity, personal
circumstances and relationship of the individual heirs of the decedent,
location, area and size of the subject property. Also, prescription, estoppel
and laches had set in as against the petitioners.
The respondent further argued that the Amended Complaint was
prematurely filed due to the fact that the Certification to File Action was
issued in violation of the prescribed procedure. The respondent likewise
insisted on his right of possession over the subject property as evidenced
by the successive transfer from Felipe Galvez to Carmen Galvez on 11
March 1955; from Carmen Galvez to Florentino San Luis to Reynaldo De
Belen on 4 June 1979, and the receipt for the purchase price
of P60,000.00 dated 19 June 1979. He asserted that from the date of his
purchase, he has been in exclusive, continuous, open and public
possession of said parcel of land.
Trial on the merits ensued which eventually resulted in the 28 October
2005 Decision of the RTC which is favorable to the petitioners. Thus:
IN VIEW OF THE FOREGOING, judgment is hereby RENDERED:
(a)
Declaring as null and void and without legal force and effect the
"Kasulatan Ng Pagbibilihang Tuluyan Ng Tumana" dated March
11, 1955 executed by Felipe Galvez in favor of Carmen Galvez;
"Kasulatan Ng Pagbibiling Tuluyan Ng Tumana dated July 28,

1958, registered as Doc. No. 945; Page 59, Book XXIV; Series of
1958 of Notary Public Fermin Samson executed by Carme[n]
Galvez married to Luis Cruz in favor of Florentino San Luis; and
"Kasulatan Ng Bilihang Tuluyan Ng Lupang Tumana" dated June
04, 1979 executed by Florentino R. San Luis married to Agripina
Reyes in favor of defendant Reynaldo Santos de Belen, entered
as Doc. No. 199; Page No. 41; Book No. 79; Series of 1979
covering 9,838 square meters of a parcel of land designated as
Lot 1303-B per approved subdivision plan in Cad. Case No. 17,
Record No. 788 submitted before the defunct CFI of Bulacan and
granted in a Decision dated December 29, 1929;

Aggrieved, respondent appealed to the Court of Appeals raising the issues

on jurisdiction for failure of the petitioners to state the assessed value of
the subject property, absence of evidence proving the lawful ownership of
the petitioners and the grant of affirmative reliefs which were not alleged or
prayed for.
On 11 February 2009, the Court of Appeals issued the assailed decision
setting aside the decision of the RTC for want of jurisdiction and declaring
further that the Amended Complaint must be dismissed.
Hence, the petition at bench seeking the reversal of the aforementioned
decision.

(b)
The Issue
Ordering the reconveyance of the disputed subject property in
question including all improvements thereon as above-described
by the defendant to the plaintiffs herein;
(c)
Ordering the defendant to pay plaintiffs the amount of P10,000.00
a month from March 06, 1998 with legal interest until the subject
property is actually returned to the plaintiffs;
(d)
Ordering the defendant to pay plaintiffs the amount of P10,000.00
as attorneys fees;
(e)
Ordering the defendant to pay plaintiffs the costs of suit. 14

The core issue for resolution is whether or not the Court of Appeals
committed reversible error in holding that the RTC did not acquire
jurisdiction for failure to allege in the complaint the assessed value of the
subject property.
Our Ruling
The general rule is that the jurisdiction of a court may be questioned at any
stage of the proceedings.15 Lack of jurisdiction is one of those excepted
grounds where the court may dismiss a claim or a case at any time when it
appears from the pleadings or the evidence on record that any of those
grounds exists, even if they were not raised in the answer or in a motion to
dismiss.16 So that, whenever it appears that the court has no jurisdiction
over the subject matter, the action shall be dismissed. This defense may
be interposed at any time, during appeal or even after final judgment. Such
is understandable, as this kind of jurisdiction is conferred by law and not
within the courts, let alone the parties, to themselves determine or
conveniently set aside.17

A reading of both the complaint and the amended complaint shows that
petitioners failed to state the assessed value of the disputed lot. This fact
was highlighted by the Court of Appeals when it ruled:
Instant complaint for Recovery of Possession failed to specify the
assessed value of the property subject matter of the action. "What
determines the nature of the action as well as which court has jurisdiction
over it are the allegations of the complaint and the character of the relief
sought." (Bejar, et. al. v. Caluag, G.R. No. 171277, February 12, 2007).
The allegations in the complaint and the relief sought by the party
determine the nature of the action if the title or designation is not clear. The
complaint, in the case at bar, is bereft of any allegation which discloses the
assessed value of the property subject matter thereof. The court a quo
therefore, did not acquire jurisdiction over instant action. The Amended
Complaint does not state a valid cause of action. 18
Facially, the above disposition finds support from the provisions of
Republic Act 7691 (RA 7691),19 the law in effect when the case was filed.
Section 1 of RA 7691, amending Section 19 of Batas Pambansa Bilang
129, pertinently states:
"Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as
the "Judiciary Reorganization Act of 1980", is hereby amended to read as
follows:
"Section 19. Jurisdiction in civil cases. Regional Trial Courts shall
exercise exclusive original jurisdiction.
"(1) In all civil actions in which the subject of the litigation is incapable of
pecuniary estimation;
"(2) In all civil actions which involve the title to, or possession of, real
property, or any interest therein, where the assessed value of the property

involved exceeds Twenty thousand pesos (P20,000,00) or, for civil actions
in Metro Manila, where such value exceeds Fifty thousand pesos
(P50,000.00) except actions for forcible entry into and unlawful detainer of
lands or buildings, original jurisdiction over which is conferred upon the
Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit Trial
Courts;
x x x x.
Thereby guided, the Court of Appeals no longer dwelt on the other issues
and matters raised before it.1wphi1
Jurisprudence has it that in a petition for review on certiorari under Rule 45
of the Rules of Court, only questions of law may be raised. 20 As held in the
case of Solmayor v. Arroyo,21 it is not the function of this Court to analyze
and weigh evidence all over again. This is premised on the presumed
thorough appreciation of the facts by the lower courts. Such that, when the
trial court and the appellate court, as in this case, reached opposite
conclusions, a review of the facts may be done. There is a permissible
scope of judicial review on the factual findings of the lower courts as
crystallized in Treas v. People of the Philippines, 22 where the Court cited
contradictory findings of the Court of Appeals and the trial court as one of
the instances where the resolution of the petition requires a review of the
factual findings of the lower courts and the evidence upon which they are
based.
So too are we reminded that procedural rules are intended to ensure the
proper administration of law and justice and the rules of procedure ought
not to be applied in a very rigid sense, for they are adopted to secure, not
override, substantial justice.23
We, accordingly, review the records of this case and note the facts and
evidence ignored by the appellate court. We observe that at the initial
stage of this case when the respondent questioned the jurisdiction of the

RTC in a Motion to Dismiss, he solely assailed the vagueness of the

complaint for failure to allege the specific identity of the subject property
and for being prematurely filed. The trial court in its 3 November 1998
Order, settled the issue by declaring that the allegations in the complaint
make out for a case of recovery of ownership and that the petitioners need
not wait for the lapse of one year from the 8 April 1997 demand letter to
maintain the accion reinvidicatoria. The trial court went on to explain that
the complaint clearly gives the defendant, herein respondent, notice of
their exclusive and absolute claim of ownership over the entire property
covered by the OCT No. RO-487 (997).
From the said Order, the respondent never raised any objection and did
not even opt to elevate the matter to a higher court via a certiorari case
which is a remedy for the correction of errors of jurisdiction. If indeed
respondent was not convinced of the trial courts ruling, he could have
availed of such remedy which is an original and independent action that
does not proceed from the trial that would lead to the judgment on the
merits. As aptly cited in the case of New Frontier Sugar Corporation v.
RTC, Branch 39, Iloilo City,24 when the issue is jurisdiction, an original
action for certiorari may be directed against an interlocutory order of the
lower court prior to an appeal from the judgment.
On the contrary, the respondent acquiesced to the 3 November 1998
Order of the trial court for him to file his Answer, 25 whereby, he asserted
ownership over the portion of the subject property which he occupied. He
attached the following proof of his ownership, to wit: a) Deed of Absolute
Sale by Felipe Galvez in favor of Carmen Galvez dated 11 March
1955;26 b) Deed of Absolute Sale by Carmen Galvez in favor of Florentino
San Luis dated 28 July 1958;27 c) Deed of Absolute Sale by Florentino San
Luis in favor of Reynaldo Santos De Belen dated 4 June 1979 28 and the
corresponding receipt of the purchase price of P60,000.00 dated 19 June
1979.29

When the pre-trial conference was concluded, the trial court issued several
Pre-Trial Orders,30 specifying the identity and coverage of the subject
property being claimed by the petitioners as well as that portion occupied
by the respondent, simplification of facts involved, and the issues which
primarily centered on the validity of the transfer or disposition made by
Felipe Galvez of the paraphernal property of his wife Antonia Fernando
from which transfer the respondent succeeded his right over the portion he
occupied.
During the trial, the petitioners were able to prove that indeed they are the
rightful heirs of Jose and Antonia Fernando and that they have right of
ownership over the property covered by OCT No. RO-487 (997) as
described in Plan Psu-39080 of Lots 1302-B and 1303 prepared by
Geodetic Engineer Alfredo C. Borja on 15 September 1997. 31 It was also
proved through the admission of the respondent that he has been
occupying a portion of Lot 1303 which is the Sapang Bayan, the old river,
titled in the name of Jose and Antonia Fernando. Thus, it was ruled that
the Deed of Sale in respondents favor which was traced from the transfer
made by Felix Galvez on 11 March 1955, without any participation of
Antonia Fernando was likewise without any settlement of property between
the said husband and wife and the property remained to be the
paraphernal property of Antonia. Consequently, the trial court declared that
the sale between Felipe Galvez and Carmen Galvez and its subsequent
transfers are void ab initio, as Felipe Galvez was neither the owner nor
administrator of the subject property.1wphi1
Further, the trial court went on to state that respondent has not proved his
status as a purchaser in good faith and for value taking cue from the facts
and circumstances as well as the numerous entries found at the dorsal
sides of OCT No. RO-487 (997) which should have put any of the buyers
on guard.
After the entire proceedings fully participated in by the respondent, he
cannot be allowed to question the result as having been rendered without

jurisdiction. This is the teaching in Tijam v. Sibonghanoy, et al. 32 as

reiterated in Soliven v. Fastforms Philippines, Inc.,33 where the Court ruled:
"While it is true that jurisdiction may be raised at any time, "this rule
presupposes that estoppel has not supervened." In the instant case,
respondent actively participated in all stages of the proceedings before the
trial court and invoked its authority by asking for an affirmative relief.
Clearly, respondent is estopped from challenging the trial courts
jurisdiction, especially when an adverse judgment has been rendered."
(Italics ours)
Similarly, as this Court held in Pantranco North Express, Inc. v. Court of
Appeals,34 participation in all stages of the case before the trial court, that
included invoking its authority in asking for affirmative relief, effectively
barred the respondent by estoppel from challenging the courts jurisdiction.
The Court has consistently upheld the doctrine that while jurisdiction may
be assailed at any stage, a litigant who participated in the court
proceedings by filing pleadings and presenting his evidence cannot later
on question the trial courts jurisdiction when judgement unfavorable to him
is rendered.

xxxx
(c) Deed of Absolute Sale by Florentino San Luis in favor of Reynaldo
Santos de Belen dated June 4, 1979 (Annex "3" hereof) 36 and the
corresponding receipt of the purchase price of P60,000.00 dated June 19,
1979 (Annex "4" hereof)."37
thereby showing that way back in 1979 or nineteen (19) years before this
case was instituted, the value of the property was already well covered by
the jurisdictional amount for cases within the jurisdiction of the RTC.
WHEREFORE, we GRANT the petition and REVERSE the assailed
Decision of the Court of Appeals. The Regional Trial Court Decision is
AFFIRMED. Let the records of this case be remanded to the RTC, Branch
10, Malolos, Bulacan for execution.SO ORDERED.
Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
Moreover, and of equal significance, the facts of this case demonstrate the
inapplicability of RA 7691. The argument of respondent that the assessed
value of the subject property places the case outside the jurisdiction of the
Regional Trial Court is belied by respondents own Answer which states
that:
xxxx
"16. That the defendants ownership and possession over the parcel of
land ought to be recovered by the plaintiff is valid and legal as evidenced
by the following:35

G.R. No. 156759

June 5, 2013

ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO,

LILY REYES, JANET BAY, JESUS R. GALANG, AND RANDY
HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.
DECISION
BERSAMIN, J.:

To warrant the substituted service of the summons and copy of the

complaint, the serving officer must first attempt to effect the same upon the
defendant in person. Only after the attempt at personal service has
become futile or impossible within a reasonable time may the officer resort
to substituted service.
The Case
Petitioners defendants in a suit for libel brought by respondent appeal
the decision promulgated on March 8, 2002 1 and the resolution
promulgated on January 13, 2003,2 whereby the Court of Appeals (CA)
respectively dismissed their petition for certiorari, prohibition and
mandamus and denied their motion for reconsideration. Thereby, the CA
upheld the order the Regional Trial Court (RTC), Branch 51, in Manila had
issued on March 12, 2001 denying their motion to dismiss because the
substituted service of the summons and copies of the complaint on each of
them had been valid and effective.3
Antecedents
On July 3, 2000, respondent, a retired police officer assigned at the
Western Police District in Manila, sued Abante Tonite, a daily tabloid of
general circulation; its Publisher Allen A. Macasaet; its Managing Director
Nicolas V. Quijano; its Circulation Manager Isaias Albano; its Editors Janet
Bay, Jesus R. Galang and Randy Hagos; and its Columnist/Reporter Lily
Reyes (petitioners), claiming damages because of an allegedly libelous
article petitioners published in the June 6, 2000 issue of Abante Tonite.
The suit, docketed as Civil Case No. 00-97907, was raffled to Branch 51 of
the RTC, which in due course issued summons to be served on each
defendant, including Abante Tonite, at their business address at Monica
Publishing Corporation, 301-305 3rd Floor, BF Condominium Building,
Solana Street corner A. Soriano Street, Intramuros, Manila. 4

In the morning of September 18, 2000, RTC Sheriff Raul Medina

proceeded to the stated address to effect the personal service of the
summons on the defendants. But his efforts to personally serve each
defendant in the address were futile because the defendants were then out
of the office and unavailable. He returned in the afternoon of that day to
make a second attempt at serving the summons, but he was informed that
petitioners were still out of the office. He decided to resort to substituted
service of the summons, and explained why in his sheriffs return dated
September 22, 2005,5 to wit:
SHERIFFS RETURN
This is to certify that on September 18, 2000, I caused the service of
summons together with copies of complaint and its annexes attached
thereto, upon the following:
1. Defendant Allen A. Macasaet, President/Publisher of defendant
AbanteTonite, at Monica Publishing Corporation, Rooms 301-305
3rd Floor, BF Condominium Building, Solana corner A. Soriano
Streets, Intramuros, Manila, thru his secretary Lu-Ann Quijano, a
person of sufficient age and discretion working therein, who signed
to acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendant were made, but the
same were ineffectual and unavailing on the ground that per
information of Ms. Quijano said defendant is always out and not
available, thus, substituted service was applied;
2. Defendant Nicolas V. Quijano, at the same address, thru his
wife Lu-Ann Quijano, who signed to acknowledge receipt thereof.
That effort (sic) to serve the said summons personally upon said
defendant were made, but the same were ineffectual and
unavailing on the ground that per information of (sic) his wife said
defendant is always out and not available, thus, substituted
service was applied;

3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy

Hagos and Lily Reyes, at the same address, thru Rene Esleta,
Editorial Assistant of defendant AbanteTonite, a person of
sufficient age and discretion working therein who signed to
acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendants were made, but the
same were ineffectual and unavailing on the ground that per
information of (sic) Mr. Esleta said defendants is (sic) always
roving outside and gathering news, thus, substituted service was
applied.
Original copy of summons is therefore, respectfully returned duly served.
Manila, September 22, 2000.
On October 3, 2000, petitioners moved for the dismissal of the complaint
through counsels special appearance in their behalf, alleging lack of
jurisdiction over their persons because of the invalid and ineffectual
substituted service of summons. They contended that the sheriff had made
no prior attempt to serve the summons personally on each of them in
accordance with Section 6 and Section 7, Rule 14 of the Rules of Court.
They further moved to drop Abante Tonite as a defendant by virtue of its
being neither a natural nor a juridical person that could be impleaded as a
party in a civil action.
At the hearing of petitioners motion to dismiss, Medina testified that he
had gone to the office address of petitioners in the morning of September
18, 2000 to personally serve the summons on each defendant; that
petitioners were out of the office at the time; that he had returned in the
afternoon of the same day to again attempt to serve on each defendant
personally but his attempt had still proved futile because all of petitioners
were still out of the office; that some competent persons working in
petitioners office had informed him that Macasaet and Quijano were
always out and unavailable, and that Albano, Bay, Galang, Hagos and

Reyes were always out roving to gather news; and that he had then
resorted to substituted service upon realizing the impossibility of his finding
petitioners in person within a reasonable time.
On March 12, 2001, the RTC denied the motion to dismiss, and directed
petitioners to file their answers to the complaint within the remaining period
allowed by the Rules of Court,6 relevantly stating:
Records show that the summonses were served upon Allen A. Macasaet,
President/Publisher of defendant AbanteTonite, through LuAnn Quijano;
upon defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy
Hagos and Lily Reyes, through Rene Esleta, Editorial Assistant of
defendant Abante Tonite (p. 12, records). It is apparent in the Sheriffs
Return that on several occasions, efforts to served (sic) the summons
personally upon all the defendants were ineffectual as they were always
out and unavailable, so the Sheriff served the summons by substituted
service.
Considering that summonses cannot be served within a reasonable time to
the persons of all the defendants, hence substituted service of summonses
was validly applied. Secretary of the President who is duly authorized to
receive such document, the wife of the defendant and the Editorial
Assistant of the defendant, were considered competent persons with
sufficient discretion to realize the importance of the legal papers served
upon them and to relay the same to the defendants named therein (Sec. 7,
Rule 14, 1997 Rules of Civil Procedure).
WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby
DENIED for lack of merit..
Accordingly, defendants are directed to file their Answers to the complaint
within the period still open to them, pursuant to the rules.

SO ORDERED.
Petitioners filed a motion for reconsideration, asserting that the sheriff had
immediately resorted to substituted service of the summons upon being
informed that they were not around to personally receive the summons,
and that Abante Tonite, being neither a natural nor a juridical person, could
not be made a party in the action.
On June 29, 2001, the RTC denied petitioners motion for
reconsideration.7 It stated in respect of the service of summons, as follows:
The allegations of the defendants that the Sheriff immediately resorted to
substituted service of summons upon them when he was informed that
they were not around to personally receive the same is untenable. During
the hearing of the herein motion, Sheriff Raul Medina of this Branch of the
Court testified that on September 18, 2000 in the morning, he went to the
office address of the defendants to personally serve summons upon them
but they were out. So he went back to serve said summons upon the
defendants in the afternoon of the same day, but then again he was
informed that the defendants were out and unavailable, and that they were
always out because they were roving around to gather news. Because of
that information and because of the nature of the work of the defendants
that they are always on field, so the sheriff resorted to substituted service
of summons. There was substantial compliance with the rules, considering
the difficulty to serve the summons personally to them because of the
nature of their job which compels them to be always out and unavailable.
Additional matters regarding the service of summons upon defendants
were sufficiently discussed in the Order of this Court dated March 12,
2001.
Regarding the impleading of Abante Tonite as defendant, the RTC held,
viz:

"Abante Tonite" is a daily tabloid of general circulation. People all over the
country could buy a copy of "Abante Tonite" and read it, hence, it is for
public consumption. The persons who organized said publication obviously
derived profit from it. The information written on the said newspaper will
affect the person, natural as well as juridical, who was stated or implicated
in the news. All of these facts imply that "Abante Tonite" falls within the
provision of Art. 44 (2 or 3), New Civil Code. Assuming arguendo that
"Abante Tonite" is not registered with the Securities and Exchange
Commission, it is deemed a corporation by estoppels considering that it
possesses attributes of a juridical person, otherwise it cannot be held liable
for damages and injuries it may inflict to other persons.
Undaunted, petitioners brought a petition for certiorari, prohibition,
mandamusin the CA to nullify the orders of the RTC dated March 12, 2001
and June 29, 2001.
Ruling of the CA
On March 8, 2002, the CA promulgated its questioned
decision,8 dismissing the petition for certiorari, prohibition, mandamus, to
wit:
We find petitioners argument without merit. The rule is that certiorari will
prosper only if there is a showing of grave abuse of discretion or an act
without or in excess of jurisdiction committed by the respondent Judge. A
judicious reading of the questioned orders of respondent Judge would
show that the same were not issued in a capricious or whimsical exercise
of judgment. There are factual bases and legal justification for the assailed
orders. From the Return, the sheriff certified that "effort to serve the
summons personally xxx were made, but the same were ineffectual and
unavailing xxx.
and upholding the trial courts finding that there was a substantial
compliance with the rules that allowed the substituted service.

Furthermore, the CA ruled:

Petitioners hereby submit that:

Anent the issue raised by petitioners that "Abante Tonite is neither a

natural or juridical person who may be a party in a civil case," and
therefore the case against it must be dismissed and/or dropped, is
untenable.

1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN HOLDING THAT THE TRIAL COURT ACQUIRED
JURISDICTION OVER HEREIN PETITIONERS.
2. THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR BY SUSTAINING THE INCLUSION OF ABANTE TONITE
AS PARTY IN THE INSTANT CASE.11

The respondent Judge, in denying petitioners motion for reconsideration,

held that:
xxxx

Ruling

Abante Tonites newspapers are circulated nationwide, showing ostensibly

its being a corporate entity, thus the doctrine of corporation by estoppel
may appropriately apply.

The petition for review lacks merit.

An unincorporated association, which represents itself to be a corporation,

will be estopped from denying its corporate capacity in a suit against it by a
third person who relies in good faith on such representation.
There being no grave abuse of discretion committed by the respondent
Judge in the exercise of his jurisdiction, the relief of prohibition is also
unavailable.
WHEREFORE, the instant petition is DENIED. The assailed Orders of
respondent Judge are AFFIRMED.
SO ORDERED.9
On January 13,
reconsideration.10
Issues

2003,

the

CA

denied

petitioners

motion

for

Jurisdiction over the person, or jurisdiction in personam the power of the

court to render a personal judgment or to subject the parties in a particular
action to the judgment and other rulings rendered in the action is an
element of due process that is essential in all actions, civil as well as
criminal, except in actions in rem or quasi in rem. Jurisdiction over the
defendantin an action in rem or quasi in rem is not required, and the court
acquires jurisdiction over an actionas long as it acquires jurisdiction over
the resthat is thesubject matter of the action. The purpose of summons in
such action is not the acquisition of jurisdiction over the defendant but
mainly to satisfy the constitutional requirement of due process. 12
The distinctions that need to be perceived between an action in personam,
on the one hand, and an action inrem or quasi in rem, on the other hand,
are aptly delineated in Domagas v. Jensen,13 thusly:
The settled rule is that the aim and object of an action determine its
character. Whether a proceeding is in rem, or in personam, or quasi in rem
for that matter, is determined by its nature and purpose, and by these only.
A proceeding in personam is a proceeding to enforce personal rights and

obligations brought against the person and is based on the jurisdiction of

the person, although it may involve his right to, or the exercise of
ownership of, specific property, or seek to compel him to control or dispose
of it in accordance with the mandate of the court. The purpose of a
proceeding in personam is to impose, through the judgment of a court,
some responsibility or liability directly upon the person of the defendant. Of
this character are suits to compel a defendant to specifically perform some
act or actions to fasten a pecuniary liability on him. An action in personam
is said to be one which has for its object a judgment against the person, as
distinguished from a judgment against the property to determine its state. It
has been held that an action in personam is a proceeding to enforce
personal rights or obligations; such action is brought against the person.
As far as suits for injunctive relief are concerned, it is well-settled that it is
an injunctive act in personam. In Combs v. Combs, the appellate court
held that proceedings to enforce personal rights and obligations and in
which personal judgments are rendered adjusting the rights and
obligations between the affected parties is in personam. Actions for
recovery of real property are in personam.
On the other hand, a proceeding quasi in rem is one brought against
persons seeking to subject the property of such persons to the discharge
of the claims assailed. In an action quasi in rem, an individual is named as
defendant and the purpose of the proceeding is to subject his interests
therein to the obligation or loan burdening the property. Actions quasi in
rem deal with the status, ownership or liability of a particular property but
which are intended to operate on these questions only as between the
particular parties to the proceedings and not to ascertain or cut off the
rights or interests of all possible claimants. The judgments therein are
binding only upon the parties who joined in the action.
As a rule, Philippine courts cannot try any case against a defendant who
does not reside and is not found in the Philippines because of the
impossibility of acquiring jurisdiction over his person unless he voluntarily
appears in court; but when the case is an action in rem or quasi in rem

enumerated in Section 15, Rule 14 of the Rules of Court, Philippine courts

have jurisdiction to hear and decide the case because they have
jurisdiction over the res, and jurisdiction over the person of the nonresident defendant is not essential. In the latter instance, extraterritorial
service of summons can be made upon the defendant, and such
extraterritorial service of summons is not for the purpose of vesting the
court with jurisdiction, but for the purpose of complying with the
requirements of fair play or due process, so that the defendant will be
informed of the pendency of the action against him and the possibility that
property in the Philippines belonging to him or in which he has an interest
may be subjected to a judgment in favor of the plaintiff, and he can thereby
take steps to protect his interest if he is so minded. On the other hand,
when the defendant in an action in personam does not reside and is not
found in the Philippines, our courts cannot try the case against him
because of the impossibility of acquiring jurisdiction over his person unless
he voluntarily appears in court.14
As the initiating party, the plaintiff in a civil action voluntarily submits
himself to the jurisdiction of the court by the act of filing the initiatory
pleading. As to the defendant, the court acquires jurisdiction over his
person either by the proper service of the summons, or by a voluntary
appearance in the action.15
Upon the filing of the complaint and the payment of the requisite legal fees,
the clerk of court forthwith issues the corresponding summons to the
defendant.16 The summons is directed to the defendant and signed by the
clerk of court under seal. It contains the name of the court and the names
of the parties to the action; a direction that the defendant answers within
the time fixed by the Rules of Court; and a notice that unless the defendant
so answers, the plaintiff will take judgment by default and may be granted
the relief applied for.17 To be attached to the original copy of the summons
and all copies thereof is a copy of the complaint (and its attachments, if
any) and the order, if any, for the appointment of a guardian ad litem. 18

The significance of the proper service of the summons on the defendant in

an action in personam cannot be overemphasized. The service of the
summons fulfills two fundamental objectives, namely: (a) to vest in the
court jurisdiction over the person of the defendant; and (b) to afford to the
defendant the opportunity to be heard on the claim brought against
him.19 As to the former, when jurisdiction in personam is not acquired in a
civil action through the proper service of the summons or upon a valid
waiver of such proper service, the ensuing trial and judgment are void. 20 If
the defendant knowingly does an act inconsistent with the right to object to
the lack of personal jurisdiction as to him, like voluntarily appearing in the
action, he is deemed to have submitted himself to the jurisdiction of the
court.21 As to the latter, the essence of due process lies in the reasonable
opportunity to be heard and to submit any evidence the defendant may
have in support of his defense. With the proper service of the summons
being intended to afford to him the opportunity to be heard on the claim
against him, he may also waive the process. 21 In other words, compliance
with the rules regarding the service of the summons is as much an issue of
due process as it is of jurisdiction.23
Under the Rules of Court, the service of the summons should firstly be
effected on the defendant himself whenever practicable. Such personal
service consists either in handing a copy of the summons to the defendant
in person, or, if the defendant refuses to receive and sign for it, in
tendering it to him.24 The rule on personal service is to be rigidly enforced
in order to ensure the realization of the two fundamental objectives earlier
mentioned. If, for justifiable reasons, the defendant cannot be served in
person within a reasonable time, the service of the summons may then be
effected either (a) by leaving a copy of the summons at his residence with
some person of suitable age and discretion then residing therein, or (b) by
leaving the copy at his office or regular place of business with some
competent person in charge thereof. 25 The latter mode of service is known
as substituted service because the service of the summons on the
defendant is made through his substitute.

It is no longer debatable that the statutory requirements of substituted

service must be followed strictly, faithfully and fully, and any substituted
service other than that authorized by statute is considered
ineffective.26 This is because substituted service, being in derogation of the
usual method of service, is extraordinary in character and may be used
only as prescribed and in the circumstances authorized by statute. 27 Only
when the defendant cannot be served personally within a reasonable time
may substituted service be resorted to. Hence, the impossibility of prompt
personal service should be shown by stating the efforts made to find the
defendant himself and the fact that such efforts failed, which statement
should be found in the proof of service or sheriffs return. 28Nonetheless,
the requisite showing of the impossibility of prompt personal service as
basis for resorting to substituted service may be waived by the defendant
either expressly or impliedly.29
There is no question that Sheriff Medina twice attempted to serve the
summons upon each of petitioners in person at their office address, the
first in the morning of September 18, 2000 and the second in the afternoon
of the same date. Each attempt failed because Macasaet and Quijano
were "always out and not available" and the other petitioners were "always
roving outside and gathering news." After Medina learned from those
present in the office address on his second attempt that there was no
likelihood of any of petitioners going to the office during the business hours
of that or any other day, he concluded that further attempts to serve them
in person within a reasonable time would be futile. The circumstances fully
warranted his conclusion. He was not expected or required as the serving
officer to effect personal service by all means and at all times, considering
that he was expressly authorized to resort to substituted service should he
be unable to effect the personal service within a reasonable time. In that
regard, what was a reasonable time was dependent on the circumstances
obtaining. While we are strict in insisting on personal service on the
defendant, we do not cling to such strictness should the circumstances
already justify substituted service instead. It is the spirit of the procedural
rules, not their letter, that governs.30

In reality, petitioners insistence on personal service by the serving officer

was demonstrably superfluous. They had actually received the
summonses served through their substitutes, as borne out by their filing of
several pleadings in the RTC, including an answer with compulsory
counterclaim ad cautelam and a pre-trial brief ad cautelam. They had also
availed themselves of the modes of discovery available under the Rules of
Court. Such acts evinced their voluntary appearance in the action.

Republic
SUPREME
Manila

Nor can we sustain petitioners contention that Abante Tonite could not be
sued as a defendant due to its not being either a natural or a juridical
person. In rejecting their contention, the CA categorized Abante Tonite as a
corporation by estoppel as the result of its having represented itself to the
reading public as a corporation despite its not being incorporated. Thereby,
the CA concluded that the RTC did not gravely abuse its discretion in
holding that the non-incorporation of Abante Tonite with the Securities and
Exchange Commission was of no consequence, for, otherwise, whoever of
the public who would suffer any damage from the publication of articles in
the pages of its tabloids would be left without recourse. We cannot
disagree with the CA, considering that the editorial box of the daily tabloid
disclosed that basis, nothing in the box indicated that Monica Publishing
Corporation had owned Abante Tonite.

BOSTON
EQUITY
RESOURCES,
INC., Petitioner,
vs.
COURT OF APPEALS AND LOLITA G. TOLEDO, Respondents.

WHEREFORE, the Court AFFIRMS the decision promulgated on March 8,

2002; and ORDERS petitioners to pay the costs of suit.
SO ORDERED.

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 173946

June 19, 2013

DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to reverse
and set aside: (1) the Decision, 1 dated 28 February 2006 and (2) the
Resolution,2 dated 1 August 2006 of the Court of Appeals in CA-G.R. SP
No. 88586. The challenged decision granted herein respondent's petition
for certiorari upon a finding that the trial court committed grave abuse of
discretion in denying respondent's motion to dismiss the complaint against
her.3Based on this finding, the Court of Appeals reversed and set aside the
Orders, dated 8 November 2004 4 and 22 December 2004,5 respectively, of
the Regional Trial Court (RTC) of Manila, Branch 24.
The Facts
On 24 December 1997, petitioner filed a complaint for sum of money with
a prayer for the issuance of a writ of preliminary attachment against the
spouses Manuel and Lolita Toledo. 6 Herein respondent filed an Answer
dated 19 March 1998 but on 7 May 1998, she filed a Motion for Leave to
Admit Amended Answer7 in which she alleged, among others, that her

husband and co-defendant, Manuel Toledo (Manuel), is already dead. 8 The

death certificate9 of Manuel states "13 July 1995" as the date of death. As
a result, petitioner filed a motion, dated 5 August 1999, to require
respondent to disclose the heirs of Manuel.10 In compliance with the verbal
order of the court during the 11 October 1999 hearing of the case,
respondent submitted the required names and addresses of the
heirs.11 Petitioner then filed a Motion for Substitution, 12 dated 18 January
2000, praying that Manuel be substituted by his children as partydefendants. It appears that this motion was granted by the trial court in an
Order dated 9 October 2000.13
Pre-trial thereafter ensued and on 18 July 2001, the trial court issued its
pre-trial order containing, among others, the dates of hearing of the case. 14

the answer to the complaint or pleading asserting a claim, a motion to

dismiss may be made x x x." 17 Respondents motion for reconsideration of
the order of denial was likewise denied on the ground that "defendants
attack on the jurisdiction of this Court is now barred by estoppel by laches"
since respondent failed to raise the issue despite several chances to do
so.18
Aggrieved, respondent filed a petition for certiorari with the Court of
Appeals alleging that the trial court seriously erred and gravely abused its
discretion in denying her motion to dismiss despite discovery, during the
trial of the case, of evidence that would constitute a ground for dismissal of
the case.19
The Court of Appeals granted the petition based on the following grounds:

The trial of the case then proceeded. Herein petitioner, as plaintiff,

presented its evidence and its exhibits were thereafter admitted.
On 26 May 2004, the reception of evidence for herein respondent was
cancelled upon agreement of the parties. On 24 September 2004, counsel
for herein respondent was given a period of fifteen days within which to file
a demurrer to evidence.15 However, on 7 October 2004, respondent
instead filed a motion to dismiss the complaint, citing the following as
grounds: (1) that the complaint failed to implead an indispensable party or
a real party in interest; hence, the case must be dismissed for failure to
state a cause of action; (2) that the trial court did not acquire jurisdiction
over the person of Manuel pursuant to Section 5, Rule 86 of the Revised
Rules of Court; (3) that the trial court erred in ordering the substitution of
the deceased Manuel by his heirs; and (4) that the court must also dismiss
the case against Lolita Toledo in accordance with Section 6, Rule 86 of the
Rules of Court.16
The trial court, in an Order dated 8 November 2004, denied the motion to
dismiss for having been filed out of time, citing Section 1, Rule 16 of the
1997 Rules of Court which states that: "Within the time for but before filing

It is elementary that courts acquire jurisdiction over the person of the

defendant x x x only when the latter voluntarily appeared or submitted to
the court or by coercive process issued by the court to him, x x x. In this
case, it is undisputed that when petitioner Boston filed the complaint on
December 24, 1997, defendant Manuel S. Toledo was already dead, x x x.
Such being the case, the court a quo could not have acquired jurisdiction
over the person of defendant Manuel S. Toledo.
x x x the court a quos denial of respondents motion to dismiss was based
on its finding that respondents attack on the jurisdiction of the court was
already barred by laches as respondent failed to raise the said ground in
its [sic] amended answer and during the pre-trial, despite her active
participation in the proceedings.
However, x x x it is well-settled that issue on jurisdiction may be raised at
any stage of the proceeding, even for the first time on appeal. By timely
raising the issue on jurisdiction in her motion to dismiss x x x respondent is
not estopped from raising the question on jurisdiction.

Moreover, when issue on jurisdiction was raised by respondent, the court a

quo had not yet decided the case, hence, there is no basis for the court a
quo to invoke estoppel to justify its denial of the motion for reconsideration;

3. The inclusion of Manuel as party-defendant is a mere misjoinder

of party not warranting the dismissal of the case before the lower
court; and

It should be stressed that when the complaint was filed, defendant Manuel
S. Toledo was already dead. The complaint should have impleaded the
estate of Manuel S. Toledo as defendant, not only the wife, considering
that the estate of Manuel S. Toledo is an indispensable party, which stands
to be benefited or be injured in the outcome of the case. x x x

4. Since the estate of Manuel is not an indispensable party, it is

not necessary that petitioner file its claim against the estate of
Manuel.
In essence, what is at issue here is the correctness of the trial courts
orders denying respondents motion to dismiss.

xxxx
The Ruling of the Court
Respondents motion to dismiss the complaint should have been granted
by public respondent judge as the same was in order. Considering that the
obligation of Manuel S. Toledo is solidary with another debtor, x x x, the
claim x x x should be filed against the estate of Manuel S. Toledo, in
conformity with the provision of Section 6, Rule 86 of the Rules of Court, x
x x.20
The Court of Appeals denied petitioners motion for reconsideration.
Hence, this petition.
The Issues
Petitioner claims that the Court of Appeals erred in not holding that:

We find merit in the petition.

Motion to dismiss filed out of time
To begin with, the Court of Appeals erred in granting the writ of certiorari in
favor of respondent. Well settled is the rule that the special civil action for
certiorari is not the proper remedy to assail the denial by the trial court of a
motion to dismiss. The order of the trial court denying a motion to dismiss
is merely interlocutory, as it neither terminates nor finally disposes of a
case and still leaves something to be done by the court before a case is
finally decided on the merits. 21 Therefore, "the proper remedy in such a
case is to appeal after a decision has been rendered." 22

1. Respondent is already estopped from questioning the trial

courts jurisdiction;

As the Supreme Court held in Indiana Aerospace University v. Comm. on

Higher Education:23

2. Petitioner never failed to implead an indispensable party as the

estate of Manuel is not an indispensable party;

A writ of certiorari is not intended to correct every controversial

interlocutory ruling; it is resorted only to correct a grave abuse of discretion
or a whimsical exercise of judgment equivalent to lack of jurisdiction. Its
function is limited to keeping an inferior court within its jurisdiction and to

relieve persons from arbitrary acts acts which courts or judges have no
power or authority in law to perform. It is not designed to correct erroneous
findings and conclusions made by the courts. (Emphasis supplied)
Even assuming that certiorari is the proper remedy, the trial court did not
commit grave abuse of discretion in denying respondents motion to
dismiss. It, in fact, acted correctly when it issued the questioned orders as
respondents motion to dismiss was filed SIX YEARS AND FIVE MONTHS
AFTER SHE FILED HER AMENDED ANSWER. This circumstance alone
already warranted the outright dismissal of the motion for having been filed
in clear contravention of the express mandate of Section 1, Rule 16, of the
Revised Rules of Court. Under this provision, a motion to dismiss shall be
filed within the time for but before the filing of an answer to the complaint
or pleading asserting a claim.24
More importantly, respondents motion to dismiss was filed after petitioner
has completed the presentation of its evidence in the trial court, giving
credence to petitioners and the trial courts conclusion that the filing of the
motion to dismiss was a mere ploy on the part of respondent to delay the
prompt resolution of the case against her.
Also worth mentioning is the fact that respondents motion to dismiss
under consideration herein is not the first motion to dismiss she filed in the
trial court. It appears that she had filed an earlier motion to dismiss 26 on
the sole ground of the unenforceability of petitioners claim under the
Statute of Frauds, which motion was denied by the trial court. More telling
is the following narration of the trial court in its Order denying respondents
motion for reconsideration of the denial of her motion to dismiss:
As can be gleaned from the records, with the admission of plaintiffs
exhibits, reception of defendants evidence was set on March 31, and April
23, 2004 x x x . On motion of the defendants, the hearing on March 31,
2004 was cancelled.

On April 14, 2004, defendants sought the issuance of subpoena ad

testificandum and duces tecum to one Gina M. Madulid, to appear and
testify for the defendants on April 23, 2004. Reception of defendants
evidence was again deferred to May 26, June 2 and June 30, 2004, x x x.
On May 13, 2004, defendants sought again the issuance of a subpoena
duces tecum and ad testificandum to the said Gina Madulid. On May 26,
2004, reception of defendants [sic] evidence was cancelled upon the
agreement of the parties. On July 28, 2004, in the absence of defendants
witness, hearing was reset to September 24 and October 8, 2004 x x x.
On September 24, 2004, counsel for defendants was given a period of
fifteen (15) days to file a demurrer to evidence. On October 7, 2004,
defendants filed instead a Motion to Dismiss x x x.27
Respondents act of filing multiple motions, such as the first and earlier
motion to dismiss and then the motion to dismiss at issue here, as well as
several motions for postponement, lends credibility to the position taken by
petitioner, which is shared by the trial court, that respondent is
deliberately impeding the early disposition of this case. The filing of the
second motion to dismiss was, therefore, "not only improper but also
dilatory."28 Thus, the trial court, "far from deviating or straying off course
from established jurisprudence on the matter, x x x had in fact faithfully
observed the law and legal precedents in this case." 29 The Court of
Appeals, therefore, erred not only in entertaining respondents petition for
certiorari, it likewise erred in ruling that the trial court committed grave
abuse of discretion when it denied respondents motion to dismiss.
On
whether
or
not
respondent
questioning the jurisdiction of the trial court

is

estopped

from

At the outset, it must be here stated that, as the succeeding discussions

will demonstrate, jurisdiction over the person of Manuel should not be an
issue in this case. A protracted discourse on jurisdiction is, nevertheless,
demanded by the fact that jurisdiction has been raised as an issue from
the lower court, to the Court of Appeals and, finally, before this Court. For
the sake of clarity, and in order to finally settle the controversy and fully
dispose of all the issues in this case, it was deemed imperative to resolve
the issue of jurisdiction.
1. Aspects of Jurisdiction
Petitioner calls attention to the fact that respondents motion to dismiss
questioning the trial courts jurisdiction was filed more than six years after
her amended answer was filed. According to petitioner, respondent had
several opportunities, at various stages of the proceedings, to assail the
trial courts jurisdiction but never did so for six straight years. Citing the
doctrine laid down in the case of Tijam, et al. v. Sibonghanoy, et
al.30 petitioner claimed that respondents failure to raise the question of
jurisdiction at an earlier stage bars her from later questioning it, especially
since she actively participated in the proceedings conducted by the trial
court.
Petitioners argument is misplaced, in that, it failed to consider that the
concept of jurisdiction has several aspects, namely: (1) jurisdiction over
the subject matter; (2) jurisdiction over the parties; (3) jurisdiction over the
issues of the case; and (4) in cases involving property, jurisdiction over the
res or the thing which is the subject of the litigation. 31
The aspect of jurisdiction which may be barred from being assailed as a
result of estoppel by laches is jurisdiction over the subject matter. Thus, in
Tijam, the case relied upon by petitioner, the issue involved was the
authority of the then Court of First Instance to hear a case for the collection
of a sum of money in the amount of P1,908.00 which amount was, at that
time, within the exclusive original jurisdiction of the municipal courts.

In subsequent cases citing the ruling of the Court in Tijam, what was
likewise at issue was the jurisdiction of the trial court over the subject
matter of the case. Accordingly, in Spouses Gonzaga v. Court of
Appeals,32 the issue for consideration was the authority of the regional trial
court to hear and decide an action for reformation of contract and
damages involving a subdivision lot, it being argued therein that jurisdiction
is vested in the Housing and Land Use Regulatory Board pursuant to PD
957 (The Subdivision and Condominium Buyers Protective Decree). In Lee
v. Presiding Judge, MTC, Legaspi City,33 petitioners argued that the
respondent municipal trial court had no jurisdiction over the complaint for
ejectment because the issue of ownership was raised in the pleadings.
Finally, in People v. Casuga,34 accused-appellant claimed that the crime of
grave slander, of which she was charged, falls within the concurrent
jurisdiction of municipal courts or city courts and the then courts of first
instance, and that the judgment of the court of first instance, to which she
had appealed the municipal court's conviction, should be deemed null and
void for want of jurisdiction as her appeal should have been filed with the
Court of Appeals or the Supreme Court.
In all of these cases, the Supreme Court barred the attack on the
jurisdiction of the respective courts concerned over the subject matter of
the case based on estoppel by laches, declaring that parties cannot be
allowed to belatedly adopt an inconsistent posture by attacking the
jurisdiction of a court to which they submitted their cause voluntarily.35
Here, what respondent was questioning in her motion to dismiss before the
trial court was that courts jurisdiction over the person of defendant
Manuel. Thus, the principle of estoppel by laches finds no application in
this case. Instead, the principles relating to jurisdiction over the person of
the parties are pertinent herein.
The Rules of Court provide:

RULE
EFFECT OF FAILURE TO PLEAD

Section 1. Defenses and objections not pleaded. Defenses and

objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim.
RULE
MOTIONS

The Court of Appeals, therefore, erred when it made a sweeping

pronouncement in its questioned decision, stating that "issue on
jurisdiction may be raised at any stage of the proceeding, even for the first
time on appeal" and that, therefore, respondent timely raised the issue in
her motion to dismiss and is, consequently, not estopped from raising the
question of jurisdiction. As the question of jurisdiction involved here is that
over the person of the defendant Manuel, the same is deemed waived if
not raised in the answer or a motion to dismiss. In any case, respondent
cannot claim the defense since "lack of jurisdiction over the person, being
subject to waiver, is a personal defense which can only be asserted by the
party who can thereby waive it by silence." 39

15

Sec. 8. Omnibus motion. Subject to the provisions of Section 1 of Rule 9,

a motion attacking a pleading, order, judgment, or proceeding shall include
all objections then available, and all objections not so included shall be
deemed waived.
Based on the foregoing provisions, the "objection on jurisdictional grounds
which is not waived even if not alleged in a motion to dismiss or the
answer is lack of jurisdiction over the subject matter. x x x Lack of
jurisdiction over the subject matter can always be raised anytime, even for
the first time on appeal, since jurisdictional issues cannot be waived x x x
subject, however, to the principle of estoppel by laches." 36
Since the defense of lack of jurisdiction over the person of a party to a
case is not one of those defenses which are not deemed waived under
Section 1 of Rule 9, such defense must be invoked when an answer or a
motion to dismiss is filed in order to prevent a waiver of the defense. 37 If
the objection is not raised either in a motion to dismiss or in the answer,
the objection to the jurisdiction over the person of the plaintiff or the
defendant is deemed waived by virtue of the first sentence of the abovequoted Section 1 of Rule 9 of the Rules of Court.38

2. Jurisdiction over the person of a defendant is acquired through a valid

service of summons; trial court did not acquire jurisdiction over the person
of Manuel Toledo
In the first place, jurisdiction over the person of Manuel was never
acquired by the trial court. A defendant is informed of a case against him
when he receives summons. "Summons is a writ by which the defendant is
notified of the action brought against him. Service of such writ is the
means by which the court acquires jurisdiction over his person." 40
In the case at bar, the trial court did not acquire jurisdiction over the person
of Manuel since there was no valid service of summons upon him,
precisely because he was already dead even before the complaint against
him and his wife was filed in the trial court. The issues presented in this
case are similar to those in the case of Sarsaba v. Vda. de Te. 41
In Sarsaba, the NLRC rendered a decision declaring that Patricio Sereno
was illegally dismissed from employment and ordering the payment of his
monetary claims. To satisfy the claim, a truck in the possession of
Serenos employer was levied upon by a sheriff of the NLRC,
accompanied by Sereno and his lawyer, Rogelio Sarsaba, the petitioner in
that case. A complaint for recovery of motor vehicle and damages, with

prayer for the delivery of the truck pendente lite was eventually filed
against Sarsaba, Sereno, the NLRC sheriff and the NLRC by the
registered owner of the truck. After his motion to dismiss was denied by
the trial court, petitioner Sarsaba filed his answer. Later on, however, he
filed an omnibus motion to dismiss citing, as one of the grounds, lack of
jurisdiction over one of the principal defendants, in view of the fact that
Sereno was already dead when the complaint for recovery of possession
was filed.
Although the factual milieu of the present case is not exactly similar to that
of Sarsaba, one of the issues submitted for resolution in both cases is
similar: whether or not a case, where one of the named defendants was
already dead at the time of its filing, should be dismissed so that the claim
may be pursued instead in the proceedings for the settlement of the estate
of the deceased defendant. The petitioner in the Sarsaba Case claimed,
as did respondent herein, that since one of the defendants died before
summons was served on him, the trial court should have dismissed the
complaint against all the defendants and the claim should be filed against
the estate of the deceased defendant. The petitioner in Sarsaba, therefore,
prayed that the complaint be dismissed, not only against Sereno, but as to
all the defendants, considering that the RTC did not acquire jurisdiction
over the person of Sereno.42 This is exactly the same prayer made by
respondent herein in her motion to dismiss.
The Court, in the Sarsaba Case, resolved the issue in this wise:
x x x We cannot countenance petitioners argument that the complaint
against the other defendants should have been dismissed, considering
that the RTC never acquired jurisdiction over the person of Sereno. The
courts failure to acquire jurisdiction over ones person is a defense which
is personal to the person claiming it. Obviously, it is now impossible for
Sereno to invoke the same in view of his death. Neither can petitioner
invoke such ground, on behalf of Sereno, so as to reap the benefit of
having the case dismissed against all of the defendants. Failure to serve

summons on Serenos person will not be a cause for the dismissal of the
complaint against the other defendants, considering that they have been
served with copies of the summons and complaints and have long
submitted their respective responsive pleadings. In fact, the other
defendants in the complaint were given the chance to raise all possible
defenses and objections personal to them in their respective motions to
dismiss and their subsequent answers.43 (Emphasis supplied.)
Hence, the Supreme Court affirmed the dismissal by the trial court of the
complaint against Sereno only.
Based on the foregoing pronouncements, there is no basis for dismissing
the complaint against respondent herein. Thus, as already emphasized
above, the trial court correctly denied her motion to dismiss.
On whether or not the estate of Manuel
Toledo is an indispensable party
Rule 3, Section 7 of the 1997 Rules of Court states:
SEC. 7. Compulsory joinder of indispensable parties. Parties-in-interest
without whom no final determination can be had of an action shall be
joined either as plaintiffs or defendants.
An indispensable party is one who has such an interest in the controversy
or subject matter of a case that a final adjudication cannot be made in his
or her absence, without injuring or affecting that interest. He or she is a
party who has not only an interest in the subject matter of the controversy,
but "an interest of such nature that a final decree cannot be made without
affecting that interest or leaving the controversy in such a condition that its
final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a

person in whose absence there cannot be a determination between the

parties already before the court which is effective, complete or equitable."
Further, an indispensable party is one who must be included in an action
before it may properly proceed.44
On the other hand, a "person is not an indispensable party if his interest in
the controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected by a
decree which does complete justice between them. Also, a person is not
an indispensable party if his presence would merely permit complete relief
between him or her and those already parties to the action, or if he or she
has no interest in the subject matter of the action." It is not a sufficient
reason to declare a person to be an indispensable party simply because
his or her presence will avoid multiple litigations.45
Applying the foregoing pronouncements to the case at bar, it is clear that
the estate of Manuel is not an indispensable party to the collection case,
for the simple reason that the obligation of Manuel and his wife,
respondent herein, is solidary.
The contract between petitioner, on the one hand and respondent and
respondents husband, on the other, states:
46

FOR VALUE RECEIVED, I/We jointly and severally (in solemn) promise
to pay BOSTON EQUITY RESOURCES, INC. x x x the sum of PESOS:
[ONE MILLION FOUR HUNDRED (P1,400,000.00)] x x x.47
The provisions and stipulations of the contract were then followed by the
respective signatures of respondent as "MAKER" and her husband as
"CO-MAKER."48 Thus, pursuant to Article 1216 of the Civil Code, petitioner
may collect the entire amount of the obligation from respondent only. The
aforementioned provision states: "The creditor may proceed against any
one of the solidary debtors or some or all of them simultaneously. The
demand made against one of them shall not be an obstacle to those which

may subsequently be directed against the others, so long as the debt has
not been fully collected."
In other words, the collection case can proceed and the demands of
petitioner can be satisfied by respondent only, even without impleading the
estate of Manuel. Consequently, the estate of Manuel is not an
indispensable party to petitioners complaint for sum of money.
However, the Court of Appeals, agreeing with the contention of
respondent, held that the claim of petitioner should have been filed against
the estate of Manuel in accordance with Sections 5 and 6 of Rule 86 of the
Rules of Court. The aforementioned provisions provide:
SEC. 5. Claims which must be filed under the notice. If not filed, barred;
exceptions. All claims for money against the decedent, arising from
contract, express or implied, whether the same be due, not due, or
contingent, all claims for funeral expenses and judgment for money
against the decedent, must be filed within the time limited in the notice;
otherwise, they are barred forever, except that they may be set forth as
counterclaims in any action that the executor or administrator may bring
against the claimants. x x x.
SEC. 6. Solidary obligation of decedent. Where the obligation of the
decedent is solidary with another debtor, the claim shall be filed against
the decedent as if he were the only debtor, without prejudice to the right of
the estate to recover contribution from the other debtor. x x x.
The Court of Appeals erred in its interpretation of the above-quoted
provisions.
In construing Section 6, Rule 87 of the old Rules of Court, the precursor of
Section 6, Rule 86 of the Revised Rules of Court, which latter provision
has been retained in the present Rules of Court without any revisions, the

Supreme Court, in the case of Manila Surety & Fidelity Co., Inc. v.
Villarama, et. al.,49 held:50
Construing Section 698 of the Code of Civil Procedure from whence
[Section 6, Rule 87] was taken, this Court held that where two persons are
bound in solidum for the same debt and one of them dies, the whole
indebtedness can be proved against the estate of the latter, the decedents
liability being absolute and primary; x x x. It is evident from the foregoing
that Section 6 of Rule 87 provides the procedure should the creditor desire
to go against the deceased debtor, but there is certainly nothing in the said
provision making compliance with such procedure a condition precedent
before an ordinary action against the surviving solidary debtors, should the
creditor choose to demand payment from the latter, could be entertained to
the extent that failure to observe the same would deprive the court
jurisdiction to take cognizance of the action against the surviving debtors.
Upon the other hand, the Civil Code expressly allows the creditor to
proceed against any one of the solidary debtors or some or all of them
simultaneously. There is, therefore, nothing improper in the creditors filing
of an action against the surviving solidary debtors alone, instead of
instituting a proceeding for the settlement of the estate of the deceased
debtor wherein his claim could be filed.
The foregoing ruling was reiterated and expounded in the later case of
Philippine National Bank v. Asuncion 51where the Supreme Court
pronounced:
A cursory perusal of Section 6, Rule 86 of the Revised Rules of Court
reveals that nothing therein prevents a creditor from proceeding against
the surviving solidary debtors. Said provision merely sets up the procedure
in enforcing collection in case a creditor chooses to pursue his claim
against the estate of the deceased solidary debtor. The rule has been set
forth that a creditor (in a solidary obligation) has the option whether to file
or not to file a claim against the estate of the solidary debtor. x x x

xxxx
It is crystal clear that Article 1216 of the New Civil Code is the applicable
provision in this matter. Said provision gives the creditor the right to
"proceed against anyone of the solidary debtors or some or all of them
simultaneously." The choice is undoubtedly left to the solidary creditor to
determine against whom he will enforce collection. In case of the death of
one of the solidary debtors, he (the creditor) may, if he so chooses,
proceed against the surviving solidary debtors without necessity of filing a
claim in the estate of the deceased debtors. It is not mandatory for him to
have the case dismissed as against the surviving debtors and file its claim
against the estate of the deceased solidary debtor, x x x. For to require the
creditor to proceed against the estate, making it a condition precedent for
any collection action against the surviving debtors to prosper, would
deprive him of his substantive rightsprovided by Article 1216 of the New
Civil Code. (Emphasis supplied.)
As correctly argued by petitioner, if Section 6, Rule 86 of the Revised
Rules of Court were applied literally, Article 1216 of the New Civil Code
would, in effect, be repealed since under the Rules of Court, petitioner has
no choice but to proceed against the estate of [the deceased debtor] only.
Obviously, this provision diminishes the [creditors] right under the New
Civil Code to proceed against any one, some or all of the solidary debtors.
Such a construction is not sanctioned by principle, which is too well settled
to require citation, that a substantive law cannot be amended by a
procedural rule. Otherwise stated, Section 6, Rule 86 of the Revised Rules
of Court cannot be made to prevail over Article 1216 of the New Civil
Code, the former being merely procedural, while the latter, substantive.
Based on the foregoing, the estate of Manuel is not an indispensable party
and the case can proceed as against respondent only. That petitioner
opted to collect from respondent and not from the estate of Manuel is
evidenced by its opposition to respondents motion to dismiss asserting

that the case, as against her, should be dismissed so that petitioner can
proceed against the estate of Manuel.
On
whether
or
not
the
party defendant is a misjoinder of party

inclusion

of

Manuel

as

Section 11 of Rule 3 of the Rules of Court states that "neither misjoinder

nor non-joinder of parties is ground for dismissal of an action. Parties may
be dropped or added by order of the court on motion of any party or on its
own initiative at any stage of the action and on such terms as are just. Any
claim against a misjoined party may be severed and proceeded with
separately."

However, the failure to effect service of summons unto Patricio Sereno,

one of the defendants herein, does not render the action DISMISSIBLE,
considering that the three (3) other defendants, x x x, were validly served
with summons and the case with respect to the answering defendants may
still proceed independently. Be it recalled that the three (3) answering
defendants have previously filed a Motion to Dismiss the Complaint which
was denied by the Court.
Hence, only the case against Patricio Sereno will be DISMISSED and the
same may be filed as a claim against the estate of Patricio Sereno, but the
case with respect to the three (3) other accused [sic] will proceed.
(Emphasis supplied.)53

Based on the last sentence of the afore-quoted provision of law, a

misjoined party must have the capacity to sue or be sued in the event that
the claim by or against the misjoined party is pursued in a separate case.
In this case, therefore, the inclusion of Manuel in the complaint cannot be
considered a misjoinder, as in fact, the action would have proceeded
against him had he been alive at the time the collection case was filed by
petitioner. This being the case, the remedy provided by Section 11 of Rule
3 does not obtain here. The name of Manuel as party-defendant cannot
simply be dropped from the case. Instead, the procedure taken by the
Court in Sarsaba v. Vda. de Te, 52 whose facts, as mentioned earlier,
resemble those of this case, should be followed herein. There, the
Supreme Court agreed with the trial court when it resolved the issue of
jurisdiction over the person of the deceased Sereno in this wise:

As a result, the case, as against Manuel, must be dismissed.

As correctly pointed by defendants, the Honorable Court has not acquired

jurisdiction over the person of Patricio Sereno since there was indeed no
valid service of summons insofar as Patricio Sereno is concerned. Patricio
Sereno died before the summons, together with a copy of the complaint
and its annexes, could be served upon him.

The rule is no different as regards party defendants. It is incumbent upon a

plaintiff, when he institutes a judicial proceeding, to name the proper party
defendant to his cause of action. In a suit or proceeding in personam of an
adversary character, the court can acquire no jurisdiction for the purpose
of trial or judgment until a party defendant who actually or legally exists
and is legally capable of being sued, is brought before it. It has even been
held that the question of the legal personality of a party defendant is a

In addition, the dismissal of the case against Manuel is further warranted

by Section 1 of Rule 3 of the Rules of Court, which states that: only natural
or juridical persons, or entities authorized by law may be parties in a civil
action." Applying this provision of law, the Court, in the case of Ventura v.
Militante,54 held:
Parties may be either plaintiffs or defendants. x x x. In order to maintain an
action in a court of justice, the plaintiff must have an actual legal existence,
that is, he, she or it must be a person in law and possessed of a legal
entity as either a natural or an artificial person, and no suit can be lawfully
prosecuted save in the name of such a person.

question of substance going to the jurisdiction of the court and not one of
procedure.
The original complaint of petitioner named the "estate of Carlos Ngo as
represented by surviving spouse Ms. Sulpicia Ventura" as the
defendant.1wphi1 Petitioner moved to dismiss the same on the ground
that the defendant as named in the complaint had no legal personality. We
agree.
x x x. Considering that capacity to be sued is a correlative of the capacity
to sue, to the same extent, a decedent does not have the capacity to be
sued and may not be named a party defendant in a court action.
(Emphases supplied.)
Indeed, where the defendant is neither a natural nor a juridical person or
an entity authorized by law, the complaint may be dismissed on the ground
that the pleading asserting the claim states no cause of action or for failure
to state a cause of action pursuant to Section 1(g) of Rule 16 of the Rules
of Court, because a complaint cannot possibly state a cause of action
against one who cannot be a party to a civil action. 55
Since the proper course of action against the wrongful inclusion of Manuel
as party-defendant is the dismissal of the case as against him, thus did the
trial court err when it ordered the substitution of Manuel by his heirs.
Substitution is proper only where the party to be substituted died during
the pendency of the case, as expressly provided for by Section 16, Rule 3
of the Rules of Court, which states:
Death of party;duty of counsel. Whenever a party to a pending action
dies, and the claim is not thereby extinguished, it shall be the duty of his
counsel to inform the court within thirty (30) days after such death of the
fact thereof, and to give the name and address of his legal representative
or representatives. x x x

The heirs of the deceased may be allowed to be substituted for the

deceased, without requiring the appointment of an executor or
administrator x x x.
The court shall forthwith order said legal representative or representatives
to appear and be substituted within a period of thirty (30) days from notice.
(Emphasis supplied.)
Here, since Manuel was already dead at the time of the filing of the
complaint, the court never acquired jurisdiction over his person and, in
effect, there was no party to be substituted.
WHEREFORE, the petition is GRANTED. The Decision dated 28 February
2006 and the Resolution dated 1 August 2006 of the Court of Appeals in
CA-G.R. SP No. 88586 are REVERSED and SET ASIDE. The Orders of
the Regional Trial Court dated 8 November 2004 and 22 December 2004,
respectively, in Civil Case No. 97-86672, are REINSTATED. The Regional
Trial Court, Branch 24, Manila is hereby DIRECTED to proceed with the
trial of Civil Case No. 97-86672 against respondent Lolita G. Toledo only,
in accordance with the above pronouncements of the Court, and to decide
the case with dispatch.
SO ORDERED.

VILLARAMA, JR., J.:

Before the Court is a petition for review on certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as amended, assailing the July 13, 2009
Decision1 and September 14, 2009 Resolution 2 of the Court of Appeals
(CA) in CA-G.R. SP No. 105898. The appellate court affirmed the
Decision3 of the Department of Agrarian Reform Adjudication Board
(DARAB) upholding the validity of the Deed of Voluntary Land Transfer and
Original Certificate of Title (OCT) No. CLOA-623 issued in favor of
respondent Marissa Nisperos-Ducusin.

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 189570

July 31, 2013

HEIRS OF SANTIAGO NISPEROS, TEODORICO NISPEROS,

RESTITUTA LARON, CARMEL IT A H. NISPEROS, VIRGILIO H.
NISPEROS, CON CHIT A H. NISPEROS, PURIT A H. ISPEROS, PEPITO
H. NISPEROS, REBECCA H. NISPEROS, ABRAHAM H. NISPEROS,
IGNACIO F. NISPEROS, RODOLFO F. NISPEROS, RAYMUNDO F.
NISPEROS, RENA TO F. NISPEROS, FE N. MUNAR, BENITO F.
NISPEROS, REYNALDO N. NISPEROS, MELBA N. JOSE, ELY N.
GADIANO, represented by TEODORICO NISPEROS, Petitioners,
vs.
MARISSA NISPEROS-DUCUSIN, Respondent.
DECISION

The instant case stemmed from a complaint4 filed by petitioners with the
DARAB alleging the following antecedents:
The 15,837-square-meter parcel of land subject of the instant case is part
of the 58,350-square-meter agricultural land in Pao Sur, San Fernando
City, La Union acquired by Santiago Nisperos, the predecessor of
petitioners, during his lifetime. He declared said property for taxation
purposes starting December 1947.5
When Santiago and his wife Estefania died, they were survived by their
nine children: Tranquilino, Felix, Olling, Maria, Lenardo, Millan, Fausto,
Candido and Cipriana. The heirs of Santiago, petitioners herein, claim that
the subject property was occupied, controlled and tilled by all nine children
of Santiago. They paid taxes for it and even hired farm workers under
Maria and Ciprianas supervision for the cultivation of the same. For
taxation purposes, however, it was initially declared only under the name
of Maria.6 Starting 1988, it was declared under the names of Maria and
Cipriana.7
During the time when Maria and Cipriana were overseeing the property,
Maria took respondent Marissa Nisperos-Ducusin, a daughter of their
cousin Purita, as her ward and raised her like her own child.

On February 12, 1988, Maria and Cipriana, acting as representatives of

their other siblings, executed a Deed of Donation Mortis Causa 8 in favor of
petitioners over the 58,350-square-meter property and another 46,000square-meter property.
On April 28, 1992, a Deed of Voluntary Land Transfer 9 (VLT) over the
subject property was executed between Maria and Cipriana as
landowners, and respondent, who was then only 17 years old, as farmerbeneficiary. The instrument was signed by the three in the presence of
witnesses Anita, Lucia and Marcelina Gascon and Municipal Agrarian
Reform Officer Susimo Asuncion. The same was notarized by Notary
Public Atty. Roberto E. Caoayan.
On June 24, 1992, Certificate of Land Ownership Award (CLOA) No.
000212245390210 was issued to respondent by the Department of Agrarian
Reform (DAR) over the subject property. By virtue of said CLOA, OCT No.
CLOA-62311 was issued to respondent a month later, or on July 24, 1992.
Alleging fraud on the part of respondent which petitioners claim to have
discovered only in August 2001, petitioners filed a complaint on September
6, 2001 with the Municipal Agrarian Reform Office (MARO) of San
Fernando City, La Union. Unfortunately, no settlement between petitioners
and respondent was reached prompting the MARO to issue a Certificate to
File Action.12
On January 23, 2002, petitioners filed with the DARAB a complaint for
annulment of documents and damages against respondent. Petitioners
contended that the transfer of ownership over the subject land was made
without the consent of the heirs of Santiago and that respondent took
advantage of Marias senility and made it appear that Maria and Cipriana
sold said property by virtue of the VLT. They further alleged that said
document was falsified by respondent because Maria could not anymore
sign but could only affix her thumbmark as she did in a 1988 Deed of
Donation. To support their complaint, they attached a Joint Affidavit of

Denial13 by Anita and Lucia Gascon the supposed instrumental witnesses

to the VLT. In said affidavit, Anita and Lucia claimed that the signatures
appearing therein are not theirs as they never affixed their signatures on
said document. They further stated that they were never aware of said
document.
Petitioners likewise asseverated in their complaint that respondent
committed fraud because she was not a bona fide beneficiary as she was
not engaged in farming since she was still a minor at that time and that she
could not validly enter into a contract with Maria and Cipriana.
On March 6, 2002, respondent filed a Motion to Dismiss 14 petitioners
complaint. She argued that the action for annulment of the VLT and the
OCT/CLOA and the claim for damages have already prescribed.
In an Order15 dated April 17, 2002, the DARAB Regional Adjudicator
denied respondents Motion to Dismiss and ordered her to file her answer
to the complaint.
In respondents Answer with Counterclaim 16 dated July 7, 2002,
respondent alleged that Maria and Cipriana acquired the property from
Santiago and possessed the same openly, continuously, exclusively and
publicly; thus, the consent of petitioners is not necessary to the VLT. She
denied the allegations of fraud and falsification, and insisted that she is a
bona fide beneficiary as she has been tilling the land with her parents even
before 1992. She added that her minority does not disqualify her from
availing the benefits of agrarian reform.
On October 16, 2002, DARAB Regional Adjudicator Rodolfo A. Caddarao
rendered a Decision17 annulling the VLT and OCT/CLOA in respondents
name. The fallo of the said decision reads:

WHEREFORE, premises considered, judgment is hereby rendered as

follows:
1. Declaring Deed of Voluntary [L]and Transfer dated April 28,
1992 executed by Maria Nisperos in favor of Marissa Nisperos
annulled or cancelled and without force and effect for having been
executed not in accordance with agrarian laws;

The Regional Adjudicator also held there was reason to believe that Maria
and Ciprianas names were stated in the tax declaration for purposes of
taxation only as no evidence was presented that they lawfully acquired the
property from their parents. It was also ruled that the issuance of the title in
respondents name was not in accordance with agrarian laws because she
cannot be considered as a tenant but more of an heir of the transferors.

4. Directing the concerned Assessors Office to reinstate the tax

declaration of said landholding in the name of Maria and Cipriana
Nisperos;

Respondent contested the Regional Adjudicators decision before the

DARAB alleging that the Regional Adjudicator committed grave abuse of
discretion. Respondent contended that the complaint should not have
been given due course since other parties-in-interest such as Maria, the
Register of Deeds of La Union and duly authorized representatives of the
DAR were not impleaded and prescription had already set in insofar as the
contestability of the CLOA is concerned. She likewise argued that being a
farmer or a tenant is not a primordial requisite to become an agrarian
reform beneficiary. She added that the Regional Adjudicator went beyond
the scope of his authority by directing the parties to litigate the issue of
ownership before the court.

5. Directing the parties to refer this problem with the court so that
the issue of ownership of the landholding could be finally resolved;
and

On September 16, 2008, the DARAB rendered a Decision 19 reversing the

decision of the Regional Adjudicator and upholding the validity of the VLT
and respondents title. The decretal portion reads:

6. Dismissing the other ancillary claims and counterclaims for lack

of merit and evidence.

WHEREFORE, premises considered, a new judgment is hereby rendered:

2. Declaring OCT No. 00021224 in the name of Marissa D.

Nisperos annulled or cancelled on the ground of material
misrepresentation of the alleged agrarian reform beneficiary.
3. Directing the Register of Deeds of La Union to cause the
cancellation of the aforementioned title;

SO ORDERED.

18

The Regional Adjudicator noted that the land supposedly owned by Maria
and Cipriana (which includes the 15,837-square-meter subject property)
has a total area of 58,350 square meters. Considering that there are two
owners, he ruled that the individual share of each would be less than five
hectares each and well within the retention limit.

1. DECLARING the VLT executed on April 28, 1992, between

respondent-appellant Marissa Nisperos-Ducusin and Maria and
Cipriana Nisperos as valid and regular;
2. DECLARING the validity of the Original Certificate of Title (OCT)
CLOA No. 623 issued in the name of respondent-appellant
Marissa Nisperos-Ducusin covering 15,837 square meter portion
of the disputed lot; and

3. MAINTAINING respondent-appellant Marissa Nisperos-Ducusin

in peaceful possession and cultivation of the subject lot.
No costs.
SO ORDERED.20
The DARAB dismissed petitioners claim of fraud since the VLT was
executed in the presence of DAR-MARO Susimo Asuncion, signed by
three instrumental witnesses and notarized by Atty. Roberto E. Caoayan of
the DAR. It likewise held that the records are bereft of any indication that
fraud was employed in the transfer, and mere conjectures that fraud might
have been exerted just because Maria was already of advanced age while
respondent was her care giver or ward is not evidence. The DARAB also
did not give credence to the Affidavit of Denial by the instrumental
witnesses since the statements there are mere hearsay because the
affiants were not cross-examined.
The DARAB likewise ruled that the fact that respondent was a minor at the
time of the execution of the VLT does not void the VLT as this is the reason
why there is an active government involvement in the VLT: so that even if
the transferee is a minor, her rights shall be protected by law. It also held
that petitioners cannot assert their rights by virtue of the Deed of Donation
Mortis Causa allegedly executed by Maria and Cipriana in their favor since
before the operative condition (the death of the donors) was fulfilled, the
donation was revoked by virtue of the VLT. The DARAB further ruled that
when OCT No. CLOA-623 was issued in respondents name, she acquired
absolute ownership of the landholding. Thus her right thereto has become
fixed and established and is no longer open to doubt or controversy.
Aggrieved, petitioners elevated the case to the CA via a petition for
review21 where they raised the following issues: (1) whether the subject
property is covered by the Comprehensive Agrarian Reform Program
(CARP); (2) whether the VLT is valid having been issued through

misrepresentation and fraud; and (3) whether the action for annulment had
already prescribed.
On July 13, 2009, the appellate court rendered the assailed decision
dismissing the petition for review and upholding the DARAB decision. It
ruled that the Regional Adjudicator acted with grave abuse of discretion
when it held that the subject property was no longer covered by our
agrarian laws because of the retention rights of petitioners. The CA held
that retention rights, exclusion of a property from CARP coverage and the
qualification and disqualification of agrarian reform beneficiaries are issues
not cognizable by the Regional Adjudicator and the DARAB but by the
DAR Secretary. The appellate court nevertheless held that petitioners
failed to discharge their burden of proving that fraud attended the
execution of the VLT. It also agreed with the DARAB that considering a
certificate of title was already issued in favor of respondent, the same
became indefeasible and incontrovertible by the time petitioners instituted
the case in January 2002, and thus may no longer be judicially reviewed.
Hence this petition before this Court raising the issues of whether the
appellate court erred in:
I
x x x DECLARING THAT THE PARAB HAS NO JURISDICTION TO RULE
THAT THE SUBJECT PIECE OF LAND WAS NO LONGER COVERED BY
AGRARIAN LAWS.
II
x x x AFFIRMING THE DECISION OF THE DARAB DESPITE CLEAR
AND CONVINCING EVIDENCE REGARDING THE EXISTENCE OF
FRAUD.

III
x x x RULING THAT THE CERTIFICATES OF TITLE ISSUED IN THE
NAME OF THE RESPONDENT IS INDEFEASIBLE.22
We set aside the assailed Decision and Resolution.
The complaint should have been lodged with the Office of the DAR
Secretary and not with the DARAB.
Section 1, Rule II of the 1994 DARAB Rules of Procedure, the rule in force
at the time of the filing of the complaint by petitioners in 2001, provides:
SECTION 1. Primary and Exclusive Original and Appellate Jurisdiction.
The Board shall have primary and exclusive jurisdiction, both original and
appellate, to determine and adjudicate all agrarian disputes involving the
implementation of the Comprehensive Agrarian Reform Program (CARP)
under Republic Act No. 6657, Executive Order Nos. 228, 229 and 129-A,
Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential
Decree No. 27 and other agrarian laws and their implementing rules and
regulations. Specifically, such jurisdiction shall include but not be limited to
cases involving the following:
xxxx
f) Those involving the issuance, correction and cancellation of Certificates
of Land Ownership Award (CLOAs) and Emancipation Patents (EPs)
which are registered with the Land Registration Authority;
xxxx
However, it is not enough that the controversy involves the cancellation of
a CLOA registered with the Land Registration Authority for the DARAB to

have jurisdiction. What is of primordial consideration is the existence of an

agrarian dispute between the parties.23
Section 3(d) of R.A. No. 6657 defines an agrarian dispute as "any
controversy relating to tenurial arrangements, whether leasehold, tenancy,
stewardship or otherwise, over lands devoted to agriculture, including
disputes concerning farmworkers associations or representation of
persons in negotiating, fixing, maintaining, changing, or seeking to arrange
terms or conditions of such tenurial arrangements" and includes "any
controversy relating to compensation of lands acquired under this Act and
other terms and conditions of transfer of ownership from landowners to
farmworkers, tenants and other agrarian reform beneficiaries, whether the
disputants stand in the proximate relation of farm operator and beneficiary,
landowner and tenant, or lessor and lessee."
Thus, in Morta, Sr. v. Occidental,24 this Court held that there must be a
tenancy relationship between the parties for the DARAB to have
jurisdiction over a case. It is essential to establish all of the following
indispensable elements, to wit: (1) that the parties are the landowner and
the tenant or agricultural lessee; (2) that the subject matter of the
relationship is an agricultural land; (3) that there is consent between the
parties to the relationship; (4) that the purpose of the relationship is to
bring about agricultural production; (5) that there is personal cultivation on
the part of the tenant or agricultural lessee; and (6) that the harvest is
shared between the landowner and the tenant or agricultural lessee. 25
In the instant case, petitioners, as supposed owners of the subject
property, did not allege in their complaint that a tenancy relationship exists
between them and respondent. In fact, in their complaint, they described
respondent as a "ward" of one of the co-owners, Maria, who is "not a bona
fide beneficiary, she being not engaged in farming because she was still a
minor" at the time the VLT was executed.26

It is axiomatic that the jurisdiction of a tribunal, including a quasi-judicial

officer or government agency, over the nature and subject matter of a
petition or complaint is determined by the material allegations therein and
the character of the relief prayed for, irrespective of whether the petitioner
or complainant is entitled to any or all such reliefs. Jurisdiction over the
nature and subject matter of an action is conferred by the Constitution and
the law, and not by the consent or waiver of the parties where the court
otherwise would have no jurisdiction over the nature or subject matter of
the action. Nor can it be acquired through, or waived by, any act or
omission of the parties. Moreover, estoppel does not apply to confer
jurisdiction to a tribunal that has none over the cause of action. The failure
of the parties to challenge the jurisdiction of the DARAB does not prevent
the court from addressing the issue, especially where the DARABs lack of
jurisdiction is apparent on the face of the complaint or petition. 27
Considering that the allegations in the complaint negate the existence of
an agrarian dispute among the parties, the DARAB is bereft of jurisdiction
to take cognizance of the same as it is the DAR Secretary who has
authority to resolve the dispute raised by petitioners. As held in Heirs of
Julian dela Cruz v. Heirs of Alberto Cruz:
The Court agrees with the petitioners contention that, under Section 2(f),
Rule II of the DARAB Rules of Procedure, the DARAB has jurisdiction over
cases involving the issuance, correction and cancellation of CLOAs which
were registered with the LRA. However, for the DARAB to have jurisdiction
in such cases, they must relate to an agrarian dispute between landowner
and tenants to whom CLOAs have been issued by the DAR Secretary. The
cases involving the issuance, correction and cancellation of the CLOAs by
the DAR in the administrative implementation of agrarian reform laws,
rules and regulations to parties who are not agricultural tenants or lessees
are within the jurisdiction of the DAR and not of the DARAB. 28 (Emphasis
supplied.)

What the P ARAD should have done is to refer the complaint to the proper
office as mandated by Section 4 of DAR Administrative Order No. 6, Series
of 2000:
SEC. 4. Referral of Cases.- If a case covered by Section 2 herein is filed
before the DARAB, the concerned DARAB official shall refer the case to
the proper DAR office for appropriate action within five (5) days after said
case is determined to be within the jurisdiction of the Secretary.
Likewise, if a case covered by Section 3 herein is filed before any office
other than the DARAB, the concerned DAR official shall refer the case to
the DARAB for resolution within the same period provided herein.
While it is true that the PARAD and the DARAB (which was upheld by the
CA) thoroughly discussed in their respective decisions the issues
pertaining to the validity of the VLT and the OCT/CLOA issued to
respondent, the fact that they are bereft of jurisdiction to resolve the same
prevents this Court from resolving the instant petition on its merits. The
doctrine of primary jurisdiction does not allow a court to arrogate unto itself
authority to resolve a controversy, the jurisdiction over which is initially
lodged with an administrative body of special competence. 29 To assume
the power is to short-circuit the administrative process, which has yet to
run its regular course. The DAR must be given a chance to correct its
administrative and procedural lapses in the issuance of the
CLOA.30Moreover, it is in a better position to resolve the particular issue at
hand, being the agency possessing the required expertise on the matter
and authority to hear the same.
WHEREFORE, the July 13, 2009 Decision and September 14, 2009
Resolution of the Court of Appeals in CA-G.R. SP No. 105898 are SET
ASIDE. The complaint is REFERRED to the Office of the Department of
Agrarian Reform Secretary for appropriate action.
No pronouncement as to costs.

SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 189874

September 4, 2013

RODULFO VALCURZA AND BEATRIZ LASAGA, SPOUSES RONALDO

GADIAN & JULIETA TAGALOG, SPOUSES ALLAN VALCURZA AND
GINA LABADO, SPOUSES ROLDAN JUMAWAN AND RUBY
VALCURZA, SPOUSES EMPERATREZ VALCURZA AND ENRIQUE
VALCURZA, CIRILA PANTUHAN, SPOUSES DANIEL VALCURZA AND
JOVETA RODELA, SPOUSES LORETO NAELGA AND REMEDIOS
DAROY, SPOUSES VERGILIO VALCURZA AND ROSARIO SINELLO,
SPOUSES PATRICIO EBANIT AND OTHELIA CABANDAY, SPOUSES
ABNER MEDIO AND MIRIAM TAGALOG, SPOUSES CARMEN
MAGTRAYO AND MEDIO MAGTRAYO, SPOUSES MARIO VALCURZA
AND EDITHA MARBA, SPOUSES ADELARDO VALCURZA AND

PRISCILLA LAGUE, SPOUSES VICTOR VALCURZA AND MERUBELLA

BEHAG, AND SPOUSES HENRY MEDIO AND ROSALINDA
ALOLHA, PETITIONERS,
vs.
ATTY. CASIMIRO N. TAMPARONG, JR., RESPONDENT.

Daroy, Vergilio Valcurza, Rosario Sinello, Patricio Ebanit, Othelia

Cabanday, Abner Medio, Miriam Tagalog, Carmen Magtrayo, Medio
Magtrayo, Mario Valcurza, Editha Marba, Adelardo Valcurza, Priscilla
Lague, Victor Valcurza, Merubella Behag, Henry Medio, and Rosalinda
Alolha (petitioners).10 As a result, OCT No. E-4640 was issued in favor of
petitioners on 30 May 1994.11

DECISION
SERENO, CJ.:
Before us is a Petition for Review on Certiorari 1 of the Decision2 dated 24
September 2009 issued by the Court of Appeals (CA) in CA-G.R. SP No.
01244-MIN. The CA reversed and set aside the Decision 3 dated 26 April
2005 of the Department of Agrarian Reform and Adjudication Board
(DARAB) and reinstated the Decision4 dated 2 January 2002 of the
Provincial Agrarian Reform and Adjudication Board (PARAB).
Casimiro N. Tamparong, Jr. (respondent) is the registered owner of a
landholding with an area of 412,004 square meters 5 and covered by
Original Certificate of Title (OCT) No. 0-3636 pursuant to a judicial decree
rendered on 24 June 1962.7 The Sangguniang Bayan of Villanueva,
Misamis Oriental allegedly passed a Comprehensive Zoning Ordinance Resolution No. 51-98, Series of 1982 - classifying respondents land from
agricultural to industrial.8
A Notice of Coverage was issued by the Department of Agrarian Reform
(DAR) on 3 November 1992 over 276,411 square meters out of the
412,004 square meters of respondents land. The 276,411 square meters
of land were collectively designated as Lot No. 1100. 9 The DAR Secretary
eventually issued Certificate of Land Ownership Award (CLOA) No.
00102751 over the land in favor of Rodulfo Valcurza, Beatriz Lasaga,
Ronaldo Gandian, Julieta Tagalog, Allan Valcurza, Gina Labado, Roldan
Jumawan, Ruby Valcurza, Emperatrez Valcurza, Enrique Valcurza, Cirila
Pantuhan, Daniel Valcurza, Joveta Rodela, Loreto Naelga, Remedios

Respondent filed a protest against the Comprehensive Agrarian Reform

Program (CARP) coverage on the ground that his land was industrial,
being found within the industrial estate of PHIVIDEC per Zoning Ordinance
No. 123, Series of 1997.12 His protest was resolved in a
Resolution13 issued by Regional Director Benjamin R. de Vera on 9
October 2000. The Resolution denied respondents protest because
Zoning Ordinance No. 123, Series of 1997, never unequivocally stated that
all the landholdings within the PHIVIDEC area had been classified as
industrial. Furthermore, the Municipal Planning and Development Council
of Villanueva, Misamis Oriental, issued a letter to the Municipal Agrarian
Reform Office (MARO) stating that Lot No. 1100 was classified as
agricultural per Municipal Ordinance No. 51-98, Series of 1982. Also,
PHIVIDEC certified that the same lot is located outside the PHIVIDEC
Industrial Estate.14
Aggrieved, respondent filed a Complaint for Annulment of Certificate of
Land Ownership Award No. 00102751 and Cancellation of OCT No. E4640 with Prayer for the Issuance of a Writ of Preliminary Injunction and/or
Temporary Restraining Order.15 In the Complaint filed with the Provincial
Adjudication Reform and Adjudication Board (PARAB) of Misamis Oriental
on 6 July 2001, he questioned the issuance of the CLOA on the ground
that his land had long been classified by the municipality as industrial. It
was also covered by Presidential Proclamation No. 1962, being adjacent
to the PHIVIDEC Industrial Estate, and was thus exempted from CARP
coverage.16

The PARAB declared that Comprehensive Zoning Ordinance No. 51-98,

Series of 1982 had reclassified Lot No. 2252 from agricultural to industrial
land prior to the effectivity of the Comprehensive Agrarian Reform Law. It
held that the complaint was not a protest or an application for exemption,
but also for annulment and cancellation of title over which DARAB had
jurisdiction. As the PARAB exercised delegated authority from the DARAB,
it was but proper for the former to rule on the complaint. 17 In the exercise
of this jurisdiction, the PARAB found the CARP coverage irregular and
anomalous because the issuance of the CLOA, as well as its registration
with the Register of Deeds, happened before the survey plan was
approved by the DENR.18 The dispositive portion of the Decision is as
follows:
WHEREFORE, premises considered, Decision is hereby rendered in favor
of the plaintiff Casimiro N. Tamparong, Jr. and against the defendants
ordering as follows:
1. The immediate annulment and cancellation of CLOA No.
00102751 and OCT No. E-4640, and all other derivative titles that
may have been issued pursuant to, in connection with, and by
reason of the fraudulent and perjured coverage of the disputed
land by the DAR;
2. The cancellation of Subdivision Plan Bsd-10-002693 (AR); and
3. The ejectment of the sixteen (16) private-defendants farmer
beneficiaries led by Sps. Rodulfo Valcurza, et al. from the disputed
landholding and to surrender their possession thereof to the
plaintiff.19
On appeal, the DARAB held that the identification of lands that are subject
to CARP and the declaration of exemption therefrom are within the
exclusive jurisdiction of the DAR Secretary. As the grounds relied upon by
petitioners in their complaint partook of a protest against the coverage of

the subject landholding from CARP and/or exemption therefrom, the

DARAB concluded that the DAR Secretary had exclusive jurisdiction over
the matter.20 Hence, the DARAB reversed the PARAB, maintained the
validity of the CLOA, and dismissed the complaint for lack of merit. 21
Dissatisfied, respondent filed a Petition for Review under Rule 43 with the
CA, which ruled that the annulment of duly registered CLOAs with the
Land Registration Authority falls within the exclusive jurisdiction of the
DARAB and not of the regional director. Furthermore, the subject
landholding was considered industrial because of a zoning classification
issued by the Municipal Council of Villanueva, Misamis Oriental, prior to 15
June 1988. This ruling is consistent with the power of local governments to
reclassify lands through a local ordinance, which is not subject to DARs
approval.22
Thus, this Petition.
Petitioners claim that respondents complaint before the PARAB concerns
the DARs implementation of the agrarian law and implementation of
CLOA as an incident thereof.23 The PARAB had no jurisdiction, because
matters strictly involving the administrative implementation of the CARL
and other agrarian laws are the exclusive prerogative of and are
cognizable by the DAR Secretary.24 Yet, supposing that PARAB had
jurisdiction, its authority to cancel CLOAs is based on the ground that the
land was found to be exempted or excluded from CARP coverage by the
DAR Secretary or the latters authorized representatives, which is not the
case here.25 The subject landholding has also been declared as
agricultural by various government agencies as evidenced by the
Department of Environment and Natural Resources-City Environment and
Natural Resources Office Certification declaring the land to be alienable
and disposable and not covered by any public land application; by the
PHIVIDEC Industrial Authority Certification that the land is outside the
industrial area of PHIVIDEC; and by the letter of the Deputized Zoning
Administrator of Villanueva, Misamis Oriental, saying that the land is

classified as agricultural.26Moreover, the Resolution and Zoning Ordinance

reclassifying the land from agricultural to industrial was not shown to have
been approved by the Housing and Land Use Regulatory Board (HLURB)
or cleared by the DAR as required by DAR Administrative Order No. 1,
Series of 1990.27
In a Resolution dated 11 January 2010, we required respondent to
comment, which he did.28 Upon noting his Comment, we asked petitioners
to file their reply, and they complied.29
The determination of issues brought by petitioners before this Court
revolves around the sole question of whether the DARAB has jurisdiction
over the subject matter of the case.

The DARABs New Rules of Procedure issued in 1994, which were in force
at the time of the filing of the complaint, provide, in pertinent part:
Section 1. Primary and Exclusive Original and Appellate Jurisdiction. The
Board shall have primary and exclusive jurisdiction, both original and
appellate, to determine and adjudicate all agrarian disputes involving the
implementation of the Comprehensive Agrarian Reform Program (CARP)
under Republic Act No. 6657, Executive Order Nos. 228, 229 and 129-A,
Republic Act No. 3844 as amended by Republic Act No. 6389, Presidential
Decree No. 27 and other agrarian laws and their implementing rules and
regulations. Specifically, such jurisdiction shall include but not be limited to
cases involving the following:
xxxx

We rule in the negative.

The jurisdiction of a court or tribunal over the nature and subject matter of
an action is conferred by law.30 The court or tribunal must look at the
material allegations in the complaint, the issues or questions that are the
subject of the controversy, and the character of the relief prayed for in
order to determine whether the nature and subject matter of the complaint
is within its jurisdiction.31 If the issues between the parties are intertwined
with the resolution of an issue within the exclusive jurisdiction of a court or
tribunal, the dispute must be addressed and resolved by the said court or
tribunal.32
Section 50 of Executive Order (E.O.) No. 229 vests the DAR with quasijudicial powers to determine and adjudicate agrarian reform matters, as
well as with exclusive original jurisdiction over all matters involving the
implementation of agrarian reform. The jurisdiction of the DAR over the
adjudication of agrarian reform cases was later on delegated to the
DARAB,33 while the formers jurisdiction over agrarian reform
implementation was assigned to its regional offices. 34

f) Those involving the issuance, correction and cancellation of Certificates

of Land Ownership Award (CLOAs) and Emancipation Patents (EPs)
which are registered with the Land Registration Authority x x x. (Emphases
supplied)
Section 3(d) of Republic Act (R.A.) No. 6657 defines an agrarian dispute
as
x x x any controversy relating to tenurial arrangements, whether leasehold,
tenancy, stewardship or otherwise, over lands devoted to agriculture,
including disputes concerning farmworkers' associations or representation
of persons in negotiating, fixing, maintaining, changing, or seeking to
arrange terms or conditions of such tenurial arrangements.
It includes any controversy relating to compensation of lands acquired
under this Act and other terms and conditions of transfer of ownership from
landowners to farmworkers, tenants and other agrarian reform
beneficiaries, whether the disputants stand in the proximate relation of

farm operator and beneficiary, landowner and tenant, or lessor and lessee.
(Emphasis supplied)
A tenurial arrangement exists when the following are established:
1)
The parties are the landowner and the tenant or agricultural lessees;
2)
The subject matter of the relationship is an agricultural land;
3)
There is consent between the parties to the relationship;
4)
The purpose of the agricultural relationship is to bring about agricultural
production;
5)
There is personal cultivation on the part of the tenant or agricultural
lessees; and
6)
The harvest is shared between the landowner and the tenant or
agricultural lessee.35

Thus, the DARAB has jurisdiction over cases involving the cancellation of
registered CLOAs relating to an agrarian dispute between landowners and
tenants. However, in cases concerning the cancellation of CLOAs that
involve parties who are not agricultural tenants or lessees cases related
to the administrative implementation of agrarian reform laws, rules and
regulations - the jurisdiction is with the DAR, and not the DARAB. 36
Here, petitioner is correct in alleging that it is the DAR and not the DARAB
that has jurisdiction.1wphi1 First, the issue of whether the CLOA issued
to petitioners over respondents land should be cancelled hinges on that of
whether the subject landholding is exempt from CARP coverage by virtue
of two zoning ordinances. This question involves the DARs determination
of whether the subject land is indeed exempt from CARP coverage a
matter involving the administrative implementation of the CARP Law.
Second, respondents complaint does not allege that the prayer for the
cancellation of the CLOA was in connection with an agrarian dispute. The
complaint is centered on the fraudulent acts of the MARO, PARO, and the
regional director that led to the issuance of the CLOA. 37
Also, the elements showing that a tenurial relationship existed between
respondent and petitioners were never alleged, much less proven. In
reality, respondent only mentioned petitioners twice in his complaint.
Although he admitted that they occupied his land, he did not specify the
nature of his relationship with them. He only said that their stay on his land
was based on mere tolerance.38 Furthermore, the only other instance when
respondent mentioned petitioners in his complaint was when they informed
him that he could no longer harvest the fruits of the land, because they
were already the owners thereof. He never stated the circumstances that
would have shown that the harvest of the fruits was in relation to a tenurial
arrangement.39
Nevertheless, assuming arguendo that the DARAB had jurisdiction, the CA
was mistaken in upholding the PARABs Decision that the land is industrial
based on a zoning ordinance, without a prior finding on whether the

ordinance had been approved by the HLURB. We ruled in Heirs of Luna v.

Afable as follows:40
The meaning of "agricultural lands" covered by the CARL was explained
further by the DAR in its AO No. 1, Series of 1990, dated 22 March 1990,
entitled "Revised Rules and Regulations Governing Conversion of Private
Agricultural Land to Non-Agricultural Uses," issued pursuant to Section 49
of the CARL. Thus:
Agricultural land refers to those devoted to agricultural activity as defined
in RA 6657 and not classified as mineral or forest by the Department of
Environment and Natural Resources (DENR) and its predecessor
agencies, and not classified in town plans and zoning ordinances as
approved by the Housing and Land Use Regulatory Board (HLURB) and
its preceding competent authorities prior to 15 June 1988 for residential,
commercial or industrial use. (Emphasis omitted)
It is clear from the last clause of the afore-quoted provision that a land is
not agricultural, and therefore, outside the ambit of the CARP if the
following conditions concur:
1. the land has been classified in town plans and zoning
ordinances as residential, commercial or industrial; and
2. the town plan and zoning ordinance embodying the land
classification has been approved by the HLURB or its predecessor
agency prior to 15 June 1988. AIDTHC
It is undeniable that local governments have the power to reclassify
agricultural into non-agricultural lands. Section 3 of RA No. 2264 (The
Local Autonomy Act of 1959) specifically empowers municipal and/or city
councils to adopt zoning and subdivision ordinances or regulations in
consultation with the National Planning Commission. By virtue of a zoning

ordinance, the local legislature may arrange, prescribe, define, and

apportion the land within its political jurisdiction into specific uses based
not only on the present, but also on the future projection of needs. It may,
therefore, be reasonably presumed that when city and municipal boards
and councils approved an ordinance delineating an area or district in their
cities or municipalities as residential, commercial, or industrial zone
pursuant to the power granted to them under Section 3 of the Local
Autonomy Act of 1959, they were, at the same time, reclassifying any
agricultural lands within the zone for non-agricultural use; hence, ensuring
the implementation of and compliance with their zoning ordinances.
The regulation by local legislatures of land use in their respective territorial
jurisdiction through zoning and reclassification is an exercise of police
power. The power to establish zones for industrial, commercial and
residential uses is derived from the police power itself and is exercised for
the protection and benefit of the residents of a locality. Ordinance No. 21 of
the Sangguniang Bayan of Calapan was issued pursuant to Section 3 of
the Local Autonomy Act of 1959 and is, consequently, a valid exercise of
police power by the local government of Calapan.
The second requirement that a zoning ordinance, in order to validly
reclassify land, must have been approved by the HLURB prior to 15 June
1988 is the result of Letter of Instructions No. 729, dated 9 August 1978.
According to this issuance, local governments are required to submit their
existing land use plans, zoning ordinances, enforcement systems and
procedures to the Ministry of Human Settlements one of the precursor
agencies of the HLURB for review and ratification. (Emphasis supplied)
Here, the records of the case show the absence of HLURB Certifications
approving Comprehensive Zoning Ordinance Resolution No. 51-98, Series
of 1982, and Zoning Ordinance No. 123, Series of 1997. Hence, it cannot
be said that the land is industrial and outside the ambit of CARP.

WHEREFORE, in view of the foregoing, the Petition dated 19 November

2009 is hereby GRANTED. The 24 September 2009 Decision of the Court
of Appeals in CA-G.R. SP No. 01244-MIN is REVERSED and SET ASIDE.
The 26 April 2005 Decision of the Department of Agrarian Reform and
Adjudication Board is REINSTATED.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

become futile or impossible within a reasonable time may the officer resort
to substituted service.
The Case
Petitioners defendants in a suit for libel brought by respondent appeal
the decision promulgated on March 8, 2002 1 and the resolution
promulgated on January 13, 2003,2 whereby the Court of Appeals (CA)
respectively dismissed their petition for certiorari, prohibition and
mandamus and denied their motion for reconsideration. Thereby, the CA
upheld the order the Regional Trial Court (RTC), Branch 51, in Manila had
issued on March 12, 2001 denying their motion to dismiss because the
substituted service of the summons and copies of the complaint on each of
them had been valid and effective.3
Antecedents

FIRST DIVISION
G.R. No. 156759

June 5, 2013

ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO,

LILY REYES, JANET BAY, JESUS R. GALANG, AND RANDY
HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.
DECISION
BERSAMIN, J.:
To warrant the substituted service of the summons and copy of the
complaint, the serving officer must first attempt to effect the same upon the
defendant in person. Only after the attempt at personal service has

On July 3, 2000, respondent, a retired police officer assigned at the

Western Police District in Manila, sued Abante Tonite, a daily tabloid of
general circulation; its Publisher Allen A. Macasaet; its Managing Director
Nicolas V. Quijano; its Circulation Manager Isaias Albano; its Editors Janet
Bay, Jesus R. Galang and Randy Hagos; and its Columnist/Reporter Lily
Reyes (petitioners), claiming damages because of an allegedly libelous
article petitioners published in the June 6, 2000 issue of Abante Tonite.
The suit, docketed as Civil Case No. 00-97907, was raffled to Branch 51 of
the RTC, which in due course issued summons to be served on each
defendant, including Abante Tonite, at their business address at Monica
Publishing Corporation, 301-305 3rd Floor, BF Condominium Building,
Solana Street corner A. Soriano Street, Intramuros, Manila. 4
In the morning of September 18, 2000, RTC Sheriff Raul Medina
proceeded to the stated address to effect the personal service of the
summons on the defendants. But his efforts to personally serve each
defendant in the address were futile because the defendants were then out

of the office and unavailable. He returned in the afternoon of that day to

make a second attempt at serving the summons, but he was informed that
petitioners were still out of the office. He decided to resort to substituted
service of the summons, and explained why in his sheriffs return dated
September 22, 2005,5 to wit:
SHERIFFS RETURN
This is to certify that on September 18, 2000, I caused the service of
summons together with copies of complaint and its annexes attached
thereto, upon the following:
1. Defendant Allen A. Macasaet, President/Publisher of defendant
AbanteTonite, at Monica Publishing Corporation, Rooms 301-305
3rd Floor, BF Condominium Building, Solana corner A. Soriano
Streets, Intramuros, Manila, thru his secretary Lu-Ann Quijano, a
person of sufficient age and discretion working therein, who signed
to acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendant were made, but the
same were ineffectual and unavailing on the ground that per
information of Ms. Quijano said defendant is always out and not
available, thus, substituted service was applied;
2. Defendant Nicolas V. Quijano, at the same address, thru his
wife Lu-Ann Quijano, who signed to acknowledge receipt thereof.
That effort (sic) to serve the said summons personally upon said
defendant were made, but the same were ineffectual and
unavailing on the ground that per information of (sic) his wife said
defendant is always out and not available, thus, substituted
service was applied;
3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy
Hagos and Lily Reyes, at the same address, thru Rene Esleta,
Editorial Assistant of defendant AbanteTonite, a person of

sufficient age and discretion working therein who signed to

acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendants were made, but the
same were ineffectual and unavailing on the ground that per
information of (sic) Mr. Esleta said defendants is (sic) always
roving outside and gathering news, thus, substituted service was
applied.
Original copy of summons is therefore, respectfully returned duly served.
Manila, September 22, 2000.
On October 3, 2000, petitioners moved for the dismissal of the complaint
through counsels special appearance in their behalf, alleging lack of
jurisdiction over their persons because of the invalid and ineffectual
substituted service of summons. They contended that the sheriff had made
no prior attempt to serve the summons personally on each of them in
accordance with Section 6 and Section 7, Rule 14 of the Rules of Court.
They further moved to drop Abante Tonite as a defendant by virtue of its
being neither a natural nor a juridical person that could be impleaded as a
party in a civil action.
At the hearing of petitioners motion to dismiss, Medina testified that he
had gone to the office address of petitioners in the morning of September
18, 2000 to personally serve the summons on each defendant; that
petitioners were out of the office at the time; that he had returned in the
afternoon of the same day to again attempt to serve on each defendant
personally but his attempt had still proved futile because all of petitioners
were still out of the office; that some competent persons working in
petitioners office had informed him that Macasaet and Quijano were
always out and unavailable, and that Albano, Bay, Galang, Hagos and
Reyes were always out roving to gather news; and that he had then
resorted to substituted service upon realizing the impossibility of his finding
petitioners in person within a reasonable time.

On March 12, 2001, the RTC denied the motion to dismiss, and directed
petitioners to file their answers to the complaint within the remaining period
allowed by the Rules of Court,6 relevantly stating:

informed that they were not around to personally receive the summons,
and that Abante Tonite, being neither a natural nor a juridical person, could
not be made a party in the action.

Records show that the summonses were served upon Allen A. Macasaet,
President/Publisher of defendant AbanteTonite, through LuAnn Quijano;
upon defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy
Hagos and Lily Reyes, through Rene Esleta, Editorial Assistant of
defendant Abante Tonite (p. 12, records). It is apparent in the Sheriffs
Return that on several occasions, efforts to served (sic) the summons
personally upon all the defendants were ineffectual as they were always
out and unavailable, so the Sheriff served the summons by substituted
service.

On June 29, 2001, the RTC denied petitioners motion for

reconsideration.7 It stated in respect of the service of summons, as follows:

WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby

DENIED for lack of merit..

The allegations of the defendants that the Sheriff immediately resorted to

substituted service of summons upon them when he was informed that
they were not around to personally receive the same is untenable. During
the hearing of the herein motion, Sheriff Raul Medina of this Branch of the
Court testified that on September 18, 2000 in the morning, he went to the
office address of the defendants to personally serve summons upon them
but they were out. So he went back to serve said summons upon the
defendants in the afternoon of the same day, but then again he was
informed that the defendants were out and unavailable, and that they were
always out because they were roving around to gather news. Because of
that information and because of the nature of the work of the defendants
that they are always on field, so the sheriff resorted to substituted service
of summons. There was substantial compliance with the rules, considering
the difficulty to serve the summons personally to them because of the
nature of their job which compels them to be always out and unavailable.
Additional matters regarding the service of summons upon defendants
were sufficiently discussed in the Order of this Court dated March 12,
2001.

Accordingly, defendants are directed to file their Answers to the complaint

within the period still open to them, pursuant to the rules.

Regarding the impleading of Abante Tonite as defendant, the RTC held,

viz:

SO ORDERED.

"Abante Tonite" is a daily tabloid of general circulation. People all over the
country could buy a copy of "Abante Tonite" and read it, hence, it is for
public consumption. The persons who organized said publication obviously
derived profit from it. The information written on the said newspaper will
affect the person, natural as well as juridical, who was stated or implicated

Considering that summonses cannot be served within a reasonable time to

the persons of all the defendants, hence substituted service of summonses
was validly applied. Secretary of the President who is duly authorized to
receive such document, the wife of the defendant and the Editorial
Assistant of the defendant, were considered competent persons with
sufficient discretion to realize the importance of the legal papers served
upon them and to relay the same to the defendants named therein (Sec. 7,
Rule 14, 1997 Rules of Civil Procedure).

Petitioners filed a motion for reconsideration, asserting that the sheriff had
immediately resorted to substituted service of the summons upon being

in the news. All of these facts imply that "Abante Tonite" falls within the
provision of Art. 44 (2 or 3), New Civil Code. Assuming arguendo that
"Abante Tonite" is not registered with the Securities and Exchange
Commission, it is deemed a corporation by estoppels considering that it
possesses attributes of a juridical person, otherwise it cannot be held liable
for damages and injuries it may inflict to other persons.

Anent the issue raised by petitioners that "Abante Tonite is neither a

natural or juridical person who may be a party in a civil case," and
therefore the case against it must be dismissed and/or dropped, is
untenable.
The respondent Judge, in denying petitioners motion for reconsideration,
held that:

Undaunted, petitioners brought a petition for certiorari, prohibition,

mandamusin the CA to nullify the orders of the RTC dated March 12, 2001
and June 29, 2001.

xxxx

Ruling of the CA

Abante Tonites newspapers are circulated nationwide, showing ostensibly

its being a corporate entity, thus the doctrine of corporation by estoppel
may appropriately apply.

On March 8, 2002, the CA promulgated its questioned

decision,8 dismissing the petition for certiorari, prohibition, mandamus, to
wit:
We find petitioners argument without merit. The rule is that certiorari will
prosper only if there is a showing of grave abuse of discretion or an act
without or in excess of jurisdiction committed by the respondent Judge. A
judicious reading of the questioned orders of respondent Judge would
show that the same were not issued in a capricious or whimsical exercise
of judgment. There are factual bases and legal justification for the assailed
orders. From the Return, the sheriff certified that "effort to serve the
summons personally xxx were made, but the same were ineffectual and
unavailing xxx.

An unincorporated association, which represents itself to be a corporation,

will be estopped from denying its corporate capacity in a suit against it by a
third person who relies in good faith on such representation.
There being no grave abuse of discretion committed by the respondent
Judge in the exercise of his jurisdiction, the relief of prohibition is also
unavailable.
WHEREFORE, the instant petition is DENIED. The assailed Orders of
respondent Judge are AFFIRMED.
SO ORDERED.9

and upholding the trial courts finding that there was a substantial
compliance with the rules that allowed the substituted service.

On January 13,
reconsideration.10

Furthermore, the CA ruled:

Issues

2003,

the

Petitioners hereby submit that:

CA

denied

petitioners

motion

for

1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN HOLDING THAT THE TRIAL COURT ACQUIRED
JURISDICTION OVER HEREIN PETITIONERS.
2. THE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR BY SUSTAINING THE INCLUSION OF ABANTE TONITE
AS PARTY IN THE INSTANT CASE.11
Ruling
The petition for review lacks merit.
Jurisdiction over the person, or jurisdiction in personam the power of the
court to render a personal judgment or to subject the parties in a particular
action to the judgment and other rulings rendered in the action is an
element of due process that is essential in all actions, civil as well as
criminal, except in actions in rem or quasi in rem. Jurisdiction over the
defendantin an action in rem or quasi in rem is not required, and the court
acquires jurisdiction over an actionas long as it acquires jurisdiction over
the resthat is thesubject matter of the action. The purpose of summons in
such action is not the acquisition of jurisdiction over the defendant but
mainly to satisfy the constitutional requirement of due process. 12
The distinctions that need to be perceived between an action in personam,
on the one hand, and an action inrem or quasi in rem, on the other hand,
are aptly delineated in Domagas v. Jensen,13 thusly:
The settled rule is that the aim and object of an action determine its
character. Whether a proceeding is in rem, or in personam, or quasi in rem
for that matter, is determined by its nature and purpose, and by these only.
A proceeding in personam is a proceeding to enforce personal rights and
obligations brought against the person and is based on the jurisdiction of
the person, although it may involve his right to, or the exercise of

ownership of, specific property, or seek to compel him to control or dispose

of it in accordance with the mandate of the court. The purpose of a
proceeding in personam is to impose, through the judgment of a court,
some responsibility or liability directly upon the person of the defendant. Of
this character are suits to compel a defendant to specifically perform some
act or actions to fasten a pecuniary liability on him. An action in personam
is said to be one which has for its object a judgment against the person, as
distinguished from a judgment against the property to determine its state. It
has been held that an action in personam is a proceeding to enforce
personal rights or obligations; such action is brought against the person.
As far as suits for injunctive relief are concerned, it is well-settled that it is
an injunctive act in personam. In Combs v. Combs, the appellate court
held that proceedings to enforce personal rights and obligations and in
which personal judgments are rendered adjusting the rights and
obligations between the affected parties is in personam. Actions for
recovery of real property are in personam.
On the other hand, a proceeding quasi in rem is one brought against
persons seeking to subject the property of such persons to the discharge
of the claims assailed. In an action quasi in rem, an individual is named as
defendant and the purpose of the proceeding is to subject his interests
therein to the obligation or loan burdening the property. Actions quasi in
rem deal with the status, ownership or liability of a particular property but
which are intended to operate on these questions only as between the
particular parties to the proceedings and not to ascertain or cut off the
rights or interests of all possible claimants. The judgments therein are
binding only upon the parties who joined in the action.
As a rule, Philippine courts cannot try any case against a defendant who
does not reside and is not found in the Philippines because of the
impossibility of acquiring jurisdiction over his person unless he voluntarily
appears in court; but when the case is an action in rem or quasi in rem
enumerated in Section 15, Rule 14 of the Rules of Court, Philippine courts
have jurisdiction to hear and decide the case because they have

jurisdiction over the res, and jurisdiction over the person of the nonresident defendant is not essential. In the latter instance, extraterritorial
service of summons can be made upon the defendant, and such
extraterritorial service of summons is not for the purpose of vesting the
court with jurisdiction, but for the purpose of complying with the
requirements of fair play or due process, so that the defendant will be
informed of the pendency of the action against him and the possibility that
property in the Philippines belonging to him or in which he has an interest
may be subjected to a judgment in favor of the plaintiff, and he can thereby
take steps to protect his interest if he is so minded. On the other hand,
when the defendant in an action in personam does not reside and is not
found in the Philippines, our courts cannot try the case against him
because of the impossibility of acquiring jurisdiction over his person unless
he voluntarily appears in court.14
As the initiating party, the plaintiff in a civil action voluntarily submits
himself to the jurisdiction of the court by the act of filing the initiatory
pleading. As to the defendant, the court acquires jurisdiction over his
person either by the proper service of the summons, or by a voluntary
appearance in the action.15

summons fulfills two fundamental objectives, namely: (a) to vest in the

court jurisdiction over the person of the defendant; and (b) to afford to the
defendant the opportunity to be heard on the claim brought against
him.19 As to the former, when jurisdiction in personam is not acquired in a
civil action through the proper service of the summons or upon a valid
waiver of such proper service, the ensuing trial and judgment are void. 20 If
the defendant knowingly does an act inconsistent with the right to object to
the lack of personal jurisdiction as to him, like voluntarily appearing in the
action, he is deemed to have submitted himself to the jurisdiction of the
court.21 As to the latter, the essence of due process lies in the reasonable
opportunity to be heard and to submit any evidence the defendant may
have in support of his defense. With the proper service of the summons
being intended to afford to him the opportunity to be heard on the claim
against him, he may also waive the process. 21 In other words, compliance
with the rules regarding the service of the summons is as much an issue of
due process as it is of jurisdiction.23

Upon the filing of the complaint and the payment of the requisite legal fees,
the clerk of court forthwith issues the corresponding summons to the
defendant.16 The summons is directed to the defendant and signed by the
clerk of court under seal. It contains the name of the court and the names
of the parties to the action; a direction that the defendant answers within
the time fixed by the Rules of Court; and a notice that unless the defendant
so answers, the plaintiff will take judgment by default and may be granted
the relief applied for.17 To be attached to the original copy of the summons
and all copies thereof is a copy of the complaint (and its attachments, if
any) and the order, if any, for the appointment of a guardian ad litem. 18

Under the Rules of Court, the service of the summons should firstly be
effected on the defendant himself whenever practicable. Such personal
service consists either in handing a copy of the summons to the defendant
in person, or, if the defendant refuses to receive and sign for it, in
tendering it to him.24 The rule on personal service is to be rigidly enforced
in order to ensure the realization of the two fundamental objectives earlier
mentioned. If, for justifiable reasons, the defendant cannot be served in
person within a reasonable time, the service of the summons may then be
effected either (a) by leaving a copy of the summons at his residence with
some person of suitable age and discretion then residing therein, or (b) by
leaving the copy at his office or regular place of business with some
competent person in charge thereof.25 The latter mode of service is known
as substituted service because the service of the summons on the
defendant is made through his substitute.

The significance of the proper service of the summons on the defendant in

an action in personam cannot be overemphasized. The service of the

It is no longer debatable that the statutory requirements of substituted

service must be followed strictly, faithfully and fully, and any substituted

service other than that authorized by statute is considered

ineffective.26 This is because substituted service, being in derogation of the
usual method of service, is extraordinary in character and may be used
only as prescribed and in the circumstances authorized by statute. 27 Only
when the defendant cannot be served personally within a reasonable time
may substituted service be resorted to. Hence, the impossibility of prompt
personal service should be shown by stating the efforts made to find the
defendant himself and the fact that such efforts failed, which statement
should be found in the proof of service or sheriffs return. 28Nonetheless,
the requisite showing of the impossibility of prompt personal service as
basis for resorting to substituted service may be waived by the defendant
either expressly or impliedly.29
There is no question that Sheriff Medina twice attempted to serve the
summons upon each of petitioners in person at their office address, the
first in the morning of September 18, 2000 and the second in the afternoon
of the same date. Each attempt failed because Macasaet and Quijano
were "always out and not available" and the other petitioners were "always
roving outside and gathering news." After Medina learned from those
present in the office address on his second attempt that there was no
likelihood of any of petitioners going to the office during the business hours
of that or any other day, he concluded that further attempts to serve them
in person within a reasonable time would be futile. The circumstances fully
warranted his conclusion. He was not expected or required as the serving
officer to effect personal service by all means and at all times, considering
that he was expressly authorized to resort to substituted service should he
be unable to effect the personal service within a reasonable time. In that
regard, what was a reasonable time was dependent on the circumstances
obtaining. While we are strict in insisting on personal service on the
defendant, we do not cling to such strictness should the circumstances
already justify substituted service instead. It is the spirit of the procedural
rules, not their letter, that governs.30

In reality, petitioners insistence on personal service by the serving officer

was demonstrably superfluous. They had actually received the
summonses served through their substitutes, as borne out by their filing of
several pleadings in the RTC, including an answer with compulsory
counterclaim ad cautelam and a pre-trial brief ad cautelam. They had also
availed themselves of the modes of discovery available under the Rules of
Court. Such acts evinced their voluntary appearance in the action.
Nor can we sustain petitioners contention that Abante Tonite could not be
sued as a defendant due to its not being either a natural or a juridical
person. In rejecting their contention, the CA categorized Abante Tonite as a
corporation by estoppel as the result of its having represented itself to the
reading public as a corporation despite its not being incorporated. Thereby,
the CA concluded that the RTC did not gravely abuse its discretion in
holding that the non-incorporation of Abante Tonite with the Securities and
Exchange Commission was of no consequence, for, otherwise, whoever of
the public who would suffer any damage from the publication of articles in
the pages of its tabloids would be left without recourse. We cannot
disagree with the CA, considering that the editorial box of the daily tabloid
disclosed that basis, nothing in the box indicated that Monica Publishing
Corporation had owned Abante Tonite.
WHEREFORE, the Court AFFIRMS the decision promulgated on March 8,
2002; and ORDERS petitioners to pay the costs of suit.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

FIRST DIVISION
G.R. No. 183804

1999,4 Enviro Kleen stopped making further payments, leaving an

outstanding balance of P816,627.00. It also ignored the various demands
of the respondent, who then filed a suit in the RTC, docketed as Civil Case
No.Q-01-45212, to collect from the petitioner the said balance, plus
damages, costs and expenses, as summarized in the RTCs decision, as
follows:

September 11, 2013

S.C.
MEGAWORLD
CONSTRUCTION
and
DEVELOPMENT
CORPORATION, Petitioner,
vs.
ENGR. LUIS U. PARADA, represented by ENGR. LEONARDO A.
PARADA of GENLITE INDUSTRIES,Respondent.

The petitioner in its answer denied liability, claiming that it was released
from its indebtedness to the respondent by reason of the novation of their
contract, which, it reasoned, took place when the latter accepted the partial
payment of Enviro Kleen in its behalf, and thereby acquiesced to the
substitution of Enviro Kleen as the new debtor in the petitioners place.
After trial, the RTC rendered judgment6 on May 28, 2004 in favor of the
respondent, the fallo of which reads, as follows:

DECISION
REYES, J.:
Before us on appeal by certiorari 1 is the Decision2 dated April 30, 2008 of
the Court of Appeals (CA) in CA-G.R. CV No. 83811 which upheld the
Decision3 dated May 8, 2004 of the Regional Trial Court (RTC) of Quezon
City, Branch 100, in Civil Case No. Q-01-45212.
Factual Antecedents
S.C. Megaworld Construction and Development Corporation (petitioner)
bought electrical lighting materials from Gentile Industries, a sole
proprietorship owned by Engineer Luis U. Parada (respondent), for its
Read-Rite project in Canlubang, Laguna. The petitioner was unable to pay
for the above purchase on due date, but blamed it on its failure to collect
under its sub-contract with the Enviro KleenTechnologies, Inc. (Enviro
Kleen). It was however able to persuade Enviro Kleen to agree to settle its
above purchase, but after paying the respondent P250,000.00 on June 2,

WHEREFORE, judgment is hereby rendered for the respondent. The

petitioner is hereby ordered to pay the respondent the following:
A. the sum of P816,627.00 representing the principal obligation
due;
B. the sum equivalent to twenty percent (20%)per month of the
principal obligation due from date of judicial demand until fully paid
as and for interest; and
C. the sum equivalent to twenty-five percent (25%) of the principal
sum due as and for attorneys fees and other costs of suits. The
compulsory counterclaim interposed by the petitioner is hereby
ordered dismissed for lack of merit.
SO ORDERED.7 (Emphasis supplied)

On appeal to the CA, the petitioner maintained that the trial court erred in
ruling that no novation of the contract took place through the substitution of
Enviro Kleen as the new debtor. But for the first time, it further argued that
the trial court should have dismissed the complaint for failure of the
respondent to implead Genlite Industries as "a proper party in interest", as
provided in Section 2 of Rule 3 of the 1997 Rules of Civil Procedure. The
said section provides:
SEC. 2. Parties in interest. A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or defended in the name of
the real party in interest.
In Section 1(g) of Rule 16 of the Rules of Court, it is also provided that the
defendant may move to dismiss the suit on the ground that it was not
brought in the name of or against the real party in interest, with the effect
that the complaint is then deemed to state no cause of action.
In dismissing the appeal, the CA noted that the petitioner in its answer
below raised only the defense of novation, and that at no stage in the
proceedings did it raise the question of whether the suit was brought in the
name of the real party in interest. Moreover, the appellate court found from
the sales invoices and receipts that the respondent is the sole proprietor of
Genlite Industries, and therefore the real party-plaintiff. Said the CA:
Settled is the rule that litigants cannot raise an issue for the first time on
appeal as this would contravene the basic rules of fair play and justice.

In any event, there is no question that respondent Engr.Luis U. Parada is

the proprietor of Genlite Industries, as shown on the sales invoice and
delivery receipts. There is also no question that a special power of attorney
was executed by respondent Engr.Luis U. Parada in favor of Engr.
Leonardo A. Parada authorizingthe latter to file a complaint against the
petitioner.8 (Citations omitted)
The petitioner also contended that a binding novation of the purchase
contract between the parties took place when the respondent accepted the
partial payment of Enviro Kleen of P250,000.00 in its behalf, and thus
acquiesced to the substitution by Enviro Kleen of the petitioner as the new
debtor. But the CA noted that there is nothing in the two (2) letters of the
respondent to Enviro Kleen, dated April 14, 1999 and June 16, 1999,
which would imply that he consented to the alleged novation, and,
particularly, that he intended to release the petitioner from its primary
obligation to pay him for its purchase of lighting materials. The appellate
court cited the RTCs finding 9 that the respondent informed Enviro Kleen in
his first letter that he had served notice to the petitioner that he would take
legal action against it for its overdue account, and that he retained his
option to pull out the lighting materials and charge the petitioner for any
damage they might sustain during the pull-out:
Respondent x x x has served notice to the petitioner that unless the
overdue account is paid, the matter will be referred to its lawyers and there
may be a pull-out of the delivered lighting fixtures. It was likewise stated
therein that incidental damages that may result to the structure in the
course of the pull-out will be to the account of the petitioner.10
The CA concurred with the RTC that by retaining his option to seek
satisfaction from the petitioner, any acquiescence which the respondent
had made was limited to merely accepting Enviro Kleen as an additional
debtor from whom he could demand payment, but without releasing the
petitioner as the principal debtor from its debt to him.

On motion for reconsideration, 11 the petitioner raised for the first time the
issue of the validity of the verification and certification of non-forum
shopping attached to the complaint. On July 18, 2008, the CA denied the
said motion for lack of merit.12
Petition for Review in the Supreme Court
In this petition, the petitioner insists, firstly, that the complaint should have
been dismissed outright by the trial court for an invalid non-forum shopping
certification; and, secondly, that the appellate court erred in not declaring
that there was a novation of the contract between the parties through
substitution of the debtor, which resulted in the release of the petitioner
from its obligation to pay the respondent the amount of its purchase. 13
Our Ruling
The petition is devoid of merit.
The
verification
and
certification
of
non-forum
shopping
in
the
complaint
is
not
a
jurisdictional
but
a
formal
requirement,
and
any
objection
as
to
non-compliance
therewith
should
be
raised
in
the
proceedings
below
and
not
for
the
first time on appeal.

"It is well-settled that no question will be entertained on appeal unless it

has been raised in the proceedings below. Points of law, theories, issues
and arguments not brought to the attention of the lower court,
administrative agency or quasi-judicial body, need not be considered by
are viewing court, as they cannot be raised for the first time at that late
stage. Basic considerations of fairness and due process impel this rule.
Any issue raised for the first time on appeal is barred by estoppel." 14
Through a Special Power of Attorney (SPA), the respondent authorized
Engr. Leonardo A. Parada (Leonardo), the eldest of his three children, to
perform the following acts in his behalf: a) to file a complaint against the
petitioner for sum of money with damages; and b) to testify in the trial
thereof and sign all papers and documents related thereto, with full powers
to enter into stipulation and compromise. 15 Incidentally, the respondent, a
widower, died of cardio-pulmonary arrest on January 21,2009, 16 survived
by his legitimate children, namely, Leonardo, Luis, Jr., and Lalaine, all
surnamed Parada. They have since substituted him in this petition, per the
Resolution of the Supreme Court dated September 2, 2009. 17 Also, on July
23, 2009, Luis, Jr. and Lalaine Parada executed an SPA authorizing their
brother Leonardo to represent them in the instant petition. 18
In the verification and certification of non-forum shopping attached to the
complaint in Civil Case No. Q01-45212, Leonardo as attorney-in-fact of his
father acknowledged as follows:
xxxx
That I/we am/are the Plaintiff in the above-captioned case;
That I/we have caused the preparation of this Complaint;
That I/we have read the same and that all the allegations therein are true
and correct to the best of my/our knowledge;

x x x x.19
In this petition, the petitioner reiterates its argument before the CA that the
above verification is invalid, since the SPA executed by the respondent did
not specifically include an authority for Leonardo to sign the verification
and certification of non-forum shopping, thus rendering the complaint
defective for violation of Sections 4 and 5 of Rule 7. The said sections
provide, as follows:
Sec. 4. Verification. A pleading is verified by an affidavit that the affiant
has read the pleading and that the allegations therein are true and correct
of his personal knowledge or based on authentic records.
Sec. 5. Certification against forum shopping. The plaintiff or principal
party shall certify under oath in the complaint or other initiatory pleading
asserting a claim for relief, or in a sworn certification annexed thereto and
simultaneously filed therewith: (a) that he has not thereto fore commenced
any action or filed any claim involving the same issues in any court, or
tribunal x x x and, to the best of his knowledge, no such other action or
claim is pending therein; (b) if there is such other pending action or claim,
a complete statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact x x x to the court wherein his aforesaid
complaint or initiatory pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by
mere amendment of the complaint or other initiatory pleading but shall be
cause for the dismissal of the case without prejudice, unless otherwise
provided, upon motion and after hearing.

The petitioners argument is untenable. The petitioner failed to reckon that

any objection as to compliance with the requirement of verification in the
complaint should have been raised in the proceedings below, and not in
the appellate court for the first time.20 In KILUSAN-OLALIA v. CA,21 it was
held that verification is a formal, not a jurisdictional requisite:
We have emphasized, time and again, that verification is a formal, not a
jurisdictional requisite, as it is mainly intended to secure an assurance that
the allegations therein made are done in good faith or are true and correct
and not mere speculation. The Court may order the correction of the
pleading, if not verified, or act on the unverified pleading if the attending
circumstances are such that a strict compliance with the rule may be
dispensed with in order that the ends of justice may be served.
Further, in rendering justice, courts have always been, as they ought to be,
conscientiously guided by the norm that on the balance, technicalities take
a backseat vis--vis substantive rights, and not the other way around. x x
x.22 (Citations omitted)
In Young v. John Keng Seng, 23 it was also held that the question of forum
shopping cannot be raised in the CA and in the Supreme Court, since such
an issue must be raised at the earliest opportunity in a motion to dismiss or
a similar pleading. The high court even warned that "invoking it in the later
stages of the proceedings or on appeal may result in the dismissal of the
action x x x."24
Moreover, granting that Leonardo has no personal knowledge of the
transaction subject of the complaint below, Section 4 of Rule 7 provides
that the verification need not be based on the verifiers personal
knowledge but even only on authentic records. Sales invoices, statements
of accounts, receipts and collection letters for the balance of the amount
still due to the respondent from the petitioner are such records. There is
clearly substantial compliance by the respondents attorney-in-fact with the
requirement of verification.

Lastly, it is well-settled that a strict compliance with the rules may be

dispensed with in order that the ends of substantial justice may be
served.25 It is clear that the present controversy must be resolved on its
merits, lest for a technical oversight the respondent should be deprived of
what is justly due him.
A
sole
proprietorship
juridical
personality
distinct
from
that
of
need
not
be
impleaded
plaintiff in a civil case.

has
separate
its
owner,
as
a

no
and
and
party-

On the question of whether Genlite Industries should have been impleaded

as a party-plaintiff, Section 1 of Rule 3 of the Rules of Court provides that
only natural or juridical persons or entities authorized by law may be
parties in a civil case. Article 44 of the New Civil Code enumerates who
are juridical persons:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or
purpose, created by law; their personality begins as soon as they
have been constituted according to law;
(3) Corporations, partnerships and associations for private interest
or purpose to which the law grants a juridical personality, separate
and distinct from that of each shareholder, partner or member.
Genlite Industries is merely the DTI-registered trade name or style of the
respondent by which he conducted his business. As such, it does not exist
as a separate entity apart from its owner, and therefore it has no separate

juridical personality to sue or be sued. 26 As the sole proprietor of Genlite

Industries, there is no question that the respondent is the real party in
interest who stood to be directly benefited or injured by the judgment in the
complaint below. There is then no necessity for Genlite Industries to be
impleaded as a party-plaintiff, since the complaint was already filed in the
name of its proprietor, Engr. Luis U. Parada. To heed the petitioners
sophistic reasoning is to permit a dubious technicality to frustrate the ends
of substantial justice.
Novation
must
shown.

is
be

never
clearly

presumed
but
and
unequivocally

Novation is a mode of extinguishing an obligation by changing its objects

or principal obligations, by substituting a new debtor in place of the old
one, or by subrogating a third person to the rights of the creditor. 27 It is "the
substitution of a new contract, debt, or obligation for an existing one
between the same or different parties." 28Article 1293 of the Civil Code
defines novation as follows:
Art. 1293. Novation which consists in substituting a new debtor in the place
of the original one, may be made even without the knowledge or against
the will of the latter, but not without the consent of the creditor. Payment by
the new debtor gives him rights mentioned in Articles 1236and 1237.
Thus, in order to change the person of the debtor, the former debtor must
be expressly released from the obligation, and the third person or new
debtor must assume the formers place in the contractual relation. 29 Article
1293 speaks of substitution of the debtor, which may either be in the form
of expromision or delegacion, as seems to be the case here. In both
cases, the old debtor must be released from the obligation, otherwise,
there is no valid novation. As explained in Garcia30:

In general, there are two modes of substituting the person of the debtor:
(1) expromision and (2) delegacion. In expromision, the initiative for the
change does not come fromand may even be made without the
knowledge ofthe debtor, since it consists of a third persons assumption
of the obligation. As such, it logically requires the consent of the third
person and the creditor. In delegacion, the debtor offers, and the creditor
accepts, a third person who consents to the substitution and assumes the
obligation; thus, the consent of these three persons are necessary. Both
modes of substitution by the debtor require the consent of the
creditor.31 (Citations omitted)
From the circumstances obtaining below, we can infer no clear and
unequivocal consent by the respondent to the release of the petitioner
from the obligation to pay the cost of the lighting materials. In fact, from the
letters of the respondent to Enviro Kleen, it can be said that he retained his
option to go after the petitioner if Enviro Kleen failed to settle the
petitioners debt. As the trial court held:
The fact that Enviro Kleen Technologies, Inc. made payments to the
respondent and the latter accepted it does not ipso facto result innovation.
Novation to be given its legal effect requires that the creditor should
consent to the substitution of a new debtor and the old debtor be released
from its obligation (Art. 1293, New Civil Code). A reading of the letters
dated 14 April 1999 (Exh. 1) and dated 16 June 1999 (Exhs. 4 &4-a) sent
by the respondent to Enviro Kleen Technologies, Inc. clearly shows that
there was nothing therein that would evince that the[respondent] has
consented to the exchange of the person of the debtor from the petitioner
to Enviro Kleen Technologies, Inc.

lawyers and there may be a pull-out of the delivered lighting fixtures. It was
likewise stated therein that incident damages that may result to the
structure in the course of the pull-out will be to the account of the
petitioner.
It is evident from the two (2) aforesaid letters that there is no indication of
the respondents intention to release the petitioner from its obligation to
pay and to transfer it to Enviro Kleen Technologies, Inc. The acquiescence
of Enviro Kleen Technologies, Inc. to assume the obligation of the
petitioner to pay the unpaid balance of [P]816,627.00 to the respondent
when there is clearly no agreement to release the petitioner will result
merely to the addition of debtors and not novation. Hence, the creditor can
still enforce the obligation against the original debtor x x x. A fact which
points strongly to the conclusion that the respondent did not assent to the
substitution of Enviro Kleen Technologies, Inc. as the new debtor is the
present action instituted by the respondent against the petitioner for the
fulfillment of its obligation. A mere recital that the respondent has agreed or
consented to the substitution of the debtor is not sufficient to establish the
fact that there was a novation. x x x.32

xxxx

The settled rule is that novation is never presumed, 33 but must be clearly
and unequivocally shown.34 In order for a new agreement to supersede the
old one, the parties to a contract must expressly agree that they are
abrogating their old contract in favor of a new one. 35 Thus, the mere
substitution of debtors will not result innovation, 36 and the fact that the
creditor accepts payments from a third person, who has assumed the
obligation, will result merely in the addition of debtors and not novation,
and the creditor may enforce the obligation against both debtors. 37 If there
is no agreement as to solidarity, the first and new debtors are considered
obligated jointly.38 As explained in Reyes v. CA39:

Notably in Exh. 1, albeit addressed to Enviro Kleen Technologies, Inc., the

respondent expressly stated that it has served notice to the petitioner that
unless the overdue account is paid, the matter will be referred to its

The consent of the creditor to a novation by change of debtor is as

indispensable as the creditors consent in conventional subrogation in
order that a novation shall legally take place. The mere circumstance of

AFP-MBAI receiving payments from respondent Eleazar who acquiesced

to assume the obligation of petitioner under the contract of sale of
securities, when there is clearly no agreement to release petitioner from
her responsibility, does not constitute novation. At most, it only creates a
juridical relation of co-debtorship or surety ship on the part of respondent
Eleazar to the contractual obligation of petitioner to AFP-MBAI and the
latter can still enforce the obligation against the petitioner. In Ajax
Marketing and Development Corporation vs. Court of Appeals which is
relevant in the instant case, we stated that
"In the same vein, to effect a subjective novation by a change in the
person of the debtor, it is necessary that the old debtor be released
expressly from the obligation, and the third person or new debtor assumes
his place in the relation. There is no novation without such release as the
third person who has assumed the debtors obligation becomes merely a
co-debtor or surety. xxx. Novation arising from a purported change in the
person of the debtor must be clear and express xxx."
In the civil law setting, novatio is literally construed as to make new. So it is
deeply rooted in the Roman Law jurisprudence, the principle novatio non
praesumitur that novation is never presumed. At bottom, for novation to
be a jural reality, its animus must be ever present, debitum pro debito
basically extinguishing the old obligation for the new one. 40 (Citation
omitted)
The trial court found that the respondent never agreed to release the
petitioner from its obligation, and this conclusion was upheld by the CA.
We generally accord utmost respect and great weight to factual findings of
the trial court and the CA, unless there appears in the record some fact or
circumstance of weight and influence which has been overlooked, or the
significance of which has been misinterpreted, that if considered would
have affected the result of the case. 41 We find no such oversight in the
appreciation of the facts below, nor such a misinterpretation thereof, as
would otherwise provide a clear and unequivocal showing that a novation

has occurred in the contract between the parties resulting in the release of
the petitioner.
Pursuant
to
Article
2209
of
the
Civil
Code,
except
as
provided
under
Central
Bank
Circular
No.
905,
and
now
under
Bangko
Sentral
ng
Pilipinas
Circular
No.
799,
which
took
effect
on
July
1,
2013,
the
respondent
may
be
awarded
interest
of
six
percent
(6%)
of
the
judgment
amount
by
way
of
actual
and
compensatory
damages.
It appears from the recital of facts in the trial courts decision that the
respondent demanded interest of two percent (2%) per month upon the
balance of the purchase price of P816,627.00, from judicial demand until
full payment. There is then an obvious clerical error committed in the fallo
of the trial courts decision, for it incorrectly ordered the defendant there
into pay "the sum equivalent to twenty percent (20%) per month of the
principal obligation due from date of judicial demand until fully paid as and
for interest."42
A clerical mistake is one which is visible to the eyes or obvious to the
understanding; an error made by a clerk or a transcriber; a mistake in
copying or writing.43 The Latin maxims Error placitandi aequitatem non tollit
("A clerical error does not take away equity"), and Error scribentis nocere
non debit ("An error made by a clerk ought not to injure; a clerical error
may be corrected") are apt in this case. 44 Viewed against the landmark
case of Medel v. CA45, an award of interest of 20% per month on the
amount due is clearly excessive and iniquitous. It could not have been the
intention of the trial court, not to mention that it is way beyond what the
plaintiff had prayed for below.

It is settled that other than in the case of judgments which are void ab initio
for lack of jurisdiction, or which are null and void per se, and thus may be
questioned at any time, when a decision is final, even the court which
issued it can no longer alter or modify it, except to correct clerical errors or
mistakes.46

from the time it is judicially demanded. In the absence of

stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil
Code.

The foregoing notwithstanding, of more important consideration in the case

before us is the fact that it is nowhere stated in the trial courts decision
that the parties had in fact stipulated an interest on the amount due to the
respondent. Even granting that there was such an agreement, there is no
finding by the trial court that the parties stipulated that the outstanding debt
of the petitioner would be subject to two percent (2%) monthly interest.
The most that the decision discloses is that the respondent demanded a
monthly interest of 2% on the amount outstanding.

2. When an obligation, not constituting a loan or forbearance of

money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be adjudged on
unliquidated claims or damages except when or until the demand
can be established with reasonable certainty. Accordingly, where
the demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of
damages may be deemed to have been reasonably
ascertained).The actual base for the computation of legal interest
shall, in any case, be on the amount finally adjudged.

Article 2209 of the Civil Code provides that "if the obligation consists in the
payment of a sum of money, and the debtor incurs in delay, the indemnity
for damages, there being no stipulation to the contrary, shall be the
payment of the interest agreed upon, and in the absence of stipulation, the
legal interest, which is six percent per annum." Pursuant to the said
provision, then, since there is no finding of a stipulation by the parties as to
the imposition of interest, only the amount of 12% per annum 47 may be
awarded by the court by way of damages in its discretion, not two
percent(2%) per month, following the guidelines laid down in the landmark
case of Eastern Shipping Lines v. Court of Appeals,48 to wit:
II. With regard particularly to an award of interest in the concept of actual
and compensatory damages, the rate of interest, as well as the accrual
thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the
interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest

3. When the judgment of the court awarding a sum of money

becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 2, above, shall be 12%
per annum from such finality until its satisfaction, this interim
period being deemed to be by then an equivalent to a forbearance
of credit.49 (Citations omitted)
As further clarified in the case of Sunga-Chan v. CA, 50 a loan or
forbearance of money, goods or credit describes a contractual obligation
whereby a lender or creditor has refrained during a given period from
requiring the borrower or debtor to repay the loan or debt then due and
payable.51 Thus:

In Reformina v. Tomol, Jr., the Court held that the legal interest at 12% per
annum under Central Bank (CB) Circular No. 416 shall be adjudged only in
cases involving the loan or forbearance of money. And for transactions
involving payment of indemnities in the concept of damages arising from
default in the performance of obligations in general and/or for money
judgment not involving a loan or forbearance of money, goods, or credit,
the governing provision is Art. 2209 of the Civil Code prescribing a yearly
6% interest. Art. 2209 pertinently provides:
"Art. 2209. If the obligation consists in the payment of a sum of money, and
the debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of the interest agreed
upon, and in the absence of stipulation, the legal interest, which is six per
cent per annum."
The term "forbearance," within the context of usury law, has been
described as a contractual obligation of a lender or creditor to refrain,
during a given period of time, from requiring the borrower or debtor to
repay the loan or debt then due and payable.
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of
interest, if proper, and the applicable rate, as follows: The12% per annum
rate under CB Circular No. 416 shall apply only to loans or forbearance of
money, goods, or credits, as well as to judgments involving such loan or
forbearance of money, goods, or credit, while the 6% per annum under Art.
2209 of the Civil Code applies "when the transaction involves the payment
of indemnities in the concept of damage arising from the breach or a delay
in the performance of obligations in general," with the application of both
rates reckoned "from the time the complaint was filed until the adjudged
amount is fully paid." In either instance, the reckoning period for the
commencement of the running of the legal interest shall be subject to the
condition "that the courts are vested with discretion, depending on the
equities of each case, on the award of interest." 52 (Citations omitted and
emphasis ours)

Pursuant, then, to Central Bank Circular No. 416, issued on July

29,1974,53 in the absence of a written stipulation, the interest rate to be
imposed in judgments involving a forbearance of credit shall be 12% per
annum, up from 6% under Article 2209 of the Civil Code. This was
reiterated in Central Bank Circular No. 905, which suspended the
effectivity of the Usury Law from January 1, 1983. 54 But if the judgment
refers to payment of interest as damages arising from a breach or delay in
general, the applicable interest rate is 6% per annum, following Article
2209 of the Civil Code.55 Both interest rates apply from judicial or
extrajudicial demand until finality of the judgment. But from the finality of
the judgment awarding a sum of money until it is satisfied, the award shall
be considered a forbearance of credit, regardless of whether the award in
fact pertained to one, and therefore during this period, the interest rate of
12% per annum for forbearance of money shall apply.56
But notice must be taken that in Resolution No. 796 dated May 16,2013,
the Monetary Board of the Bangko Sentral ng Pilipinas approved the
revision of the interest rate to be imposed for the loan or forbearance of
any money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest. Thus, under
BSP Circular No.799, issued on June 21, 2013 and effective on July 1,
2013, the said rate of interest is now back at six percent (6%), viz:
BANGKO
SENTRAL
OFFICE OF THE GOVERNOR
CIRCULAR
Series of 2013

NG

NO.

PILIPINAS

799

Subject: Rate of interest in the absence of stipulation

The monetary Board, in its Resolution No. 796 dated 16 May
2013,approved the following revisions governing the rate of interest in the

absence of stipulation in loan contracts, thereby amending Section 2 of

Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be
six percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 of the Manual
of Regulations for Banks and Sections 4305Q.1, 4305S.3 and
4303P.1 of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
FOR THE MONETARY BOARD:
DIWA
Officer-In-Charge

C.

GUINIGUNDO

The award of attorneys fees is not proper.

Other than to say that the petitioner "unjustifiably failed and refused to pay
the respondent," the trial court did not state in the body of its decision the
factual or legal basis for its award of attorneys fees to the respondent, as
required under Article 2208 of the New Civil Code, for which reason we
have resolved to delete the same. The rule is settled that the trial court
must state the factual, legal or equitable justification for its award of
attorneys fees.57Indeed, the matter of attorneys fees cannot be stated
only in the dispositive portion, but the reasons must be stated in the body
of the courts decision.58 This failure or oversight of the trial court cannot
even be supplied by the CA. As concisely explained in Frias v. San DiegoSison59:

Article 2208 of the New Civil Code enumerates the instances where such
may be awarded and, in all cases, it must be reasonable, just and
equitable if the same were to be granted. Attorneys fees as part of
damages are not meant to enrich the winning party at the expense of the
losing litigant. They are not awarded every time a party prevails in a suit
because of the policy that no premium should be placed on the right to
litigate. The award of attorneys fees is the exception rather than the
general rule. As such, it is necessary for the trial court to make findings of
facts and law that would bring the case within the exception and justify the
grant of such award. The matter of attorneys fees cannot be mentioned
only in the dispositive portion of the decision. They must be clearly
explained and justified by the trial court in the body of its decision. On
appeal, the CA is precluded from supplementing the bases for awarding
attorneys fees when the trial court failed to discuss in its Decision the
reasons for awarding the same.1wphi1 Consequently, the award of
attorneys fees should be deleted.60 (Citations omitted)
WHEREFORE, premises considered, the Decision dated April 30, 2008 of
the Court of Appeals in CA-G.R. CV No. 83811 is AFFIRMED with
MODIFICATION. Petitioner S.C. Megaworld Construction and
Development Corporation is ordered to pay respondent Engr. Luis A.
Parada, represented by Engr. Leonardo A. Parada, the principal amount
due of P816,627.00, plus interest at twelve percent (12%) per annum,
reckoned from judicial demand until June 30, 2013, and six percent (6%)
per an own from July 1, 2013 until finality hereof, by way of actual and
compensatory damages. Thereafter, the principal amount due as adjusted
by interest shall likewise earn interest at six percent (6%) per annum until
fully paid. The award of attorney's fees is DELETED.
SO ORDERED.

Republic
SUPREME
Manila

of

the

Philippines
COURT

EN BANC
G.R. No. 192803

December 10, 2013

ALLIANCE FOR RURAL AND AGRARIAN RECONSTRUCTION, INC.,

ALSO
KNOWN
AS
ARARO
PARTY-LIST,Petitioner,
vs.
COMMISSION ON ELECTIONS, Respondent.
DECISION
LEONEN, J.:
It is beyond human expectations that we charge voters with knowledge as
to which among the many party-list groups listed in the ballot they are
presented with during election day is disqualified. To do so will amount to
their disenfranchisement and the failure to comply with the proportionality
for party-list representatives required by the Constitution and by law.

We are asked to decide the Petition for Review on Certiorari filed by a

party-list group that ran for the 2010 national elections. The petitioner
questions the validity of the formula used by the Commission on Elections
in determining and proclaiming the winning party-list groups. 1

3 GABRIELA WOMENS PARTY 2

4 COOPERATIVE NATCCO NETWORK PARTY 2
5 ABONO 2

We rule that the Petition is moot and academic. However, we provide

guidance for the bench and the bar with respect to the formula used in
determining the winning party-list groups. We refine the divisor in the
formula use din getting the percentage of votes garnered by a party-list.
The facts as established on record are as follows:
Petitioner, Alliance for Rural and Agrarian Reconstruction, Inc.,(ARARO)
was a duly accredited party-list under Republic Act No. 7941.2Itgarnered a
total of one hundred forty-seven thousand two hundred four (147,204)
votes in the May 10, 2010 elections and ranked fiftieth (50th). 3 The
Commission on Elections En Banc sitting as the National Board of
Canvassers initially proclaimed twenty-eight (28) party-list organizations as
winners involving a total of thirty-five (35) seats guaranteed and additional
seats.4 The result was based on the Commission on Elections count of
one hundred twenty-one (121) Certificates of Canvass or a total of twentynine million seven hundred fifty thousand and forty-one (29,750,041) votes
for the Party-List System.5
The winning party-list groups were the following: 6
PARTY NUMBER OF SEATS
1 COALITION OF ASSOCIATIONS OF SENIOR CITIZENS OF THE
PHILIPPINES, INC. 2
2 AKBAYAN! CITIZENS ACTION PARTY 2

6 BAYAN MUNA 2
7 AN WARAY 2
8 AGRICULTURAL SECTOR ALLIANCE SECTOR OF THE PHILIPPINES,
INC. 1
9 ALLIANCE FOR BARANGAY CONCERNS PARTY 1
10 ANAKPAWIS 1
11 KABATAAN PARTYLIST 1
12 ABANTE MINDANAO, INC. 1
13 ACT TEACHERS 1
14 YOU AGAINST CORRUPTION AND POVERTY 1
15 KASANGGA SA KAUNLARAN, INC. 1
16 BAGONG HENERASYON 1
17 ANG GALING PINOY 1
18 AGBIAG! TIMPUYOG ILOCANO, INC. 1

19 PUWERSA NG BAYANing ATLETA 1

Without waiting for the resolution of the House of Representatives

Electoral Tribunal, the petitioner filed the present Petition for Review on
Certiorari with Prayer for Preliminary Injunction and Temporary Restraining
Order.8The petitioner asks that this Court:

20 ARTS BUSINESS AND SCIENCE PROFESSIONALS 1

21 TRADE UNION CONGRESS PARTY 1
22 ALYANSA NG MGA GRUPONG HALIGI
TEKNOLOHIYA PARA SA MAMAMAYAN, INC. 1

NG

AGHAM

AT

23 DEMOCRATIC INDEPENDENT WORKERS ASSOCIATION, INC. 1

24 KAPATIRAN NG MGA NAKULONG NA WALANG SALA 1
25 KALINGA-ADVOCACY FOR SOCIAL EMPOWERMENT AND NATION
BUILDING THROUGH EASING POVERTY, INC. 1
26 ALAGAD PARTY-LIST 1
27 UNA ANG PAMILYA
CONSERVATIVES 1

FORMERLY

ALLIANCE

OF

NEO-

28 ALLIANCE OF VOLUNTEER EDUCATORS 1

TOTAL SEATS 35
Petitioner then filed an election protest before the House of
Representatives Electoral Tribunal questioning the Resolution of the
Commission on Elections that proclaimed the 28 party-list groups listed
above.7

1. modify the Commission on Elections interpretation of the formula stated

in BANAT v. COMELEC9 by making the divisor for the computation of the
percentage votes, from total number of votes cast minus the votes for the
disqualified party-list candidates, to the total number of votes cast
regardless whether party-list groups are disqualified;
2. enjoin the public respondent Commission on Elections from proclaiming
the remaining winning party-list candidates until it modifies the
interpretation of the formula used in BANAT v. COMELEC to the formula
proposed by the petitioner; and
3. issue a Temporary Restraining Order against the public respondent until
it modifies the present formula for computing the number of seats for the
winning party-list candidates to the formula proposed by the
petitioner.10This Court did not issue any Temporary Restraining
Order.11By Resolution, the National Board of Canvassers proclaimed the
winning party-list groups with the following computation: 12
WHEREAS, as of May 17, 2010, the projected/maximum total party-list
votes cannot go any higher than thirty million two hundred sixty[-]four
thousand five hundred seventy[-]nine (30,264,579)given the following
statistical data:
DESCRIPTION REGISTERED VOTERS
Total party-list votes already canvassed/tabulated 29,750,041
Less: Votes garnered by the eight (8) disqualified parties 308,335

Total party-list votes already canvassed/tabulated after deducting votes of

the eight (8) disqualified parties 29,441,706
Add: Party-list votes still uncanvassed Lanao del Sur 515,488
Local Absentee Voting 19,071

Cooperation and Harmony Towards Educational Reforms, Inc., and Abono

[v.]Commission on Elections, the ranking of the participating parties,
organizations and coalitions from highest to lowest based on the number
of votes garnered as of May 17, 2010, and the seats that may be obtained
by each party to complete the allocation of the available 57 party-list seats,
are shown below:13

Due to lowering of threshold 92,740

RANK PARTY VOTES GARNERED VOTES GARNERED OVER TOTAL

VOTES FOR PARTY LIST, in %(A) GUARANTEED SEAT First Round (B)
ADDITIONAL SEATS Second Round(C) (B) plus (C), in whole integers (D)

Precincts reporting Final Testing and Sealing results 186,275

1 AKO BICOL POLITICAL PARTY 1,522,986 5.0322% 1 2.26 3

Maximum Total Party-List Votes 30,264,579

2 COALITION OF ASSOCIATIONS OF SENIOR CITIZENS OF THE

PHILIPPINES, INC. 1,292,182 4.2696% 1 1.92 2

Overseas Absentee Voting 9,299

WHEREAS, since there are twohundred twenty-nine (229) legislative

districts, the total number of party-list seats available for the May 10, 2010
automated national and local elections is fifty-seven (57) based on the
following formula: number of legislative districts/0.80 x 0.20;
WHEREAS, the provision of Section 11 of Republic Act No. 7941 provides,
in part, that:

3 BUHAY HAYAAN YUMABONG 1,249,555 4.1288% 1 1.85 2

4 AKBAYAN! CITIZEN'S ACTION PARTY 1,058,6913.4981% 1 1.57 2
5 GABRIELAWOMENS PARTY 1,001,421 3.3089% 11.482
6 COOPERATIVE NATCCO NETWORK PARTY 943,5293.1176% 1 1.40 2

"(b) The parties, organizations, and coalitions receiving at least two

percent (2%) of the total votes cast for the party-list system shall be
entitled to one seat each: Provided, That those garnering more than two
[sic] (2%) of the votes shall be entitled to additional seats in proportion to
their total number of votes: Provided, finally, That each party, organization
or coalitions shall be entitled to not more than three (3) seats."

7 1ST CONSUMERS ALLIANCE FOR RURAL ENERGY 768,829 2.5404%

1 1.142
8 ABONO 766,615 2.5330% 1 1.132
9 BAYAN MUNA 746,019 2.4650% 1 1.102

WHEREAS, applying the formula in the case of Barangay Association for

National Advancement and Transparency (BANAT) v. Commission on
Elections, and [sic] Bayan Muna, Advocacy for Teacher Empowerment,

10 AN WARAY 711,631 2.3514% 1 1.05 2

11 CITIZEN'S BATTLE AGAINST CORRUPTION 647,483 2.1394% 1 0.96

1

24 KASANGGA SA KAUNLARAN, INC. 296,368 0.9793% 0 1 1

25 BAGONG HENERASYON 292,875 0.9677% 0 1 1

12 ADVOCACY FOR TEACHER EMPOWERMENT THROUGH ACTION

COOPERATION AND HARMONY TOWARDS EDUCATIONAL REFORMS
614,725 2.0312% 1 0.91 1
13 AGRICULTURAL SECTOR ALLIANCE
PHILIPPINES, INC. 515,501 1.7033% 0 1 1

SECTOR

OF

THE

26 ALLIANCE FOR NATIONALISM AND DEMOCRACY 292,057 0.9650%

011
27 ANG GALING PINOY 269,009 0.8889% 0 1 1
28 AGBIAG! TIMBUYOG ILOCANO, INC. 262,298 0.8667% 0 1 1

14 BUTIL FARMERS PARTY 506,703 1.6742% 0 1 1

29 PUWERSA NG BAYANING ATLETA 258,498 0.8541% 0 1 1
15 ALLIANCE FOR BARANGAY CONCERNS PARTY 469,093 1.5500% 0
11

30 ARTS BUSINESS AND SCIENCE PROFESSIONALS 257,301

0.8502% 0 1 1

16 ANAKPAWIS 445,628 1.4724% 0 1 1

31 TRADE UNION CONGRESS PARTY 244,623 0.8083% 0 1 1
17 KABATAAN PARTYLIST 417,923 1.3809% 0 1 1
18 LPG MARKETERS ASSOCIATION, INC. 417,600 1.3798% 0 1 1
19 ABANTE MINDANAO, INC. 376,011 1.2424% 0 1 1

32 ALYANSA NG MGA GRUPONG HALIGI NG AGHAM AT

TEKNOLOHIYA PARA SA MAMAMAYAN, INC. 241,898 0.7993% 0 1 1
33 DEMOCRATIC INDEPENDENT WORKERS' ASSOCIATION, INC.
238,675 0.7886% 0 1 1

20 ACT TEACHERS 369,564 1.2211% 0 1 1

21 ANG ASOSASYON SANG MANGUNGUMA NGA BISAYA-OWA
MANGUNGUMA, INC. 357,009 1.1796% 0 1 1
22 YOU AGAINST CORRUPTION AND POVERTY 335,635 1.1090% 0 1 1
23 ASSOCIATION OF PHILIPPINE ELECTRIC COOPERATIVES 313,359
1.0354% 0 1 1

34 KAPATIRAN NG MGA NAKULONG NA WALANG SALA 234,717

0.7756% 0 1 1
35 KALINGA-ADVOCACY FOR SOCIAL EMPOWERMENT AND NATION
BUILDING THROUGH EASING POVERTY, INC. 229,198 0.7573% 0 1 1
36 ALAGAD PARTY-LIST 227,116 0.7504% 0 1 1
37 1-UNITED TRANSPORT KOALISYON 220,002 0.7269% 0 1 1

38 UNA ANG PAMILYA FORMERLY

CONSERVATIVES 217,032 0.7171% 0 1 1

ALLIANCE

OF

NEO-

51 ATONG PAGLAOM 145,435 0.4805% 0 0 0

39 ALLIANCE OF VOLUNTEER EDUCATORS 214,760 0.7096% 0 1

52 PILIPINO ASSOCIATION FOR COUNTRY-URBAN POOR YOUTH

ADVANCEMENT AND WELFARE 143,151 0.4730% 0 0 0

14 0AANGAT TAYO 176,074 0.5818% 0 1 1

53 ABANTE TRIBUNG MAKABANSA 142,013 0.4692% 0 0 0

41 ADHIKAING TINATAGUYOD NG KOOPERATIBA 173,711 0.5740% 0 1

1

54 ANGAT ATING KABUHAYAN PILIPINAS, INC. 141,780 0.4685% 0 0 0

55 PARTIDO NG MANGGAGAWA 140,000 0.4626% 0 0 0

42 ANG LABAN NG INDIGONG FILIPINO 170,304 0.5627% 0 1 1

43 ASSOCIATION OF LABORERS AND EMPLOYEES 167,654 0.5540%
011

56
ALYANSANG
BAYANIHAN
NG
MGA
MAGSASAKA,
MANGGAGAWANG-BUKID AT MANGINGISDA 137,842 0.4555% 0 0 0
57 ALLIANCE TRANSPORT SECTOR 136,710 0.4517% 0 0 0

44 KASOSYO PRODUCER-CONSUMER EXCHANGE ASSOCIATION,

INC. 166,432 0.5499% 0 1 1
45 ALAY BUHAY COMMUNITY DEVELOPMENT FOUNDATION, INC.
163,164 0.5391% 0 1 1
46 AKSYON MAGSASAKA PARTIDO TINIG NG MASA 161,674 0.5342%
011
47 KATIPUNAN NG MGA ANAK NG BAYAN ALL FILIPINO DEMOCRATIC
MOVEMENT 160,745 0.5311% 0 0 0

58 KAUNLARAN NG AGRIKULTURA ASENSADONG PROBINSYA

ANGAT NG BAYAN 130,270 0.4304% 0 0 0
59 BARANGAY NATIN 126,462 0.4179% 0 0 0
60 1-AKO BABAENG ASTIG AASENSO 120,734 0.3989% 0 0 0
61 1GUARDIANS NATIONALIST OF THE PHILIPPINES, INC. 120,727
0.3989% 0 0 0
62 BABAE PARA SA KAUNLARAN 117,299 0.3876% 0 0 0

48 ANAK MINDANAO 157,733 0.5212% 0 0 0

49 VETERANS FREEDOM PARTY 154,183 0.5095% 0 0 0
50 ALLIANCE FOR RURAL RECONSTRUCTION, INC. 147,204 0.4864%
000

63 BAGONG BAYAN NAGTATAGUYOD SA

IDEOLOHIYA AT LAYUNIN 115,428 0.3814% 0 0 0
64 AHON PINOY 115,197 0.3806% 0 0 0

DEMOKRATIKONG

65 ACTION FOR DYNAMIC DEVELOPMENT, INC. 115,058 0.3802% 0 0

0

Commission on Elections erroneous interpretation. The figure presented

by petitioner resulted from the following computations: 14

66 KATRIBU INDIGINOUS PEOPLES SECTORAL PARTY 114,891

0.3796% 0 0 0

37,377,371 (Number of voters who actually voted LESS votes for

disqualified party lists)

67 ANG LADLAD LBGT PARTY 113,187 0.3740% 0 0 0

less 30,264,579 (Number of votes for party-list candidates LESS number

of votes for disqualified party-list candidates)

68 CONFEDERATION OF NON-STOCK
ASSOCIATIONS, INC. 110,759 0.3660% 0 0 0

SAVINGS

AND

LOAN
7,112,792 (Total number of disregarded votes according to petitioner
ARARO)

69 KABALIKAT NG MGA MAMAMAYAN 109,739 0.3626% 0 0 0

70 ONE ADVOCACY FOR HEALTH, PROGRESS AND OPPORTUNITY
109,682 0.3624% 0 0 0
71 BINHI; PARTIDO NG MGA MAGSASAKA
MAGSASAKA 108,005 0.3569% 0 0 0

PARA

SA

MGA

72 1-AANI 107,970 0.3568% 0 0 0

73 AKAP BATA, INC. 107,154 0.3541% 0 0 0
74 ANG ASOSASYON NG MGA TRABAHADOR AT PAHINANTE 107,135
0.3540% 0 0 0
75 AGILA NG MGA KATUTUBONG PILIPINO, INC. 105,009 0.3470% 0 0
0
The petitioner suggests that the formula used by the Commission on
Elections is flawed because votes that were spoiled or that were not made
for any party-lists were not counted. According to the petitioner, around
seven million (7,000,000) votes were disregarded as a result of the

First, the total number of votes for disqualified party-lists is deducted from
the total number of voters that actually voted. The total number of votes for
disqualified party-list groups is three hundred eight thousand three
hundred thirty-five (308,335). 15 The total number of voters that actually
voted is thirty-seven million six hundred eighty-five thousand seven
hundred six (37,685,706).16 After subtracting the amounts, the result is
thirty-seven million three hundred seventy-seven thousand three hundred
seventy-one (37,377,371)votes.
Second, the number of votes for disqualified party-list groups is again
deducted from the number of votes for party-list candidates which the
petitioner pegged at thirty million five hundred seventy-two thousand nine
hundred fourteen votes (30,572,914). 17 The difference then is thirty million
two hundred sixty-four thousand five hundred seventy-nine (30,264,579)
votes.
Lastly, to get the total number of votes disregarded by the Commission on
Elections interpretation, 30,264,579 is subtracted from 37,377,371.The
computation then results to seven million one hundred twelve thousand
seven hundred ninety-two (7,112,792) votes disregarded using the
Commission on Elections interpretation.

On the other hand, the formula used by the Commission on Elections En

Banc sitting as the National Board of Canvassers is the following:
ref
- http://sc.judiciary.gov.ph/pdf/web/viewer.html?
file=/jurisprudence/2013/december2013/192803.pdf
Number
of
seats
available
to
legislative
districts______________________________x .20 =Number of seats
available to party-list representatives .80
Thus, the total number of party-list seats available for the May 2010
elections is 57 as shown below:
229______________________________x .20 =57 .80
The National Board of Canvassers Resolution No. 10-009 applies the
formula used in Barangay Association for National Advancement and
Transparency (BANAT) v. COMELEC18 to arrive at the winning party-list
groups and their guaranteed seats, where:
Number of votes of party-list
______________________________=
Proportion or Percentage of votes garnered by party-list
Total number of votes for party-list candidates
The Proportion or Percentage of votes garnered by party-list should be
greater than or equal to 2% or 0.02 to entitle a party-list candidate to one
(1) seat in the first round. There will be a second round if the total number
of guaranteed seats awarded in the first round is less than the total
number of party-list seats available. Thus:

Total number of party-list seats available - Number of seats allocated in

first round x Proportion or Percentage of votes garnered by party-list =
Additional seats awarded
If the total seats available for party-lists are not yet awarded after the
second round (this is computed by getting the sum of the seats awarded in
the first round and the additional seats awarded in the second round), the
next in the party-list ranking will be given one (1) seat each until all seats
are fully distributed. A three-seat cap per party-list, however, is imposed on
winning groups. Fractional seats are not rounded off and are disregarded.
The petitioner argues that the Commission on Elections interpretation of
the formula used in BANAT v. COMELECis flawed because it is not in
accordance with the law.19 The petitioner distinguishes the phrases, valid
votes castfor party-list candidates on the one hand as against votes
cast for the party-list system on the other.
The petitioner puts in issue the interpretation of Sections 11 and 12 of
Republic Act No.7941 or "An Act Providing for the Election of Party-List
Representatives Through the Party-List System, and Appropriating Funds
Therefor." The sections provide the guidelines in allocating seats to partylist representatives:
Section 11. Number of Party-List Representatives. The party-list
representatives shall constitute twenty per centum (20%) of the total
number of the members of the House of Representatives including those
under the party-list.
For purposes of the May 1998 elections, the first five (5) major political
parties on the basis of party representation in the House of
Representatives at the start of the Tenth Congress of the Philippines shall
not be entitled to participate in the party-list system.

In determining the allocation of seats for the second vote, the following
procedure shall be observed:
(a) The parties, organizations, and coalitions shall be ranked from the
highest to the lowest based on the number of votes they garnered during
the elections.
(b) The parties, organizations, and coalitions receiving at least two percent
(2%) of the total votes cast for the party-list system shall be entitled to one
seat each: Provided, That those garnering more than two percent (2%) of
the votes shall be entitled to additional seats in proportion to their total
number of votes: Provided, finally, That each party, organization, or
coalition shall be entitled to not more than three (3) seats.
Section
12. Procedure
in
Allocating
Seats
for
Party-List
Representatives. The COMELEC shall tally all the votes for the parties,
organizations, or coalitions on a nationwide basis, rank them according to
the number of votes received and allocate party-list representatives
proportionately according to the percentage of votes obtained by each
party, organization, or coalition as against the total nationwide votes cast
for the party-list system.(Emphasis provided)
The petitioner argues that the correct interpretation of the provisions of
Republic Act No. 7941 or the Party-list Law does not distinguish between
valid and invalid votes, to wit:

Therefore, votes for specific party lists are not the same as votes for the
party-list system. Hence, people whose votes were spoiled for instance
(like checking or failure to properly shade the ovals in the ballots, or voted
for two party lists when the requirement is only one, or had erasures on
their ballots for instance), or did not vote for any party-list at all are still
voters for the party-list system. The votes for the party-list system [include]
all those people who voted whether their votes were counted or not as
long as the mechanism for the selection of party-list is in
place.20 (Emphasis provided)
In its November 12, 2010 Comment, 21 the Commission on Elections
through the Office of the Solicitor General took the position that invalid or
stray votes should not be counted in determining the divisor. The
Commission on Elections argues that this will contradict Citizens Battle
Against Corruption (CIBAC) v. COMELEC22 and Barangay Association for
National Advancement and Transparency (BANAT) v. COMELEC. 23 It
asserts that:
Neither can the phrase be construed to include the number of voters who
did not even vote for any qualified party-list candidate, as these voters
cannot be considered to have cast any vote "for the party-list system." 24
The issues in this case are as follows:
I. Whether the case is already moot and academic
II. Whether petitioners have legal standing
III. Whether the Commission on Elections committed grave abuse of
discretion in its interpretation of the formula used in BANAT v.
COMELEC25 to determine the party-list groups that would be proclaimed in
the 2010 elections

The third issue requires our determination of the computation of the correct
divisor to be used. The options are:
A. All votes cast for the party-list system less the votes cast for
subsequently disqualified party-list groups and votes declared spoiled
B. The total votes cast
C. The total number of valid votes cast for the party-list system including
votes cast for party-list groups listed in the ballot even if subsequently
declared disqualified. The divisor should not include votes that are
declared spoiled or invalid.

We held that the expiration of the challenged term of office renders the
corresponding Petition moot and academic. 29 This leaves any ruling on the
issues raised by the petitioner with no practical or useful value. 30
However, the following exceptions to the rule of declining jurisdiction over
moot and academic cases are allowed: (1) there was a grave violation of
the Constitution; (2) the case involved a situation of exceptional character
and was of paramount public interest; (3) the issues raised required the
formulation of controlling principles to guide the Bench, the Bar and the
public; and (4) the case was capable of repetition yet evading review. 31 On
the importance of the assailed formula, this Court will discuss the issues
raised by the petitioner as these are capable of repetition yet evading
review32 and for the guidance of the bench, bar, and public. 33

We decide as follows:
II
I
The petitioner is not the real party in interest
26

This case is moot and academic. Mendoza v. Villas defines a moot and
academic case:
A moot and academic case is one that ceases to present a justiciable
controversy by virtue of supervening events, so that a declaration thereon
would be of no practical value. As a rule, courts decline jurisdiction over
such case, or dismiss it on ground of mootness.27
Several supervening events have already rendered this case moot and
academic. First, the Commission on Elections En Banc already proclaimed
other winning party-list groups.28 Second, the term of office of the winning
party-list groups in the May 2010 national elections ended on June 30,
2013. Finally, the conduct of the May 13, 2013 elections resulted in a new
set of party-list groups.

"A real party in interest is the party who stands to be benefited or injured
by the judgement in the suit, or the party entitled to the avails of the
suit."34 The partys interest must be direct, substantial, and material. 35 In
this case, the petitioner attacks the validity of the formula used and upheld
in BANAT. It also proposes its own interpretation of the formula to
determine the proportional representation of party-list candidates in the
House of Representatives. However despite any new computation,
ARAROs proposed divisor of total votes cast for the party-list system
whether valid or invalid still fails to secure one seat for ARARO. Reviewing
the figures presented by the petitioner:36
With Divisor of total valid votes cast for party-list system
minus votes cast for disqualified party-lists or invalid votes
(30,264,579) With Divisor of votes cast for the party-list
system as proposed by ARARO (37,377,371)

Votes garnered 147,204 147,204

Votes garnered over total votes cast for party-lists (%)
0.4864 0.3939
Guaranteed Seat 0 0
This table clearly shows that the petitioner does not suffer a direct,
substantial or material injury from the application of the formula interpreted
and used in BANAT in proclaiming the winning party-lists in the assailed
National Board of Canvassers Resolution. The computation proposed by
petitioner ARARO even lowers its chances to meet the 2% threshold
required by law for a guaranteed seat. Its arguments will neither benefit
nor injure the party. Thus, it has no legal standing to raise the argument in
this Court.
III
However, we review the interpretation of the formula used for the
determination of wining party-list candidates with respect to the divisor
used for the guidance of bench and bar and for future elections.
The textual references for determining the formula to be used are found in
the Constitution and the statute interpreting the relevant provisions.
Article VI, Section 5,paragraphs 1 and 2 of the 1987 Constitution provide
the following:
1. The House of Representatives shall be composed of not more than two
hundred and fifty members, unless otherwise fixed by law, who shall be
elected from legislative districts apportioned among the provinces, cities,
and the Metropolitan Manila area in accordance with the number of their
respective inhabitants, and on the basis of a uniform and progressive ratio,

and those who, as provided by law, shall be elected through a party-list

system of registered national, regional, and sectoral parties or
organizations.
2. The party-list representatives shall constitute twenty per centum of the
total number of representatives including those under the party list. For
three consecutive terms after the ratification of this Constitution, one-half
of the seats allocated to party-list representatives shall be filled, as
provided by law, by selection or election from the labor, peasant, urban
poor, indigenous cultural communities, women, youth, and such other
sectors as may be provided by law, except the religious sector.
Sections 11 and 12 of Republic Act No. 7941,thus, provide:
Section 11. Number of Party-List Representatives. The party-list
representatives shall constitute twenty per centum (20%) of the total
number of the members of the House of Representatives including those
under the party-list.
For purposes of the May 1998 elections, the first five (5) major political
parties on the basis of party representation in the House of
Representatives at the start of the Tenth Congress of the Philippines shall
not be entitled to participate in the party-list system.
In determining the allocation of seats for the second vote, the following
procedure shall be observed:
(a) The parties, organizations, and coalitions shall be ranked from the
highest to the lowest based on the number of votes they garnered during
the elections.
(b) The parties, organizations, and coalitions receiving at least two percent
(2%) of the total votes cast for the party-list systemshall be entitled to one

seat each: Provided, That those garnering more than two percent (2%) of
the votes shall be entitled to additional seats in proportion to their total
number of votes: Provided, finally, That each party, organization, or
coalition shall be entitled to not more than three(3) seats.
Section 12. Procedure in Allocating Seats for Party-List Representatives.
The COMELEC shall tally all the votes for the parties, organizations, or
coalitions on a nationwide basis, rank them according to the number of
votes received and allocate party-list representatives proportionately
according to the percentage of votes obtained by each party, organization,
or coalition as against the total nationwide votes cast for the party-list
system.(Emphasis provided)
In Veterans Federation Party v. Commission on Elections,37 we reversed
the Commission on Elections ruling that the respondent parties, coalitions,
and organizations were each entitled to a party-list seat despite their
failure to reach the 2% threshold in the 1998 party-list election. Veterans
also stated that the 20% requirement in the Constitution is merely a ceiling.
Veterans laid down the "four inviolable parameters" in determining the
winners in a Philippine-style party-list election based on a reading of the
Constitution and Republic Act No. 7941:
First, the twenty percent allocation-the combined number of all party-list
congressmen shall not exceed twenty percent of the total membership of
the House of Representatives, including those elected under the party list.
Second, the two percent threshold-only those parties garnering a minimum
of two percent of the total valid votes cast for the party-list system are
"qualified" to have a seat in the House of Representatives.

Third, the three-seat limit-each qualified party, regardless of the number of

votes it actually obtained, is entitled to a maximum of three seats; that is,
one "qualifying" and two additional seats.
Fourth, proportional representation-the additional seats which a qualified
party is entitled to shall be computed "in proportion to their total number of
votes."38 (Emphasis provided)
In Partido ng Manggagawa (PM) and Butil Farmers Party (Butil) v.
COMELEC,39 the petitioning party-list groups sought the immediate
proclamation by the Commission on Elections of their respective second
nominee, claiming that they were entitled to one (1) additional seat each in
the House of Representatives. We held that the correct formula to be used
is the one used in Veterans and reiterated it in Ang Bagong Bayani OFW
Labor
Party
v.
COMELEC.40 This
Court
in CIBAC
v.
41
COMELEC differentiates the formula used in Ang Bagong Bayani but
upholds the validity of the Veterans formula.
In BANAT v. COMELEC,42 we declared the 2% threshold in relation to the
distribution of the additional seats as void. We said in that case that:
x x x The two percent threshold presents an unwarranted obstacle to the
full implementation of Section 5(2), Article VI of the Constitution and
prevents the attainment of "the broadest possible representation of party,
sectoral or group interests in the House of Representatives." (Republic Act
No. 7941, Section 2)
xxxx
x x x There are two steps in the second round of seat allocation. First, the
percentage is multiplied by the remaining available seats, 38, which is the
difference between the 55 maximum seats reserved under the Party-List
System and the 17 guaranteed seats of the two-percenters. The whole

integer of the product of the percentage and of the remaining available

seats corresponds to a partys share in the remaining available
seats.Second, we assign one party-list seat to each of the parties next in
rank until all available seats are completely distributed. We distributed all
of the remaining 38 seats in the second round of seat allocation. Finally,
we apply the three-seat cap to determine the number of seats each
qualified party-list candidate is entitled.43
The most recent Atong Paglaum v. COMELEC44 does not in any way
modify the formula set in Veterans. It only corrects the definition of valid
party-list groups. We affirmed that party-list groups maybe national,
regional, and sectoral parties or organizations. We abandoned the
requirement introduced in Ang Bagong Bayani that all party-list groups
should prove that they represent a "marginalized" or "under-represented"
sector.
Proportional representation is provided in Section 2 of Republic Act No.
7941.45 BANAT overturned Veterans interpretation of the phrase in
proportion to their total number of votes. We clarified that the interpretation
that only those that obtained at least 2% of the votes may get additional
seats will not result in proportional representation because it will make it
impossible for the party-list seats to be filled completely. As demonstrated
in BANAT, the 20% share may never be filled if the 2% threshold is
maintained.
The divisor, thus, helps to determine the correct percentage of
representation of party-list groups as intended by the law. This is part of
the index of proportionality of the representation of a party-list to the House
of Representatives.46 It measures the relation between the share of the
total seats and the share of the total votes of the party-list. 47 In Veterans,
where the 20% requirement in the Constitution was treated only as a
ceiling, the mandate for proportional representation was not achieved, and
thus, was held void by this Court.

The petitioner now argues that the votes of all the registered voters who
actually voted in the May 2010 elections should be included in the
computation of the divisor whether valid or invalid. 48 According to the
petitioner, votes cast for the party-list candidates is not the same as the
votes cast under or for the party-list system. Specifically, it said that: The
party list system is not just for the specific party lists as provided in the
ballot, but pertains to the system of selection of the party list to be part of
the House of Representatives.49 The petitioner claims that there should be
no distinction in law between valid and invalid votes. Invalid votes include
those votes that were made for disqualified party-list groups, votes that
were spoiled due to improper shading, erasures in the ballots, and even
those that did not vote for any party-list candidate at all. 50 All of the votes
should be included in the divisor to determine the 2% threshold.
We agree with the petitioner but only to the extent that votes later on
determined to be invalid due to no cause attributable to the voter
should not be excluded in the divisor. In other words, votes cast
validly for a party-list group listed in the ballot but later on
disqualified should be counted as part of the divisor. To do otherwise
would be to disenfranchise the voters who voted on the basis of
good faith that that ballot contained all the qualified candidates.
However, following this rationale, party-list groups listed in the ballot
but whose disqualification attained finality prior to the elections and
whose disqualification was reasonably made known by the
Commission on Elections to the voters prior to such elections should
not be included in the divisor.
Not all votes cast in the elections should be included in the divisor.
Contrary to the argument of the petitioner, Section 11(b) of Republic Act
No. 7941 is clear that only those votes cast for the party-list system shall
be considered in the computation of the percentage of representation:
(b) The parties, organizations, and coalitions receiving at least two percent
(2%) of the total votes cast for the party-list systemshall be entitled to one

seat each: Provided, That those garnering more than two percent (2%) of
the votes shall be entitled to additional seats in proportion to their total
number of votes: Provided, finally, That each party, organization, or
coalition shall be entitled to not more than three (3) seats.
(Emphasisprovided)
The total votes cast do not include invalid votes. The invalid votes, for the
determination of the denominator, may be votes that were spoiled or votes
that resulted from the following: improper shading or having no shade at
all;51existence of stray or ambiguous marks;52 tears in the ballot; and/or
ballots rejected by the Precinct Count Optical Scan (PCOS) machines
under the paper-based53automated election system. All these are causes
that nullify the count for that vote that can be attributable to the voters
action.
Votes cast for the party-list system should, however, include all votes cast
for party-list groups contained in the ballot even if subsequently they are
disqualified by the Commission on Elections or by our courts. Thus, the
content of the divisor in the formula to determine the seat allocation for the
party-list component of the House of Representatives should be amended
accordingly.
We qualify that the divisor to be used in interpreting the formula used
in BANAT is the total votes cast for the party-list system. This should not
include the invalid votes. However, so as not to disenfranchise a
substantial portion of the electorate, total votes cast for the party-list
system should mean all the votes validly cast for all the candidates listed
in the ballot. The voter relies on the ballot when making his or her
choices.
To the voter, the listing of candidates in the official ballot represents the
extent of his or her choices for an electoral exercise. He or she is entitled
to the expectation that these names have properly been vetted by the
Commission on Elections. Therefore, he or she is also by right entitled to

the expectation that his or her choice based on the listed names in the
ballot will be counted.
In Reyes v.COMELEC54 as cited in Loreto v. Brion,55 this Court said "that
the votes cast for the disqualified candidate are presumed to have been
cast in the belief that he is qualified." 56 Therefore, the votes cast for
disqualified candidates are presumed to be made with a sincere belief that
the voters choices were qualified candidates and that they were without
any intention to misapply their franchise.57 Their votes may not be treated
as stray, void or meaningless58for purposes of the divisor in the party-list
elections. Assuming arguendo that petitions for certiorari do not stay the
execution of the judgment or final order or resolution sought to be
reviewed,59 the finality of the disqualification of a candidate should not be a
means for the disenfranchisement of the votes cast for the party-list
system.
Section 10 of the Party-list Law should thus be read in conjunction with the
intention of the law as seen in Section 2, to wit:
Sec. 2. Declaration of Policy. -The State shall promote proportional
representation in the election of representatives to the House of
Representatives through a party-list system of registered national, regional
and sectoral parties or organizations or coalitions thereof, which will
enable Filipino citizens belonging to the marginalized and
underrepresented sectors, organizations and parties, and who lack welldefined political constituencies but who could contribute to the formulation
and enactment of appropriate legislation that will benefit the nation as a
whole, to become members of the House of Representatives. Towards this
end, the State shall develop and guarantee a full, free and open party
system in order to attain the broadest possible representation of party,
sectoral or group interests in the House of Representatives by enhancing
their chances to compete for and win seats in the legislature, and shall
provide the simplest scheme possible. (Emphasis provided)

Section 10 of Republic Act No. 7941, which governs party-list elections,

states that votes cast for a party-list "not entitled to be voted for shall not
be counted." It does not specify any reckoning period of the finding of
disqualification or cancellation of registration for the validity or the invalidity
of votes unlike that in Section 72 of the Omnibus Election Code, as
amended by Section 6, Republic Act No. 6646. 60 Taking Sections 2 and 10
together, this Court must consider the intention of the law and the nature of
Philippine style party-list elections. Party-list groups provide for a different
and special representation in Congress. To disregard votes of party-list
groups disqualified after the conduct of the elections means the
disenfranchisement of thousands, if not hundreds of thousands of votes, of
the Filipino people. Definitely, it is not the voters fault that the party-list
group in the ballot it votes for will be subsequently disqualified. The voter
should not be penalized.

However, there are instances when the Commission on Elections include

the name of the party-list group in the ballot but such group is disqualified
with finality prior to the elections. In applying and interpreting the
provisions of Section 6 of Republic Act No. 6646,we said in Cayat v.
Commission on Elections62 that votes cast in favor of a candidate
"disqualified with finality" should be considered stray and not be counted.
To be consistent, the party-list group in the ballot that has been disqualified
with finality and whose final disqualification was made known to the
electorate by the Commission on Elections should also not be included in
the divisor. This is to accord weight to the disqualification as well as accord
respect to the inherent right of suffrage of the voters.

The counting of votes for party-list groups in the ballot but subsequently
declared as disqualified is, thus, corollary to the "fundamental tenet of
representative democracy that the people should be allowed to choose
whom they please to govern them." 61 It is also part of the right of suffrage,
and the laws intention to ensure a more representative Congress should
be given priority.

Number of votes of party-list ______________________________ =

Proportion or Percentage of votes garnered by party-list Total number of
valid votes for party-list candidates

Therefore, the divisor should now include all votes cast for party-list groups
that are subsequently disqualified for so long as they were presented as a
choice to the electorate.
If his or her vote is not counted as part of the divisor, then this would
amount to a disenfranchisement of a basic constitutional right to be able to
choose representatives of the House of Representatives in two ways. First,
his or her vote will be nullified. Second, he or she will be deprived of
choosing another party-list group to represent his or her interest should the
party listed in the ballot be declared disqualified.

Thus, the formula to determine the proportion garnered by the party-list

group would now henceforth be:

The total votes cast for the party-list system include those votes made for
party-list groups indicated in the ballot regardless of the pendency of their
motions for reconsideration or petitions before any tribunal in relation to
their cancellation or disqualification cases. However, votes made for those
party-list groups whose disqualification attained finality prior to the
elections should be excluded if the electorate is notified of the finality of
their disqualification by the Commission on Elections. The divisor also
shall not include invalid votes.
WHEREFORE from the above discussion:
1. The prayer to enjoin the Commission on Elections from proclaiming the
qualified party-list groups is denied for being moot and academic;

2. The formula in determining the winning party-list groups, as used and

interpreted in the case of BANAT v. COMELEC, is MODIFIED as follows:
Number of votes. of party-list Total number of valid votes for party-list
candidates Proportion or Percentage of votes garnered by party-list
The divisor shall be the total number of valid votes cast for the party-list
system including votes cast for party-list groups whose names are in the
ballot but are subsequently disqualified. Party-list groups listed in the ballot
but whose disqualification attained finality prior to the elections and whose
disqualification was reasonably made known by the Commission on
Elections to the voters prior to such elections should not be included in the
divisor. The divisor shall also not include votes that are declared spoiled or
invalid.
The refined formula shall apply prospectively to succeeding party-list
elections from the date of finality of this case.
SO ORDERED.

themselves the real parties in interest to claim and recover compensation

for the damages arising from the wrongful attachment of its assets. Only
the corporation is the real party in interest for that purpose.
The Case

Republic
SUPREME
Manila

of

the

Philippines
COURT

Antecedents

FIRST DIVISION
G.R. No. 173297

Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic

insurance company, assails the decision promulgated on January 31,
2006,1 whereby the Court of Appeals (CA) in CA-G.R. CV No. 79145
affirmed the judgment rendered on April 28, 2003 by the Regional Trial
Court in Parafiaque City (RTC) holding Stronghold Insurance and
respondent Manuel D. Marafion, Jr. jointly and solidarily liable for damages
to respondents Tomas Cuenca, Marcelina Cuenca, Milagros Cuenca
(collectively referred to as Cuencas), and Bramie Tayactac, upon the
latters claims against the surety bond issued by Stronghold Insurance for
the benefit of Maraon.2

March 6, 2013

STRONGHOLD
INSURANCE
COMPANY,
INC., Petitioner,
vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA,
BRAMIE T. TAYACTAC, and MANUEL D. MARANON, JR., Respondents.
DECISION
BERSAMIN, J.:
The personality of a corporation is distinct and separate from the
personalities of its stockholders. Hence, its stockholders are not

On January 19, 1998, Maraon filed a complaint in the RTC against the
Cuencas for the collection of a sum of money and damages. His
complaint, docketed as Civil Case No. 98-023, included an application for
the issuance of a writ of preliminary attachment. 3 On January 26, 1998, the
RTC granted the application for the issuance of the writ of preliminary
attachment conditioned upon the posting of a bond of P1,000,000.00
executed in favor of the Cuencas. Less than a month later, Maraon
amended the complaint to implead Tayactac as a defendant. 4
On February 11, 1998, Maraon posted SICI Bond No. 68427 JCL (4) No.
02370 in the amount of P1,000,000.00 issued by Stronghold Insurance.
Two days later, the RTC issued the writ of preliminary attachment. 5 The
sheriff served the writ, the summons and a copy of the complaint on the
Cuencas on the same day. The service of the writ, summons and copy of
the complaint were made on Tayactac on February 16, 1998. 6

Enforcing the writ of preliminary attachment on February 16 and February

17, 1998, the sheriff levied upon the equipment, supplies, materials and
various other personal property belonging to Arc Cuisine, Inc. that were
found in the leased corporate office-cum-commissary or kitchen of the
corporation.7 On February 19, 1998, the sheriff submitted a report on his
proceedings,8 and filed an ex parte motion seeking the transfer of the
levied properties to a safe place. The RTC granted the ex parte motion on
February 23, 1998.9
On February 25, 1998, the Cuencas and Tayactac presented in the RTC a
Motion to Dismiss and to Quash Writ of Preliminary Attachment on the
grounds that: (1) the action involved intra-corporate matters that were
within the original and exclusive jurisdiction of the Securities and
Exchange Commission (SEC); and (2) there was another action pending in
the SEC as well as a criminal complaint in the Office of the City Prosecutor
of Paraaque City.10

On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R.

SP No. 49288,14 granting the petition. It annulled and set aside the
challenged orders, and dismissed the amended complaint in Civil Case
No. 98-023 for lack of jurisdiction, to wit:
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND
SET ASIDE, and the judgment is hereby rendered DISMISSING the
Amended Complaint in Civil Case No. 98-023 of the respondent court, for
lack of jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and
resolution of the Cuencas and Tayactacs claim for the damages sustained
from the enforcement of the writ of preliminary attachment. 15
On February 17, 2000,16 the sheriff reported to the RTC, as follows:

On March 5, 1998, Maraon opposed the motion.

11

On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash
Writ of Preliminary Attachment, stating that the action, being one for the
recovery of a sum of money and damages, was within its jurisdiction. 12
Under date of September 3, 1998, the Cuencas and Tayactac moved for
the reconsideration of the denial of their Motion to Dismiss and to Quash
Writ of Preliminary Attachment, but the RTC denied their motion for
reconsideration on September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on
certiorari and prohibition to challenge the August 10, 1998 and September
16, 1998 orders of the RTC on the basis of being issued with grave abuse
of discretion amounting to lack or excess of jurisdiction (C.A.-G.R. SP No.
49288).13

On the scheduled inventory of the properties (February 17, 2000) and to

comply with the Resolution of the Court of Appeals dated December 24,
1999 ordering the delivery of the attached properties to the defendants, the
proceedings thereon being:
1. With the assistance for (sic) the counsel of Cuencas, Atty.
Pulumbarit, Atty. Ayo, defendant Marcelina Cuenca, and two Court
Personnel, Robertson Catorce and Danilo Abanto, went to the
warehouse where Mr. Maraon recommended for safekeeping the
properties in which he personally assured its safety, at No. 14,
Marian II Street, East Service Road, Paraaque Metro Manila.
2. That to our surprise, said warehouse is now tenanted by a new
lessee and the properties were all gone and missing.

3. That there are informations (sic) that the properties are seen at
Contis Pastry & Bake Shop owned by Mr. Maraon, located at BF
Homes in Paraaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require
Sheriff to Deliver Attached Properties and to Set Case for
Hearing,17 praying that: (1) the Branch Sheriff be ordered to immediately
deliver the attached properties to them; (2) Stronghold Insurance be
directed to pay them the damages being sought in accordance with its
undertaking under the surety bond for P1,000,0000.00; (3) Maraon be
held personally liable to them considering the insufficiency of the amount
of the surety bond; (4) they be paid the total of P1,721,557.20 as actual
damages representing the value of the lost attached properties because
they, being accountable for the properties, would be turning that amount
over to Arc Cuisine, Inc.; and (5) Maraon be made to pay P200,000.00 as
moral damages, P100,000.00 as exemplary damages, and P100,000.00
as attorneys fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In
turn, the Cuencas and Tayactac filed their reply on May 5, 2000.
On May 25, 2000, Maraon filed his own comment/opposition to the
Motion to Require Sheriff to Deliver Attached Properties and to Set Case
for Hearing of the Cuencas and Tayactac, arguing that because the
attached properties belonged to Arc Cuisine, Inc. 50% of the stockholding
of which he and his relatives owned, it should follow that 50% of the value
of the missing attached properties constituted liquidating dividends that
should remain with and belong to him. Accordingly, he prayed that he
should be required to return only P100,000.00 to the Cuencas and
Tayactac.18

On June 5, 2000, the RTC commanded Maraon to surrender all the

attached properties to the RTC through the sheriff within 10 days from
notice; and directed the Cuencas and Tayactac to submit the affidavits of
their witnesses in support of their claim for damages. 19
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation
and Compliance.20
Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding
Maraon and Stronghold Insurance jointly and solidarily liable for damages
to the Cuencas and Tayactac,21 viz:
WHEREFORE, premises considered, as the defendants were able to
preponderantly prove their entitlement for damages by reason of the
unlawful and wrongful issuance of the writ of attachment, MANUEL D.
MARAON, JR., plaintiff and defendant, Stronghold Insurance Company
Inc., are found to be jointly and solidarily liable to pay the defendants the
following amount to wit:
(1) PhP1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorneys fees; and
(5) To pay the cost of suit.
SO ORDERED.

Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145),
assigning the following errors to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO
PAY THE AMOUNT OF P1,000,000.00 REPRESENTING THE AMOUNT
OF THE BOND AND OTHER DAMAGES TO THE DEFENDANTS.

THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR

AND DECIDED QUESTIONS OF SUBSTANCE IN A WAY NOT IN
ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE
HONORABLE COURT CONSIDERING THAT THE COURT OF APPEALS
AFFIRMED THE ERRONEOUS DECISION OF THE TRIAL COURT
HOLDING
RESPONDENT
MARA[]ON
AND
PETITIONER
STRONGHOLD JOINTLY AND SOLIDARILY LIABLE TO PAY THE
RESPONDENTS CUENCA, et al., FOR PURPORTED DAMAGES BY
REASON OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE
OF THE WRIT OF ATTACHMENT, DESPITE THE FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF
THE PROPERTIES ATTACHED AND THUS, ARE NOT THE
PROPER PARTIES TO CLAIM ANY PURPORTED DAMAGES
ARISING THEREFROM.

II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE
INDEMNITY AGREEMENT (EXH. "2-SURETY") EXECUTED BY MANUEL
D. MARAON, JR. IN FAVOR OF STRONGHOLD WHEREIN HE BOUND
HIMSELF TO INDEMNIFY STRONGHOLD OF WHATEVER AMOUNT IT
MAY BE HELD LIABLE ON ACCOUNT OF THE ISSUANCE OF THE
ATTACHMENT BOND.22

B) THE PURPORTED DAMAGES BY REASON OF THE

ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF THE
WRIT OF ATTACHMENT WERE CAUSED BY THE NEGLIGENCE
OF THE BRANCH SHERIFF OF THE TRIAL COURT AND HIS
FAILURE TO COMPLY WITH THE PROVISIONS OF THE RULES
OF COURT PERTAINING TO THE ATTACHMENT OF
PROPERTIES.

On January 31, 2006, the CA, finding no reversible error, promulgated its
decision affirming the judgment of the RTC.23
Stronghold Insurance moved for reconsideration, but the CA denied its
motion for reconsideration on June 22, 2006.

C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD

PETITIONER STRONGHOLD TO BE SOLIDARILY LIABLE WITH
RESPONDENT MARA[]ON TO RESPONDENTS CUENCA et
al., FOR MORAL DAMAGES, EXEMPLARY DAMAGES,
ATTORNEYS FEES AND COST OF SUIT DESPITE THE FACT
THAT THE GUARANTY OF PETITIONER STRONGHOLD
PURSUANT TO ITS SURETY BOND IS LIMITED ONLY TO THE
AMOUNT OF P1,000,000.00.

Issues
Hence, this appeal by petition for review on certiorari by Stronghold
Insurance, which submits that:
I.
II

IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD

HAVE HELD RESPONDENT MARA[]ON TO BE LIABLE TO INDEMNIFY
PETITIONER STRONGHOLD FOR ALL PAYMENTS, DAMAGES,
COSTS, LOSSES, PENALTIES, CHARGES AND EXPENSES IT
SUSTAINED IN CONNECTION WITH THE INSTANT CASE, PURSUANT
TO THE INDEMNITY AGREEMENT ENTERED INTO BY PETITIONER
STRONGHOLD AND RESPONDENT MARA[]ON.24

prescribed by law. In like manner, the obligations and liability on

the attachment bond are also prescribed by law and not left to the
discretion or will of the contracting parties to the prejudice of the
persons against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the
damages sustained by herein respondents is both a statutory and
contractual obligation and for which, it cannot escape
accountability and liability in favor of the person against whom the
illegal writ of attachment was issued and enforced. To allow
Stronghold to delay, excuse or exempt itself from liability is
unconstitutional, unlawful, and contrary to the basic tenets of
equity and fair play.

On their part, the Cuencas and Tayactac counter:

A. Having actively participated in the trial and appellate
proceedings of this case before the Regional Trial Court and the
Court of Appeals, respectively, petitioner Stronghold is legally and
effectively BARRED by ESTOPPEL from raising for the first time
on appeal before this Honorable Court a defense and/or issue not
raised below.25
B. Even assuming arguendo without admitting that the principle of
estoppel is not applicable in this instant case, the assailed
Decision and Resolution find firm basis in law considering that the
writ of attachment issued and enforced against herein respondents
has been declared ILLEGAL, NULL AND VOID for having been
issued beyond the jurisdiction of the trial court.
C. There having been a factual and legal finding of the illegality of
the issuance and consequently, the enforcement of the writ of
attachment, Maranon and his surety Stronghold, consistent with
the facts and the law, including the contract of suretyship they
entered into, are JOINTLY AND SEVERALLY liable for the
damages sustained by herein respondents by reason thereof.
D. Contrary to the allegations of Stronghold, its liability as surety
under the attachment bond without which the writ of attachment
shall not issue and be enforced against herein respondent if

F. While the liability of Stronghold as surety indeed covers the

principal amount of P1,000,000.00, nothing in the law and the
contract between the parties limit or exempt Stronghold from
liability for other damages. Including costs of suit and interest.26
In his own comment,27
Maraon insisted that he could not be personally held liable under the
attachment bond because the judgment of the RTC was rendered without
jurisdiction over the subject matter of the action that involved an intracorporate controversy among the stockholders of Arc Cuisine, Inc.; and
that the jurisdiction properly pertained to the SEC, where another action
was already pending between the parties.
Ruling
Although the question of whether the Cuencas and Tayactac could
themselves recover damages arising from the wrongful attachment of the
assets of Arc Cuisine, Inc. by claiming against the bond issued by

Stronghold Insurance was not raised in the CA, we do not brush it aside
because the actual legal interest of the parties in the subject of the
litigation is a matter of substance that has jurisdictional impact, even on
appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be disallowed immediately if it
involves a person without any interest at stake, for it would be futile and
meaningless to still proceed and render a judgment where there is no
actual controversy to be thereby determined. Courts of law in our judicial
system are not allowed to delve on academic issues or to render advisory
opinions. They only resolve actual controversies, for that is what they are
authorized to do by the Fundamental Law itself, which forthrightly ordains
that the judicial power is wielded only to settle actual controversies
involving rights that are legally demandable and enforceable. 28
To ensure the observance of the mandate of the Constitution, Section 2,
Rule 3 of the Rules of Court requires that unless otherwise authorized by
law or the Rules of Court every action must be prosecuted or defended in
the name of the real party in interest. 29 Under the same rule, a real party in
interest is one who stands to be benefited or injured by the judgment in the
suit, or one who is entitled to the avails of the suit. Accordingly, a person ,
to be a real party in interest in whose name an action must be prosecuted,
should appear to be the present real owner of the right sought to be
enforced, that is, his interest must be a present substantial interest, not a
mere expectancy, or a future, contingent, subordinate, or consequential
interest.30
Where the plaintiff is not the real party in interest, the ground for the
motion to dismiss is lack of cause of action. 31The reason for this is that the
courts ought not to pass upon questions not derived from any actual
controversy. Truly, a person having no material interest to protect cannot
invoke the jurisdiction of the court as the plaintiff in an action. 32 Nor does a

court acquire jurisdiction over a case where the real party in interest is not
present or impleaded.
The purposes of the requirement for the real party in interest prosecuting
or defending an action at law are: (a) to prevent the prosecution of actions
by persons without any right, title or interest in the case; (b) to require that
the actual party entitled to legal relief be the one to prosecute the action;
(c) to avoid a multiplicity of suits; and (d) to discourage litigation and keep
it within certain bounds, pursuant to sound public policy.33 Indeed,
considering that all civil actions must be based on a cause of
action,34 defined as the act or omission by which a party violates the right
of another,35 the former as the defendant must be allowed to insist upon
being opposed by the real party in interest so that he is protected from
further suits regarding the same claim. 36 Under this rationale, the
requirement benefits the defendant because "the defendant can insist
upon a plaintiff who will afford him a setup providing good res judicata
protection if the struggle is carried through on the merits to the end." 37
The rule on real party in interest ensures, therefore, that the party with the
legal right to sue brings the action, and this interest ends when a judgment
involving the nominal plaintiff will protect the defendant from a subsequent
identical action. Such a rule is intended to bring before the court the party
rightfully interested in the litigation so that only real controversies will be
presented and the judgment, when entered, will be binding and conclusive
and the defendant will be saved from further harassment and vexation at
the hands of other claimants to the same demand.38
But the real party in interest need not be the person who ultimately will
benefit from the successful prosecution of the action. Hence, to aid itself in
the proper identification of the real party in interest, the court should first
ascertain the nature of the substantive right being asserted, and then must
determine whether the party asserting that right is recognized as the real
party in interest under the rules of procedure. Truly, that a party stands to
gain from the litigation is not necessarily controlling. 39

It is fundamental that the courts are established in order to afford reliefs to

persons whose rights or property interests have been invaded or violated,
or are threatened with invasion by others conduct or acts, and to give
relief only at the instance of such persons. The jurisdiction of a court of law
or equity may not be invoked by or for an individual whose rights have not
been breached.40
The remedial right or the remedial obligation is the persons interest in the
controversy. The right of the plaintiff or other claimant is alleged to be
violated by the defendant, who has the correlative obligation to respect the
right of the former. Otherwise put, without the right, a person may not
become a party plaintiff; without the obligation, a person may not be sued
as a party defendant; without the violation, there may not be a suit. In such
a situation, it is legally impossible for any person or entity to be both
plaintiff and defendant in the same action, thereby ensuring that the
controversy is actual and exists between adversary parties. Where there
are no adversary parties before it, the court would be without jurisdiction to
render a judgment.41
There is no dispute that the properties subject to the levy on attachment
belonged to Arc Cuisine, Inc. alone, not to the Cuencas and Tayactac in
their own right. They were only stockholders of Arc Cuisine, Inc., which
had a personality distinct and separate from that of any or all of
them.42 The damages occasioned to the properties by the levy on
attachment, wrongful or not, prejudiced Arc Cuisine, Inc., not them. As
such, only Arc Cuisine, Inc. had the right under the substantive law to
claim and recover such damages. This right could not also be asserted by
the Cuencas and Tayactac unless they did so in the name of the
corporation itself. But that did not happen herein, because Arc Cuisine, Inc.
was not even joined in the action either as an original party or as an
intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest
in the personal properties coming under the levy on attachment by virtue

alone of their being stockholders in Arc Cuisine, Inc. Their stockholdings

represented only their proportionate or aliquot interest in the properties of
the corporation, but did not vest in them any legal right or title to any
specific properties of the corporation. Without doubt, Arc Cuisine, Inc.
remained the owner as a distinct legal person.43
Given the separate and distinct legal personality of Arc Cuisine, Inc., the
Cuencas and Tayactac lacked the legal personality to claim the damages
sustained from the levy of the formers properties. According to Asset
Privatization Trust v. Court of Appeals,44 even when the foreclosure on the
assets of the corporation was wrongful and done in bad faith the
stockholders had no standing to recover for themselves moral damages;
otherwise, they would be appropriating and distributing part of the
corporations assets prior to the dissolution of the corporation and the
liquidation of its debts and liabilities. Moreover, in Evangelista v.
Santos,45 the Court, resolving whether or not the minority stockholders had
the right to bring an action for damages against the principal officers of the
corporation for their own benefit, said:
As to the second question, the complaint shows that the action is for
damages resulting from mismanagement of the affairs and assets of the
corporation by its principal officer, it being alleged that defendants
maladministration has brought about the ruin of the corporation and the
consequent loss of value of its stocks. The injury complained of is thus
primarily to the corporation, so that the suit for the damages claimed
should be by the corporation rather than by the stockholders (3 Fletcher,
Cyclopedia of Corporation pp. 977-980). The stockholders may not directly
claim those damages for themselves for that would result in the
appropriation by, and the distribution among them of part of the corporate
assets before the dissolution of the corporation and the liquidation of its
debts and liabilities, something which cannot be legally done in view of
section 16 of the Corporation Law, which provides:

No shall corporation shall make or declare any stock or bond dividend or

any dividend whatsoever except from the surplus profits arising from its
business, or divide or distribute its capital stock or property other than
actual profits among its members or stockholders until after the payment of
its debts and the termination of its existence by limitation or lawful
dissolution.
xxxx
In the present case, the plaintiff stockholders have brought the action not
for the benefit of the corporation but for their own benefit, since they ask
that the defendant make good the losses occasioned by his
mismanagement and pay to them the value of their respective participation
in the corporate assets on the basis of their respective holdings. Clearly,
this cannot be done until all corporate debts, if there be any, are paid and
the existence of the corporation terminated by the limitation of its charter or
by lawful dissolution in view of the provisions of section 16 of the
Corporation Law. (Emphasis ours)

time of the attachment, considering that their custody was only incidental
to the operation of the corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc
Cuisine, Inc. a proper action to recover damages resulting from the
attachment. Such action would be one directly brought in the name of the
corporation. Yet, that was not true here, for, instead, the Cuencas and
Tayactac presented the claim in their own names.
In view of the outcome just reached, the Court deems it unnecessary to
give any extensive consideration to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review; and
REVERSES and SETS ASIDE the decision of the Court of Appeals in CAG.R. CV No. 79145 promulgated on January 31,2006.
No pronouncements on costs of suit.
SO ORDERED.

It results that plaintiffs complaint shows no cause of action in their favor so

that the lower court did not err in dismissing the complaint on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the
requirement of section 16 of the Corporation Law be first complied with, we
note that the action stated in their complaint is susceptible of being
converted into a derivative suit for the benefit of the corporation by a mere
change in the prayer. Such amendment, however, is not possible now,
since the complaint has been filed in the wrong court, so that the same has
to be dismissed.46
That Maraon knew that Arc Cuisine, Inc. owned the properties levied on
attachment but he still excluded Arc Cuisine, Inc. from his complaint was of
no consequence now. The Cuencas and Tayactac still had no right of
action even if the affected properties were then under their custody at the

in CA-G.R. SP No. 71551. The CA set aside the orders dated February 28,
20024 and April 1, 20025 of the Regional Trial Court (RTC), Branch 8, Cebu
City, which denied the motion to dismiss for reconsideration respectively,
of respondents Rovila Water Supply, Inc. (Rovilla, Inc.), Earl U. Kokseng,
Lialia Torres, Dalla P. Romanillos and Marissa Gabuya.
THE FACTUAL ANTECEDENTS
Petitioners Rebecca Pacaa-Contreras and Rosalie Pacaa, children of
Lourdes Teves Pacaa and Luciano Pacaa, filed the present case against
Rovila Inc., Earl, Lilia, Dalla and Marisa for accounting and damages. 6
Republic
SUPREME
Manila

of

the

Philippines
COURT

SECOND DIVISION
G.R. No. 168979

December 2, 2013

REBECCA
PACAA-CONTRERAS
and
ROSALIE
PACAA, Petitioners,
vs.
ROVILA WATER SUPPLY, INC., EARL U KOKSENG, LILIA TORRES,
DALLA P. ROMANILLOS and MARISSA GABUYA, Respondents.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari 1 under Rule 4 of the
Rules of Court seeking the reversal of the decision 2 dated January 27,
2005 and the resolution3 dated June 6, 2005 of the Courts of Appeals (CA)

The petitioners claimed that their family has long been known in the
community to be engaged in the water supply business; they operated the
"Rovila Water Supply" from their family residence and were engaged in the
distribution of water to customers in Cebu City. The petitioners alleged that
Lilia was a former trusted employee in the family business who hid
business records and burned and ransacked the family files. Lilia also
allegedly posted security guards and barred the members of the Pacaa
family from operating their business. She then claimed ownership over the
family business through a corporation named "Rovila Water Supply, Inc."
(Rovila Inc.) Upon inquiry with the Securities and Exchange Commission
(SEC), the petitioners claimed that Rovila Inc. was surreptitiously formed
with the respondents as the majority stockholders. The respondents did so
by conspiring with one another and forming the respondent corporation to
takeover and illegally usurp the family business registered name. 7
In forming the respondent corporation, the respondents allegedly used the
name of Lourdes as one of the incorporators and made it appear in the
SEC documents that the family business was operated in a place other
than the Pacaa residence. Thereafter, the respondents used the Pacaa
familys receipts and the deliveries and sales were made to appear as
those of the respondent Rovila Inc. Using this scheme, the respondents
fraudulently appropriated the collections and payments. 8

The petitioners filed the complaint in their own names although Rosalie
was authorized by Lourdes through a sworn declaration and special power
of attorney (SPA). The respondents filed a first motion to dismiss on the
ground that the RTC had no jurisdiction over an intra-corporate
controversy.9

On January 23, 2002,16 the respondents again filed a motion to dismiss on

the grounds, among others, that the petitioners are not the real parties in
interest to institute and prosecute the case and that they have no valid
cause of action against the respondents.
THE RTC RULING

The RTC denied the motion. On September 26, 2000, Lourdes died 10 and
the petitioners amended their complaint, with leave of court, on October 2,
2000 to reflect this development.11
They still attached to their amended complaint the sworn declaration with
SPA, but the caption of the amended complaint remained the same. 12
On October 10, 2000, Luciano also died.13
The respondents filed their Answer on November 16, 2000. 14
The petitioners sister, Lagrimas Pacaa-Gonzales, filed a motion for leave
to intervene and her answer-in-intervention was granted by the trial court.
At the subsequent pre-trial, the respondents manifested to the RTC that a
substitution of the parties was necessary in light of the deaths of Lourdes
and Luciano. They further stated that they would seek the dismissal of the
complaint because the petitioners are not the real parties in interest to
prosecute the case. The pre-trial pushed through as scheduled and the
RTC directed the respondents to put into writing their earlier manifestation.
The RTC issued a pre-trial order where one of the issues submitted was
whether the complaint should be dismissed for failure to comply with
Section 2, Rule 3 of the Rules of Court which requires that every action
must be prosecuted in the name of the real party in interest. 15

The RTC denied the respondents motion to dismiss. It ruled that, save for
the grounds for dismissal which may be raised at any stage of the
proceedings, a motion to dismiss based on the grounds invoked by the
respondents may only be filed within the time for, but before, the filing of
their answer to the amended complaint. Thus, even granting that the
defenses invoked by the respondents are meritorious, their motion was
filed out of time as it was filed only after the conclusion of the pre-trial
conference. Furthermore, the rule on substitution of parties only applies
when the parties to the case die, which is not what happened in the
present case.17
The RTC likewise denied the respondents motion for reconsideration. 18
The respondents filed a petition for certiorari under Rule 65 of the Rules of
Court with the CA, invoking grave abuse of discretion in the denial of their
motion to dismiss. They argued that the deceased spouses Luciano and
Lourdes, not the petitioners, were the real parties in interest. Thus, the
petitioners violated Section 16, Rule 3 of the Rules of Court on the
substitution of parties.19
Furthermore, they seasonably moved for the dismissal of the case 20 and
the RTC never acquired jurisdiction over the persons of the petitioners as
heirs of Lourdes and Luciano.21
THE CA RULING

The CA granted the petition and ruled that the RTC committed grave
abuse of discretion as the petitioners filed the complaint and the amended
complaint as attorneys-in-fact of their parents. As such, they are not the
real parties in interest and cannot bring an action in their own names; thus,
the complaint should be dismissed 22pursuant to the Courts ruling in
Casimiro v. Roque and Gonzales.23
Neither are the petitioners suing as heirs of their deceased parents.
Pursuant to jurisprudence,24 the petitioners should first be declared as
heirs before they can be considered as the real parties in interest. This
cannot be done in the present ordinary civil case but in a special
proceeding for that purpose. The CA agreed with the respondents that they
alleged the following issues as affirmative defenses in their answer: 1) the
petitioners are not the real parties in interest; and 2) that they had no legal
right to institute the action in behalf of their parents. 25
That the motion to dismiss was filed after the period to file an answer has
lapsed is of no moment. The RTC judge entertained it and passed upon its
merit. He was correct in doing so because in the pre-trial order, one of the
submitted issues was whether the case must be dismissed for failure to
comply with the requirements of the Rules of Court. Furthermore, in
Dabuco v. Court of Appeals, 26 the Court held that the ground of lack of
cause of action may be raised in a motion to dismiss at anytime. 27
The CA further ruled that, in denying the motion to dismiss, the RTC judge
acted contrary to established rules and jurisprudence which may be
questioned via a petition for certiorari. The phrase "grave abuse of
discretion" which was traditionally confined to "capricious and whimsical
exercise of judgment" has been expanded to include any action done
"contrary to the Constitution, the law or jurisprudence[.]" 28
THE PARTIES ARGUMENTS

The petitioners filed the present petition and argued that, first, in annulling
the interlocutory orders, the CA unjustly allowed the motion to dismiss
which did not conform to the rules.29
Specifically, the motion was not filed within the time for, but before the filing
of, the answer to the amended complaint, nor were the grounds raised in
the answer. Citing Section 1, Rule 9 of the Rules of Court, the respondents
are deemed to have waived these grounds, as correctly held by the RTC. 30
Second, even if there is non-joinder and misjoinder of parties or that the
suit is not brought in the name of the real party in interest, the remedy is
not outright dismissal of the complaint, but its amendment to include the
real parties in interest.31
Third, the petitioners sued in their own right because they have actual and
substantial interest in the subject matter of the action as heirs or coowners, pursuant to Section 2, Rule 3 of the Rules of Court. 32
Their declaration as heirs in a special proceeding is not necessary,
pursuant to the Courts ruling in Marabilles, et al. v. Quito. 33
Finally, the sworn declaration is evidentiary in nature which remains to be
appreciated after the trial is completed.34
The respondents reiterated in their comment that the petitioners are not
the real parties in interest.35
They likewise argued that they moved for the dismissal of the case during
the pre-trial conference due to the petitioners procedural lapse in refusing
to comply with a condition precedent, which is, to substitute the heirs as
plaintiffs. Besides, an administrator of the estates of Luciano and Lourdes
has already been appointed.36

The respondents also argued that the grounds invoked in their motion to
dismiss were timely raised, pursuant to Section 2, paragraphs g and i,
Rule 18 of the Rules of Court. Specifically, the nature and purposes of the
pre-trial include, among others, the dismissal of the action, should a valid
ground therefor be found to exist; and such other matters as may aid in the
prompt disposition of the action. Finally, the special civil action of certiorari
was the proper remedy in assailing the order of the RTC. 37

petitioners should first be declared as heirs. A review of the 1940, 1964

and the present 1997 Rules of Court shows that the fundamentals of the
ground for dismissal based on "failure to state a cause of action" have
drastically changed over time. A historical background of this particular
ground is in order to preclude any confusion or misapplication of
jurisprudence decided prior to the effectivity of the present Rules of Court.
The 1940 Rules of Court provides under Section 10, Rule 9 that:

THE COURTS RULING

Section 10. Waiver of defenses- Defenses and objections not pleaded

either in a motion to dismiss or in the answer are deemed waived; except
the defense of failure to state a cause of action, which may be alleged in a
later pleading, if one is permitted, or by motion for judgment on the
pleadings, or at the trial on the merits; but in the last instance, the motion
shall be disposed of as provided in section 5 of Rule 17 in the light of any
evidence which may have been received. Whenever it appears that the
court has no jurisdiction over the subject-matter, it shall dismiss the action.
[underscoring supplied]

We find the petition meritorious.

Petition for certiorari under Rule 65 is a proper remedy for a denial of a
motion to dismiss attended by grave abuse of discretion
In Barrazona v. RTC, Branch 61, Baguio City,38 the Court held that while an
order denying a motion to dismiss is interlocutory and non-appealable,
certiorari and prohibition are proper remedies to address an order of denial
made without or in excess of jurisdiction. The writ of certiorari is granted to
keep an inferior court within the bounds of its jurisdiction or to prevent it
from committing grave abuse of discretion amounting to lack or excess of
jurisdiction.
The history and development of the ground "fails to state a cause of
action" in the 1940, 1964 and the present 1997 Rules of Court
Preliminarily, a suit that is not brought in the name of the real party in
interest is dismissible on the ground that the complaint "fails to state a
cause of action."39
Pursuant to jurisprudence,40 this is also the ground invoked when the
respondents alleged that the petitioners are not the real parties in interest
because: 1) the petitioners should not have filed the case in their own
names, being merely attorneys-in-fact of their mother; and 2) the

This provision was essentially reproduced in Section 2, Rule 9 of the 1964

Rules of Court, and we quote:
Section 2. Defenses and objections not pleaded deemed waived.
Defenses and objections not pleaded either in a motion to dismiss or in the
answer are deemed waived; except the failure to state a cause of action
which may be alleged in a later pleading, if one is permitted, or by motion
for judgment on the pleadings, or at the trial on the merits; but in the last
instance, the motion shall be disposed of as provided in section 5 of Rule
10 in the light of any evidence which may have been received. Whenever it
appears that the court has no jurisdiction over the subject-matter, it shall
dismiss the action. [underscoring supplied]
Under the present Rules of Court, this provision was reflected in Section 1,
Rule 9, and we quote:

Section 1. Defenses and objections not pleaded. Defenses and

objections not pleaded either in a motion to dismiss or in the answer are
deemed waived. However, when it appears from the pleadings or the
evidence on record that the court has no jurisdiction over the subject
matter, that there is another action pending between the same parties for
the same cause, or that the action is barred by a prior judgment or by
statute of limitations, the court shall dismiss the claim. [underscoring
supplied]
Notably, in the present rules, there was a deletion of the ground of "failure
to state a cause of action" from the list of those which may be waived if not
invoked either in a motion to dismiss or in the answer. Another novelty
introduced by the present Rules, which was totally absent in its two
precedents, is the addition of the period of time within which a motion to
dismiss should be filed as provided under Section 1, Rule 16 and we
quote:
Section 1. Grounds. Within the time for but before filing the answer to
the complaint or pleading asserting a claim, a motion to dismiss may be
made on any of the following grounds: xxx [underscoring supplied]
All these considerations point to the legal reality that the new Rules
effectively restricted the dismissal of complaints in general, especially
when what is being invoked is the ground of "failure to state a cause of
action." Thus, jurisprudence governed by the 1940 and 1964 Rules of
Court to the effect that the ground for dismissal based on failure to state a
cause of action may be raised anytime during the proceedings, is already
inapplicable to cases already governed by the present Rules of Court
which took effect on July 1, 1997. As the rule now stands, the failure to
invoke this ground in a motion to dismiss or in the answer would result in
its waiver. According to Oscar M. Herrera, 41 the reason for the deletion is
that failure to state a cause of action may be cured under Section 5, Rule
10 and we quote:

Section 5. Amendment to conform to or authorize presentation of

evidence. When issues not raised by the pleadings are tried with the
express or implied consent of the parties they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any party
at any time, even after judgment; but failure to amend does not effect the
result of the trial of these issues. If evidence is objected to at the trial on
the ground that it is not within the issues made by the pleadings, the court
may allow the pleadings to be amended and shall do so with liberality if the
presentation of the merits of the action and the ends of substantial justice
will be subserved thereby. The court may grant a continuance to enable
the amendment to be made.
With this clarification, we now proceed to the substantial issues of the
petition.
The motion to dismiss in the present case based on failure to state a
cause of action was not timely filed and was thus waived
Applying Rule 16 of the Rules of Court which provides for the grounds for
the dismissal of a civil case, the respondents grounds for dismissal fall
under Section 1(g) and (j), Rule 16 of the Rules of Court, particularly,
failure to state a cause of action and failure to comply with a condition
precedent (substitution of parties), respectively. The first paragraph of
Section 1,42
Rule 16 of the Rules of Court provides for the period within which to file a
motion to dismiss under the grounds enumerated. Specifically, the motion
should be filed within the time for, but before the filing of, the answer to the
complaint or pleading asserting a claim. Equally important to this provision
is Section 1,43

Rule 9 of the Rules of Court which states that defenses and objections not
pleaded either in a motion to dismiss or in the answer are deemed waived,
except for the following grounds: 1) the court has no jurisdiction over the
subject matter; 2) litis pendencia; 3) res judicata; and 4) prescription.
Therefore, the grounds not falling under these four exceptions may be
considered as waived in the event that they are not timely invoked. As the
respondents motion to dismiss was based on the grounds which should
be timely invoked, material to the resolution of this case is the period within
which they were raised. Both the RTC and the CA found that the motion to
dismiss was only filed after the filing of the answer and after the pre-trial
had been concluded. Because there was no motion to dismiss before the
filing of the answer, the respondents should then have at least raised these
grounds as affirmative defenses in their answer. The RTCs assailed
orders did not touch on this particular issue but the CA ruled that the
respondents did, while the petitioners insist that the respondents did not. In
the present petition, the petitioners reiterate that there was a blatant nonobservance of the rules when the respondents did not amend their answer
to invoke the grounds for dismissal which were raised only during the pretrial and, subsequently, in the subject motion to dismiss. 44
The divergent findings of the CA and the petitioners arguments are
essentially factual issues. Time and again, we have held that the
jurisdiction of the Court in a petition for review on certiorari under Rule 45,
such as the present case, is limited only to questions of law, save for
certain exceptions. One of these is attendant herein, which is, when the
findings are conclusions without citation of specific evidence on which they
are based.45
In the petition filed with the CA, the respondents made a passing allegation
that, as affirmative defenses in their answer, they raised the issue that the
petitioners are not the real parties in interest.46
On the other hand, the petitioners consistently argued otherwise in their
opposition47 to the motion to dismiss, and in their comment 48 and in their

memorandum49 on the respondents petition before the CA. Our

examination of the records shows that the CA had no basis in its finding
that the respondents alleged the grounds as affirmative defenses in their
answer. The respondents merely stated in their petition for certiorari that
they alleged the subject grounds in their answer. However, nowhere in the
petition did they support this allegation; they did not even attach a copy of
their answer to the petition. It is basic that the respondents had the duty to
prove by substantial evidence their positive assertions. Considering that
the petition for certiorari is an original and not an appellate action, the CA
had no records of the RTCs proceedings upon which the CA could refer to
in order to validate the respondents claim. Clearly, other than the
respondents bare allegations, the CA had no basis to rule, without proof,
that the respondents alleged the grounds for dismissal as affirmative
defenses in the answer. The respondents, as the parties with the burden of
proving that they timely raised their grounds for dismissal, could have at
least attached a copy of their answer to the petition. This simple task they
failed to do. That the respondents did not allege in their answer the subject
grounds is made more apparent through their argument, both in their
motion to dismiss50 and in their comment,51 that it was only during the pretrial stage that they verbally manifested and invited the attention of the
lower court on their grounds for dismissal. In order to justify such late
invocation, they heavily relied on Section 2(g) and (i), Rule 18 52 of the
Rules of Court that the nature and purpose of the pre-trial include, among
others, the propriety of dismissing the action should there be a valid
ground therefor and matters which may aid in the prompt disposition of the
action. The respondents are not correct. The rules are clear and require no
interpretation. Pursuant to Section 1, Rule 9 of the Rules of Court, a
motion to dismiss based on the grounds invoked by the respondents may
be waived if not raised in a motion to dismiss or alleged in their answer. On
the other hand, "the pre-trial is primarily intended to make certain that all
issues necessary to the disposition of a case are properly raised. The
purpose is to obviate the element of surprise, hence, the parties are
expected to disclose at the pre-trial conference all issues of law and fact

which they intend to raise at the trial, except such as may involve
privileged or impeaching matter."53
The issues submitted during the pre-trial are thus the issues that would
govern the trial proper. The dismissal of the case based on the grounds
invoked by the respondents are specifically covered by Rule 16 and Rule 9
of the Rules of Court which set a period when they should be raised;
otherwise, they are deemed waived.
The Dabuco ruling is inapplicable in the present case; the ground for
dismissal "failure to state a cause of action" distinguished from "lack of
cause of action"
To justify the belated filing of the motion to dismiss, the CA reasoned out
that the ground for dismissal of "lack of cause of action" may be raised at
any time during the proceedings, pursuant to Dabuco v. Court of Appeals. 54
This is an erroneous interpretation and application of Dabuco as will be
explained below.
First, in Dabuco, the grounds for dismissal were raised as affirmative
defenses in the answer which is in stark contrast to the present case.
Second, in Dabuco, the Court distinguished between the dismissal of the
complaint for "failure to state a cause of action" and "lack of cause of
action." The Court emphasized that in a dismissal of action for lack of
cause of action, "questions of fact are involved, [therefore,] courts hesitate
to declare a plaintiff as lacking in cause of action. Such declaration is
postponed until the insufficiency of cause is apparent from a
preponderance of evidence.
Usually, this is done only after the parties have been given the opportunity
to present all relevant evidence on such questions of fact." 55

In fact, in Dabuco, the Court held that even the preliminary hearing on the
propriety of lifting the restraining order was declared insufficient for
purposes of dismissing the complaint for lack of cause of action. This is so
because the issues of fact had not yet been adequately ventilated at that
preliminary stage. For these reasons, the Court declared in Dabuco that
the dismissal by the trial court of the complaint was premature. In the case
of Macaslang v. Zamora,56 the Court noted that the incorrect appreciation
by both the RTC and the CA of the distinction between the dismissal of an
action, based on "failure to state a cause of action" and "lack of cause of
action," prevented it from properly deciding the case, and we quote:
Failure to state a cause of action and lack of cause of action are really
different from each other. On the one hand, failure to state a cause of
action refers to the insufficiency of the pleading, and is a ground for
dismissal under Rule 16 of the Rules of Court. On the other hand, lack of
cause [of] action refers to a situation where the evidence does not prove
the cause of action alleged in the pleading. Justice Regalado, a
recognized commentator on remedial law, has explained the distinction:
xxx What is contemplated, therefore, is a failure to state a cause of action
which is provided in Sec. 1(g) of Rule 16. This is a matter of insufficiency
of the pleading. Sec. 5 of Rule 10, which was also included as the last
mode for raising the issue to the court, refers to the situation where the
evidence does not prove a cause of action. This is, therefore, a matter of
insufficiency of evidence. Failure to state a cause of action is different from
failure to prove a cause of action. The remedy in the first is to move for
dismissal of the pleading, while the remedy in the second is to demur to
the evidence, hence reference to Sec. 5 of Rule 10 has been eliminated in
this section. The procedure would consequently be to require the pleading
to state a cause of action, by timely objection to its deficiency; or, at the
trial, to file a demurrer to evidence, if such motion is warranted. [italics
supplied]
Based on this discussion, the Court cannot uphold the dismissal of the
present case based on the grounds invoked by the respondents which

they have waived for failure to invoke them within the period prescribed by
the Rules. The Court cannot also dismiss the case based on "lack of cause
of action" as this would require at least a preponderance of evidence
which is yet to be appreciated by the trial court. Therefore, the RTC did not
commit grave abuse of discretion in issuing the assailed orders denying
the respondents motion to dismiss and motion for reconsideration. The
Court shall not resolve the merits of the respondents grounds for dismissal
which are considered as waived.
Other heirs of the spouses Pacaa to be impleaded in the case.

It should be emphasized that insofar as the petitioners are concerned, the

respondents have waived the dismissal of the complaint based on the
ground of failure to state a cause of action because the petitioners are not
the real parties in interest. At this juncture, a distinction between a real
party in interest and an indispensable party is in order. In Carandang v.
Heirs of de Guzman, et al., 57 the Court clarified these two concepts and
held that "[a] real party in interest is the party who stands to be benefited
or injured by the judgment of the suit, or the party entitled to the avails of
the suit. On the other hand, an indispensable party is a party in interest
without whom no final determination can be had of an action, in contrast to
a necessary party, which is one who is not indispensable but who ought to
be joined as a party if complete relief is to be accorded as to those already
parties, or for a complete determination or settlement of the claim subject
of the action. xxx If a suit is not brought in the name of or against the real
party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action. However, the dismissal on this ground
entails an examination of whether the parties presently pleaded are
interested in the outcome of the litigation, and not whether all persons
interested in such outcome are actually pleaded. The latter query is
relevant in discussions concerning indispensable and necessary parties,
but not in discussions concerning real parties in interest. Both
indispensable and necessary parties are considered as real parties in
interest, since both classes of parties stand to be benefited or injured by
the judgment of the suit."
At the inception of the present case, both the spouses Pacaa were not
impleaded as parties-plaintiffs. The Court notes, however, that they are
indispensable parties to the case as the alleged owners of Rovila Water
Supply. Without their inclusion as parties, there can be no final
determination of the present case. They possess such an interest in the
controversy that a final decree would necessarily affect their rights, so that
the courts cannot proceed without their presence. Their interest in the
subject matter of the suit and in the relief sought is inextricably intertwined
with that of the other parties.58

Jurisprudence on the procedural consequence of the inclusion or noninclusion of an indispensable party is divided in our jurisdiction. Due to the
non-inclusion of indispensable parties, the Court dismissed the case in
Lucman v. Malawi, et al.59 and Go v. Distinction Properties Development
Construction, Inc.,60 while in Casals, et al. v. Tayud Golf and Country Club
et al.,61 the Court annulled the judgment which was rendered without the
inclusion of the indispensable parties. In Arcelona et al. v. Court of
Appeals62 and Bulawan v. Aquende,63 and Metropolitan Bank & Trust
Company v. Alejo et al. 64 the Court ruled that the burden to implead or
order the impleading of an indispensable party rests on the plaintiff and on
the trial court, respectively. Thus, the non-inclusion of the indispensable
parties, despite notice of this infirmity, resulted in the annulment of these
cases. In Plasabas, et al. v. Court of Appeals, et al., 65 the Court held that
the trial court and the CA committed reversible error when they summarily
dismissed the case, after both parties had rested their cases following a
protracted trial, on the sole ground of failure to implead indispensable
parties. Non-joinder of indispensable parties is not a ground for the
dismissal of an action. The remedy is to implead the non-party claimed to
be indispensable. However, in the cases of Quilatan, et al. v. Heirs of
Quilatan, et al.66 and Lagunilla, et al. v. Monis, et al., 67 the Court remanded
the case to the RTC for the impleading of indispensable parties. On the
other hand, in Lotte Phil. Co., Inc. v. Dela Cruz, 68PepsiCo, Inc. v. Emerald
Pizza, 69 and Valdez Tallorin, v. Heirs of Tarona, et al., 70 the Court directly
ordered that the indispensable parties be impleaded. Mindful of the
differing views of the Court as regards the legal effects of the non-inclusion
of indispensable parties, the Court clarified in Republic of the Philippines v.
Sandiganbayan, et al.,71 that the failure to implead indispensable parties is
a curable error and the foreign origin of our present rules on indispensable
parties permitted this corrective measure. This cited case held:
Even in those cases where it might reasonably be argued that the failure of
the Government to implead the sequestered corporations as defendants is
indeed a procedural aberration xxx, slight reflection would nevertheless
lead to the conclusion that the defect is not fatal, but one correctible under

applicable adjective rules e.g., Section 10, Rule 5 of the Rules of Court
[specifying the remedy of amendment during trial to authorize or to
conform to the evidence]; Section 1, Rule 20 [governing amendments
before trial], in relation to the rule respecting omission of so-called
necessary or indispensable parties, set out in Section 11, Rule 3 of the
Rules of Court. It is relevant in this context to advert to the old familiar
doctrines that the omission to implead such parties "is a mere technical
defect which can be cured at any stage of the proceedings even after
judgment"; and that, particularly in the case of indispensable parties, since
their presence and participation is essential to the very life of the action, for
without them no judgment may be rendered, amendments of the complaint
in order to implead them should be freely allowed, even on appeal, in fact
even after rendition of judgment by this Court, where it appears that the
complaint otherwise indicates their identity and character as such
indispensable parties." Although there are decided cases wherein the nonjoinder of indispensable parties in fact led to the dismissal of the suit or the
annulment of judgment, such cases do not jibe with the matter at hand.
The better view is that non-joinder is not a ground to dismiss the suit or
annul the judgment. The rule on joinder of indispensable parties is founded
on equity. And the spirit of the law is reflected in Section 11, Rule 3 of the
1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the
ground of non-joinder or misjoinder of parties and allows the amendment
of the complaint at any stage of the proceedings, through motion or on
order of the court on its own initiative. Likewise, jurisprudence on the
Federal Rules of Procedure, from which our Section 7, Rule 3 on
indispensable parties was copied, allows the joinder of indispensable
parties even after judgment has been entered if such is needed to afford
the moving party full relief. Mere delay in filing the joinder motion does not
necessarily result in the waiver of the right as long as the delay is
excusable.
In Galicia, et al. v. Vda. De Mindo, et al., 72 the Court ruled that in line with
its policy of promoting a just and inexpensive disposition of a case, it
allowed the intervention of the indispensable parties instead of dismissing

the complaint. Furthermore, in Commissioner Domingo v. Scheer,73 the

Court cited Salvador, et al. v. Court of Appeals, et al. 74 and held that the
Court has full powers, apart from that power and authority which are
inherent, to amend the processes, pleadings, proceedings and decisions
by substituting as party-plaintiff the real party in interest. The Court has the
power to avoid delay in the disposition of this case, and to order its
amendment in order to implead an indispensable party. With these
discussions as premises, the Court is of the view that the proper remedy in
the present case is to implead the indispensable parties especially when
their non-inclusion is merely a technical defect. To do so would serve
proper administration of justice and prevent further delay and multiplicity of
suits. Pursuant to Section 9, Rule 3 of the Rules of Court, parties may be
added by order of the court on motion of the party or on its own initiative at
any stage of the action. If the plaintiff refuses to implead an indispensable
party despite the order of the court, then the court may dismiss the
complaint for the plaintiffs failure to comply with a lawful court order.75
The operative act that would lead to the dismissal of the case would be the
refusal to comply with the directive of the court for the joinder of an
indispensable party to the case.76
Obviously, in the present case, the deceased Pacaas can no longer be
included in the complaint as indispensable parties because of their death
during the pendency of the case. Upon their death, however, their
ownership and rights over their properties were transmitted to their heirs,
including herein petitioners, pursuant to Article 774 77 in relation with Article
77778 of the Civil Code.
In Orbeta, et al. v. Sendiong, 79 the Court acknowledged that the heirs,
whose hereditary rights are to be affected by the case, are deemed
indispensable parties who should have been impleaded by the trial court.
Therefore, to obviate further delay in the proceedings of the present case
and given the Courts authority to order the inclusion of an indispensable
party at any stage of the proceedings, the heirs of the spouses Pacaa,

except the petirioners who are already parties to the case are Lagrimas
Pacaa-Gonzalez who intervened in the case, are hereby ordered
impleaded as parties-plaintiffs.
WHEREFORE, the petition is GRANTED. The decision dated January 27,
2005 and the resolution date June 6, 2005 of the Court of Appeals in CAG.R. SP No. 71551 are REVERSED and SET ASIDE. The heirs of the
spouses Luciano and Lourdes Pacaa, except herein petitioner and
Lagrimas Pacaa-Gonzalez, are ORDERED IMPLEADED as parties
plaintiffs and the RTC is directed tp proceed with the trial of the case with
DISPATCH.
SO ORDERED.

The factual and procedural antecedents of the case are as follows:

Republic
SUPREME
Manila

of

the

Philippines
COURT

THIRD DIVISION
G.R. No. 186610

July 29, 2013

POLICE
SENIOR
SUPERINTENDENT
DIMAPINTO
MACAWADIB, Petitioner,
vs.
THE
PHILIPPINE
NATIONAL POLICE
DIRECTORATE
FOR
PERSONNEL AND RECORDS MANAGEMENT,Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to nullify and set aside the Decision 1 and
Resolution2 of the Court of Appeals (CA), dated December 17, 2008 and
February 25, 2009, respectively, in CA-G.R. SP No. 02120-MIN. The
assailed CA judgment nullified the December 4, 2001 Decision 3 of the
Regional Trial Court (RTC) of Marawi City, Branch 8, in Spl. Proc. No. 78201, while the questioned CA Resolution denied petitioner's Motion for
Reconsideration.

Petitioner was a police officer with the rank of Police Senior

Superintendent. On July 30, 2001, pursuant to the provisions of Section 39
of Republic Act 6975, otherwise known as the "Department of the Interior
and Local Government Act of 1990," the Chief of Directorial Staff of the
Philippine National Police (PNP) issued General Order No. 1168,
enumerating the names of commissioned officers who were subject to
compulsory retirement on various dates in the month of January 2002 by
virtue of their attainment of the compulsory retirement age of 56. Among
the names included in the said Order was that of petitioner, who was
supposed to retire on January 11, 2002, as the files of the PNP Records
Management Division indicate that he was born on January 11, 1946.
On September 3, 2001, petitioner filed an application for late registration of
his birth with the Municipal Civil Registrar's Office of Mulondo, Lanao del
Sur. In the said application, petitioner swore under oath that he was born
on January 11, 1956. The application was, subsequently, approved.
On October 15, 2001, petitioner filed with the RTC of Marawi City, Branch
8, a Petition for Correction of Entry in the Public Service Records
Regarding the Birth Date. Pertinent portions of his allegations are as
follows:
xxxx
1. That herein petitioner is 45 years old, married, Filipino citizen,
PNP (Police Superintendent) by occupation and resident of Camp
Bagong Amai, Pakpak, Marawi City. x x x;
2. That on January 11, 1956, herein petitioner was born in
Mulondo, Lanao del Sur, x x x, copy of his live birth certificate is
attached and marked as Annex "A", for ready reference;

3. That when petitioner herein joined with (sic) the government

service, particularly the local police force and later on the
Integrated National Police, he honestly entered his birth date as
January 11, 1946, while in his (sic) Government Service Insurance
System (GSIS, in short) and National Police Commission, he
erroneously entered his birth date as January 11, 1946, which
entry are honestly based on estimation, as Muslim (sic) in the
south do not register their marriages and births before;

1. Ordering the Chief, Records Management, PNP NHQ, Camp

Crame, Quezon City, to make a correction upon the birth date of
herein petitioner to January 11, 1956;

4. That herein petitioner has correctly entered his true and correct
birth date, January 11, 1956, in his Service Record at the National
Headquarters, Philippine National Police, Directorate for
Personnel and Records Management, Camp Crame, Quezon City,
copy of which is attached and marked as Annex "B", x x x;

3. Ordering the Chief, Records of the Civil Service Commission,

Manila and all other offices concern (sic), to make the necessary
correction in the Public Records of herein petitioner to January 11,
1956.

2. Ordering the Director, Personnel and Records Management

Service, NAPOLCOM, Makati City, to make correction upon the
birth date of herein petitioner from January 11, 1946 to January 11,
1956; and

SO ORDERED.5
5. That herein petitioner is submitting Joint Affidavit of two (2)
disinterested person (sic) x x x;
6. That this petition is not intended to defraud anybody but to
establish the true and correct birth date of herein petitioner.
x x x x4
The petition was docketed as Spl. Proc. No. 782-01.
On December 4, 2001, the RTC rendered its Decision, disposing as
follows:
WHEREFORE, judgment is hereby rendered in favor of petitioner
DIMAPINTO BABAI MACAWADIB, to wit:

Subsequently, the RTC issued an Entry of Final Judgment 6 indicating

therein that its December 4, 2001 Decision in Spl. Proc. No. 782-01 has
become final and executory on March 13, 2002.
On January 8, 2008, herein respondent filed a Petition for Annulment of
Judgment with Prayer for the Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction with the CA, seeking to nullify the
above-mentioned Decision of the RTC on the ground that the trial court
failed to acquire jurisdiction over the PNP, "an unimpleaded indispensable
party."7
On December 17, 2008, the CA promulgated its assailed Decision with the
following dispositive portion:
WHEREFORE, finding the instant petition impressed with merit, the same
is hereby GRANTED. The assailed Decision dated December 4, 2001 of
the respondent court in Spl. Proc. No. 782-01 is NULLIFIED and SET

ASIDE. Also, so as to prevent further damage upon the PNP, let a

permanent injunction issue in the meantime, barring the private
respondent Dimapinto Babai Macawadib from continuing and prolonging
his tenure with the PNP beyond the mandatory retirement age of fifty-six
(56) years.
SO ORDERED.8
Petitioner filed a Motion for Reconsideration, 9 but the CA denied it in its
Resolution10 dated February 25, 2009.
Hence, the instant petition with the following Assignment of Errors:
1. THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT PNP-DPRM IS AN INDISPENSABLE PARTY IN
SPECIAL PROCEEDING NO. 782-01 AND THAT THE RTC HAVE
(sic) NOT ACQUIRED JURISDICTION OVER THE PERSON OF
THE PNPDPRM.
2. THE HONORABLE COURT OF APPEALS ERRED IN NOT
DISMISSING CA-G.R. SP NO. 02120-MIN DESPITE THE FACT
THAT THE ASSAILED RTC DECISION DATED DECEMBER 4,
2001 IN SPECIAL PROCEEDING NO. 782-01 HAS LONG
BECOME FINAL AND EXECUTORY AND WAS IN FACT FULLY
AND COMPLETELY EXECUTED AFTER THE PNP-DPRM
CORRECTED THE DATE OF BIRTH OF THE PETITIONER
FROM JANUARY 11, 1946 TO JANUARY 11, 1956.
3. THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING THAT PNP-DPRM IS NOT ESTOPPED FROM
ASSAILING THE VALIDITY OF THE RTC DECISION IN SPECIAL
PROCEEDING NO. 782-01.

4. THE HONORABLE COURT OF APPEALS ERRED IN NOT

DISMISSING CA-G.R. SP NO. 02120-MIN FOR BEING
INSUFFICIENT IN FORM AND SUBSTANCE.11
In his first assigned error, petitioner contends that respondent is not an
indispensable party.1wphi1 The Court is not persuaded. On the contrary,
the Court agrees with the ruling of the CA that it is the integrity and
correctness of the public records in the custody of the PNP, National Police
Commission (NAPOLCOM) and Civil Service Commission (CSC) which
are involved and which would be affected by any decision rendered in the
petition for correction filed by herein petitioner. The aforementioned
government agencies are, thus, required to be made parties to the
proceeding. They are indispensable parties, without whom no final
determination of the case can be had. An indispensable party is defined as
one who has such an interest in the controversy or subject matter that a
final adjudication cannot be made, in his absence, without injuring or
affecting that interest.12 In the fairly recent case of Go v. Distinction
Properties Development and Construction, Inc., 13 the Court had the
occasion to reiterate the principle that:
Under Section 7, Rule 3 of the Rules of Court, "parties in interest without
whom no final determination can be had of an action shall be joined as
plaintiffs or defendants." If there is a failure to implead an indispensable
party, any judgment rendered would have no effectiveness.
It is "precisely when an indispensable party is not before the court (that)
an action should be dismissed. The absence of an indispensable party
renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even to those
present." The purpose of the rules on joinder of indispensable parties is a
complete determination of all issues not only between the parties
themselves, but also as regards other persons who may be affected by the
judgment. A decision valid on its face cannot attain real finality where there
is want of indispensable parties.14

Citing previous authorities, the Court also held in the Go case that:
The general rule with reference to the making of parties in a civil action
requires the joinder of all indispensable parties under any and all
conditions, their presence being a sine qua non of the exercise of judicial
power. (Borlasa v. Polistico, 47 Phil. 345, 348) For this reason, our
Supreme Court has held that when it appears of record that there are other
persons interested in the subject matter of the litigation, who are not made
parties to the action, it is the duty of the court to suspend the trial until such
parties are made either plaintiffs or defendants. (Pobre, et al. v. Blanco, 17
Phil. 156). x x x Where the petition failed to join as party defendant the
person interested in sustaining the proceeding in the court, the same
should be dismissed. x x x When an indispensable party is not before the
court, the action should be dismissed.15
The burden of procuring the presence of all indispensable parties is on the
plaintiff.16
In the instant case, there is a necessity to implead the PNP, NAPOLCOM
and CSC because they stand to be adversely affected by petitioner's
petition which involves substantial and controversial alterations in
petitioner's service records. Moreover, as correctly pointed out by the
Office of the Solicitor General (OSG), if petitioner's service is extended by
ten years, the government, through the PNP, shall be burdened by the
additional salary and benefits that would have to be given to petitioner
during such extension. Thus, aside from the OSG, all other agencies which
may be affected by the change should be notified or represented as the
truth is best ascertained under an adversary system of justice.
As the above-mentioned agencies were not impleaded in this case much
less given notice of the proceedings, the decision of the trial court granting
petitioner's prayer for the correction of entries in his service records, is
void. As mentioned above, the absence of an indispensable party renders

all subsequent actions of the court null and void for want of authority to act,
not only as to the absent parties but even as to those present. 17
On the question of whether or not respondent is estopped from assailing
the decision of the RTC for failure of the OSG, as government
representative, to participate in the proceedings before the trial court or to
file an opposition to petitioner's petition for correction of entries in his
service records, this Court rules that such an apparent oversight has no
bearing on the validity of the appeal which the petitioner filed before the
CA. Neither can the State, as represented by the government, be
considered in estoppel due to the petitioner's seeming acquiescence to the
judgment of the RTC when it initially made corrections to some of
petitioner's records with the PNP. This Court has reiterated time and again
that the absence of opposition from government agencies is of no
controlling significance, because the State cannot be estopped by the
omission, mistake or error of its officials or agents. 18Nor is the Republic
barred from assailing the decision granting the petition for correction of
entries if, on the basis of the law and the evidence on record, such petition
has no merit.19
As to the second and last assigned errors, suffice it to say that considering
that the assailed decision of the RTC is null and void, the same could not
have attained finality. Settled is the rule that a void judgment cannot attain
finality and its execution has no basis in law.20
At this juncture, it may not be amiss to point out that, like the CA, this
Court cannot help but entertain serious doubts on the veracity of
petitioner's claim that he was indeed born in 1956. The late registration of
petitioner's certificate of live birth on September 3, 2001 was made fortyfive (45) years after his supposed birth and a mere 34 days after the PNP's
issuance of its Order for his compulsory retirement. He had all the time to
make such registration but why did he do it only when he was about to
retire?

The Court, likewise, agrees with the observation of the OSG that, if
petitioner was indeed born in 1956, he would have been merely 14 years
old in 1970 when he was appointed as Chief of Police of Mulondo, Lanao
del Sur. This would not have been legally tenable, considering that Section
9 of RA 4864, otherwise known as the Police Act of 1966, provides, among
others, that a person shall not be appointed to a local police agency if he is
less than twenty-three years of age. Moreover, realistically speaking, it
would be difficult to believe that a 14-year old minor would serve as a
police officer, much less a chief of police.
The Court also gives credence to the pronouncement made by the CA
which took judicial notice that in the several hearings of the petition before
the appellate court where the petitioner was present, the CA observed that
"in the several hearings of this petition before Us where the private
respondent was present, he does not really appear to be 52 years old but
his old age of 62."21
It can be argued that petitioner's belatedly registered certificate of live
birth, as a public document, enjoys the presumption of validity. However,
petitioner merely relied on such presumption without presenting any other
convincing or credible evidence to prove that he was really born in 1956.
On the contrary, the specific facts attendant in the case at bar, as well as
the totality of the evidence presented during the hearing of the case in the
court a quo, sufficiently negate the presumption of regularity accorded to
petitioner's belatedly registered birth certificate.
In this regard, it is also apropos to mention that, in cases of correction or
change of information based on belatedly registered birth certificates, the
CSC no longer requires a court order to warrant such correction or change
of information in its records. However, in an apparent move to safeguard
its records, the CSC imposes the submission of additional evidence that
would prove the veracity of the entries in a belatedly registered birth
certificate. Thus, the CSC, in its Memorandum Circular No. 31, dated
November 20, 2001, demands that, aside from the said birth certificate, the

person requesting the correction or change of information must submit

other authenticated supporting documents, such as baptismal certificate,
affidavits of two disinterested witnesses, and "other employment, personal
or school records which would support the entry reflected in the delayed
registered birth certificate and which entry is requested to be reflected in
the records of the Commission as the true and correct entry." In the instant
case, petitioner was only able to submit affidavits of two witnesses, who
were not really proven to be disinterested and whose testimonies were not
even tested in the crucible of cross-examination. On the contrary, the other
pieces of documentary evidence on record, such as his marriage
certificate, and his school and service records, contradict his claims and
show that he was, in fact, born in 1946.
WHEREFORE, the petition for review on certiorari is DENIED. The
Decision dated December 17, 2008 and the Resolution dated February 25,
2009 of the Court of Appeals, in CA-G.R. SP No. 02120-MIN, are hereby
AFFIRMED.
SO ORDERED.

GENESIS INVESTMENT, INC., CEBU JAYA REALTY INC., and

SPOUSES
RHODORA
and
LAMBERT
LIM,Petitioners,
vs.
HEIRS
of
CEFERINO
EBARASABAL,* NAMELY:
ROGELIO
EBARASABAL, SPOUSES LIGAYA E. GULIMLIM AND JOSE
GULIMLIM, SPOUSES VISITACION E. CONEJOS and ELIAS
CONEJOS, BEN TEJERO, POCAS TEJERO, GERTRUDES TEJERO,
BANING HAYO, LACIO EBARASABAL and JULIETA EBARASABAL;
HEIRS OF FLORO EBARASABAL, namely: SOFIA ABELONG, PEPITO
EBARASABAL AND ELPIDIO EBARASABAL; HEIRS OF LEONA
EBARASABAL- APOLLO, namely: SILVESTRA A. MOJELLO and
MARCELINO APOLLO; HEIRS OF PEDRO EBARASABAL, namely:
BONIFACIO EBARASABAL, SERGIO EBARASABAL and JAIME
EBARASABAL; HEIRS of ISIDRO EBARASABAL, NAMELY: SPOUSES
CARLOSA E. NUEVO and FORTUNATO NUEVA;** HEIRS of BENITO
EBARASABAL, namely: PAULO BAGAAN, SPOUSES CATALINA A.
MARIBAO and RENE MARIBAO, VICENTE ABRINICA and PATRON
EBARASABAL; HEIRS of JULIAN EBARASABAL, NAMELY: ALFREDO
BAGAAN, JUAN BAGAAN, AVELINO BAGAAN, FERDINAND
BAGAAN, MAURO BAGAAN, SPOUSES ROWENA B. LASACA and
FRANCISCO LACASA,*** SPOUSES MARIA B. CABAG and EMILIO
CABAG and ESTELITA BAGAAN, all being represented herein by
VICTOR
MOJELLO,
FEDERICO
BAGAAN
and
PAULINO
EBARASABAL, as their Attorneys-in-Fact, Respondents.
Republic
SUPREME
Manila

of

the

DECISION
PERALTA, J.:

THIRD DIVISION
G.R. No. 181622

Philippines
COURT

November 20, 2013

Before the Court is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to reverse and set aside the Decision 1 and
Resolution,2 dated July 11, 2007 and January 10, 2008, respectively, of the
Court of Appeals (CA) in CA-G.R. CEB-SP No. 01017.

The antecedents of the case are as follows:

On November 12, 2003, herein respondents filed against herein petitioners
a Complaint3 for Declaration of Nullity of Documents, Recovery of Shares,
Partition, Damages and Attorney's Fees. The Complaint was filed with the
Regional Trial Court (RTC) of Barili, Cebu.
On August 5, 2004, herein petitioners filed a Motion to
Dismiss4 contending, among others, that the RTC has no jurisdiction to try
the case on the ground that, as the case involves title to or possession of
real property or any interest therein and since the assessed value of the
subject property does not exceed P20,000.00 (the same being
only P11,990.00), the action falls within the jurisdiction of the Municipal
Trial Court (MTC).5
In its Order6 dated September 29, 2004, the RTC granted petitioners'
Motion to Dismiss, holding as follows:

Respondents filed a Motion for Partial Reconsideration, 8 arguing that their

complaint consists of several causes of action, including one for annulment
of documents, which is incapable of pecuniary estimation and, as such,
falls within the jurisdiction of the RTC.9
On March 17, 2005, the RTC issued an Order granting respondents'
Motion for Partial Reconsideration and reversing its earlier Order dated
September 29, 2004. The RTC ruled, thus:
On the issue of want of jurisdiction, this court likewise finds to be with merit
the contention of the movants as indeed the main case or the primary relief
prayed for by the movants is for the declaration of nullity or annulment of
documents which unquestionably is incapable of pecuniary estimation and
thus within the exclusive original jurisdiction of this court to try although in
the process of resolving the controversy, claims of title or possession of
the property in question is involved which together with all the other
remaining reliefs prayed for are but purely incidental to or as a
consequence of the foregoing principal relief sought. 10

xxxx
And while the prayer of the plaintiffs for the annulment of documents
qualified the case as one incapable of pecuniary estimation thus, rendering
it cognizable supposedly by the second level courts but considering that
Republic Act No. 7691 expressly provides to cover "all civil actions" which
phrase understandably is to include those incapable of pecuniary
estimation, like the case at bar, this Court is of the view that said law really
finds application here more so that the same case also "involves title to, or
possession of, real property, or any interest therein." For being so, the
assessed value of the real property involved is determinative of which
court has jurisdiction over the case. And the plaintiffs admitting that the
assessed value of the litigated area is less thanP20,000.00, the
defendants are correct in arguing that the case is beyond this Court's
jurisdiction.7

Petitioners filed a Motion for Reconsideration, 11 but the RTC denied it in its
Order dated June 23, 2005.
Aggrieved, petitioners filed a petition for certiorari with the CA. However,
the CA dismissed the petition via its assailed Decision dated July 11, 2007,
holding that the subject matter of respondents' complaint is incapable of
pecuniary estimation and, therefore, within the jurisdiction of the RTC,
considering that the main purpose in filing the action is to declare null and
void the documents assailed therein.12
Petitioners' Motion for Reconsideration was, subsequently, denied in the
CA Resolution dated January 10, 2008.

Hence, the instant petition for review on certiorari raising the sole issue, to
wit:
Whether or not the Honorable Court of Appeals gravely erred in concluding
that the Regional Trial Court, Branch 60 of Barili, Cebu has jurisdiction
over the instant case when the ALLEGATIONS IN THE COMPLAINT
clearly shows that the main cause of action of the respondents is for the
Recovery of their Title, Interest, and Share over a Parcel of Land, which
has an assessed value of P11,990.00 and thus, within the jurisdiction of
the Municipal Trial Court.13
The petition lacks merit.
For a clearer understanding of the case, this Court, like the CA, finds it
proper to quote pertinent portions of respondents' Complaint, to wit:
xxxx
1. Plaintiffs are all Filipino, of legal age, surviving descendants either as
grandchildren or great grandchildren and heirs and successors-ininterest of deceased Roman Ebarsabal, who died on 07 September 1952 x
xx
xxxx
8. During the lifetime of Roman Ebarsabal, he acquired a parcel of land
situated in Basdaku, Saavedra, Moalboal, Cebu, x x x.
xxxx
with a total assessed value of P2,890.00 x x x. However, for the year 2002,
the property was already having (sic) a total assessed value of P11,990.00
x x x.

9. Upon the death of said Roman Ebarsabal, his eight (8) children named
in par. 7 above, became co-owners of his above-described property by
hereditary succession; taking peaceful possession and enjoyment of the
same in fee simple pro indiviso, paying the real estate taxes thereon and
did not partition the said property among themselves until all of them
likewise died, leaving, however, their respective children and descendants
and/or surviving heirs and successors-in-interest, and who are now the
above-named plaintiffs herein;
10. The plaintiffs who are mostly residents in (sic) Mindanao and Manila,
have just recently uncovered the fact that on 28th January 1997, the
children and descendants of deceased Gil Ebarsabal, namely: Pelagio,
Hipolito, Precela, Fructuosa, Roberta, Florentino, Erlinda, Sebastian,
Cirilo, all surnamed Ebarsabal, have executed among themselves a Deed
of Extrajudicial Settlement with Sale of Roman Ebarsabal's entire property
described above, by virtue of which they allegedly extrajudicially settled
the same and, for P2,600,000.00 although only the sum of P950,000.00
was reflected in their Deed of Sale for reason only known to them, they
sold the whole property to defendants Genesis Investment Inc.
represented by co-defendant Rhodora B. Lim, the wife of Lambert Lim,
without the knowledge, permission and consent of the plaintiffs who are
the vendors' co-owners of the lot in question, x x x.
11. Surprisingly, however, the defendant Genesis managed to have the Tax
Declaration of the property issued in the name of co-defendant Cebu Jaya
Realty Incorporated, a firm which, as already intimated above, is also
owned by Spouses Lambert and Rhodora B. Lim, instead of in the name of
Genesis Investment, Incorporated, which is actually the vendee firm of the
lot in question.
xxxx
Hence, the reason why Cebu Jaya Realty, Incorporated is joined and
impleaded herein as a co-defendant.

12. Without the participation of the plaintiffs who are co-owners of the lot in
question in the proceedings, the aforementioned extrajudicial settlement
with sale cannot be binding upon the plaintiff-co-owners.

WHEREFORE, in view of all the foregoing, it is most respectfully prayed of

this Honorable Court that, after due notice and hearing, judgment shall be
rendered in favor of the plaintiffs, as follows, to wit:

13. Further, where as in this case, the other heirs who are the plaintiffs
herein, did not consent to the sale of their ideal shares in the inherited
property, the sale was only to be limited to the pro indiviso share of the
selling heirs.

1 Declaring as null and void and not binding upon the plaintiffs, the
following documents to wit:
(a) Deed of Extrajudicial Settlement with Sale executed by and
between the heirs of deceased Gil Ebarsabal headed by Pedro
Ebarsabal, and Genesis Investment, Inc., represented by Rhodora
Lim, dated 28th of January, 1997, marked as Annex-A;

xxxx
14. By representation, the plaintiffs, are therefore, by law, entitled to their
rightful shares from the estate of the deceased Roman Ebarsabal
consisting of seven (7) shares that would have been due as the shares of
seven (7) other children of Roman Ebarsabal who are also now deceased,
namely: Ceferino, Floro, Leona, Pedro, Isidoro, Julian and Benito, all
surnamed Ebarsabal.
15. The defendants who had prior knowledge of the existence of the other
heirs who are co-owners of the vendors of the property they purchased,
had unlawfully acted in bad faith in insisting to buy the whole property in
co-ownership, only from the heirs and successors-in-interest of deceased
Gil Ebarsabal, who is only one (1) of the eight (8) children of deceased
Roman Ebarsabal, and without notifying thereof in whatever manner the
plaintiffs who are the heirs and successors-in-interest of the other coowners of the property-in-question; thus, have compelled the plaintiffs
herein to file this instant case in court to protect their interests, x x x.

(b) Memorandum of Agreement executed between Pedro

Ebarsabal and Genesis Investment, Inc., represented by Rhodora
Lim dated 27 January, which document is notarized;
(c) Tax Declaration of Real Property issued to Cebu Jaya Realty,
Inc., marked as Annex-D;
2 Ordering the defendants to make partition of the property in litigation
with the plaintiffs into eight (8) equal shares; to get one (1) share thereof,
which is the only extent of what they allegedly acquired by purchase as
mentioned above, and to transfer, restore or reconvey and deliver to the
plaintiffs, seven (7) shares thereof, as pertaining to and due for the latter
as the heirs and successors-in-interest of the seven (7) brothers and sister
of deceased Gil Ebarsabal already named earlier in this complaint;
xxxx

xxxx
PRAYER

Further reliefs and remedies just and equitable in the premises are also
herein prayed for.
x x x x14

It is true that one of the causes of action of respondents pertains to the

title, possession and interest of each of the contending parties over the
contested property, the assessed value of which falls within the jurisdiction
of the MTC. However, a complete reading of the complaint would readily
show that, based on the nature of the suit, the allegations therein, and the
reliefs prayed for, the action is within the jurisdiction of the RTC.
As stated above, it is clear from the records that respondents' complaint
was for "Declaration of Nullity of Documents, Recovery of Shares,
Partition, Damages and Attorney's Fees." In filing their Complaint with the
RTC, respondents sought to recover ownership and possession of their
shares in the disputed parcel of land by questioning the due execution and
validity of the Deed of Extrajudicial Settlement with Sale as well as the
Memorandum of Agreement entered into by and between some of their coheirs and herein petitioners. Aside from praying that the RTC render
judgment declaring as null and void the said Deed of Extrajudicial
Settlement with Sale and Memorandum of Agreement, respondents
likewise sought the following: (1) nullification of the Tax Declarations
subsequently issued in the name of petitioner Cebu Jaya Realty, Inc.; (2)
partition of the property in litigation; (3) reconveyance of their respective
shares; and (3) payment of moral and exemplary damages, as well as
attorney's fees, plus appearance fees.1wphi1
Clearly, this is a case of joinder of causes of action which comprehends
more than the issue of partition of or recovery of shares or interest over the
real property in question but includes an action for declaration of nullity of
contracts and documents which is incapable of pecuniary estimation. 15
As cited by the CA, this Court, in the case of Singson v. Isabela
Sawmill,16 held that:
In determining whether an action is one the subject matter of which is not
capable of pecuniary estimation, this Court has adopted the criterion of
first ascertaining the nature of the principal action or remedy sought. If it is

primarily for the recovery of a sum of money, the claim is considered

capable of pecuniary estimation, and whether jurisdiction is in the
municipal courts or in the courts of first instance would depend on the
amount of the claim. However, where the basic issue is something other
than the right to recover a sum of money, where the money claim is purely
incidental to, or a consequence of, the principal relief sought, this Court
has considered such actions as cases where the subject of the litigation
may not be estimated in terms of money, and are cognizable by courts of
first instance [now Regional Trial Courts].17
This rule was reiterated in Russell v. Vestil 18 and Social Security System v.
Atlantic Gulf and Pacific Company of Manila Inc.19
Contrary to petitioners contention, the principal relief sought by petitioners
is the nullification of the subject Extrajudicial Settlement with Sale entered
into by and between some of their co-heirs and respondents, insofar as
their individual shares in the subject property are concerned. Thus, the
recovery of their undivided shares or interest over the disputed lot, which
were included in the sale, simply becomes a necessary consequence if the
above deed is nullified. Hence, since the principal action sought in
respondents Complaint is something other than the recovery of a sum of
money, the action is incapable of pecuniary estimation and, thus,
cognizable by the RTC.20 Well entrenched is the rule that jurisdiction over
the subject matter of a case is conferred by law and is determined by the
allegations in the complaint and the character of the relief sought,
irrespective of whether the party is entitled to all or some of the claims
asserted.21
Moreover, it is provided under Section 5 (c), Rule 2 of the Rules of Court
that where the causes of action are between the same parties but pertain
to different venues or jurisdictions, the joinder may be allowed in the RTC
provided one of the causes of action falls within the jurisdiction of said
court and the venue lies therein. Thus, as shown above, respondents
complaint clearly falls within the jurisdiction of the RTC.

WHEREFORE, the petition is DENIED. The Decision and Resolution dated

July 11, 2007 and January 10, 2008, respectively, of the Court of Appeals
in CA-G.R. CEB-SP No. 01017 are AFFIRMED.

SO ORDERED.