CIVIL PROCEDURE

G.R. No. 124166 November 16, 1999 being purchased. Pending further investigation, Guianan was preventively
suspended together with two (2) other MCO managers.
BENGUET CORPORATION, petitioner,
vs. In a letter dated 5 August 1983 BENGUET informed Guianan of his
NATIONAL LABOR RELATIONS COMMISSION and FELIZARDO A. termination from employment effective 7 August 1983 for breach of trust
GUIANAN, respondent. and confidence of the company due to gross negligence and misconduct. An
investigating committee conducted a formal inquiry and finding private
respondents explanations unsatisfactory, he was formally dismissed on 9
November 1983. Two (2) other managers involved in the alleged anomaly
BELLOSILLO, J.: were similarly dismissed.

On grave abuse of discretion amounting to lack or excess of jurisdiction
BENGUET CORPORATION assails the Decision of public respondent National
Labor Relations Commission (NLRC) for declaring, in complete disregard of
petitioner's evidence, that private respondent was illegally dismissed. 1
Private respondent Felizardo A. Guianan started working with BENGUET way
back in 1963 as a "bodegero" in its Ungay-Malobago Project in Rapu-Rapu,
Albay. Sometime in 1966 he was transferred to the companys Negros Sulphur
Project in Taytay, Negros Oriental. He was later promoted to supervisor. In 1973
he was again transferred to Masinloc Chromite Operation (MCO) in Coto,
Masinloc, Zambales, where he served in various capacities from assistant
warehouse supervisor to manager of the Materials Group until his termination
in 1983.
In June 1983 BENGUET allegedly received an anonymous letter imputing,
among others, "extensive graft and corruption, dishonest and poor management
practices at the MCO involving materials which had been costing the company
millions of pesos." 2 The writer implicated private respondent Guianan as one of
the alleged perpetrators of the anomalies but cautiously stated that he/she had, as
yet, no proof or evidence to substantiate the accusations.
BENGUET constituted an audit committee to verify the allegations in the
anonymous letter. Based on its initial findings, the committee reported that a
substantial number of purchased spare parts withdrawn from the warehouse was
either secondhand, defective and/or off-specification although there was no
proof to support the claim that high-valued parts previously disposed of were
AL Ilagan-Malipol, AB, MD
Sometime in March 1984 BENGUET initiated a criminal case for estafa
against Guianan before the Office of the Provincial Fiscal of Zambales but
the case was dismissed after preliminary investigation. BENGUET appealed
the case to the Department of Justice by way of petition for review but it
was likewise dismissed.
On 9 October 1986 Guianan filed a complaint for illegal dismissal, illegal
suspension, reinstatement and damages against BENGUET before the
Regional Arbitration Branch III. For failure of private respondent to attend
several conferences the case was dismissed without prejudice on 30 June
1988.
On 13 January 1989 the complaint was revived before the Office of Labor
Arbiter Ricardo C. Nora. In his decision dated 30 July 1992 the Labor
Arbiter found that Guianan was not given due process when he was
immediately discharged merely on the basis of an anonymous letter; that he
was investigated twenty-two (22) days after dismissal probably as an
afterthought; and was again served with his termination papers for the
second time on 9 November 1983. The dismissal of Guianan, in the opinion
of the Labor Arbiter, was illegal because it was pre-planned, premeditated
and smacked of utter bad faith. Moreover, there was no showing that he had
a hand in the purchase of the off-specification materials since his principal
functions were confined to merely the requisitioning of spare parts as
ordered by the end-user departments. In other words, the anomalies imputed
to him could not be ascribed to him but to the end-user departments. 3
1
CIVIL PROCEDURE
Ruling out reinstatement because of Guianan's age he was already fifty-nine
(59) in 1989 the Labor Arbiter ordered BENGUET to pay private respondent
P300,000.00 as separation pay and P540,000.00 as back wages for three (3)
years. BENGUET was also ordered to pay the dismissed employee P250,000.00
as moral damages, P125,000.00 as exemplary damages plus P121,500.00 for
attorney's fees.
On appeal the NLRC held that while it concurred with the finding of the Labor The Labor Arbiter convincingly explained in his decision the principal
Arbiter that Guianan was illegally dismissed it modified the appealed decision functions of private respondent thus 11
by deleting the awards for moral and exemplary damages and attorney's fees. 4
BENGUET now comes to this Court assailing the Decision of the NLRC on the
ground that it completely disregarded the evidence when it ruled that the
dismissal of Guianan was illegal.
We are not inclined to arrive at a different conclusion. Findings of fact of quasi-
judicial agencies like the NLRC are generally accorded not only respect but at
5
times finality if such are supported by substantial evidence. As found by the
Labor Arbiter, Guianan was dismissed on the basis of an anonymous letter. He
was not given any opportunity to confront the charges mentioned therein prior to
6 7
his dismissal. In a letter dated 5 August 1983 he was informed by BENGUET
through AVP Amado Lagdameo that effective 7 August 1983 his employment
was being terminated.
On 29 August 1983, i.e., twenty-two (22) days after, an investigating committee
conducted a probe on the matter resulting in the finding that private respondent
was responsible for the anomalies adverted to in the anonymous letter.
Consequently, he was once again dismissed on 9 November 1983. The He further elucidated that
composition of the fact-finding committee, twenty-two (22) days after Guianan
was first terminated, was obviously an afterthought to give a semblance of
compliance with the 30-day notice requirement provided by law. It was merely a
8
token gesture to cure the obviously defective earlier dismissal on 7 August. The
termination of Guianan was tinged with bad faith on the part of BENGUET. Our
laws as well as this Court have consistently recognized and respected an
employers right to terminate the services of an employee for a just or authorized
cause but this prerogative must be exercised in good faith. 9
AL Ilagan-Malipol, AB, MD
Private respondent Guianan was dismissed for alleged lack of trust and
confidence because of his gross negligence and misconduct in the purchase
at exorbitant prices of useless off-specification and secondhand spare parts
received at the warehouse, later withdrawn, and thereafter scattered and left
for junk in several places in the mine site. 10 In a gargantuan establishment
such as herein petitioner, it is well nigh impossible to repose on a single
individual such a herculean task as what petitioner seems to be suggesting.
It appears that as the Manager in charge of materials at
respondents MCO, the principal functions of the
complainant were confined to merely requisitioning of spare
parts and materials as ordered by the end-user departments.
The department under the complainant maintains and carries
a total of 127,000 line items of spare parts and other
materials. Save for the items usually carried in the warehouse
at MCO in Coto, Masinloc, Zambales, complainant initiates
requisitions only when so requested by the end-user
departments but the actual purchase of said materials and
spare parts are (sic) done by another department the
Purchasing Department based in respondent companys
Head Office situated in Makati, Metro Manila. Complainant
has no hand in the canvassing of prices as well as in the
actual purchases thereof as these functions are reposed in the
Purchasing Department of respondent company.
During trial, the eight (8) pictures were presented to show
that eight (8) line items were received by the Materials
department under complainant which were off-specifications.
The pictures, by the way, were not duly identified by the
photographer, nor was the time and place of the taking
thereof identified, only spoke of eight (8) line items. It is
uncontroverted, however, that there were more than 127,000
of such line items being carried and maintained at the
2
CIVIL PROCEDURE
complainants department. Each of these line items is composed While it is true that loss of trust and confidence is a just cause for
of thousands upon thousands of small and big parts which make it termination, it must not be simulated or concocted but must be supported by
reasonable to provide allowance or margin for human error. Error, substantial evidence. In termination cases, the burden of proof of a just and
in our view, in about eight (8) line items would be reasonably valid cause for dismissing the employee rests upon the employer, and the
ascribed to innocent human error. Furthermore, there was no latters failure to do so inevitably results in a finding that the dismissal is
proof adduced that complainant ever profited from the transaction unjustified. 14 Private respondent had risen from the ranks from a mere
when these off-specification materials were purchased or "bodegero" in 1963 to manager of Materials Department which position he
delivered to his department. The off-specification materials held until his arbitrary dismissal in 1983 an enviable feat indeed
described and depicted in the pictures were still in the company considering that his educational background was minimal. He relied solely
warehouse even up to the time when complainants services were on his unswerving loyalty to the company and dedication to his work to
terminated. And neither was there evidence shown that the same, climb the often tortuous and perilous corporate ladder. He was the recipient
for being off-specification, has no more use to the company. of numerous awards, commendations and promotions from BENGUET
which he had served for two (2) decades. In his entire service to the
Needless to say, the conclusions of the Labor Arbiter sufficiently corroborated company he was never implicated in any irregularity or anomaly; on the
by the evidence on record must be accorded great respect considering that he contrary, his colleagues had consistently recognized his excellent
was in a better position to assess and evaluate the credibility of the parties. As performance. To be dismissed with precipitate haste and uncorroborated
testified to by BENGUET's witnesses, periodic audits on the Materials imputations is an act of serious ingratitude to a man who had spent the most
Department were conducted by internal and external auditors from 1979 to 1983 productive years of his life in the pursuit of the company's goals.
when the anomalies were supposedly committed. But the audits yielded negative
results. 12 Private respondent was illegally dismissed in 1983, i.e., prior to the
effectivity of RA 6715 on 21 March 1989. Therefore, in consonance with
One could only wonder how the perpetrators of these alleged anomalies were the Mercury Drug rule, 15 which was the doctrine applicable prior to RA
able to go on with their nefarious deeds undetected for a number of years. The 6715, the award of back wages shall be limited to three (3) years from the
alleged damage incurred by BENGUET as a result of the reported irregularities date of termination. Again while reinstatement is a relief mandated in illegal
were never confirmed by the SGV auditing firm nor by any independent and dismissal, the same cannot be awarded in instances where it is no longer
disinterested auditor. As correctly pointed out by the Labor Arbiter feasible as in this case where private respondent is already over-aged.
Therefore, separation pay in lieu of reinstatement may be awarded.
Based on the above-described uncontroverted procedure, we find
and so hold that the anomalies alleged to have been committed by WHEREFORE, the assailed Decision of public respondent National Labor
the complainant which principally consisted of and involved the Relations Commission ordering petitioner Benguet Corporation to pay
act of purchasing of alleged off-specification materials and spare private respondent Felizardo A. Guianan back wages in the amount of
parts as well as the act of actually requisitioning thereof which P540,000.00 or the equivalent of his three (3)-year salary and separation pay
are requested and made not by the complainant but by the end- in the amount of P300,000.00 or the equivalent of his twenty (20) months
user departments, were not anomalies that may be ascribed to salary computed at one month salary for every year of service, is
complainant. At most, the anomalies adduced were committed by AFFIRMED.
some other persons either in the purchasing department or in
the end-user departments but not by complainant. 13 SO ORDERED.
AL Ilagan-Malipol, AB, MD 3
CIVIL PROCEDURE
same, however, was returned to the court with the certification of the
G.R. No. L-58781 July 31, 1987 postmaster "Return to sender, Reason moved."

TEOFILO MAGNO, ISIDRO CABATIC, HERMINIO CABATIC, On September 14, 1981, respondent Court of Appeals issued the following
FELICITAS CABATIC, Assisted by her husband, JOSE CARINO, TOMAS Resolution:
MAGNO, ELPIDIO MAGNO, AURORA MAGNO, Assisted by her
husband, ODELON BUGAYONG, NICANOR MAGNO and LOLITA Considering that the copy of Decision dated June 30, 1981 addressed
MAGNO, petitioners, to Atty. Atinidoro B. Sison of 33 B.M.A. Tatalon, Quezon City,
vs. counsel for the appellants was returned unclaimed with the notation
HONORABLE COURT OF APPEALS, GAVINO MAGNO, NICETAS on the envelope "MOVED", the Court Resolved to resend the said
MAGNO, and NAZARIA MAGNO, Assisted by her husband, SIMEON DE copy of the Decision to the appellants themselves at Alaminos,
GUZMAN, respondents. Pangasinan, and the appellants are hereby informed that the fifteen
(15) days period within which to file for reconsideration will be
PARAS, J.: counted from the receipt of the decision herewith attached. (Annex
"5-A" p. 54, Rollo).
This is a special civil action for certiorari seeking to declare void ab initio the
Resolution of respondent Court of Appeals dated September 22, 1981 which A copy of this Resolution was sent to petitioners themselves addressed as
ordered the issuance of an Entry of Judgment in CA-G.R. No. 52655-R. The follows Mr. Teofilo Magno et al., Patricio, Alaminos, Pangasinan. It is
petition also prays for the issuance of a preliminary injunction to temporarily not disputed that this address is the address on record of petitioners. But
maintain the status quo by ordering the provincial sheriff of the province of again the enveloped addressed to them was returned to the court with the
Pangasinan to desist from enforcing the writ of execution issued in Civil Case notation deceased.
No. A-413 pursuant to the said Entry of Judgment.
On September 22, 1981, the respondent court issued its now assailed
Civil Case No. A-413 is an action for Partition of Certain Properties and for Resolution ordering the issuance of the entry of judgment.
Damages, filed by private respondents against petitioners in the Court of First
Instance of Pangasinan, Branch VII thereof. In a Decision * dated October 5, Petitioners' motion for reconsideration was denied hence, they filed the
1972, the lower court ordered the partition of the properties subject of the present petition, which We find to be without merit.
complaint in accordance with the schedule therein appearing. It also ordered the
petitioners to pay jointly and severally unto the private respondents the amount It is well-settled that when a party is represented by counsel, notice should
of P3,000.00 as attorney's fees. be made upon the counsel of record at his given address to which notices of
all kinds emanating from the court should be sent in the absence of a proper
Petitioners appealed to the Court of Appeals which appeal was docketed as CA- and adequate notice to the court of a change of address. (Cubar vs.
G.R. No. 52655-R. On June 30, 1981, the said court promulgated its Mendoza, 120 SCRA 768).lawph!1
Decision** affirming the decision of the lower court.
In the case now before Us, the records show that the notice and copy of the
Notice of the decision was sent to petitioners' counsel Atty. Atinidoro B. Sison at decision of respondent Court of Appeals were sent to petitioners's counsel of
his given mailing address which is 33 B.M.A. Ave., Tatalon, Quezon City. The record Atty. Atinidoro E. Sison at his given mailing address which is 33
AL Ilagan-Malipol, AB, MD 4
CIVIL PROCEDURE
B.M.A. Avenue, Tatalon, Quezon City. The first notice to him by the Postmaster
to claim his mail was on July 9, 1981. The rule is that service of notice becomes
effective at the expiration of the five-day period upon failure of the addresse to
claim his mail within five (5) days from the date of first notice Sec. 8, Rule 13
Rules of Court (Feraren vs. Santos, 113 SCRA 707). Therefore in this case the
service became effective five days after July 9, 1981 which is July 14, 1981. The
decision became final on August 13, 1981. A xerox copy of the said envelope
properly addressed appears on page 52 of the Rollo. This fact is further shown
by the certification issued by the then Acting Clerk of the Court of Appeals,
Atty. Cesar M. Marzan. (p. 51, Rollo). If Atty. Sison moved to another address
without informing the respondent of his change of address the omission or
neglect will not stay the finality of the decision. The notice sent to petitioners
themselves, under the circumstances is not even necessary. (Francisco vs. Puno,
108 SCRA 427). It may be stated though that while petitioners claim that Teofilo
Magno to whom the notice to the petitioners was addressed is already dead, it is
not explained why their present petition before this Court still includes the name
Teofilo Magno. There is no indication in the record that he has been duly
substituted by his legal representative.

The decision in this case having become final on July 29, 1981, there being no
appeal taken therefrom, respondent court committed no error in issuing its
resolution dated September 22, 1981 ordering the issuance of the corresponding
entry of judgment.

WHEREFORE, for lack of merit, this petition is hereby DISMISSED. The

restraining order earlier issued is lifted.

SO ORDERED.

AL Ilagan-Malipol, AB, MD 5
CIVIL PROCEDURE
registered mail; however, the pleading did not contain any written
G.R. No. 132007 August 5, 1998 explanation as to why service was not made personally upon petitioner-
plaintiff, as required by Section 11 of Rule 13 of the 1997 Rules of Civil
SOLAR TEAM ENTERTAINMENT, INC., petitioner, Procedure.
vs.
HON. HELEN BAUTISTA RICA-FORT, in her capacity as Presiding Judge On 11 August 1997, petitioner filed a motion to expunge the "Answer (with
of the Regional Trial Court of Paraaque, Metro Manila (Branch 260), Counterclaims)" and to declare herein private respondents in
TEAM IMAGE ENTERTAINMENT, INC., FELIX S. CO, JEFFREY C. default, 5 alleging therein that the latter did not observe the mandate of the
CAL, and KING CUISIA, respondents. aforementioned Section 11, and that there was:

[A]bsolutely no valid reason why defendant[s] should not

have personally served plaintiff's . . . counsel with [a] copy of
DAVIDE, JR., J.: their answer [as] (t)he office of defendant's (sic) counsel,
Atty. Froilan Cabaltera, is just a stone [sic] throw away from
At issue is whether respondent judge committed grave abuse of discretion the office of [petitioner's] counsel, with an estimate (sic)
amounting to lack or excess of jurisdiction in denying petitioner's motion to distance of about 200 meters more or less.
expunge private respondents' answer with counterclaims on the ground that said
pleading was not served personally; moreover, there was no written explanation Petitioner further alleged that the post office was "about ten (10) times
as to why personal service was not accomplished, as required by Section 11 of farther from the office of Atty. Cabaltera,"
Rule 13 of the 1997 Rules of Civil Procedure.
On 15 August 1997, private respondents filed their opposition 6 to the
The antecedents are not disputed. abovementioned motion, alleging that petitioner's "rigid and inflexible
reliance on the provisions of Section 11, Rule 13 . . . is an adventitious resort
On 10 July 1997, petitioner, as plaintiff, filed before the Regional Trial Court to technicality and is contrary to Section 6 of Rule 3 . . . which admonishes
(RTC) in Paraaque, Metro Manila, a complaint for recovery of possession and that said Rules 'shall be liberally construed in order to promote their
damages with prayer for a writ of replevin 1 against herein private respondents. objective in securing a just, speedy and inexpensive disposition of [e]very
The case was docketed as Civil Case No. 97-0304 and was assigned to Branch action and proceeding;'" and that Section 11, Rule 13 notwithstanding,
260 of said court, presided over by public respondent Judge Helen Bautista- private respondents "religiously complied with [Section 5 of Rule 13] by
Ricafort. personally present[ing] to the clerk of court their said Answer . . . furnishing
a copy thereof to the counsel for [petitioner] by way of registered mail."
Summonses and copies of the complaint were forthwith served on private
respondents. On 25 July 1997, their counsel filed a notice of appearance with On 8 September 1997, public respondent Judge Bautista-Ricafort issued an
urgent ex-parte motion for extension of time to plead, 2 which the court granted order 7 stating that under Section 11 of Rule 13 "it is within the discretion of
in its order of 4 August 1997. 3 the [trial court] whether to consider the pleading as filed or not," and
denying, for lack of merit, petitioner's motion to expunge the "Answer (with
On 8 August 1997, private respondents, as defendants, filed their "Answer (with Counterclaims)" and to declare private respondents in default.
Counterclaims).'' 4 A copy thereof was furnished counsel for petitioner by
AL Ilagan-Malipol, AB, MD 6
CIVIL PROCEDURE
Petitioner immediately moved for reconsideration 8 of the order, but public respondents' clear, admitted and inexcusable violation of Section 11, Rule 13
respondent Judge Bautista-Ricafort denied this motion in her order 9 of 17 of the 1997 Rules of Civil Procedure, in that: (a) the "Answer (with
November 1997. The order justified the denial in this wise: Counterclaims)" was not served personally upon petitioner's counsel despite
the undisputed fact that the offices of private respondents' counsel and that
Sec. 6 [of] Rule 1 of the 1997 Rules of Civil Procedure ordains of petitioner's counsel are only about 200 meters away from each other; and
that the Rules shall be liberally construed in order to promote (b) the Answer did not contain any explanation as to why the answer was not
their objective of securing a just, speedy and inexpensive served personally.
disposition of every action and proceeding.
In their Comment, filed in compliance with the resolution of 2 February
Liberal construction of the rules and the pleading is the 1998, and to which petitioner filed a Reply, private respondents aver that
controlling principle to effect substantial justice. public respondent Judge Bautista-Ricafort correctly admitted private
respondents' "Answer (with Counterclaims)" in light of Section 6, Rule 1 of
As pointed out by the Supreme Court in Alonso vs. Villamor, 16 the 1997 Rules of Civil Procedure; that Section 11 of Rule 13 begins with
Phil. 315, "the error in this case is purely technical. To take the phrase "whenever practicable," thereby suggesting that service by mail
advantage of it for other purposes than to cure it, does not appeal may still be effected depending on the relative priority of the pleading
to a fair sense of justice. Its presentation as fatal to plaintiff a [sic] sought to be filed; and when service is not done personally, it is more
case smacks of skill rather than right. A litigation is not a game of prudent and judicious for the courts to require a written explanation rather
technicalities in which one, more deeply schooled and skilled in than to expunge the pleading outright or consider the same as not being
the subtle art of movement and position, entraps and destroys the filed.
other. It is rather, a contest in which each contending party fully
and fairly lays before the Court the facts in issue and then, In view of the importance of the issue raised, which is, undoubtedly, one of
brushing aside as wholly trivial and indecisive all imperfections the first impression, the Court resolved to give due course to the petition and
or form of technicalities of procedure, asks that justice be done consider it submitted for decision on the basis of the pleadings filed by the
upon the merits. Lawsuits, unlike duels, are not to be won by a parties.
rapier's thrust."
Sec. 5, Rule 13 of the 1997 Rules of Civil Procedure prescribes two modes
While it is desirable that the above Rules be faithfully and even of service of pleadings, motions, notices, orders, judgments and other
meticulously observed, courts should not strict about procedural papers, namely: (1) personal service; and (2) service by mail. The first is
lapses that do not really impair the proper administration of governed by Section 6, while the second, by Section 7 of said Rule. If
justice. Furthermore, it is well settled that litigations should, as service cannot be done either personally or by mail, substituted service may
much as possible be decided on their merits and not on be resorted to under Section 8 thereof.
technicalities.
Pursuant, however, to Section 11 of Rule 13, service and filing of pleadings
Petitioner thus filed the instant special civil action of certiorari, contending that and other papers must, whenever practicable, be done personally; and if
public respondent Judge Bautista-Ricafort committed grave abuse of discretion made through other modes, the party concerned must provide a written
amounting to lack or excess of jurisdiction when she admitted private explanation as to why the service or filing was not done personally. The
respondents' "Answer (with Counterclaims)" notwithstanding private section reads:
AL Ilagan-Malipol, AB, MD 7
CIVIL PROCEDURE
Sec. 11. Priorities in modes of service and filing. Whenever and resort to other modes of service and filing, the exception. Henceforth,
practicable, the service and filing of pleadings and other papers whenever personal service or filing is practicable, in light of the
shall be done personally. Except with respect to papers emanating circumstances of time, place and person, personal service or filing is
from the court, a resort to other modes must be accompanied by a mandatory. Only when personal service or filing is not practicable may
written explanation why the service or filing was not done resort to other modes be had, which must then be accompanied by a written
personally. A violation of this Rule may be cause to consider the explanation as to why personal service or filing was not practicable to begin
paper as not filed. (n) with. In adjudging the plausibility of an explanation, a court shall likewise
consider the importance of the subject matter of the case or the issues
Note that Section 11 refers to both service of pleadings and other papers involved therein, and the prima facie merit of the pleading sought to be
on the adverse party or his counsel as provided for in Sections 6, 7 and 8; expunged for violation of Section 11. This Court cannot rule otherwise, lest
and to the filing of pleadings and other papers in court. we allow circumvention of the innovation introduced by the 1997 Rules in
order to obviate delay in the administration of justice.
Personal service and filing are preferred for obvious reasons. Plainly, such
should expedite action or resolution on a pleading, motion or other paper; and Here, the proximity between the offices of opposing counsel was
conversely, minimize, if not eliminate, delays likely to be incurred if service or established; moreover, that the office of private respondents' counsel was
filing is done by mail, considering the inefficiency of the postal service. "ten times farther" from the post office than the distance separating the
Likewise, personal service will do away with the practice of some lawyers who, offices of opposing counsel. Of course, proximity would seem to make
wanting to appear clever, resort to the following less than ethical practices: (1) personal service most practicable, but exceptions may nonetheless apply.
serving or filing pleadings by mail to catch opposing counsel off-guard, thus For instance, where the adverse party or opposing counsel to be served with
leaving the latter with little or no time to prepare, for instance, responsive a pleading seldom reports to office and no employee is regularly present to
pleadings or an opposition; or (2) upon receiving notice from the post office that receive pleadings, or where service is done on the last day of the
the registered parcel containing the pleading of or other paper from the adverse reglementary period and the office of the adverse party or opposing counsel
party may be claimed, unduly procrastinating before claiming the parcel, or, to be served is closed, for whatever reason.
worse, not claiming it at all, thereby causing undue delay in the disposition of
such pleading or other papers. Returning, however, to the merits of this case, in view of the proximity
between the offices of opposing counsel and the absence of any attendant
If only to underscore the mandatory nature of this innovation to our set of explanation as to why personal service of the answer was not effected,
adjective rules requiring personal service whenever practicable, Section 11 of indubitably, private respondents' counsel violated Section 11 of Rule 13 and
Rule 13 then gives the court the discretion to consider a pleading or paper as not the motion to expunge was prima facie meritorious. However, the grant or
filed if the other modes of service or filing were resorted to and no written denial of said motion nevertheless remained within the sound exercise of the
explanation was made as to why personal service was not done in the first place. trial court's discretion. Thus, as guided by Section 6, Rule 1 of the 1997
The exercise of discretion must, necessarily, consider the practicability of Rules of Civil Procedure, which ordains that the Rules shall be liberally
personal service, for Section 11 itself begins with the clause "whenever construed in order to promote their objective of securing a just, speedy and
practicable." inexpensive disposition of every action or proceeding, as well as by the
dictum laid down in Alonso v. Villamor, 16 Phil. 315 [1910], the trial court
We thus take this opportunity to clarify that under Section 11, Rule 13 of the opted to exercise its discretion in favor of admitting the "Answer (with
1997 Rules of Civil Procedure, personal service and filing is the general rule, Counterclaims)," instead of expunging it from the record.
AL Ilagan-Malipol, AB, MD 8
CIVIL PROCEDURE
To our mind, if motions to expunge or strike out pleadings for violation of
Section 11 of Rule 13 were to be indiscriminately resolved under Section 6 of
Rule 1 or Alonzo v. Villamor and other analogous cases, then Section 11 would
become meaningless and its sound purpose negated. Nevertheless, we sustain
the challenged ruling of the trial court, but for reasons other than those provided
for in the challenged order.

The 1997 Rules of Civil Procedure took effect only on 1 July 1997, while the
questioned "Answer (with Counterclaims)" was filed only on 8 August 1997, or
on the 39th day following the effectivity of the 1997 Rules. Hence, private
respondents' counsel may not have been fully aware of the requirements and
ramifications of Section 11, Rule 13. In fact, as pointed out by petitioner's
counsel, in another case where private respondents' counsel was likewise
opposing counsel, the latter similarly failed to comply with Section 11.

It has been several months since the 1997 Rules of Civil Procedure took effect.
In the interim, this Court has generally accommodated parties and counsel who
failed to comply with the requirement of a written explanation whenever
personal service or filing was not practicable, guided, in the exercise of our
discretion, by the primary objective of Section 11, the importance of the subject
matter of the case, the issues involved and the prima faciemerit of the
challenged pleading. However, as we have in the past, for the guidance of the
Bench and Bar, strictest compliance with Section 11 of Rule 13 is mandated one
month from promulgation of this Decision.

WHEREFORE, the instant petition is DISMISSED considering that while the

justification for the denial of the motion to expunge the "Answer (with
Counterclaims)" may not necessarily be correct, yet, for the reasons above
stated, the violation of Section 11 of Rule 13 may be condoned.

No pronouncement as to costs.

SO ORDERED.

AL Ilagan-Malipol, AB, MD 9
CIVIL PROCEDURE
expunged for violation of Section 11. This Court cannot rule otherwise, lest we allow
SOLAR TEAM ENTERTAINMENT vs. RICA-FORT circumvention of the innovation introduced by the 1997 Rules in order to obviate delay
in the administration of justice.
G.R. No. 132007 August 5, 1998
Returning, however, to the merits of this case, in view of the proximity between the
offices of opposing counsel and the absence of any attendant explanation as to why
FACTS:
personal service of the answer was not effected, indubitably, private respondents'
counsel violated Section 11 of Rule 13 and the motion to expunge was prima facie
This is a case for the recovery of possession and damages with a prayer for a writ of meritorious. However, the grant or denial of said motion nevertheless remained within
replevin. the sound exercise of the trial court's discretion. Thus, as guided by Section 6, Rule 1 of
the 1997 Rules of Civil Procedure, which ordains that the Rules shall be liberally
Private respondents filed their Answer and a copy was furnished to the counsel of petitioner construed in order to promote their objective of securing a just, speedy and inexpensive
by registered mail but the pleading did not contain and written explanation why personal disposition of every action or proceeding, as well as by the dictum laid down in Alonso
service was not made upon petitioner-plaintiff as required by the Rules of Court. v. Villamor, 16 Phil. 315 [1910], the trial court opted to exercise its discretion in favor
of admitting the "Answer (with Counterclaims)," instead of expunging it from the
On 11 August 1997, petitioner filed a motion to expunge the "Answer (with Counterclaims)" record.
and to declare herein private respondents in default, 5 alleging therein that the latter did not
observe the mandate of the aforementioned Section 11, and that there was: [A]bsolutely no To our mind, if motions to expunge or strike out pleadings for violation of Section 11
valid reason why defendant[s] should not have personally served plaintiff's . . . counsel with of Rule 13 were to be indiscriminately resolved under Section 6 of Rule 1 or Alonzo v.
[a] copy of their answer [as] (t)he office of defendant's (sic) counsel, Atty. Froilan Villamor and other analogous cases, then Section 11 would become meaningless and its
Cabaltera, is just a stone [sic] throw away from the office of [petitioner's] counsel, with an sound purpose negated.
estimate (sic) distance of about 200 meters more or less.
Nevertheless, we sustain the challenged ruling of the trial court, but for reasons other
Petitioner further alleged that the post office was "about ten (10) times farther from the than those provided for in the challenged order.
office of Atty. Cabaltera,"
The 1997 Rules of Civil Procedure took effect only on 1 July 1997, while the
ISSUE: Whether or not respondent judge committed grave abuse of discretion amounting to questioned "Answer (with Counterclaims)" was filed only on 8 August 1997, or on the
lack or excess of jurisdiction in denying petitioner's motion to expunge private respondents' 39th day following the effectivity of the 1997 Rules. Hence, private respondents'
answer with counterclaims on the ground that said pleading was not served personally counsel may not have been fully aware of the requirements and ramifications of
Section 11, Rule 13. In fact, as pointed out by petitioner's counsel, in another case
HELD: where private respondents' counsel was likewise opposing counsel, the latter similarly
failed to comply with Section 11.
We thus take this opportunity to clarify that under Section 11, Rule 13 of the 1997 Rules of
Civil Procedure, personal service and filing is the general rule, and resort to other modes of WHEREFORE, the instant petition is DISMISSED
service and filing, the exception. Henceforth, whenever personal service or filing is
practicable, in light of the circumstances of time, place and person, personal service or filing
is mandatory. Only when personal service or filing is not practicable may resort to other
modes be had, which must then be accompanied by a written explanation as to why personal
service or filing was not practicable to begin with. In adjudging the plausibility of an
explanation, a court shall likewise consider the importance of the subject matter of the case
or the issues involved therein, and the prima facie merit of the pleading sought to be
AL Ilagan-Malipol, AB, MD 10
CIVIL PROCEDURE
De Guia filed a complaint forspecific performance and damages docketed
G.R. No. 131175 August 28, 2001 as Civil Case No. PQ-9412-P5 against herein petitioners spouses Jovito and
Norma Valenzuela before the then Court of First Instance of Rizal in Pasay
SPOUSES JOVITO VALENZUELA and NORMA VALENZUELA, City. The complaint prayed, among others, that the Spouses Valenzuela be
SPOUSES ALFREDO QUIAZON and BELLA GONZALES QUIAZON, ordered to execute in favor of private respondents the necessary deed of sale
SPOUSES EDUARDO DE GUZMAN and JULIETA DE GUZMAN, DE covering the two (2) parcels of land allegedly subject of a contract to sell
GUZMAN DEVELOPMENT CORPORATION, SKYFREIGHT between said parties.
BROKERAGE, INC., ATTY. ROMULO R. BOBADILA and WEB-HEGG
CONSTRUCTION RESOURCES, INCORPORATED, petitioners, On 16 September 1981, private respondents spouses De Guia, upon
vs. discovering that the subject real properties were sold and transferred by the
HONORABLE COURT OF APPEALS and SPOUSES MANUEL T. DE spouses Valenzuela to herein co-petitioners spouses Alfredo and Bella
GUIA and LETICIA MARIANO DE GUIA and the REGISTER OF Gonzales Quiazon, filed Civil Case No. PQ 9432-P6 for annulment of sale,
DEEDS OF PARAAQUE CITY, METRO MANILA, respondents. cancellation of title and damages, against spouses Valenzuela, spouses
Quiazon, and the Register of Deeds of Pasay City. In the complaint, private
BUENA, J.: respondents spouses De Guia prayed specifically for the annulment of the
deed of sale executed by the spouses Valenzuela in favor of the spouses
In resolving the propriety of the amendment of the complaint in the present case, Quiazon, cancellation of TCT Nos. 39396 and 39397 in the name of spouses
which motion to amend was filed after the lapse of fifteen years from the filing Quiazon, and the reinstatement of TCT No. 39142 in the name of the
of the initiatory pleading sought to be amended, this Court painstakingly spouses Valenzuela, or in the alternative, the reconveyance of the subject
considered not only the peculiar circumstances obtaining, but also accorded properties by the spouses Quiazon to spouses Valenzuela.
premium to the legal truism that "adjective law is not the counterfoil of
substantive law" and that the rules of procedure must not be perverted into On 13 October 1981, private respondents spouses De Guia amended their
engines of injustice.1 complaint in Civil Case No. PQ-9432-P impleading Webb-Hegg
Construction Resources, Inc. as additional defendant.
Sought to be reversed in the instant petition for review on certiorari is the
decision2 of the Court of Appeals dated 15 August 1997 in C.A. G.R. SP. No. On 19 January 1983, spouses De Guia filed in Civil Case No. PQ-9432-P a
44185, which nullified and set aside the orders dated 11 November 1996 3and 06 Motion to Admit Second Amended Complaint impleading as additional
February 1997 of the Regional Trial Court (RTC) of Pasay City, Branch 231, in defendant Gerardo Villacorta. Prior to the resolution of such pending
Civil Case No. PQ-9412-P. The subject orders of the RTC denied private motion, Civil Case No. PQ-9432-P was transferred to the Regional Trial
respondents' motion to admit amended complaint dated 18 March 1997. Court of Makati, Branch 133 pursuant to the Judiciary Reorganization Law
(B.P. Blg. 129). As a result of the transfer of the case, Civil Case No. PQ-
Similarly impugned is the resolution of the Court of Appeals dated 24 October 9432-P was redocketed as Civil Case No. 2723.
4

1997, denying private respondents' motion for reconsideration.

On 20 May 1983, the RTC of Makati, Branch 133 issued an order admitting
The factual antecedents and proceedings unfold. the second amended complaint. Upon motion of the defendants therein,
however, Civil Case No. 2723 was returned to. RTC-Pasay, where herein
On 10 September 1981, herein private respondents spouses Manuel and Leticia private respondents spouses De Guia filed a motion to admit third amended
AL Ilagan-Malipol, AB, MD 11
CIVIL PROCEDURE
complaint seeking to implead spouses De Guzman, De Guzman Development In an order dated 11 November 1996, Judge Ylagan denied the motion to
Corporation, Skyfreight Brokerage, Inc. and Lawyer Romeo Bobadilla, as admit amended complaint prompting herein private respondents spouses De
additional defendants. Guia to file a motion for reconsideration which the lower court denied.

On 30 May 1984, the RTC-Pasay issued an omnibus order7 denying the motion Private respondents elevated the lower court's order denying the motion to
to admit the third amended complaint and declaring as automatically vacated the admit amended complaint to the Court of Appeals.
order of RTC-Makati, Branch 133, which admitted the second amended
complaint. Upon denial of their motion for reconsideration, private respondents On 15 August 1997, the Court of Appeals rendered the assailed decision the
spouses De Guia then filed a petition for certiorari and prohibition before the decretal portion of which declares:
appellate court, docketed as CA G.R. SP. No. 04518.
"WHEREFORE, the instant petition for certiorari and mandamus is
On 27 March 1990, after a preliminary hearing on the affirmative defenses of hereby GRANTED. Consequently, the orders dated November 11,
pendency of another action and splitting a cause of action, the lower court issued 1996 and February 6, 1997 are SET ASIDE and respondent is
an order dismissing the complaint in Civil Case No. PQ-9432-P. Private ordered to admit petitioners' amended complaint dated March
respondents spouses De Guia appealed the dismissal of said case before the 18,1997."
Court of Appeals which on 30 March 1994, affirmed the dismissal order of the
lower court. Aggrieved, private respondents spouses De Guia filed a petition On 05 November 1997, the RTC-Pasay, Branch 231 issued an
before the Supreme Court assailing the decision of the Court of Appeals. order8 admitting the amended complaint, pursuant to the decision of the
Court of Appeals dated 15 August 1997. Herein petitioners filed with the
In a Resolution dated 24 July 1995, the High Court dismissed the petition for lower court a manifestation with motion to reconsider9 to the effect that they
having been filed beyond the reglementary period. Private respondents moved to would file a "petition for review on certiorari" before the Supreme Court, to
reconsider, which motion the Supreme Court denied via a resolution dated 30 which manifestation private respondents filed an opposition. Petitioners then
September 1995. filed a reply to the opposition after which the lower court, in an order dated
23 January, decreed "that the admission of the amended complaint and
Upon motion of spouses Quiazon in Civil Case Nos. PQ-9412-P and PQ-9432-P, service of summons are hereby held in abeyance until after the Supreme
the lower court issued an order dated 17 January 1996 directing the cancellation Court has resolved the case before it which has effectively placed this court
of the Notice of Lis Pendens under Entry No. 81-11596 and Entry No. 81-12186 on notice."
and the Adverse Claim under Entry No. 81-11601 on TCT Nos. 39386 and
39397 in the name of spouses Quiazon. On 02 February 1996, private On 17 December 1997, herein petitioners filed the instant petition where this
respondents sought to reconsider the trial court's order. Court is tasked in the main to resolve the propriety of the amendment of the
complaint in Civil Case No. PQ-9412-P. Petitioners argue, among others,
On 18 March 1996, private respondents filed a motion to admit amended that the amendment should not be allowed inasmuch as the introduction of
complaint in Civil Case No. PQ-9412-P. Prior to the resolution of the two amendments to the complaint in Civil Case No. PQ-9412-P would, in effect,
pending motions, private respondents filed a motion for the inhibition of the "radically and substantially change the cause of action and theory" of the
presiding judge of Branch 117, RTC-Pasay. In an order dated 17 April 1996, the case.
court granted the motion for inhibition resulting in the re-raffle of Civil Case
No. PQ-9412-P to Branch 231, presided by Judge Cesar Z. Ylagan. The Court sanctions the amendment of the complaint and resolves to strike
AL Ilagan-Malipol, AB, MD 12
CIVIL PROCEDURE
down the petition. At the this point, a review of the pertinent provisions in any particular remedy, and a litigant cannot insist on the
regarding amendments is in order. Section 1, Rule 10 of the 1997 Rules of Civil application to the trial of his case, whether civil or criminal, of any
Procedure explicitly provides: other than the existing rules of procedure."10 (emphasis ours)

"SECTION 1. Amendment in general. - Pleadings may be amended by Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil
adding or striking out an allegation or the name of any party, or by Procedure11 amended the former rule12 in such manner that the phrase "or
correcting a mistake in the name of a party or a mistaken or inadequate that the cause of action or defense is substantially altered" was stricken-off
allegation or description in any other respect, so that the actual merits of and not retained in the new rules. The clear import of such amendment in
the controversy may speedily be determined, without regard to Section 3, Rule 10 is that under the new rules, "the amendment may (now)
technicalities, and in the most expeditious and inexpensive manner." substantially alter the cause of action or defense." 13 This should only be true,
(emphasis ours) however, when despite a substantial change or alteration in the cause of
action or defense, the amendments sought to be made shall serve the higher
Equally important is Section 3, Rule 10 of the Rules: interests of substantial justice, and prevent delay and equally promote the
laudable objective of the rules which is to secure a "just, speedy and
"SECTION 3. Amendments by leave of court. - Except as provided in the inexpensive disposition of every action and proceeding.
next preceding section, substantial amendments may be made only upon
leave of court. But such leave may be refused if it appears to the court Thus, granting arguendo that the amendment of the complaint in Civil Case
that the motion was made with intent to delay. Orders of the court upon No. PQ-9432-P would substantially alter or change the cause of action or
the matters provided in this section shall be made upon motion filed in defense in said controversy, this Court nonetheless holds that in the higher
court, and after notice to the adverse party, and an opportunity to be interest of substantial justice, the introduction of amendments to the
heard." complaint is apropos at this particular instance to forestall further delay in
the resolution of the actual merits of the parties' respective claims and
Petitioners contend that the foregoing provisions of the 1997 Rules of Civil defenses. To reiterate, the Rules of Court seek to eliminate undue reliance on
Procedure cannot be applied in the case at bar. We do not agree. Elementary is technical rules and to make litigation as inexpensive, as practicable and as
the rule in this jurisdiction that one does not have a vested right in procedural convenient as can be done.14 Rules of procedure, after all, are but tools
rules, thus: designed to facilitate the attainment of justice, such that when rigid
application of the rules tends to frustrate rather than promote substantial
"Statutes regulating the procedure of courts will be considered as justice, the Supreme Court is empowered to suspend their operation. 15 This
applicable to actions pending and undetermined at the time of their Court will not hesitate to set aside technicalities in favor of what is fair and
passage. Procedural laws are retroactive in that sense and to that extent. just.16
The fact that procedural statutes may somehow affect the litigants' rights
may not preclude their retroactive application to pending actions. The As the records would readily reveal, the instant case Civil Case No. PQ-
retroactive application of procedural laws is not violative of any right of 9412-P has already dragged and suffered protracted delay for a span of
a person who may feel that he is adversely affected. Nor is the retroactive twenty years, borne by countless legal skirmishes between the party litigants
application of procedural statutes constitutionally objectionable. The involving principally entanglement on technical niceties and procedural
reason is that as a general rule, no vested right may attach to, nor arise rules. In fact, the procedural incidents and interlocutory matters relating to
from procedural laws. It has been held that "a person has no vested right this controversy, to wit, Civil Case No. PQ-9412-P and its related case Civil
AL Ilagan-Malipol, AB, MD 13
CIVIL PROCEDURE
Case No. PQ-9432-P, have reached no less than the portals of this Court at least
twice first, as to the specific issue of the propriety of admission of a third
amended complaint in Civil Case No. PQ-9432 and second, as to the particular
query on the validity of the dismissal of Civil Case No. PQ-9432-P, on the
ground of litis pendentia.
By and large, due to the multifarious procedural incidents involving these two
suits, albeit issues concededly not to be outrightly dismissed as less important,
the actual merits of the controversy have yet to reach their full adjudication,
resolution and determination. Under these circumstances, particularly
considering the dismissal of Civil Case No. PQ-9432-P on ground of litis
pendentia, the disallowance of the amendment of the complaint in Civil Case
No. PQ-9412-P would, to our mind, necessarily result in an even greater delay in
the disposition and adjudication of the actual merits of the case, which run
counter to the hallowed office and cardinal objective of the Rules to provide, at
each possible instance, an expeditious and full resolution of issues involving the
respective rights and liabilities of the parties under substantive law.
True enough, the delay that has so characterized the adjudication of the merits of
this case which original complaint was filed practically two decades ago
has not escaped the attention of this Court. Thus, in the interest of substantial
justice, this Court allows the introduction of amendments to the complaint in
Civil Case No. PQ-9412-P so as to afford the party-litigants the full and genuine
opportunity to substantiate their respective claims and defenses and for the trial
court to finally resolve the matters relating to the merits of the case.
Besides, the defendants sought to be impleaded in Civil Case No. PQ-9412-P are
not left without justifiable recourse. To this end, the law in no uncertain terms
provide for the necessary legal implements and the adoption of effective means
and defenses sanctioned by the Rules, wherein both parties in the controversy
may very well advance and protect their respective legal interests. By
sanctioning the introduction of amendments to the complaint, the issues shall at
last be viewed, so to speak, in the clear light of day and substantial matters
therein shall not anymore be lost in the abyss of technicalities and procedural
jargon.
On this matter, the discourse of the Court of Appeals is elucidating:
AL Ilagan-Malipol, AB, MD
"With the dismissal of Civil Case No. PQ-9432-P in which
petitioners (herein private respondents spouses De Guia) seek the
annulment of the sale made by spouses Valenzuela in favor of
spouses Quiazon, complete relief could be obtained by petitioners
only by the admission of the amended complaint. Without the
amendment, a favorable judgment for petitioners would be
meaningless, if not futile, as the properties covered by the contract to
sell which they seek to enforce had already been sold to spouses
Quiazon, who are among those sought to be impleaded as additional
defendants in the amended complaint.
"x x x The inquiry should be as to whether or not the amendment is
necessary to enable the parties, particularly petitioners, to obtain
complete relief in just one proceeding. As above stated, the non-
inclusion of spouses Quiazon and others who may have acquired
rights or interest in the properties in question will render the relief
originally sought in Civil Case No. PQ-9412-P incomplete without
the sale or transfer to spouses Quiazon being nullified; hence, the
need for the amendment. x x x
"x x x Needless to state, the court is of the considered opinion that
admission of the amended complaint is not only necessary to afford
complete relief to the parties; it will also forestall any further need to
institute other actions or proceedings arising from the transaction
subject matter of Civil Case No. PQ-9412-P. x x x"
Inasmuch as herein private respondents, in its amended complaint, likewise
pray for reconveyance of the real property, considering that the subject
parcels of land were transferred in the name of spouses Quiazon who
notably were not impleaded in the original complaint in Civil Case No. PQ-
9412-P, it bears to stress that "owners of property over which reconveyance
is asserted are indispensable parties without whom no relief is available and
without whom the court can render no valid judgment."17
Additionally, petitioners stubbornly maintain that the principle of res
judicata, specifically the doctrine of conclusiveness of judgment, should find
application in the instant case so as to preclude the court from resolving
14
CIVIL PROCEDURE
anew the propriety of the amendment in Civil Case No. PQ-9412-P, which issue, in which it is understood as the bar by prior judgment constituting a
according to petitioner, was previously passed upon and determined in Civil ground for a motion to dismiss in civil cases.
Case No. PQ-9432-P.
"On the other hand, the less familiar concept or less terminological
The contention is without basis. Res judicata, either in the concept of bar by usage of res judicata as a rule on conclusiveness of judgment refers
former judgment or conclusiveness of judgment, cannot be applied to the present to the situation where the judgment in the prior action operates as an
case. estoppel only as to the matters actually determined therein or which
were necessarily included therein. Consequently, since other
In Vda. De Cruzo vs. Carriaga, Jr.,18 this Court speaking through Mr. Justice admissible and relevant matters which the parties in the second
Florenz Regalado, inked an enlightening discourse on the subject: action could properly offer are not concluded by the said judgment,
the same is not a bar to or a ground for dismissal of the second
"The doctrine of res judicata thus lays down two main rules which may action.
be stated as follows: 1) The judgment or decree of a court of competent
jurisdiction on the merits concludes the parties and their privies to the "At bottom, the other elements being virtually the same, the
litigation and constitutes a bar to a new action or suit involving the same fundamental difference between the rule of res judicata as a bar by
cause of action either before the same or any other tribunal; and 2) Any former judgment and as merely a rule on the conclusiveness of
right, fact, or matter in issue directly adjudicated or necessarily involved judgment is that, in the first, there is an identity in the cause of
in the determination of an action before a competent court in which a action in both cases involved whereas, in the second, the cause of
judgment or decree isrendered on the merits is conclusively settled by action in the first case is different from that in the second case."
the judgment therein and cannot again be litigated between the parties (emphasis ours)
and their privies whether or not the claim or demand, purpose or subject
matter of the two suits is the same. These two main rules mark the Proceeding from the foregoing disquisition, the principle of res judicata,
distinction between the principles governing the two typical cases in requires the concurrence of the following requisites:19
which a judgment may operate as evidence. In speaking of these cases,
the first general rule above stated, and which corresponds to the "a) The former judgment or order must be final;
aforequoted paragraph (b) of Section 49, is referred to as 'bar by former
judgment' while the second general rule, which is embodied in "b) It must be a judgment or order on the merits, that is, it was
paragraph (c) of the same section, is known as 'conclusiveness of rendered after a consideration of the evidence or stipulations
judgment.' submitted by the parties at the trial of the case;

"Stated otherwise, when we speak of res judicata in its concept as a 'bar
by former judgment.' the judgment rendered in the first case is an
absolute bar to the subsequent action wince said judgment is conclusive
not only as to the matters offered and received to sustain that judgment
but also as to any other matter which might have been offered for that
purpose and which could have been adjudged therein. This is the concept
in which the term res judicata is more commonly and generally used and
AL Ilagan-Malipol, AB, MD
"c) It must have been rendered by a court having jurisdiction over
the subject matter and the parties; and
"d) There must be, between the first and second actions, identity of
parties, of subject matter and of cause of action. This requisite is
satisfied if the two actions are substantially between the same
parties." (emphasis ours)
15
CIVIL PROCEDURE
For want of the second requisite, to wit, that the judgment must be rendered on
the merits, the instant case is thus removed from the operation of the principle
of res judicata. Stated differently, if the judgment is not on the merits, it cannot
be considered as a conclusive adjudication of the controversy. Consequently, a
judgment dismissing an action for want of jurisdiction, or because of the
pendency of another action between the same parties and for the same cause, or
a judgment absolving a defendant because he was not served with summons, or
a dismissal on the ground of misjoinder cannot operate as res adjudicata on the
merits.20

To this end, it must be noted that the dismissal of Civil Case No. PQ-9432-P was
due to litis pendentia or the pendency of another action, obviously referring to
Civil Case No. PQ-9412-P. Applying the foregoing doctrines, the judgment
dismissing Civil Case No. PQ-9432-P, on the ground of litis pendentia, cannot
be considered an adjudication on the merits.21 Clearly then, res judicata cannot
apply.

WHEREFORE, premises considered, the assailed decision of the Court of

Appeals in C.A. G.R. SP. No. 44185 is AFFIRMED and the instant petition is
DENIED for lack of merit. Accordingly, the Regional Trial Court of Pasay City
Branch 231, is hereby ordered to admit herein private respondents' amended
complaint in Civil Case No. PQ-9412-P, to issue the necessary summons to all
impleaded defendants therein and to resolve the case with dispatch.

SO ORDERED.

AL Ilagan-Malipol, AB, MD 16
CIVIL PROCEDURE
G.R. No. 89070 May 18, 1992 period from 23 June to 24 July 1984. These Board Resolutions abolished the
BENGUET ELECTRIC COOPERATIVE, INC., petitioner, housing allowance of respondent Cosalan; reduced his salary and his
vs. NATIONAL LABOR RELATIONS COMMISSION, PETER representation and commutable allowances; directed him to hold in
COSALAN and BOARD OF DIRECTORS OF BENGUET ELECTRIC abeyance all pending personnel disciplinary actions; and struck his name out
as a principal signatory to transactions of petitioner Beneco.
COOPERATIVE, INC., * respondents.
During the period from 28 July to 25 September 1984, the respondent
FELICIANO, J.:
Beneco Board members adopted another series of resolutions which resulted
Private respondent Peter Cosalan was the General Manager of Petitioner in the ouster of respondent Cosalan as General Manager of Beneco and his
Benguet Electric Cooperative, Inc. (Beneco), having been elected as such by exclusion from performance of his regular duties as such, as well as the
the Board of Directors of Beneco, with the approval of the National withholding of his salary and allowances. These resolutions were as follows:
Electrification Administrator, Mr. Pedro Dumol, effective 16 October 1982.
1. Resolution No. 91-4 dated 28 July 1984:
On 3 November 1982, respondent Cosalan received Audit Memorandum No. 1
issued by the Commission on Audit (COA). This Memorandum noted that . . . that the services of Peter M. Cosalan as General Manager of BENECO is
cash advances received by officers and employees of petitioner Beneco in the terminated upon approval of the National Electrification Administration;
amount of P129,618.48 had been virtually written off in the books of Beneco. In 2. Resolution No. 151-84 dated September 15, 1984;
the Audit Memorandum, the COA directed petitioner Beneco to secure the . . . that Peter M. Cosalan is hereby suspended from his position as General
approval of the National Electrification Administration (NEA) before writing Manager of the Benguet Electric Cooperative, Inc. (BENECO) effective as
off or condoning those cash advances, and recommended the adoption of of the start of the office hours on September 24, 1984, until a final decision
remedial measures. has been reached by the NEA on his dismissal;
On 12 November 1982, COA issued another Memorandum Audit . . . that GM Cosalans suspension from office shall remain in full force and
Memorandum No. 2 addressed to respondent Peter Cosalan, inviting attention effect until such suspension is sooner lifted, revoked or rescinded by the
to the fact that the audit of per diems and allowances received by officials and Board of Directors; that all monies due him are withheld until cleared;
members of the Board of Directors of Beneco showed substantial
inconsistencies with the directives of the NEA. The Audit Memorandum once 3. Resolution No. 176-84 dated September 25, 1984;
again directed the taking of immediate action in conformity with existing NEA . . . that Resolution No. 151-84, dated September 15, 1984 stands as
regulations. preventive suspension for GM Peter M. Cosalan. 1
On 19 May 1983, petitioner Beneco received the COA Audit Report on the Respondent Cosalan nevertheless continued to work as General Manager of
financial status and operations of Beneco for the eight (8) month period ended
Beneco, in the belief that he could be suspended or removed only by duly
30 September 1982. This Audit Report noted and enumerated irregularities in the
authorized officials of NEA, in accordance with provisions of P.D. No, 269,
utilization of funds amounting to P37 Million released by NEA to Beneco, and as amended by P.D. No. 1645 (the statute creating the NEA, providing for its
recommended that appropriate remedial action be taken. capitalization, powers and functions and organization), the loan agreement
Having been made aware of the serious financial condition of Beneco and what between NEA and petitioner Beneco 2 and the NEA Memorandum of 2 July
appeared to be mismanagement, respondent Cosalan initiated implementation of 1980. 3 Accordingly, on 5 October and 10 November 1984, respondent
the remedial measures recommended by the COA. The respondent members of Cosalan requested petitioner Beneco to release the compensation due him.
the Board of Beneco reacted by adopting a series of resolutions during the
AL Ilagan-Malipol, AB, MD 17
CIVIL PROCEDURE
Beneco, acting through respondent Board members, denied the written request and giving due course to respondent Board members appeal although such
of respondent Cosalan. appeal had been filed out of time; and second, that the NLRC had acted with
Respondent Cosalan then filed a complaint with the National Labor Relations grave abuse of discretion amounting to lack of jurisdiction in holding
Commission (NLRC) on 5 December 1984 against respondent members of the petitioner alone liable for payment of the backwages and allowances due to
Beneco Board, challenging the legality of the Board resolutions which ordered Cosalan and releasing respondent Board members from liability therefor.
his suspension and termination from the service and demanding payment of his We consider that petitioners first contention is meritorious. There is no
salaries and allowances. On 18 February 1985, Cosalan amended his complaint dispute about the fact that the respondent Beneco Board members received
to implead petitioner Beneco and respondent Board members, the latter in their the decision of the labor Arbiter on 21 April 1988. Accordingly, and because
respective dual capacities as Directors and as private individuals. 1 May 1988 was a legal holiday, they had only up to 2 May 1988 within
which to perfect their appeal by filing their memorandum on appeal. It is
In the course of the proceedings before the Labor Arbiter, Cosalan filed a motion
also not disputed that the respondent Board members memorandum on
for reinstatement which, although opposed by petitioner Beneco, was granted on
appeal was posted by registered mail on 3 May 1988 and received by the
23 October 1987 by Labor Arbiter Amado T. Adquilen. Petitioner Beneco
NLRC the following day. 4 Clearly, the memorandum on appeal was filed
complied with the Labor Arbiters order on 28 October 1987 through Resolution
out of time.
No. 10-90.
Respondent Board members, however, insist that their Memorandum on
On 5 April 1988, the Labor Arbiter rendered a decision (a) confirming Cosalans
Appeal was filed on time because it was delivered for mailing on 1 May
reinstatement; (b) ordering payment to Cosalan of his backwages and
1988 to the Garcia Communications Company, a licensed private letter
allowances by petitioner Beneco and respondent Board members, jointly and
carrier. The Board members in effect contend that the date of delivery to
severally, for a period of three (3) years without deduction or qualification,
Garcia Communications was the date of filing of their appeal memorandum.
amounting to P344,000.00; and (3) ordering the individual Board members to
pay, jointly and severally, to Cosalan moral damages of P50,000.00 plus Respondent Board members contention runs counter to the established rule
attorneys fees of ten percent (10%) of the wages and allowances awarded him. that transmission through a private carrier or letter-forwarder instead of
the Philippine Post Office is not a recognized mode of filing
Respondent Board members appealed to the NLRC, and there filed a
pleadings. 5The established rule is that the date of delivery of pleadings to a
Memorandum on Appeal. Petitioner Beneco did not appeal, but moved to
private letter-forwarding agency is not to be considered as the date of filing
dismiss the appeal filed by respondent Board members and for execution of
thereof in court, and that in such cases, the date of actual receipt by the
judgment. By this time, petitioner Beneco had a new set of directors.
court, and not the date of delivery to the private carrier, is deemed the date
In a decision dated 21 November 1988, public respondent NLRC modified the of filing of that pleading. 6
award rendered by the Labor Arbiter by declaring that petitioner
Beneco alone, and not respondent Board members, was liable for respondent There, was, therefore, no reason grounded upon substantial justice and the
Cosalans backwages and allowances, and by ruling that there was no legal basis prevention of serious miscarriage of justice that might have justified the
NLRC in disregarding the ten-day reglementary period for perfection of an
for the award of moral damages and attorneys fees made by the Labor Arbiter.
appeal by the respondent Board members. Accordingly, the applicable rule
Beneco, through its new set of directors, moved for reconsideration of the was that the ten-day reglementary period to perfect an appeal is mandatory
NLRC decision, but without success. and jurisdictional in nature, that failure to file an appeal within the
In the present Petition for Certiorari, Benecos principal contentions are two- reglementary period renders the assailed decision final and executory and no
fold: first, that the NLRC had acted with grave abuse of discretion in accepting longer subject to review. 7 The respondent Board members had thus lost
AL Ilagan-Malipol, AB, MD 18
CIVIL PROCEDURE
their right to appeal from the decision of the Labor Arbiter and the NLRC should severally liable with BENECO for Cosalans backwages is untenable. The
have forthwith dismissed their appeal memorandum.
There is another and more compelling reason why the respondent Board to stand on.
members appeal should have been dismissed forthwith: that appeal was quite
bereft of merit. Both the Labor Arbiter and the NLRC had found that the
indefinite suspension and termination of services imposed by the respondent
Board members upon petitioner Cosalan was illegal. That illegality flowed,
firstly, from the fact that the suspension of Cosalan was continued long after
expiration of the period of thirty (30) days, which is the maximum period of
preventive suspension that could be lawfully imposed under Section 4, Rule
XIV of the Omnibus Rules Implementing the Labor Code. Secondly, Cosalan
had been deprived of procedural due process by the respondent Board members.
He was never informed of the charges raised against him and was given no
opportunity to meet those charges and present his side of whatever dispute
existed; he was kept totally in the dark as to the reason or reasons why he had
been suspended and effectively dismissed from the service of Beneco. Thirdly,
respondent Board members failed to adduce any cause which could reasonably
be regarded as lawful cause for the suspension and dismissal of respondent
Cosalan from his position as General Manager of Beneco. Cosalan was, in other
words, denied due process both procedural and substantive. Fourthly, respondent
Board members failed to obtain the prior approval of the NEA of their
suspension now dismissal of Cosalan, which prior approval was required, inter
alia, under the subsisting loan agreement between the NEA and Beneco. The
requisite NEA approval was subsequently sought by the respondent Board
members; no NEA approval was granted.
In reversing the decision of the Labor Arbiter declaring petitioner Beneco and
respondent Board members solidarily liable for the salary, allowances, damages
and attorneys fees awarded to respondent Cosalan, the NLRC said:
. . . A perusal of the records show that the members of the Board never acted in
their individual capacities. They were acting as a Board passing resolutions
affecting their general manager. If these resolutions and resultant acts
transgressed the law, to then BENECO for which the Board was acting in behalf
should bear responsibility. The records do not disclose that the individual Board
members were motivated by malice or bad faith, rather, it reveals an intramural
power play gone awry and misapprehension of its own rules and regulations.
For this reason, the decision holding the individual board members jointly and
AL Ilagan-Malipol, AB, MD
same goes for the award of damages which does not have the proverbial leg
The Labor Arbiter below should have heeded his own observation in his
decision
Respondent BENECO as an artificial person could not have, by itself, done
anything to prevent it. But because the former have acted while in office and
in the course of their official functions as directors of BENECO, . . .
Thus, the decision of the Labor Arbiter should be modified conformably
with all the foregoing holding BENECO solely liable for backwages and
releasing the appellant board members from any individual
liabilities. 8(Emphasis supplied)
The applicable general rule is clear enough. The Board members and
officers of a corporation who purport to act for and in behalf of the
corporation, keep within the lawful scope of their authority in so acting, and
act in good faith, do not become liable, whether civilly or otherwise, for the
consequences of their acts, those acts, when they are such a nature and are
done under such circumstances, are properly attributed to the corporation
alone and no personal liability is incurred by such officers and Board
members. 9
The major difficulty with the conclusion reached by the NLRC is that the
NLRC clearly overlooked or disregarded the circumstances under which
respondent Board members had in fact acted in the instant case. As noted
earlier, the respondent Board members responded to the efforts of Cosalan to
take seriously and implement the Audit Memoranda issued by the COA
explicitly addressed to the petitioner Beneco, first by stripping Cosalan of
the privileges and perquisites attached to his position as General Manager,
then by suspending indefinitely and finally dismissing Cosalan from such
position. As also noted earlier, respondent Board members offered no
suggestion at all of any just or lawful cause that could sustain the suspension
and dismissal of Cosalan. They obviously wanted to get rid of Cosalan and
so acted, in the words of the NLRC itself, with indecent haste in removing
him from his position and denying him substantive and procedural due
process. Thus, the record showed strong indications that respondent Board
members had illegally suspended and dismissed Cosalan precisely because
19
CIVIL PROCEDURE
he was trying to remedy the financial irregularities and violations of NEA fullest use of, service on an area coverage basis at the lowest cost consistent
regulations which the COA had brought to the attention of Beneco. The with sound economy and the prudent management of the business of such
conclusion reached by the NLRC that the records do not disclose that the corporations. 10(Emphasis supplied)
individual Board members were motivated by malice or bad faith flew in the We agree with the Solicitor General, secondly, that respondent Board
face of the evidence of record. At the very least, a strong presumption had members were guilty of gross negligence or bad faith in directing the
arisen, which it was incumbent upon respondent Board members to disprove, affairs of the corporation in enacting the series of resolutions noted earlier
that they had acted in reprisal against respondent Cosalan and in an effort to indefinitely suspending and dismissing respondent Cosalan from the
suppress knowledge about and remedial measures against the financial position of General Manager of Beneco. Respondent Board members, in
irregularities the COA Audits had unearthed. That burden respondent Board doing so, acted belong the scope of their authority as such Board members.
members did not discharge. The dismissal of an officer or employee in bad faith, without lawful cause
The Solicitor General has urged that respondent Board members may be held and without procedural due process, is an act that is contra legem. It cannot
liable for damages under the foregoing circumstance under Section 31 of the be supposed that members of boards of directors derive any authority to
Corporation Code which reads as follows: violate the express mandates of law or the clear legal rights of their officers
Sec. 31. Liability of directors, trustees or officers. Directors or trustees who and employees by simply purporting to act for the corporation they control.
willfully and knowingly vote for or assent to patently unlawful acts of the We believe and so hold, further, that not only are Beneco and respondent
corporation or who are guilty of gross negligence or bad faith in directing the Board members properly held solidarily liable for the awards made by the
affairs of the corporation or acquire any personal or pecuniary interest in Labor Arbiter, but also that petitioner Beneco which was controlled by and
conflict with their duty as such directors or trustees shall be jointly liable and which could act only through respondent Board members, has a right to be
severally for all damages resulting therefrom suffered by the corporation, its reimbursed for any amounts that Beneco may be compelled to pay to
stockholders or members and other persons . . . (Emphasis supplied) respondent Cosalan. Such right of reimbursement is essential if the innocent
We agree with the Solicitor General, firstly, that Section 31 of the Corporation members of Beneco are not to be penalized for the acts of respondent Board
Code is applicable in respect of Beneco and other electric cooperatives similarly members which were both done in bad faith and ultra vires. The liability-
situated. Section 4 of the Corporation Code renders the provisions of that Code generating acts here are the personal and individual acts of respondent
applicable in a supplementary manner to all corporations, including those with Board members, and are not properly attributed to Beneco itself.
special or individual charters so long as those provisions are not inconsistent WHEREFORE, the Petition for Certiorari is GIVEN DUE COURSE, the
with such charters. We find no provision in P.D. No. 269, as amended, that comment filed by respondent Board members is TREATED as their answer,
would exclude expressly or by necessary implication the applicability of Section and the decision of the National Labor Relations Commission dated 21
31 of the Corporation Code in respect of members of the boards of directors of November 1988 in NLRC Case No. RAB-1-0313-84 is hereby SET
electric cooperatives. Indeed, P.D. No. 269 expressly describes these ASIDE and the decision dated 5 April 1988 of Labor Arbiter Amado T.
cooperatives as corporations: Adquilen hereby REINSTATED in toto. In addition, respondent Board
members are hereby ORDERED to reimburse petitioner Beneco any
Sec. 15. Organization and Purpose. Cooperative non-stock, non-profit
amounts that it may be compelled to pay to respondent Cosalan by virtue of
membership corporations may be organized, and electric cooperative
the decision of Labor Arbiter Amado T. Adquilen. No pronouncement as to
corporations heretofore formed or registered under the Philippine non-
costs.
Agricultural Co-operative Act may as hereinafter provided be converted, under
this Decree for the purpose of supplying, and of promoting and encouraging-the SO ORDERED.

AL Ilagan-Malipol, AB, MD 20
CIVIL PROCEDURE
Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur. The Supreme Court ruled that BENECO and the BENECO Board Members
209 SCRA 55 Business Organization Corporation Law Cooperatives are are liable for the damages caused against Cosalan. However BENECO can
seek reimbursement from the Board Members so as not to unduly penalize
Treated as Corporations Ultra Vires Acts of the Board Members
the innocent members of BENECO.
In 1982, Peter Cosalan, then general manager of the Benguet Electric
Cooperative (BENECO), received an audit report from the National
Electrification Administration (NEA). The said audit advised Cosalan of certain
irregularities in the management of the funds of BENECO. Cosalan then sought
to address the issue by introducing reforms recommended by the NEA as well as
by the auditing body, Commission on Audit. However, the Board Members of
BENECO reacted to these reforms by issuing a series of resolutions which first
reduced Cosalans salary and allowances, then he was excluded from his work,
and eventually, he was suspended indefinitely.
Cosalan then filed a complaint for illegal dismissal against the BENECO Board
Members, he later impleaded BENECO itself. The Labor Arbiter (LA) ruled in
favor of Cosalan. The National Labor Relations Commission (NLRC) affirmed
the decision of the LA but modified it so as to absolve the Board Members from
liability as it held that the Board Members merely acted in their official capacity.
BENECO, being the only party adjudged to be liable, then appealed said
decision.
ISSUE: Whether or not the National Labor Relations Commission is correct.
HELD: No. The act of the Board Members is ultra vires. There was no legal
basis for them to suspend Cosalan indefinitely for under the Implementing
Rules of the Labor Code the maximum period form preventive suspension
should not go beyond 30 days. Further, it was found that Cosalan was never
informed of the charges against him nor was he afforded the opportunity to
present his case. He was deprived of due process. Nor was Cosalans suspension
approved by the NEA, which is also required for due process purposes.
These acts by the Board Members are tainted with bad faith. A very strong
presumption arises that the Board Members are acting in reprisal against the
reforms sought to be introduced by Cosalan in order to address the irregularities
within BENECO. The Board Members are therefore liable for damages under
Section 31 of the Corporation Code. And even though BENECO is a
cooperative, it is still covered by the Corporation Code because under PD 269,
cooperatives are considered as corporations.

AL Ilagan-Malipol, AB, MD 21
CIVIL PROCEDURE
could not come up with such amount, he requested Joey Gomez on a
G.R. No. 96132 June 26, 1992 personal level to look for a third party who could lend him the equivalent
amount of the warranty deposit, however, unknown to petitioner, it was
ORIEL MAGNO, petitioner, vs. HONORABLE COURT OF APPEALS and Corazon Teng who advanced the deposit in question, on condition that the
PEOPLE OF THE PHILIPPINES, respondents. same would be paid as a short term loan at 3% interest (Ibid., P. 41)

This is an appeal by certiorari under Rule 45 of the Revised Rules of Court,
from the decision* of the respondent Court of Appeals which affirmed in
toto the decision of the Regional Trial Court of Quezon City, Branch 104 finding
the accused petitioner, guilty of violations of Batas Pambansa Blg. 22, in
Criminal Cases Q-35693 to 35696 before they were elevated on appeal to the
respondent appellate Court under CA-G.R. CR No. 04889.
The specific provision in the Leasing Agreement, reads:
1.1. WARRANTY DEPOSIT Before or upon delivery of each item of
Equipment, the Lessee shall deposit with the Lessor such sum or sums
specified in Schedule A to serve as security for the faithful performance of
its obligations.

The antecedent facts and circumstances of the four (4) counts of the offense This deposit shall be refunded to the Lessee upon the satisfactory
charged, have been clearly illustrated, in the Comment of the Office of the completion of the entire period of Lease, subject to the conditions of clause
Solicitor General as official counsel for the public respondent, thus: 1.12 of this Article. (Ibid., p. 17)

Petitioner was in the process of putting up a car repair shop sometime in April
1983, but a did not have complete equipment that could make his venture
workable. He also had another problem, and that while he was going into this
entrepreneurship, he lacked funds with which to purchase the necessary
equipment to make such business operational. Thus, petitioner, representing
Ultra Sources International Corporation, approached Corazon Teng, (private
complainant) Vice President of Mancor Industries (hereinafter referred to as
Mancor) for his needed car repair service equipment of which Mancor was a
distributor, (Rollo, pp. 40-41)
Having been approached by petitioner on his predicament, who fully bared that
he had no sufficient funds to buy the equipment needed, the former (Corazon
Teng) referred Magno to LS Finance and Management Corporation (LB Finance
for brevity) advising its Vice-President, Joey Gomez, that Mancor was willing
and able to supply the pieces of equipment needed if LS Finance could
accommodate petitioner and provide him credit facilities. (Ibid., P. 41)
The arrangement went through on condition that petitioner has to put up a September 28, 1983, in the amount of P10,076.87. (Ibid., pp. 42 & 43).
warranty deposit equivalent to thirty per centum (30%) of the total value of the
pieces of equipment to be purchased, amounting to P29,790.00. Since petitioner
AL Ilagan-Malipol, AB, MD
As part of the arrangement, petitioner and LS Finance entered into a leasing
agreement whereby LS Finance would lease the garage equipments and
petitioner would pay the corresponding rent with the option to buy the same.
After the documentation was completed, the equipment were delivered to
petitioner who in turn issued a postdated check and gave it to Joey Gomez
who, unknown to the petitioner, delivered the same to Corazon Teng. When
the check matured, Petitioner requested through Joey Gomez not to deposit
the check as he (Magno) was no longer banking with Pacific Bank.
To replace the first check issued, petitioner issued another set of six (6)
postdated checks. Two (2) checks dated July 29, 1983 were deposited and
cleared while the four (4) others, which were the subject of the four counts
of the aforestated charges subject of the petition, were held momentarily by
Corazon Teng, on the request of Magno as they were not covered with
sufficient funds. These checks were a) Piso Bank Check Nos. 006858, dated
August 15, 1983, 006859 dated August 28, 1983 and 006860 dated
September 15, 1983, all in the amount of P5,038.43 and No. 006861 dated
22
CIVIL PROCEDURE
Subsequently, petitioner could not pay LS Finance the monthly rentals, thus it to economic constraints or business failure, then it is lawful and just that the
pulled out the garage equipments. It was then on this occasion that petitioner warranty deposit should not be charged against the petitioner.
became aware that Corazon Teng was the one who advanced the warranty
deposit. Petitioner with his wife went to see Corazon Teng and promised to pay To charge the petitioner for the refund of a "warranty deposit" which he did
the latter but the payment never came and when the four (4) checks were not withdraw as it was not his own account, it having remained with LS
deposited they were returned for the reason "account closed." (Ibid., p. 43) Finance, is to even make him pay an unjust "debt", to say the least, since
petitioner did not receive the amount in question. All the while, said amount
After joint trial before the Regional Trial Court of Quezon City, Branch 104, the was in the safekeeping of the financing company, which is managed,
accused-petitioner was convicted for violations of BP Blg. 22 on the four (4) supervised and operated by the corporation officials and employees of LS
cases, as follows: Finance. Petitioner did not even know that the checks he issued were turned
over by Joey Gomez to Mrs. Teng, whose operation was kept from his
. . . finding the accused-appellant guilty beyond reasonable doubt of the offense knowledge on her instruction. This fact alone evoke suspicion that the
of violations of B.P. Blg. 22 and sentencing the accused to imprisonment for one transaction is irregular and immoral per se, hence, she specifically requested
year in each Criminal Case Nos. Q-35693, Q-35695 and Q-35696 and to pay to Gomez not to divulge the source of the "warranty deposit".
complainant the respective amounts reflected in subject checks. (Ibid., pp. 25,
27) It is intriguing to realize that Mrs. Teng did not want the petitioner to know
that it was she who "accommodated" petitioner's request for Joey Gomez, to
Reviewing the above and the affirmation of the above-stated decision of the source out the needed funds for the "warranty deposit". Thus it unfolds the
court a quo, this Court is intrigued about the outcome of the checks subject of kind of transaction that is shrouded with mystery, gimmickry and doubtful
the cases which were intended by the parties, the petitioner on the one hand and legality. It is in simple language, a scheme whereby Mrs. Teng as the
the private complainant on the other, to cover the "warranty deposit" equivalent supplier of the equipment in the name of her corporation, Mancor, would be
to the 30% requirement of the financing company. Corazon Teng is one of the able to "sell or lease" its goods as in this case, and at the same time,
officers of Mancor, the supplier of the equipment subject of the Leasing privately financing those who desperately need petty accommodations as
Agreement subject of the high financing scheme undertaken by the petitioner as this one. This modus operandi has in so many instances victimized
lessee of the repair service equipment, which was arranged at the instance of unsuspecting businessmen, who likewise need protection from the law, by
Mrs. Teng from the very beginning of the transaction. availing of the deceptively called "warranty deposit" not realizing that they
also fall prey to leasing equipment under the guise of a lease-purchase
By the nature of the "warranty deposit" amounting to P29,790.00 corresponding agreement when it is a scheme designed to skim off business clients.
to 30% of the "purchase/lease" value of the equipments subject of the
transaction, it is obvious that the "cash out" made by Mrs. Teng was not used by This maneuvering has serious implications especially with respect to the
petitioner who was just paying rentals for the equipment. It would have been threat of the penal sanction of the law in issue, as in this case. And, with a
different if petitioner opted to purchase the pieces of equipment on or about the willing court system to apply the full harshness of the special law in
termination of the lease-purchase agreement in which case he had to pay the question, using the "mala prohibitia" doctrine, the noble objective of the law
additional amount of the warranty deposit which should have formed part of the is tainted with materialism and opportunism in the highest, degree.
purchase price. As the transaction did not ripen into a purchase, but remained a
lease with rentals being paid for the loaned equipment, which were pulled out by This angle is bolstered by the fact that since the petitioner or lessee referred
the Lessor (Mancor) when the petitioner failed to continue paying possibly due to above in the lease agreement knew that the amount of P29,790.00 subject
AL Ilagan-Malipol, AB, MD 23
CIVIL PROCEDURE
of the cases, were mere accommodation-arrangements with somebody thru Joey Thus, it behooves upon a court of law that in applying the punishment
Gomez, petitioner did not even attempt to secure the refund of said amount from imposed upon the accused, the objective of retribution of a wronged society,
LS Finance, notwithstanding the agreement provision to the contrary. To argue should be directed against the "actual and potential wrongdoers." In the
that after the termination of the lease agreement, the warranty deposit should be instant case, there is no doubt that petitioner's four (4) checks were used to
refundable in full to Mrs. Teng by petitioner when he did not cash out the collateralize an accommodation, and not to cover the receipt of an actual
"warranty deposit" for his official or personal use, is to stretch the nicety of the
"account or credit for value" as this was absent, and therefore petitioner
alleged law (B.P. No, 22) violated. should not be punished for mere issuance of the checks in question.
Following the aforecited theory, in petitioner's stead the "potential
For all intents and purposes, the law was devised to safeguard the interest of the wrongdoer", whose operation could be a menace to society, should not be
banking system and the legitimate public checking account user. It did not intend glorified by convicting the petitioner.
to shelter or favor nor encourage users of the system to enrich themselves
through manipulations and circumvention of the noble purpose and objective of While in case of doubt, the case should have been resolved in favor of the
the law. Least should it be used also as a means of jeopardizing honest-to- accused, however, by the open admission of the appellate court below, oven
goodness transactions with some color of "get-rich" scheme to the prejudice of when the ultimate beneficiary of the "warranty deposit" is of doubtful
well-meaning businessmen who are the pillars of society. certainty, the accused was convicted, as shown below:

Under the utilitarian theory, the "protective theory" in criminal law, "affirms that
the primary function of punishment is the protective (sic) of society against
actual and potential wrongdoers." It is not clear whether petitioner could be
considered as having actually committed the wrong sought to be punished in the
offense charged, but on the other hand, it can be safely said that the actuations of
Mrs. Carolina Teng amount to that of potential wrongdoers whose operations
should also be clipped at some point in time in order that the unwary public will
not be failing prey to such a vicious transaction (Aquino, The Revised Penal
Code, 1987 Edition, Vol. I, P. 11)
Corollary to the above view, is the application of the theory that "criminal law is
founded upon that moral disapprobation . . . of actions which are
immoral, i.e., which are detrimental (or dangerous) to those conditions upon
which depend the existence and progress of human society. This
disappropriation is inevitable to the extent that morality is generally founded and
built upon a certain concurrence in the moral opinions of all. . . . That which we
call punishment is only an external means of emphasizing moral disapprobation
the method of punishment is in reality the amount of punishment," (Ibid., P.
11, citing People v. Roldan Zaballero, CA 54 O.G. 6904, Note also Justice
Pablo's view in People v. Piosca and Peremne, 86 Phil. 31).
AL Ilagan-Malipol, AB, MD
Nor do We see any merit in appellant's claim that the obligation of the
accused to complainant had been extinguished by the termination of the
leasing agreement by the terms of which the warranty deposit advanced
by complainant was refundable to the accused as lessee and that as the
lessor L.S. Finance neither made any liquidation of said amount nor returned
the same to the accused, it may he assumed that the amount was already
returned to the complainant. For these allegations, even if true, do not
change the fact, admitted by appellant and established by the evidence, that
the four checks were originally issued on account or for value. And as We
have already observed, in order that there may be a conviction under the
from paragraph of Section 2 of B.P. Blg 22 with respect to the element of
said offense that the check should have been made and issued on account or
for value it is sufficient, all the other elements of the offense being
present, that the check must have been drawn and issued in payment of an
obligation.
Moreover, even granting, arguendo, that the extinguishment, after the
issuance of the checks, of the obligation in consideration of which the
checks were issued, would have resulted in placing the case at bar beyond
the purview of the prohibition in Section 1 of BP Blg. 22, there is no
satisfactory proof that there was such an extinguishment in the present
24
CIVIL PROCEDURE
case. Appellee aptly points out that appellant had not adduced any direct A cross-reference to the following term shows:
evidence to prove that the amount advanced by the complainant to cover the
warranty deposit must already have been returned to her. (Rollo, p. 30) Fitness for Particular Purpose:

It is indubitable that the respondent Court of Appeals even disregarded the
cardinal rule that the accused is presumed innocent until proven guilty beyond
reasonable doubt. On the contrary, the same court even expected the petitioner-
appellant to adduce evidence to show that he was not guilty of the crime
charged. But how can be produce documents showing that the warranty deposit
has already been taken back by Mrs. Teng when she is an officer of Mancor
which has interest in the transaction, besides being personally interested in the
profit of her side-line. Thus, even if she may have gotten back the value of the
accommodation, she would still pursue collecting from the petitioner since she
had in her possession the checks that "bounced".
Where the seller at the time of contracting has reason to know any particular
purpose for which the goods are required and that the buyer is relying on the
seller's skill or judgment to select or furnish suitable goods, there is, unless
excluded or modified, an implied warranty that the goods shall be fit for
such purpose, (Ibid., p. 573)
b) Deposit: Money lodged with a person as an earnest or security for the
performance of some contract, to be forfeited if the depositor fails in his
undertaking. It may be deemed to be part payment and to that extent may
constitute the purchaser the actual owner of the estate.

That the court a quo merely relied on the law, without looking into the real To commit to custody, or to lay down; to place; to put. To lodge for safe-
nature of the warranty deposit is evident from the following pronouncement: keeping or as a pledge to intrust to the care of another.

And the trail court concluded that there is no question that the accused violated
BP Blg. 22, which is a special statutory law, violations of which are mala
prohibita. The court relied on the rule that in cases ofmala prohibita, the only
inquiry is whether or not the law had been violated, proof of criminal intent not
being necessary for the conviction of the accused, the acts being prohibited for
reasons of public policy and the defenses of good faith and absence of criminal
intent being unavailing in prosecutions for said offenses." (Ibid., p. 26)
The crux of the matter rests upon the reason for the drawing of the postdated
checks by the petitioner, i.e., whether they were drawn or issued "to apply on
account or for value", as required under Section 1 of B.P. Blg, 22. When viewed
against the following definitions of the catch-terms "warranty" and "deposit", for
which the postdated checks were issued or drawn, all the more, the alleged crime
could not have been committed by petitioner:
a) Warranty A promise that a proposition of fact is true. A promise that have the funds with which to put up the warranty deposit and as a matter of
certain facts are truly as they are represented to be and that they will remain so: . fact, he openly intimated this to the vital conduit of the transaction, Joey
. . (Black's Law Dictionary, Fifth Edition, (1979) p. 1423)
AL Ilagan-Malipol, AB, MD
The act of placing money in the custody of a bank or banker, for safety or
convenience, to be withdrawn at the will of the depositor or under rules and
regulations agreed on. Also, the money so deposited, or the credit which the
depositor receives for it. Deposit, according to its commonly accepted and
generally understood among bankers and by the public, includes not only
deposits payable on demand and for which certificates, whether interest-
bearing or not, may be issued, payable on demand, or on certain notice or at
a fixed future time. (Ibid., pp. 394-395)
Furthermore, the element of "knowing at the time of issue that he does not
have sufficient funds in or credit with the drawee bank for the payment of
such check in full upon its presentment, which check is subsequently
dishonored by the drawee bank for insufficiency of funds or credit or would
have been dishonored for the same reason . . . is inversely applied in this
case. From the very beginning, petitioner never hid the fact that he did not
Gomez, to whom petitioner was introduced by Mrs. Teng. It would have
been different if this predicament was not communicated to all the parties he
25
CIVIL PROCEDURE
dealt with regarding the lease agreement the financing of which was covered by
L.S. Finance Management.

WHEREFORE, the appealed decision is REVERSED and the accused-petitioner

is hereby ACQUITTED of the crime charged.

SO ORDERED.

Padilla and Regalado, JJ., concur.

Narvasa, C.J.,, concurs in the result.

Nocon, J., is on leave.

AL Ilagan-Malipol, AB, MD 26
CIVIL PROCEDURE
Magno vs. CA GR 96132, 26 June 1992 Second Division, Paras (J)

Facts: Oriel Magno lacked funds to purchase necessary equipment to

make his car repair shop business operational. He approached Corazon
Teng, who in turn referred LS Finance and Management Corporation,
who could accommodate him and provide him credit facilities. LS Finance
required a warranty deposit (30% of the total value of the pieces of
equipment to be purchased), which Teng advanced, unknown to Magno.
When the equipment were delivered to Magno, he issued a postdated
check to LS Finance, which delivered it to Teng. When the check
matured, Magno requested that the check not to be deposited as he no
longer banks with Pacific Bank. To replace the check, Magno issued 6
postdated checks, 2 of which were deposited and cleared, the other 4
were held momentarily by Teng, on the request of Magno for they are
not covered with sufficient funds. As Magno cannot pay the monthly
rentals fro the equipment, the same were pulled out. Only then did
Magno learned that Teng was the one who advanced the deposit. Magno
promised to pay her but payment never came. When the checks were
deposited, they were dishonored. Magno was found guilty of violation of
BP22 when the cases were adjudicated.

Issue: Whether there was a violation of BP 22.

Held: The crux of the matter rest upon the reason for the drawing of the
postdated checks by Magno, i.e. whether they were drawn or issued to
apply on account or for value, as required under Section 1 of BP 22.
When viewed against the definitions of warranty and deposit, for
which the postdated checks were issued or drawn, the alleged crime
could not have been committed by Magno. Furthermore, the element of
knowing at the time of issue that he does not have sufficient funds in or
credit with the drawee bank....: is inversely applied in the case. From
the beginning, Magno never hid the fact that he had no funds. Magno,
thus, was acquitted of the crime charged.

AL Ilagan-Malipol, AB, MD 27