Teofilo Carlos and petitioner Juan De Dios Carlos were brothers who each have three parcels of land by

virtue of inheritance. Later Teofilo died intestate. He was survived by respondents Felicidad Sandoval
and their son, Teofilo Carlos II. Upon Teofilos death, two parcels of land were registered in the name of
Felicidad and Teofilo II. In August 1995, Carlos commenced an action against respondents before the
court a quo. In his complaint, Carlos asserted that the marriage between his late brother and Felicidad
was a nullity in view of the absence of the required marriage license. He likewise maintained that his
deceased brother was neither the natural nor the adoptive father of Teofilo Carlos II. He argued that the
properties covered by such certificates of title, including the sums received by respondents as proceeds,
should be reconveyed to him.
HELD: The grounds for declaration of absolute nullity of marriage must be proved. Neither judgment on
the pleadings nor summary judgment is allowed. So is confession of judgment disallowed. Carlos argues
that the CA should have applied Rule 35 of the Rules of Court governing summary judgment, instead of
the rule on judgment on the pleadings. Petitioner is misguided. Whether it is based on judgment on the
pleadings or summary judgment, the CA was correct in reversing the summary judgment rendered by
the trial court. Both the rules on judgment on the pleadings and summary judgments have no place in
cases of declaration of absolute nullity of marriage and even in annulment of marriage.
A petition for declaration of absolute nullity of void marriage may be filed solely by the husband or wife.
Exceptions: (1) Nullity of marriage cases commenced before the effectivity of A.M. No. 02-11-10-SC; and
(2) Marriages celebrated during the effectivity of the Civil Code. Under the Rule on Declaration of
Absolute Nullity of Void Marriages and Annulment of Voidable Marriages, the petition for declaration of
absolute nullity of marriage may not be filed by any party outside of the marriage. A petition for
declaration of absolute nullity of void marriage may be filed solely by the husband or the wife. Only an
aggrieved or injured spouse may file a petition for annulment of voidable marriages or declaration of
absolute nullity of void marriages. Such petition cannot be filed by compulsory or intestate heirs of the
spouses or by the State. The Committee is of the belief that they do not have a legal right to file the
petition. Compulsory or intestate heirs have only inchoate rights prior to the death of their predecessor,
and, hence, can only question the validity of the marriage of the spouses upon the death of a spouse in a
proceeding for the settlement of the estate of the deceased spouse filed in the regular courts. On the
other hand, the concern of the State is to preserve marriage and not to seek its dissolution. The Rule
extends only to marriages entered into during the effectivity of the Family Code which took effect on
August 3, 1988.
The advent of the Rule on Declaration of Absolute Nullity of Void Marriages marks the beginning of the
end of the right of the heirs of the deceased spouse to bring a nullity of marriage case against the
surviving spouse. But the Rule never intended to deprive the compulsory or intestate heirs of their
successional rights.
While A.M. No. 02-11-10-SC declares that a petition for declaration of absolute nullity of marriage may
be filed solely by the husband or the wife, it does not mean that the compulsory or intestate heirs are
without any recourse under the law. They can still protect their successional right, for, as stated in the
Rationale of the Rules on Annulment of Voidable Marriages and Declaration of Absolute Nullity of Void
Marriages, compulsory or intestate heirs can still question the validity of the marriage of the spouses,
not in a proceeding for declaration of nullity but upon the death of a spouse in a proceeding for the
settlement of the estate of the deceased spouse filed in the regular courts.
It is emphasized, however, that the Rule does not apply to cases already commenced before March 15,
2003 although the marriage involved is within the coverage of the Family Code. This is so, as the new
Rule which became effective on March 15, 2003 is prospective in its application.
Petitioner commenced the nullity of marriage case against respondent Felicidad in 1995. The marriage in
controversy was celebrated on May 14, 1962. Which law would govern depends upon when the
marriage took place.
The marriage having been solemnized prior to the effectivity of the Family Code, the applicable law is
the Civil Code which was the law in effect at the time of its celebration. But the Civil Code is silent as to
who may bring an action to declare the marriage void. Does this mean that any person can bring an
action for the declaration of nullity of marriage?
True, under the New Civil Code which is the law in force at the time the respondents were married, or
even in the Family Code, there is no specific provision as to who can file a petition to declare the nullity
of marriage; however, only a party who can demonstrate proper interest can file the same. A petition
to declare the nullity of marriage, like any other actions, must be prosecuted or defended in the name of
the real party-in-interest and must be based on a cause of action. Thus, in Nial v. Badayog, the Court
held that the children have the personality to file the petition to declare the nullity of marriage of their
deceased father to their stepmother as it affects their successional rights.












Republic of the Philippines
Supreme Court
Manila


THIRD DIVISION


JAMES ESTRELLER, EDUARDO

G.R. No. 170264
CULIANAN, GREG CARROS,


RAQUEL YEE, JOSELITO


PENILLA, LORNA DOTE,


CRESENCIANA CLEOPAS,

Present:
TRINIDAD TEVES, SONIA


PENILLA, ANITA GOMINTONG,

YNARES-SANTIAGO, J.,
CHING DIONESIO, MARIBEL

Chairperson,
MANALO, DESIRES HUERTO,

AUSTRIA-MARTINEZ,
and RAYMUNDO CORTES,

CHICO-NAZARIO,
Petitioners,

NACHURA, and


PERALTA, JJ.
- versus -





LUIS MIGUEL YSMAEL and


CRISTETA L. SANTOS-ALVAREZ,

Promulgated:
Respondents.*

March 13, 2009
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


AUSTRIA-MARTINEZ, J.:

In the present petition, the Court finds occasion to reassert the legal precepts that a co-owner may file
an action for recovery of possession without the necessity of joining all the other co-owners as co-
plaintiffs since the suit is deemed to be instituted for the benefit of all; and that Section 2 of Presidential
Decree (P.D.) No. 2016, reinforced by P.D. No. 1517, which prohibits the eviction of qualified
tenants/occupants, extends only to landless urban families who are rightful occupants of the land and
its structures, and does not include those whose presence on the land is merely tolerated and without
the benefit of contract, those who enter the land by force or deceit, or those whose possession is under
litigation.

Respondents filed with the Regional Trial Court (RTC), Branch 216, Quezon City, a case for Recovery of
Possession against petitioners, claiming ownership of the property subject of dispute located in E.
Rodriguez Avenue and La Filonila Streets in Quezon City, by virtue of Transfer Certificate of Title (TCT)
No. 41698 issued by the Register of Deeds of Quezon City on June 10, 1958. Respondents alleged that
on various dates in 1973, petitioners entered the property through stealth and strategy and had since
occupied the same; and despite demands made in March 1993, petitioners refused to vacate the
premises, prompting respondents to file the action.[1]

Petitioners denied respondents' allegations. According to them, respondent Luis Miguel Ysmael (Ysmael)
had no personality to file the suit since he only owned a small portion of the property, while respondent
Cristeta Santos-Alvarez (Alvarez) did not appear to be a registered owner thereof. Petitioners also
contended that their occupation of the property was lawful, having leased the same from the
Magdalena Estate, and later on from Alvarez. Lastly, petitioners asserted that the property has already
been proclaimed by the Quezon City Government as an Area for Priority Development under P. D. Nos.
1517 and 2016, which prohibits the eviction of lawful tenants and demolition of their homes.[2]

After trial, the RTC rendered its Decision dated September 15, 2000 in favor of respondents. The
dispositive portion of the Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of plaintiffs Luis Miguel Ysmael
and Cristeta L. Santos-Alvarez and against defendants ordering the latter and all persons claiming rights
under them to immediately vacate the subject property and peacefully surrender the same to the
plaintiffs.

Defendants are likewise ordered to pay plaintiffs the following:

1. The amount of P400.00 each per month from the date of extra-judicial demand until the subject
property is surrendered to plaintiffs as reasonable compensation for the use and possession thereof;
2. The amount of P20,000.00 by way of exemplary damages;
3. The amount of P20,000.00 by way of attorney's fees and litigation expenses;
4. Cost of suit.

Corollarily, the counter-claims of defendants are hereby DISMISSED for lack of merit.

SO ORDERED.[3]

Petitioners appealed to the Court of Appeals (CA), which, in a Decision[4] dated March 14, 2005,
dismissed their appeal and affirmed in toto the RTC Decision.

Hence, the present petition for review under Rule 45 of the Rules of Court, on the following grounds:

I
THE HONORABLE COURT OF APPEALS ERRED IN CONCLUDING THAT RESPONDENTS YSMAEL
AND ALVAREZ ARE BOTH REAL PARTIES IN INTEREST WHO WOULD BE BENEFITED OR INJURED BY THE
JUDGMENT OR THE PARTY ENTITLED TO THE AVAILS OF THE SUIT.

II
THE HONORABLE COURT OF APPEALS FAILED TO CONSIDER AND DECIDE THE RELEVANT
QUESTIONS AND ISSUES PRESENTED BY THE PETITIONERS IN ROMAN NUMERALS II, III AND IV OF THEIR
DISCUSSIONS AND ARGUMENTS IN THE APPELLANTS BRIEF WHICH ARE HEREUNTO COPIED OR
REPRODUCED.[5]

The present petition merely reiterates the issues raised and settled by the RTC and the CA. On this
score, it is well to emphasize the rule that the Courts role in a petition under Rule 45 is limited to
reviewing or reversing errors of law allegedly committed by the appellate court. Factual findings of the
trial court, especially when affirmed by the CA, are conclusive on the parties. Since such findings are
generally not reviewable, this Court is not duty-bound to analyze and weigh all over again the evidence
already considered in the proceedings below, unless the factual findings complained of are devoid of
support from the evidence on record or the assailed judgment is based on a misapprehension of
facts.[6]

The Court then finds that the petition is without merit.

Respondents are real parties-in-interest in the suit below and may, therefore, commence the complaint
for accion publiciana. On the part of Ysmael, he is a named co-owner of the subject property under TCT
No. 41698, together with Julian Felipe Ysmael, Teresa Ysmael, and Ramon Ysmael.[7] For her part,
Alvarez was a buyer of a portion of the property, as confirmed in several documents, namely: (1)
Decision dated August 30, 1974 rendered by the Regional Trial Court of Quezon City, Branch 9 (IX), in
Civil Case No. Q-8426, which was based on a Compromise Agreement between Alvarez and the
Magdalena Estate;[8] (2) an unnotarized Deed of Absolute Sale dated May 1985 executed between the
Ysmael Heirs and Alvarez;[9] and (3) a notarized Memorandum of Agreement between the Ysmael Heirs
and Alvarez executed on May 2, 1991.[10]

Recently, in Wee v. De Castro,[11] the Court, citing Article 487 of the Civil Code, reasserted the rule that
any one of the co-owners may bring any kind of action for the recovery of co-owned properties since the
suit is presumed to have been filed for the benefit of all co-owners. The Court also stressed that Article
487 covers all kinds of action for the recovery of possession, i.e., forcible entry and unlawful detainer
(accion interdictal), recovery of possession (accion publiciana), and recovery of ownership (accion de
reivindicacion), thus:

In the more recent case of Carandang v. Heirs of De Guzman,this Court declared that a co-owner is not
even a necessary party to an action for ejectment, for complete relief can be afforded even in his
absence, thus:

In sum, in suits to recover properties, all co-owners are real parties in interest. However, pursuant to
Article 487 of the Civil Code and the relevant jurisprudence, any one of them may bring an action, any
kind of action for the recovery of co-owned properties. Therefore, only one of the co-owners, namely
the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a
complete relief can be afforded in the suit even without their participation, since the suit is presumed to
have been filed for the benefit of all co-owners. (Emphasis supplied)

Petitioners persistently question the validity of the transfer of ownership to Alvarez. They insist that
Alvarez failed to establish any right over the property since the Deed of Absolute Sale was not inscribed
on TCT No. 41698. Interestingly, petitioners debunked their own argument when they themselves
claimed in their Answer with Counter-claim that they derived their right to occupy the property from a
lease agreement with, first, the Magdalena Estate, and thereafter, Alvarez herself.[12] More
importantly, the fact that the sale was not annotated or inscribed on TCT No. 41698 does not make it
any less valid. A contract of sale has the force of law between the contracting parties and they are
expected to abide, in good faith, by their respective contractual commitments. Article 1358 of the Civil
Code which requires the embodiment of certain contracts in a public instrument, is only for
convenience; and registration of the instrument only adversely affects third parties, and non-compliance
therewith does not adversely affect the validity of the contract or the contractual rights and obligations
of the parties thereunder.[13]

Petitioners further contend that the property subject of the Deed of Absolute Sale Lot 6, Block 4 of
Subd. Plan Psd No. 33309 is different from that being claimed in this case, which are Lots 2 and 3.
They claim that there exists another title covering the subject property, i.e., TCT No. 41698 in the names
of Victoria M. Panganiban and Teodoro M. Panganiban.

Notably, TCT No. 41698 in the name of the Ysmael Heirs covers several parcels of land under Subd. Plan
Psd No. 33309. These include: Lot 2, Block 4; Lot 3, Block 4; and Lot 6, Block 4, each of which contains
1,000 square meters. In the Decision dated August 30, 1974 rendered by the RTC of Quezon City,
Branch 9, in Civil Case No. Q-8426, the ownership of 200 square meters of Lot 2, Block 4; 250 square
meters of Lot 3, Block 4; and the full 1,000 square meters of Lot 6, Block 4, was conferred on Alvarez. A
Deed of Absolute Sale dated May 1985 was later executed by the Ysmael Heirs in favor of Alvarez, but it
covered only Lot 6, Block 4. Nevertheless, a Memorandum of Agreement dated May 2, 1991 was
subsequently entered into by the Ysmael Heirs and Alvarez, whereby all three apportioned parcels of
land allocated to Alvarez under the RTC Decision dated August 30, 1974, were finally sold, transferred
and conveyed to her. Evidently, while the title was yet to be registered in the name of Alvarez, for all
intents and purposes, however, the subject property was already owned by her. The Ysmael Heirs are
merely naked owners of the property, while Alvarez is already the beneficial or equitable owner thereof;
and the right to the gains, rewards and advantages generated by the property pertains to her.

The existence of a title in the same TCT No. 41698, this time in the names of Victoria M. Panganiban and
Teodoro M. Panganiban, was adequately explained by the Certification of the Register of Deeds dated
March 1, 1994, and which reads:

At the instance of RUY ALBERTO S. RONDAIN, I, SAMUEL C. CLEOFE, Register of Deeds of Quezon City, do
hereby certify that TCT No. 41698, covering Lot 19, Blk. 8 of the cons.-subd. plan Pos-817, with an area
of Three Hundred Seventy Five (375) Square Meters, registered in the name of VICTORIA M.
PANGANIBAN; and TEODORO M. PANGANIBAN, married to Elizabeth G. Panganiban, issued on February
8, 1991, is existing and on file in this Registry.

This is to certify further that TCT No. 41698 presented by Ruy Alberto S. Rondain covering Lot 3, Blk. 2 of
the subd. Plan PSD-3309, with an area of Nine Hundred Ninety Six (996) Square Meters, issued on June
10, 1958 and registered in the name of JUAN FELIPE YSMAEL, TERESA YSMAEL, RAMON YSMAEL, LUIS
MIGUEL YSMAEL, which is also an existing title is different and distinct from each other inasmuch as they
cover different Lots and Plans.

That it is further certified that the similarity in the title numbers is due to the fact that after the fire of
June 11, 1988, the Quezon City Registry issued new title numbers beginning with TCT No. 1.[14]
(Emphasis supplied)

Finally, petitioners' claim that they are entitled to the protection against eviction and demolition
afforded by P.D. Nos. 2016,[15] 1517,[16] and Republic Act (R.A.) No. 7279,[17] is not plausible.

Section 6 of P.D. No. 1517 grants preferential rights to landless tenants/occupants to acquire land within
urban land reform areas, while Section 2 of P.D. No. 2016 prohibits the eviction of qualified tenants/
occupants.

In Dimaculangan v. Casalla,[18] the Court was emphatic in ruling that the protective mantle of P.D. No.
1517 and P.D. No. 2016 extends only to landless urban families who meet these qualifications: a) they
are tenants as defined under Section 3(f) of P.D. No. 1517; b) they built a home on the land they are
leasing or occupying; c) the land they are leasing or occupying is within an Area for Priority Development
and Urban Land Reform Zone; and d) they have resided on the land continuously for the last 10 years or
more.

Section 3(f) of P.D. No. No. 1517 defines the term "tenant" covered by the said decree as the rightful
occupant of land and its structures, but does not include those whose presence on the land is merely
tolerated and without the benefit of contract, those who enter the land by force or deceit, or those
whose possession is under litigation. It has already been ruled that occupants of the land whose
presence therein is devoid of any legal authority, or those whose contracts of lease were already
terminated or had already expired, or whose possession is under litigation, are not considered "tenants"
under the Section 3(f).[19]

Petitioners claim that they are lawful lessees of the property. However, they failed to prove any lease
relationship or, at the very least, show with whom they entered the lease contract. Respondents, on the
other hand, were able to prove their right to enjoy possession of the property. Thus, petitioners, whose
occupation of the subject property by mere tolerance has been terminated by respondents, clearly do
not qualify as tenants covered by these social legislations.

Finally, petitioners failed to demonstrate that they qualify for coverage under R. A. No. 7279 or the
Urban Development and Housing Act of 1992.

R. A. No. 7279 provides for the procedure to be undertaken by the concerned local governments in the
urban land development process, to wit: conduct an inventory of all lands and improvements within
their respective localities, and in coordination with the National Housing Authority, the Housing and
Land Use Regulatory Board, the National Mapping Resource Information Authority, and the Land
Management Bureau; identify lands for socialized housing and resettlement areas for the immediate
and future needs of the underprivileged and homeless in the urban areas; acquire the lands; and dispose
of said lands to the beneficiaries of the program.[20] While there is a Certification that the area
bounded by E. Rodriguez, Victoria Avenue, San Juan River and 10th Street of Barangay. Damayang Lagi,
Quezon City is included in the list of Areas for Priority Development under Presidential Proclamation No.
1967,[21] there is no showing that the property has already been acquired by the local government for
this purpose; or that petitioners have duly qualified as beneficiaries.

All told, the Court finds no reason to grant the present petition.

WHEREFORE, the petition is DENIED for lack of merit. The Decision dated March 14, 2005 of the Court
of Appeals is AFFIRMED.

SO ORDERED.






STRONGHOLD INSURANCE COMPANY,
INC. v. TOMAS CUENCA, G.R. No. 173297,
March 6, 2013
Civil procedure; real party in interest. Accordingly, a person, to be a real party in interest in whose
name an action must be prosecuted, should appear to be the present real owner of the right sought
to be enforced, that is, his interest must be a present substantial interest, not a mere expectancy, or
a future, contingent, subordinate, or consequential interest. Where the plaintiff is not the real party in
interest, the ground for the motion to dismiss is lack of cause of action. The reason for this is that the
courts ought not to pass upon questions not derived from any actual controversy.
Indeed, considering that all civil actions must be based on a cause of action, defined as the act or
omission by which a party violates the right of another, the former as the defendant must be
allowed to insist upon being opposed by the real party in interest so that he is protected from further
suits regarding the same claim. Under this rationale, the requirement benefits the defendant
because the defendant can insist upon a plaintiff who will afford him a setup providing good res
judicata protection if the struggle is carried through on the merits to the end.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 173297 March 6, 2013

STRONGHOLD INSURANCE COMPANY, INC., Petitioner,
vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T. TAYACTAC, and MANUEL D.
MARANON, JR., Respondents.

D E C I S I O N

BERSAMIN, J.:

The personality of a corporation is distinct and separate from the personalities of its stockholders.
Hence, its stockholders are not themselves the real parties in interest to claim and recover
compensation for the damages arising from the wrongful attachment of its assets. Only the corporation
is the real party in interest for that purpose.

The Case

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

Antecedents

On January 19, 1998, Maraon filed a complaint in the RTC against the Cuencas for the collection of a
sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an application
for the issuance of a writ of preliminary attachment.3 On January 26, 1998, the RTC granted the
application for the issuance of the writ of preliminary attachment conditioned upon the posting of a
bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later, Maraon amended
the complaint to implead Tayactac as a defendant.4

On February 11, 1998, Maraon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount of
P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of preliminary
attachment.5 The sheriff served the writ, the summons and a copy of the complaint on the Cuencas on
the same day. The service of the writ, summons and copy of the complaint were made on Tayactac on
February 16, 1998.6

Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff levied
upon the equipment, supplies, materials and various other personal property belonging to Arc Cuisine,
Inc. that were found in the leased corporate office-cum-commissary or kitchen of the corporation.7 On
February 19, 1998, the sheriff submitted a report on his proceedings,8 and filed an ex parte motion
seeking the transfer of the levied properties to a safe place. The RTC granted the ex parte motion on
February 23, 1998.9

On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss and to Quash
Writ of Preliminary Attachment on the grounds that: (1) the action involved intra-corporate matters that
were within the original and exclusive jurisdiction of the Securities and Exchange Commission (SEC); and
(2) there was another action pending in the SEC as well as a criminal complaint in the Office of the City
Prosecutor of Paraaque City.10

On March 5, 1998, Maraon opposed the motion.11

On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary
Attachment, stating that the action, being one for the recovery of a sum of money and damages, was
within its jurisdiction.12

Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of the
denial of their Motion to Dismiss and to Quash Writ of Preliminary Attachment, but the RTC denied their
motion for reconsideration on September 16, 1998.

Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and prohibition to
challenge the August 10, 1998 and September 16, 1998 orders of the RTC on the basis of being issued
with grave abuse of discretion amounting to lack or excess of jurisdiction (C.A.-G.R. SP No. 49288).13

On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No. 49288,14 granting the
petition. It annulled and set aside the challenged orders, and dismissed the amended complaint in Civil
Case No. 98-023 for lack of jurisdiction, to wit:

WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET ASIDE, and the judgment is
hereby rendered DISMISSING the Amended Complaint in Civil Case No. 98-023 of the respondent court,
for lack of jurisdiction.

SO ORDERED.

On December 27, 1999, the CA remanded to the RTC for hearing and resolution of the Cuencas and
Tayactacs claim for the damages sustained from the enforcement of the writ of preliminary
attachment.15

On February 17, 2000,16 the sheriff reported to the RTC, as follows:

On the scheduled inventory of the properties (February 17, 2000) and to comply with the Resolution of
the Court of Appeals dated December 24, 1999 ordering the delivery of the attached properties to the
defendants, the proceedings thereon being:

1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit, Atty. Ayo, defendant Marcelina
Cuenca, and two Court Personnel, Robertson Catorce and Danilo Abanto, went to the warehouse where
Mr. Maraon recommended for safekeeping the properties in which he personally assured its safety, at
No. 14, Marian II Street, East Service Road, Paraaque Metro Manila.

2. That to our surprise, said warehouse is now tenanted by a new lessee and the properties were all
gone and missing.

3. That there are informations (sic) that the properties are seen at Contis Pastry & Bake Shop owned by
Mr. Maraon, located at BF Homes in Paraaque City.

On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver Attached
Properties and to Set Case for Hearing,17 praying that: (1) the Branch Sheriff be ordered to immediately
deliver the attached properties to them; (2) Stronghold Insurance be directed to pay them the damages
being sought in accordance with its undertaking under the surety bond for P1,000,0000.00; (3) Maraon
be held personally liable to them considering the insufficiency of the amount of the surety bond; (4)
they be paid the total of P1,721,557.20 as actual damages representing the value of the lost attached
properties because they, being accountable for the properties, would be turning that amount over to
Arc Cuisine, Inc.; and (5) Maraon be made to pay P200,000.00 as moral damages, P100,000.00 as
exemplary damages, and P100,000.00 as attorneys fees.

Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and
Tayactac filed their reply on May 5, 2000.

On May 25, 2000, Maraon filed his own comment/opposition to the Motion to Require Sheriff to
Deliver Attached Properties and to Set Case for Hearing of the Cuencas and Tayactac, arguing that
because the attached properties belonged to Arc Cuisine, Inc. 50% of the stockholding of which he and
his relatives owned, it should follow that 50% of the value of the missing attached properties
constituted liquidating dividends that should remain with and belong to him. Accordingly, he prayed
that he should be required to return only P100,000.00 to the Cuencas and Tayactac.18

On June 5, 2000, the RTC commanded Maraon to surrender all the attached properties to the RTC
through the sheriff within 10 days from notice; and directed the Cuencas and Tayactac to submit the
affidavits of their witnesses in support of their claim for damages.19

On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance.20

Ruling of the RTC

After trial, the RTC rendered its judgment on April 28, 2003, holding Maraon and Stronghold Insurance
jointly and solidarily liable for damages to the Cuencas and Tayactac,21 viz:

WHEREFORE, premises considered, as the defendants were able to preponderantly prove their
entitlement for damages by reason of the unlawful and wrongful issuance of the writ of attachment,
MANUEL D. MARAON, JR., plaintiff and defendant, Stronghold Insurance Company Inc., are found to
be jointly and solidarily liable to pay the defendants the following amount to wit:

(1) PhP1,000,000.00 representing the amount of the bond;

(2) PhP 100,000.00 as moral damages;

(3) PhP 50,000.00 as exemplary damages;

(4) Php 100,000.00 as attorneys fees; and

(5) To pay the cost of suit.

SO ORDERED.

Ruling of the CA

Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145), assigning the following errors to
the RTC, to wit:

I.

THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO PAY THE AMOUNT OF P1,000,000.00
REPRESENTING THE AMOUNT OF THE BOND AND OTHER DAMAGES TO THE DEFENDANTS.

II.

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

On January 31, 2006, the CA, finding no reversible error, promulgated its decision affirming the
judgment of the RTC.23

Stronghold Insurance moved for reconsideration, but the CA denied its motion for reconsideration on
June 22, 2006.

Issues

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

I.

THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED QUESTIONS OF
SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE DECISIONS OF THE
HONORABLE COURT CONSIDERING THAT THE COURT OF APPEALS AFFIRMED THE ERRONEOUS DECISION
OF THE TRIAL COURT HOLDING RESPONDENT MARA[]ON AND PETITIONER STRONGHOLD JOINTLY AND
SOLIDARILY LIABLE TO PAY THE RESPONDENTS CUENCA, et al., FOR PURPORTED DAMAGES BY REASON
OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT, DESPITE THE
FACT THAT:

A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE PROPERTIES ATTACHED AND THUS, ARE
NOT THE PROPER PARTIES TO CLAIM ANY PURPORTED DAMAGES ARISING THEREFROM.

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

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

II

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

On their part, the Cuencas and Tayactac counter:

A. Having actively participated in the trial and appellate proceedings of this case before the Regional
Trial Court and the Court of Appeals, respectively, petitioner Stronghold is legally and effectively
BARRED by ESTOPPEL from raising for the first time on appeal before this Honorable Court a defense
and/or issue not raised below.25

B. Even assuming arguendo without admitting that the principle of estoppel is not applicable in this
instant case, the assailed Decision and Resolution find firm basis in law considering that the writ of
attachment issued and enforced against herein respondents has been declared ILLEGAL, NULL AND VOID
for having been issued beyond the jurisdiction of the trial court.

C. There having been a factual and legal finding of the illegality of the issuance and consequently, the
enforcement of the writ of attachment, Maranon and his surety Stronghold, consistent with the facts
and the law, including the contract of suretyship they entered into, are JOINTLY AND SEVERALLY liable
for the damages sustained by herein respondents by reason thereof.

D. Contrary to the allegations of Stronghold, its liability as surety under the attachment bond without
which the writ of attachment shall not issue and be enforced against herein respondent if prescribed by
law. In like manner, the obligations and liability on the attachment bond are also prescribed by law and
not left to the discretion or will of the contracting parties to the prejudice of the persons against whom
the writ was issued.

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

F. While the liability of Stronghold as surety indeed covers the principal amount of P1,000,000.00,
nothing in the law and the contract between the parties limit or exempt Stronghold from liability for
other damages. Including costs of suit and interest.26

In his own comment,27

Maraon insisted that he could not be personally held liable under the attachment bond because the
judgment of the RTC was rendered without jurisdiction over the subject matter of the action that
involved an intra-corporate controversy among the stockholders of Arc Cuisine, Inc.; and that the
jurisdiction properly pertained to the SEC, where another action was already pending between the
parties.

Ruling

Although the question of whether the Cuencas and Tayactac could themselves recover damages arising
from the wrongful attachment of the assets of Arc Cuisine, Inc. by claiming against the bond issued by
Stronghold Insurance was not raised in the CA, we do not brush it aside because the actual legal interest
of the parties in the subject of the litigation is a matter of substance that has jurisdictional impact, even
on appeal before this Court.

The petition for review is meritorious.

There is no question that a litigation should be disallowed immediately if it involves a person without
any interest at stake, for it would be futile and meaningless to still proceed and render a judgment
where there is no actual controversy to be thereby determined. Courts of law in our judicial system are
not allowed to delve on academic issues or to render advisory opinions. They only resolve actual
controversies, for that is what they are authorized to do by the Fundamental Law itself, which
forthrightly ordains that the judicial power is wielded only to settle actual controversies involving rights
that are legally demandable and enforceable.28

To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court
requires that unless otherwise authorized by law or the Rules of Court every action must be prosecuted
or defended in the name of the real party in interest.29 Under the same rule, a real party in interest is
one who stands to be benefited or injured by the judgment in the suit, or one who is entitled to the
avails of the suit. Accordingly, a person , to be a real party in interest in whose name an action must be
prosecuted, should appear to be the present real owner of the right sought to be enforced, that is, his
interest must be a present substantial interest, not a mere expectancy, or a future, contingent,
subordinate, or consequential interest.30

Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of cause
of action.31 The reason for this is that the courts ought not to pass upon questions not derived from any
actual controversy. Truly, a person having no material interest to protect cannot invoke the jurisdiction
of the court as the plaintiff in an action.32 Nor does a court acquire jurisdiction over a case where the
real party in interest is not present or impleaded.

The purposes of the requirement for the real party in interest prosecuting or defending an action at law
are: (a) to prevent the prosecution of actions by persons without any right, title or interest in the case;
(b) to require that the actual party entitled to legal relief be the one to prosecute the action; (c) to avoid
a multiplicity of suits; and (d) to discourage litigation and keep it within certain bounds, pursuant to
sound public policy.33 Indeed, considering that all civil actions must be based on a cause of action,34
defined as the act or omission by which a party violates the right of another,35 the former as the
defendant must be allowed to insist upon being opposed by the real party in interest so that he is
protected from further suits regarding the same claim.36 Under this rationale, the requirement benefits
the defendant because "the defendant can insist upon a plaintiff who will afford him a setup providing
good res judicata protection if the struggle is carried through on the merits to the end."37

The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings the
action, and this interest ends when a judgment involving the nominal plaintiff will protect the defendant
from a subsequent identical action. Such a rule is intended to bring before the court the party rightfully
interested in the litigation so that only real controversies will be presented and the judgment, when
entered, will be binding and conclusive and the defendant will be saved from further harassment and
vexation at the hands of other claimants to the same demand.38

But the real party in interest need not be the person who ultimately will benefit from the successful
prosecution of the action. Hence, to aid itself in the proper identification of the real party in interest, the
court should first ascertain the nature of the substantive right being asserted, and then must determine
whether the party asserting that right is recognized as the real party in interest under the rules of
procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling.39

It is fundamental that the courts are established in order to afford reliefs to persons whose rights or
property interests have been invaded or violated, or are threatened with invasion by others conduct or
acts, and to give relief only at the instance of such persons. The jurisdiction of a court of law or equity
may not be invoked by or for an individual whose rights have not been breached.40

The remedial right or the remedial obligation is the persons interest in the controversy. The right of the
plaintiff or other claimant is alleged to be violated by the defendant, who has the correlative obligation
to respect the right of the former. Otherwise put, without the right, a person may not become a party
plaintiff; without the obligation, a person may not be sued as a party defendant; without the violation,
there may not be a suit. In such a situation, it is legally impossible for any person or entity to be both
plaintiff and defendant in the same action, thereby ensuring that the controversy is actual and exists
between adversary parties. Where there are no adversary parties before it, the court would be without
jurisdiction to render a judgment.41

There is no dispute that the properties subject to the levy on attachment belonged to Arc Cuisine, Inc.
alone, not to the Cuencas and Tayactac in their own right. They were only stockholders of Arc Cuisine,
Inc., which had a personality distinct and separate from that of any or all of them.42 The damages
occasioned to the properties by the levy on attachment, wrongful or not, prejudiced Arc Cuisine, Inc.,
not them. As such, only Arc Cuisine, Inc. had the right under the substantive law to claim and recover
such damages. This right could not also be asserted by the Cuencas and Tayactac unless they did so in
the name of the corporation itself. But that did not happen herein, because Arc Cuisine, Inc. was not
even joined in the action either as an original party or as an intervenor.

The Cuencas and Tayactac were clearly not vested with any direct interest in the personal properties
coming under the levy on attachment by virtue alone of their being stockholders in Arc Cuisine, Inc.
Their stockholdings represented only their proportionate or aliquot interest in the properties of the
corporation, but did not vest in them any legal right or title to any specific properties of the corporation.
Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person.43

Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac lacked
the legal personality to claim the damages sustained from the levy of the formers properties. According
to Asset Privatization Trust v. Court of Appeals,44 even when the foreclosure on the assets of the
corporation was wrongful and done in bad faith the stockholders had no standing to recover for
themselves moral damages; otherwise, they would be appropriating and distributing part of the
corporations assets prior to the dissolution of the corporation and the liquidation of its debts and
liabilities. Moreover, in Evangelista v. Santos,45 the Court, resolving whether or not the minority
stockholders had the right to bring an action for damages against the principal officers of the
corporation for their own benefit, said:

As to the second question, the complaint shows that the action is for damages resulting from
mismanagement of the affairs and assets of the corporation by its principal officer, it being alleged that
defendants maladministration has brought about the ruin of the corporation and the consequent loss of
value of its stocks. The injury complained of is thus primarily to the corporation, so that the suit for the
damages claimed should be by the corporation rather than by the stockholders (3 Fletcher, Cyclopedia
of Corporation pp. 977-980). The stockholders may not directly claim those damages for themselves for
that would result in the appropriation by, and the distribution among them of part of the corporate
assets before the dissolution of the corporation and the liquidation of its debts and liabilities, something
which cannot be legally done in view of section 16 of the Corporation Law, which provides:

No shall corporation shall make or declare any stock or bond dividend or any dividend whatsoever
except from the surplus profits arising from its business, or divide or distribute its capital stock or
property other than actual profits among its members or stockholders until after the payment of its
debts and the termination of its existence by limitation or lawful dissolution.

x x x x

In the present case, the plaintiff stockholders have brought the action not for the benefit of the
corporation but for their own benefit, since they ask that the defendant make good the losses
occasioned by his mismanagement and pay to them the value of their respective participation in the
corporate assets on the basis of their respective holdings. Clearly, this cannot be done until all corporate
debts, if there be any, are paid and the existence of the corporation terminated by the limitation of its
charter or by lawful dissolution in view of the provisions of section 16 of the Corporation Law. (Emphasis
ours)

It results that plaintiffs complaint shows no cause of action in their favor so that the lower court did not
err in dismissing the complaint on that ground.

While plaintiffs ask for remedy to which they are not entitled unless the requirement of section 16 of
the Corporation Law be first complied with, we note that the action stated in their complaint is
susceptible of being converted into a derivative suit for the benefit of the corporation by a mere change
in the prayer. Such amendment, however, is not possible now, since the complaint has been filed in the
wrong court, so that the same has to be dismissed.46

That Maraon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still
excluded Arc Cuisine, Inc. from his complaint was of no consequence now. The Cuencas and Tayactac
still had no right of action even if the affected properties were then under their custody at the time of
the attachment, considering that their custody was only incidental to the operation of the corporation.

It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper action to
recover damages resulting from the attachment. Such action would be one directly brought in the name
of the corporation. Yet, that was not true here, for, instead, the Cuencas and Tayactac presented the
claim in their own names.

In view of the outcome just reached, the Court deems it unnecessary to give any extensive consideration
to the remaining issues.

WHEREFORE, the Court GRANTS the petition for review; and REVERSES and SETS ASIDE the decision of
the Court of Appeals in CA-G.R. CV No. 79145 promulgated on January 31,2006.

No pronouncements on costs of suit.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 192986 January 15, 2013

ADVOCATES FOR TRUTH IN LENDING, INC. and EDUARDO B. OLAGUER, Petitioners,
vs.
BANGKO SENTRAL MONETARY BOARD, represented by its Chairman, GOVERNOR ARMANDO M.
TETANGCO, JR., and its incumbent members: JUANITA D. AMATONG, ALFREDO C. ANTONIO, PETER FA
VILA, NELLY F. VILLAFUERTE, IGNACIO R. BUNYE and CESAR V. PURISIMA, Respondents.

D E C I S I O N

REYES, J.:

Petitioners, claiming that they are raising issues of transcendental importance to the public, filed directly
with this Court this Petition for Certiorari under Rule 65 of the 1997 Rules of Court, seeking to declare
that the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), replacing the Central Bank Monetary
Board (CB-MB) by virtue of Republic Act (R.A.) No. 7653, has no authority to continue enforcing Central
Bank Circular No. 905,1 issued by the CB-MB in 1982, which "suspended" Act No. 2655, or the Usury Law
of 1916.

Factual Antecedents

Petitioner "Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, non-stock corporation organized
to engage in pro bono concerns and activities relating to money lending issues. It was incorporated on
July 9, 2010,2 and a month later, it filed this petition, joined by its founder and president, Eduardo B.
Olaguer, suing as a taxpayer and a citizen.

R.A. No. 265, which created the Central Bank (CB) of the Philippines on June 15, 1948, empowered the
CB-MB to, among others, set the maximum interest rates which banks may charge for all types of loans
and other credit operations, within limits prescribed by the Usury Law. Section 109 of R.A. No. 265
reads:

Sec. 109. Interest Rates, Commissions and Charges. The Monetary Board may fix the maximum rates
of interest which banks may pay on deposits and on other obligations.

The Monetary Board may, within the limits prescribed in the Usury Law fix the maximum rates of
interest which banks may charge for different types of loans and for any other credit operations, or may
fix the maximum differences which may exist between the interest or rediscount rates of the Central
Bank and the rates which the banks may charge their customers if the respective credit documents are
not to lose their eligibility for rediscount or advances in the Central Bank.

Any modifications in the maximum interest rates permitted for the borrowing or lending operations of
the banks shall apply only to future operations and not to those made prior to the date on which the
modification becomes effective.

In order to avoid possible evasion of maximum interest rates set by the Monetary Board, the Board may
also fix the maximum rates that banks may pay to or collect from their customers in the form of
commissions, discounts, charges, fees or payments of any sort. (Underlining ours)

On March 17, 1980, the Usury Law was amended by Presidential Decree (P.D.) No. 1684, giving the CB-
MB authority to prescribe different maximum rates of interest which may be imposed for a loan or
renewal thereof or the forbearance of any money, goods or credits, provided that the changes are
effected gradually and announced in advance. Thus, Section 1-a of Act No. 2655 now reads:

Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of interest
for the loan or renewal thereof or the forbearance of any money, goods or credits, and to change such
rate or rates whenever warranted by prevailing economic and social conditions: Provided, That changes
in such rate or rates may be effected gradually on scheduled dates announced in advance.

In the exercise of the authority herein granted the Monetary Board may prescribe higher maximum
rates for loans of low priority, such as consumer loans or renewals thereof as well as such loans made by
pawnshops, finance companies and other similar credit institutions although the rates prescribed for
these institutions need not necessarily be uniform. The Monetary Board is also authorized to prescribe
different maximum rate or rates for different types of borrowings, including deposits and deposit
substitutes, or loans of financial intermediaries. (Underlining and emphasis ours)

In its Resolution No. 2224 dated December 3, 1982,3 the CB-MB issued CB Circular No. 905, Series of
1982, effective on January 1, 1983. Section 1 of the Circular, under its General Provisions, removed the
ceilings on interest rates on loans or forbearance of any money, goods or credits, to wit:

Sec. 1. The rate of interest, including commissions, premiums, fees and other charges, on a loan or
forbearance of any money, goods, or credits, regardless of maturity and whether secured or unsecured,
that may be charged or collected by any person, whether natural or juridical, shall not be subject to any
ceiling prescribed under or pursuant to the Usury Law, as amended. (Underscoring and emphasis ours)

The Circular then went on to amend Books I to IV of the CBs "Manual of Regulations for Banks and
Other Financial Intermediaries" (Manual of Regulations) by removing the applicable ceilings on specific
interest rates. Thus, Sections 5, 9 and 10 of CB Circular No. 905 amended Book I, Subsections 1303,
1349, 1388.1 of the Manual of Regulations, by removing the ceilings for interest and other charges,
commissions, premiums, and fees applicable to commercial banks; Sections 12 and 17 removed the
interest ceilings for thrift banks (Book II, Subsections 2303, 2349); Sections 19 and 21 removed the
ceilings applicable to rural banks (Book III, Subsection 3152.3-c); and, Sections 26, 28, 30 and 32
removed the ceilings for non-bank financial intermediaries (Book IV, Subsections 4303Q.1 to 4303Q.9,
4303N.1, 4303P).4

On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653 establishing the Bangko
Sentral ng Pilipinas (BSP) to replace the CB. The repealing clause thereof, Section 135, reads:

Sec. 135. Repealing Clause. Except as may be provided for in Sections 46 and 132 of this Act, Republic
Act No. 265, as amended, the provisions of any other law, special charters, rule or regulation issued
pursuant to said Republic Act No. 265, as amended, or parts thereof, which may be inconsistent with the
provisions of this Act are hereby repealed. Presidential Decree No. 1792 is likewise repealed.

Petition for Certiorari

To justify their skipping the hierarchy of courts and going directly to this Court to secure a writ of
certiorari, petitioners contend that the transcendental importance of their Petition can readily be seen
in the issues raised therein, to wit:

a) Whether under R.A. No. 265 and/or P.D. No. 1684, the CB-MB had the statutory or constitutional
authority to prescribe the maximum rates of interest for all kinds of credit transactions and forbearance
of money, goods or credit beyond the limits prescribed in the Usury Law;

b) If so, whether the CB-MB exceeded its authority when it issued CB Circular No. 905, which removed
all interest ceilings and thus suspended Act No. 2655 as regards usurious interest rates;

c) Whether under R.A. No. 7653, the new BSP-MB may continue to enforce CB Circular No. 905.5

Petitioners attached to their petition copies of several Senate Bills and Resolutions of the 10th Congress,
which held its sessions from 1995 to 1998, calling for investigations by the Senate Committee on Banks
and Financial Institutions into alleged unconscionable commercial rates of interest imposed by these
entities. Senate Bill (SB) Nos. 376 and 1860,7 filed by Senator Vicente C. Sotto III and the late Senator
Blas F. Ople, respectively, sought to amend Act No. 2655 by fixing the rates of interest on loans and
forbearance of credit; Philippine Senate Resolution (SR) No. 1053,8 10739 and 1102,10 filed by Senators
Ramon B. Magsaysay, Jr., Gregorio B. Honasan and Franklin M. Drilon, respectively, urged the aforesaid
Senate Committee to investigate ways to curb the high commercial interest rates then obtaining in the
country; Senator Ernesto Maceda filed SB No. 1151 to prohibit the collection of more than two months
of advance interest on any loan of money; and Senator Raul Roco filed SR No. 114411 seeking an
investigation into an alleged cartel of commercial banks, called "Club 1821", reportedly behind the
regime of high interest rates. The petitioners also attached news clippings12 showing that in February
1998 the banks prime lending rates, or interests on loans to their best borrowers, ranged from 26% to
31%.

Petitioners contend that under Section 1-a of Act No. 2655, as amended by P.D. No. 1684, the CB-MB
was authorized only to prescribe or set the maximum rates of interest for a loan or renewal thereof or
for the forbearance of any money, goods or credits, and to change such rates whenever warranted by
prevailing economic and social conditions, the changes to be effected gradually and on scheduled dates;
that nothing in P.D. No. 1684 authorized the CB-MB to lift or suspend the limits of interest on all credit
transactions, when it issued CB Circular No. 905. They further insist that under Section 109 of R.A. No.
265, the authority of the CB-MB was clearly only to fix the banks maximum rates of interest, but always
within the limits prescribed by the Usury Law.

Thus, according to petitioners, CB Circular No. 905, which was promulgated without the benefit of any
prior public hearing, is void because it violated Article 5 of the New Civil Code, which provides that "Acts
executed against the provisions of mandatory or prohibitory laws shall be void, except when the law
itself authorizes their validity."

They further claim that just weeks after the issuance of CB Circular No. 905, the benchmark 91-day
Treasury bills (T-bills),13 then known as "Jobo" bills14 shot up to 40% per annum, as a result. The banks
immediately followed suit and re-priced their loans to rates which were even higher than those of the
"Jobo" bills. Petitioners thus assert that CB Circular No. 905 is also unconstitutional in light of Section 1
of the Bill of Rights, which commands that "no person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied the equal protection of the laws."

Finally, petitioners point out that R.A. No. 7653 did not re-enact a provision similar to Section 109 of R.A.
No. 265, and therefore, in view of the repealing clause in Section 135 of R.A. No. 7653, the BSP-MB has
been stripped of the power either to prescribe the maximum rates of interest which banks may charge
for different kinds of loans and credit transactions, or to suspend Act No. 2655 and continue enforcing
CB Circular No. 905.

Ruling

The petition must fail.

A. The Petition is procedurally infirm.

The decision on whether or not to accept a petition for certiorari, as well as to grant due course thereto,
is addressed to the sound discretion of the court.15 A petition for certiorari being an extraordinary
remedy, the party seeking to avail of the same must strictly observe the procedural rules laid down by
law, and non-observance thereof may not be brushed aside as mere technicality.16

As provided in Section 1 of Rule 65, a writ of certiorari is directed against a tribunal exercising judicial or
quasi-judicial functions.17 Judicial functions are exercised by a body or officer clothed with authority to
determine what the law is and what the legal rights of the parties are with respect to the matter in
controversy. Quasi-judicial function is a term that applies to the action or discretion of public
administrative officers or bodies given the authority to investigate facts or ascertain the existence of
facts, hold hearings, and draw conclusions from them as a basis for their official action using discretion
of a judicial nature.18

The CB-MB (now BSP-MB) was created to perform executive functions with respect to the
establishment, operation or liquidation of banking and credit institutions, and branches and agencies
thereof.19 It does not perform judicial or quasi-judicial functions. Certainly, the issuance of CB Circular
No. 905 was done in the exercise of an executive function. Certiorari will not lie in the instant case.20

B. Petitioners have no locus standi to file the Petition

Locus standi is defined as "a right of appearance in a court of justice on a given question." In private
suits, Section 2, Rule 3 of the 1997 Rules of Civil Procedure provides that "every action must be
prosecuted or defended in the name of the real party in interest," who is "the party who stands to be
benefited or injured by the judgment in the suit or the party entitled to the avails of the suit." Succinctly
put, a partys standing is based on his own right to the relief sought.21

Even in public interest cases such as this petition, the Court has generally adopted the "direct injury"
test that the person who impugns the validity of a statute must have "a personal and substantial interest
in the case such that he has sustained, or will sustain direct injury as a result."22 Thus, while petitioners
assert a public right to assail CB Circular No. 905 as an illegal executive action, it is nonetheless required
of them to make out a sufficient interest in the vindication of the public order and the securing of relief.
It is significant that in this petition, the petitioners do not allege that they sustained any personal injury
from the issuance of CB Circular No. 905.

Petitioners also do not claim that public funds were being misused in the enforcement of CB Circular No.
905. In Kilosbayan, Inc. v. Morato,23 involving the on-line lottery contract of the PCSO, there was no
allegation that public funds were being misspent, which according to the Court would have made the
action a public one, "and justify relaxation of the requirement that an action must be prosecuted in the
name of the real party-in-interest." The Court held, moreover, that the status of Kilosbayan as a peoples
organization did not give it the requisite personality to question the validity of the contract. Thus:

Petitioners do not in fact show what particularized interest they have for bringing this suit. It does not
detract from the high regard for petitioners as civic leaders to say that their interest falls short of that
required to maintain an action under the Rule 3, Sec. 2.24

C. The Petition raises no issues of transcendental importance.

In the 1993 case of Joya v. Presidential Commission on Good Government,25 it was held that no
question involving the constitutionality or validity of a law or governmental act may be heard and
decided by the court unless there is compliance with the legal requisites for judicial inquiry, namely: (a)
that the question must be raised by the proper party; (b) that there must be an actual case or
controversy; (c) that the question must be raised at the earliest possible opportunity; and (d) that the
decision on the constitutional or legal question must be necessary to the determination of the case
itself.

In Prof. David v. Pres. Macapagal-Arroyo,26 the Court summarized the requirements before taxpayers,
voters, concerned citizens, and legislators can be accorded a standing to sue, viz:

(1) the cases involve constitutional issues;

(2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax measure is
unconstitutional;

(3) for voters, there must be a showing of obvious interest in the validity of the election law in question;

(4) for concerned citizens, there must be a showing that the issues raised are of transcendental
importance which must be settled early; and

(5) for legislators, there must be a claim that the official action complained of infringes upon their
prerogatives as legislators.

While the Court may have shown in recent decisions a certain toughening in its attitude concerning the
question of legal standing, it has nonetheless always made an exception where the transcendental
importance of the issues has been established, notwithstanding the petitioners failure to show a direct
injury.27 In CREBA v. ERC,28 the Court set out the following instructive guides as determinants on
whether a matter is of transcendental importance, namely: (1) the character of the funds or other assets
involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory
prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of
any other party with a more direct and specific interest in the questions being raised. Further, the Court
stated in Anak Mindanao Party-List Group v. The Executive Secretary29 that the rule on standing will not
be waived where these determinants are not established.

In the instant case, there is no allegation of misuse of public funds in the implementation of CB Circular
No. 905. Neither were borrowers who were actually affected by the suspension of the Usury Law joined
in this petition. Absent any showing of transcendental importance, the petition must fail.

More importantly, the Court notes that the instant petition adverted to the regime of high interest rates
which obtained at least 15 years ago, when the banks prime lending rates ranged from 26% to 31%,30
or even 29 years ago, when the 91-day Jobo bills reached 40% per annum. In contrast, according to the
BSP, in the first two (2) months of 2012 the bank lending rates averaged 5.91%, which implies that the
banks prime lending rates were lower; moreover, deposit interests on savings and long-term deposits
have also gone very low, averaging 1.75% and 1.62%, respectively.31

Judging from the most recent auctions of T-bills, the savings rates must be approaching 0%.1wphi1 In
the auctions held on November 12, 2012, the rates of 3-month, 6-month and 1-year T-bills have
dropped to 0.150%, 0.450% and 0.680%, respectively.32 According to Manila Bulletin, this very low
interest regime has been attributed to "high liquidity and strong investor demand amid positive
economic indicators of the country."33

While the Court acknowledges that cases of transcendental importance demand that they be settled
promptly and definitely, brushing aside, if we must, technicalities of procedure,34 the delay of at least
15 years in the filing of the instant petition has actually rendered moot and academic the issues it now
raises.

For its part, BSP-MB maintains that the petitioners allegations of constitutional and statutory violations
of CB Circular No. 905 are really mere challenges made by petitioners concerning the wisdom of the
Circular. It explains that it was in view of the global economic downturn in the early 1980s that the
executive department through the CB-MB had to formulate policies to achieve economic recovery, and
among these policies was the establishment of a market-oriented interest rate structure which would
require the removal of the government-imposed interest rate ceilings.35

D. The CB-MB merely suspended the effectivity of the Usury Law when it issued CB Circular No. 905.

The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long been
recognized and upheld in many cases. As the Court explained in the landmark case of Medel v. CA,36
citing several cases, CB Circular No. 905 "did not repeal nor in anyway amend the Usury Law but simply
suspended the latters effectivity;"37 that "a CB Circular cannot repeal a law, *for+ only a law can repeal
another law;"38 that "by virtue of CB Circular No. 905, the Usury Law has been rendered ineffective;"39
and "Usury has been legally non-existent in our jurisdiction. Interest can now be charged as lender and
borrower may agree upon."40

In First Metro Investment Corp. v. Este Del Sol Mountain Reserve, Inc.41 cited in DBP v. Perez,42 we also
belied the contention that the CB was engaged in self-legislation. Thus:

Central Bank Circular No. 905 did not repeal nor in any way amend the Usury Law but simply suspended
the latters effectivity. The illegality of usury is wholly the creature of legislation. A Central Bank Circular
cannot repeal a law. Only a law can repeal another law. x x x.43

In PNB v. Court of Appeals,44 an escalation clause in a loan agreement authorized the PNB to
unilaterally increase the rate of interest to 25% per annum, plus a penalty of 6% per annum on past
dues, then to 30% on October 15, 1984, and to 42% on October 25, 1984. The Supreme Court
invalidated the rate increases made by the PNB and upheld the 12% interest imposed by the CA, in this
wise:

P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate freely
regarding any subsequent adjustment in the interest rate that shall accrue on a loan or forbearance of
money, goods or credits. In fine, they can agree to adjust, upward or downward, the interest previously
stipulated. x x x.45

Thus, according to the Court, by lifting the interest ceiling, CB Circular No. 905 merely upheld the
parties freedom of contract to agree freely on the rate of interest. It cited Article 1306 of the New Civil
Code, under which the contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good customs, public
order, or public policy.

E. The BSP-MB has authority to enforce CB Circular No. 905.

Section 1 of CB Circular No. 905 provides that "The rate of interest, including commissions, premiums,
fees and other charges, on a loan or forbearance of any money, goods, or credits, regardless of maturity
and whether secured or unsecured, that may be charged or collected by any person, whether natural or
juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as amended."
It does not purport to suspend the Usury Law only as it applies to banks, but to all lenders.

Petitioners contend that, granting that the CB had power to "suspend" the Usury Law, the new BSP-MB
did not retain this power of its predecessor, in view of Section 135 of R.A. No. 7653, which expressly
repealed R.A. No. 265. The petitioners point out that R.A. No. 7653 did not reenact a provision similar to
Section 109 of R.A. No. 265.

A closer perusal shows that Section 109 of R.A. No. 265 covered only loans extended by banks, whereas
under Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe the maximum rate or rates
of interest for all loans or renewals thereof or the forbearance of any money, goods or credits, including
those for loans of low priority such as consumer loans, as well as such loans made by pawnshops,
finance companies and similar credit institutions. It even authorizes the BSP-MB to prescribe different
maximum rate or rates for different types of borrowings, including deposits and deposit substitutes, or
loans of financial intermediaries.

Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No. 265, now R.A. No. 7653, merely
supplemented it as it concerns loans by banks and other financial institutions. Had R.A. No. 7653 been
intended to repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal terms.

Moreover, the rule is settled that repeals by implication are not favored, because laws are presumed to
be passed with deliberation and full knowledge of all laws existing pertaining to the subject.46 An
implied repeal is predicated upon the condition that a substantial conflict or repugnancy is found
between the new and prior laws. Thus, in the absence of an express repeal, a subsequent law cannot be
construed as repealing a prior law unless an irreconcilable inconsistency and repugnancy exists in the
terms of the new and old laws.47 We find no such conflict between the provisions of Act 2655 and R.A.
No. 7653.

F. The lifting of the ceilings for interest rates does not authorize stipulations charging excessive,
unconscionable, and iniquitous interest.

It is settled that nothing in CB Circular No. 905 grants lenders a carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets.48 As
held in Castro v. Tan:49

The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily
assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation
of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or
in the human conscience nor is there any reason whatsoever which may justify such imposition as
righteous and as one that may be sustained within the sphere of public or private morals.50

Stipulations authorizing iniquitous or unconscionable interests have been invariably struck down for
being contrary to morals, if not against the law.51 Indeed, under Article 1409 of the Civil Code, these
contracts are deemed inexistent and void ab initio, and therefore cannot be ratified, nor may the right
to set up their illegality as a defense be waived.

Nonetheless, the nullity of the stipulation of usurious interest does not affect the lenders right to
recover the principal of a loan, nor affect the other terms thereof.52 Thus, in a usurious loan with
mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the creditor
upon failure by the debtor to pay the debt due. The debt due is considered as without the stipulated
excessive interest, and a legal interest of 12% per annum will be added in place of the excessive interest
formerly imposed,53following the guidelines laid down in the landmark case of Eastern Shipping Lines,
Inc. v. Court of Appeals,54 regarding the manner of computing legal interest:

II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.

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

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of credit.55 (Citations omitted)

The foregoing rules were further clarified in Sunga-Chan v. Court of Appeals, 56 as follows:

Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and the
applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply only to loans
or forbearance of money, goods, or credits, as well as to judgments involving such loan or forbearance
of money, goods, or credit, while the 6% per annum under Art. 2209 of the Civil Code applies "when the
transaction involves the payment of indemnities in the concept of damage arising from the breach or a
delay in the performance of obligations in general," with the application of both rates reckoned "from
the time the complaint was filed until the [adjudged] amount is fully paid." In either instance, the
reckoning period for the commencement of the running of the legal interest shall be subject to the
condition "that the courts are vested with discretion, depending on the equities of each case, on the
award of interest."57 (Citations omitted)

WHEREFORE, premises considered, the Petition for certiorari is DISMISSED.

SO ORDERED.
















Republic of the Philippines
Supreme Court
Manila



SECOND DIVISION


BEATRIZ SIOK PING TANG,
Petitioner,



- versus -





SUBIC BAY DISTRIBUTION, INC.,
Respondent.
G.R. No. 162575

Present:

CARPIO, J., Chairperson,
NACHURA,
PERALTA,
ABAD, and
MENDOZA, JJ.

Promulgated:

December 15, 2010

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


DECISION


PERALTA, J.:

Before us is a petition for review on certiorari filed by petitioner Beatriz Siok Ping Tang seeking to
annul and set aside the Decision[1] dated October 17, 2003 and the Resolution[2] dated March 5, 2004
of the Court of Appeals (CA) in CA-G.R. SP No. 74629.

The antecedent facts are as follows:

Petitioner is doing business under the name and style of Able Transport. Respondent Subic
Bay Distribution, Inc. (SBDI) entered in two Distributorship Agreements with petitioner and Able
Transport in April 2002. Under the Agreements, respondent, as seller, will sell, deliver or procure to be
delivered petroleum products, and petitioner, as distributor, will purchase, receive and pay for its
purchases from respondent. The two Agreements had a period of one year, commencing on October
2001 to October 2002, which shall continue on an annual basis unless terminated by either party upon
thirty days written notice to the other prior to the expiration of the original term or any extension
thereof.

Section 6.3 of the Distributorship Agreement provides that respondent may require petitioner
to put up securities, real or personal, or to furnish respondent a performance bond issued by a bonding
company chosen by the latter to secure and answer for petitioner's outstanding account, and or faithful
performance of her obligations as contained or arising out of the Agreement. Thus, petitioner applied
for and was granted a credit line by the United Coconut Planters Bank (UCPB), International Exchange
Bank (IEBank), and Security Bank Corporation (SBC). Petitioner also applied with the Asia United Bank
(AUB) an irrevocable domestic standby letter of credit in favor of respondent. All these banks separately
executed several undertakings setting the terms and conditions governing the drawing of money by
respondent from these banks.

Petitioner allegedly failed to pay her obligations to respondent despite demand, thus,
respondent tried to withdraw from these bank undertakings.

Petitioner then filed with the Regional Trial Court (RTC) of Quezon City separate petitions[3]
against the banks for declaration of nullity of the several bank undertakings and domestic letter of credit
which they issued with the application for the issuance of a temporary restraining order (TRO) and writ
of preliminary injunction. The cases were later consolidated and were assigned to Branch 101. Petitioner
asked for the annulment of the bank undertakings/letter of credit which she signed on the ground that
the prevailing market rate at the time of respondent's intended drawings with which petitioner will be
charged of as interests and penalties is oppressive, exorbitant, unreasonable and unconscionable
rendering it against public morals and policy; and that to make her automatically liable for millions of
pesos on the bank undertakings, these banks merely required the submission of a mere certification
from the company (respondent) that the customer (petitioner) has not paid its account (and its
statement of account of the client) without first verifying the truthfulness of the alleged petitioner's
total liability to the drawer thereon. Therefore, such contracts are oppressive, unreasonable and
unconscionable as they would result in her obtaining several millions of liability.

On November 28, 2002, a hearing was conducted for the issuance of the TRO and the writ of
preliminary injunction wherein the petitioner and the bank representatives were present. On query of
the respondent Judge Normandie Pizarro (Judge Pizarro) to the bank representatives with regard to the
eventual issuance of the TRO, the latter all replied that they will abide by the sound judgment of the
court. The court then issued an Order[4] granting the TRO and requiring petitioner to implead
respondent as an indispensable party and for the latter to submit its position paper on the matter of the
issuance of the injunction. Petitioner and respondent submitted their respective position papers.

On December 17, 2002, the RTC rendered an Order,[5] the dispositive portion of which reads:
ACCORDINGLY, let a Writ of Preliminary Injunction be issued restraining and enjoining
herein Respondent UCPB, IEB, SB and AUB from releasing any funds to SBDI, pursuant to the Bank
Undertakings and/or Domestic Standby Letter of Credit until further orders from this Court.
Consequently, Petitioner is hereby DIRECTED to post a bond in the amount of TEN MILLION PESOS
(P10,000,000.00), to answer for whatever damages respondent banks and SBDI may suffer should this
Court finally decide that petitioner was not entitled thereto. [6]



The RTC found that both respondent and petitioner have reasons for the enforcement or non-
enforcement of the bank undertakings, however, as to whether said reasons were justifiable or not, in
view of the attending circumstances, the RTC said that these can only be determined after a full blown
trial. It ruled that the outright denial of petitioner's prayer for the issuance of injunction, even if the
evidence warranted the reasonable probability that real injury will occur if the relief for shall not be
granted in favor of petitioner, will not serve the ends of justice.

Respondent filed with the CA a petition for certiorari with prayer for the issuance of a TRO and
writ of preliminary injunction against respondent Judge Pizarro and petitioner. Subsequently, petitioner
filed her Comment and respondent filed its Reply.

On July 4, 2003, the CA issued a Resolution[7] granting the TRO prayed for by respondent after
finding that it was apparent that respondent has a legal right under the bank undertakings issued by
UCPB, SBC, and IEBank; and that until those undertakings were nullified, respondent's rights under the
same should be maintained.

On July 11, 2003, the CA issued a Supplemental Resolution[8] wherein the Domestic Standby Letter
of Credit issued by AUB was ordered included among the bank undertakings, to which respondent has a
legal right.
On October 17, 2003, the CA rendered its assailed Decision, the decretal portion of which reads:

WHEREFORE, the petition is hereby GRANTED. The Order dated December 17, 2002 is hereby
ANNULLED AND SET ASIDE. The writ of preliminary injunction issued by the lower court is hereby
LIFTED.[9]



In so ruling, the CA said that the grant or denial of an injunction rests on the sound discretion
of the RTC which should not be intervened, except in clear cases of abuse. Nonetheless, the CA
continued that the RTC should avoid issuing a writ of preliminary injunction which would, in effect,
dispose of the main case without trial. It found that petitioner was questioning the validity of the bank
undertakings and letter of credit for being oppressive, unreasonable and unconscionable. However, as
provided under the law, private transactions are presumed to be fair and regular and that a person
takes ordinary care of his concerns. The CA ruled that the RTC's issuance of the injunction, which was
premised on the abovementioned justification, would be a virtual acceptance of petitioner's claim, thus,
already a prejudgment of the main case. It also said that contracts are presumed valid until they are
voided by a court of justice, thus, until such time that petitioner has presented sufficient evidence to
rebut such presumption, her legal right to the writ is doubtful.

As to petitioner's claim of respondent's non-filing of a motion for reconsideration before
resorting to a petition for certiorari, the CA said that it is not a rigid rule, as jurisprudence had said, that
when a definite question has been properly raised, argued and submitted in the RTC and the latter had
decided the question, a motion for reconsideration is no longer necessary before filing a petition for
certiorari. The court found that both parties had fully presented their sides on the issuance of the writ of
preliminary injunction and that the RTC had squarely resolved the issues presented by both parties.
Thus, respondent could not be faulted for not filing a motion for reconsideration.

In a Resolution dated March 5, 2004, petitioner's motion for reconsideration was denied.

Hence, this petition, wherein petitioner raises the following assignment of errors:

I. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND REVERSIBLE ERROR IN
GIVING DUE COURSE AND GRANTING THE PETITION FOR CERTIORARI FILED BY PRIVATE RESPONDENT
SBDI, DESPITE THE FACT THAT THE ORIGINAL PARTIES IN THE TRIAL COURT, WHO ARE EQUALLY
MANDATED BY THE QUESTIONED ORDER OF THE TRIAL COURT, NAMELY; UCPB, IEBANK, SBC AND AUB,
AS DEFENDANTS IN THE MAIN CASE, WERE NOT IMPLEADED AS INDISPENSABLE PARTIES IN THE
PETITION.

II. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND REVERSIBLE ERROR
IN GIVING DUE COURSE AND GRANTING PRIVATE RESPONDENT SBDI'S PETITION WHEN THE LATTER
ADMITTEDLY FAILED TO FILE A PRIOR MOTION FOR RECONSIDERATION BEFORE THE TRIAL COURT,
MORESO WHEN INDISPENSABLE PARTIES WERE NOT IMPLEADED WHICH SHOULD HAVE RENDERED THE
COURT OF APPEALS IN WANT OF JURISDICTION TO ACT.[10]


Petitioner claims that the CA decision is void for want of authority of the CA to act on the petition
as the banks should have been impleaded for being indispensable parties, since they are the original
party respondents in the RTC; that the filing with the CA of respondent's petition for certiorari
emanated from the RTC Order wherein the banks were the ones against whom the questioned Order
was issued; that the banks are the ones who stand to release hundred millions of pesos which
respondent sought to draw from the questioned bank undertakings and domestic standby letter of
credit through the certiorari proceedings, thus, they should be given an opportunity to be heard.
Petitioner claims that even the CA recognized the banks' substantial interest over the subject matter of
the case when, despite not being impleaded as parties in the petition filed by respondent, the CA also
notified the banks of its decision.

Petitioner argues that a petition for certiorari filed without a prior motion for reconsideration is a
premature action and such omission constitutes a fatal infirmity; that respondent explained its omission
only when petitioner already brought the same to the attention of the CA, thus, a mere afterthought
and an attempt to cure the fatal defects of its petition.

In its Comment, respondent contends that the banks which issued the bank undertakings and letter
of credit are not indispensable parties in the petition for certiorari filed in the CA. Respondent argues
that while the RTC preliminarily resolved the issue of whether or not petitioner was entitled to an
injunctive relief, and the enforcement of any decision granting such would necessarily involve the banks,
the resolution of the issue regarding the injunction does not require the banks' participation. This is so
because on one hand the entitlement or non-entitlement to an injunction is a matter squarely between
petitioner and respondent, the latter being the party that is ultimately enjoined from benefiting from
the banks' undertakings. On the other hand, respondent contends that the issue resolved by the CA was
whether or not the RTC gravely abused its discretion in granting the injunctive relief to respondent; that
while the enforcement of any decision enjoining the implementation of the injunction issued by the RTC
would affect the banks, the resolution of whether there is grave abuse of discretion committed by the
RTC does not require the banks' participation.

Respondent claims that while as a rule, a motion for reconsideration is required before filing a
petition for certiorari, the rule admits of exceptions, which are, among others: (1) when the issues raised
in the certiorari proceedings have been duly raised and passed upon by the RTC or are the same as
those raised and passed upon in the RTC; (2) there is an urgent necessity and time is of the essence for
the resolution of the issues raised and any further delay would prejudice the interests of the petitioner;
and (3) the issue raised is one purely of law, which are present in respondent's case.

In her Reply, petitioner claims that the decree that will compel and order the banks to release any
funds to respondent pending the resolution of her petition in the RTC will have an injurious effect upon
her rights and interest. She reiterates her arguments in her petition.

Respondent filed a Rejoinder saying that it is misleading for petitioner to allege that the decree
sought by respondent before the CA is directed against the banks; that even the dispositive portion of
the CA decision did not include any express directive to the banks; that there was nothing in the CA
decision which compelled and ordered the banks to release funds in favor of respondent as the CA
decision merely annulled the RTC Order and lifted the writ of preliminary injunction. Respondent
contends that the banks are not persons interested in sustaining the RTC decision as this was obvious
from the separate answers they filed in the RTC wherein they uniformly maintained that the bank
undertakings/letter of credit are not oppressive, unreasonable and unconscionable. Respondent avers
that petitioner is the only person interested in upholding the injunction issued by the RTC, since it will
enable her to prevent the banks from releasing funds to respondent. Respondent insists that petitioner's
petition before the RTC and the instant petition have caused and continues to cause respondent grave
and irreparable damage.

Both parties were then required to file their respective memoranda, in which they complied.


Petitioner's insistence that the banks are indispensable parties, thus, should have been impleaded
in the petition for certiorari filed by respondent in the CA, is not persuasive.

In Arcelona v. Court of Appeals,[11] we stated the nature of indispensable party, thus:

An indispensable party is a party who has such an interest in the controversy or subject matter that a
final adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who
has not only an interest in the subject matter of the controversy, but also has an interest of such nature
that a final decree cannot be made without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with equity and good conscience. It has
also been considered that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective, complete, or equitable.
Further, an indispensable party is one who must be included in an action before it may properly go
forward.

A person is not an indispensable party, however, if his interest in the controversy or
subject matter is separable from the interest of the other parties, so that it will not necessarily be
directly or injuriously affected by a decree which does complete justice between them. Also, a person is
not an indispensable party if his presence would merely permit complete relief between him and those
already parties to the action, or if he has no interest in the subject matter of the action. It is not a
sufficient reason to declare a person to be an indispensable party that his presence will avoid multiple
litigation.[12]


Applying the foregoing, we find that the banks are not indispensable parties in the petition for
certiorari which respondent filed in the CA assailing the RTC Order dated December 17, 2002. In fact,
several circumstances would show that the banks are not parties interested in the matter of the
issuance of the writ of preliminary injunction, whether in the RTC or in the CA.

First. During the hearing of petitioner's prayer for the issuance of a TRO, the RTC, in open court,
elicited from the lawyer-representatives of the four banks their position in the event of the issuance of
the TRO, and all these representatives invariably replied that they will abide and/or submit to the sound
judgment of the court.[13]

Second. When the RTC issued its Order dated December 17, 2002 granting the issuance of the writ
of preliminary injunction, the banks could have challenged the same if they believe that they were
aggrieved by such issuance. However, they did not, and such actuations were in consonance with their
earlier position that they would submit to the sound judgment of the RTC.

Third. When respondent filed with the CA the petition for certiorari with prayer for the issuance of
a TRO and writ of preliminary injunction, and a TRO was subsequently issued, copies of the resolution
were also sent[14] to the banks, although not impleaded, yet the latter took no action to question their
non-inclusion in the petition. Notably, the SBC filed an Urgent Motion for Clarification[15] on whether
or not the issuance of the TRO has the effect of restraining the bank from complying with the writ of
preliminary injunction issued by the RTC or nullifying /rendering ineffectual the said writ. In fact, SBC
even stated that the motion was filed for no other purpose, except to seek proper guidance on the issue
at hand so that whatever action or position it may take with respect to the CA resolution will be
consistent with its term and purposes.

Fourth. When the CA rendered its assailed Decision nullifying the injunction issued by the RTC, and
copies of the decision were furnished these banks, not one of these banks ever filed any pleading to
assail their non-inclusion in the certiorari proceedings.


Indeed, the banks have no interest in the issuance of the injunction, but only the petitioner. The
banks' interests as defendants in the petition for declaration of nullity of their bank undertakings filed
against them by petitioner in the RTC are separable from the interests of petitioner for the issuance of
the injunctive relief.

Moreover, certiorari, as a special civil action, is an original action invoking the original jurisdiction
of a court to annul or modify the proceedings of a tribunal, board or officer exercising judicial or quasi-
judicial functions.[16] It is an original and independent action that is not part of the trial or the
proceedings on the complaint filed before the trial court.[17] Section 5, Rule 65 of the Rules of Court
provides:


Section 5. Respondents and costs in certain cases. - When the petition filed relates to the acts or
omissions of a judge, court, quasi-judicial agency, tribunal, corporation, board, officer or person, the
petitioner shall join, as private respondent or respondents with such public respondent or respondents.
the person or persons interested in sustaining the proceedings in the court; and it shall be the duty of
such private respondents to appear and defend, both in his or their own behalf and in behalf of the
public respondent or respondents affected by the proceedings, and the costs awarded in such
proceedings in favor of the petitioner shall be against the private respondents only, and not against the
judge, court, quasi-judicial agency, tribunal, corporation, board, officer or person impleaded as public
respondent or respondents.

x x x x


Clearly, in filing the petition for certiorari, respondent should join as party defendant with the court
or judge, the person interested in sustaining the proceedings in the court, and it shall be the duty of
such person to appear and defend, both in his own behalf and in behalf of the court or judge affected by
the proceedings. In this case, there is no doubt that it is only the petitioner who is the person interested
in sustaining the proceedings in court since she was the one who sought for the issuance of the writ of
preliminary injunction to enjoin the banks from releasing funds to respondent. As earlier discussed, the
banks are not parties interested in the subject matter of the petition. Thus, it is only petitioner who
should be joined as party defendant with the judge and who should defend the judge's issuance of
injunction.

Notably, the dispositive portion of the assailed CA Decision declared the annulment of the Order
dated December 17, 2002 and lifted the writ of preliminary injunction issued by the RTC. The decision
was directed against the order of the judge. There was no order for the banks to release the funds
subject of their undertakings/letter of credit although such order to lift the injunction would ultimately
result to the release of funds to respondent.

Petitioner contends that respondent filed its petition for certiorari in the CA without a prior motion
for reconsideration, thus, constitutes a fatal infirmity.

We do not agree.

Concededly, the settled rule is that a motion for reconsideration is a condition sine qua non for
the filing of a petition for certiorari.[18] Its purpose is to grant an opportunity for the court to correct
any actual or perceived error attributed to it by the re-examination of the legal and factual
circumstances of the case.[19] The rule is, however, circumscribed by well-defined exceptions, such as
(a) where the order is a patent nullity, as where the court a quo had no jurisdiction; (b) where the
questions raised in the certiorari proceeding have been duly raised and passed upon by the lower court,
or are the same as those raised and passed upon in the lower court; (c) where there is an urgent
necessity for the resolution of the question and any further delay would prejudice the interests of the
Government or of the petitioner or the subject matter of the action is perishable; (d) where, under the
circumstances, a motion for reconsideration would be useless; (e) where petitioner was deprived of due
process and there is extreme urgency for relief; (f) where, in a criminal case, relief from an order of
arrest is urgent and the granting of such relief by the trial court is improbable; (g) where the proceedings
in the lower court are a nullity for lack of due process; (h) where the proceedings were ex parte, or in
which the petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or
where public interest is involved.[20]

Respondent explained their omission of filing a motion for reconsideration before resorting to a
petition for certiorari based on exceptions (b), (c) and (i). The CA brushed aside the filing of the motion
for reconsideration based on the ground that the questions raised in the certiorari proceedings have
been duly raised and passed upon by the lower court, or are the same as those raised and passed upon
in the lower court. We agree.

Respondent had filed its position paper in the RTC stating the reasons why the injunction prayed
for by petitioner should not be granted. However, the RTC granted the injunction. Respondent filed a
petition for certiorari with the CA and presented the same arguments which were already passed upon
by the RTC. The RTC already had the opportunity to consider and rule on the question of the propriety
or impropriety of the issuance of the injunction. We found no reversible error committed by the CA for
relaxing the rule since respondent's case falls within the exceptions.




Petitioner's reliance on Philippine National Construction Corporation v. National Labor Relations
Commission,[21] where we required the filing of a motion for reconsideration before the filing of a
petition for certiorari notwithstanding petitioner's invocation of the recognized exception, i.e., the same
questions raised before the public respondent were to be raised before us, is not applicable. In said
case, we ruled that petitioner failed to convince us that his case falls under the recognized exceptions as
the basis was only petitioner's bare allegation. In this case before us, the CA found, and to which we
agree, that both parties have fully presented their respective arguments in the RTC on petitioner's
prayer for the issuance of the writ of preliminary injunction, and that respondent's argument that
petitioner is not entitled to the injunctive relief had been squarely resolved by the RTC.

WHEREFORE, the petition is DENIED. The Decision dated October 17, 2003 and the Resolution
dated March 5, 2004 of the Court of Appeals, in CA-G.R. SP No. 74629, are hereby AFFIRMED.


















Robert De Galicia vs. Mercado G.R. 146744
Facts
Case Background
Petitioner Robert G. de Galicia was a business partner in RCL Enterprises. He was asked by his
partner Carmen Arciaga to co-sign with her a Philbank check for P50,000 payable to cash.
Allegedly without his knowledge and consent, Arciaga rediscounted the check with respondent
Mely Mercado at 8% interest, thus, only the sum of P46,000 was given.
Checks were dishonored for insufficiency of funds. Mercado then filed a complaint for estafa and
for violation BP 221 against petitioner and Carmen Arciaga.
Petitioner countered by filing in the RTC Manila, a case for the declaration of nullity of the
agreement to pay interest between respondent and his partner, Arciaga. He prayed that the agreement,
together with the rediscounted check, be declared void for being contrary to public policy.
Lower Court Rulings
RTC: dismissed petitioners case for lack of jurisdiction. Motion for reconsideration was denied.
o Arciaga, one of the parties in the so-called agreement, was not a party to the present case.
o The subject check amounting to P50,000 was way below the jurisdictional amount vested in the
Regional Trial Court.
Since this is a pure question of law, the petitioner filed a petition for review under Rule 45 of the
1997 Rules of Civil Procedure before the SC.
Issues:
Procedural Issue:
Whether RTC did not err in dismissing the complaint because Arciaga, as an indispensable party,
was not impleaded;
Substantial Issue
Whether the trial court erred in dismissing the complaint for lack of jurisdiction over its subject
matter simply because the amount involve was only P50,000.
Held and Ratio
Procedural Issue
Yes, this Court sustains the dismissal of the subject complaint for its failure to implead an
indispensable party.
o Under Rule 3, Section 7 of the 1997 Rules of Civil Procedure, an indispensable party is a party-in-
interest without whom there can be no final determination of an action.
o The interests of such indispensable party in the subject matter of the suit and the relief are so bound
with those of the other parties that his legal presence as a party to the proceeding is an absolute
necessity; such that a complete and efficient determination of the equities and rights of the parties is
not possible if he is not joined.
Arciaga, being a co-signatory of the re-discounted check and being privy to the assailed agreement,
was an indispensable party to the suit. Her interest in the suit was intertwined with the rights and
interest of both petitioner and respondent.
Substantial Issue
Yes, the subject of the action before the trial court was incapable of pecuniary estimation and
therefore cognizable by the RTC.
o Under BP 129, the RTC shall exercise exclusive jurisdiction in all civil actions in which the subject of
the litigation is incapable of pecuniary estimation.
If it is primarily for the recovery of a sum of money, the claim is considered capable of pecuniary
estimation, and jurisdiction lies in the municipal courts or in RTC depending on the amount involved.
However, if the issue is something other than the right to recover a sum of money, where the money
claim is purely incidental to, or a consequence of, the principal relief sought, jurisdiction lies with the
RTC.

In this case, what was being assailed was the payment of interest, not the recovery of a sum of money
as found by the trial court.







THIRD DIVISION

DIONISIA MONIS LAGUNILLA and RAFAEL MONIS,
Petitioners,



- versus -




ANDREA MONIS VELASCO and MACARIA MONIS,
Respondents.

G.R. No. 169276

Present:

YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

Promulgated:

June 16, 2009

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


DECISION

NACHURA, J.:





For review is the Court of Appeals (CA) Decision[1] dated July 13, 2005 in CA-G.R. CV No. 56998 affirming
with modification the Regional Trial Court (RTC) Decision[2] dated April 24, 1997 in Civil Case No. 466 for
Annulment of Documents and Damages.


The facts, as culled from the records, are as follows:

Rev. Fr. Patricio (Patricio), Magdalena Catalina (Magdalena), Venancio, and respondent Macaria, all
surnamed Monis, as well as respondent Andrea Monis - Velasco (Andrea), are siblings. Venancio is the
father of petitioners Dionisia Monis Lagunilla and Rafael Monis. During their lifetime, Patricio and
Magdalena acquired several properties which included several parcels of land in the province of La
Union and another one situated in Quezon City, with an area of 208.35 sq. m. (otherwise known as the
Quezon City property).[3] The Quezon City property was co-owned by Patricio and Magdalena, together
with Andrea and Pedro Velasco.

After the death of Patricio and Magdalena, or on February 24, 1993, Andrea and Macaria (to the
exclusion of Venancios children) executed a Deed of Extrajudicial Settlement with Donation*4+
(hereinafter referred to as the subject Deed) involving the Quezon City property, and donated the same
to Andreas son, Pedro Monis Velasco, Jr. (Pedro). By virtue of said Deed, Transfer Certificate of Title
(TCT) No. RT-60455 (190472)[5] was cancelled and a new one (TCT No. 85837) was issued in the name of
Pedro.[6]

On June 1, 1993, petitioners instituted an action for Annulment of Documents and Damages[7] before
the Regional Trial Court (RTC) of Balaoan, La Union against respondents. The case was raffled to Branch
34 and was docketed as Civil Case No. 466. In their complaint, petitioners sought the annulment of the
subject Deed, allegedly because of the fraudulent act committed by respondents in executing the same.
They claimed that respondents misrepresented that they were the only surviving heirs of Patricio and
Magdalena when, in fact, they (petitioners) were also surviving heirs by virtue of their right to represent
their deceased father Venancio. In short, being Patricio and Magdalenas nephew and niece, they were
asserting their rights, as co-heirs, to the Quezon City property. Respondents fraudulent act was,
according to petitioners, a ground for the annulment of the subject Deed. As a consequence of the
nullity of the extrajudicial settlement, they further sought the cancellation of the title and tax
declarations issued pursuant thereto, in the name of Pedro.

Respondents countered that nowhere in the subject Deed did they assert to be the only surviving heirs
of Patricio and Magdalena. Admittedly, however, they claimed to be the only legitimate sisters of the
deceased. They added that annulment of the Deed was not tenable, considering that petitioners
already received advances on their share of the properties of the decedent; besides, there were other
properties that had not been the subject of partition from which they could obtain reparation, if they
are so entitled. Contrary to petitioners claim, respondents insisted that there was no way that the
subject Deed could be annulled in the absence of any valid ground to rely on.[8]

No amicable settlement was reached during the pre-trial; thus, trial on the merits ensued.

After petitioners rested their case, they moved for the amendment of the complaint to implead
additional party and to conform to the evidence presented.[9] Petitioners averred that the resolution of
the case would affect the interest of Pedro as donee; hence, he is an indispensable party. The RTC,
however, denied the motion, as the amendment of the complaint would result in the introduction of a
different cause of action prejudicial to respondents. The court further held that the amendment of the
complaint would unduly delay the resolution of the case.

On April 24, 1997, the RTC decided in favor of respondents, disposing, as follows:

WHEREFORE, taken in the above light, the Court hereby orders the case DISMISSED and further orders
the plaintiffs to pay the defendants jointly and severally the following, thus:

1) P100,000.00 as moral damages;
2) P50,000.00 as exemplary damages;
3) P100,000.00 as attorneys fees; and
4) To pay the costs of this suit.

SO ORDERED.[10]


Applying Article 887 of the Civil Code, the RTC ruled that petitioners are not compulsory heirs;
thus, they could not invoke bad faith as a ground to rescind the subject Deed. As to respondents
declaration that they were the only surviving heirs of the decedents, the trial court said that it was, in a
way, a non-recognition of petitioners claim that they, too, are heirs. The court, likewise, gave credence
to respondents claim that petitioners had previously received advances on their share of the
inheritance. As to the remedy of rescission, the court declared that it was not available in the instant
case because of the existence of other remedies that may be availed of by petitioners, considering that
there were other properties from which they could obtain reparation, assuming they are entitled.[11]

On appeal to the Court of Appeals, the appellate court affirmed with modification the trial courts
decision, viz.:

WHEREFORE, premises considered, the assailed decision dated April 24, 1997 of the Regional Trial
Court of Balao[a]n, La Union in Civil Case No. 466 is hereby AFFIRMED with MODIFICATION, in that the
award of exemplary damages and attorneys fees is deleted. No pronouncement as to costs.

SO ORDERED.[12]


The appellate court made a definitive conclusion that petitioners, together with respondents, are
heirs of Macaria and Patricio. However, considering that petitioners are not compulsory heirs, it agreed
with the RTC that they could not use bad faith as a ground to rescind the contract as provided for in
Article 1104 of the New Civil Code. The appellate court also agreed with the trial court that bad faith on
the part of respondents was wanting. While recognizing the doctrine that the subject Deed was not
binding on petitioners because they did not participate therein, the appellate court refused to annul the
contract on the basis thereof, in view of the existence of other properties previously received by
petitioners and those that may still be the subject of partition. The court further denied the prayer to
annul the donation made in favor of Pedro, inasmuch as it was belatedly raised by petitioners.[13] The
appellate court likewise found the deletion of the award of exemplary damages and attorneys fees
proper.[14]

Unsatisfied, petitioners come to this Court in this petition for review on certiorari raising the
following issues:

I. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AND
MANIFESTLY OVERLOOKED RELEVANT FACTS NOT DISPUTED AND WHICH IF PROPERLY CONSIDERED
WOULD JUSTIFY A DIFFERENT CONCLUSION THAT THERE IS FRAUD OR BAD FAITH ON THE PART OF
DEFENDANTS-APPELLEES IN EXCLUDING PLAINTIFFS-APPELLANTS FROM THE DEED OF EXTRA JUDICIAL
SETTLEMENT WITH DONATION.

II. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT THE MERE ACT OF REPUDIATING THE INTEREST OF A CO-OWNER IS NOT
SUFFICIENT TO SUPPORT A FINDING OF BAD FAITH SINCE NO BAD FAITH CAN BE ATTRIBUTED TO A
PERSON WHO ONLY EXERCISES A PRIVILEGE GRANTED BY LAW.

III. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT THERE IS ABSENCE OF FRAUD OR BAD FAITH ON THE PART OF DEFENDANTS-
APPELLEES IN EXCLUDING PLAINTIFFS-APPELLANTS IN THE EXTRA JUDICIAL SETTLEMENT BASED ON AN
INFERENCE THAT IS MANIFESTLY MISTAKEN THAT PLAINTIFFS-APPELLANTS HAVE ALREADY OBTAINED
THEIR ADVANCE OF INHERITANCE FROM THE DECEDENTS.

IV. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW AND
GRAVE ABUSE OF DISCRETION IN CONCLUDING THAT THE ASSAILED EXTRAJUDICIAL SETTLEMENT
CANNOT BE ANNULLED SINCE THE MISREPRESENTATION IS NOT SO GRAVE IN CHARACTER AS TO
AMOUNT TO BAD FAITH (AND) RULE 74, SECTION 1, SECOND PARAGRAPH, DOES NOT DISCOUNT THE
POSSIBILITY THAT SOME HEIRS MAY HAVE BEEN EXCLUDED IN THE EXECUTION OF THE EXTRAJUDICIAL
SETTLEMENT.

V. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION TANTAMOUNT TO AN ERROR OF LAW IN CONCLUDING THAT THE DEED OF EXTRAJUDICIAL
SETTLEMENT WITH DONATION CANNOT BE ANNULLED.

VI. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
AWARDING MORAL DAMAGES DESPITE FINDING THAT THE SUIT WAS MADE IN GOOD FAITH.

VII. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT THAT THE MOTION TO AMEND COMPLAINT
TO IMPLEAD ADDITIONAL PARTY AND TO CONFORM TO THE EVIDENCE PRESENTED FILED BY THE
PLAINTIFFS-APPELLANTS IS NOT PROPER.[15]


In fine, petitioners challenge the appellate courts conclusions on the validity of the extrajudicial
settlement with donation and the denial of the motion to amend the complaint to implead an
indispensable party and conform to the evidence presented.

Much as we would like to make a definitive conclusion on the respective rights of all the parties and
decide, once and for all, their interests over the subject property, we are barred by a jurisdictional issue.

Jurisdiction is the power invested in courts for administering justice, that is, to hear and decide cases.
For the court to exercise the authority to dispose of the case on the merits, it must acquire jurisdiction
over the subject matter and the parties.[16]

Courts acquire jurisdiction over a party plaintiff upon the filing of the complaint. On the other hand,
jurisdiction over the person of a party defendant is assured upon the service of summons in the manner
required by law or, otherwise, by his voluntary appearance. As a rule, if a defendant has not been
summoned, the court acquires no jurisdiction over his person, and a personal judgment rendered
against such defendant is null and void. A decision that is null and void for want of jurisdiction of the
trial court is not a decision in contemplation of law and can never become final and executory.[17]

Corollary to the issue of jurisdiction, and equally important, is the mandatory rule on joinder of
indispensable parties set forth in Section 7, Rule 3 of the Rules of Court, to wit:

SEC. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants.


The general rule with reference to parties to a civil action requires the joinder of all necessary parties,
where possible, and the joinder of all indispensable parties under any and all conditions.[18] The evident
intent of the Rules on the joinder of indispensable and necessary parties is the complete determination
of all possible issues, not only between the parties themselves but also as regards other persons who
may be affected by the judgment.[19]

In this case, petitioners challenge the denial of their motion to amend the complaint to implead Pedro
who, they claim, is an indispensable party to the case. We are, therefore, compelled to address this
important question.

In Regner v. Logarta[20] and Arcelona v. CA,[21] we laid down the test to determine if a party is an
indispensable party, viz.:

An indispensable party is a party who has an interest in the controversy or subject matter that a final
adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has an interest of such nature that
a final decree cannot be made without affecting his interest or leaving the controversy in such a
condition that its final determination may be wholly inconsistent with equity and good conscience. It
has also been considered that an indispensable party is a person in whose absence there cannot be a
determination between the parties already before the court which is effective, complete or equitable.
Further, an indispensable party is one who must be included in an action before it may properly go
forward.

A person is not an indispensable party, however, if his interest in the controversy or subject matter is
separable from the interest of the other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also, a person is not an indispensable
party if his presence would merely permit complete relief between him and those already parties to the
action, or if he has no interest in the subject matter of the action. It is not a sufficient reason to declare
a person to be an indispensable party that his presence will avoid multiple litigation.[22]


In upholding the denial of the motion to amend the complaint, the appellate court concluded that the
sole desire of petitioners in instituting the case was the annulment of the extrajudicial settlement.
Effectively, it separated the question of the validity of the extrajudicial settlement from the validity of
the donation. Accordingly, the court said, the latter issue could be threshed out in a separate
proceeding later. This explains why Pedro was not considered an indispensable party by the trial and
appellate courts.

We beg to differ.

Even without having to scrutinize the records, a mere reading of the assailed decision readily
reveals that Pedro is an indispensable party. At the time of the filing of the complaint, the title to the
Quezon City property was already registered in the name of Pedro, after TCT No. 60455 (190472) in the
names of Pedro Velasco, Andrea, Magdalena and Patricio Monis was cancelled, pursuant to the
extrajudicial settlement with donation executed by respondents. The central thrust of the complaint
was that respondents, by themselves, could not have transferred the Quezon City property to Pedro
because petitioners, as heirs of Patricio and Magdalena, also have rights over it. Accordingly, petitioners
specifically prayed that the extrajudicial settlement with donation be annulled and the transfer
certificate of title and tax declarations (in the name of Pedro) issued pursuant thereto be canceled. The
pertinent portion of the complaint is quoted for easy reference:

WHEREFORE, in view of the foregoing, it is respectfully prayed that judgment be rendered as
follows

1. By ordering the annulment of Annex A hereof as well as the cancellation of transfer
certificate of title and tax declarations issued pursuant thereto.[23]


If such prayer and thrust were to be denied (as held by the trial and appellate courts), the problem
would be less obvious, as the status quo would be maintained. However, if they were to be upheld,
Pedros title to the property would undoubtedly be directly and injuriously affected. Even if we only
resolve the validity of the extrajudicial settlement, there would be no final adjudication of the case
without involving Pedros interest.

Verily, Pedros interest in the subject matter of the suit and in the relief sought are so inextricably
intertwined with that of the other parties. His legal presence as a party to the proceedings is, therefore,
an absolute necessity.[24] His interest in the controversy and in the subject matter is not separable from
the interest of the other parties.

It is unfortunate that petitioners failed to implead Pedro as defendant in their complaint. Interestingly,
however, they realized such mistake, albeit belatedly, and thus sought the amendment of the complaint
to join him as a defendant, but the RTC refused to grant the same.

Well-settled is the rule that joinder of indispensable parties is mandatory.[25] It is a condition sine qua
non to the exercise of judicial power.[26] The absence of an indispensable party renders all subsequent
actions of the court null and void for want of authority to act, not only as to the absent parties but even
as to those present.[27] Without the presence of indispensable parties to the suit, the judgment of the
court cannot attain finality.[28] One who is not a party to a case is not bound by any decision of the
court; otherwise, he will be deprived of his right to due process.[29] That is why the case is generally
remanded to the court of origin for further proceedings.[30]

In light of these premises, no final ruling can be had on the validity of the extrajudicial settlement.
While we wish to abide by the mandate on speedy disposition of cases, we cannot render a premature
judgment on the merits. To do so could result in a possible violation of due process. The inclusion of
Pedro is necessary for the effective and complete resolution of the case and in order to accord all parties
the benefit of due process and fair play.[31]

Nevertheless, as enunciated in Commissioner Domingo v. Scheer,[32] Lotte Phil. Co., Inc. v. Dela
Cruz,[33] and PepsiCo, Inc. v. Emerald Pizza, Inc.,[34] the non-joinder of indispensable parties is not a
ground for the dismissal of an action. The remedy is to implead the non-party claimed to be
indispensable. Parties may be added by order of the court on motion of the party or on its own initiative
at any stage of the action and/or at such times as are just. If the plaintiff refuses to implead an
indispensable party despite the order of the court, then the court may dismiss the complaint for the
plaintiffs failure to comply with a lawful court order.

In light of the foregoing, a remand of the case to the trial court is imperative.

WHEREFORE, the Decision of the Court of Appeals dated July 13, 2005 in CA-G.R. CV No. 56998 is SET
ASIDE. Let the case be REMANDED to the Regional Trial Court for the inclusion of Pedro Velasco, Jr. as
an indispensable party, and for further proceedings.











SECOND DIVISION



JOSEPHINE MARMO,* NESTOR ESGUERRA, DANILO DEL PILAR and MARISA DEL PILAR,
Petitioners,



- versus -



MOISES O. ANACAY,
Respondent.
G.R. No. 182585

Present:

CARPIO, J., Chairperson,
LEONARDO-DE CASTRO,
BRION,
DEL CASTILLO, and
ABAD, JJ.



Promulgated:

November 27, 2009


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

D E C I S I O N

BRION, J.:

Before us is the Petition for Review on Certiorari,[1] filed by the spouses Josephine Marmo and Nestor
Esguerra and the spouses Danilo del Pilar and Marisa del Pilar (collectively, the petitioners), to reverse
and set aside the Decision[2] dated December 28, 2007 and the Resolution[3] dated April 11, 2008 of
the Former Special Eleventh Division of the Court of Appeals (CA) in CA-G.R. SP No. 94673. The assailed
CA Decision dismissed the petitioners petition for certiorari challenging the Orders dated March 14,
2006[4] and May 8, 2006[5] of the Regional Trial Court (RTC), Branch 90, Dasmarias, Cavite in Civil Case
No. 2919-03, while the assailed CA Resolution denied the petitioners motion for reconsideration.

FACTUAL BACKGROUND

The facts of the case, as gathered from the parties pleadings, are briefly summarized below:

On September 16, 2003, respondent Moises O. Anacay filed a case for Annulment of Sale, Recovery of
Title with Damages against the petitioners[6] and the Register of Deeds of the Province of Cavite,
docketed as Civil Case No. 2919-03.[7] The complaint states, among others, that: the respondent is the
bona-fide co-owner, together with his wife, Gloria P. Anacay (now deceased), of a 50-square meter
parcel of land and the house built thereon, located at Blk. 54, Lot 9, Regency Homes, Brgy. Malinta,
Dasmarias, Cavite, covered by Transfer Certificate of Title (TCT) No. T-815595 of the Register of Deeds
of Cavite; they authorized petitioner Josephine to sell the subject property; petitioner Josephine sold the
subject property to petitioner Danilo for P520,000.00, payable in monthly installments of P8,667.00
from May 2001 to June 2006; petitioner Danilo defaulted in his installment payments from December
2002 onwards; the respondent subsequently discovered that TCT No. 815595 had been cancelled and
TCT No. T-972424 was issued in petitioner Josephines name by virtue of a falsified Deed of Absolute
Sale dated September 20, 2001; petitioner Josephine subsequently transferred her title to petitioner
Danilo; TCT No. T-972424 was cancelled and TCT No. T-991035 was issued in petitioner Danilos name.
The respondent sought the annulment of the Deed of Absolute Sale dated September 20, 2001 and the
cancellation of TCT No. T-991035; in the alternative, he demanded petitioner Danilos payment of the
balance of P347,000.00 with interest from December 2002, and the payment of moral damages,
attorneys fees, and cost of suit.

In her Answer, petitioner Josephine averred, among others, that the respondents children, as co-
owners of the subject property, should have been included as plaintiffs because they are indispensable
parties.*8+ Petitioner Danilo echoed petitioner Josephines submission in his Answer.*9+

Following the pre-trial conference, the petitioners filed a Motion to Dismiss the case for the
respondents failure to include his children as indispensable parties.*10+

The respondent filed an Opposition, arguing that his children are not indispensable parties because the
issue in the case can be resolved without their participation in the proceedings.[11]

THE RTC RULING

The RTC found the respondents argument to be well-taken and thus denied the petitioners motion to
dismiss in an Order dated March 14, 2006.*12+ It also noted that the petitioners motion was simply
filed to delay the proceedings.

After the denial of their Motion for Reconsideration,[13] the petitioners elevated their case to the CA
through a Petition for Certiorari under Rule 65 of the Rules of Court.[14] They charged the RTC with
grave abuse of discretion amounting to lack of jurisdiction for not dismissing the case after the
respondent failed to include indispensable parties.

THE CA RULING

The CA dismissed the petition[15] in a Decision promulgated on December 28, 2007. It found that the
RTC did not commit any grave abuse of discretion in denying the petitioners motion to dismiss, noting
that the respondents children are not indispensable parties.

The petitioners moved[16] but failed[17] to secure a reconsideration of the CA Decision; hence, the
present petition.

Following the submission of the respondents Comment*18+ and the petitioners Reply,*19+ we gave due
course to the petition and required the parties to submit their respective memoranda.[20] Both parties
complied.[21]

Meanwhile, on April 24, 2009, the petitioners filed with the RTC a Motion to Suspend Proceedings due
to the pendency of the present petition. The RTC denied the motion to suspend as well as the motion
for reconsideration that followed. The petitioners responded to the denial by filing with us a petition for
the issuance of a temporary restraining order (TRO) to enjoin the RTC from proceeding with the hearing
of the case pending the resolution of the present petition.

THE PETITION and
THE PARTIES SUBMISSIONS

The petitioners submit that the respondents children, who succeeded their deceased mother as co-
owners of the property, are indispensable parties because a full determination of the case cannot be
made without their presence, relying on Arcelona v. Court of Appeals,[22] Orbeta v. Sendiong,[23] and
Galicia v. Manliquez Vda. de Mindo.[24] They argue that the non-joinder of indispensable parties is a
fatal jurisdictional defect.

The respondent, on the other hand, counters that the respondents children are not indispensable
parties because the issue involved in the RTC whether the signatures of the respondent and his wife in
the Deed of Absolute Sale dated September 20, 2001 were falsified - can be resolved without the
participation of the respondents children.

THE ISSUE

The core issue is whether the respondents children are indispensable parties in Civil Case No. 2919-03.
In the context of the Rule 65 petition before the CA, the issue is whether the CA correctly ruled that the
RTC did not commit any grave abuse of discretion in ruling that the respondents children are not
indispensable parties.

OUR RULING

We see no merit in the petition.

General Rule: The denial of a
motion to dismiss is an
interlocutory order which is
not the proper subject of an
appeal or a petition for
certiorari.

At the outset, we call attention to Section 1 of Rule 41[25] of the Revised Rules of Court governing
appeals from the RTC to the CA. This Section provides that an appeal may be taken only from a
judgment or final order that completely disposes of the case, or of a matter therein when declared by
the Rules to be appealable. It explicitly states as well that no appeal may be taken from an interlocutory
order.

In law, the word interlocutory refers to intervening developments between the commencement of a
suit and its complete termination; hence, it is a development that does not end the whole
controversy.*26+ An interlocutory order merely rules on an incidental issue and does not terminate or
finally dispose of the case; it leaves something to be done before the case is finally decided on the
merits.[27]

An Order denying a Motion to Dismiss is interlocutory because it does not finally dispose of the case,
and, in effect, directs the case to proceed until final adjudication by the court. Only when the court
issues an order outside or in excess of jurisdiction or with grave abuse of discretion, and the remedy of
appeal would not afford adequate and expeditious relief, will certiorari be considered an appropriate
remedy to assail an interlocutory order.[28]

In the present case, since the petitioners did not wait for the final resolution on the merits of Civil Case
No. 2919-03 from which an appeal could be taken, but opted to immediately assail the RTC Orders dated
March 14, 2006 and May 8, 2006 through a petition for certiorari before the CA, the issue for us to
address is whether the RTC, in issuing its orders, gravely abused its discretion or otherwise acted outside
or in excess of its jurisdiction.

The RTC did not commit grave
abuse of discretion in denying
the petitioners Motion to
Dismiss; the respondents co-
owners are not indispensable
parties.


The RTC grounded its Order dated March 14, 2006 denying the petitioners motion to dismiss on the
finding that the respondents children, as co-owners of the subject property, are not indispensable
parties to the resolution of the case.

We agree with the RTC.

Section 7, Rule 3 of the Revised Rules of Court[29] defines indispensable parties as parties-in-interest
without whom there can be no final determination of an action and who, for this reason, must be joined
either as plaintiffs or as defendants. Jurisprudence further holds that a party is indispensable, not only if
he has an interest in the subject matter of the controversy, but also if his interest is such that a final
decree cannot be made without affecting this interest or without placing the controversy in a situation
where the final determination may be wholly inconsistent with equity and good conscience. He is a
person whose absence disallows the court from making an effective, complete, or equitable
determination of the controversy between or among the contending parties. [30]

When the controversy involves a property held in common, Article 487 of the Civil Code explicitly
provides that any one of the co-owners may bring an action in ejectment.

We have explained in Vencilao v. Camarenta*31+ and in Sering v. Plazo*32+ that the term action in
ejectment includes a suit for forcible entry (detentacion) or unlawful detainer (desahucio).[33] We also
noted in Sering that the term action in ejectment includes also, an accion publiciana (recovery of
possession) or accion reinvidicatoria*34+ (recovery of ownership). Most recently in Estreller v.
Ysmael,[35] we applied Article 487 to an accion publiciana case; in Plasabas v. Court of Appeals[36] we
categorically stated that Article 487 applies to reivindicatory actions.

We upheld in several cases the right of a co-owner to file a suit without impleading other co-owners,
pursuant to Article 487 of the Civil Code. We made this ruling in Vencilao, where the amended
complaint for forcible entry and detainer specified that the plaintiff is one of the heirs who co-owns
the disputed properties. In Sering, and Resuena v. Court of Appeals,[37] the co-owners who filed the
ejectment case did not represent themselves as the exclusive owners of the property. In Celino v. Heirs
of Alejo and Teresa Santiago,[38] the complaint for quieting of title was brought in behalf of the co-
owners precisely to recover lots owned in common.[39] In Plasabas, the plaintiffs alleged in their
complaint for recovery of title to property (accion reivindicatoria) that they are the sole owners of the
property in litigation, but acknowledged during the trial that the property is co-owned with other
parties, and the plaintiffs have been authorized by the co-owners to pursue the case on the latters
behalf.

These cases should be distinguished from Baloloy v. Hular[40] and Adlawan v. Adlawan[41] where the
actions for quieting of title and unlawful detainer, respectively, were brought for the benefit of the
plaintiff alone who claimed to be the sole owner. We held that the action will not prosper unless the
plaintiff impleaded the other co-owners who are indispensable parties. In these cases, the absence of an
indispensable party rendered all subsequent actions of the court null and void for want of authority to
act, not only as to the absent parties but even as to those present.

We read these cases to collectively mean that where the suit is brought by a co-owner, without
repudiating the co-ownership, then the suit is presumed to be filed for the benefit of the other co-
owners and may proceed without impleading the other co-owners. However, where the co-owner
repudiates the co-ownership by claiming sole ownership of the property or where the suit is brought
against a co-owner, his co-owners are indispensable parties and must be impleaded as party-
defendants, as the suit affects the rights and interests of these other co-owners.

In the present case, the respondent, as the plaintiff in the court below, never disputed the existence of a
co-ownership nor claimed to be the sole or exclusive owner of the litigated lot. In fact, he recognized
that he is a bona-fide co-owner of the questioned property, along with his deceased wife. Moreover
and more importantly, the respondents claim in his complaint in Civil Case No. 2919-03 is personal to
him and his wife, i.e., that his and his wifes signatures in the Deed of Absolute Sale in favor of petitioner
Josephine were falsified. The issue therefore is falsification, an issue which does not require the
participation of the respondents co-owners at the trial; it can be determined without their presence
because they are not parties to the document; their signatures do not appear therein. Their rights and
interests as co-owners are adequately protected by their co-owner and father, respondent Moises O.
Anacay, since the complaint was made precisely to recover ownership and possession of the properties
owned in common, and, as such, will redound to the benefit of all the co-owners.[42]

In sum, respondents children, as co-owners of the subject property, are not indispensable parties to the
resolution of the case. We held in Carandang v. Heirs of De Guzman[43] that in cases like this, the co-
owners are not even necessary parties, for a complete relief can be accorded in the suit even without
their participation, since the suit is presumed to be filed for the benefit of all.*44+ Thus, the respondents
children need not be impleaded as party-plaintiffs in Civil Case No. 2919-03.

We cannot subscribe to the petitioners reliance on our rulings in Arcelona v. Court of Appeals,[45]
Orbeta v. Sendiong[46] and Galicia v. Manliquez Vda. de Mindo,[47] for these cases find no application
to the present case. In these cited cases, the suits were either filed against a co-owner without
impleading the other co-owners, or filed by a party claiming sole ownership of a property that would
affect the interests of third parties.

Arcelona involved an action for security of tenure filed by a tenant without impleading all the co-owners
of a fishpond as party-defendants. We held that a tenant, in an action to establish his status as such,
must implead all the pro-indiviso co-owners as party-defendants since a tenant who fails to implead all
the co-owners as party-defendants cannot establish with finality his tenancy over the entire co-owned
land. Orbeta, on the other hand, involved an action for recovery of possession, quieting of title and
damages wherein the plaintiffs prayed that they be declared absolute co-owners of the disputed
property, but we found that there were third parties whose rights will be affected by the ruling and who
should thus be impleaded as indispensable parties. In Galicia, we noted that the complaint for recovery
of possession and ownership and annulment of title alleged that the plaintiffs predecessor-in-interest
was deprived of possession and ownership by a third party, but the complaint failed to implead all the
heirs of that third party, who were considered indispensable parties.

In light of these conclusions, no need arises to act on petitioners prayer for a TRO to suspend the
proceedings in the RTC and we find no reason to grant the present petition.

WHEREFORE, premises considered, we hereby DENY the petition for its failure to show any reversible
error in the assailed Decision dated December 28, 2007 and Resolution dated April 11, 2008 of the Court
of Appeals in CA-G.R. SP No. 94673, both of which we hereby AFFIRM. Costs against the petitioners.

SO ORDERED.











THIRD DIVISION

LEONIS NAVIGATION CO., INC. and WORLD MARINE PANAMA, S.A.,
Petitioners,


- versus -



CATALINO U. VILLAMATER and/or The Heirs of the Late Catalino U. Villamater, represented herein by
Sonia Mayuyu Villamater; and NATIONAL LABOR RELATIONS COMMISSION,
Respondents.

G.R. No. 179169

Present:

CORONA, J.,
Chairperson,
VELASCO, JR.,
NACHURA,
PERALTA, and
MENDOZA, JJ.


Promulgated:

March 3, 2010

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


DECISION

NACHURA, J.:





This is a petition for review on certiorari[1] under Rule 45 of the Rules of Court, seeking to annul and set
aside the Decision[2] dated May 3, 2007 and the Resolution[3] dated July 23, 2007 of the Court of
Appeals (CA) in CA-G.R. SP No. 85594, entitled Leonis Navigation Co., Inc., et al. v. Catalino U.
Villamater, et al.


The antecedents of this case are as follows:

Private respondent Catalino U. Villamater (Villamater) was hired as Chief Engineer for the ship MV Nord
Monaco, owned by petitioner World Marine Panama, S.A., through the services of petitioner Leonis
Navigation Co., Inc. (Leonis), as the latters local manning agent. Consequent to this employment,
Villamater, on June 4, 2002, executed an employment contract,[4] incorporating the Standard Terms
and Conditions Governing the Employment of Filipino Seafarers on Board Ocean-Going Vessels as
prescribed by the Philippine Overseas Employment Administration (POEA).

Prior to his deployment, Villamater underwent the required Pre-Employment Medical Examination
(PEME). He passed the PEME and was declared Fit to Work.*5+ Thereafter, Villamater was deployed
on June 26, 2002.

Sometime in October 2002, around four (4) months after his deployment, Villamater suffered intestinal
bleeding and was given a blood transfusion. Thereafter, he again felt weak, lost considerable weight,
and suffered intermittent intestinal pain. He consulted a physician in Hamburg, Germany, who advised
hospital confinement. Villamater was diagnosed with Obstructive Adenocarcinoma of the Sigmoid, with
multiple liver metastases, possibly local peritoneal carcinosis and infiltration of the bladder, possibly
lung metastasis, and anemia; Candida Esophagitis; and Chronic Gastritis. He was advised to undergo
chemotherapy and continuous supportive treatment, such as pain-killers and blood transfusion.[6]

Villamater was later repatriated, under medical escort, as soon as he was deemed fit to travel. As soon
as he arrived in the Philippines, Villamater was referred to company-designated physicians. The
diagnosis and the recommended treatment abroad were confirmed. He was advised to undergo six (6)
cycles of chemotherapy. However, Dr. Kelly Siy Salvador, one of the company-designated physicians,
opined that Villamaters condition appears to be not work-related, but suggested a disability grading
of 1.[7]

In the course of his chemotherapy, when no noticeable improvement occurred, Villamater filed a
complaint[8] before the Arbitration Branch of the National Labor Relations Commission (NLRC) for
payment of permanent and total disability benefits in the amount of US$80,000.00, reimbursement of
medical and hospitalization expenses in the amount of P11,393.65, moral damages in the sum of
P1,000,000.00, exemplary damages in the amount of P1,000,000.00, as well as attorneys fees.

After the submission of the required position papers, the Labor Arbiter rendered a decision[9] dated July
28, 2003 in favor of Villamater, holding that his illness was compensable, but denying his claim for moral
and exemplary damages. The Labor Arbiter disposed as follows

WHEREFORE, foregoing premises considered, judgment is hereby rendered declaring complainants
illness to be compensable and ordering respondents LEONIS NAVIGATION CO., INC. and WORLD MARINE
PANAMA, S.A. liable to pay, jointly and severally, complainant CATALINO U. VILLAMATER, the amount of
US$60,000.00 or its Philippine Peso equivalent at the time of actual payment, representing the latters
permanent total disability benefits plus ten percent (10%) thereof as Attorneys Fees.


All other claims are dismissed for lack of merit.

SO ORDERED.[10]


Petitioners appealed to the NLRC. Villamater also filed his own appeal, questioning the award of the
Labor Arbiter and claiming that the 100% degree of disability should be compensated in the amount of
US$80,000.00, pursuant to Section 2, Article XXI of the ITF-JSU/AMOSUP Collective Bargaining
Agreement (CBA) between petitioners and Associated Marine Officers & Seamens Union of the
Philippines, which covered the employment contract of Villamater.

On February 4, 2004, the NLRC issued its resolution,[11] dismissing the respective appeals of both
parties and affirming in toto the decision of the Labor Arbiter.

Petitioners filed their motion for reconsideration of the February 4, 2004 resolution, but the NLRC
denied the same in its resolution dated June 15, 2004.

Aggrieved, petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the CA.
After the filing of the required memoranda, the CA rendered its assailed May 3, 2007 Decision,
dismissing the petition. The appellate court, likewise, denied petitioners motion for reconsideration in
its July 23, 2007 Resolution.

Hence, this petition based on the following grounds, to wit:

First, the Court of Appeals erroneously held that *the+ Commissions Dismissal Decision does not
constitute grave abuse of discretion amounting to lack or excess of jurisdiction but mere error of
judgment, considering that the decision lacks evidentiary support and is contrary to both evidence on
record and prevailing law and jurisprudence.

Second, the Court of Appeals seriously erred in upholding the NLRCs decision to award Grade 1
Permanent and Total Disability Benefits in favor of seaman Villamater despite the lack of factual and
legal basis to support such award, and more importantly, when it disregarded undisputed facts and
substantial evidence presented by petitioners which show that seaman Villamaters illness was not
work-related and hence, not compensable, as provided by the Standard Terms of the POEA Contract.

Third, the Court of Appeals erred in holding that non-joinder of indispensable parties warrant the
outright dismissal of the Petition for Review on Certiorari.

Fourth, the Court of Appeals erroneously held that final and executory decisions or resolutions of the
NLRC render appeals to superior courts moot and academic.

Last, the Court of Appeals seriously erred in upholding the award of attorneys fees considering that the
grant has neither factual nor legal basis.[12]


Before delving into the merits of this petition, we deem it fit to discuss the procedural issues raised by
petitioners.

First. It is worthy to note that the CA dismissed the petition, considering that (1) the June 15, 2004
Resolution of the NLRC had already become final and executory on June 26, 2004, and the same was
already recorded in the NLRC Book of Entries of Judgments; and that (2) the award of the Labor Arbiter
was already executed, thus, the case was closed and terminated.

According to Sections 14 and 15, Rule VII of the 2005 Revised Rules of Procedure of the NLRC

Section 14. Finality of decision of the commission and entry of judgment. a) Finality of the Decisions,
Resolutions or Orders of the Commission. Except as provided in Section 9 of Rule X, the decisions,
resolutions or orders of the Commission shall become final and executory after ten (10) calendar days
from receipt thereof by the parties.

b) Entry of Judgment. Upon the expiration of the ten (10) calendar day period provided in paragraph
(a) of this Section, the decision, resolution, or order shall be entered in a book of entries of judgment.

The Executive Clerk or Deputy Executive Clerk shall consider the decision, resolution or order as final
and executory after sixty (60) calendar days from date of mailing in the absence of return cards,
certifications from the post office, or other proof of service to parties.

Section 15. Motions for reconsideration. Motion for reconsideration of any decision, resolution or
order of the Commission shall not be entertained except when based on palpable or patent errors;
provided that the motion is under oath and filed within ten (10) calendar days from receipt of decision,
resolution or order, with proof of service that a copy of the same has been furnished, within the
reglementary period, the adverse party; and provided further, that only one such motion from the same
party shall be entertained.

Should a motion for reconsideration be entertained pursuant to this SECTION, the resolution shall be
executory after ten (10) calendar days from receipt thereof.[13]


Petitioners received the June 15, 2004 resolution of the NLRC, denying their motion for
reconsideration, on June 16, 2004. They filed their petition for certiorari before the CA only on August
9, 2004,[14] or 54 calendar days from the date of notice of the June 15, 2004 resolution. Considering
that the above-mentioned 10-day period had lapsed without petitioners filing the appropriate appeal,
the NLRC issued an Entry of Judgment dated June 28, 2004.

Moreover, by reason of the finality of the June 15, 2004 NLRC resolution, the Labor Arbiter issued
on July 29, 2004 a Writ of Execution.*15+ Consequently, Leonis voluntarily paid Villamaters widow,
Sonia M. Villamater (Sonia), the amount of P3,649,800.00, with Rizal Commercial and Banking
Corporation (RCBC) Managers Check No. 0000008550*16+ dated August 12, 2004, as evidenced by the
Acknowledgment Receipt[17] dated August 13, 2004, and the Cheque Voucher[18] dated August 12,
2004. Following the complete satisfaction of the judgment award, the Labor Arbiter issued an Order[19]
dated September 8, 2004 that reads

There being complete satisfaction of the judgment award as shown by the record upon receipt of
the complainant of the amount of P3,649,800.00, voluntarily paid by the respondent, as full and final
satisfaction of the Writ of Execution dated July 29, 2004; and finding the same to be not contrary to law,
morals, good custom, and public policy, and pursuant to Section 14, Rule VII of the Rules of Procedure of
the National Labor Relations Commission (NLRC), this case is hereby ordered DISMISSED with prejudice,
and considered CLOSED and TERMINATED.

SO ORDERED.


Petitioners never moved for a reconsideration of this Order regarding the voluntariness of their
payment to Sonia, as well as the dismissal with prejudice and the concomitant termination of the case.

However, petitioners argued that the finality of the case did not render the petition for certiorari
before the CA moot and academic. On this point, we agree with petitioners.

In the landmark case of St. Martin Funeral Home v. NLRC,[20] we ruled that judicial review of
decisions of the NLRC is sought via a petition for certiorari under Rule 65 of the Rules of Court, and the
petition should be filed before the CA, following the strict observance of the hierarchy of courts. Under
Rule 65, Section 4,[21] petitioners are allowed sixty (60) days from notice of the assailed order or
resolution within which to file the petition. Thus, although the petition was not filed within the 10-day
period, petitioners reasonably filed their petition for certiorari before the CA within the 60-day
reglementary period under Rule 65.

Further, a petition for certiorari does not normally include an inquiry into the correctness of its
evaluation of the evidence. Errors of judgment, as distinguished from errors of jurisdiction, are not
within the province of a special civil action for certiorari, which is merely confined to issues of
jurisdiction or grave abuse of discretion. It is, thus, incumbent upon petitioners to satisfactorily
establish that the NLRC acted capriciously and whimsically in order that the extraordinary writ of
certiorari will lie. By grave abuse of discretion is meant such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, and it must be shown that the discretion was exercised
arbitrarily or despotically.

The CA, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed
decision or resolution, committed grave abuse of discretion by capriciously, whimsically, or arbitrarily
disregarding evidence that is material to or decisive of the controversy; and it cannot make this
determination without looking into the evidence of the parties. Necessarily, the appellate court can
only evaluate the materiality or significance of the evidence, which is alleged to have been capriciously,
whimsically, or arbitrarily disregarded by the NLRC, in relation to all other evidence on record.[22]
Notably, if the CA grants the petition and nullifies the
decision or resolution of the NLRC on the ground of grave abuse of discretion amounting to excess or
lack of jurisdiction, the decision or resolution of the NLRC is, in contemplation of law, null and void ab
initio; hence, the decision or resolution never became final and executory.[23]

In the recent case Bago v. National Labor Relations Commission,[24] we had occasion to rule that
although the CA may review the decisions or resolutions of the NLRC on jurisdictional and due process
considerations, particularly when the decisions or resolutions have already been executed, this does not
affect the statutory finality of the NLRC decisions or resolutions in view of Rule VIII, Section 6 of the
2002 New Rules of Procedure of the NLRC, viz.:

RULE VIII

x x x x

SECTION 6. EFFECT OF FILING OF PETITION FOR CERTIORARI ON EXECUTION. A petition for
certiorari with the Court of Appeals or the Supreme Court shall not stay the execution of the assailed
decision unless a temporary restraining order is issued by the Court of Appeals or the Supreme
Court.[25]


Simply put, the execution of the final and executory decision or resolution of the NLRC shall
proceed despite the pendency of a petition for certiorari, unless it is restrained by the proper court. In
the present case, petitioners already paid Villamaters widow, Sonia, the amount of P3,649,800.00,
representing the total and permanent disability award plus attorneys fees, pursuant to the Writ of
Execution issued by the Labor Arbiter. Thereafter, an Order was issued declaring the case as closed and
terminated. However, although there was no motion for reconsideration of this last Order, Sonia was,
nonetheless, estopped from claiming that the controversy had already reached its end with the issuance
of the Order closing and terminating the case. This is because the Acknowledgment Receipt she signed
when she received petitioners payment was without prejudice to the final outcome of the petition for
certiorari pending before the CA.

Second. We also agree with petitioners in their position that the CA erred in dismissing outright
their petition for certiorari on the ground of non-joinder of indispensable parties. It should be noted
that petitioners impleaded only the then deceased Villamater[26] as respondent to the petition,
excluding his heirs.

Rule 3, Section 7 of the Rules of Court defines indispensable parties as those who are parties in interest
without whom there can be no final determination of an action.[27] They are those parties who possess
such an interest in the controversy that a final decree would necessarily affect their rights, so that the
courts cannot proceed without their presence.[28] A party is indispensable if his interest in the subject
matter of the suit and in the relief sought is inextricably intertwined with the other parties
interest.[29]

Unquestionably, Villamaters widow stands as an indispensable party to this case.

Under Rule 3, Section 11 of the Rules of Court, neither misjoinder nor non-joinder of parties is a ground
for the dismissal of an action, thus:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is ground
for dismissal of an action. Parties may be dropped or added by order of the court on motion of any party
or on its own initiative at any stage of the action and on such terms as are just. Any claim against a
misjoined party may be severed and proceeded with separately.


The proper remedy is to implead the indispensable party at any stage of the action. The court, either
motu proprio or upon the motion of a party, may order the inclusion of the indispensable party or give
the plaintiff an opportunity to amend his complaint in order to include indispensable parties. If the
plaintiff ordered to include the indispensable party refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only upon
unjustified failure or refusal to obey the order to include or to amend is the action dismissed.[30]

On the merits of this case, the questions to be answered are: (1) Is Villamater entitled to total and
permanent disability benefits by reason of his colon cancer? (2) If yes, would he also be entitled to
attorneys fees?

As to Villamaters entitlement to total and permanent disability benefits, petitioners argue, in
essence, that colon cancer is not among the occupational diseases listed under Section 32-A of the POEA
Standard Terms and Conditions Governing the Employment of Filipino Seafarers On-Board Ocean Going
Vessels (POEA Standard Contract), and that the risk of contracting the same was not increased by
Villamaters working conditions during his deployment. Petitioners posit that Villamater had familial
history of colon cancer; and that, although dietary considerations may be taken, his diet -- which might
have been high in fat and low in fiber and could have thus increased his predisposition to develop colon
cancer -- might only be attributed to him, because it was he who chose what he ate on board the vessels
he was assigned to. Petitioners also cited the supposed declaration of their company-designated
physicians who attended to Villamater that his disease was not work-related.

We disagree.

It is true that under Section 32-A of the POEA Standard Contract, only two types of cancers are
listed as occupational diseases (1) Cancer of the epithelial lining of the bladder (papilloma of the
bladder); and (2) cancer, epithellematous or ulceration of the skin or of the corneal surface of the eye
due to tar, pitch, bitumen, mineral oil or paraffin, or compound products or residues of these
substances. Section 20 of the same Contract also states that those illnesses not listed under Section 32
are disputably presumed as work-related. Section 20 should, however, be read together with Section
32-A on the conditions to be satisfied for an illness to be compensable,[31] to wit:


For an occupational disease and the resulting disability or death to be compensable, all the
following conditions must be established:

1. The seafarers work must involve the risk described herein;


2. The disease was contracted as a result of the seafarers exposure to the described risks;

3. The disease was contracted within a period of exposure and under such other factors necessary to
contract it;

4. There was no notorious negligence on the part of the seafarer.


Colon cancer, also known as colorectal cancer or large bowel cancer, includes cancerous growths in the
colon, rectum and appendix. With 655,000 deaths worldwide per year, it is the fifth most common form
of cancer in the United States of America and the third leading cause of cancer-related deaths in the
Western World. Colorectal cancers arise from adenomatous polyps in the colon. These mushroom-
shaped growths are usually benign, but some develop into cancer over time. Localized colon cancer is
usually diagnosed through colonoscopy.[32]

Tumors of the colon and rectum are growths arising from the inner wall of the large intestine. Benign
tumors of the large intestine are called polyps. Malignant tumors of the large intestine are called
cancers. Benign polyps can be easily removed during colonoscopy and are not life-threatening. If
benign polyps are not removed from the large intestine, they can become malignant (cancerous) over
time. Most of the cancers of the large intestine are believed to have developed as polyps. Colorectal
cancer can invade and damage adjacent tissues and organs. Cancer cells can also break away and
spread to other parts of the body (such as liver and lung) where new tumors form. The spread of colon
cancer to distant organs is called metastasis of the colon cancer. Once metastasis has occurred in
colorectal cancer, a complete cure of the cancer is unlikely.[33]

Globally, colorectal cancer is the third leading cause of cancer in males and the fourth leading cause of
cancer in females. The frequency of colorectal cancer varies around the world. It is common in the
Western world and is rare in Asia and in Africa. In countries where the people have adopted western
diets, the incidence of colorectal cancer is increasing.[34]

Factors that increase a persons risk of colorectal cancer include high fat intake, a family history of
colorectal cancer and polyps, the presence of polyps in the large intestine, and chronic ulcerative
colitis.[35]

Diets high in fat are believed to predispose humans to colorectal cancer. In countries with high
colorectal cancer rates, the fat intake by the population is much higher than in countries with low cancer
rates. It is believed that the breakdown products of fat metabolism lead to the formation of cancer-
causing chemicals (carcinogens). Diets high in vegetables and high-fiber foods may rid the bowel of
these carcinogens and help reduce the risk of cancer.[36]

A persons genetic background is an important factor in colon cancer risk. Among first-degree relatives
of colon-cancer patients, the lifetime risk of developing colon cancer is 18%. Even though family history
of colon cancer is an important risk factor, majority (80%) of colon cancers occur sporadically in patients
with no family history of it. Approximately 20% of cancers are associated with a family history of colon
cancer. And 5% of colon cancers are due to hereditary colon cancer syndromes. Hereditary colon
cancer syndromes are disorders where affected family members have inherited cancer-causing genetic
defects from one or both of the parents.[37]
In the case of Villamater, it is manifest that the interplay of age, hereditary, and dietary factors
contributed to the development of colon cancer. By the time he signed his employment contract on
June 4, 2002, he was already 58 years old, having been born on October 5, 1943,[38] an age at which the
incidence of colon cancer is more likely.[39] He had a familial history of colon cancer, with a brother
who succumbed to death and an uncle who underwent surgery for the same illness.[40] Both the Labor
Arbiter and the NLRC found his illness to be compensable for permanent and total disability, because
they found that his dietary provisions while at sea increased his risk of contracting colon cancer because
he had no choice of what to eat on board except those provided on the vessels and these consisted
mainly of high-fat, high-cholesterol, and low-fiber foods.

While findings of the Labor Arbiter, which were affirmed by the NLRC, are entitled to great weight and
are binding upon the courts, nonetheless, we find it also worthy to note that even during the
proceedings before the Labor Arbiter, Villamater cited that the foods provided on board the vessels
were mostly meat, high in fat and high in cholesterol. On this matter, noticeably, petitioners were silent
when they argued that Villamaters affliction was brought about by diet and genetics. It was only after
the Labor Arbiter issued his Decision, finding colon cancer to be compensable because the risk was
increased by the victuals provided on board, that petitioners started claiming that the foods available on
the vessels also consisted of fresh fruits and vegetables, not to mention fish and poultry. It is also worth
mentioning that while Dr. Salvador declared that Villamaters cancer appears to be not work-related,
she nevertheless suggested to petitioners Disability Grade 1, which, under the POEA Standard Contract,
shall be considered or shall constitute total and permanent disability.*41+ During his confinement in
Hamburg, Germany, Villamater was diagnosed to have colon cancer and was advised to undergo
chemotherapy and medical treatment, including blood transfusions. These findings were, in fact,
confirmed by the findings of the company-designated physicians. The statement of Dr. Salvador that
Villamaters colon cancer appears to be not work-related remained at that, without any medical
explanation to support the same. However, this statement, not definitive as it is, was negated by the
same doctors suggestion of Disability Grade 1. Under Section 20-B of the Philippine Overseas
Employment Administration-Standard Employment Contract (POEA-SEC), it is the company-designated
physician who must certify that the seafarer has suffered a permanent disability, whether total or
partial, due to either injury or illness, during the term of his employment.[42]

On these points, we sustain the Labor Arbiter and the NLRC in granting total and permanent disability
benefits in favor of Villamater, as it was sufficiently shown that his having contracted colon cancer was,
at the very least, aggravated by his working conditions,[43] taking into consideration his dietary
provisions on board, his age, and his job as Chief Engineer, who was primarily in charge of the technical
and mechanical operations of the vessels to ensure voyage safety. Jurisprudence provides that to
establish compensability of a non-occupational disease, reasonable proof of work-connection and not
direct causal relation is required. Probability, not the ultimate degree of certainty, is the test of proof in
compensation proceedings.[44]
The Labor Arbiter correctly awarded Villamater total and permanent disability benefits, computed on
the basis of the schedule provided under the POEA Standard Contract, considering that the schedule of
payment of benefits under the ITF-JSU/AMOSUP CBA refers only to permanent disability as a result of an
accident or injury.[45]

By reason of Villamaters entitlement to total and permanent disability benefits, he (or in this case his
widow Sonia) is also entitled to the award of attorneys fees, not under Article 2208(2) of the Civil Code,
*w+hen the defendants act or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest, but under Article 2208(8) of the same Code, involving actions for
indemnity under workmens compensation and employers liability laws.

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

SO ORDERED.
Republic of the Philippines
Supreme Court
Manila

THIRD DIVISION

REPUBLIC OF THE PHILIPPINES,
Petitioner,


- versus -


JULIAN EDWARD EMERSON COSETENG-MAGPAYO (A.K.A. JULIAN EDWARD EMERSON MARQUEZ-LIM
COSETENG),
Respondent.
G.R. No. 189476

Present:

CARPIO MORALES, J., Chairperson,
BRION,
BERSAMIN, and
VILLARAMA, JR., and
SERENO, JJ.


Promulgated:

February 2, 2011


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



D E C I S I O N


CARPIO MORALES, J.:
Born in Makati on September 9, 1972, Julian Edward Emerson Coseteng Magpayo (respondent) is the
son of Fulvio M. Magpayo Jr. and Anna Dominique Marquez-Lim Coseteng who, as respondents
certificate of live birth[1] shows, contracted marriage on March 26, 1972.

Claiming, however, that his parents were never legally married, respondent filed on July 22, 2008 at the
Regional Trial Court (RTC) of Quezon City a Petition to change his name to Julian Edward Emerson
Marquez Lim Coseteng. The petition, docketed as SPP No. Q-0863058, was entitled IN RE PETITION
FOR CHANGE OF NAME OF JULIAN EDWARD EMERSON COSETENG MAGPAYO TO JULIAN EDWARD
EMERSON MARQUEZ-LIM COSETENG.

In support of his petition, respondent submitted a certification from the National Statistics Office stating
that his mother Anna Dominique does not appear in *its+ National Indices of Marriage.*2+ Respondent
also submitted his academic records from elementary up to college[3] showing that he carried the
surname Coseteng, and the birth certificate of his child where Coseteng appears as his surname.*4+
In the 1998, 2001 and 2004 Elections, respondent ran and was elected as Councilor of Quezon Citys 3rd
District using the name JULIAN M.L. COSETENG.*5+

On order of Branch 77 of the Quezon City RTC,[6] respondent amended his petition by alleging therein
compliance with the 3-year residency requirement under Section 2, Rule 103 of the Rules of Court.[7]

The notice setting the petition for hearing on November 20, 2008 was published in the newspaper
Broadside in its issues of October 31-November 6, 2008, November 7-13, 2008, and November 14-20,
2008.[8] And a copy of the notice was furnished the Office of the Solicitor General (OSG).

No opposition to the petition having been filed, an order of general default was entered by the trial
court which then allowed respondent to present evidence ex parte.[9]


By Decision of January 8, 2009,[10+ the trial court granted respondents petition and directed the Civil
Registrar of Makati City to:

1. Delete the entry March 26, 1972 in Item 24 for DATE AND PLACE OF MARRIAGE OF PARTIES *in
herein respondents Certificate of live Birth+;

2. Correct the entry MAGPAYO in the space for the Last Name of the *respondent+ to COSETENG;

3. Delete the entry COSETENG in the space for Middle Name of the *respondent+; and

4. Delete the entry Fulvio Miranda Magpayo, Jr. in the space for FATHER of the *respondent+
(emphasis and underscoring supplied; capitalization in the original)


The Republic of the Philippines (Republic) filed a motion for reconsideration but it was denied by the
trial court by Order of July 2, 2009,[11] hence, it, thru the OSG, lodged the present petition for review to
the Court on pure question of law.

The Republic assails the decision in this wise:

I. . . . THE PETITION FOR CHANGE OF NAMEINVOLVES THE CHANGE OF *RESPONDENTS+
CIVIL STATUS FROM LEGITIMATE TO ILLEGITIMATE AND, THEREFORE, SHOULD BE MADE THROUGH
APPROPRIATE ADVERSARIAL PROCEEDINGS

II. THE TRIAL COURT EXCEEDED ITS JURISDICTION WHEN IT DIRECTED THE DELETION OF THE
NAME OF RESPONDENTS FATHER FROM HIS BIRTH CERTIFICATE.*12] (emphasis and underscoring
supplied)



The Republic contends that the deletion of the entry on the date and place of marriage of respondents
parents from his birth certificate has the effect of changing his civil status from legitimate to illegitimate,
hence, any change in civil status of a person must be effected through an appropriate adversary
proceeding.[13]

The Republic adds that by ordering the deletion of respondents parents date of marriage and the name
of respondents father from the entries in respondents birth certificate,*14+ the trial court exceeded its
jurisdiction, such order not being in accord with respondents prayer reading:

WHEREFORE, premises considered, it is most respectfully prayed that the Honorable Court issue an
order allowing the change of name of petitioner from JULIAN EDWARD EMERSON COSETENG MAGPAYO
to JULIAN EDWARD EMERSON MARQUEZ-LIM COSETENG, and that the Honorable Court order the Local
Civil Registrar and all other relevant government agencies to reflect the said change of name in their
records.

Petitioner prays for other reliefs deemed proper under the premises.[15] (underscoring supplied)

Respondent counters that the proceeding before the trial court was adversarial in nature. He cites
the serving of copies of the petition and its annexes upon the Civil Registrar of Makati, the Civil Registrar
General, and the OSG; the posting of copies of the notice of hearing in at least four public places at least
ten days before the hearing; the delegation to the OSG by the City Prosecutor of Quezon City to appear
on behalf of the Republic; the publication of the notice of hearing in a newspaper of general circulation
for three consecutive weeks; and the fact that no oppositors appeared on the scheduled hearing.[16]

The petition is impressed with merit.

A person can effect a change of name under Rule 103 (CHANGE OF NAME) using valid and meritorious
grounds including (a) when the name is ridiculous, dishonorable or extremely difficult to write or
pronounce; (b) when the change results as a legal consequence such as legitimation; (c) when the
change will avoid confusion; (d) when one has continuously used and been known since childhood by a
Filipino name, and was unaware of alien parentage; (e) a sincere desire to adopt a Filipino name to erase
signs of former alienage, all in good faith and without prejudicing anybody; and (f) when the surname
causes embarrassment and there is no showing that the desired change of name was for a fraudulent
purpose or that the change of name would prejudice public interest.*17+ Respondents reason for
changing his name cannot be considered as one of, or analogous to, recognized grounds, however.

The present petition must be differentiated from Alfon v. Republic of the Philippines.[18] In Alfon, the
Court allowed the therein petitioner, Estrella Alfon, to use the name that she had been known since
childhood in order to avoid confusion. Alfon did not deny her legitimacy, however. She merely sought
to use the surname of her mother which she had been using since childhood. Ruling in her favor, the
Court held that she was lawfully entitled to use her mothers surname, adding that the avoidance of
confusion was justification enough to allow her to do so. In the present case, however, respondent
denies his legitimacy.

The change being sought in respondents petition goes so far as to affect his legal status in relation to his
parents. It seeks to change his legitimacy to that of illegitimacy. Rule 103 then would not suffice to
grant respondents supplication.

Labayo-Rowe v. Republic*19+ categorically holds that changes which may affect the civil status from
legitimate to illegitimate . . . are substantial and controversial alterations which can only be allowed
after appropriate adversary proceedings . . .

Since respondents desired change affects his civil status from legitimate to illegitimate, Rule 108
applies. It reads:

SECTION 1. Who may file petition.Any person interested in any act, event, order or decree concerning
the civil status of persons which has been recorded in the civil register, may file a verified petition for
the cancellation or correction of any entry relating thereto, with the [RTC] of the province where the
corresponding civil registry is located.

x x x x

SEC. 3. Parties.When cancellation or correction of an entry in the civil register is sought, the civil
registrar and all persons who have or claim any interest which would be affected thereby shall be made
parties to the proceeding.

SEC. 4. Notice and publication. Upon the filing of the petition, the court shall, by an order, fix the time
and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons
named in the petition. The court shall also cause the order to be published once a week for three (3)
consecutive weeks in a newspaper of general circulation in the province. (emphasis, italics and
underscoring supplied)


Rule 108 clearly directs that a petition which concerns ones civil status should be filed in the civil
registry in which the entry is sought to be cancelled or corrected that of Makati in the present case,
and all persons who have or claim any interest which would be affected thereby should be made
parties to the proceeding.

As earlier stated, however, the petition of respondent was filed not in Makati where his birth certificate
was registered but in Quezon City. And as the above-mentioned title of the petition filed by respondent
before the RTC shows, neither the civil registrar of Makati nor his father and mother were made parties
thereto.



Respondent nevertheless cites Republic v. Capote[20] in support of his claim that his change of name
was effected through an appropriate adversary proceeding.

Republic v. Belmonte,[21] illuminates, however:

The procedure recited in Rule 103 regarding change of name and in Rule 108 concerning the
cancellation or correction of entries in the civil registry are separate and distinct. They may not be
substituted one for the other for the sole purpose of expediency. To hold otherwise would render
nugatory the provisions of the Rules of Court allowing the change of ones name or the correction of
entries in the civil registry only upon meritorious grounds. . . . (emphasis, capitalization and
underscoring supplied)


Even assuming arguendo that respondent had simultaneously availed of these two statutory remedies,
respondent cannot be said to have sufficiently complied with Rule 108. For, as reflected above, aside
from improper venue, he failed to implead the civil registrar of Makati and all affected parties as
respondents in the case.

Republic v. Labrador*22+ mandates that a petition for a substantial correction or change of entries in
the civil registry should have as respondents the civil registrar, as well as all other persons who have or
claim to have any interest that would be affected thereby. It cannot be gainsaid that change of status
of a child in relation to his parents is a substantial correction or change of entry in the civil registry.

Labayo-Rowe[23] highlights the necessity of impleading indispensable parties in a petition which
involves substantial and controversial alterations. In that case, the therein petitioner Emperatriz
Labayo-Rowe (Emperatriz) filed a petition for the correction of entries in the birth certificates of her
children, Vicente Miclat, Jr. and Victoria Miclat, in the Civil Registry of San Fernando, Pampanga.
Emperatriz alleged that her name appearing in the birth certificates is Beatriz, which is her nickname,
but her full name is Emperatriz; and her civil status appearing in the birth certificate of her daughter
Victoria as married on 1953 Bulan are erroneous because she was not married to Vicente Miclat
who was the one who furnished the data in said birth certificate.

The trial court found merit in Emperatrizs petition and accordingly directed the local civil registrar to
change her name appearing in her childrens birth certificates from Beatriz to Emperatriz; and to correct
her civil status in Victorias birth certificate from married to single and the date and place of
marriage to no marriage.

On petition before this Court after the Court of Appeals found that the order of the trial court involved a
question of law, the Court nullified the trial courts order directing the change of Emperatriz civil status
and the filiation of her child Victoria in light of the following observations:

x x x x Aside from the Office of the Solicitor General, all other indispensable parties should have been
made respondents. They include not only the declared father of the child but the child as well, together
with the paternal grandparents, if any, as their hereditary rights would be adversely affected thereby.
All other persons who may be affected by the change should be notified or represented. The truth is
best ascertained under an adversary system of justice.

The right of the child Victoria to inherit from her parents would be substantially impaired if her status
would be changed from legitimate to illegitimate. Moreover, she would be exposed to humiliation
and embarrassment resulting from the stigma of an illegitimate filiation that she will bear thereafter.
The fact that the notice of hearing of the petition was published in a newspaper of general circulation
and notice thereof was served upon the State will not change the nature of the proceedings taken. Rule
108, like all the other provisions of the Rules of Court, was promulgated by the Supreme Court pursuant
to its rule-making authority under Section 13, Article VIII of the 1973 Constitution, which directs that
such rules shall not diminish, increase or modify substantive rights. If Rule 108 were to be extended
beyond innocuous or harmless changes or corrections of errors which are visible to the eye or obvious
to the understanding, so as to comprehend substantial and controversial alterations concerning
citizenship, legitimacy of paternity or filiation, or legitimacy of marriage, without observing the proper
proceedings as earlier mentioned, said rule would thereby become an unconstitutional exercise which
would tend to increase or modify substantive rights. This situation is not contemplated under Article
412 of the Civil Code.[24] (emphasis, italics and underscoring supplied)



As for the requirement of notice and publication, Rule 108 provides:

SEC. 4. Notice and publication.Upon the filing of the petition, the court shall, by an order, fix the time
and place for the hearing of the same, and cause reasonable notice thereof to be given to the persons
named in the petition. The court shall also cause the order to be published once a week for three (3)
consecutive weeks in a newspaper of general circulation in the province.



SEC. 5. Opposition.The civil registrar and any person having or claiming any interest under the entry
whose cancellation or correction is sought may, within fifteen (15) days from notice of the petition, or
from the last date of publication of such notice, file his opposition thereto. (emphasis and underscoring
supplied)


A reading of these related provisions readily shows that Rule 108 clearly mandates two sets of notices to
different potential oppositors. The first notice is that given to the persons named in the petition
and the second (which is through publication) is that given to other persons who are not named in the
petition but nonetheless may be considered interested or affected parties, such as creditors. That two
sets of notices are mandated under the above-quoted Section 4 is validated by the subsequent Section
5, also above-quoted, which provides for two periods (for the two types of potential oppositors)
within which to file an opposition (15 days from notice or from the last date of publication).

This is the overriding principle laid down in Barco v. Court of Appeals.[25] In that case, Nadina Maravilla
(Nadina) filed a petition for correction of entries in the birth certificate of her daughter June from June
Salvacion Maravilla to June Salvacion Gustilo, Armando Gustilo being, according to Nadina, her
daughters real father. Gustilo in fact filed before the trial court a CONSTANCIA wherein he
acknowledged June as his daughter. The trial court granted the petition.

After Gustilo died, his son Jose Vicente Gustilo filed with the Court of Appeals a petition for annulment
of the Order of the trial court granting the change of Junes family name to Gustilo.

Milagros Barco (Barco), natural guardian of her minor daughter Mary Joy Ann Gustilo, filed before the
appellate court a motion for intervention, alleging that Mary Joy had a legal interest in the annulment of
the trial courts Order as Mary Joy was, by Barcos claim, also fathered by Gustilo.

The appellate court dismissed the petition for annulment and complaint-in-intervention.

On appeal by Barco, this Court ruled that she should have been impleaded in Nadinas petition for
correction of entries of the birth certificate of Mary Joy. But since a petitioner, like Nadina, is not
expected to exhaustively identify all the affected parties, the subsequent publication of the notice cured
the omission of Barco as a party to the case. Thus the Court explained:

Undoubtedly, Barco is among the parties referred to in Section 3 of Rule 108. Her interest was affected
by the petition for correction, as any judicial determination that June was the daughter of Armando
would affect her wards share in the estate of her father. It cannot be established whether Nadina knew
of Mary Joys existence at the time she filed the petition for correction. Indeed, doubt may always be
cast as to whether a petitioner under Rule 108 would know of all the parties whose interests may be
affected by the granting of a petition. For example, a petitioner cannot be presumed to be aware of all
the legitimate or illegitimate offsprings of his/her spouse or paramour. x x x x.

x x x x

The purpose precisely of Section 4, Rule 108 is to bind the whole world to the subsequent judgment on
the petition. The sweep of the decision would cover even parties who should have been impleaded
under Section 3, Rule 108 but were inadvertently left out. x x x x.[26] (emphasis, italics and
underscoring supplied)


Meanwhile, in Republic v. Kho,[27] Carlito Kho (Carlito) and his siblings named the civil registrar as
the sole respondent in the petition they filed for the correction of entries in their respective birth
certificates in the civil registry of Butuan City, and correction of entries in the birth certificates of
Carlitos minor children. Carlito and his siblings requested the correction in their birth certificates of the
citizenship of their mother Epifania to Filipino, instead of Chinese, and the deletion of the word
married opposite the phrase Date of marriage of parents because their parents Juan and Epifania
were not married. And Carlito requested the correction in the birth certificates of their children of his
and his wifes date of marriage to reflect the actual date of their marriage as appearing in their marriage
certificate. In the course of the hearing of the petition, Carlito also sought the correction of the name of
his wife from Maribel to Marivel.

The Khos mother Epifania took the witness stand where she declared that she was not married to Juan
who died before the filing of the Khos petition.

The trial court granted the petition.

On the issue of whether the failure to implead Marivel and the Khos parents rendered the trial of the
petition short of the required adversary proceedings and the trial courts judgment void, this Court held
that when all the procedural requirements under Rule 108 are followed, the publication of the notice of
hearing cures the failure to implead an indispensable party. In so ruling, the Court noted that the
affected parties were already notified of the proceedings in the case since the petitioner-siblings Khos
were the ones who initiated the petition respecting their prayer for correction of their citizenship, and
Carlito respecting the actual date of his marriage to his wife; and, with respect to the Khos petition for
change of their civil status from legitimate to illegitimate, their mother Epifania herself took the witness
stand declaring that she was not married to their father.

What is clear then in Barco and Kho is the mandatory directive under Section 3 of Rule 108 to implead
the civil registrar and the parties who would naturally and legally be affected by the grant of a petition
for correction or cancellation of entries. Non-impleading, however, as party-respondent of one who is
inadvertently left out or is not established to be known by the petitioner to be affected by the grant of
the petition or actually participates in the proceeding is notified through publication.

IN FINE, when a petition for cancellation or correction of an entry in the civil register involves
substantial and controversial alterations including those on citizenship, legitimacy of paternity or
filiation, or legitimacy of marriage, a strict compliance with the requirements of Rule 108 of the Rules of
Court is mandated.

WHEREFORE, the petition is, in light of the foregoing discussions, GRANTED. The January 8, 2009
Decision of Branch 77 of the Regional Trial Court of Quezon City in SP Proc. No. Q-0863058 is NULLIFIED.
FIRST DIVISION
[G.R. No. 138497. January 16, 2002]

IMELDA RELUCIO, petitioner, vs. ANGELINA MEJIA LOPEZ, respondent.
D E C I S I O N
PARDO, J.:

The Case

The case is a petition for review on certiorari[1] seeking to set aside the decision[2] of the Court of
Appeals that denied a petition for certiorari assailing the trial courts order denying petitioners motion
to dismiss the case against her inclusion as party defendant therein.

The Facts

The facts, as found by the Court of Appeals, are as follows:

On September 15, 1993, herein private respondent Angelina Mejia Lopez (plaintiff below) filed a
petition for APPOINTMENT AS SOLE ADMINISTRATRIX OF CONJUGAL PARTNERSHIP OF PROPERTIES,
FORFEITURE, ETC., against defendant Alberto Lopez and petitioner Imelda Relucio, docketed as Spec.
Proc. M-3630, in the Regional Trial Court of Makati, Branch 141. In the petition, private-respondent
alleged that sometime in 1968, defendant Lopez, who is legally married to the private respondent,
abandoned the latter and their four legitimate children; that he arrogated unto himself full and exclusive
control and administration of the conjugal properties, spending and using the same for his sole gain and
benefit to the total exclusion of the private respondent and their four children; that defendant Lopez,
after abandoning his family, maintained an illicit relationship and cohabited with herein petitioner since
1976.

It was further alleged that defendant Lopez and petitioner Relucio, during their period of cohabitation
since 1976, have amassed a fortune consisting mainly of stockholdings in Lopez-owned or controlled
corporations, residential, agricultural, commercial lots, houses, apartments and buildings, cars and other
motor vehicles, bank accounts and jewelry. These properties, which are in the names of defendant
Lopez and petitioner Relucio singly or jointly or their dummies and proxies, have been acquired
principally if not solely through the actual contribution of money, property and industry of defendant
Lopez with minimal, if not nil, actual contribution from petitioner Relucio.

In order to avoid defendant Lopez obligations as a father and husband, he excluded the private
respondent and their four children from sharing or benefiting from the conjugal properties and the
income or fruits there from. As such, defendant Lopez either did not place them in his name or
otherwise removed, transferred, stashed away or concealed them from the private-respondent. He
placed substantial portions of these conjugal properties in the name of petitioner Relucio.

It was also averred that in the past twenty five years since defendant Lopez abandoned the private-
respondent, he has sold, disposed of, alienated, transferred, assigned, canceled, removed or stashed
away properties, assets and income belonging to the conjugal partnership with the private-respondent
and either spent the proceeds thereof for his sole benefit and that of petitioner Relucio and their two
illegitimate children or permanently and fraudulently placed them beyond the reach of the private-
respondent and their four children.

On December 8, 1993, a Motion to Dismiss the Petition was filed by herein petitioner on the ground
that private respondent has no cause of action against her.

An Order dated February 10, 1994 was issued by herein respondent Judge denying petitioner Relucios
Motion to Dismiss on the ground that she is impleaded as a necessary or indispensable party because
some of the subject properties are registered in her name and defendant Lopez, or solely in her name.

Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the Order of the
respondent Judge dated February 10, 1994 but the same was likewise denied in the Order dated May
31, 1994.*3+

On June 21, 1994, petitioner filed with the Court of Appeals a petition for certiorari assailing the trial
courts denial of her motion to dismiss.*4+

On May 31, 1996, the Court of Appeals promulgated a decision denying the petition.[5] On June 26,
1996, petitioner filed a motion for reconsideration.[6] However, on April 6, 1999, the Court of Appeals
denied petitioners motion for reconsideration.*7+

Hence, this appeal.[8]

The Issues

1. Whether respondents petition for appointment as sole administratrix of the conjugal property,
accounting, etc. against her husband Alberto J. Lopez established a cause of action against petitioner.

2. Whether petitioners inclusion as party defendant is essential in the proceedings for a complete
adjudication of the controversy.[9]

The Courts Ruling

We grant the petition. We resolve the issues in seriatim.

First issue: whether a cause of action exists against petitioner in the proceedings below. A cause of
action is an act or omission of one party the defendant in violation of the legal right of the other.*10+
The elements of a cause of action are:

(1) a right in favor of the plaintiff by whatever means and under whatever law it arises or is
created;

(2) an obligation on the part of the named defendant to respect or not to violate such right; and

(3) an act or omission on the part of such defendant in violation of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff for which the latter may
maintain an action for recovery of damages.[11]

A cause of action is sufficient if a valid judgment may be rendered thereon if the alleged facts were
admitted or proved.[12]

In order to sustain a motion to dismiss for lack of cause of action, the complaint must show that the
claim for relief does not exist, rather than that a claim has been merely defectively stated or is
ambiguous, indefinite or uncertain.[13]

Hence, to determine the sufficiency of the cause of action alleged in Special Proceedings M-3630, we
assay its allegations.

In Part Two on the Nature of *the+ Complaint, respondent Angelina Mejia Lopez summarized the
causes of action alleged in the complaint below.

The complaint is by an aggrieved wife against her husband.

Nowhere in the allegations does it appear that relief is sought against petitioner. Respondents causes
of action were all against her husband.

The first cause of action is for judicial appointment of respondent as administratrix of the conjugal
partnership or absolute community property arising from her marriage to Alberto J. Lopez. Petitioner is
a complete stranger to this cause of action. Article 128 of the Family Code refers only to spouses, to wit:

If a spouse without just cause abandons the other or fails to comply with his or her obligations to the
family, the aggrieved spouse may petition the court for receivership, for judicial separation of property,
or for authority to be the sole administrator of the conjugal partnership property xxx

The administration of the property of the marriage is entirely between them, to the exclusion of all
other persons. Respondent alleges that Alberto J. Lopez is her husband. Therefore, her first cause of
action is against Alberto J. Lopez. There is no right-duty relation between petitioner and respondent
that can possibly support a cause of action. In fact, none of the three elements of a cause of action
exists.

The second cause of action is for an accounting by respondent husband.*14+ The accounting of
conjugal partnership arises from or is an incident of marriage.

Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no cause
of action can exist against petitioner on this ground.

Respondents alternative cause of action is for forfeiture of Alberto J. Lopez share in the co-owned
property acquired during his illicit relationship and cohabitation with *petitioner+*15+ and for the
dissolution of the conjugal partnership of gains between him *Alberto J. Lopez+ and the *respondent+.

The third cause of action is essentially for forfeiture of Alberto J. Lopez share in property co-owned by
him and petitioner. It does not involve the issue of validity of the co-ownership between Alberto J.
Lopez and petitioner. The issue is whether there is basis in law to forfeit Alberto J. Lopez share, if any
there be, in property co-owned by him with petitioner.

Respondents asserted right to forfeit extends to Alberto J. Lopez share alone. Failure of Alberto J.
Lopez to surrender such share, assuming the trial court finds in respondents favor, results in a breach of
an obligation to respondent and gives rise to a cause of action.[16] Such cause of action, however,
pertains to Alberto J. Lopez, not petitioner.

The respondent also sought support. Support cannot be compelled from a stranger.

The action in Special Proceedings M-3630 is, to use respondent Angelina M. Lopez own words, one by
an aggrieved wife against her husband.*17+ References to petitioner in the common and specific
allegations of fact in the complaint are merely incidental, to set forth facts and circumstances that prove
the causes of action alleged against Alberto J. Lopez.

Finally, as to the moral damages, respondents claim for moral damages is against Alberto J. Lopez, not
petitioner.

To sustain a cause of action for moral damages, the complaint must have the character of an action for
interference with marital or family relations under the Civil Code.

A real party in interest is one who stands to be benefited or injured by the judgment of the suit.*18+ In
this case, petitioner would not be affected by any judgment in Special Proceedings M-3630.

If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable party
is one without whom there can be no final determination of an action.*19+ Petitioners participation in
Special Proceedings M-3630 is not indispensable. Certainly, the trial court can issue a judgment
ordering Alberto J. Lopez to make an accounting of his conjugal partnership with respondent, and give
support to respondent and their children, and dissolve Alberto J. Lopez conjugal partnership with
respondent, and forfeit Alberto J. Lopez share in property co-owned by him and petitioner. Such
judgment would be perfectly valid and enforceable against Alberto J. Lopez.

Nor can petitioner be a necessary party in Special Proceedings M-3630. A necessary party as one who is
not indispensable but who ought to be joined as party if complete relief is to be accorded those already
parties, or for a complete determination or settlement of the claim subject of the action.[20] In the
context of her petition in the lower court, respondent would be accorded complete relief if Alberto J.
Lopez were ordered to account for his alleged conjugal partnership property with respondent, give
support to respondent and her children, turn over his share in the co-ownership with petitioner and
dissolve his conjugal partnership or absolute community property with respondent.

The Judgment
WHEREFORE, the Court GRANTS the petition and REVERSES the decision of the Court of Appeals.[21] The
Court DISMISSES Special Proceedings M-3630 of the Regional Trial Court, Makati, Branch 141 as against
petitioner.

No costs.
THIRD DIVISION


AUTOCORP GROUP and PETER Y. RODRIGUEZ,
Petitioners,



- versus -



INTRA STRATA ASSURANCE CORPORATION and BUREAU OF CUSTOMS,
Respondents.

G.R. No. 166662

Present:

YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

Promulgated:

June 27, 2008
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x


D E C I S I O N


CHICO-NAZARIO, J.:


This is a Petition for Review on Certiorari from the Decision[1] of the Court of Appeals dated 30 June
2004 in CA-G.R. CV No. 62564 which affirmed with modification the Decision[2] of the Regional Trial
Court (RTC) of Makati City, Branch 150 in Civil Case No. 95-1584 dated 16 September 1998.

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

On 19 August 1990, petitioner Autocorp Group, represented by its President, petitioner Peter Y.
Rodriguez, secured an ordinary re-export bond, Instrata Bond No. 5770, from private respondent Intra
Strata Assurance Corporation (ISAC) in favor of public respondent Bureau of Customs (BOC), in the
amount of P327,040.00, to guarantee the re-export of one unit of Hyundai Excel 4-door 1.5 LS and/or to
pay the taxes and duties thereon.

On 21 December 1990, petitioners obtained another ordinary re-export bond, Instrata Bond No. 7154,
from ISAC in favor of the BOC, in the amount of P447,671.00, which was eventually increased to
P707,609.00 per Bond Endorsement No. BE-0912/91 dated 10 January 1991, to guarantee the re-export
of one unit of Hyundai Sonata 2.4 GLS and/or to pay the taxes and duties thereon.

Petitioners executed and signed two Indemnity Agreements with identical stipulations in favor of ISAC,
agreeing to act as surety of the subject bonds. Petitioner Rodriguez signed the Indemnity Agreements
both as President of the Autocorp Group and in his personal capacity. Petitioners thus agreed to the
following provisions:

INDEMNITY: - The undersigned agree at all times to jointly and severally indemnify the COMPANY and
keep it indemnified and hold and save it harmless from and against any and all damages, losses, costs,
stamps, taxes, penalties, charges and expenses of whatsoever kind and nature including counsel or
attorneys fee which the COMPANY shall or may at any time sustain or incur in consequence of having
become surety upon the bond herein above referred to or any extension, renewal, substitution or
alteration thereof, made at the instance of the undersigned or any of them, or any other bond executed
on behalf of the undersigned or any of them, and to pay; reimburse and make good to the COMPANY, its
successors and assigns, alls sums and amounts of money which it or its representatives shall pay or
cause to be paid, or become liable to pay on accounts of the undersigned or any of them, of whatsoever
kind and nature, including 25% of the amount involved in the litigation or other matters growing out of
or connected therewith, for and as attorneys fees, but in no case less than P300.00 and which shall be
payable whether or not the case be extrajudicially settled, it being understood that demand made upon
anyone of the undersigned herein is admitted as demand made on all of the signatories hereof. It is
hereby further agreed that in case of any extension or renewal of the bond, we equally bind ourselves to
the COMPANY under the same terms and conditions as therein provided without the necessity of
executing another indemnity agreement for the purpose and that we may be granted under this
indemnity agreement.

MATURITY OF OUR OBLIGATIONS AS CONTRACTED HEREWITH AND ACCRUAL OF ACTION: -
Notwithstanding of (sic) the next preceding paragraph where the obligation involves a liquidated
amount for the payment of which the COMPANY has become legally liable under the terms of the
obligation and its suretyship undertaking, or by the demand of the obligee or otherwise and the latter
has merely allowed the COMPANYs aforesaid liability irrespective of whether or not payment has
actually been made by the COMPANY, the COMPANY for the protection of its interest may forthwith
proceed against the undersigned or either of them by court action or otherwise to enforce payment,
even prior to making payment to the obligee which may hereafter be done by the COMPANY.

INTEREST IN CASE OF DELAY: - In the event of delay in payment of the said sum or sums by the
undersigned they will pay interest at the rate of 12% per annum or same, which interest, if not paid, will
be liquidated and accumulated to the capital quarterly, and shall earn the same interest as the capital;
all this without prejudice to the COMPANYs right to demand judicially or extrajudicially the full payment
of its claims.

INCONTESTABILITY OF PAYMENT MADE BY THE COMPANY: - Any payment or disbursement made
by the COMPANY on account of the above-mentioned Bond, its renewals, extensions or substitutions,
replacement or novation in the belief either that the COMPANY was obligated to make such payment or
that said payment was necessary in order to avoid greater losses or obligations for which the COMPANY
might be liable by virtue of the terms of the above-mentioned Bond, its renewal, extensions or
substitutions, shall be final and will not be disputed by the undersigned, who bind themselves to jointly
and severally indemnify the COMPANY of any such payments, as stated in the preceding clauses:

WAIVER OF VENUE OF ACTION: - We hereby agree that any question which may arise between
the COMPANY and the undersigned by reason of this document and which has to be submitted for
decision to a court of justice shall be brought before the court of competent jurisdiction in Makati, Rizal,
waiving for this purpose any other venue.

WAIVER: - The undersigned hereby waive all the rights[,] privileges and benefits that they have or
may have under Articles 2077, 2078, 2079, 2080 and 2081, of the Civil Code of the Philippines.

The undersigned, by this instrument, grant a special power of attorney in favor of all or any of the
other undersigned so that any of the undersigned may represent all the others in all transactions related
to this Bond, its renewals, extensions, or any other agreements in connection with this Counter-
Guaranty, without the necessity of the knowledge or consent of the others who hereby promise to
accept as valid each and every act done or executed by any of the attorneys-in-fact by virtue of the
special power of attorney.

OUR LIABILITY HEREUNDER: - It shall not be necessary for the COMPANY to bring suit against the
principal upon his default or to exhaust the property of the principal, but the liability hereunder of the
undersigned indemnitors shall be jointly and severally, a primary one, the same as that of the principal,
and shall be exigible immediately upon the occurrence of such default.

CANCELLATION OF BOND BY THE COMPANY: - The COMPANY may at any time cancel the above-
mentioned Bond, its renewals, extensions or substitutions, subject to any liability which might have
accrued prior to the date of cancellation refunding the proportionate amount of the premium unearned
on the date of cancellation.

RENEWALS, ALTERATIONS AND SUBSTITUTIONS: - The undersigned hereby empower and
authorize the COMPANY to grant or consent to the granting of any extension, continuation, increase,
modification, change, alteration and/or renewal of the original bond herein referred to, and to execute
or consent to the execution of any substitution for said Bond with the same or different, conditions and
parties, and the undersigned hereby hold themselves jointly and severally liable to the COMPANY for the
original Bond herein above-mentioned or for any extension, continuation, increase, modification,
change, alteration, renewal or substitution thereof without the necessary of any new indemnity
agreement being executed until the full amount including principal, interest, premiums, costs, and other
expenses due to the COMPANY thereunder is fully paid up.

SEVERABILITY OF PROVISIONS: - It is hereby agreed that should any provision or provisions of this
agreement be declared by competent public authority to be invalid or otherwise unenforceable, all
remaining provisions herein contained shall remain in full force and effect.

NOTIFICATION: - The undersigned hereby accept due notice of that the COMPANY has accepted
this guaranty, executed by the undersigned in favor of the COMPANY.[3]


In sum, ISAC issued the subject bonds to guarantee compliance by petitioners with their undertaking
with the BOC to re-export the imported vehicles within the given period and pay the taxes and/or duties
due thereon. In turn, petitioners agreed, as surety, to indemnify ISAC for the liability the latter may
incur on the said bonds.

Petitioner Autocorp Group failed to re-export the items guaranteed by the bonds and/or liquidate the
entries or cancel the bonds, and pay the taxes and duties pertaining to the said items despite repeated
demands made by the BOC, as well as by ISAC. By reason thereof, the BOC considered the two bonds,
with a total face value of P1,034,649.00, forfeited.

Failing to secure from petitioners the payment of the face value of the two bonds, despite several
demands sent to each of them as surety under the Indemnity Agreements, ISAC filed with the RTC on 24
October 1995 an action against petitioners to recover the sum of P1,034,649.00, plus 25% thereof or
P258,662.25 as attorneys fees. ISAC impleaded the BOC as a necessary party plaintiff in order that the
reward of money or judgment shall be adjudged unto the said necessary plaintiff.*4+ The case was
docketed as Civil Case No. 95-1584.

Petitioners filed a Motion to Dismiss on 11 December 1995 on the grounds that (1) the Complaint states
no cause of action; and (2) the BOC is an improper party.

The RTC, in an Order*5+ dated 27 February 1996, denied petitioners Motion to Dismiss. Petitioners thus
filed their Answer to the Complaint, claiming that they sought permission from the BOC for an extension
of time to re-export the items covered by the bonds; that the BOC has yet to issue an assessment for
petitioners alleged default; and that the claim of ISAC for payment is premature as the subject bonds
are not yet due and demandable.

During the pre-trial conference, petitioners admitted the genuineness and due execution of Instrata
Bonds No. 5770 and No. 7154, but specifically denied those of the corresponding Indemnity
Agreements. The parties agreed to limit the issue to whether or not these bonds are now due and
demandable.

On 16 September 1998, the RTC rendered its Decision ordering petitioners to pay ISAC and/or the BOC
the face value of the subject bonds in the total amount of P1,034,649.00, and to pay ISAC P258,662.25
as attorneys fees, thus:

WHEREFORE, judgment is hereby rendered in favor of the [herein private respondent ISAC] and as
against the [herein petitioners] who are ordered to pay the [private respondent] Intra Strata Assurance
Corporation and/or the Bureau of Customs the amount of P1,034,649.00 which is the equivalent
amount of the subject bonds as well as to pay the plaintiff corporation the sum of P258,662.25 as and
for attorneys fees.*6+


Petitioners Motion for Reconsideration was denied by the RTC in a Resolution dated 15 January
1999.[7]

Petitioners appealed to the Court of Appeals. On 30 June 2004, the Court of Appeals rendered its
Decision affirming the RTC Decision, only modifying the amount of the attorneys fees awarded:

WHEREFORE, the appealed 16 September 1998 Decision is MODIFIED to reduce the award of attorneys
fees to One Hundred Three Thousand Four Hundred Sixty Four Pesos & Ninety Centavos (P103,464.90).
The rest is affirmed in toto. Costs against [herein petitioners].[8]


In a Resolution dated 5 January 2005, the Court of Appeals refused to reconsider its Decision.

Petitioners thus filed the instant Petition for Review on Certiorari, assigning the following errors
allegedly committed by the Court of Appeals:

I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RENDERING JUDGMENT AGAINST
PETITIONERS BASED ON A PREMATURE ACTION AND/OR RULING IN FAVOR OF RESPONDENTS WHO
HAVE NO CAUSE OF ACTION AGAINST PETITIONERS.

II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE DECISION OF
BRANCH 150, REGIONAL TRIAL COURT OF MAKATI CITY BASED ON MISAPPREHENSION OF FACTS,
UNSUPPORTED BY EVIDENCE ON RECORD & CONTRARY TO LAW.

III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT GIVING MERIT TO THE ISSUE
RAISED BY PETITIONERS THAT THE BUREAU OF CUSTOMS IS IMPROPERLY IMPLEADED BY INTRA STRATA.

IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED [IN] AFFIRMING THE PORTION OF THE
DECISION HOLDING PETITIONER PETER Y. RODRIGUEZ AS JOINTLY LIABLE WHEN AMENDMENTS WERE
INTRODUCED, WITHOUT HIS CONSENT AND APPROVAL.[9]


The present Petition is without merit.


Absence of actual forfeiture of the subject bonds


Petitioners contend that their obligation to ISAC is not yet due and demandable. They cannot be made
liable by ISAC in the absence of an actual forfeiture of the subject bonds by the BOC and/or an explicit
pronouncement by the same bureau that ISAC is already liable on the said bonds. In this case, there is
yet no actual forfeiture of the bonds, but merely a recommendation of forfeiture, for no writ of
execution has been issued against such bonds.[10] Hence, Civil Case No. 95-1584 was prematurely filed
by ISAC. Petitioners further argue that:

Secondly, it bears emphasis that as borne by the records, not only is there no writ of forfeiture against
Surety Bond No. 7154, there is likewise no evidence adduced on record to prove that respondent Intra
Strata has made legal demand against Surety Bond No. 5770 neither is there a showing that respondent
BOC initiated a demand or issued notice for its forfeiture and/or confiscation.[11]


The Court of Appeals, in its assailed Decision, already directly addressed petitioners arguments by ruling
that an actual forfeiture of the subject bonds is not necessary for petitioners to be liable thereon to ISAC
as surety under the Indemnity Agreements.

According to the relevant provision of the Indemnity Agreements executed between petitioner and
ISAC, which reads:

[W]here the obligation involves a liquidated amount for the payment of which [ISAC] has become legally
liable under the terms of the obligation and its suretyship undertaking or by the demand of the [BOC] or
otherwise and the latter has merely allowed the *ISACs+ aforesaid liability, irrespective of whether or
not payment has actually been made by the [ISAC], the [ISAC] for the protection of its interest may
forthwith proceed against [petitioners Autocorp Group and Rodriguez] or either of them by court action
or otherwise to enforce payment, even prior to making payment to the [BOC] which may hereafter be
done by [ISAC][,][12]


petitioners obligation to indemnify ISAC became due and demandable the moment the bonds issued by
ISAC became answerable for petitioners non-compliance with its undertaking with the BOC. Stated
differently, petitioners became liable to indemnify ISAC at the same time the bonds issued by ISAC were
placed at the risk of forfeiture by the BOC for non-compliance by petitioners with its undertaking.

The subject bonds, Instrata Bonds No. 5770 and No. 7154, became due and demandable upon the
failure of petitioner Autocorp Group to comply with a condition set forth in its undertaking with the
BOC, specifically to re-export the imported vehicles within the period of six months from their date of
entry. Since it issued the subject bonds, ISAC then also became liable to the BOC. At this point, the
Indemnity Agreements already give ISAC the right to proceed against petitioners via court action or
otherwise.

The Indemnity Agreements, therefore, give ISAC the right to recover from petitioners the face value of
the subject bonds plus attorneys fees at the time ISAC becomes liable on the said bonds to the BOC,
regardless of whether the BOC had actually forfeited the bonds, demanded payment thereof and/or
received such payment. It must be pointed out that the Indemnity Agreements explicitly provide that
petitioners shall be liable to indemnify ISAC whether or not payment has actually been made by the
*ISAC+ and ISAC may proceed against petitioners by court action or otherwise even prior to making
payment to the [BOC] which may hereafter be done by *ISAC+.

Even when the BOC already admitted that it not only made a demand upon ISAC for the payment of the
bond but even filed a complaint against ISAC for such payment,[13] such demand and complaint are not
necessary to hold petitioners liable to ISAC for the amount of such bonds. Petitioners attempts to
prove that there was no actual forfeiture of the subject bonds are completely irrelevant to the case at
bar.

It is worthy to note that petitioners did not impugn the validity of the stipulation in the Indemnity
Agreements allowing ISAC to proceed against petitioners the moment the subject bonds become due
and demandable, even prior to actual forfeiture or payment thereof. Even if they did so, the Court
would be constrained to uphold the validity of such a stipulation for it is but a slightly expanded
contractual expression of Article 2071 of the Civil Code which provides, inter alia, that the guarantor
may proceed against the principal debtor the moment the debt becomes due and demandable. Article
2071 of the Civil Code provides:

Art. 2071. The guarantor, even before having paid, may proceed against the principal debtor:

(1) When he is sued for the payment;

(2) In case of insolvency of the principal debtor;

(3) When the debtor has bound himself to relieve him from the guaranty within a specified period, and
this period has expired;

(4) When the debt has become demandable, by reason of the expiration of the period for payment;

(5) After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless
it be of such nature that it cannot be extinguished except within a period longer than ten years;

(6) If there are reasonable grounds to fear that the principal debtor intends to abscond;

(7) If the principal debtor is in imminent danger of becoming insolvent.

In all these cases, the action of the guarantor is to obtain release from the guaranty, or to demand a
security that shall protect him from any proceedings by the creditor and from the danger of insolvency
of the debtor. (Emphases ours.)


Petitioners also invoke the alleged lack of demand on the part of ISAC on petitioners as regards Instrata
Bond No. 5770 before it instituted Civil Case No. 95-1584. Even if proven true, such a fact does not carry
much weight considering that demand, whether judicial or extrajudicial, is not required before an
obligation becomes due and demandable. A demand is only necessary in order to put an obligor in a
due and demandable obligation in delay,[14] which in turn is for the purpose of making the obligor liable
for interests or damages for the period of delay.[15] Thus, unless stipulated otherwise, an extrajudicial
demand is not required before a judicial demand, i.e., filing a civil case for collection, can be resorted to.

Inclusion of the Bureau of Customs as a party to the case


ISAC included the BOC as a necessary party plaintiff in order that the reward of money or judgment
shall be adjudged unto the said necessary plaintiff.*16+

Petitioners assail this inclusion of the BOC as a party in Civil Case No. 95-1584 on the ground that it was
not properly represented by the Solicitor General. Petitioners also contend that the inclusion of the BOC
as a party in Civil Case No. 95-1584 is highly improper and should not be countenanced as the net
result would be tantamount to collusion between Intra Strata and the Bureau of Customs which would
deny and deprive petitioners their personal defenses against the BOC.*17+

In its assailed Decision, the Court of Appeals did not find merit in petitioners arguments on the matter,
holding that when the BOC forfeited the subject bonds issued by ISAC, subrogation took place so that
whatever right the BOC had against petitioners were eventually transferred to ISAC. As ISAC merely
steps into the shoes of the BOC, whatever defenses petitioners may have against the BOC would still be
available against ISAC.

The Court likewise cannot sustain petitioners position.

The misjoinder of parties does not warrant the dismissal of the action. Section 11, Rule 3 of the Rules of
Court explicitly states:

SEC. 11. Misjoinder and non-joinder of parties.Neither misjoinder nor non-joinder of parties is ground
for dismissal of an action. Parties may be dropped or added by order of the court on motion of any
party or on its own initiative at any stage of the action and on such terms as are just. Any claim against
a misjoined party may be severed and proceeded with separately.


Consequently, the purported misjoinder of the BOC as a party cannot result in the dismissal of Civil Case
No. 95-1584. If indeed the BOC was improperly impleaded as a party in Civil Case No. 95-1584, at most,
it may be dropped by order of the court, on motion of any party or on its own initiative, at any stage of
the action and on such terms as are just.

Should the BOC then be dropped as a party to Civil Case No. 95-1584?

ISAC alleged in its Complaint[18] that the BOC is being joined as a necessary party in Civil Case No. 95-
1584.

A necessary party is defined in Section 8, Rule 3 of the Rules of Court as follows:

SEC. 8. Necessary party.A necessary party is one who is not indispensable but who ought to be joined
as a party if complete relief is to be accorded as to those already parties, or for a complete
determination or settlement of the claim subject of the action.


The subject matter of Civil Case No. 95-1584 is the liability of Autocorp Group to the BOC, which ISAC is
also bound to pay as the guarantor who issued the bonds therefor. Clearly, there would be no complete
settlement of the subject matter of the case at bar the liability of Autocorp Group to the BOC should
Autocorp Group be merely ordered to pay its obligations with the BOC to ISAC. BOC is, therefore, a
necessary party in the case at bar, and should not be dropped as a party to the present case.

It can only be conceded that there was an irregularity in the manner the BOC was joined as a necessary
party in Civil Case No. 95-1584. As the BOC, through the Solicitor General, was not the one who initiated
Civil Case No. 95-1584, and neither was its consent obtained for the filing of the same, it may be
considered an unwilling co-plaintiff of ISAC in said action. The proper way to implead the BOC as a
necessary party to Civil Case No. 95-1584 should have been in accordance with Section 10, Rule 3 of the
Rules of Court, viz:

SEC. 10. Unwilling co-plaintiff. If the consent of any party who should be joined as plaintiff can not be
obtained, he may be made a defendant and the reason therefor shall be stated in the complaint.


Nonetheless, the irregularity in the inclusion of the BOC as a party to Civil Case No. 95-1584 would not in
any way affect the disposition thereof. As the Court already found that the BOC is a necessary party to
Civil Case No. 95-1584, it would be a graver injustice to drop it as a party.

Petitioners argument that the inclusion of the BOC as a party to this case would deprive them of their
personal defenses against the BOC is utterly baseless.

First, as ruled by the Court of Appeals, petitioners defenses against the BOC are completely available
against ISAC, since the right of the latter to seek indemnity from petitioner depends on the right of the
BOC to proceed against the bonds.

The Court, however, deems it essential to qualify that ISACs right to seek indemnity from petitioners
does not constitute subrogation under the Civil Code, considering that there has been no payment yet
by ISAC to the BOC. There are indeed cases in the aforementioned Article 2071 of the Civil Code
wherein the guarantor or surety, even before having paid, may proceed against the principal debtor, but
in all these cases, Article 2071 of the Civil Code merely grants the guarantor or surety an action to
obtain release from the guaranty, or to demand a security that shall protect him from any proceedings
by the creditor and from the danger of insolvency of the debtor. The benefit of subrogation, an
extinctive subjective novation by a change of creditor, which transfers to the person subrogated, the
credit and all the rights thereto appertaining, either against the debtor or against third persons,*19+ is
granted by the Article 2067 of the Civil Code only to the guarantor (or surety) who pays.*20+

ISAC cannot be said to have stepped into the shoes of the BOC, because the BOC still retains said rights
until it is paid. ISACs right to file Civil Case No. 95-1584 is based on the express provision of the
Indemnity Agreements making petitioners liable to ISAC at the very moment ISACs bonds become due
and demandable for the liability of Autocorp Group to the BOC, without need for actual payment by
ISAC to the BOC. But it is still correct to say that all the defenses available to petitioners against the BOC
can likewise be invoked against ISAC because the latters contractual right to proceed against petitioners
only arises when the Autocorp Group becomes liable to the BOC for non-compliance with its
undertakings. Indeed, the arguments and evidence petitioners can present against the BOC to prove
that Autocorp Groups liability to the BOC is not yet due and demandable would also establish that
petitioners liability to ISAC under the Indemnity Agreements has not yet arisen.

Second, making the BOC a necessary party to Civil Case No. 95-1584 actually allows petitioners to
simultaneously invoke its defenses against both the BOC and ISAC. Instead of depriving petitioners of
their personal defenses against the BOC, Civil Case No. 95-1584 actually gave them the opportunity to
kill two birds with one stone: to disprove its liability to the BOC and, thus, negate its liability to ISAC.

Liability of petitioner Rodriguez


Petitioner Rodriguez posits that he is merely a guarantor, and that his liability arises only when the
person with whom he guarantees the credit, Autocorp Group in this case, fails to pay the obligation.
Petitioner Rodriguez invokes Article 2079 of the Civil Code on Extinguishment of Guaranty, which states:

Art. 2079. An extension granted to the debtor by the creditor without the consent of the guarantor
extinguishes the guaranty. The mere failure on the part of the creditor to demand payment after the
debt has become due does not of itself constitute any extension of time referred to herein.


Petitioner Rodriguez argues that there was an amendment as to the effectivity of the bonds, and this
constitutes a modification of the agreement without his consent, thereby exonerating him from any
liability.

We must take note at this point that petitioners have not presented any evidence of this alleged
amendment as to the effectivity of the bonds.[21] Be that as it may, even if there was indeed such an
amendment, such would not cause the exoneration of petitioner Rodriguez from liability on the bonds.

The Court of Appeals, in its assailed Decision, held that the use of the term guarantee in a contract does
not ipso facto mean that the contract is one of guaranty. It thus ruled that both petitioners assumed
liability as a regular party and obligated themselves as original promissors, i.e., sureties, as shown in the
following provisions of the Indemnity Agreement:

INDEMNITY: - The undersigned [Autocorp Group and Rodriguez] agree at all times to jointly and
severally indemnify the COMPANY [ISAC] and keep it indemnified and hold and save it harmless from
and against any and all damages, losses, costs, stamps, taxes, penalties, charges and expenses of
whatsoever kind and nature including counsel or attorneys fee which the COMPANY *ISAC+ shall or may
at any time sustain or incur in consequence of having become surety upon the bond herein above
referred to x x x

x x x x

OUR LIABILITY HEREUNDER: - It shall not be necessary for the COMPANY [ISAC] to bring suit against the
principal [Autocorp Group] upon his default or to exhaust the property of the principal [Autocorp
Group], but the liability hereunder of the undersigned indemnitors [Rodriguez] shall be jointly and
severally, a primary one, the same as that of the principal [Autocorp Group], and shall be exigible
immediately upon the occurrence of such default. (Emphases supplied.)


The Court of Appeals concluded that since petitioner Rodriguez was a surety, Article 2079 of the Civil
Code does not apply. The appellate court further noted that both petitioners authorized ISAC to
consent to the granting of an extension of the subject bonds.

The Court of Appeals committed a slight error on this point. The provisions of the Civil Code on
Guarantee, other than the benefit of excussion, are applicable and available to the surety.[22] The
Court finds no reason why the provisions of Article 2079 would not apply to a surety.

This, however, would not cause a reversal of the Decision of the Court of Appeals. The Court of Appeals
was correct that even granting arguendo that there was a modification as to the effectivity of the bonds,
petitioners would still not be absolved from liability since they had authorized ISAC to consent to the
granting of any extension, modification, alteration and/or renewal of the subject bonds, as expressly set
out in the Indemnity Agreements:

RENEWALS, ALTERATIONS AND SUBSTITUTIONS: - The undersigned [Autocorp Group and Rodriguez]
hereby empower and authorize the COMPANY [ISAC] to grant or consent to the granting of any
extension, continuation, increase, modification, change, alteration and/or renewal of the original bond
herein referred to, and to execute or consent to the execution of any substitution for said Bond with the
same or different, conditions and parties, and the undersigned [Autocorp Group and Rodriguez] hereby
hold themselves jointly and severally liable to the COMPANY [ISAC] for the original Bond herein above-
mentioned or for any extension, continuation, increase, modification, change, alteration, renewal or
substitution thereof without the necessary of any new indemnity agreement being executed until the
full amount including principal, interest, premiums, costs, and other expenses due to the COMPANY
[ISAC] thereunder is fully paid up.[23] (Emphases supplied.)


The foregoing provision in the Indemnity Agreements clearly authorized ISAC to consent to the granting
of any extension, modification, alteration and/or renewal of the subject bonds.

There is nothing illegal in such a provision. In Philippine American General Insurance Co., Inc. v.
Mutuc,[24] the Court held that an agreement whereby the sureties bound themselves to be liable in
case of an extension or renewal of the bond, without the necessity of executing another indemnity
agreement for the purpose and without the necessity of being notified of such extension or renewal, is
valid; and that there is nothing in it that militates against the law, good customs, good morals, public
order or public policy.

WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the Court of
Appeals dated 30 June 2004 in CA-G.R. CV No. 62564 which affirmed with modification the Decision of
the Regional Trial Court of Makati City, in Civil Case No. 95-1584 dated 16 September 1998 is AFFIRMED
in toto. Costs against petitioners.

SO ORDERED.





SECOND DIVISION


B. VAN ZUIDEN BROS., LTD., G.R. No. 147905
Petitioner,
Present:

QUISUMBING, J.,
Chairperson,
-versus- CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.


GTVL MANUFACTURING Promulgated:
INDUSTRIES, INC.,
Respondent. May 28, 2007
x-----------------------------------------------------------------------------------------x


D E C I S I O N


CARPIO, J.:


The Case


Before the Court is a petition for review[1] of the 18 April 2001 Decision[2] of the Court of Appeals
in CA-G.R. CV No. 66236. The Court of Appeals affirmed the Order[3] of the Regional Trial Court, Branch
258, Paraaque City (trial court) dismissing the complaint for sum of money filed by B. Van Zuiden Bros.,
Ltd. (petitioner) against GTVL Manufacturing Industries, Inc. (respondent).

The Facts


On 13 July 1999, petitioner filed a complaint for sum of money against respondent, docketed as
Civil Case No. 99-0249. The pertinent portions of the complaint read:

1. Plaintiff, ZUIDEN, is a corporation, incorporated under the laws of Hong Kong. x x x ZUIDEN is not
engaged in business in the Philippines, but is suing before the Philippine Courts, for the reasons
hereinafter stated.

x x x x

3. ZUIDEN is engaged in the importation and exportation of several products, including lace products.

4. On several occasions, GTVL purchased lace products from [ZUIDEN].

5. The procedure for these purchases, as per the instructions of GTVL, was that ZUIDEN delivers the
products purchased by GTVL, to a certain Hong Kong corporation, known as Kenzar Ltd. (KENZAR), x x x
and the products are then considered as sold, upon receipt by KENZAR of the goods purchased by GTVL.

KENZAR had the obligation to deliver the products to the Philippines and/or to follow whatever
instructions GTVL had on the matter.

Insofar as ZUIDEN is concerned, upon delivery of the goods to KENZAR in Hong Kong, the
transaction is concluded; and GTVL became obligated to pay the agreed purchase price.

x x x x

7. However, commencing October 31, 1994 up to the present, GTVL has failed and refused to pay
the agreed purchase price for several deliveries ordered by it and delivered by ZUIDEN, as above-
mentioned.

x x x x

9. In spite [sic] of said demands and in spite [sic] of promises to pay and/or admissions of liability,
GTVL has failed and refused, and continues to fail and refuse, to pay the overdue amount of
U.S.$32,088.02 [inclusive of interest].[4]


Instead of filing an answer, respondent filed a Motion to Dismiss[5] on the ground that petitioner
has no legal capacity to sue. Respondent alleged that petitioner is doing business in the Philippines
without securing the required license. Accordingly, petitioner cannot sue before Philippine courts.

After an exchange of several pleadings[6] between the parties, the trial court issued an Order on 10
November 1999 dismissing the complaint.

On appeal, the Court of Appeals sustained the trial courts dismissal of the complaint.

Hence, this petition.

The Court of Appeals Ruling

In affirming the dismissal of the complaint, the Court of Appeals relied on Eriks Pte., Ltd. v. Court of
Appeals.[7] In that case, Eriks, an unlicensed foreign corporation, sought to collect US$41,939.63 from a
Filipino businessman for goods which he purchased and received on several occasions from January to
May 1989. The transfers of goods took place in Singapore, for the Filipinos account, F.O.B. Singapore,
with a 90-day credit term. Since the transactions involved were not isolated, this Court found Eriks to be
doing business in the Philippines. Hence, this Court upheld the dismissal of the complaint on the ground
that Eriks has no capacity to sue.

The Court of Appeals noted that in Eriks, while the deliveries of the goods were perfected in
Singapore, this Court still found Eriks to be engaged in business in the Philippines. Thus, the Court of
Appeals concluded that the place of delivery of the goods (or the place where the transaction took
place) is not material in determining whether a foreign corporation is doing business in the Philippines.
The Court of Appeals held that what is material are the proponents to the transaction, as well as the
parties to be benefited and obligated by the transaction.

In this case, the Court of Appeals found that the parties entered into a contract of sale whereby
petitioner sold lace products to respondent in a series of transactions. While petitioner delivered the
goods in Hong Kong to Kenzar, Ltd. (Kenzar), another Hong Kong company, the party with whom
petitioner transacted was actually respondent, a Philippine corporation, and not Kenzar. The Court of
Appeals believed Kenzar is merely a shipping company. The Court of Appeals concluded that the
delivery of the goods in Hong Kong did not exempt petitioner from being considered as doing business
in the Philippines.

The Issue

The sole issue in this case is whether petitioner, an unlicensed foreign corporation, has legal
capacity to sue before Philippine courts. The resolution of this issue depends on whether petitioner is
doing business in the Philippines.


The Ruling of the Court


The petition is meritorious.


Section 133 of the Corporation Code provides:

Doing business without license. No foreign corporation transacting business in the Philippines
without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action,
suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be
sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of
action recognized under Philippine laws.


The law is clear. An unlicensed foreign corporation doing business in the Philippines cannot sue
before Philippine courts. On the other hand, an unlicensed foreign corporation not doing business in
the Philippines can sue before Philippine courts.

In the present controversy, petitioner is a foreign corporation which claims that it is not doing
business in the Philippines. As such, it needs no license to institute a collection suit against respondent
before Philippine courts.

Respondent argues otherwise. Respondent insists that petitioner is doing business in the
Philippines without the required license. Hence, petitioner has no legal capacity to sue before Philippine
courts.

Under Section 3(d) of Republic Act No. 7042 (RA 7042) or The Foreign Investments Act of 1991,
the phrase doing business includes:

x x x soliciting orders, service contracts, opening offices, whether called liaison offices or branches;
appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay
in the country for a period or periods totalling one hundred eighty (180) days or more; participating in
the management, supervision or control of any domestic business, firm, entity or corporation in the
Philippines; and any other act or acts that imply a continuity of commercial dealings or arrangements,
and contemplate to that extent the performance of acts or works, or the exercise of some of the
functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization: Provided, however, That the phrase doing business shall not be
deemed to include mere investment as a shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such investor; nor having a nominee director
or officer to represent its interests in such corporation; nor appointing a representative or distributor
domiciled in the Philippines which transacts business in its own name and for its own account.
The series of transactions between petitioner and respondent cannot be classified as doing
business in the Philippines under Section 3(d) of RA 7042. An essential condition to be considered as
doing business in the Philippines is the actual performance of specific commercial acts within the
territory of the Philippines for the plain reason that the Philippines has no jurisdiction over commercial
acts performed in foreign territories. Here, there is no showing that petitioner performed within the
Philippine territory the specific acts of doing business mentioned in Section 3(d) of RA 7042. Petitioner
did not also open an office here in the Philippines, appoint a representative or distributor, or manage,
supervise or control a local business. While petitioner and respondent entered into a series of
transactions implying a continuity of commercial dealings, the perfection and consummation of these
transactions were done outside the Philippines.[8]

In its complaint, petitioner alleged that it is engaged in the importation and exportation of several
products, including lace products. Petitioner asserted that on several occasions, respondent purchased
lace products from it. Petitioner also claimed that respondent instructed it to deliver the purchased
goods to Kenzar, which is a Hong Kong company based in Hong Kong. Upon Kenzars receipt of the
goods, the products were considered sold. Kenzar, in turn, had the obligation to deliver the lace
products to the Philippines. In other words, the sale of lace products was consummated in Hong Kong.

As earlier stated, the series of transactions between petitioner and respondent transpired and
were consummated in Hong Kong.[9] We also find no single activity which petitioner performed here in
the Philippines pursuant to its purpose and object as a business organization.[10] Moreover,
petitioners desire to do business within the Philippines is not discernible from the allegations of the
complaint or from its attachments. Therefore, there is no basis for ruling that petitioner is doing
business in the Philippines.

In Eriks, respondent therein alleged the existence of a distributorship agreement between him and
the foreign corporation. If duly established, such distributorship agreement could support respondents
claim that petitioner was indeed doing business in the Philippines. Here, there is no such or similar
agreement between petitioner and respondent.

We disagree with the Court of Appeals ruling that the proponents to the transaction determine
whether a foreign corporation is doing business in the Philippines, regardless of the place of delivery or
place where the transaction took place. To accede to such theory makes it possible to classify, for
instance, a series of transactions between a Filipino in the United States and an American company
based in the United States as doing business in the Philippines, even when these transactions are
negotiated and consummated only within the United States.

An exporter in one country may export its products to many foreign importing countries without
performing in the importing countries specific commercial acts that would constitute doing business in
the importing countries. The mere act of exporting from ones own country, without doing any specific
commercial act within the territory of the importing country, cannot be deemed as doing business in the
importing country. The importing country does not acquire jurisdiction over the foreign exporter who
has not performed any specific commercial act within the territory of the importing country. Without
jurisdiction over the foreign exporter, the importing country cannot compel the foreign exporter to
secure a license to do business in the importing country.

Otherwise, Philippine exporters, by the mere act alone of exporting their products, could be
considered by the importing countries to be doing business in those countries. This will require
Philippine exporters to secure a business license in every foreign country where they usually export their
products, even if they do not perform any specific commercial act within the territory of such importing
countries. Such a legal concept will have a deleterious effect not only on Philippine exports, but also on
global trade.

To be doing or transacting business in the Philippines for purposes of Section 133 of the
Corporation Code, the foreign corporation must actually transact business in the Philippines, that is,
perform specific business transactions within the Philippine territory on a continuing basis in its own
name and for its own account. Actual transaction of business within the Philippine territory is an
essential requisite for the Philippines to acquire jurisdiction over a foreign corporation and thus require
the foreign corporation to secure a Philippine business license. If a foreign corporation does not
transact such kind of business in the Philippines, even if it exports its products to the Philippines, the
Philippines has no jurisdiction to require such foreign corporation to secure a Philippine business
license.

Considering that petitioner is not doing business in the Philippines, it does not need a license in
order to initiate and maintain a collection suit against respondent for the unpaid balance of
respondents purchases.





WHEREFORE, we GRANT the petition. We REVERSE the Decision dated 18 April 2001 of the Court
of Appeals in CA-G.R. CV No. 66236. No costs.

SO ORDERED.













Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 152318 April 16, 2009

DEUTSCHE GESELLSCHAFT FR TECHNISCHE ZUSAMMENARBEIT, also known as GERMAN AGENCY FOR
TECHNICAL COOPERATION, (GTZ) HANS PETER PAULENZ and ANNE NICOLAY, Petitioners,
vs.
HON. COURT OF APPEALS, HON. ARIEL CADIENTE SANTOS, Labor Arbiter of the Arbitration Branch,
National Labor Relations Commission, and BERNADETTE CARMELLA MAGTAAS, CAROLINA DIONCO,
CHRISTOPHER RAMOS, MELVIN DELA PAZ, RANDY TAMAYO and EDGARDO RAMILLO, Respondents.

D E C I S I O N

TINGA, J.:

On 7 September 1971, the governments of the Federal Republic of Germany and the Republic of the
Philippines ratified an Agreement concerning Technical Co-operation (Agreement) in Bonn, capital of
what was then West Germany. The Agreement affirmed the countries "common interest in promoting
the technical and economic development of their States, and recogni[zed] the benefits to be derived by
both States from closer technical co-operation," and allowed for the conclusion of "arrangements
concerning individual projects of technical co-operation."1 While the Agreement provided for a limited
term of effectivity of five (5) years, it nonetheless was stated that "[t]he Agreement shall be tacitly
extended for successive periods of one year unless either of the two Contracting Parties denounces it in
writing three months prior to its expiry," and that even upon the Agreements expiry, its provisions
would "continue to apply to any projects agreed upon x x x until their completion."2

On 10 December 1999, the Philippine government, through then Foreign Affairs Secretary Domingo
Siazon, and the German government, agreed to an Arrangement in furtherance of the 1971 Agreement.
This Arrangement affirmed the common commitment of both governments to promote jointly a project
called, Social Health InsuranceNetworking and Empowerment (SHINE), which was designed to "enable
Philippine familiesespecially poor onesto maintain their health and secure health care of sustainable
quality."3 It appears that SHINE had already been in existence even prior to the effectivity of the
Arrangement, though the record does not indicate when exactly SHINE was constituted. Nonetheless,
the Arrangement stated the various obligations of the Filipino and German governments. The relevant
provisions of the Arrangement are reproduced as follows:

3. The Government of the Federal Republic of Germany shall make the following contributions to the
project.

It shall

(a) second

- one expert in health economy, insurance and health systems for up to 48 expert/months,

- one expert in system development for up to 10 expert/months

- short-term experts to deal with special tasks for a total of up to 18 expert/months,

- project assistants/guest students as required, who shall work on the project as part of their basic and
further training and assume specific project tasks under the separately financed junior staff promotion
programme of the Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ);

(b) provide in situ

- short-term experts to deal with diverse special tasks for a total of up to 27 expert/months,

- five local experts in health economy, health insurance, community health systems, information
technology, information systems, training and community mobilization for a total of up to 240
expert/months,

- local and auxiliary personnel for a total of up to 120 months;

(c) supply inputs, in particular

- two cross-country vehicles,

- ten computers with accessories,

- office furnishings and equipment
up to a total value of DM 310,000 (three hundred and ten thousand Deutsche Mark);

(c) meet

- the cost of accommodation for the seconded experts and their families in so far as this cost is not met
by the seconded experts themselves,

- the cost of official travel by the experts referred to in sub-paragraph (a) above within and outside the
Republic of the Philippines,

- the cost of seminars and courses,

- the cost of transport and insurance to the project site of inputs to be supplied pursuant to sub-
paragraph (c) above, excluding the charges and storage fees referred to in paragraph 4(d) below,

- a proportion of the operating and administrative costs;

x x x

4. The Government of the Republic of the Philippines shall make the following contributions to the
project:

It shall

(a) provide the necessary Philippine experts for the project, in particular one project coordinator in the
Philippine Health Insurance Corporation (Philhealth), at least three further experts and a sufficient
number of administrative and auxiliary personnel, as well as health personnel in the pilot provinces and
in the other project partners, in particular one responsible expert for each pilot province and for each
association representing the various target groups,

- release suitably qualified experts from their duties for attendance at the envisaged basic and further
training activities; it shall only nominate such candidates as have given an undertaking to work on the
project for at least five years after completing their training and shall ensure that these Philippine
experts receive appropriate remuneration,

- ensure that the project field offices have sufficient expendables,

- make available the land and buildings required for the project;

(b) assume an increasing proportion of the running and operating costs of the project;

(c) afford the seconded experts any assistance they may require in carrying out the tasks assigned to
them and place at their disposal all necessary records and documents;

(d) guarantee that

- the project is provided with an itemized budget of its own in order to ensure smooth continuation of
the project.

- the necessary legal and administrative framework is created for the project,

- the project is coordinated in close cooperation with other national and international agencies relevant
to implementation,

- the inputs supplied for the project on behalf of the Government of the Federal Republic of Germany
are exempted from the cost of licenses, harbour dues, import and export duties and other public
charges and fees, as well as storage fees, or that any costs thereof are met, and that they are cleared by
customs without delay. The aforementioned exemptions shall, at the request of the implementing
agencies also apply to inputs procured in the Republic of the Philippines,

- the tasks of the seconded experts are taken over as soon as possible by Philippine experts,

- examinations passed by Philippine nationals pursuant to this Arrangement are recognized in
accordance with their respective standards and that the persons concerned are afforded such
opportunities with regard to careers, appointments and advancement as are commensurate with their
training.4

In the arraignment, both governments likewise named their respective implementing organizations for
SHINE. The Philippines designated the Department of Health (DOH) and the Philippine Health Insurance
Corporation (Philhealth) with the implementation of SHINE. For their part, the German government
"charge[d] the Deustche Gesellschaft fr Technische Zusammenarbeit[5 ] (GTZ[6 ]) GmbH, Eschborn,
with the implementation of its contributions."7

Private respondents were engaged as contract employees hired by GTZ to work for SHINE on various
dates between December of 1998 to September of 1999. Bernadette Carmela Magtaas was hired as an
"information systems manager and project officer of SHINE;"8 Carolina Dionco as a "Project Assistant of
SHINE;"9 Christopher Ramos as "a project assistant and liason personnel of NHI related SHINE activities
by GTZ;"10 Melvin Dela Paz and Randy Tamayo as programmers;11 and Edgardo Ramilo as "driver,
messenger and multipurpose service man."12 The employment contracts of all six private respondents
all specified Dr. Rainer Tollkotter, identified as an adviser of GTZ, as the "employer." At the same time,
all the contracts commonly provided that "[i]t is mutually agreed and understood that [Dr. Tollkotter, as
employer] is a seconded GTZ expert who is hiring the Employee on behalf of GTZ and for a Philippine-
German bilateral project named Social Health InsuranceNetworking and Empowerment (SHINE)
which will end at a given time."13

In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post of SHINE Project
Manager. Disagreements eventually arose between Nicolay and private respondents in matters such as
proposed salary adjustments, and the course Nicolay was taking in the implementation of SHINE
different from her predecessors. The dispute culminated in a letter14 dated 8 June 2000, signed by the
private respondents, addressed to Nicolay, and copies furnished officials of the DOH, Philheath, and the
director of the Manila office of GTZ. The letter raised several issues which private respondents claim had
been brought up several times in the past, but have not been given appropriate response. It was claimed
that SHINE under Nicolay had veered away from its original purpose to facilitate the development of
social health insurance by shoring up the national health insurance program and strengthening local
initiatives, as Nicolay had refused to support local partners and new initiatives on the premise that
community and local government unit schemes were not sustainablea philosophy that supposedly
betrayed Nicolays lack of understanding of the purpose of the project. Private respondents further
alleged that as a result of Nicolays "new thrust, resources have been used inappropriately;" that the
new management style was "not congruent with the original goals of the project;" that Nicolay herself
suffered from "cultural insensitivity" that consequently failed to sustain healthy relations with SHINEs
partners and staff.

The letter ended with these ominous words:

The issues that we [the private respondents] have stated here are very crucial to us in working for the
project. We could no longer find any reason to stay with the project unless ALL of these issues be
addressed immediately and appropriately.15

In response, Nicolay wrote each of the private respondents a letter dated 21 June 2000, all similarly
worded except for their respective addressees. She informed private respondents that the "projects
orientations and evolution" were decided in consensus with partner institutions, Philhealth and the
DOH, and thus no longer subject to modifications. More pertinently, she stated:

You have firmly and unequivocally stated in the last paragraph of your 8th June 2000 letter that you and
the five other staff "could no longer find any reason to stay with the project unless ALL of these issues
be addressed immediately and appropriately." Under the foregoing premises and circumstances, it is
now imperative that I am to accept your resignation, which I expect to receive as soon as possible.16

Taken aback, private respondents replied with a common letter, clarifying that their earlier letter was
not intended as a resignation letter, but one that merely intended to raise attention to what they
perceived as vital issues.17 Negotiations ensued between private respondents and Nicolay, but for
naught. Each of the private respondents received a letter from Nicolay dated 11 July 2000, informing
them of the pre-termination of their contracts of employment on the grounds of "serious and gross
insubordination, among others, resulting to loss of confidence and trust."18

On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the NLRC. Named
as respondents therein where GTZ, the Director of its Manila office Hans Peter Paulenz, its Assistant
Project Manager Christian Jahn, and Nicolay.

On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground that the Labor
Arbiter had no jurisdiction over the case, as its acts were undertaken in the discharge of the
governmental functions and sovereign acts of the Government of the Federal Republic of Germany. This
was opposed by private respondents with the arguments that GTZ had failed to secure a certification
that it was immune from suit from the Department of Foreign Affairs, and that it was GTZ and not the
German government which had implemented the SHINE Project and entered into the contracts of
employment.

On 27 November 2000, the Labor Arbiter issued an Order19 denying the Motion to Dismiss. The Order
cited, among others, that GTZ was a private corporation which entered into an employment contract;
and that GTZ had failed to secure from the DFA a certification as to its diplomatic status.

On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating Motion to Dismiss," again praying
that the Motion to Dismiss be granted on the jurisdictional ground, and reprising the arguments for
dismissal it had earlier raised.20 No action was taken by the Labor Arbiter on this new motion. Instead,
on 15 October 2001, the Labor Arbiter rendered a Decision21 granting the complaint for illegal
dismissal. The Decision concluded that respondents were dismissed without lawful cause, there being "a
total lack of due process both substantive and procedural [sic]."22 GTZ was faulted for failing to observe
the notice requirements in the labor law. The Decision likewise proceeded from the premise that GTZ
had treated the letter dated 8 June 2000 as a resignation letter, and devoted some focus in debunking
this theory.

The Decision initially offered that it "need not discuss the jurisdictional aspect considering that the same
had already been lengthily discussed in the Order de*n+ying respondents Motion to Dismiss."23
Nonetheless, it proceeded to discuss the jurisdictional aspect, in this wise:

Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction to entertain the
complaint on the following grounds:

Firstly, under the employment contract entered into between complainants and respondents,
specifically Section 10 thereof, it provides that "contract partners agree that his contract shall be subject
to the LAWS of the jurisdiction of the locality in which the service is performed."

Secondly, respondent having entered into contract, they can no longer invoke the sovereignty of the
Federal Republic of Germany.

Lastly, it is imperative to be immune from suit, respondents should have secured from the Department
of Foreign Affairs a certification of respondents diplomatic status and entitlement to diplomatic
privileges including immunity from suits. Having failed in this regard, respondents cannot escape liability
from the shelter of sovereign immunity.[sic]24

Notably, GTZ did not file a motion for reconsideration to the Labor Arbiters Decision or elevate said
decision for appeal to the NLRC. Instead, GTZ opted to assail the decision by way of a special civil action
for certiorari filed with the Court of Appeals.25 On 10 December 2001, the Court of Appeals
promulgated a Resolution26 dismissing GTZs petition, finding that "judicial recourse at this stage of the
case is uncalled for[,] [t]he appropriate remedy of the petitioners [being] an appeal to the NLRC x x x."27
A motion for reconsideration to this Resolution proved fruitless for GTZ.28

Thus, the present petition for review under Rule 45, assailing the decision and resolutions of the Court
of Appeals and of the Labor Arbiter. GTZs arguments center on whether the Court of Appeals could
have entertained its petition for certiorari despite its not having undertaken an appeal before the NLRC;
and whether the complaint for illegal dismissal should have been dismissed for lack of jurisdiction on
account of GTZs insistence that it enjoys immunity from suit. No special arguments are directed with
respect to petitioners Hans Peter Paulenz and Anne Nicolay, respectively the then Director and the then
Project Manager of GTZ in the Philippines; so we have to presume that the arguments raised in behalf of
GTZs alleged immunity from suit extend to them as well.

The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition. In its
Comment dated 7 November 2005, the OSG took the side of GTZ, with the prayer that the petition be
granted on the ground that GTZ was immune from suit, citing in particular its assigned functions in
implementing the SHINE programa joint undertaking of the Philippine and German governments
which was neither proprietary nor commercial in nature.

The Court of Appeals had premised the dismissal of GTZs petition on its procedural misstep in bypassing
an appeal to NLRC and challenging the Labor Arbiters Decision directly with the appellate court by way
of a Rule 65 petition. In dismissing the petition, the

Court of Appeals relied on our ruling in Air Service Cooperative v. Court of Appeals.29 The central issue
in that case was whether a decision of a Labor Arbiter rendered without jurisdiction over the subject
matter may be annulled in a petition before a Regional Trial Court. That case may be differentiated from
the present case, since the Regional Trial Court does not have original or appellate jurisdiction to review
a decision rendered by a Labor Arbiter. In contrast, there is no doubt, as affirmed by jurisprudence, that
the Court of Appeals has jurisdiction to review, by way of its original certiorari jurisdiction, decisions
ruling on complaints for illegal dismissal.

Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the proper recourse
from the decision of the Labor Arbiter is to first appeal the same to the NLRC. Air Services is in fact
clearly detrimental to petitioners position in one regard. The Court therein noted that on account of the
failure to correctly appeal the decision of the Labor Arbiter to the NLRC, such judgment consequently
became final and executory.30 GTZ goes as far as to "request" that the Court re-examine Air Services, a
suggestion that is needlessly improvident under the circumstances. Air Services affirms doctrines
grounded in sound procedural rules that have allowed for the considered and orderly disposition of
labor cases.

The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of Appeals,31 that even when
appeal is available, the Court has nonetheless allowed a writ of certiorari when the orders of the lower
court were issued either in excess of or without jurisdiction. Indeed, the Court has ruled before that the
failure to employ available intermediate recourses, such as a motion for reconsideration, is not a fatal
infirmity if the ruling assailed is a patent nullity. This approach suggested by the OSG allows the Court to
inquire directly into what is the main issuewhether GTZ enjoys immunity from suit.

The arguments raised by GTZ and the OSG are rooted in several indisputable facts. The SHINE project
was implemented pursuant to the bilateral agreements between the Philippine and German
governments. GTZ was tasked, under the 1991 agreement, with the implementation of the contributions
of the German government. The activities performed by GTZ pertaining to the SHINE project are
governmental in nature, related as they are to the promotion of health insurance in the Philippines. The
fact that GTZ entered into employment contracts with the private respondents did not disqualify it from
invoking immunity from suit, as held in cases such as Holy See v. Rosario, Jr.,32 which set forth what
remains valid doctrine:

Certainly, the mere entering into a contract by a foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the foreign
state is engaged in the activity in the regular course of business. If the foreign state is not engaged
regularly in a business or trade, the particular act or transaction must then be tested by its nature. If the
act is in pursuit of a sovereign activity, or an incident thereof, then it is an act jure imperii, especially
when it is not undertaken for gain or profit.33

Beyond dispute is the tenability of the comment points raised by GTZ and the OSG that GTZ was not
performing proprietary functions notwithstanding its entry into the particular employment contracts.
Yet there is an equally fundamental premise which GTZ and the OSG fail to address, namely: Is GTZ, by
conception, able to enjoy the Federal Republics immunity from suit?

The principle of state immunity from suit, whether a local state or a foreign state, is reflected in Section
9, Article XVI of the Constitution, which states that "the State may not be sued without its consent."
Who or what consists of "the State"? For one, the doctrine is available to foreign States insofar as they
are sought to be sued in the courts of the local State,34 necessary as it is to avoid "unduly vexing the
peace of nations."

If the instant suit had been brought directly against the Federal Republic of Germany, there would be no
doubt that it is a suit brought against a State, and the only necessary inquiry is whether said State had
consented to be sued. However, the present suit was brought against GTZ. It is necessary for us to
understand what precisely are the parameters of the legal personality of GTZ.

Counsel for GTZ characterizes GTZ as "the implementing agency of the Government of the Federal
Republic of Germany," a depiction similarly adopted by the OSG. Assuming that characterization is
correct, it does not automatically invest GTZ with the ability to invoke State immunity from suit. The
distinction lies in whether the agency is incorporated or unincorporated. The following lucid discussion
from Justice Isagani Cruz is pertinent:

Where suit is filed not against the government itself or its officials but against one of its entities, it must
be ascertained whether or not the State, as the principal that may ultimately be held liable, has given its
consent to be sued. This ascertainment will depend in the first instance on whether the government
agency impleaded is incorporated or unincorporated.

An incorporated agency has a charter of its own that invests it with a separate juridical personality, like
the Social Security System, the University of the Philippines, and the City of Manila. By contrast, the
unincorporated agency is so called because it has no separate juridical personality but is merged in the
general machinery of the government, like the Department of Justice, the Bureau of Mines and the
Government Printing Office.

If the agency is incorporated, the test of its suability is found in its charter. The simple rule is that it is
suable if its charter says so, and this is true regardless of the functions it is performing. Municipal
corporations, for example, like provinces and cities, are agencies of the State when they are engaged in
governmental functions and therefore should enjoy the sovereign immunity from suit. Nevertheless,
they are subject to suit even in the performance of such functions because their charter provides that
they can sue and be sued.35

State immunity from suit may be waived by general or special law.36 The special law can take the form
of the original charter of the incorporated government agency. Jurisprudence is replete with examples
of incorporated government agencies which were ruled not entitled to invoke immunity from suit,
owing to provisions in their

charters manifesting their consent to be sued. These include the National Irrigation Administration,37
the former Central Bank,38 and the National Power Corporation.39 In SSS v. Court of Appeals,40 the
Court through Justice Melencio-Herrera explained that by virtue of an express provision in its charter
allowing it to sue and be sued, the Social Security System did not enjoy immunity from suit:

We come now to the amendability of the SSS to judicial action and legal responsibility for its acts. To our
minds, there should be no question on this score considering that the SSS is a juridical entity with a
personality of its own. It has corporate powers separate and distinct from the Government. SSS' own
organic act specifically provides that it can sue and be sued in Court. These words "sue and be sued"
embrace all civil process incident to a legal action. So that, even assuming that the SSS, as it claims,
enjoys immunity from suit as an entity performing governmental functions, by virtue of the explicit
provision of the aforecited enabling law, the Government must be deemed to have waived immunity in
respect of the SSS, although it does not thereby concede its liability. That statutory law has given to the
private citizen a remedy for the enforcement and protection of his rights. The SSS thereby has been
required to submit to the jurisdiction of the Courts, subject to its right to interpose any lawful defense.
Whether the SSS performs governmental or proprietary functions thus becomes unnecessary to belabor.
For by that waiver, a private citizen may bring a suit against it for varied objectives, such as, in this case,
to obtain compensation in damages arising from contract, and even for tort.

A recent case squarely in point anent the principle, involving the National Power Corporation, is that of
Rayo v. Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court, speaking through
Mr. Justice Vicente Abad Santos, ruled:

"It is not necessary to write an extended dissertation on whether or not the NPC performs a
governmental function with respect to the management and operation of the Angat Dam. It is sufficient
to say that the government has organized a private corporation, put money in it and has allowed it to
sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a government, owned and
controlled corporation, it has a personality of its own, distinct and separate from that of the
Government. Moreover, the charter provision that the NPC can 'sue and be sued in any court' is without
qualification on the cause of action and accordingly it can include a tort claim such as the one instituted
by the petitioners."41

It is useful to note that on the part of the Philippine government, it had designated two entities, the
Department of Health and the Philippine Health Insurance Corporation (PHIC), as the implementing
agencies in behalf of the Philippines. The PHIC was established under Republic Act No. 7875, Section
16(g) of which grants the corporation the power "to sue and be sued in court." Applying the previously
cited jurisprudence, PHIC would not enjoy immunity from suit even in the performance of its functions
connected with SHINE, however, governmental in nature as they may be.

Is GTZ an incorporated agency of the German government? There is some mystery surrounding that
question. Neither GTZ nor the OSG go beyond the claim that petitioner is "the implementing agency of
the Government of the Federal Republic of Germany." On the other hand, private respondents asserted
before the Labor Arbiter that GTZ was "a private corporation engaged in the implementation of
development projects."42 The Labor Arbiter accepted that claim in his Order denying the Motion to
Dismiss,43 though he was silent on that point in his Decision. Nevertheless, private respondents argue in
their Comment that the finding that GTZ was a private corporation "was never controverted, and is
therefore deemed admitted."44 In its Reply, GTZ controverts that finding, saying that it is a matter of
public knowledge that the status of petitioner GTZ is that of the "implementing agency," and not that of
a private corporation.45

In truth, private respondents were unable to adduce any evidence to substantiate their claim that GTZ
was a "private corporation," and the Labor Arbiter acted rashly in accepting such claim without
explanation. But neither has GTZ supplied any evidence defining its legal nature beyond that of the bare
descriptive "implementing agency." There is no doubt that the 1991 Agreement designated GTZ as the
"implementing agency" in behalf of the German government. Yet the catch is that such term has no
precise definition that is responsive to our concerns. Inherently, an agent acts in behalf of a principal,
and the GTZ can be said to act in behalf of the German state. But that is as far as "implementing agency"
could take us. The term by itself does not supply whether GTZ is incorporated or unincorporated,
whether it is owned by the German state or by private interests, whether it has juridical personality
independent of the German government or none at all.

GTZ itself provides a more helpful clue, inadvertently, through its own official Internet website.46 In the
"Corporate Profile" section of the English language version of its site, GTZ describes itself as follows:

As an international cooperation enterprise for sustainable development with worldwide operations, the
federally owned Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ) GmbH supports the
German Government in achieving its development-policy objectives. It provides viable, forward-looking
solutions for political, economic, ecological and social development in a globalised world. Working under
difficult conditions, GTZ promotes complex reforms and change processes. Its corporate objective is to
improve peoples living conditions on a sustainable basis.

GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was founded in 1975 as a
company under private law. The German Federal Ministry for Economic Cooperation and Development
(BMZ) is its major client. The company also operates on behalf of other German ministries, the
governments of other countries and international clients, such as the European Commission, the United
Nations and the World Bank, as well as on behalf of private enterprises. GTZ works on a public-benefit
basis. All surpluses generated are channeled [sic] back into its own international cooperation projects
for sustainable development.47

GTZs own website elicits that petitioner is "federally owned," a "federal enterprise," and "founded in
1975 as a company under private law." GTZ clearly has a very meaningful relationship with the Federal
Republic of Germany, which apparently owns it. At the same time, it appears that GTZ was actually
organized not through a legislative public charter, but under private law, in the same way that Philippine
corporations can be organized under the Corporation Code even if fully owned by the Philippine
government.

This self-description of GTZ in its own official website gives further cause for pause in adopting
petitioners argument that GTZ is entitled to immunity from suit because it is "an implementing agency."
The above-quoted statement does not dispute the characterization of GTZ as an "implementing agency
of the Federal Republic of Germany," yet it bolsters the notion that as a company organized under
private law, it has a legal personality independent of that of the Federal Republic of Germany.

The Federal Republic of Germany, in its own official website,48 also makes reference to GTZ and
describes it in this manner:

x x x Going by the principle of "sustainable development," the German Technical Cooperation (Deutsche
Gesellschaft fr Technische Zusammenarbeit GmbH, GTZ) takes on non-profit projects in international
"technical cooperation." The GTZ is a private company owned by the Federal Republic of Germany.49

Again, we are uncertain of the corresponding legal implications under German law surrounding "a
private company owned by the Federal Republic of Germany." Yet taking the description on face value,
the apparent equivalent under Philippine law is that of a corporation organized under the Corporation
Code but owned by the Philippine government, or a government-owned or controlled corporation
without original charter. And it bears notice that Section 36 of the Corporate Code states that "[e]very
corporation incorporated under this Code has the power and capacity x x x to sue and be sued in its
corporate name."50

It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself has not
been vested or has been specifically deprived the power and capacity to sue and/or be sued. Yet in the
proceedings below and before this Court, GTZ has failed to establish that under German law, it has not
consented to be sued despite it being owned by the Federal Republic of Germany. We adhere to the rule
that in the absence of evidence to the contrary,

foreign laws on a particular subject are presumed to be the same as those of the Philippines,51 and
following the most intelligent assumption we can gather, GTZ is akin to a governmental owned or
controlled corporation without original charter which, by virtue of the Corporation Code, has expressly
consented to be sued. At the very least, like the Labor Arbiter and the Court of Appeals, this Court has
no basis in fact to conclude or presume that GTZ enjoys immunity from suit.

This absence of basis in fact leads to another important point, alluded to by the Labor Arbiter in his
rulings. Our ruling in Holy See v. Del Rosario52 provided a template on how a foreign entity desiring to
invoke State immunity from suit could duly prove such immunity before our local courts. The principles
enunciated in that case were derived from public international law. We stated then:

In Public International Law, when a state or international agency wishes to plead sovereign or diplomatic
immunity in a foreign court, it requests the Foreign Office of the state where it is sued to convey to the
court that said defendant is entitled to immunity.

In the United States, the procedure followed is the process of "suggestion," where the foreign state or
the international organization sued in an American court requests the Secretary of State to make a
determination as to whether it is entitled to immunity. If the Secretary of State finds that the defendant
is immune from suit, he, in turn, asks the Attorney General to submit to the court a "suggestion" that
the defendant is entitled to immunity. In England, a similar procedure is followed, only the Foreign
Office issues a certification to that effect instead of submitting a "suggestion" (O'Connell, I International
Law 130 [1965]; Note: Immunity from Suit of Foreign Sovereign Instrumentalities and Obligations, 50
Yale Law Journal 1088 [1941]).

In the Philippines, the practice is for the foreign government or the international organization to first
secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how the
Philippine Foreign Office conveys its endorsement to the courts varies. In International Catholic
Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign Affairs just sent a letter
directly to the Secretary of Labor and Employment, informing the latter that the respondent-employer
could not be sued because it enjoyed diplomatic immunity. In World Health Organization v. Aquino, 48
SCRA 242 (1972), the Secretary of Foreign Affairs sent the trial court a telegram to that effect. In Baer v.
Tizon, 57 SCRA 1 (1974), the U.S. Embassy asked the Secretary of Foreign Affairs to request the Solicitor
General to make, in behalf of the Commander of the United States Naval Base at Olongapo City,
Zambales, a "suggestion" to respondent Judge. The Solicitor General embodied the "suggestion" in a
Manifestation and Memorandum as amicus curiae.53

It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was imperative for
petitioners to secure from the Department of Foreign Affairs "a certification of respondents diplomatic
status and entitlement to diplomatic privileges including immunity from suits."54 The requirement
might not necessarily be imperative. However, had GTZ obtained such certification from the DFA, it
would have provided factual basis for its claim of immunity that would, at the very least, establish a
disputable evidentiary presumption that the foreign party is indeed immune which the opposing party
will have to overcome with its own factual evidence. We do not see why GTZ could not have secured
such certification or endorsement from the DFA for purposes of this case. Certainly, it would have been
highly prudential for GTZ to obtain the same after the Labor Arbiter had denied the motion to dismiss.
Still, even at this juncture, we do not see any evidence that the DFA, the office of the executive branch
in charge of our diplomatic relations, has indeed endorsed GTZs claim of immunity. It may be possible
that GTZ tried, but failed to secure such certification, due to the same concerns that we have discussed
herein.
Would the fact that the Solicitor General has endorsed GTZs claim of States immunity from suit before
this Court sufficiently substitute for the DFA certification? Note that the rule in public international law
quoted in Holy See referred to endorsement by the Foreign Office of the State where the suit is filed,
such foreign office in the Philippines being the Department of Foreign Affairs. Nowhere in the Comment
of the OSG is it manifested that the DFA has endorsed GTZs claim, or that the OSG had solicited the
DFAs views on the issue. The arguments raised by the OSG are virtually the same as the arguments
raised by GTZ without any indication of any special and distinct perspective maintained by the Philippine
government on the issue. The Comment filed by the OSG does not inspire the same degree of
confidence as a certification from the DFA would have elicited.1avvphi1
Holy See made reference to Baer v. Tizon,55 and that in the said case, the United States Embassy asked
the Secretary of Foreign Affairs to request the Solicitor General to make a "suggestion" to the trial court,
accomplished by way of a Manifestation and Memorandum, that the petitioner therein enjoyed
immunity as the Commander of the Subic Bay Naval Base. Such circumstance is actually not narrated in
the text of Baer itself and was likely supplied in Holy See because its author, Justice Camilio Quiason,
had appeared as the Solicitor in behalf of the OSG in Baer. Nonetheless, as narrated in Holy See, it was
the Secretary of Foreign Affairs which directed the OSG to intervene in behalf of the United States
government in the Baer case, and such fact is manifest enough of the endorsement by the Foreign
Office. We do not find a similar circumstance that bears here.
The Court is thus holds and so rules that GTZ consistently has been unable to establish with satisfaction
that it enjoys the immunity from suit generally enjoyed by its parent country, the Federal Republic of
Germany. Consequently, both the Labor Arbiter and the Court of Appeals acted within proper bounds
when they refused to acknowledge that GTZ is so immune by dismissing the complaint against it. Our
finding has additional ramifications on the failure of GTZ to properly appeal the Labor Arbiters decision
to the NLRC. As pointed out by the OSG, the direct recourse to the Court of Appeals while bypassing the
NLRC could have been sanctioned had the Labor Arbiters decision been a "patent nullity." Since the
Labor Arbiter acted properly in deciding the complaint, notwithstanding GTZs claim of immunity, we
cannot see how the decision could have translated into a "patent nullity."
As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by filing directly with
the Court of Appeals the petition for certiorari. It then follows that the Court of Appeals acted correctly
in dismissing the petition on that ground. As a further consequence, since petitioners failed to perfect an
appeal from the Labor Arbiters Decision, the same has long become final and executory. All other
questions related to this case, such as whether or not private respondents were illegally dismissed, are
no longer susceptible to review, respecting as we do the finality of the Labor Arbiters Decision.
A final note. This decision should not be seen as deviation from the more common methodology
employed in ascertaining whether a party enjoys State immunity from suit, one which focuses on the
particular functions exercised by the party and determines whether these are proprietary or sovereign
in nature. The nature of the acts performed by the entity invoking immunity remains the most
important barometer for testing whether the privilege of State immunity from suit should apply. At the
same time, our Constitution stipulates that a State immunity from suit is conditional on its withholding
of consent; hence, the laws and circumstances pertaining to the creation and legal personality of an
instrumentality or agency invoking immunity remain relevant. Consent to be sued, as exhibited in this
decision, is often conferred by the very same statute or general law creating the instrumentality or
agency.

WHEREFORE, the petition is DENIED. No pronouncement as to costs.

SO ORDERED.

SECOND DIVISION


CHRISTINE CHUA G.R. No. 151900
Petitioner,
Present:

PUNO, J.
Chairman,
- versus - AUSTRIA-MARTINEZ,
CALLEJO,
TINGA, and
CHICO-NAZARIO, JJ.
JORGE TORRES and
ANTONIO BELTRAN,
Respondents. August 30, 2005
x---------------------------------------------------------------------x


D E C I S I O N

TINGA, J.:

The Court settles an issue, heretofore undecided, on whether the absence of the signature in the
required verification and certification against forum-shopping of a party misjoined as a plaintiff is a valid
ground for the dismissal of the complaint. We rule in the negative.

The relevant facts in this Petition for Review are culled from the records.


On 24 October 2001, a complaint for damages was lodged before the Regional Trial Court (RTC) of
Caloocan City, Branch 126.[1] The complaint was filed by Christine Chua, herein petitioner, impleading
her brother Jonathan Chua as a necessary co-plaintiff. Named as defendants in the suit were herein
respondents Jorge Torres and Antonio Beltran. Torres was the owner of the 9th Avenue Caltex Service
Center (Caltex Service Center), while Beltran was an employee of the said establishment as the head of
its Sales and Collection Division.[2]

The complaint alleged that on 3 April 2000, Jonathan Chua issued in favor of the Caltex Service
Center his personal Rizal Commercial Banking Corporation (RCBC) Check No. 0412802 in the amount of
Nine Thousand Eight Hundred Forty Nine Pesos and Twenty Centavos (P9,849.20) in payment for
purchases of diesel oil. However, the check was dishonored by the drawee bank when presented for
payment on the ground that the account was closed. Beltran then sent petitioner a demand letter
informing her of the dishonor of the check and demanding the payment thereof. Petitioner ignored the
demand letter on the ground that she was not the one who issued the said check.

Without bothering to ascertain who had actually issued the check, Beltran instituted against petitioner a
criminal action for violation of Batas Pambansa Bilang 22 (B.P. 22). Subsequently, a criminal information
was filed against petitioner with the Metropolitan Trial Court (MTC) of Caloocan City, Branch 50.[3] The
MTC then issued a warrant of arrest against petitioner. The police officers tasked with serving the
warrant looked for her in her residence, in the auto repair shop of her brother, and even at the Manila
Central University were she was enrolled as a medical student, all to the alleged embarrassment and
social humiliation of petitioner.*4+

Beltrans purported negligence amounted to either malicious prosecution or serious defamation in
prosecuting petitioner resulting from the issuance of a check she herself did not draw, and served cause
for a claim of moral damages. On the other hand, Torres, as employer of Beltran, was alleged to have
failed to observe the diligence of a good father of the family to prevent the damage suffered by
petitioner. Exemplary damages and attorneys fees were likewise sought, thus bringing the
aggregate total of damages claimed to Two Million Pesos (P2,000,000.00), plus costs of suit.[5]

Significantly, while Jonathan Chua was named as a plaintiff to the suit, it was explicitly qualified in the
second paragraph of the complaint that he was being impleaded here-in as a necessary party-
plaintiff.*6+ There was no allegation in the complaint of any damage or injury sustained by Jonathan,
and the prayer therein expressly named petitioner as the only party to whom respondents were sought
to recompense.[7] Neither did Jonathan Chua sign any verification or certification against forum-
shopping, although petitioner did sign an attestation, wherein she identified herself as the principal
plaintiff.*8+

Upon motion of respondents, the RTC ordered the dismissal of the complaint[9] on the ground that
Jonathan Chua had not executed a certification against forum-shopping. The RTC stressed that
Section 5, Rule 7 of the Rules of Civil Procedure, the rule requiring the


certification, makes no distinction whether the plaintiff required to execute the certification is a
principal party, a nominal party or a necessary party. Instead, the provision requires that a plaintiff or
principal party who files a complaint or initiatory pleading execute such certification. Jonathan Chua,
being a plaintiff in this case, was obliged to execute or sign such certification.[10] Hence, his failure to do
so in violation of the mandatory rule requiring the certification against forum-shopping constituted valid
cause for the dismissal of the petition.[11]

After the RTC denied the motion for reconsideration[12] lodged by petitioner, the matter was elevated
directly to this Court by way of petition for review under Rule 45, raising a purely legal question,[13]
cast, if somewhat unwieldily, as whether or not a co-plaintiff impleaded only as a necessary party, who
however has no claim for relief or is not asserting any claim for relief in the complaint, should also make
a certification against forum shopping.*14+


Preliminarily, it bears noting that Jonathan Chua did not sign as well any verification to the complaint,
ostensibly in violation of Section 7, Rule 4 of the Rules of Civil Procedure. The RTC failed to mention such
fact, as does petitioner in her present petition. In their arguments before this Court, respondents do
refer in passing to the verification requirement[15], but do not place any particular focus thereto. The
verification requirement is separate from the certification requirement.[16] It is noted that as a matter
of practice, the verification is usually accomplished at the same time as the certification against forum-
shopping; hence the customary nomenclature, Verification and Certification of Non Forum-Shopping
or its variants. For this reason, it is quite possible that the RTC meant to assail as well the failure of
Jonathan Chua to verify the complaint.

The verification requirement is significant, as it is intended to secure an assurance that the allegations in
the pleading are true and correct and not the product of the imagination or a matter of speculation, and
that the pleading is filed in good faith.[17] The absence of a proper verification is cause to treat the
pleading as unsigned and dismissible.[18] It would be as well that the Court discuss whether under the
circumstances, Jonathan Chua is also required to execute a verification in respect to petitioners
complaint.

Having established the proper parameters of the petition, we proceed to the core issues. We find the
petition has merit, although we appreciate the situation differently from petitioner. Our decision
proceeds from the fundamental premise that Jonathan Chua was misjoined as a party plaintiff in this
case.

It is elementary that it is only in the name of a real party in interest that a civil suit may be
prosecuted.[19] Under Section 2, Rule 3 of the Rules of Civil Procedure, a real party in interest is the
party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the
avails of the suit. "Interest" within the meaning of the rule means material interest, an interest in issue
and to be affected by the decree, as distinguished from mere interest in the question involved, or a
mere incidental interest.[20] One having no right or interest to protect cannot invoke the jurisdiction of
the court as a party plaintiff in an action.[21] To qualify a person to be a real party in interest in whose
name an action must be prosecuted, he must appear to be the present real owner of the right sought to
enforced.[22]

The subject complaint does not allege any rights of Jonathan Chua violated by respondents, present any
rights of his to be enforced, or seek in his behalf any rights to the avails of suit. In short, Jonathan claims
nothing, and for nothing, in the subject complaint. If he alone filed the complaint, it would have been
dismissed on the ground that the complaint states no cause of action, instituted as it was by a person
who was not a real party in interest.

But was it proper for petitioner to have even impleaded Jonathan as a co-plaintiff in the first place?
Petitioner alleged in her complaint that Jonathan was a necessary party, and remains consistent to that
claim even before this Court. She however fails to demonstrate how Jonathan can be considered as a
necessary party, other than by noting that he was the one who really
issued the check in controversy.*23+ Such fact, if proven, may establish the malice of respondents in
filing the criminal case against petitioner for violation of B.P. 22, but does not create the need to require
Jonathans participation as a necessary party.

Section 8, Rule 7 of the Rules of Civil Procedure defines a necessary party as one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to those
already parties, or for a complete determination or settlement of the claim subject of the action.*24+
Necessary parties are those whose presence is necessary to adjudicate the whole controversy, but
whose interests are so far separable that a final decree can be made in their absence without affecting
them.[25]

An example of a necessary party may be found in Seno v. Mangubat.[26] Petitioner therein sold her
property through a deed of sale to three vendees. Two of the vendees then sold their shares to the third
buyer, who then sold the property to another set of persons. Thereafter, petitioner, who claimed that
the true intent of the first sale was an equitable mortgage, filed a complaint seeking the reformation of
the deed of sale and the annulment of the second sale. The question arose whether the two vendees
who had since disposed of their shares should be considered as indispensable parties or necessary
parties. In concluding that they were only necessary parties, the Court reasoned:

In the present case, there are no rights of defendants Andres Evangelista and Bienvenido Mangubat to
be safeguarded if the sale should be held to be in fact an absolute sale nor if the sale is held to be an
equitable mortgage. Defendant Marcos Mangubat became the absolute owner of the subject property
by virtue of the sale to him of the shares of the aforementioned defendants in the property. Said
defendants no longer have any interest in the subject property. However, being parties to the
instrument sought to be reformed, their presence is necessary in order to settle all the possible issues of
the controversy. Whether the disputed sale be declared an absolute sale or an equitable mortgage, the
rights of all the defendants will have been amply protected. Defendants-spouses Luzame in any event
may enforce their rights against defendant Marcos Mangubat.[27]


In Seno, the persons deemed by the Court as necessary parties may have had already disposed of
their interests in the property. However, should the lower court therein grant the prayer for the
reformation of the deed of sale, the ruling will undoubtedly have an effect on such parties, on matters
such as the purchase price which they may have received, and on whatever transmission of rights that
may have occurred between them and the vendor.

In contrast, Jonathan Chua does not stand to be affected should the RTC rule either favorably or
unfavorably of the complaint. This is due to the nature of the cause of action of the complaint, which
alleges an injury personal to petitioner, and the relief prayed for, which is to be adjudicated solely to
petitioner. There is no allegation in the complaint alleging any violation or omission of any right of
Jonathan, either arising from contract or from law.

It may be so that Jonathan may be called to testify by his sister, in order to prove the essential allegation
that she did not issue the check in question, and perhaps such testimony would be vital to petitioners
cause of action. But this does not mean that Jonathan should be deemed a necessary party, as such
circumstance would merely place him in the same class as those witnesses whose testimony would be
necessary to prove the allegations of the complaint. But the fact remains that Jonathan would stand
unaffected by the final ruling on the complaint. The judicial confirmation or rejection of the allegations
therein, or grant or denial of the reliefs prayed for will not infringe on or augment any of his rights under
the law. If there would be any effect to Jonathan of the RTCs ultimate decision on the complaint, it
would be merely emotional, arising from whatever ties of kinship he may retain towards his sister, and
no different from whatever effects that may be similarly sustained on petitioners immediate family.

Since we are unconvinced by petitioners basic premise that Jonathan was a necessary party, it is
unnecessary to directly settle the issue as couched by petitioner of whether or not a co-plaintiff
impleaded only as a necessary party, who however has no claim for relief or is not asserting any claim
for relief in the complaint, should also make a certification against forum shopping.*28+ We can note, as
the RTC did, that Section 5, Rule 7 of the 1997 Rules of Civil Procedure makes no distinctions that would
expressly exempt a necessary party from executing the certification against forum shopping.
Nonetheless, there are dimensions to the matter, heretofore unraised, that may unsettle a strict
application of the rule, such as if the necessary party is impleaded as a plaintiff or counterclaimant
without his knowledge or against his will.[29] But these circumstances relevant to a necessary party are
not present in this case, and thus require no further comment upon for now.




Instead, what the Court may rule upon is whether the absence of the signature of the person
misjoined as a party-plaintiff in either the verification page or certification against forum-shopping is
ground for the dismissal of the action. We rule that it is not so, and that the RTC erred in dismissing the
instant complaint. There is no judicial precedent affirming or rejecting such a view, but we are
comfortable with making such a pronouncement. A misjoined party plaintiff has no business
participating in the case as a plaintiff in the first place, and it would make little sense to require the
misjoined party in complying with all the requirements expected of plaintiffs.

At the same time, Section 11, Rule 3 of the 1997 Rules of Civil Procedure states:

Neither misjoinder nor non-joinder of parties is ground for dismissal of an action. Parties may be
dropped or added by order of the court on motion of any party or on its own initiative at any stage of
the action and on such terms as are just. Any claim against a misjoined party may be severed and
proceeded with separately.[30]



Clearly, misjoinder of parties is not fatal to the complaint. The rule prohibits dismissal of a suit on
the ground of non-joinder or misjoinder of parties.[31] Moreover, the dropping of misjoined parties
from the complaint may be done motu proprio by the court, at any stage, without need for a motion to
such effect from the adverse party.[32] Section 11, Rule 3 indicates that the misjoinder of parties, while
erroneous, may be corrected with ease through amendment, without further hindrance to the
prosecution of the suit.

It should then follow that any act or omission committed by a misjoined party plaintiff should not
be cause for impediment to the prosecution of the case, much less for the dismissal of the suit. After all,
such party should not have been included in the first place, and no efficacy should be accorded to
whatever act or omission of
the party.[33] Since the misjoined party plaintiff receives no recognition from the court as either an
indispensable or necessary party-plaintiff, it then follows that whatever action or inaction the misjoined
party may take on the verification or certification against forum-shopping is inconsequential. Hence, it
should not have mattered to the RTC that Jonathan Chua had failed to sign the certification against
forum-shopping, since he was misjoined as a plaintiff in the first place. The fact that Jonathan was
misjoined is clear on the face of the complaint itself, and the error of the RTC in dismissing the
complaint is not obviated by the fact that the adverse party failed to raise this point. After all, the RTC
could have motu proprio dropped Jonathan as a plaintiff, for the reasons above-stated which should
have been evident to it upon examination of the complaint.

There may be a school of thought that would nonetheless find some satisfaction in petitioners
woes before the RTC, as it was her error in the first place of wrongfully impleading her brother as a party
plaintiff which ultimately served as cause for the dismissal of the complaint. The blame may in the final
analysis lie with petitioner, yet we should not construe the rules of procedure to quench an unnecessary
thirst to punish at the expense of the intellectual integrity of the rules. For our Rules of Court do not
regard the misjoinder of parties as an error of fatal consequence, and the logical extension of this
principle is to consider those procedural acts or omissions of misjoined parties as of similar import.




WHEREFORE, the Petition is GRANTED. The Orders dated 3 December 2001 and 15 January 2002 of
the Regional Trial Court of Caloocan City, Branch 126, in Civil Case No. C-19863 are SET ASIDE, and the
Complaint in the aforementioned case is REINSTATED. The lower court is ENJOINED to hear and decide
the case with deliberate dispatch. No pronouncement as to costs.

SO ORDERED.











THIRD DIVISION


LITTIE SARAH A. AGDEPPA,
LYNN SARAH A. AGDEPPA,
LOUELLA JEANNE A. AGDEPPA, and LALAINE LILIBETH A. AGDEPPA,
Petitioners,


- versus -


HEIRS OF IGNACIO BONETE, represented by DOROTEA BONETE, HIPOLITO BONETE, MILAGROS BONETE,
MAURICIO BONETE, FERNANDO BONETE, and OPHELIA BONETE,
Respondents.

G.R. No. 164436


Present:


CORONA, J.,
Chairperson,
VELASCO, JR.,
NACHURA,
PERALTA, and
MENDOZA, JJ.



Promulgated:

January 15, 2010

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



DECISION


NACHURA, J.:


Before this Court is a Petition for Review on Certiorari,[1] seeking the reversal of the Court of
Appeals (CA) Decision,[2] dated December 27, 2002,
which reversed and set aside the Order,[3] dated May 21, 1990, issued by the Regional Trial Court (RTC),
Branch 18, of Midsayap, Cotabato.

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

In 1979, respondent Dorotea Bonete (Dorotea), widow of the late Ignacio Bonete and mother
of respondents Hipolito Bonete, Milagros Bonete, Mauricio Bonete, Fernando Bonete, and Ophelia
Bonete (respondents), obtained a loan in the amount of P55,000.00 from Development Bank of the
Philippines (DBP), Cotabato City Branch, in order to buy farm implements. A parcel of agricultural land,
known as Lot No. (1144) H-207865 with an area of 18.00 hectares, covered by Transfer Certificate of
Title (TCT) No. T-56923,[4] issued in the name of Dorotea and situated in Demapaco, Libungan, Cotabato
(subject property), was used as collateral to secure the said loan.

In 1982, respondents, through Dorotea, received a notice of collection from DBP.
Respondents alleged that herein petitioner and counsel, Atty. Littie Sarah A. Agdeppa (Littie Sarah),
expressed deep concern and sympathy for them. Consequently, Littie Sarah accompanied Dorotea to
DBP and obligated herself to pay the loan. Thereafter, Dorotea was allegedly made to sign a document
as Littie Sarahs security for the amount which the latter paid to DBP in connection with the said loan.
Further, respondents alleged that, since 1982, Littie Sarah and her representatives had been gradually
easing them out of the subject property and that they were ordered to stop the cultivation of their
respective ricefields. Eventually, respondents were forcibly ejected from the subject property.

Further, Littie Sarah planted corn and put up duck-raising projects on the subject property.

On this account, respondents inquired from the Register of Deeds and found that the title to
the subject property, which was in the name of respondents' predecessor-in-interest, the late Ignacio
Bonete, had already been canceled and transferred to Littie Sarah under TCT No. T-75454 by virtue of a
purported deed of sale. According to Dorotea, Littie Sarah took advantage of her by letting her sign a
contract, ostensibly as security for the loan from DBP, which later turned out to be a deed of sale. Thus,
respondents filed a Complaint[5] for Recovery of Ownership and Possession and/or Annulment of Deed
of Sale of the Subject Property with Damages, docketed as Civil Case No. 484 before the RTC.

Littie Sarah filed a Motion to Dismiss[6] the Complaint based on the following grounds: 1)
that respondents had no legal capacity to sue; 2) that respondents were not the real parties in
interest; 3) that the Complaint stated no cause of action; and 4) that the claim or demand set forth in
the Complaint had already been waived and extinguished.

Later, the Complaint was amended, impleading herein petitioners Lynn Sarah Agdeppa,
Louella Jeanne Agdeppa, and Lalaine Lilibeth Agdeppa, together with Littie Sarah, as defendants
(petitioners).[7] Respondents also filed an Opposition to the Motion to Dismiss. [8]

On May 21, 1990, the RTC issued an Order dismissing the Amended Complaint with costs
against respondents. It held that the Amended Complaint did not show the character and
representation that respondents claimed to have. TCT No. T-56923, covering the subject property, was
not in the name of the late Ignacio Bonete but in Dorotea's name. Thus, the RTC held that respondents
were not real parties in interest. Respondents filed a Motion for Reconsideration[9] which the RTC
denied in its Order[10] dated January 12, 1991. Therein, the RTC held that respondents lacked the
personality to sue; thus, a valid basis to grant the motion to dismiss on the ground that the complaint
did not state a cause of action.

Aggrieved, respondents went to the CA.[11] On December 27, 2002, the CA reversed and set
aside the RTC Order, and remanded the case to the RTC for further proceedings because Dorotea, being
the former owner of the subject property, was a real party in interest.

Petitioners filed their Motion for Reconsideration,[12] which the CA denied in its Resolution[13]
dated April 28, 2004.

Hence, this Petition assigning the following errors:

THE HONORABLE COURT OF APPEALS IN REVERSING THE ORDER OF DISMISSAL ISSUED BY THE
REGIONAL TRIAL COURT, ACTED CONTRARY TO LAW AND JURISPRUDENCE; DEPARTED FROM THE
ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS; GRAVELY ERRED AND GRAVELY ABUSED ITS
DISCRETION TANTAMOUNT TO LACK OF JURISDICTION; AND LAID DOWN A VERY BAD PRECEDENT, AS
FOLLOWS:

A. BY VIOLATING SPECIFICALLY THE PROVISIONS OF THE RULES OF COURT, PARTICULARLY SECS. 2
AND 3 OF RULE 3 OF THE RULES OF COURT, ON PARTIES-PLAINTIFFS TO CIVIL ACTIONS AND REAL
PARTIES IN INTEREST;

B. BY UPHOLDING THE LEGAL CAPACITY OF THE PLAINTIFFS HEIRS OF IGNACIO BONETE TO SUE
AND TO FILE THIS CASE WHEN THE HONORABLE COURT OF APPEALS ITSELF EVEN RIGHTFULLY FOUND
THAT TCT NO. T-56923 WAS ALREADY REGISTERED IN THE NAME OF DOROTEA BONETE, WHEN IT WAS
SOLD TO HEREIN DEFENDANTS, SUCH THAT IGNACIO BONETE OR THE HEIRS OF IGNACIO BONETE [HAD]
NOTHING TO DO WITH THE SAID PROPERTY- THUS[,] NOT THE REAL PARTY IN INTEREST AND [HAD] NO
LEGAL PERSONALITY TO SUE AND LIKEWISE [HAD] NO CAUSE OF ACTION AGAINST DEFENDANTS
(PETITIONERS HEREIN);

C. THAT THE DECISION OF THIS HONORABLE COURT OF APPEALS WAS ISSUED CONTRARY TO LAW
AND JURISPRUDENCE AND CONTRARY TO THE TRUE, ACTUAL AND EXISTING FACTS OF THIS CASE AND
EVEN TO THE VERY FINDINGS OF THE HONORABLE COURT OF APPEALS ITSELF, BECAUSE WHILE THE
HONORABLE COURT OF APPEALS RULED THAT DOROTEA BONETE AS REGISTERED OWNER IS A PARTY IN
INTEREST, THIS CASE IS NOT PROSECUTED IN THE NAME OF DOROTEA BONETE, BUT IN THE NAME OF
THE HEIRS OF IGNACIO BONETE, AND IF EVER THE NAME OF DOROTEA BONETE IS MENTIONED IT WAS
MERELY [AND] ALLEGEDLY IN REPRESENTATION OF THE HEIRS OF IGNACIO BONETE AND NOT IN HER
OWN PERSONAL CAPACITY; BUT WHICH REPRESENTATION IS NOT EVEN ALLEGED IN THE COMPLAINT,
THUS STILL A VIOLATION OF THE RULES OF COURT;

D. THAT THE REMANDING OF THIS CASE TO THE REGIONAL TRIAL COURT FOR FURTHER
PROCEEDINGS WITH THE PARTY PLAINTIFF HEIRS OF IGNACIO BONETE NOT BEING A REAL PARTY IN
INTEREST VIOLATES THE WELL ESTABLISHED GENERAL RULE *THAT+ ONE HAVING NO RIGHT OR
INTEREST TO PROTECT CANNOT INVOKE THE JURISDICTION OF THE COURT AS A PARTY PLAINTIFF IN AN
ACTION. (Ralla v. Ralla, 199 SCRA 495 *1991+) AND THE GENERAL RULE OF x x x COMMON LAW x x x
THAT EVERY ACTION MUST BE BROUGHT IN THE NAME OF THE PARTY WHOSE LEGAL RIGHT HAS BEEN
INVADED OR INFRINGED;

E. IT WILL CREATE A VERY BAD AND IMPROPER PRECEDENT NOT WARRANTED UNDER THE
PROVISIONS OF THE RULES OF COURT; [AND]

F. WILL UNNECESSARILY CAUSE THE PARTIES UNDUE DELAY AND EXPENSES FOR AFTER ALL THE
PARTIES-PLAINTIFFS THEREIN ARE NOT THE REAL PARTIES IN INTEREST[.][14]


The instant Petition is bereft of merit.


While it is true that respondents committed a procedural infraction before the RTC, such infraction
does not justify the dismissal of the case.

Misjoinder of parties does not warrant the dismissal of the action.[15] Rule 3, Section 11 of the
Rules of Court clearly provides:

Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of
parties is ground for dismissal of an action. Parties may be dropped or added by order of the court on
motion of any party or on its own initiative at any stage of the action and on such terms as are just. Any
claim against a misjoined party may be severed and proceeded with separately.


It bears stressing that TCT No. T-56923, covering the subject property, was issued in the name of
Dorotea. This is established by the record, and petitioners themselves admit this fact. However, because
TCT No. T-75454, allegedly issued in favor of Littie Sarah, and the purported deed of sale, allegedly
executed by Dorotea in favor of Littie Sarah, are not on record. Considering the allegations in the
pleadings, it is best that a trial on the merits be conducted.

We fully agree with the apt and judicious ruling of the CA, when it said:

As the former owner of the subject property, the same having been titled in her name under TCT
No. T-56923, Dorotea Cariaga Bonete, being the real party [in] interest, has the legal capacity to file the
instant case for reconveyance and annulment of deed of sale. The complaint was filed by the
[respondents] precisely to question the issuance of TCT No. T-75454 in the name of Littie Sarah Agdeppa
as the transaction allegedly contemplated was only to secure Doroteas loan.

Why the property became the subject of the deed of sale which is being disputed by Dorotea
should be threshed out in a full-blown trial on the merits in order to afford the contending parties their
respective days in
court. As held in Del Bros. Hotel Corporation vs. Court of Appeals, 210 SCRA 33, the complaint is not
supposed to contain evidentiary matters as this will have to be done at the trial on the merits of the
case.

A final note.

A liberal construction of the Rules is apt in situations involving excusable formal errors in a
pleading, as long as the same do not subvert the essence of the proceeding, and they connote at least a
reasonable attempt at compliance with the Rules.[16] The Court is not precluded from rectifying errors
of judgment, if blind and stubborn adherence to procedure would result in the sacrifice of substantial
justice for technicality. To deprive respondents, particularly Dorotea, of their claims over the subject
property on the strength of sheer technicality would be a travesty of justice and equity.

WHEREFORE, the instant Petition is DENIED and the assailed Court of Appeals Decision is
AFFIRMED. The Regional Trial Court, Branch 18 of Midsayap, Cotabato, is hereby directed to resolve this
case on the merits with deliberate dispatch. Costs against petitioners.















SECOND DIVISION


ANICIA VALDEZ-TALLORIN, G.R. No. 177429
Petitioner,
Present:

Carpio, J., Chairperson,
- versus - Leonardo-De Castro,
Brion,
Del Castillo, and
Abad, JJ.
HEIRS OF JUANITO TARONA,
Represented by CARLOS TARONA,
ROGELIO TARONA and Promulgated:
LOURDES TARONA,
Respondents. November 24, 2009

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

DECISION

ABAD, J.:


This case is about a courts annulment of a tax declaration in the names of three persons, two of whom
had not been impleaded in the case, for the reason that the document was illegally issued to them.

The Facts and the Case

On February 9, 1998 respondents Carlos, Rogelio, and Lourdes Tarona (the Taronas) filed an action
before the Regional Trial Court (RTC) of Balanga, Bataan,[1] against petitioner Anicia Valdez-Tallorin
(Tallorin) for the cancellation of her and two other womens tax declaration over a parcel of land.

The Taronas alleged in their complaint that, unknown to them, in 1981, the Assessors Office of Morong
in Bataan cancelled Tax Declaration 463 in the name of their father, Juanito Tarona (Juanito), covering
6,186 square meters of land in Morong, Bataan. The cancellation was said to be based on an unsigned
though notarized affidavit that Juanito allegedly executed in favor of petitioner Tallorin and two others,
namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez, who were not impleaded in the action.
In place of the cancelled one, the Assessors Office issued Tax Declaration 6164 in the names of the
latter three persons. The old man Taronas affidavit had been missing and no copy could be found
among the records of the Assessors Office.*2+

The Taronas further alleged that, without their fathers affidavit on file, it followed that his tax
declaration had been illegally cancelled and a new one illegally issued in favor of Tallorin and the others
with her. The unexplained disappearance of the affidavit from official files, the Taronas concluded,
covered-up the falsification or forgery that caused the substitution.[3] The Taronas asked the RTC to
annul Tax Declaration 6164, reinstate Tax Declaration 463, and issue a new one in the name of Juanitos
heirs.

On March 6, 1998 the Taronas filed a motion to declare petitioner Tallorin in default for failing to
answer their complaint within the allowed time.[4] But, before the RTC could act on the motion,
Tallorin filed a belated answer, alleging among others that she held a copy of the supposedly missing
affidavit of Juanito who was merely an agricultural tenant of the land covered by Tax Declaration 463.
He surrendered and waived in that affidavit his occupation and tenancy rights to Tallorin and the others
in consideration of P29,240.00. Tallorin also put up the affirmative defenses of non-compliance with the
requirement of conciliation proceedings and prescription.

On March 12, 1998 the RTC set Tallorins affirmative defenses for hearing*5+ but the Taronas sought
reconsideration, pointing out that the trial court should have instead declared Tallorin in default based
on their earlier motion.*6+ On June 2, 1998 the RTC denied the Taronas motion for reconsideration*7+
for the reasons that it received Tallorins answer before it could issue a default order and that the
Taronas failed to show proof that Tallorin was notified of the motion three days before the scheduled
hearing. Although the presiding judge inhibited himself from the case on motion of the Taronas, the
new judge to whom the case was re-raffled stood by his predecessors previous orders.

By a special civil action for certiorari before the Court of Appeals (CA),[8] however, the Taronas
succeeded in getting the latter court to annul the RTCs March 12 and June 2, 1998 orders.*9+ The CA
ruled that the RTC gravely abused its discretion in admitting Tallorins late answer in the absence of a
motion to admit it. Even if petitioner Tallorin had already filed her late answer, said the CA, the RTC
should have heard the Taronas motion to declare Tallorin in default.

Upon remand of the case, the RTC heard the Taronas motion to declare Tallorin in default,*10+
granted the same, and directed the Taronas to present evidence ex parte.[11]

On January 30, 2002 the RTC rendered judgment, a) annulling the tax declaration in the names of
Tallorin, Margarita Pastelero Vda. de Valdez, and Dolores Valdez; b) reinstating the tax declaration in the
name of Juanito; and c) ordering the issuance in its place of a new tax declaration in the names of
Juanitos heirs. The trial court also ruled that Juanitos affidavit authorizing the transfer of the tax
declaration had no binding force since he did not sign it.

Tallorin appealed the above decision to the CA,[12] pointing out 1) that the land covered by the tax
declaration in question was titled in her name and in those of her two co-owners; 2) that Juanitos
affidavit only dealt with the surrender of his tenancy rights and did not serve as basis for canceling Tax
Declaration 463 in his name; 3) that, although Juanito did not sign the affidavit, he thumbmarked and
acknowledged the same before a notary public; and 4) that the trial court erred in not dismissing the
complaint for failure to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez who were
indispensable parties in the action to annul Juanitos affidavit and the tax declaration in their favor.*13+

On May 22, 2006 the CA rendered judgment, affirming the trial courts decision.*14+ The CA rejected all
of Tallorins arguments. Since she did not assign as error the order declaring her in default and since she
took no part at the trial, the CA pointed out that her claims were in effect mere conjectures, not based
on evidence of record.[15] Notably, the CA did not address the issue Tallorin raised regarding the
Taronas failure to implead Margarita Pastelero Vda. de Valdez and Dolores Valdez as indispensable
party-defendants, their interest in the cancelled tax declarations having been affected by the RTC
judgment.

Questions Presented

The petition presents the following questions for resolution by this Court:

1. Whether or not the CA erred in failing to dismiss the Taronas complaint for not impleading
Margarita Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner Tallorin, the
annulled tax declaration had been issued;

2. Whether or not the CA erred in not ruling that the Taronas complaint was barred by prescription;
and

3. Whether or not the CA erred in affirming the RTCs finding that Juanitos affidavit had no legal
effect because it was unsigned; when at the hearing of the motion to declare Tallorin in default, it was
shown that the affidavit bore Juanitos thumbmark.

The Courts Rulings

The first question, whether or not the CA erred in failing to dismiss the Taronas complaint for not
impleading Margarita Pastelero Vda. de Valdez and Dolores Valdez in whose names, like their co-owner
Tallorin, the annulled tax declaration had been issued, is a telling question.

The rules mandate the joinder of indispensable parties. Thus:

Sec. 7. Compulsory joinder of indispensable parties. Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs and defendants.[16]

Indispensable parties are those with such an interest in the controversy that a final decree would
necessarily affect their rights, so that the courts cannot proceed without their presence.[17] Joining
indispensable parties into an action is mandatory, being a requirement of due process. Without their
presence, the judgment of the court cannot attain real finality.

Judgments do not bind strangers to the suit. The absence of an indispensable party renders all
subsequent actions of the court null and void. Indeed, it would have no authority to act, not only as to
the absent party, but as to those present as well. And where does the responsibility for impleading all
indispensable parties lie? It lies in the plaintiff.[18]

Here, the Taronas sought the annulment of the tax declaration in the names of defendant Tallorin
and two others, namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez and, in its place, the
reinstatement of the previous declaration in their father Juanitos name. Further, the Taronas sought to
strike down as void the affidavit in which Juanito renounced his tenancy right in favor of the same three
persons. It is inevitable that any decision granting what the Taronas wanted would necessarily affect
the rights of such persons to the property covered by the tax declaration.

The Court cannot discount the importance of tax declarations to the persons in whose names they are
issued. Their cancellation adversely affects the rights and interests of such persons over the properties
that the documents cover. The reason is simple: a tax declaration is a primary evidence, if not the
source, of the right to claim title of ownership over real property, a right enforceable against another
person. The Court held in Uriarte v. People[19] that, although not conclusive, a tax declaration is a
telling evidence of the declarants possession which could ripen into ownership.

In Director of Lands v. Court of Appeals,[20] the Court said that no one in his right mind would pay taxes
for a property that he did not have in his possession. This honest sense of obligation proves that the
holder claims title over the property against the State and other persons, putting them on notice that he
would eventually seek the issuance of a certificate of title in his name. Further, the tax declaration
expresses his intent to contribute needed revenues to the Government, a circumstance that strengthens
his bona fide claim to ownership.[21]

Here, the RTC and the CA annulled Tax Declaration 6164 that belonged not only to defendant Tallorin
but also to Margarita Pastelero Vda. de Valdez and Dolores Valdez, which two persons had no
opportunity to be heard as they were never impleaded. The RTC and the CA had no authority to annul
that tax declaration without seeing to it that all three persons were impleaded in the case.

But the Taronas action cannot be dismissed outright. As the Court held in Plasabas v. Court of
Appeals,[22] the non-joinder of indispensable parties is not a ground for dismissal. Section 11, Rule 3 of
the 1997 Rules of Civil Procedure prohibits the dismissal of a suit on the ground of non-joinder or
misjoinder of parties and allows the amendment of the complaint at any stage of the proceedings,
through motion or on order of the court on its own initiative. Only if plaintiff refuses to implead an
indispensable party, despite the order of the court, may it dismiss the action.

There is a need, therefore, to remand the case to the RTC with an order to implead Margarita
Pastelero Vda. de Valdez and Dolores Valdez as defendants so they may, if they so desire, be heard.

In view of the Courts resolution of the first question, it would serve no purpose to consider the
other questions that the petition presents. The resolution of those questions seems to depend on the
complete evidence in the case. This will not yet happen until all the indispensable party-defendants are
impleaded and heard on their evidence.

WHEREFORE, the Court GRANTS the petition and SETS ASIDE the decision of the Regional Trial
Court of Balanga, Bataan in Civil Case 6739 dated January 30, 2002 and the decision of the Court of
Appeals in CA-G.R. CV 74762 dated May 22, 2006. The Court REMANDS the case to the Regional Trial
Court of Balanga, Bataan which is DIRECTED to have Margarita Pastelero Vda. de Valdez and Dolores
Valdez impleaded by the plaintiffs as party-defendants and, afterwards, to hear the case in the manner
prescribed by the rules.

SO ORDERED.





ECOND DIVISION
[G.R. No. 147999. February 27, 2004]

SUI MAN HUI CHAN and GONZALO CO, petitioners, vs. HON. COURT OF APPEALS and OSCAR D.
MEDALLA, respondents.
D E C I S I O N
QUISUMBING, J.:

For review on certiorari is the Decision[1] dated May 3, 2001, of the Court of Appeals in CA-G.R. SP No.
61889, affirming the Order[2] dated January 11, 2000, of the Regional Trial Court (RTC) of Mandaluyong
City, Branch 213, in Civil Case No. MC99-666, which had denied petitioners Motion to Dismiss the
complaint filed by private respondent.

The facts, as culled from records, are as follows:

On March 30, 1999, private respondent Oscar Medalla filed a complaint before the RTC of Mandaluyong
City, docketed as Civil Case No. MC99-666, for collection of a sum of money arising from breach of a
contract of lease and damages, against petitioners Sui Man Hui Chan and Gonzalo Co.

The complaint alleged that on November 14, 1988, Napoleon C. Medalla as lessor and Ramon Chan as
lessee entered into a Lease Contract[3] over a hotel building located at No. 29 Abanao Street, Baguio
City. Chan would use the leased premises as a restaurant named Cypress Inn. Pertinently, the parties
agreed on the following:

1. The period of lease shall be for ten (10) years or from 15 July 1988 to 15 July 1998.

2. The payment of the realty taxes due to the government on the leased premises shall be for the
account of the Lessee.

3. The agreement is binding upon the heirs and/or successors-in-interest of the Lessor and the Lessee.

Petitioner Gonzalo Co was employed by Ramon Chan as the general manager of Cypress Inn and acted
as his agent in all his dealings with Napoleon Medalla.

On August 5, 1989, Ramon Chan died. He was survived by his wife, petitioner Sui Man Hui Chan, who
continued to operate the restaurant.

On July 17, 1996, Napoleon Medalla died. Among his heirs is private respondent Oscar Medalla, who
succeeded him as owner and lessor of the leased premises. The contract was neither amended nor
terminated after the death of the original parties but was continued by their respective successors-in-
interest pursuant to the terms thereof. Petitioners Chan and Co, the latter, in his capacity as agent and
general manager, continued to deal with private respondent Medalla in all transactions pertaining to the
contract.

On various occasions, petitioners failed to pay the monthly rentals due on the leased premises. Despite
several Statements of Accounts sent by Medalla, petitioners failed to pay the rentals due but,
nonetheless, continued to use and occupy the leased premises.

On February 26, 1997, Medalla sent a letter addressed to Ramon Chan, indicating that (1) the contract
of lease would expire on July 15, 1998, and (2) he was not amenable to a renewal of said contract after
its expiration.

Medalla then sent demand letters to petitioners, but the latter still failed to pay the unpaid rentals. He
also found out that petitioners had not paid the realty taxes due on the leased premises since 1991,
amounting to P610,019.11. Medalla then asked petitioners to settle the unpaid rentals, pay the unpaid
real estate taxes, and vacate the leased premises.

On January 1999, petitioners vacated the premises but without paying their unpaid rentals and realty
taxes. Aggrieved by petitioners refusal to pay the amounts owing, which had reached P4,147,901.80 by
March 1999, private respondent Medalla instituted Civil Case No. MC99-666.

In their Answer to the Complaint, petitioners denied owing private respondent the amounts claimed by
the latter. They alleged that the late Ramon Chan had paid all the rentals due up to March 15, 1998.
Moreover, they need not pay any balance owing on the rentals as they were required to pay two (2)
months advance rentals upon signing of the contract and make a guarantee deposit amounting to
P220,000. On the matter of unpaid realty taxes, petitioners alleged that private respondent was
responsible therefor as the owner of the leased premises, notwithstanding any contrary stipulations in
the contract.

On July 19, 1999, petitioners filed a Supplemental Answer with Motion to Dismiss alleging that they
were neither parties nor privies to the Contract of Lease, hence they are not the real parties-in-interest.

Private respondent filed a Reply and Opposition to petitioners Supplemental Answer with Motion to
Dismiss dated August 2, 1999, praying for the denial of the Motion to Dismiss for having been belatedly
filed in direct contravention of Section 1, Rule 16, of the 1997 Rules of Civil Procedure.[4] He further
alleged that petitioner Chan, as the owner of the business and petitioner Co as the agent of petitioner
Chan, are clearly real parties-in-interest in the case. Private respondent pointed to their continuous
dealings with him in all transactions relating to the contract after the death of Ramon Chan and even
after the expiration of the Contract of Lease.

On January 11, 2000, the RTC denied petitioners Motion to Dismiss, thus:

WHEREFORE, in view of the foregoing, the motion to dismiss dated July 19, 1999 filed by defendant
through counsel against plaintiff is hereby DENIED for lack of merit.

SO ORDERED.[5]

The trial court pointed out that petitioners continued to transact business with private respondent after
the death of Ramon Chan as shown by the communications between the parties. It also declared that
private respondents acquiescence to petitioners continued occupation and enjoyment of the leased
premises and the latters recognition of the formers ownership of said premises reflected an oral
agreement between the parties to continue the Lease Contract.

Petitioners moved for reconsideration on the ground that any claim should be filed against the estate of
Ramon Chan in an estate proceeding pursuant to Section 5, Rule 86, of the Revised Rules of Court[6]
since Ramon Chans estate is the real party-in-interest. The court denied said motion and declared that
Section 5, Rule 86 is inapplicable in the case. It pointed out that the unpaid rentals being claimed were
those for the period April 1993 to December 1998. These were incurred by petitioners and not by the
late Ramon Chan, who died on August 5, 1989.

Dissatisfied, petitioners elevated the matter to the Court of Appeals through a special civil action of
certiorari, docketed as CA-G.R. SP No. 61889. The Court of Appeals, however, affirmed the RTC Orders,
as follows:

WHEREFORE, foregoing premises considered, the petition having no merit in fact and in law is hereby
DENIED DUE COURSE and ACCORDINGLY ORDERED DISMISSED. The assailed Orders are resultantly
AFFIRMED WITH COSTS TO PETITIONERS.

SO ORDERED.[7]

Hence, the instant petition submitting as sole issue for our resolution:

WHETHER OR NOT RESPONDENT COURT OF APPEALS COMMITTED SERIOUS ERROR IN LAW IN
AFFIRMING THE RTC ORDERS DENYING PETITIONERS MOTION TO DISMISS AND THE SUBSEQUENT
MOTION FOR RECONSIDERATION.[8]

Petitioners argue that the Court of Appeals erred in affirming the RTCs Orders because they are not the
real parties-in-interest and hence, were improperly impleaded in the complaint as defendants.
Petitioners insist that they were neither parties nor were they privy to the Contract of Lease between
the late Ramon Chan and Napoleon Medalla. They vigorously assert that any claim for unpaid rentals
should be made against the estate of Ramon Chan pursuant to Section 5, Rule 86 of the Revised Rules of
Court.

We find for private respondent. Prefatorily, it bears stressing that petitioners Motion to Dismiss was
filed after an Answer had already been filed. This alone warranted an outright dismissal of the motion
for having been filed in contravention of the clear and explicit mandate of Section 1, Rule 16, of the
Revised Rules of Civil Procedure. Under this section, a motion to dismiss shall be filed within the time
for but before filing the answer to the complaint or pleading asserting a claim.[9] Here, petitioners filed
their Supplemental Answer with Motion to Dismiss almost two months after filing their Answer, in clear
contravention of the aforecited rule.

The Court of Appeals stated that the grant or denial of a Motion to Dismiss is an interlocutory order, and
it cannot be the proper subject of a special civil action for certiorari. The proper remedy in such a case is
to appeal after a decision has been rendered, the CA said. A writ of certiorari is not intended to correct
every controversial interlocutory ruling; it is resorted to only to correct a grave abuse of discretion or a
whimsical exercise of judgment equivalent to lack or excess of jurisdiction. The function of a petition for
certiorari is limited to keeping an inferior court within the bounds of its jurisdiction and to relieve
persons from arbitrary acts, acts which courts or judges have no power or authority in law to perform.
Certiorari is not designed to correct erroneous findings and conclusions made by the court.[10] On this
score, we are in agreement with the appellate court.

At any rate, we find no merit to petitioners contention that they are not real parties-in-interest since
they are not parties nor signatories to the contract and hence should not have been impleaded as
defendants. It is undeniable that petitioner Chan is an heir of Ramon Chan and, together with petitioner
Co, was a successor-in-interest to the restaurant business of the late Ramon Chan. Both continued to
operate the business after the death of Ramon. Thus, they are real parties-in-interest in the case filed
by private respondent, notwithstanding that they are not signatories to the Contract of Lease.

A lease contract is not essentially personal in character. Thus, the rights and obligations therein are
transmissible to the heirs.[11] The general rule, therefore, is that heirs are bound by contracts entered
into by their predecessors-in-interest except when the rights and obligations arising therefrom are not
transmissible by (1) their nature, (2) stipulation or (3) provision of law.[12] In the subject Contract of
Lease, not only were there no stipulations prohibiting any transmission of rights, but its very terms and
conditions explicitly provided for the transmission of the rights of the lessor and of the lessee to their
respective heirs and successors. The contract is the law between the parties. The death of a party does
not excuse nonperformance of a contract, which involves a property right, and the rights and obligations
thereunder pass to the successors or representatives of the deceased. Similarly, nonperformance is not
excused by the death of the party when the other party has a property interest in the subject matter of
the contract.[13]

Finally, as to petitioners contention that any claim should have been filed before the estate proceeding
of Ramon Chan pursuant to Section 5 of Rule 86, the trial court found that the unpaid rentals sought to
be claimed were for the period April 1993 to December 1998. Note that Ramon Chan, the original
lessee, died on August 5, 1989. In other words, as the unpaid rentals did not accrue during the lifetime
of Ramon Chan, but well after his death, his estate might not be held liable for them. Hence, there is no
indubitable basis to apply Section 5, Rule 86, of the Revised Rules of Court as petitioners urge
respondents to do.

WHEREFORE, the instant petition is DENIED and the Decision of the Court of Appeals in CA-G.R. SP. No.
61889 is AFFIRMED. Costs against petitioners.

SO ORDERED.

















CARANDANG V HEIRS OF DE GUZMAN
TOPIC: RULE ON COMPULSORY JOINDER OF INDISPENSABLE PARTIES (CO-
OWNERS OF PERSONAL PROPERTIES)


NATURE OF THE CASE: This case reached the Supreme Court as an appeal to the decision of the CA
ruling against the spouses Carandang and denying their motion for reconsideration. The CA affirmed the
RTCs decision that Milagros de Guzman, the decedents wife, is not an indispensable party in the
complaint, hence, her non-inclusion in the case does not warrant a dismissal of the complaint.

FACTS: Spouses Carandang and the decedent Quirino de Guzman were stockholders and corporate
officers of Mabuhay Broadcasting System (MBS). The Carandangs have equities at 54 % while Quirino
has 46%.

When the capital stock of MBS was increased on November 26, 1983, the Carandangs
subscribed P345,000 from it, P293,250 from the said amount was loaned by Quirino to the Carandangs.
In the subsequent increase in MBS capital stock on March 3, 1989, the Carandangs subscribed again to
the increase in the amount of P93,750. But, P43,125 out of the mentioned amount was again loaned by
Quirino.

When Quirino sent a demand letter to the Carandangs for the payment of the loan, the
Carandangs refused to pay. They contend that a pre-incorporation agreement was executed between
Arcadio Carandang and Quirino, whereby Quirino promised to pay for the stock subscriptions of the
Arcadio without cost, in consideration for Arcadios technical expertise, his newly purchased equipment,
and his skill in repairing and upgrading radio/communication equipment therefore, there is no
indebtedness on the part of the Carandangs.

Thereafter, Quirino filed a complaint seeking to recover the P336,375 total amount of the loan
together with damages. The RTC ruled in favor of Quirino and ordered the Carandangs to pay the loan
plus interest, attorneys fees, and costs of suit. The Carandangs appealed the trial courts decision to the
CA, but the CA affirmed the same. The subsequent Motion for Reconsideration filed by the Carandangs
were also denied. Hence, this appeal to the SC.

SPOUSES CARANDANG: Three of the four checks used to pay their stock subscriptions were issued in
the name of Milagros de Guzman, the decedents wife. Thus, Milagros should be considered as an
indispensable party in the complaint. Being such, the failure to join Milagros as a party in the case should
cause the dismissal of the action by reason of a jurisprudence stating that: (i)f a suit is not brought in the
name of or against the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action."

ISSUE: Whether or not the RTC should have dismissed the case for failure to state a cause of action,
considering that Milagros de Guzman, allegedly an indispensable party, was not included as a party-
plaintiff.

HELD: No. Although the spouses Carandang were correct in invoking the aforementioned doctrine, the
ground set forth entails an examination of whether the parties presently pleaded are interested in the
outcome of the litigation, and not whether all persons interested in such outcome are actually pleaded.
The first query seeks to answer the question of whether Milagros is a real party in interest, while the latter
query is asking if she is an indispensable party. Since the issue of this case calls for the definition of an
indispensable party, invoking the abovementioned doctrine is irrelevant to the case because the doctrine
talks about a real party in interest and not an indispensable party. Although it is important to take note
that an indispensable party is also a real party in interest.

*Definitions:
> Real party in interest the party who stands to be benefited or injured by the judgment of the suit, or
the party entitled to the avails of the suit.
> Indispensable party a party in interest without whom no final determination can be had of an action
> Necessary party one who is not indispensable but who ought to be joined as a party if complete relief
is to be accorded as to those already parties, or for a complete determination or settlement of the claim
subject of the action
> Pro-forma parties those who are required to be joined as co-parties in suits by or against another
party as may be provided by the applicable substantive law or procedural rule.
An example is provided by Section 4, Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided
by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable nor necessary.
The third case occurs if, for example, a husband files an action to recover a property which he claims to
be part of his exclusive property. The wife may have no legal interest in such property, but the rules
nevertheless require that she be joined as a party.

Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3
August 1988. As they did not execute any marriage settlement, the regime of conjugal partnership of
gains govern their property relations.

All property acquired during the marriage, whether the acquisition appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be conjugal unless the
contrary is proved.

Credits are personal properties, acquired during the time the loan or other credit
transaction was executed. Therefore, credits loaned during the time of the marriage are presumed to be
conjugal property.

Assuming that the four checks are credits, they are assumed to be conjugal properties of Quirino
and Milagros. There being no evidence to the contrary, such presumption subsists. As such, Quirino de
Guzman, being a co-owner of specific partnership property, is certainly a real party in interest.

Now, with regard to the discussion on the effect of non-inclusion of parties in the complaint filed:
in indispensable parties, when an indispensable party is not before the court, the action should be
dismissed. The absence of an indispensable party renders all subsequent actuations of the court void, for
want of authority to act, not only as to the absent parties but even as to those present. For necessary
parties, the non-inclusion of a necessary party does not prevent the court from proceeding in the action,
and the judgment rendered therein shall be without prejudice to the rights of such necessary party. Non-
compliance with the order for the inclusion of a necessary party would not warrant the dismissal of the
complaint. Lastly, for pro-forma parties, the general rule under Section 11, Rule 3 must be followed: such
non-joinder is not a ground for dismissal. Hence, in a case concerning an action to recover a sum of
money, we held that the failure to join the spouse in that case was not a jurisdictional defect. The non-
joinder of a spouse does not warrant dismissal as it is merely a formal requirement which may be cured
by amendment.

Conversely, in the instances that the pro-forma parties are also indispensable or necessary
parties, the rules concerning indispensable or necessary parties, as the case may be, should be applied.
Thus, dismissal is warranted only if the pro-forma party not joined in the complaint is an indispensable
party.

Under Art. 147 of the Civil Code which was superceded by Art. 108 of the Family Code, the
conjugal partnership shall be governed by the rules on the contract of partnership. Thus, Milagros is a co-
owner of the subject personal property in this case the credit incurred by spouses Carandang. Being co-
owners of the alleged credit, Quirino and Milagros de Guzman may separately bring an action for the
recovery thereof.

In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring an action,
any kind of action, for the recovery of co-owned properties. Therefore, only one of the co-owners, namely
the co-owner who filed the suit for the recovery of the co-owned property, is an indispensable party
thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a
complete relief can be accorded in the suit even without their participation, since the suit is presumed to
have been filed for the benefit of all co-owners.

Thus, Milagros de Guzman is not an indispensable party in the action for the recovery of the
allegedly loaned money to the spouses Carandang. As such, she need not have been impleaded in said
suit, and dismissal of the suit is not warranted by her not being a party thereto. (The Civ Pro issue was
not the main issue in the case.)

SECOND DIVISION



JUDGE ANTONIO C. SUMALJAG,
Petitioner,



- versus -



SPOUSES DIOSDIDIT and MENENDEZ M. LITERATO; and MICHAELES MAGLASANG RODRIGO,
Respondents.

G.R. No. 149787

Present:

QUISUMBING, J., Chairperson,
TINGA,
BRION,
*REYES, and
** LEONARDO-DE CASTRO, JJ.

Promulgated:


June 18, 2008

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

D E C I S I O N

BRION, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision*1+ of the Court of Appeals (CA) dated June 26, 2001 and its related Resolution*2+
dated September 4, 2001 in CA-G.R. SP No. 59712. The assailed Decision dismissed the petition for
certiorari filed by petitioner Judge Antonio C. Sumaljag (the petitioner) in the interlocutory matter
outlined below in Civil Cases B-1239 and B-1281 before the trial court. The challenged Resolution
denied the petitioners motion for reconsideration.

ANTECEDENT FACTS

On November 16, 1993, Josefa D. Maglasang (Josefa) filed with the Regional Trial Court (RTC),
Branch 14, Baybay, Leyte a complaint[3] (docketed as Civil Case No. B-1239) for the nullity of the deed of
sale of real property purportedly executed between her as vendor and the spouses Diosdidit and
Menendez Literato (the respondent spouses) as vendees. The complaint alleged that this deed of sale
dated October 15, 1971 of Lot 1220-D is spurious. Josefa was the sister of Menendez Maglasang
Literato (Menendez). They were two (2) of the six (6) heirs who inherited equal parts of a 6.3906-
hectare property (Lot 1220) passed on to them by their parents Cristito and Inecita Diano Maglasang.[4]
Lot 1220-D was partitioned to Josefa, while Lot 1220-E was given to Menendez.

The respondent spouses response to the complaint was an amended answer with counterclaim*5+
denying that the deed of sale was falsified. They impleaded the petitioner with Josefa as counterclaim
defendant on the allegation that the petitioner, at the instance of Josefa, occupied Lot 1220-D and Lot
1220-E without their (the respondent spouses) authority; Lot 1220-E is theirs by inheritance while 1220-
D had been sold to them by Josefa. They also alleged that the petitioner acted in bad faith in acquiring
the two (2) lots because he prepared and notarized on September 26, 1986 the contract of lease over
the whole of Lot 1220 between all the Maglasang heirs (but excluding Josefa) and Vicente Tolo, with the
lease running from 1986 to 1991; thus, the petitioner then knew that Josefa no longer owned Lot 1220-
D.

Civil Case No. 1281[6] is a complaint that Menendez filed on April 4, 1996 with the RTC for the
declaration of the inexistence of lease contract, recovery of possession of land, and damages against the
petitioner and Josefa after the RTC dismissed the respondent spouses counterclaim in Civil Case No.
1239. The complaint alleged that Josefa, who had previously sold Lot 1220-D to Menendez, leased it,
together with Lot 1220-E, to the petitioner. Menendez further averred that the petitioner and Josefa
were in bad faith in entering their contract of lease as they both knew that Josefa did not own the
leased lots. Menendez prayed, among others, that this lease contract between Josefa and the petitioner
be declared null and void.

Josefa died on May 3, 1999 during the pendency of Civil Case Nos. B-1239 and B-1281.

On August 13, 1999, Atty. Zenen A. Puray (Atty. Puray) - the petitioners and Josefas common
counsel - asked the RTC in Civil Case No. 1239 that he be given an extended period or up to September
10, 1999 within which to file a formal notice of death and substitution of party.

The RTC granted the motion in an order dated August 13, 1999.[7] On August 26, 1999, Atty.
Puray filed with the RTC a notice of death and substitution of party,[8] praying that Josefa in his
capacity as plaintiff and third party counterclaim defendant be substituted by the petitioner. The
submission alleged that prior to Josefas death, she executed a Quitclaim Deed*9+ over Lot 1220-D in
favor of Remismundo D. Maglasang[10] who in turn sold this property to the petitioner.

Menendez, through counsel, objected to the proposed substitution, alleging that Atty. Puray filed the
notice of death and substitution of party beyond the thirty-day period provided under Section 16, Rule 3
of the 1997 Rules of Civil Procedure, as amended. She recommended instead that Josefa be substituted
by the latters full-blood sister, Michaeles Maglasang Rodrigo (Michaeles).

The RTC denied Atty. Purays motion for substitution and instead ordered the appearance of Michaeles
as representative of the deceased Josefa. This Order provides:

WHEREFORE, in view of the foregoing, the motion is hereby DENIED for lack of merit and instead order
the appearance of Mrs. Mechailes Maglasang-Rodrigo of Brgy. Binulho, Albuera, Leyte, as representative
of the deceased Josefa Maglasang.

SO ORDERED.[11]

The RTC subsequently denied the petitioners motion for reconsideration in an order*12+ dated May 25,
2000.

The petitioner went to the CA on a petition for certiorari (docketed as CA-G.R. SP No. 59712) to question
the above interlocutory orders. In a Decision[13] dated June 26, 2001, the CA dismissed the petition for
lack of merit. The appellate court similarly denied the petitioners motion for reconsideration in its
Resolution[14] dated September 4, 2001.

The present petition essentially claims that the CA erred in dismissing CA-G.R. No. SP 59712 since: (a)
the property under litigation was no longer part of Josefas estate since she was no longer its owner at
the time of her death; (b) the petitioner had effectively been subrogated to the rights of Josefa over the
property under litigation at the time she died; (c) without an estate, the heir who was appointed by the
lower court no longer had any interest to represent; (d) the notice of death was seasonably submitted
by the counsel of Josefa to the RTC within the extended period granted; and (e) the petitioner is a
transferee pendente lite who the courts should recognize pursuant to Rule 3, Section 20 of the Rules of
Court.


THE COURTS RULING

We resolve to deny the petition for lack of merit.

The Governing Rule.

The rule on substitution in case of death of a party is governed by Section 16, Rule 3 of the 1997 Rules of
Civil Procedure, as amended, which provides:
Section 16. Death of a party; duty of counsel. Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within thirty (30)
days after such death of the fact thereof, and to give the name and address of his legal representative or
representatives. Failure of counsel to comply with this duty shall be a ground for disciplinary action.

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

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

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


The purpose behind this rule is the protection of the right to due process of every party to the
litigation who may be affected by the intervening death. The deceased litigant is herself or himself
protected as he/she continues to be properly represented in the suit through the duly appointed legal
representative of his estate.[15]

Application of the Governing Rule.

a. Survival of the pending action

A question preliminary to the application of the above provision is whether Civil Case Nos. B-1239 and B-
1281 are actions that survive the death of Josefa. We said in Gonzalez v. Pagcor:[16]

The criteria for determining whether an action survives the death of a plaintiff or petitioner was
elucidated upon in Bonilla v. Barcena (71 SCRA 491 (1976). as follows:

. . . The question as to whether an action survives or not depends on the nature of the action and the
damage sued for. In the causes of action which survive, the wrong complained [of] affects primarily and
principally property and property rights, the injuries to the person being merely incidental, while in the
causes of action which do not survive, the injury complained of is to the person, the property and rights
of property affected being incidental. . . .

Since the question involved in these cases relate to property and property rights, then we are dealing
with actions that survive so that Section 16, Rule 3 must necessarily apply.

b. Duty of Counsel under the Rule.

The duty of counsel under the aforecited provision is to inform the court within thirty (30) days after the
death of his client of the fact of death, and to give the name and address of the deceaseds legal
representative or representatives. Incidentally, this is the only representation that counsel can
undertake after the death of a client as the fact of death terminated any further lawyer-client
relationship.[17]

In the present case, it is undisputed that the counsel for Josefa did in fact notify the lower court,
although belatedly, of the fact of her death.[18] However, he did as well inform the lower court that

2. That before she died she executed a QUITCLAIM DEED in favor of REMISMUNDO D. MAGLASANG
over the land in question (Lot No. 1220-D of Benolho, Albuera, Leyte), evidenced by a QUITCLAIM DEED,
copy of which is hereto attached as Annex B who in turn sold it in favor of JUDGE ANTONIO
SUMALJAG, evidenced by a DEED OF ABSOLUTE SALE, copy of which is hereto attached as Annex C.

Further, counsel asked that the deceased Josefa Maglasang in her capacity as plaintiff and as Third
Party Counterclaim Defendant be substituted in the case at bar by JUDGE ANTONIO SUMALJAG whose
address is 38 Osmena Street, Ormoc City pursuant to Section 16, Rule 3 of the 1997 Rules of Civil
Procedure.

This notification, although filed late, effectively informed the lower court of the death of litigant Josefa
Maglasang so as to free her counsel of any liability for failure to make a report of death under Section
16, Rule 3 of the Rules of Court. In our view, counsel satisfactorily explained to the lower court the
circumstances of the late reporting, and the latter in fact granted counsel an extended period. The
timeliness of the report is therefore a non-issue.

The reporting issue that goes into the core of this case is whether counsel properly gave the court the
name and address of the legal representative of the deceased that Section 16, Rule 3 specifies. We rule
that he did not. The legal representatives that the provision speaks of, refer to those authorized by
law the administrator, executor or guardian[19] who, under the rule on settlement of estate of
deceased persons,[20] is constituted to take over the estate of the deceased. Section 16, Rule 3 likewise
expressly provides that the heirs of the deceased may be allowed to be substituted for the deceased,
without requiring the appointment of an executor or administrator . . .. Significantly, the person now
the present petitioner - that counsel gave as substitute was not one of those mentioned under Section
16, Rule 3. Rather, he is a counterclaim co-defendant of the deceased whose proferred justification for
the requested substitution is the transfer to him of the interests of the deceased in the litigation prior to
her death.

Under the circumstances, both the lower court and the CA were legally correct in not giving effect to
counsels suggested substitute.

First, the petitioner is not one of those allowed by the Rules to be a substitute. Section 16, Rule 3
speaks for itself in this respect.

Second, as already mentioned above, the reason for the Rule is to protect all concerned who may be
affected by the intervening death, particularly the deceased and her estate. We note in this respect that
the Notice that counsel filed in fact reflects a claim against the interest of the deceased through the
transfer of her remaining interest in the litigation to another party. Interestingly, the transfer is in favor
of the very same person who is suggested to the court as the substitute. To state the obvious, the
suggested substitution effectively brings to naught the protection that the Rules intend; plain common
sense tells us that the transferee who has his own interest to protect, cannot at the same time
represent and fully protect the interest of the deceased transferor.

Third, counsel has every authority to manifest to the court changes in interest that transpire in the
course of litigation. Thus, counsel could have validly manifested to the court the transfer of Josefas
interests in the subject matter of litigation pursuant to Section 19, Rule 3.[21] But this can happen only
while the client-transferor was alive and while the manifesting counsel was still the effective and
authorized counsel for the client-transferor, not after the death of the client when the lawyer-client
relationship has terminated. The fact that the alleged transfer may have actually taken place is
immaterial to this conclusion, if only for the reason that it is not for counsel, after the death of his client,
to make such manifestation because he then has lost the authority to speak for and bind his client.
Thus, at most, the petitioner can be said to be a transferee pendente lite whose status is pending with
the lower court.

Lastly, a close examination of the documents attached to the records disclose that the subject matter of
the Quitclaim allegedly executed by Josefa in favor of Remismundo is Lot 1220-E, while the subject
matter of the deed of sale executed by Remismundo in the petitioners favor is Lot 1220-D. This
circumstance alone raises the possibility that there is more than meets the eye in the transactions
related to this case.

c. The Heirs as Legal Representatives.

The CA correctly harked back to the plain terms of Section 16, Rule 3 in determining who the
appropriate legal representative/s should be in the absence of an executor or administrator. The
second paragraph of the Section 16, Rule 3 of the 1997 Rules of Court, as amended, is clear - the heirs of
the deceased may be allowed to be substituted for the deceased, without requiring the appointment of
an executor or administrator. Our decisions on this matter have been clear and unequivocal. In San
Juan, Jr. v. Cruz, this Court held:


The pronouncement of this Court in Lawas v. Court of Appeals x x x that priority is given to the legal
representative of the deceased (the executor or administrator) and that it is only in case of
unreasonable delay in the appointment of an executor or administrator, or in cases where the heirs
resort to an extra-judicial settlement of the estate that the court may adopt the alternative of allowing
the heirs of the deceased to be substituted for the deceased, is no longer true.[22] (Emphasis ours)


We likewise said in Gochan v. Young: [23]


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


Josefas death certificate*24+ shows that she was single at the time of her death. The records do not
show that she left a will. Therefore, as correctly held by the CA, in applying Section 16, Rule 3, her heirs
are her surviving sisters (Michaelis, Maria, Zosima, and Consolacion) and the children of her deceased
sister, Lourdes (Manuel, Cesar, Huros and Regulo) who should be her legal representatives. Menendez,
although also a sister, should be excluded for being one of the adverse parties in the cases before the
RTC.

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

Costs against the petitioner.


SECOND DIVISION

CRISOLOGO C. DOMINGO,
Petitioner,




- versus -




SEVERINO AND RAYMUNDO LANDICHO, JULIAN ABELLO, MARTA DE SAGUN AND EDITHA G.
SARMIENTO,
Respondents.

G.R. No. 170015

Present:

QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.


Promulgated:

August 29, 2007

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

D E C I S I O N

CARPIO MORALES, J.:
Crisologo C. Domingo (Domingo) filed on April 20, 1993 with the Regional Trial Court (RTC) of Tagaytay
City an application for registration,[1] docketed as LRC No. TG-451, of five parcels of land delineated as
Lot Nos. 7513, 7515, 7516, 7517 and 7518, Cad. 355 under Approved Survey Plan AS-04-002475[2] (the
lots).

The lots, which are located at Barangay Tolentino, Tagaytay, have a total land area of 38,975 square
meters.

In his application, Domingo claimed that he bought the lots from Genoveva Manlapit (Genoveva) in 1948
and has since been in continuous, open, public, adverse and uninterrupted possession thereof in the
concept of an owner.

Domingo further claimed that prior to his purchase of the lots, Genoveva had been in possession thereof
in the concept of an owner for more than 30 years.[3]

To Domingos application the following documents were attached:
1. Tracing Cloth of Approved Plan AS-04-002475 (surveyed from September 24, 1963 to February
13, 1964 and approved on December 12, 1990).[4]

2. Photocopy of the Technical Description of Lot Nos. 7513, 7515, 7516, 7517, and 7518.[5]

3. Photocopy of the Geodetic Engineers Certificate.*6+

4. Owners Copy of Tax Declaration Nos. GR-019-0893-R (covering Lot 7513), GR-019-0894-R
(covering Lot 7515), GR-019-0895-R (covering Lot 7516), GR-019-0896-R (covering Lot 7517), GR-019-
0897-R (covering Lot 7518), all dated January 7, 1993 and in the name of Crisologo C. Domingo.[7]

5. Land Management Inspectors 2nd Indorsement dated October 22, 1990 recommending
approval of AS-Plan.[8]


The Land Registration Authority (LRA), which filed before the RTC its Report[9] dated September 27,
1993, stated that after plotting Plan AS-04-002475 in the Municipal Index Sheet thru its tie lines, a
discrepancy was noted. The RTC thus referred the matter to the Lands Management Sector, Region IV
for verification and correction.

Acting on the directive of the RTC, the Director of Lands filed a Report that per records of the Lands
Management Bureau in Manila, the land involved in said case was not covered by any land patent or by
public land application pending issuance of patent. *10+

The LRA later filed a Supplementary Report[11] dated December 22, 1993 stating that:

x x x x
2. The Regional Technical Director, Region Office IV, thru the Chief, Surveys Division, Robert C.
Pangyarihan in his letter dated November 22, 1993, a copy is attached hereto as Annex A, informed
that per records on file in that Office, the correct adjoining survey along line 8-9 of Lot 7516 and along
lines 3-4-5 of Lot 7515 should be Lot 9237 Cad-355, covered by As-04-000091 and that the parcel of land
covered by As-04-002475 are not portions of or identical to any previously approved isolated survey;
and

3. When the above-furnished correction was applied on plan As-04-002475 no more discrepancy exists.

x x x x

On November 26, 1993, herein respondents Severino and Raymundo Landicho, Julian Abello, Marta de
Sagun, and Editha G. Sarmiento filed an Answer/Opposition*12+ to Domingos application, claiming that
they have been in open, continuous, adverse and actual possession and cultivation of the lots in the
concept of an owner and have been paying real estate taxes thereon;[13] and that Survey Plan AS-04-
002475 was lifted from the cadastral survey of the government which was surveyed for them and other
individual owners.[14]

During the pendency of his application or on March 9, 1996, Domingo died. His counsel, Atty. Irineo
Anarna, did not, however, inform the RTC of his death.
By Decision[15] of December 22, 1997, the RTC approved Domingos application for registration, the
dispositive portion of which reads:

WHEREFORE, in the light of the foregoing premises and considerations, this Court hereby renders
judgment approving the instant application for registration and thus places under the operation of Act
141, Act 496 and/or P.D. 1529, otherwise known as the Property Registration Law, the lands described
in Plan AS-04-002475 as Lots 7513, 7515, 7516, 7517 and 7518, Cad-355, Tagaytay Cadastre, containing
an area of 10,519 square meters, 3, 956 square meters, 18, 921 square meters, 3, 985 square meters
and 1, 594 square meters, respectively, as supported by their technical descriptions now forming parts
of the records of this case, in addition to other proofs adduced, in the name of CRISOLOGO C.
DOMINGO, Filipino, of legal age, married to Corazon A. Domingo, and with residence at No. 34 Dao St.,
Project 3, Quezon City, Metro Manila.

Once this decision becomes final and executory, the corresponding decree of registration shall forthwith
issue.

SO ORDERED.[16]


Respondents appealed to the Court of Appeals, contending that contrary to Domingos claim that he and
his predecessors-in-interest have been in actual, continuous and uninterrupted possession of the lots,
Domingo has always been a resident of No. 34 Dao St., Project 3, Quezon City; that despite Domingos
claim that he has a caretaker overseeing the lots, he could not even give the name of the caretaker; and
that Domingo admittedly declared the lots in his name only in 1993.

By Decision[17] of June 30, 2005, the Court of Appeals reversed and set aside the RTC decision and
dismissed Domingos application for registration of land title.

The appellate court ruled that while Domingo sought judicial confirmation of his imperfect title under
the Public Land Act and Section 14 (1) of Presidential Decree (P.D.) No. 1529, THE PROPERTY
REGISTRATION DECREE, he failed to prove that he and his predecessors-in-interest had been in
possession and occupation of the lots under a bona fide claim of ownership since June 12, 1945 or
earlier.[18]

And the appellate court noted that Domingo failed to present the alleged deed of sale executed by
Genoveva*19+ and could only prove through his Tax Declaration No. 0298 (new) that his possession in
the concept of an owner started only in 1948 (Exhibit L, Records, p. 117).

Domingos Motion for Reconsideration having been denied by the appellate court, the present
petition was lodged, faulting the appellate court:

I

. . . x x x x WHEN IT LIMITED CONSIDERATION OF THE MATTERS ESTABLISHED IN THE APPLICATION TO
SECTION 48 (B) OF THE PUBLIC LAND ACT AND SECTION 14 (1) OF PD 1529.

II

. . . x x x WHEN IT HELD THAT PETITIONER IS NOT ENTITLED FOR REGISTRATION OF TITLE OVER THE
SUBJECT LAND, NOTWITHSTANDING THE FACT THAT THE EVIDENCE ON RECORD CLEARLY ESTABLISHED
HIS ENTITLEMENT [TO] REGISTRATION OF TITLE OVER THE LAND UNDER SECTION 14 (1) AND (4) OF PD
1529.[20] (Underscoring supplied)


Domingos present counsel argues that assuming that Domingo failed to establish his possession from
June 12, 1945 or earlier in accordance with Section 14(1) of P.D. No. 1529, he is still entitled to
registration of title under Article 1113[21] in relation to Article 1137[22] of the Civil Code.[23]
In their Comment[24] to the present petition, respondents pray for its denial for being substantially
defective, Domingos death not having been alleged, albeit the Verification and Certification against
Forum Shopping was signed by Domingos alleged Surviving Spouse and Heirs.*25+

To respondents Comment, Domingos counsel filed a Reply*26+ stating that there is no clearer
manifestation of the death of Domingo than the statement under oath of his surviving spouse and heirs
in substitution of deceased CRISOLOGO C. DOMINGO contained in the Verification and Certification
against Forum Shopping which forms part of the present petition.[27] Nonetheless, the counsel
presented a certified true copy of Domingos death certificate*28] showing that he died on March 9,
1996 (during the pendency of his application before the RTC as earlier stated).

The petition is bereft of merit.

Section 14 (1) of P.D. No. 1529 provides:

Sec. 14. Who may apply. The following persons may file in the proper Court of First Instance an
application for registration of title to land, whether personally or through their duly authorized
representatives:

(1) Those who by themselves or through their predecessors-in-interest have been in open, continuous,
exclusive and notorious possession and occupation of alienable and disposable lands of the public
domain under a bona fide claim of ownership since June 12, 1945, or earlier.[29] (Underscoring
supplied)
To thus be entitled to registration of a land, the applicant must prove that (a) the land applied for forms
part of the disposable and alienable agricultural lands of the public domain; and (b) he has been in open,
continuous, exclusive, and notorious possession and occupation of the same under a bona fide claim of
ownership either since time immemorial or since June 12, 1945.[30]

All lands not otherwise appearing to be clearly within private ownership are presumed to belong to the
State, and unless it has been shown that they have been reclassified by the State as alienable or
disposable to a private person, they remain part of the inalienable public domain.[31]

To prove that a land is alienable, an applicant must conclusively establish the existence of a positive act
of the government, such as a presidential proclamation or an executive order, or administrative action,
investigation reports of the Bureau of Lands investigator or a legislative act or statute.[32]

While petitioner presented a document denominated as 2nd Indorsement*33+ issued by Land
Management Inspector Amadeo Mediran that the lots are within the alienable and disposable zone
under Project No. 3 LSC-3113 issued on April 5, 1978 as certified by the Director of the Forest
Development, the genuineness of the document cannot be ascertained, it being a mere photocopy.
Besides, the truth of its contents cannot be ascertained, Mediran having failed to take the witness stand
to identify and testify thereon.

In fine, Domingo failed to adduce incontrovertible evidence[34] showing that the lots have been
declared alienable. They are thus presumed to belong to the public domain, beyond the commerce of
man, and are not susceptible of private appropriation and acquisitive prescription.

But even assuming arguendo that the lots are alienable, Domingo failed to comply with the requirement
on the period of possession. While he alleged in his petition that he bought the lots from Genoveva in
1948, he failed, as the appellate court correctly noted, to adduce the deed of sale executed for the
purpose, or to explain the reason behind the failure and to present sufficient evidence to prove the fact
of sale.

Again, even assuming arguendo that the lots were indeed sold to him by Genoveva, Domingo failed to
adduce proof that Genoveva, from whom he seeks to tack his possession, acquired registrable title over
them on June 12, 1945 or earlier. Under the same assumption, Domingos claim that he has been in
actual, continuous, adverse and open possession of the lots in the concept of an owner since 1948 is a
conclusion of law which must be substantiated with proof of specific acts of ownership and factual
evidence of possession.[35]

An examination of the tax receipts[36] presented by Domingo shows that they are of recent vintage, the
earliest being dated January 8, 1993.

Tax Declaration Nos. 0298, GR-019-0884, and GR-019-0885,[37] which appear to have been issued in
1947 *sic+, 1964, and 1968, respectively, contain the declaration Filed under Presidential Decree No.
464 below the title Declaration of Real Property. P.D. No. 464, THE REAL PROPERTY TAX CODE,
took effect, however, only on June 1, 1974. Specifically with respect to the first tax declaration, it even
shows that Domingo subscribed and swore to it on August 1, 1947 at which time he had not bought the
lot yet, in 1948 by his claim.

A note on Domingos death during the pendency of his application at the RTC. Indeed, the records do
not show that his death on March 9, 1996 was brought to the RTCs attention, which is not in
accordance with Sections 16 and 17, Rule 3 of the 1994 Rules of Court, viz:

SEC. 16. Duty of attorney upon death, incapacity, or incompetency of party. Whenever a party to a
pending case dies, becomes incapacitated or incompetent, it shall be the duty of his attorney to inform
the court promptly of such death, incapacity or incompetency, and to give the name and residence of his
executor, administrator, guardian or other legal representative. (Italics in the original; underscoring
supplied)

SEC. 17. Death of party. After a party dies and the claim is not thereby extinguished, the court shall
order, upon proper notice, the legal representative of the deceased to appear and to be substituted for
the deceased, within a period of thirty (30) days, or within such time as may be granted. If the legal
representative fails to appear within said time, the court may order the opposing party to procure the
appointment of a legal representative of the deceased within a time to be specified by the court, and
the representative shall immediately appear for and on behalf of the interest of the deceased. The
court charges involved in procuring such appointment, if defrayed by the opposing party, may be
recovered as costs. The heirs of the deceased may be allowed to be substituted for the deceased,
without requiring the appointment of an executor or administrator and the court may appoint guardian
ad litem for the minor heirs. (Italics in the original; underscoring supplied)


When a party dies in an action that survives and no order is issued by the court for the appearance of
the legal representative or of the heirs of the deceased in substitution of the deceased, and as a matter
of fact no substitution has ever been effected, the proceedings held by the court without such legal
representatives or heirs and the judgment rendered after such trial are null and void because the court
acquired no jurisdiction over the person of the legal representative or of the heirs upon whom the trial
and judgment would be binding.[38]

Unlike, however, jurisdiction over the subject matter which is conferred by law, jurisdiction over the
person of the parties to the case may, however, be waived either expressly or impliedly.[39] In the case
at bar, the surviving heirs voluntarily submitted themselves to the jurisdiction of this Court, albeit
belatedly, by participating in the present petition.

Under the now amended Section 16, Rule 3 of the 1997 Rules of Court, failure of a counsel to comply
with the provision thereof is a ground for disciplinary action, viz:

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

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

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

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


The failure of Domingos former counsel, Atty. Irineo A. Anarna of No. 4 Madlansacay St., Poblacion
Lilang 4118 Cavite, to comply with the immediately quoted provisions of the Rules, is compounded by
his misrepresentation, before the CA, that Domingo was well and alive when he stated in his Motion to
Withdraw Appearance as Counsel*40+ dated July 8, 2004 that the motion for withdrawal *was+
conformed to by Mrs. Rosemarie Manlapit Zamora, representative of the applicant as shown by her
signature . . . and that Mrs. Rosemarie Zamora also undertakes to personally seek the conformity of the
Applicant (Underscoring supplied); and by his retaining of the name of Domingo in the title of his
pleadings before the appellate court.

Canon 10 of the Code of Professional Responsibility provides that a lawyer owes candor, fairness
and good faith to the court. Rule 10.01 likewise provides that a lawyer shall do no falsehood, nor
consent to the doing of any in court; nor shall he mislead, or allow the court to be mislead by any
artifice. And Rule 10.03 provides that a lawyer shall observe the rules of procedure and shall not
misuse them to defeat the ends of justice.

This Court thus takes this occasion to warn Atty. Anarna that a repetition of a similar violation of
the Rules of Court and the Code of Professional Responsibility will be dealt with strictly.

WHEREFORE, the petition is, in light of the foregoing discussion, DENIED.

Let a copy of this Decision be furnished Atty. Irineo A. Anarna of No. 4 Madlansacay St., Poblacion
Lilang, 4118 Cavite.

SO ORDERED.



Napere vs. Barbarona
Post under case digests, Remedial Law at Thursday, February 23, 2012 Posted by Schizophrenic Mind
Facts: Jose Barabarona co-owns a property in Leyte. Juan Napere who owns the adjoining lot planted
coconut trees not only on his lot but also on the lot of Barbarona. Barbarona filed a case for quieting of
title and recovery of possession of property against Napere. While the case was pending, Juan Napere
died. His counsel informed the court of such fact. He also gave the names of the heirs of Napere. On the
merits, the RTC ruled in favor of Barbarona, The heirs of Napere argue that the decision is a nullity
because the RTC was not able to acquire jurisdiction of the heirs after Juan Napere died.

Issue: Whether or not mere failure to substitute a deceased party is sufficient to nullify the RTC decision

Held: No. According to the Rules of Court, when a party to a pending case dies, and the action is not
extinguished by death, the Rules require the substitution of the deceased party y his legal
representative or heirs. In such case, the counsel is obliged to inform the court of the death of his client
and give the name and address of the latters legal representatives.

These obligations were complied with by Naperes counsel. It is the RTC who failed to order a
substitution. Despite of this, the RTC decision should not be nullified unless there is a showing that such
failure to order a substitute constitutes an undeniable violation of due process.

The matter of substitution of heirs is not a matter of jurisdiction, but a requirement of due process. The
rule was designed to ensure that the deceased part would continue to be properly represented in the
suit through his heirs. This was accomplished in this case, because even without the order of the court,
the heirs of Napere have appeared and actively participated in the proceedings. Formal substitution of
heirs is, therefore, not necessary.






Republic of the Philippines
SUPREME COURT
Manila


THIRD DIVISION


SPOUSES ANTONIO F. ALGURA G.R. No. 150135
and LORENCITA S.J. ALGURA,
Petitioners,
Present:

- versus - QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
THE LOCAL GOVERNMENT TINGA, and
UNIT OF THE CITY OF NAGA, VELASCO, JR., JJ.
ATTY. MANUEL TEOXON,
ENGR. LEON PALMIANO,
NATHAN SERGIO and Promulgated:
BENJAMIN NAVARRO, SR.,
Respondents. October 30, 2006

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


D E C I S I O N

VELASCO, JR., J.:

Anyone who has ever struggled with poverty
knows how extremely expensive it is to be poor.

James Baldwin

The Constitution affords litigantsmoneyed or poorequal access to the courts; moreover, it
specifically provides that poverty shall not bar any person from having access to the courts.[1]
Accordingly, laws and rules must be formulated, interpreted, and implemented pursuant to the intent
and spirit of this constitutional provision. As such, filing fees, though one of the essential elements in
court procedures, should not be an obstacle to poor litigants opportunity to seek redress for their
grievances before the courts.
The Case

This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order of the
Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403 entitled Spouses Antonio F.
Algura and Lorencita S.J. Algura v. The Local Government Unit of the City of Naga, et al., dismissing the
case for failure of petitioners Algura spouses to pay the required filing fees.[2] Since the instant petition
involves only a question of law based on facts established from the pleadings and documents submitted
by the parties,[3] the Court gives due course to the instant petition sanctioned under Section 2(c) of
Rule 41 on Appeal from the RTCs, and governed by Rule 45 of the 1997 Rules of Civil Procedure.

The Facts

On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified
Complaint dated August 30, 1999[4] for damages against the Naga City Government and its officers,
arising from the alleged illegal demolition of their residence and boarding house and for payment of lost
income derived from fees paid by their boarders amounting to PhP 7,000.00 monthly.

Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants,[5] to which
petitioner Antonio Alguras Pay Slip No. 2457360 (Annex A of motion) was appended, showing a gross
monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP 10,474.00) and a net pay of
Three Thousand Six Hundred Sixteen Pesos and Ninety Nine Centavos (PhP 3,616.99) for [the month of]
July 1999.*6+ Also attached as Annex B to the motion was a July 14, 1999 Certification*7+ issued by the
Office of the City Assessor of Naga City, which stated that petitioners had no property declared in their
name for taxation purposes.

Finding that petitioners motion to litigate as indigent litigants was meritorious, Executive Judge
Jose T. Atienza of the Naga City RTC, in the September 1, 1999 Order,*8+ granted petitioners plea for
exemption from filing fees.

Meanwhile, as a result of respondent Naga City Governments demolition of a portion of petitioners
house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their boarders rentals. With
the loss of the rentals, the meager income from Lorencita Alguras sari-sari store and Antonio Alguras
small take home pay became insufficient for the expenses of the Algura spouses and their six (6)
children for their basic needs including food, bills, clothes, and schooling, among others.

On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10, 1999,[9]
arguing that the defenses of the petitioners in the complaint had no cause of action, the spouses
boarding house blocked the road right of way, and said structure was a nuisance per se.

Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed
their Reply with Ex-Parte Request for a Pre-Trial Setting[10] before the Naga City RTC on October 19,
1999. On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days within
which to file a Motion to Disqualify Petitioners as Indigent Litigants.
On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of
Filing Fees dated March 10, 2000.[11] They asserted that in addition to the more than PhP 3,000.00 net
income of petitioner Antonio Algura, who is a member of the Philippine National Police, spouse
Lorencita Algura also had a mini-store and a computer shop on the ground floor of their residence along
Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that petitioners second floor was used as
their residence and as a boarding house, from which they earned more than PhP 3,000.00 a month. In
addition, it was claimed that petitioners derived additional income from their computer shop patronized
by students and from several boarders who paid rentals to them. Hence, respondents concluded that
petitioners were not indigent litigants.

On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion[12] to
respondents motion to disqualify them for non-payment of filing fees.

On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent litigants
on the ground that they failed to substantiate their claim for exemption from payment of legal fees and
to comply with the third paragraph of Rule 141, Section 18 of the Revised Rules of Courtdirecting
them to pay the requisite filing fees.[13]

On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order. On
May 8, 2000, respondents then filed their Comment/Objections to petitioners Motion for
Reconsideration.

On May 5, 2000, the trial court issued an Order[14] giving petitioners the opportunity to comply with
the requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants.

On May 13, 2000, petitioners submitted their Compliance[15] attaching the affidavits of petitioner
Lorencita Algura[16] and Erlinda Bangate,[17] to comply with the requirements of then Rule 141,
Section 18 of the Rules of Court and in support of their claim to be declared as indigent litigants.

In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their small
dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her husband, and their six
(6) minor children had to rely mainly on her husbands salary as a policeman which provided them a
monthly amount of PhP 3,500.00, more or less. Also, they did not own any real property as certified by
the assessors office of Naga City. More so, according to her, the meager net income from her small
sari-sari store and the rentals of some boarders, plus the salary of her husband, were not enough to pay
the familys basic necessities.

To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit of
Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura and
Lorencita Algura, who were her neighbors; that they derived substantial income from their boarders;
that they lost said income from their boarders rentals when the Local Government Unit of the City of
Naga, through its officers, demolished part of their house because from that time, only a few boarders
could be accommodated; that the income from the small store, the boarders, and the meager salary of
Antonio Algura were insufficient for their basic necessities like food and clothing, considering that the
Algura spouses had six (6) children; and that she knew that petitioners did not own any real property.

Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17, 2000[18]
Order denying the petitioners Motion for Reconsideration.

Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the GROSS INCOME or
TOTAL EARNINGS of plaintiff Algura *was+ 10,474.00 which amount *was+ over and above the amount
mentioned in the first paragraph of Rule 141, Section 18 for pauper litigants residing outside Metro
Manila.*19+ Said rule provides that the gross income of the litigant should not exceed PhP 3,000.00 a
month and shall not own real estate with an assessed value of PhP 50,000.00. The trial court found that,
in Lorencita S.J. Alguras May 13, 2000 Affidavit, nowhere was it stated that she and her immediate
family did not earn a gross income of PhP 3,000.00.

The Issue

Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue for
the consideration of the Court: whether petitioners should be considered as indigent litigants who
qualify for exemption from paying filing fees.

The Ruling of the Court

The petition is meritorious.

A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is
necessary before the Court rules on the issue of the Algura spouses claim to exemption from paying
filing fees.

When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found in
Rule 3, Section 22 which provided that:

SECTION 22. Pauper litigant.Any court may authorize a litigant to prosecute his action or defense
as a pauper upon a proper showing that he has no means to that effect by affidavits, certificate of the
corresponding provincial, city or municipal treasurer, or otherwise. Such authority[,] once given[,] shall
include an exemption from payment of legal fees and from filing appeal bond, printed record and
printed brief. The legal fees shall be a lien to any judgment rendered in the case [favorable] to the
pauper, unless the court otherwise provides.


From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any provision
on pauper litigants.

On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0 (formerly G.R. No. 64274),
approved the recommendation of the Committee on the Revision of Rates and Charges of Court Fees,
through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141 of the Rules of Court
to generate funds to effectively cover administrative costs for services rendered by the courts.[20] A
provision on pauper litigants was inserted which reads:

SECTION 16. Pauper-litigants exempt from payment of court fees.Pauper-litigants include wage
earners whose gross income do not exceed P2,000.00 a month or P24,000.00 a year for those residing in
Metro Manila, and P1,500.00 a month or P18,000.00 a year for those residing outside Metro Manila, or
those who do not own real property with an assessed value of not more than P24,000.00, or not more
than P18,000.00 as the case may be.


Such exemption shall include exemption from payment of fees for filing appeal bond, printed record
and printed brief.

The legal fees shall be a lien on the monetary or property judgment rendered in favor of the pauper-
litigant.

To be entitled to the exemption herein provided, the pauper-litigant shall execute an affidavit that
he does not earn the gross income abovementioned, nor own any real property with the assessed value
afore-mentioned [sic], supported by a certification to that effect by the provincial, city or town assessor
or treasurer.


When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil Procedure
(inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated April 8, 1997, which
became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules of Court was superseded by
Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as follows:

SECTION 21. Indigent party.A party may be authorized to litigate his action, claim or defense as an
indigent if the court, upon an ex parte application and hearing, is satisfied that the party is one who has
no money or property sufficient and available for food, shelter and basic necessities for himself and his
family.

Such authority shall include an exemption from payment of docket and other lawful fees, and of
transcripts of stenographic notes which the court may order to be furnished him. The amount of the
docket and other lawful fees which the indigent was exempted from paying shall be a lien on any
judgment rendered in the case favorable to the indigent, unless the court otherwise provides.

Any adverse party may contest the grant of such authority at any time before judgment is rendered
by the trial court. If the court should determine after hearing that the party declared as an indigent is in
fact a person with sufficient income or property, the proper docket and other lawful fees shall be
assessed and collected by the clerk of court. If payment is not made within the time fixed by the court,
execution shall issue for the payment thereof, without prejudice to such other sanctions as the court
may impose.


At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803,
however, there was no amendment made on Rule 141, Section 16 on pauper litigants.
On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC,
whereby certain fees were increased or adjusted. In this Resolution, the Court amended Section 16 of
Rule 141, making it Section 18, which now reads:

SECTION 18. Pauper-litigants exempt from payment of legal fees.Pauper litigants (a) whose gross
income and that of their immediate family do not exceed four thousand (P4,000.00) pesos a month if
residing in Metro Manila, and three thousand (P3,000.00) pesos a month if residing outside Metro
Manila, and (b) who do not own real property with an assessed value of more than fifty thousand
(P50,000.00) pesos shall be exempt from the payment of legal fees.

The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper litigant,
unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he and
his immediate family do not earn the gross income abovementioned, nor do they own any real property
with the assessed value aforementioned, supported by an affidavit of a disinterested person attesting to
the truth of the litigants affidavit.

Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to strike out
the pleading of that party, without prejudice to whatever criminal liability may have been incurred.


It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without revoking or
amending Section 21 of Rule 3, which provides for the exemption of pauper litigants from payment of
filing fees. Thus, on March 1, 2000, there were two existing rules on pauper litigants; namely, Rule 3,
Section 21 and Rule 141, Section 18.

On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No. 04-
2-04-SC, which became effective on the same date. It then became Section 19 of Rule 141, to wit:



SEC. 19. Indigent litigants exempt from payment of legal fees.INDIGENT LITIGANTS (A) WHOSE
GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT EXCEED AN AMOUNT DOUBLE THE
MONTHLY MINIMUM WAGE OF AN EMPLOYEE AND (B) WHO DO NOT OWN REAL PROPERTY WITH A
FAIR MARKET VALUE AS STATED IN THE CURRENT TAX DECLARATION OF MORE THAN THREE HUNDRED
THOUSAND (P300,000.00) PESOS SHALL BE EXEMPT FROM PAYMENT OF LEGAL FEES.

The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent litigant
unless the court otherwise provides.

To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he and
his immediate family do not earn a gross income abovementioned, and they do not own any real
property with the fair value aforementioned, supported by an affidavit of a disinterested person
attesting to the truth of the litigants affidavit. The current tax declaration, if any, shall be attached to
the litigants affidavit.

Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to dismiss the
complaint or action or to strike out the pleading of that party, without prejudice to whatever criminal
liability may have been incurred. (Emphasis supplied.)


Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to
implement RA 9227 which brought about new increases in filing fees. Specifically, in the August 16, 2004
amendment, the ceiling for the gross income of litigants applying for exemption and that of their
immediate family was increased from PhP 4,000.00 a month in Metro Manila and PhP 3,000.00 a month
outside Metro Manila, to double the monthly minimum wage of an employee; and the maximum value
of the property owned by the applicant was increased from an assessed value of PhP 50,000.00 to a
maximum market value of PhP 300,000.00, to be able to accommodate more indigent litigants and
promote easier access to justice by the poor and the marginalized in the wake of these new increases in
filing fees.

Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment or
recall of Rule 3, Section 21 on indigent litigants.

With this historical backdrop, let us now move on to the sole issuewhether petitioners are
exempt from the payment of filing fees.

It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999.
However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly applied Rule 141,
Section 18 on Legal Fees when the applicable rules at that time were Rule 3, Section 21 on Indigent
Party which took effect on July 1, 1997 and Rule 141, Section 16 on Pauper Litigants which became
effective on July 19, 1984 up to February 28, 2000.

The old Section 16, Rule 141 requires applicants to file an ex-parte motion to litigate as a pauper
litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00 a month or PhP
24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month or PhP 18,000.00 a year
for those residing outside Metro Manila or those who do not own real property with an assessed value
of not more than PhP 24,000.00 or not more than PhP 18,000.00 as the case may be. Thus, there are
two requirements: a) income requirementthe applicants should not have a gross monthly income of
more than PhP 1,500.00, and b) property requirementthey should not own property with an assessed
value of not more than PhP 18,000.00.

In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura and
neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross monthly income
of PhP 10,474.00,[21] and a Certification of the Naga City assessor stating that petitioners do not have
property declared in their names for taxation.[22] Undoubtedly, petitioners do not own real property as
shown by the Certification of the Naga City assessor and so the property requirement is met. However
with respect to the income requirement, it is clear that the gross monthly income of PhP 10,474.00 of
petitioner Antonio F. Algura and the PhP 3,000.00 income of Lorencita Algura when combined, were
above the PhP 1,500.00 monthly income threshold prescribed by then Rule 141, Section 16 and
therefore, the income requirement was not satisfied. The trial court was therefore correct in
disqualifying petitioners Alguras as indigent litigants although the court should have applied Rule 141,
Section 16 which was in effect at the time of the filing of the application on September 1, 1999. Even if
Rule 141, Section 18 (which superseded Rule 141, Section 16 on March 1, 2000) were applied, still the
application could not have been granted as the combined PhP 13,474.00 income of petitioners was
beyond the PhP 3,000.00 monthly income threshold.

Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14, 2000
Order disqualifying them as indigent litigants[23] that the rules have been relaxed by relying on Rule 3,
Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate their action as
indigents if the court is satisfied that the party is one who has no money or property sufficient and
available for food, shelter and basic necessities for himself and his family. The trial court did not give
credence to this view of petitioners and simply applied Rule 141 but ignored Rule 3, Section 21 on
Indigent Party.

The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate as
indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule 141, Section
16 and Rule 3, Section 21 on such applications or should the court apply only Rule 141, Section 16 and
discard Rule 3, Section 21 as having been superseded by Rule 141, Section 16 on Legal Fees.

The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141,
Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August 16, 2003,
which is now the present rule) are still valid and enforceable rules on indigent litigants.

For one, the history of the two seemingly conflicting rules readily reveals that it was not the intent
of the Court to consider the old Section 22 of Rule 3, which took effect on January 1, 1994 to have been
amended and superseded by Rule 141, Section 16, which took effect on July 19, 1984 through A.M. No.
83-6-389-0. If that is the case, then the Supreme Court, upon the recommendation of the Committee on
the Revision on Rules, could have already deleted Section 22 from Rule 3 when it amended Rules 1 to 71
and approved the 1997 Rules of Civil Procedure, which took effect on July 1, 1997. The fact that Section
22 which became Rule 3, Section 21 on indigent litigant was retained in the rules of procedure, even
elaborating on the meaning of an indigent party, and was also strengthened by the addition of a third
paragraph on the right to contest the grant of authority to litigate only goes to show that there was no
intent at all to consider said rule as expunged from the 1997 Rules of Civil Procedure.

Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and the
second on August 16, 2004; and yet, despite these two amendments, there was no attempt to delete
Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain the two (2) rules on
indigent litigants to cover applications to litigate as an indigent litigant.

It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and 2004
amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals are frowned
upon unless the intent of the framers of the rules is unequivocal. It has been consistently ruled that:

(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that the legislature
so intended. As laws are presumed to be passed with deliberation and with full knowledge of all existing
ones on the subject, it is but reasonable to conclude that in passing a statute[,] it was not intended to
interfere with or abrogate any former law relating to same matter, unless the repugnancy between the
two is not only irreconcilable, but also clear and convincing, and flowing necessarily from the language
used, unless the later act fully embraces the subject matter of the earlier, or unless the reason for the
earlier act is beyond peradventure removed. Hence, every effort must be used to make all acts stand
and if, by any reasonable construction they can be reconciled, the later act will not operate as a repeal
of the earlier.[24] (Emphasis supplied).


Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by
Section 18 and later Section 19 of Rule 141, the Court finds that the two rules can and should be
harmonized.

The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled
principle that when conflicts are seen between two provisions, all efforts must be made to harmonize
them. Hence, every statute *or rule+ must be so construed and harmonized with other statutes *or
rules+ as to form a uniform system of jurisprudence.*25+

In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation of
seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus ruled:

Consequently, every statute should be construed in such a way that will harmonize it with existing
laws. This principle is expressed in the legal maxim interpretare et concordare leges legibus est optimus
interpretandi, that is, to interpret and to do it in such a way as to harmonize laws with laws is the best
method of interpretation.[26]


In the light of the foregoing considerations, therefore, the two (2) rules can stand together and are
compatible with each other. When an application to litigate as an indigent litigant is filed, the court
shall scrutinize the affidavits and supporting documents submitted by the applicant to determine if the
applicant complies with the income and property standards prescribed in the present Section 19 of Rule
141that is, the applicants gross income and that of the applicants immediate family do not exceed an
amount double the monthly minimum wage of an employee; and the applicant does not own real
property with a fair market value of more than Three Hundred Thousand Pesos (PhP 300,000.00). If the
trial court finds that the applicant meets the income and property requirements, the authority to litigate
as indigent litigant is automatically granted and the grant is a matter of right.

However, if the trial court finds that one or both requirements have not been met, then it would
set a hearing to enable the applicant to prove that the applicant has no money or property sufficient
and available for food, shelter and basic necessities for himself and his family. In that hearing, the
adverse party may adduce countervailing evidence to disprove the evidence presented by the applicant;
after which the trial court will rule on the application depending on the evidence adduced. In addition,
Section 21 of Rule 3 also provides that the adverse party may later still contest the grant of such
authority at any time before judgment is rendered by the trial court, possibly based on newly discovered
evidence not obtained at the time the application was heard. If the court determines after hearing, that
the party declared as an indigent is in fact a person with sufficient income or property, the proper
docket and other lawful fees shall be assessed and collected by the clerk of court. If payment is not
made within the time fixed by the court, execution shall issue or the payment of prescribed fees shall be
made, without prejudice to such other sanctions as the court may impose.

The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section 21
does not clearly draw the limits of the entitlement to the exemption. Knowing that the litigants may
abuse the grant of authority, the trial court must use sound discretion and scrutinize evidence strictly in
granting exemptions, aware that the applicant has not hurdled the precise standards under Rule 141.
The trial court must also guard against abuse and misuse of the privilege to litigate as an indigent litigant
to prevent the filing of exorbitant claims which would otherwise be regulated by a legal fee
requirement.

Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras after
their affidavits and supporting documents showed that petitioners did not satisfy the twin requirements
on gross monthly income and ownership of real property under Rule 141. Instead of disqualifying the
Alguras as indigent litigants, the trial court should have called a hearing as required by Rule 3, Section 21
to enable the petitioners to adduce evidence to show that they didnt have property and money
sufficient and available for food, shelter, and basic necessities for them and their family.[27] In that
hearing, the respondents would have had the right to also present evidence to refute the allegations
and evidence in support of the application of the petitioners to litigate as indigent litigants. Since this
Court is not a trier of facts, it will have to remand the case to the trial court to determine whether
petitioners can be considered as indigent litigants using the standards set in Rule 3, Section 21.

Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets the
salary and property requirements under Section 19 of Rule 141, then the grant of the application is
mandatory. On the other hand, when the application does not satisfy one or both requirements, then
the application should not be denied outright; instead, the court should apply the indigency test under
Section 21 of Rule 3 and use its sound discretion in determining the merits of the prayer for exemption.

Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987
Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief Justice
Hilario G. Davide, Jr., placed prime importance on easy access to justice by the poor as one of its six
major components. Likewise, the judicial philosophy of Liberty and Prosperity of Chief Justice Artemio
V. Panganiban makes it imperative that the courts shall not only safeguard but also enhance the rights
of individualswhich are considered sacred under the 1987 Constitution. Without doubt, one of the
most precious rights which must be shielded and secured is the unhampered access to the justice
system by the poor, the underprivileged, and the marginalized.

WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the disqualification of
petitioners, the July 17, 2000 Order denying petitioners Motion for Reconsideration, and the September
11, 2001 Order dismissing the case in Civil Case No. RTC-99-4403 before the Naga City RTC, Branch 27
are ANNULLED and SET ASIDE. Furthermore, the Naga City RTC is ordered to set the Ex-Parte Motion to
Litigate as Indigent Litigants for hearing and apply Rule 3, Section 21 of the 1997 Rules of Civil
Procedure to determine whether petitioners can qualify as indigent litigants.








SECOND DIVISION


UNIWIDE HOLDINGS, INC.,
Petitioner,



-versus-



ALEXANDER M. CRUZ,
Respondent.


G.R. No. 171456

Present:

QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.




Promulgated:
August 9, 2007
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

CARPIO MORALES, J.:


Petitioner, Uniwide Holdings, Inc. (UHI), whose principal office is located in Paraaque City,
entered into a Franchise Agreement[1] (the agreement) granting respondent, Alexander M. Cruz (Cruz),
a five-year franchise to adopt and use the Uniwide Family Store System for the establishment and
operation of a Uniwide Family Store along Marcos Highway, Sta. Cruz, Cogeo, Marikina City.

Article 10.2[2] of the agreement called for Cruz as franchisee to pay UHI a monthly service fee of
P50,000 or three percent of gross monthly purchases, whichever is higher, payable within five days after
the end of each month without need of formal billing or demand from UHI. In case of any delay in the
payment of the monthly service fee, Cruz would, under Article 10.3[3] of the agreement, be liable to pay
an interest charge of three percent per month.

It appears that Cruz had purchased goods from UHIs affiliated companies First Paragon
Corporation (FPC) and Uniwide Sales Warehouse Club, Inc. (USWCI).

In August 2002, FPC and USWCI executed Deeds of Assignment[4] in favor of UHI assigning all their
rights and interests over Cruzs accounts payable to them.

As of August 13, 2002, Cruz had outstanding obligations with UHI, FPC, and USWCI in the total
amount of P1,358,531.89, drawing UHI to send him a letter of even date for the settlement thereof in
five days. His receipt of the letter notwithstanding, Cruzs accounts remained unsettled.

Thus UHI filed a complaint[5] for collection of sum of money before the Regional Trial Court (RTC)
of Paraaque docketed as Civil Case No. 04-0278 against Cruz on the following causes of action:

FIRST CAUSE OF ACTION

10. Being entitled to the payment of monthly service fee pursuant to the FA, which
defendant failed to pay despite demand, plaintiff suffered actual damages in the amount of Phil. Peso:
One Million Three Hundred Twenty Seven Thousand Six Hundred Sixty Nine & 83/100 (P1,327,669.83),
computed as of 05 April 2004, for which defendant should be held liable together with legal interest
thereon from the date of filing of this Complaint, until fully paid.

SECOND CAUSE OF ACTION

11. Being the assignee of the receivable of FPC, which receivable defendant failed to pay
despite demand, plaintiff suffered actual damages in the amount of Phil. Peso: Sixty Four Thousand One
Hundred Sixty Five & 96/100 (P64,165.96) for which defendant should be held liable together with the
legal interest thereon computed from date of receipt of plaintiffs demand letter, or on August 16, 2002
to be exact, until fully paid.

THIRD CAUSE OF ACTION

12. Being the assignee of the receivable of USWCI, which receivable defendant failed to
pay despite demand, plaintiff suffered actual damages in the total amount of Phil. Peso: One Million Five
Hundred Seventy Nine Thousand Sixty One & 36/100 (P1,579,061.36), computed as of 05 April 2004,
inclusive of the two and a half percent (2.5%) monthly interest, as and by way of penalty, and the three
(3%) annual interest on the unpaid amount, for which defendant should be held liable, with legal
interest thereon from the date of filing of this Complaint, until fully paid.

FOURTH CAUSE OF ACTION

13. By reason of defendants obstinate refusal or failure to pay his indebtedness, plaintiff
was constrained to file this Complaint and in the process incur expenses by way of attorneys fees, which
could be reasonably estimated to reach at least Phil. Peso: Two Hundred Fifty Thousand (P250,000.00)
and for which defendant should be held answerable for.[6] (Emphasis and underscoring supplied)


To the complaint Cruz filed a motion to dismiss[7] on the ground of improper venue, he invoking
Article 27.5 of the agreement which reads:

27.5 Venue Stipulation The Franchisee consents to the exclusive jurisdiction of the courts of Quezon
City, the Franchisee waiving any other venue.[8] (Emphasis supplied)


Branch 258 of the Paraaque RTC, by Order*9+ of December 12, 2005, granted Cruzs motion to
dismiss.

Hence, the present petition before this Court, raising the sole legal issue of:

WHETHER A CASE BASED ON SEVERAL CAUSES OF ACTION IS DISMISSIBLE ON THE GROUND OF
IMPROPER VENUE WHERE ONLY ONE OF THE CAUSES OF ACTION ARISES FROM A CONTRACT WITH
EXCLUSIVE VENUE STIPULATION.[10] (Underscoring supplied)


Petitioner contends that nowhere in the agreement is there a mention of FPC and USWCI, and
neither are the two parties thereto, hence, they cannot be bound to the stipulation on exclusive
venue.

The petition is impressed with merit.

The general rule on venue of personal actions, as in petitioners complaint for collection of sum of
money, is embodied in Section 2, Rule 4 of the Rules of Court which provides:

Sec. 2. Venue of personal actions. All other actions may be commenced and tried where the plaintiff or
any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides,
or in the case of a nonresident defendant, where he may be found, at the election of the plaintiff.
(Emphasis and underscoring supplied)


The afore-quoted provision is, however, qualified by Section 4 of the same rule which allows parties,
before the filing of the action, to validly agree in writing on an exclusive venue.[11]

The forging of a written agreement on an exclusive venue of an action does not, however, preclude
parties from bringing a case to other venues.

Where there is a joinder of causes of action between the same parties one of which does not arise out
of the contract where the exclusive venue was stipulated upon, the complaint, as in the one at bar, may
be brought before other venues provided that such other cause of action falls within the jurisdiction of
the court and the venue lies therein.[12]

Based on the allegations in petitioners complaint, the second and third causes of action are based on
the deeds of assignment executed in its favor by FPC and USWCI. The deeds bear no exclusive venue
stipulation with respect to the causes of action thereunder. Hence, the general rule on venue applies
that the complaint may be filed in the place where the plaintiff or defendant resides.[13]

It bears emphasis that the causes of action on the assigned accounts are not based on a breach of the
agreement between UHI and Cruz. They are based on separate, distinct and independent contracts-
deeds of assignment in which UHI is the assignee of Cruzs obligations to the assignors FPC and USWCI.
Thus, any action arising from the deeds of assignment cannot be subjected to the exclusive venue
stipulation embodied in the agreement. So San Miguel Corporation v. Monasterio[14] enlightens:

Exclusive venue stipulation embodied in a contract restricts or confines parties thereto
when the suit relates to breach of said contract. But where the exclusivity clause does not make it
necessarily encompassing, such that even those not related to the enforcement of the contract should
be subject to the exclusive venue, the stipulation designating exclusive venues should be strictly
confined to the specific undertaking or agreement. Otherwise, the basic principles of freedom to
contract might work to the great disadvantage of a weak party-suitor who ought to be allowed free
access to courts of justice.[15] (Emphasis and underscoring supplied)


In fine, since the other causes of action in petitioners complaint do not relate to a breach of the
agreement it forged with Cruz embodying the exclusive venue stipulation, they should not be subjected
thereto. As San Miguel further enlightens:

Restrictive stipulations are in derogation of the general policy of making it more
convenient for the parties to institute actions arising from or in relation to their agreements. Thus, the
restriction should be strictly construed as relating solely to the agreement for which the exclusive venue
stipulation is embodied. Expanding the scope of such limitation on a contracting party will create
unwarranted restrictions which the parties might find unintended or worse, arbitrary and
oppressive.[16] (Underscoring supplied)


WHEREFORE, the petition is GRANTED. The December 12, 2005 Order of Regional Trial Court of
Paraaque City, Branch 258 in Civil Case No. 04-0278 is SET ASIDE. The case is REMANDED to said court
which is directed to reinstate the case to its docket and conduct further proceedings thereon with
dispatch.





ADELAIDA INFANTE, G.R. NO. 156596
Petitioner,
Present:

YNARES-SANTIAGO, J.,
Chairperson,
- versus - AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
REYES, JJ.

ARAN BUILDERS, INC., Promulgated:
Respondent.* August 24, 2007
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x


D E C I S I O N


AUSTRIA-MARTINEZ, J.:


This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking the
reversal of the Decision[1] of the Court of Appeals (CA) promulgated on August 12, 2002, which upheld
the Order dated September 4, 2001, issued by the Regional Trial Court of Muntinlupa City (RTC).

The undisputed facts and issues raised in the lower courts are accurately summarized by the CA as
follows:
Before the Regional Trial Court of Muntinlupa City (or Muntinlupa RTC; Branch 276), presided
over by Hon. Norma C. Perello (or respondent judge), was an action for revival of judgment filed on
June 6, 2001 by Aran Builders, Inc. (or private respondent) against Adelaida Infante (or petitioner),
docketed as Civil Case No. 01-164.

The judgment sought to be revived was rendered by the Regional Trial Court of Makati City (or
Makati RTC; Branch 60) in an action for specific performance and damages, docketed as Civil Case No.
15563.

The Makati RTC judgment, which became final and executory on November 16, 1994, decreed as
follows:

26. WHEREFORE, the Court hereby renders judgment as follows:

26.1 The defendant ADELAIDA B. INFANTE is ordered to do the following within thirty (30) days from
finality hereof:

26.1.1. To deliver to the plaintiff ARAN BUILDERS, INC. the following: (a) the complete plans (lot plan,
location map and vicinity map); (b) Irrevocable Power of Attorney; (c ) Real Estate Tax clearance; (d) tax
receipts; (e) proof of up to date payment of Subdivision Association dues referred to in the CONTRACT
TO SELL dated November 10, 1986 (Exh. A or Exh. 1);

26.1.2. To execute the deed of sale of Lot No. 11, Block 9, Phase 3-A1, Ayala Alabang Subdivision
covered by TCT No. 114015 for P500,000.00 in favor of the plaintiff;

26.1.3. To pay the capital gains tax, documentary stamp taxes and other taxes which the Bureau of
Internal Revenue may assess in connection with the sale mentioned in the preceding paragraph and to
submit to the plaintiff proof of such payment;

26.1.4. To secure the written conformity of AYALA CORPORATION to the said sale and to give such
written conformity to the plaintiff;

26.1.5. To register the deed of sale with the Registry of Deeds and deliver to AYALA CORPORATION the
certificate of title issued in the name of plaintiff pursuant to such registration;

26.2 Upon the compliance of the defendant with the preceding directives, the plaintiff must
immediately pay to the defendant the sum of P321,918.25;

26.3 The defendant is ordered to pay plaintiff P10,000.00 as attorneys fees;

26.4 The Complaint for moral and exemplary damages is DISMISSED;

26.5 The COUNTERCLAIM is DISMISSED; and

26.6 Cost is taxed against the defendant.

Petitioner filed a motion to dismiss the action (for revival of judgment) on the grounds that the
Muntinlupa RTC has no jurisdiction over the persons of the parties and that venue was improperly laid.
Private respondent opposed the motion.

On September 4, 2001, the Muntinlupa RTC issued an order which reads:

The MOTION TO DISMISS is denied.

Admittedly, the Decision was rendered by the Makati Regional Trial Court, but it must be
emphasized that at that time there was still no Regional Trial Court in Muntinlupa City, then under the
territorial jurisdiction of the Makati Courts, so that cases from this City were tried and heard at Makati
City. With the creation of the Regional Trial Courts of Muntinlupa City, matters involving properties
located in this City, and cases involving Muntinlupa City residents were all ordered to be litigated before
these Courts.

The case at bar is a revival of a judgment which declared the plaintiff as the owner of a parcel of
land located in Muntinlupa City. It is this judgment which is sought to be enforced thru this action which
necessarily involves the interest, possession, title, and ownership of the parcel of land located in
Muntinlupa city and adjudged to Plaintiff. It goes without saying that the complaint should be filed in
the latter City where the property is located, as there are now Regional Trial Courts hereat.

Defendant may answer the complaint within the remaining period, but no less than five (5) days,
otherwise a default judgment might be taken against her.

It is SO ORDERED.

Her motion for reconsideration having been denied per order dated September 28, 2001,
petitioner came to this Court [CA] via the instant special civil action for certiorari. She ascribes grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of respondent judge for
erroneously holding that Civil Case No. 01-164 is a revival of judgment which declared private
respondent as the owner of a parcel of land located in Muntinlupa City and (that) the judgment
rendered by the (Makati RTC) in Civil Case No. 15563 sought to be enforced necessarily involves the
interest, possession, title and ownership of the parcel of land located in Muntinlupa City.

Petitioner asserts that the complaint for specific performance and damages before the Makati
RTC is a personal action and, therefore, the suit to revive the judgment therein is also personal in
nature; and that, consequently, the venue of the action for revival of judgment is either Makati City or
Paraaque City where private respondent and petitioner respectively reside, at the election of private
respondent.

On the other hand, private respondent maintains that the subject action for revival judgment is quasi in
rem because it involves and affects vested or adjudged right on a real property; and that, consequently,
venue lies in Muntinlupa City where the property is situated.[2]

On August 12, 2002, the CA promulgated its Decision ruling in favor of herein private respondent.
The CA held that since the judgment sought to be revived was rendered in an action involving title to or
possession of real property, or interest therein, the action for revival of judgment is then an action in
rem which should be filed with the Regional Trial Court of the place where the real property is located.
Petitioner moved for reconsideration of the CA Decision but the motion was denied per Resolution
dated January 7, 2003.

Hence, herein petition. Petitioner claims that the CA erred in finding that the complaint for revival
of judgment is an action in rem which was correctly filed with the RTC of the place where the disputed
real property is located.

The petition is unmeritorious.

Petitioner insists that the action for revival of judgment is an action in personam; therefore, the
complaint should be filed with the RTC of the place where either petitioner or private respondent
resides. Petitioner then concludes that the filing of the action for revival of judgment with the RTC of
Muntinlupa City, the place where the disputed property is located, should be dismissed on the ground of
improper venue.

Private respondent is of the opinion that the judgment it is seeking to revive involves interest over
real property. As such, the present action for revival is a real action, and venue was properly laid with
the court of the place where the realty is located.

Thus, the question that must be answered is: where is the proper venue of the present action for
revival of judgment?

Section 6, Rule 39 of the 1997 Rules of Civil Procedure provides that after the lapse of five (5) years
from entry of judgment and before it is barred by the statute of limitations, a final and executory
judgment or order may be enforced by action. The Rule does not specify in which court the action for
revival of judgment should be filed.

In Aldeguer v. Gemelo,[3] the Court held that:

x x x an action upon a judgment must be brought either in the same court where said judgment was
rendered or in the place where the plaintiff or defendant resides, or in any other place designated by
the statutes which treat of the venue of actions in general. (Emphasis supplied)[4]

but emphasized that other provisions in the rules of procedure which fix the venue of actions in general
must be considered.[5]

Under the present Rules of Court, Sections 1 and 2 of Rule 4 provide:

Section 1. Venue of real actions. - Actions affecting title to or possession of real property, or
interest therein, shall be commenced and tried in the proper court which has jurisdiction over the area
wherein the real property involved, or a portion thereof, is situated.

x x x x

Section 2. Venue of personal actions. - All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found, at the election
of the plaintiff.

Thus, the proper venue depends on the determination of whether the present action for revival of
judgment is a real action or a personal action. Applying the afore-quoted rules on venue, if the action
for revival of judgment affects title to or possession of real property, or interest therein, then it is a real
action that must be filed with the court of the place where the real property is located. If such action
does not fall under the category of real actions, it is then a personal action that may be filed with the
court of the place where the plaintiff or defendant resides.

In support of her contention that the action for revival of judgment is a personal action and should
be filed in the court of the place where either the plaintiff or defendant resides, petitioner cites the
statements made by the Court in Aldeguer v. Gemelo[6] and Donnelly v. Court of First Instance of
Manila[7]. Petitioner, however, seriously misunderstood the Court's rulings in said cases.

In Aldeguer, what the Court stated was that *t+he action for the execution of a judgment for
damages is a personal one, and under section 377 [of the Code of Civil Procedure], it should be brought
in any province where the plaintiff or the defendant resides, at the election of the plaintiff*8+ (Emphasis
and underscoring supplied). Petitioner apparently took such statement to mean that any action for
revival of judgment should be considered as a personal one. This thinking is incorrect. The Court
specified that the judgment sought to be revived in said case was a judgment for damages. The
judgment subject of the action for revival did not involve or affect any title to or possession of real
property or any interest therein. The complaint filed in the revival case did not fall under the category
of real actions and, thus, the action necessarily fell under the category of personal actions.

In Donnelly, the portion of the Decision being relied upon by petitioner stated thus:

Petitioner raises before this Court two (2) issues, namely: (a) whether an action for revival of
judgment is one quasi in rem and, therefore, service of summons may be effected thru publication; and
(b) whether the second action for revival of judgment (Civil Case No. 76166) has already prescribed. To
our mind, the first is not a proper and justiciable issue in the present proceedings x x x. Nevertheless, let
it be said that an action to revive a judgment is a personal one. (Emphasis supplied)[9]

The Court clearly pointed out that in said case, the issue on whether an action for revival of judgment is
quasi in rem was not yet proper and justiciable. Therefore, the foregoing statement cannot be used as a
precedent, as it was merely an obiter dictum. Moreover, as in Aldeguer, the judgment sought to be
revived in Donnelly involved judgment for a certain sum of money. Again, no title or interest in real
property was involved. It is then understandable that the action for revival in said case was categorized
as a personal one.

Clearly, the Court's classification in Aldeguer and Donnelly of the actions for revival of judgment as
being personal in character does not apply to the present case.

The allegations in the complaint for revival of judgment determine whether it is a real action or a
personal action.

The complaint for revival of judgment alleges that a final and executory judgment has ordered
herein petitioner to execute a deed of sale over a parcel of land in Ayala Alabang Subdivision in favor of
herein private respondent; pay all pertinent taxes in connection with said sale; register the deed of sale
with the Registry of Deeds and deliver to Ayala Corporation the certificate of title issued in the name of
private respondent. The same judgment ordered private respondent to pay petitioner the sum of
P321,918.25 upon petitioner's compliance with the aforementioned order. It is further alleged that
petitioner refused to comply with her judgment obligations despite private respondent's repeated
requests and demands, and that the latter was compelled to file the action for revival of judgment.
Private respondent then prayed that the judgment be revived and a writ of execution be issued to
enforce said judgment.

The previous judgment has conclusively declared private respondent's right to have the title over
the disputed property conveyed to it. It is, therefore, undeniable that private respondent has an
established interest over the lot in question; and to protect such right or interest, private respondent
brought suit to revive the previous judgment. The sole reason for the present action to revive is the
enforcement of private respondent's adjudged rights over a piece of realty. Verily, the action falls under
the category of a real action, for it affects private respondent's interest over real property.

The present case for revival of judgment being a real action, the complaint should indeed be filed
with the Regional Trial Court of the place where the realty is located.

Section 18 of Batas Pambansa Bilang 129 provides:

Sec. 18. Authority to define territory appurtenant to each branch. - The Supreme Court shall
define the territory over which a branch of the Regional Trial Court shall exercise its authority. The
territory thus defined shall be deemed to be the territorial area of the branch concerned for purposes of
determining the venue of all suits, proceedings or actions, whether civil or criminal, as well as
determining the Metropolitan Trial Courts, Municipal Trial Courts and Municipal Circuit Trial Courts over
which the said branch may exercise appellate jurisdiction. The power herein granted shall be exercised
with a view to making the courts readily accessible to the people of the different parts of the region and
making the attendance of litigants and witnesses as inexpensive as possible. (Emphasis supplied)

From the foregoing, it is quite clear that a branch of the Regional Trial Court shall exercise its authority
only over a particular territory defined by the Supreme Court. Originally, Muntinlupa City was under the
territorial jurisdiction of the Makati Courts. However, Section 4 of Republic Act No. 7154, entitled An
Act to Amend Section Fourteen of Batas Pambansa Bilang 129, Otherwise Known As The Judiciary
Reorganization Act of 1981, took effect on September 4, 1991. Said law provided for the creation of a
branch of the Regional Trial Court in Muntinlupa. Thus, it is now the Regional Trial Court in Muntinlupa
City which has territorial jurisdiction or authority to validly issue orders and processes concerning real
property within Muntinlupa City.

Thus, there was no grave abuse of discretion committed by the Regional Trial Court of Muntinlupa
City, Branch 276 when it denied petitioner's motion to dismiss; and the CA did not commit any error in
affirming the same.

WHEREFORE, the petition is DENIED. The Decision dated August 12, 2002 and Resolution dated
January 7, 2003 of the Court of Appeals are AFFIRMED.














THIRD DIVISION
[G.R. No. 138978. September 12, 2002]

HI-YIELD REALTY, INC., petitioner, vs. COURT OF APPEALS, HONORABLE MAURICIO RIVERA AS PRESIDING
JUDGE OF THE REGIONAL TRIAL COURT, ANTIPOLO CITY, BRANCH 73 AND NOLI FRANCISCO,
respondents.
D E C I S I O N
CORONA, J.:

For review is the decision dated November 18, 1998 of the Court of Appeals, the dispositive part of
which reads:

WHEREFORE, foregoing considered, the petition to declare the Orders dated 31 January 1994, 15
March 1994, 13 June 1994 and 16 July 1997 of the Regional Trial Court of Antipolo, Rizal, Branch 23, in
Civil Case No. 93-2813 is DENIED. Accordingly, the assailed Orders are SUSTAINED. The trial court is
hereby directed to make a final determination of the REDEMPTION PRICE. HI-YIELD REALTY, INC. is
directed to allow NOLI S. FRANCISCO to redeem the subject property for the amount as determined by
the trial court.


SO ORDERED.*1+

THE FACTS

On August 10, 1987, private respondent Noli Francisco, as attorney-in-fact of spouses Servulo Carawatan
and Felicidad Leyva, and petitioner Hi-Yield Realty, Inc. entered into a Deed of Real Estate Mortgage
with Francisco as mortgagor and Hi-Yield Realty, Inc. as mortgagee. The property subject of the
mortgage, which was owned by the spouses Carawatan, was situated at Lumang Dayap, Cainta, Rizal and
covered by Transfer Certificate of Title No. 297171. It was mortgaged as security for the loan of
P100,000 which was payable in three (3) months.

Private respondent failed to pay and settle the amount loaned despite repeated demands by petitioner.
Hence, on February 27, 1992, petitioner extrajudicially foreclosed the mortgage on the property. The
property was sold for P285,000 with petitioner as the highest bidder. Subsequently, a Certificate of
Sale[2] was issued in favor of petitioner. This was registered on August 13, 1992. Under the law, private
respondent thus had a twelve-month redemption period expiring on August 13, 1993.

On August 13, 1993, however, private respondent, claiming that he offered to redeem the property
twice prior to the expiration of the said redemption period but that petitioner allegedly refused to
accept the offer and instead demanded more than P1,500,000 as redemption price, filed a petition with
the Regional Trial Court, Branch 23 of Antipolo, Rizal, with the following prayer:

1. ordering the respondent to have the subject real property be redeemed by the petitioner after
paying the amount of P285,000.00, plus 1% per month interest therein and other amount which the
purchaser may have paid thereon after purchase;

2. Notifying the Register of Deeds for the Province of Rizal of the instant petition and hence, title to the
aforesaid real property not be consolidated to and in favor of the respondent foreclosure sale/buyer.

And in the meantime, Petitioner further prays before the Honorable Court, that he be allowed to
consign/deposit the amount of P285,000.00 plus interest of 1% per month beginning August 12, 1992 in
favor of respondent, to show his good faith in paying the redemption price.*3+

On January 31, 1994, the trial court declared that the issue as manifested by the parties in the pre-trial
conference was merely to determine the amount of the capital gains tax and documentary stamps as
computed by the Marikina BIR office. Thus, it ordered private respondent to pay the corresponding
amount of taxes within thirty (30) days or on March 15, 1994.

On March 15, 1994, the trial court issued an order directing petitioner to submit within two (2) days an
updated statement of account which was to be the basis for the payment of the redemption price by
private respondent. In the same order, private respondent was also directed to pay the redemption
price within fifteen (15) days from receipt of the order.

In compliance with the order, petitioner submitted to the trial court a detailed computation of the total
redemption price as of March 17, 1994. Private respondent received his copy on March 24, 1994 and
therefore had until April 8, 1994 to pay the redemption price in full. He, however, failed to pay it by that
date. Instead, on April 8, 1994, private respondent filed an Urgent Motion for Extension of Time*4+
with the trial court asking for an extra time of forty-five (45) days within which to pay the redemption
price. He reasoned that his debtor was not able to pay him the amount he needed to augment his cash
on hand and that he was then waiting for a bank loan for P150,000. Simply put, private respondent did
not have sufficient money to tender.

The trial court denied private respondents motion in its order dated May 4, 1994, recognizing the right
of petitioner to consolidate the property in its name.[5] The order stated:

Acting on the motion for extension of time filed by the petitioner in this case praying that they be
granted a period of 45 days from April 8, 1994 within which to pay the redemption price to the
respondent and considering that since April 8, 1994 up to the present, a period of 26 days have elapsed
without any pleading filed by the petitioner that they are ready and willing to pay the redemption price
and considering the opposition filed by the respondent/oppositor, the motion is found to be without
merit and, therefore, the Court denies the motion.

Wherefore, the respondent has the right to consolidate the property in its name.

Subsequently, petitioner filed a motion to compel private respondent to deliver the original owners
copy of title (TCT No. 297171).

On May 26, 1994, private respondent moved to reconsider, offering to pay the amount of P510,000 in
managers check and P38, 872.93 in personal check.

In a surprising turn-around, the trial court issued an order on June 13, 1994 directly contradicting its
May 4, 1994 order: it now allowed private respondent to pay petitioner the redemption price in the
amount of P548, 872.93 plus 1% per month from April 8, 1994 to June 30, 1994 within five (5) days from
receipt of the order. Not only that. Petitioner was also ordered to accept the payment offered by
respondent as the full redemption price.

When petitioner refused to accept private respondents tender of payment, private respondent, on June
28, 1994, filed a motion[6] with the trial court to consign the amount of P561, 247.61 as the full and
final redemption price.

On July 8, 1994, petitioner moved to reconsider the June 13, 1994 order arguing that the period of
redemption could not be extended as it is fixed by law. But the trial court, on July 16, 1997, not only
denied petitioners motion for reconsideration but also granted private respondents motion for
consignation.

Aggrieved, petitioner filed a petition for certiorari at the Court of Appeals, alleging that the orders of the
trial court dated January 31, 1994, March 15, 1994, June 13, 1994 and July 16, 1997 were issued in
excess of the trial courts jurisdiction. Petitioner argued that the trial court in effect extended the
twelve-month period of redemption of a duly foreclosed property by almost four years.

The Court of Appeals, however, did not find merit in the petition on the basis of the following:

x x x the one-year redemption period should be reckoned from 13 August 1992. In this regard, NOLI
was able to effectively exercise his right of redemption on 13 August 1993.

The records show that on two occasions, within the redemption period, NOLI offered to redeem the
subject property. Failing to afford the redemption price stated by HYRI, he filed an action before the trial
court with the purpose of determining the subject property. To show his good faith in paying the
redemption price, NOLI offered to consign/deposit the amount of P285,000.00 plus 1% interest per
month beginning 12 August 1992 in favor of HYRI.

NOLIs petition filed on 13 August 1993 had the effect of a formal offer to redeem. As stated in Belisario
vs. Intermediate Appellate Court, the filing of a complaint to enforce repurchase within the period of
redemption is equivalent to an offer to redeem and has the effect of preserving the right to
redemption. To explain, a formal offer to redeem, accompanied by a bona fide tender of the
redemption price, although proper, is not essential where x x x the right to redeem is exercised thru the
filing of judicial action. Where the action is filed after the statutory period has expired, the
determination of whether the plaintiff consigned the redemption price with the court simultaneous with
the filing of the action is necessary to see if the right of redemption sans judicial action was validly
exercised. Thus, to reiterate, the filing of the action itself within the redemption period is equivalent to
a formal offer to redeem. (Underscoring provided)

In view thereof, the petition filed before the trial court was timely made and was rightfully acted on.

x x x x x x x x x

In the instant case, the assailed Orders were issued merely to determine the amount of capital gains tax
and documentary stamps, as computed by BIR Marikina and to consider the granting of NOLIs right to
redeem the subject property. x x x In view thereof, there was no extension of the redemption period. As
heretofore stated, the period of redemption expired on 13 August 1993. And within the said period,
NOLI has effectively exercised his right of redemption. Having so established the same, the contention of
extending the redemption period finds no support in the records of the instant case.*7+

Frustrated in its attempt to stymie private respondents efforts to redeem the subject property on a
petition to the Court of Appeals, petitioner now seeks a review of the respondent courts decision under
the following

ASSIGNMENT OF ERRORS

A. THE HONORABLE COURT OF APPEALS ERRED IN SUSTAINING THE ORDERS OF THE TRIAL COURT
EXTENDING THE PERIOD OF REDEMPTION AND GRANTING A RELIEF IN EQUITY WHERE THE APPLICABLE
LAW AND JURISPRUDENCE SPECIFICALLY PROVIDES OTHERWISE.

B. THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE ORDERS OF THE TRIAL COURT WHICH
ERRED IN ITS APPLICATION AND INTERPRETATION OF SECTION 28, RULE 39 OF THE 1997 RULES OF CIVIL
PROCEDURE.

C. THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE RULINGS IN THE BELISARIO CASE IN
THE CASE AT BAR.*8+

THE ISSUES

In a nutshell, petitioner argues that the trial court erred in allowing redemption after April 8, 1994, the
date when private respondent lost all his redemptive rights. Stated otherwise, the trial court should not
have allowed private respondent forty-five (45) more days beyond April 8, 1994 within which to redeem
the foreclosed property.

Petitioner contends that the motions dated May 26, 1994 and June 28, 1994 filed by private respondent
to consign and tender the payment of the redemption price were merely designed to stretch the time
for redemption of the subject property. Private respondent did not have the ability to redeem the
subject property as he had no money at the outset. The redemption price he initially offered was
woefully inadequate because it did not include the taxes, interest and other expenses petitioner
incurred during the foreclosure proceedings. Petitioner therefore felt it was justified in refusing to
accept private respondents initial offer to redeem. Hence, private respondents action in the Antipolo
RTC, filed on August 13, 1993 (the original expiration date of the period of redemption), was merely a
subterfuge to forestall the running of the redemption period.

Furthermore, according to petitioner, even if private respondent had been legally allowed to redeem
the property until April 8, 1994 (as authorized by the March 15, 1994 order of the trial court), the latter
never made any actual tender or consignation of payment and therefore no redemption was ever made.
Thus, private respondent had already lost all his redemptive rights as of that date and the order dated
June 13, 1994 granting a further forty-five (45) day extension to redeem after April 8, 1994 was
completely beyond the trial courts power to give.

THE QUESTIONED ORDERS

Petitioner challenged before the respondent Court of Appeals the authority of the trial court to issue the
following orders

(a) dated January 31, 1994 which defined the issue involved in the case as merely determining the
amount of taxes and which mandated private respondent to pay the corresponding amount of taxes
within thirty (30) days;

(b) dated March 15, 1994 which directed petitioner to submit an updated statement of account and
private respondent to pay the redemption price (the updated statement of account as basis therefor)
within fifteen (15) days from receipt of the order;

(c) dated June 13, 1994 which allowed private respondent to redeem upon payment to petitioner of the
redemption price of P548,872.93 and

(d) dated July 16, 1997 which denied petitioners motion for reconsideration of the June 13, 1994 order
and which granted private respondents motion for consignation.

Petitioner now seeks to correct in this Court the error of the Court of Appeals in sustaining the four
above-mentioned orders of the trial court.

THIS COURTS RULING

Section 28, Rule 39 of the Rules of Court provides:

SEC. 28. Time and manner of, and amounts payable on, successive redemptions; notice to be given and
filed. The judgment obligor, or redemptioner, may redeem the property from the purchaser, at any
time within one (1) year from the date of the registration of the certificate of sale, by paying the
purchaser the amount of his purchase, with one per centum per month interest thereon in addition, up
to the time of redemption, together with the amount of any assessments or taxes which the purchaser
may have paid thereon after purchase, and interest on such last named amount of the same rate; and if
the purchaser be also a creditor having a prior lien to that of the redemptioner, other than the judgment
under which such purchase was made, the amount of such other lien, with interest.

Pursuant to the abovementioned rule, the right of redemption should be exercised within the specified
time limit, which is one year from the date of registration of the certificate of sale. Moreover, the
redemptioner should make an actual tender in good faith of the full amount of the purchase price as
provided above, which means the auction price of the property plus the creditors other legitimate
expenses like taxes, registration fees, etc.

The rule works well if both parties agree on the amount to be tendered on or before the end of the
redemption period. In this case, however, the parties could not agree on the amount as in fact the
private respondent claimed he twice tried to redeem the property but the petitioner refused because
they could not agree on the redemption price.

What is the redemptioners option therefore when the redemption period is about to expire and the
redemption cannot take place on account of disagreement over the redemption price?

According to jurisprudence,[9] the redemptioner faced with such a problem may preserve his right of
redemption through judicial action which in every case must be filed within the one-year period of
redemption. The filing of the court action to enforce redemption, being equivalent to a formal offer to
redeem, would have the effect of preserving his redemptive rights and freezing the expiration of the
one-year period. This is a fair interpretation provided the action is filed on time and in good faith, the
redemption price is finally determined and paid within a reasonable time, and the rights of the parties
are respected.

Stated otherwise, the foregoing interpretation, as applied to the case at bar, has three critical
dimensions: (1) timely redemption or redemption by expiration date (or, as what happened in this case,
the redemptioner was forced to resort to judicial action to freeze the expiration of the redemption
period); (2) good faith as always, meaning, the filing of the private respondents action on August 13,
1993 must have been for the sole purpose of determining the redemption price and not to stretch the
redemptive period indefinitely; and (3) once the redemption price is determined within a reasonable
time, the redemptioner must make prompt payment in full.

Conversely, if private respondent had to resort to judicial action to stall the expiration of the redemptive
period on August 13, 1993 because he and the petitioner could not agree on the redemption price which
still had to be determined, private respondent could not thereby be expected to tender payment
simultaneously with the filing of the action on said date.

Accordingly, the trial court did not err when it resolved to allow private respondent to redeem the
property through its orders dated January 31, 1994 and March 15, 1994. The order dated March 15,
1994 thus preserved private respondents right to redeem pending the computation of the taxes to be
added to the total amount of the redemption price.

Private respondent could not be reproached, at least initially, for offering to pay less than the full
amount of the redemption price as the amount of taxes and expenses, at that point, was not yet clearly
determined. Proof of this is the fact that petitioner had to be required by the March 15, 1994 order of
the trial court to submit an updated account of the total capital gains tax and interest added to the
purchase price. Petitioner did not oppose the said order. Instead, on March 17, 1994, it promptly
complied with the directive of the trial court. Which could have only meant that petitioner itself
recognized that the redemption price was uncertain and could not therefore be settled yet at that point.

However, after petitioner, pursuant to the trial court order on March 15, 1994, furnished private
respondent the updated statement of account on March 24, 1994, the latter should have redeemed the
foreclosed property within 15 days, that is, on or before April 8, 1994. The private respondent should
have promptly tendered by then the complete and updated redemption price as computed. Should the
amount allow redemption, the redemptioner should then pay the amount already adverted to.*10+

But on April 8, 1994, the deadline set by the trial court, private respondent did not tender any payment.
Instead, he asked for an extension of 45 days because his money was not enough. The trial court was
therefore correct when it denied, on May 4, 1994,*11+ private respondents plea for a 45-day extension
for payment. It was also correct in declaring, in the same order, the right of petitioner to consolidate
the property in its name on account of private respondents failure to redeem the property on or before
April 8, 1994.

Strangely, however, the trial court had a sudden change of heart and reversed itself after private
respondent filed a motion for reconsideration on May 26, 1994. This is where we draw the line between
the judicious and injudicious use of discretion by the trial court.

On June 13, 1994 and July 16, 1997, it issued two orders which effectively allowed an extension of the
redemptive period and consignation of the redemption price. We raise a quizzical eyebrow, to say the
least.

The trial court resolved to allow private respondent to redeem and pay the redemption price of the
property in the interest of justice and on the ground of equity way beyond what was reasonable and
contemplated by the law. We cannot upbraid the trial court for sympathizing with private respondent
but this exercise of discretion cannot be allowed to trample upon the other partys rights.

The pendency of the right of redemption depresses the market value of the land until the period
expires. Permitting private respondent to file a suit for redemption, with either party unable to foresee
when final judgment will come, renders meaningless the period fixed by the statute for effecting the
redemption. It makes the redemptive period indefinite and cripples any effort of the landowner to
realize the value of his land. In the same way, the buyer cannot immediately recover his investment.[12]
Thus, unless and until the redemption is resolved with finality, both the landowners and buyers needs
cannot be met. Petitioner and private respondent herein were thus basically posed on similar footing
before redemption. But whoever of them stands to be irreparably injured in the long run deserves the
Courts equitable protection.*13+ Thus we have held that:

Equity has been defined as justice outside law, being ethical rather than jural and belonging to the
sphere of morals than of law. It is grounded on the precepts of conscience and not on any sanction of
positive law.*14+

Private respondent may have elicited the sympathy of the trial court. We cannot, however, be blind to
the rights of petitioner. It was serious error to make the final redemption of the foreclosed property
dependent on the financial condition of private respondent. It may have been difficult for private
respondent to raise the money to redeem the property but financial hardship is not a ground to extend
the period of redemption.[15]

Thus, this Court cannot apply the same leniency as it did in Belisario vs. IAC.[16] The Belisario case is not
on all fours with the instant case. For one, in Belisario, the petitioners therein manifested their desire to
redeem the property through a letter addressed to PNB. Enclosed in the letter was a postal money order
in the amount of P630 as partial payment, with the balance to be paid in 12 equal monthly installments.
There was a definite tender of payment by petitioners therein although at the outset the amount
tendered was incomplete and made with a proposal to pay on installment. This Court held that (t)here
(was) no cogent reason for requiring the vendee to accept payment by installments from the
redemptioner as it would ultimately result in an indefinite extension of the redemption period. In the
instant case, however, there was no definite tender of payment to petitioner when private respondent
allegedly offered to redeem the property on August 13, 1993.

Had private respondents act of filing a suit for redemption really been in good faith, private respondent
could have at least consigned or deposited what he thought to be the correct amount simultaneously
with the filing of the action to redeem on August 13, 1993 - to show not only good faith but also his
intention and capability of paying in full what he believed to be the reasonable price. But even as he
petitioned the court for the consignation of the redemption price, no actual consignation was made. He
instead sought a 45-day extension of the period to pay the redemption price. This was downright
reflective of private respondents financial inability to redeem from the very start.

For another, the controversy in the Belisario case involved the determination of the proper reckoning of
the period of redemption. This Court held there that

(t)he redemption period, for purposes of determining the time when a final Deed of Sale may be
executed or issued and the ownership of the registered land consolidated in the purchaser at an
extrajudicial foreclosure sale under Act 3135, should be reckoned from the date of the registration of
the Certificate of Sale in the Office of the Register of Deeds concerned and not from the date of public
auction.

In the instant case, however, the fact that private respondent made a formal offer to redeem before the
expiration of the period to redeem was not squarely at issue. The focal issue here is whether or not the
extension of the redemptive period by the trial court was well within private respondents preserved
right to redeem. The circumstances clearly show it was not.

The Court of Appeals thus cited the Belisario case out of context because the incidents of said case are
different from those of the case at bar.

Precedents are helpful in deciding cases when they are on all fours or at least substantially identical
with previous litigations. Argumentum a simili valet in lege. x x x Except when there is a need to reverse
them because of an emergent viewpoint or an altered situation x x x.*17+

The opportunity to redeem the subject property was never denied to private respondent. His timely
formal offer through judicial action to redeem was likewise recognized. But that is where it ends. We
cannot sanction and grant every succeeding motion or petition specially if frivolous or unreasonable
filed by him because this would manifestly and unreasonably delay the final resolution of ownership
of the subject property.

And we cannot be clearer on this point: as a result of the trial courts grant of a 45-day extended period
to redeem, almost nine (9) years have elapsed with both parties claims over the property dangling in
limbo, to the serious impairment of petitioners rights.

We cannot thus help but call the trial courts attention to the prejudice it has wittingly or unwittingly
caused the petitioner. It was really all too simple. The trial court should have seen, as in fact it had
already initially seen, that the 45-day extension sought by private respondent on April 8, 1994 was just a
play to cover up his lack of funds to redeem the foreclosed property.

WHEREFORE, the petition is PARTLY GRANTED. The decision of the Court of Appeals under review is
hereby MODIFIED as follows: (1) the orders dated January 31, 1994 and March 15, 1994 of the trial court
are hereby SUSTAINED; (2) the orders dated June 13, 1994 and July 16, 1997 of the trial court are hereby
SET ASIDE and NULLIFIED. Consequently, for failure of private respondent to redeem the property within
the period set by the trial court in its order dated March 15, 1994, the petitioner is hereby allowed
to consolidate the title to the subject property in its name.

SO ORDERED.

Puno, (Chairman), Panganiban, and Carpio-Morales, JJ., concur.
Sandoval-Gutierrez, J., on leave.












Republic of the Philippines
SUPREME COURT
Manila


SECOND DIVISION


IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and JOSE G. RESLIN,
Petitioners,


- versus -


COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA
BENEDICTO-PAULINO,
Respondents.


G.R. No. 154096

Present:

QUISUMBING, J., Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BRION, JJ.

Promulgated:

August 22, 2008
x-----------------------------------------------------------------------------------------x

D E C I S I O N

VELASCO, JR., J.:

The Case

This Petition for Review on Certiorari under Rule 45 assails and seeks to nullify the Decision[1] dated
October 17, 2001 of the Court of Appeals (CA) in CA-G.R. SP No. 64246 and its Resolution[2] of June 20,
2002 denying petitioners motion for reconsideration. The assailed CA decision annulled and set aside
the Orders dated October 9, 2000, December 18, 2000, and March 15, 2001 of the Regional Trial Court
(RTC), Branch 17 in Batac, Ilocos Norte which admitted petitioners amended complaint in Civil Case Nos.
3341-17 and 3342-17.



The Facts

Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now deceased, and his business
associates (Benedicto Group) organized Far East Managers and Investors, Inc. (FEMII) and Universal
Equity Corporation (UEC), respectively. As petitioner Irene Marcos-Araneta would later allege, both
corporations were organized pursuant to a contract or arrangement whereby Benedicto, as trustor,
placed in his name and in the name of his associates, as trustees, the shares of stocks of FEMII and UEC
with the obligation to hold those shares and their fruits in trust and for the benefit of Irene to the extent
of 65% of such shares. Several years after, Irene, through her trustee-husband, Gregorio Ma. Araneta III,
demanded the reconveyance of said 65% stockholdings, but the Benedicto Group refused to oblige.

In March 2000, Irene thereupon instituted before the RTC two similar complaints for conveyance of
shares of stock, accounting and receivership against the Benedicto Group with prayer for the issuance of
a temporary restraining order (TRO). The first, docketed as Civil Case No. 3341-17, covered the UEC
shares and named Benedicto, his daughter, and at least 20 other individuals as defendants. The second,
docketed as Civil Case No. 3342-17, sought the recovery to the extent of 65% of FEMII shares held by
Benedicto and the other defendants named therein.

Respondent Francisca Benedicto-Paulino,*3+ Benedictos daughter, filed a Motion to Dismiss Civil Case
No. 3341-17, followed later by an Amended Motion to Dismiss. Benedicto, on the other hand, moved to
dismiss[4] Civil Case No. 3342-17, adopting in toto the five (5) grounds raised by Francisca in her
amended motion to dismiss. Among these were: (1) the cases involved an intra-corporate dispute over
which the Securities and Exchange Commission, not the RTC, has jurisdiction; (2) venue was improperly
laid; and (3) the complaint failed to state a cause of action, as there was no allegation therein that
plaintiff, as beneficiary of the purported trust, has accepted the trust created in her favor.

To the motions to dismiss, Irene filed a Consolidated Opposition, which Benedicto and Francisca
countered with a Joint Reply to Opposition.

Upon Benedictos motion, both cases were consolidated.

During the preliminary proceedings on their motions to dismiss, Benedicto and Francisca, by way of
bolstering their contentions on improper venue, presented the Joint Affidavit[5] of Gilmia B. Valdez,
Catalino A. Bactat, and Conchita R. Rasco who all attested being employed as household staff at the
Marcos Mansion in Brgy. Lacub, Batac, Ilocos Norte and that Irene did not maintain residence in said
place as she in fact only visited the mansion twice in 1999; that she did not vote in Batac in the 1998
national elections; and that she was staying at her husbands house in Makati City.

Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5 community tax certificate[6]
(CTC) issued on 11/07/99 in Curimao, Ilocos Norte to support her claimed residency in Batac, Ilocos
Norte.

In the meantime, on May 15, 2000, Benedicto died and was substituted by his wife, Julita C. Benedicto,
and Francisca.

On June 29, 2000, the RTC dismissed both complaints, stating that these partly constituted real action,
and that Irene did not actually reside in Ilocos Norte, and, therefore, venue was improperly laid. In its
dismissal order,*7+ the court also declared all the other issues raised in the different Motions to Dismiss
x x x moot and academic.
From the above order, Irene interposed a Motion for Reconsideration[8] which Julita and Francisca
duly opposed.

Pending resolution of her motion for reconsideration, Irene filed on July 17, 2000 a Motion (to Admit
Amended Complaint),[9] attaching therewith a copy of the Amended Complaint[10] dated July 14, 2000
in which the names of Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin appeared as additional
plaintiffs. As stated in the amended complaint, the added plaintiffs, all from Ilocos Norte, were Irenes
new trustees. Parenthetically, the amended complaint stated practically the same cause of action but, as
couched, sought the reconveyance of the FEMII shares only.

During the August 25, 2000 hearing, the RTC dictated in open court an order denying Irenes motion for
reconsideration aforementioned, but deferred action on her motion to admit amended complaint and
the opposition thereto.[11]

On October 9, 2000, the RTC issued an Order[12] entertaining the amended complaint, dispositively
stating:

WHEREFORE, the admission of the Amended Complaint being tenable and legal, the same is GRANTED.

Let copies of the Amended Complaint be served to the defendants who are ordered to answer within
the reglementary period provided by the rules.


The RTC predicated its order on the following premises:

(1) Pursuant to Section 2, Rule 10 of the Rules of Court,[13] Irene may opt to file, as a matter of right, an
amended complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos Norte resident, in the
amended complaint setting out the same cause of action cured the defect of improper venue.

(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the amended complaint in
question in the place of residence of any of Irenes co-plaintiffs.

In time, Julita and Francisca moved to dismiss the amended complaint, but the RTC, by Order[14]
dated December 18, 2000, denied the motion and reiterated its directive for the two to answer the
amended complaint.

In said order, the RTC stood pat on its holding on the rule on amendments of pleadings. And
scoffing at the argument about there being no complaint to amend in the first place as of October 9,
2000 (when the RTC granted the motion to amend) as the original complaints were dismissed with
finality earlier, i.e., on August 25, 2000 when the court denied Irenes motion for reconsideration of the
June 29, 2000 order dismissing the original complaints, the court stated thusly: there was actually no
need to act on Irenes motion to admit, it being her right as plaintiff to amend her complaints absent any
responsive pleading thereto. Pushing its point, the RTC added the observation that the filing of the
amended complaint on July 17, 2000 ipso facto superseded the original complaints, the dismissal of
which, per the June 29, 2000 Order, had not yet become final at the time of the filing of the amended
complaint.

Following the denial on March 15, 2001 of their motion for the RTC to reconsider its December 18, 2000
order aforestated, Julita and Francisca, in a bid to evade being declared in default, filed on April 10, 2001
their Answer to the amended complaint.[15] But on the same day, they went to the CA via a petition
for certiorari, docketed as CA-G.R. SP No. 64246, seeking to nullify the following RTC orders: the first,
admitting the amended complaint; the second, denying their motion to dismiss the amended complaint;
and the third, denying their motion for reconsideration of the second issuance.

Inasmuch as the verification portion of the joint petition and the certification on non-forum shopping
bore only Franciscas signature, the CA required the joint petitioners to submit x x x either the written
authority of Julita C. Benedicto to Francisca B. Paulino authorizing the latter to represent her in these
proceedings, or a supplemental verification and certification duly signed by x x x Julita C. Benedicto.*16+
Records show the submission of the corresponding authorizing Affidavit[17] executed by Julita in favor
of Francisca.

Later developments saw the CA issuing a TRO[18] and then a writ of preliminary injunction[19] enjoining
the RTC from conducting further proceedings on the subject civil cases.

On October 17, 2001, the CA rendered a Decision, setting aside the assailed RTC orders and dismissing
the amended complaints in Civil Case Nos. 3341-17 and 3342-17. The fallo of the CA decision reads:

WHEREFORE, based on the foregoing premises, the petition is hereby GRANTED. The assailed Orders
admitting the amended complaints are SET ASIDE for being null and void, and the amended complaints a
quo are, accordingly, DISMISSED.[20]

Irene and her new trustees motion for reconsideration of the assailed decision was denied through the
equally assailed June 20, 2002 CA Resolution. Hence, this petition for review is before us.

The Issues

Petitioners urge the setting aside and annulment of the assailed CA decision and resolution on the
following submissions that the appellate court erred in: (1) allowing the submission of an affidavit by
Julita as sufficient compliance with the requirement on verification and certification of non-forum
shopping; (2) ruling on the merits of the trust issue which involves factual and evidentiary
determination, processes not proper in a petition for certiorari under Rule 65 of the Rules of Court; (3)
ruling that the amended complaints in the lower court should be dismissed because, at the time it was
filed, there was no more original complaint to amend; (4) ruling that the respondents did not waive
improper venue; and (5) ruling that petitioner Irene was not a resident of Batac, Ilocos Norte and that
none of the principal parties are residents of Ilocos Norte.[21]

The Courts Ruling

We affirm, but not for all the reasons set out in, the CAs decision.

First Issue: Substantial Compliance with the Rule
on Verification and Certification of Non-Forum Shopping

Petitioners tag private respondents petition in CA-G.R. SP No. 64246 as defective for non-compliance
with the requirements of Secs. 4[22] and 5[23] of Rule 7 of the Rules of Court at least with regard to
Julita, who failed to sign the verification and certification of non-forum shopping. Petitioners thus fault
the appellate court for directing Julitas counsel to submit a written authority for Francisca to represent
Julita in the certiorari proceedings.

We are not persuaded.

Verification not Jurisdictional; May be Corrected

Verification is, under the Rules, not a jurisdictional but merely a formal requirement which the court
may motu proprio direct a party to comply with or correct, as the case may be. As the Court articulated
in Kimberly Independent Labor Union for Solidarity, Activism and Nationalism (KILUSAN)-Organized
Labor Associations in Line Industries and Agriculture (OLALIA) v. Court of Appeals:

[V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance
that the allegations therein made are done in good faith or are true and correct and not mere
speculation. The Court may order the correction of the pleading, if not verified, or act on the unverified
pleading if the attending circumstances are such that a strict compliance with the rule may be dispensed
with in order that the ends of justice may be served.[24]

Given this consideration, the CA acted within its sound discretion in ordering the submission of proof of
Franciscas authority to sign on Julitas behalf and represent her in the proceedings before the appellate
court.

Signature by Any of the Principal Petitioners is Substantial Compliance

Regarding the certificate of non-forum shopping, the general rule is that all the petitioners or plaintiffs
in a case should sign it.[25] However, the Court has time and again stressed that the rules on forum
shopping, which were designed to promote the orderly administration of justice, do not interdict
substantial compliance with its provisions under justifiable circumstances.[26] As has been ruled by the
Court, the signature of any of the principal petitioners[27] or principal parties,[28] as Francisca is in this
case, would constitute a substantial compliance with the rule on verification and certification of non-
forum shopping. It cannot be overemphasized that Francisca herself was a principal party in Civil Case
No. 3341-17 before the RTC and in the certiorari proceedings before the CA. Besides being an heir of
Benedicto, Francisca, with her mother, Julita, was substituted for Benedicto in the instant case after his
demise.

And should there exist a commonality of interest among the parties, or where the parties filed the case
as a collective, raising only one common cause of action or presenting a common defense, then the
signature of one of the petitioners or complainants, acting as representative, is sufficient compliance.
We said so in Cavile v. Heirs of Clarita Cavile.[29] Like Thomas Cavile, Sr. and the other petitioners in
Cavile, Francisca and Julita, as petitioners before the CA, had filed their petition as a collective, sharing a
common interest and having a common single defense to protect their rights over the shares of stocks in
question.

Second Issue: Merits of the Case cannot be Resolved
on Certiorari under Rule 65

Petitioners posture on the second issue is correct. As they aptly pointed out, the CA, in the exercise of
its certiorari jurisdiction under Rule 65, is limited to reviewing and correcting errors of jurisdiction only.
It cannot validly delve into the issue of trust which, under the premises, cannot be judiciously resolved
without first establishing certain facts based on evidence.

Whether a determinative question is one of law or of fact depends on the nature of the dispute. A
question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain given set of facts; or when the issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of facts being admitted. A question of
fact obtains when the doubt or difference arises as to the truth or falsehood of facts or when the query
invites the calibration of the whole evidence considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding circumstances, as well as their relation to each other
and to the whole, and the probability of the situation.[30]

Clearly then, the CA overstepped its boundaries when, in disposing of private respondents petition for
certiorari, it did not confine itself to determining whether or not lack of jurisdiction or grave abuse of
discretion tainted the issuance of the assailed RTC orders, but proceeded to pass on the factual issue of
the existence and enforceability of the asserted trust. In the process, the CA virtually resolved petitioner
Irenes case for reconveyance on its substantive merits even before evidence on the matter could be
adduced. Civil Case Nos. 3341-17 and 3342-17 in fact have not even reached the pre-trial stage. To
stress, the nature of the trust allegedly constituted in Irenes favor and its enforceability, being
evidentiary in nature, are best determined by the trial court. The original complaints and the amended
complaint certainly do not even clearly indicate whether the asserted trust is implied or express. To be
sure, an express trust differs from the implied variety in terms of the manner of proving its
existence.[31] Surely, the onus of factually determining whether the trust allegedly established in favor
of Irene, if one was indeed established, was implied or express properly pertains, at the first instance, to
the trial court and not to the appellate court in a special civil action for certiorari, as here. In the
absence of evidence to prove or disprove the constitution and necessarily the existence of the trust
agreement between Irene, on one hand, and the Benedicto Group, on the other, the appellate court
cannot intelligently pass upon the issue of trust. A pronouncement on said issue of trust rooted on
speculation and conjecture, if properly challenged, must be struck down. So it must be here.

Third Issue: Admission of Amended Complaint Proper

As may be recalled, the CA veritably declared as reversibly erroneous the admission of the amended
complaint. The flaw in the RTCs act of admitting the amended complaint lies, so the CA held, in the fact
that the filing of the amended complaint on July 17, 2000 came after the RTC had ordered with finality
the dismissal of the original complaints. According to petitioners, scoring the CA for its declaration
adverted to and debunking its posture on the finality of the said RTC order, the CA failed to take stock of
their motion for reconsideration of the said dismissal order.

We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the Rules of Court which
provides:

SEC. 2. Amendments as a matter of right. A party may amend his pleading once as a matter of right
at any time before a responsive pleading is served or in the case of a reply, at any time within ten (10)
days after it is served.


As the aforequoted provision makes it abundantly clear that the plaintiff may amend his complaint once
as a matter of right, i.e., without leave of court, before any responsive pleading is filed or served.
Responsive pleadings are those which seek affirmative relief and/or set up defenses,[32] like an answer.
A motion to dismiss is not a responsive pleading for purposes of Sec. 2 of Rule 10.[33] Assayed against
the foregoing perspective, the RTC did not err in admitting petitioners amended complaint, Julita and
Francisca not having yet answered the original complaints when the amended complaint was filed. At
that precise moment, Irene, by force of said Sec. 2 of Rule 10, had, as a matter of right, the option of
amending her underlying reconveyance complaints. As aptly observed by the RTC, Irenes motion to
admit amended complaint was not even necessary. The Court notes though that the RTC has not offered
an explanation why it saw fit to grant the motion to admit in the first place.

In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety of admitting an amended
complaint before a responsive pleading is filed, wrote:

[W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled
is the rule that a motion to dismiss is not a responsive pleading for purposes of Section 2, Rule 10. As no
responsive pleading had been filed, respondent could amend her complaint in Civil Case No. C-20124 as
a matter of right. Following this Courts ruling in Breslin v. Luzon Stevedoring Co. considering that
respondent has the right to amend her complaint, it is the correlative duty of the trial court to accept
the amended complaint; otherwise, mandamus would lie against it. In other words, the trial courts
duty to admit the amended complaint was purely ministerial. In fact, respondent should not have filed a
motion to admit her amended complaint.[34]


It may be argued that the original complaints had been dismissed through the June 29, 2000 RTC order.
It should be pointed out, however, that the finality of such dismissal order had not set in when Irene
filed the amended complaint on July 17, 2000, she having meanwhile seasonably sought reconsideration
thereof. Irenes motion for reconsideration was only resolved on August 25, 2000. Thus, when Irene
filed the amended complaint on July 17, 2000, the order of dismissal was not yet final, implying that
there was strictly no legal impediment to her amending her original complaints.[35]

Fourth Issue: Private Respondents did not Waive Improper Venue

Petitioners maintain that Julita and Francisca were effectively precluded from raising the matter of
improper venue by their subsequent acts of filing numerous pleadings. To petitioners, these pleadings,
taken together, signify a waiver of private respondents initial objection to improper venue.

This contention is without basis and, at best, tenuous. Venue essentially concerns a rule of procedure
which, in personal actions, is fixed for the greatest convenience possible of the plaintiff and his
witnesses. The ground of improperly laid venue must be raised seasonably, else it is deemed waived.
Where the defendant failed to either file a motion to dismiss on the ground of improper venue or
include the same as an affirmative defense, he is deemed to have waived his right to object to improper
venue.[36] In the case at bench, Benedicto and Francisca raised at the earliest time possible, meaning
within the time for but before filing the answer to the complaint,*37+ the matter of improper venue.
They would thereafter reiterate and pursue their objection on venue, first, in their answer to the
amended complaints and then in their petition for certiorari before the CA. Any suggestion, therefore,
that Francisca and Benedicto or his substitutes abandoned along the way improper venue as ground to
defeat Irenes claim before the RTC has to be rejected.

Fifth Issue: The RTC Has No Jurisdiction
on the Ground of Improper Venue

Subject Civil Cases are Personal Actions

It is the posture of Julita and Francisca that the venue was in this case improperly laid since the suit in
question partakes of a real action involving real properties located outside the territorial jurisdiction of
the RTC in Batac.

This contention is not well-taken. In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract, or the recovery of damages.[38] Real actions, on the other
hand, are those affecting title to or possession of real property, or interest therein. In accordance with
the wordings of Sec. 1 of Rule 4, the venue of real actions shall be the proper court which has territorial
jurisdiction over the area wherein the real property involved, or a portion thereof, is situated. The
venue of personal actions is the court where the plaintiff or any of the principal plaintiffs resides, or
where the defendant or any of the principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the plaintiff.[39]

In the instant case, petitioners are basically asking Benedicto and his Group, as defendants a quo, to
acknowledge holding in trust Irenes purported 65% stockownership of UEC and FEMII, inclusive of the
fruits of the trust, and to execute in Irenes favor the necessary conveying deed over the said 65%
shareholdings. In other words, Irene seeks to compel recognition of the trust arrangement she has with
the Benedicto Group. The fact that FEMIIs assets include real properties does not materially change the
nature of the action, for the ownership interest of a stockholder over corporate assets is only inchoate
as the corporation, as a juridical person, solely owns such assets. It is only upon the liquidation of the
corporation that the stockholders, depending on the type and nature of their stockownership, may have
a real inchoate right over the corporate assets, but then only to the extent of their stockownership.


The amended complaint is an action in personam, it being a suit against Francisca and the late
Benedicto (now represented by Julita and Francisca), on the basis of their alleged personal liability to
Irene upon an alleged trust constituted in 1968 and/or 1972. They are not actions in rem where the
actions are against the real properties instead of against persons.[40] We particularly note that
possession or title to the real properties of FEMII and UEC is not being disputed, albeit part of the assets
of the corporation happens to be real properties.

Given the foregoing perspective, we now tackle the determinative question of venue in the light of the
inclusion of additional plaintiffs in the amended complaint.

Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4

We point out at the outset that Irene, as categorically and peremptorily found by the RTC after a
hearing, is not a resident of Batac, Ilocos Norte, as she claimed. The Court perceives no compelling
reason to disturb, in the confines of this case, the factual determination of the trial court and the
premises holding it together. Accordingly, Irene cannot, in a personal action, contextually opt for Batac
as venue of her reconveyance complaint. As to her, Batac, Ilocos Norte is not what Sec. 2, Rule 4 of the
Rules of Court adverts to as the place where the plaintiff or any of the principal plaintiffs resides at the
time she filed her amended complaint. That Irene holds CTC No. 17019451[41] issued sometime in June
2000 in Batac, Ilocos Norte and in which she indicated her address as Brgy. Lacub, Batac, Ilocos is really
of no moment. Let alone the fact that one can easily secure a basic residence certificate practically
anytime in any Bureau of Internal Revenue or treasurers office and dictate whatever relevant data one
desires entered, Irene procured CTC No. 17019451 and appended the same to her motion for
reconsideration following the RTCs pronouncement against her being a resident of Batac.

Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is the proper court venue,
asseverate that Batac, Ilocos Norte is where the principal parties reside.

Pivotal to the resolution of the venue issue is a determination of the status of Irenes co-plaintiffs in the
context of Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4, which pertinently provide as follows:

Rule 3
PARTIES TO CIVIL ACTIONS

SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized
by law or these Rules, every action must be prosecuted or defended in the name of the real party in
interest.

SEC. 3. Representatives as parties. Where the action is allowed to be prosecuted or defended by a
representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the title of
the case and shall be deemed to be the real party in interest. A representative may be a trustee of an
express trust, a guardian, an executor or administrator, or a party authorized by law or these Rules. An
agent acting in his own name and for the benefit of an undisclosed principal may sue or be sued without
joining the principal except when the contract involves things belonging to the principal.

Rule 4
VENUE OF ACTIONS

SEC. 2. Venue of personal actions. All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found, at the election
of the plaintiff.


Venue is Improperly Laid

There can be no serious dispute that the real party-in-interest plaintiff is Irene. As self-styled beneficiary
of the disputed trust, she stands to be benefited or entitled to the avails of the present suit. It is
undisputed too that petitioners Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin, all from Ilocos Norte,
were included as co-plaintiffs in the amended complaint as Irenes new designated trustees. As trustees,
they can only serve as mere representatives of Irene.

Upon the foregoing consideration, the resolution of the crucial issue of whether or not venue had
properly been laid should not be difficult.

Sec. 2 of Rule 4 indicates quite clearly that when there is more than one plaintiff in a personal action
case, the residences of the principal parties should be the basis for determining proper venue. According
to the late Justice Jose Y. Feria, the word principal has been added *in the uniform procedure rule+ in
order to prevent the plaintiff from choosing the residence of a minor plaintiff or defendant as the
venue.*42+ Eliminate the qualifying term principal and the purpose of the Rule would, to borrow from
Justice Regalado, be defeated where a nominal or formal party is impleaded in the action since the
latter would not have the degree of interest in the subject of the action which would warrant and entail
the desirably active participation expected of litigants in a case.*43+

Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene stands undisputedly as the
principal plaintiff, the real party-in-interest. Following Sec. 2 of Rule 4, the subject civil cases ought to
be commenced and prosecuted at the place where Irene resides.

Principal Plaintiff not a Resident in Venue of Action

As earlier stated, no less than the RTC in Batac declared Irene as not a resident of Batac, Ilocos Norte.
Withal, that court was an improper venue for her conveyance action.

The Court can concede that Irenes three co-plaintiffs are all residents of Batac, Ilocos Norte. But it
ought to be stressed in this regard that not one of the three can be considered as principal party-
plaintiffs in Civil Case Nos. 3341-17 and 3342-17, included as they were in the amended complaint as
trustees of the principal plaintiff. As trustees, they may be accorded, by virtue of Sec. 3 of Rule 3, the
right to prosecute a suit, but only on behalf of the beneficiary who must be included in the title of the
case and shall be deemed to be the real party-in-interest. In the final analysis, the residences of Irenes
co-plaintiffs cannot be made the basis in determining the venue of the subject suit. This conclusion
becomes all the more forceful considering that Irene herself initiated and was actively prosecuting her
claim against Benedicto, his heirs, assigns, or associates, virtually rendering the impleading of the
trustees unnecessary.

And this brings us to the final point. Irene was a resident during the period material of Forbes Park,
Makati City. She was not a resident of Brgy. Lacub, Batac, Ilocos Norte, although jurisprudence[44] has it
that one can have several residences, if such were the established fact. The Court will not speculate on
the reason why petitioner Irene, for all the inconvenience and expenses she and her adversaries would
have to endure by a Batac trial, preferred that her case be heard and decided by the RTC in Batac. On
the heels of the dismissal of the original complaints on the ground of improper venue, three new
personalities were added to the complaint doubtless to insure, but in vain as it turned out, that the case
stays with the RTC in Batac.

Litigants ought to bank on the righteousness of their causes, the superiority of their cases, and the
persuasiveness of arguments to secure a favorable verdict. It is high time that courts, judges, and those
who come to court for redress keep this ideal in mind.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision and Resolution dated October 17,
2001 and June 20, 2002, respectively, of the CA in CA-G.R. SP No. 64246, insofar as they nullified the
assailed orders of the RTC, Branch 17 in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 3342-17 on
the ground of lack of jurisdiction due to improper venue, are hereby AFFIRMED. The Orders dated
October 9, 2000, December 18, 2000, and March 15, 2001 of the RTC in Civil Case Nos. 3341-17 and
3342-17 are accordingly ANNULLED and SET ASIDE and said civil cases are DISMISSED.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION



G.R. No. 106920 December 10, 1993

PHILIPPINE BANKING CORPORATION, petitioner,
vs.
HON. SALVADOR S. TENSUAN, Judge of Regional Trial Court of Makati, National Capital Judicial Region,
Branch 146; CIRCLE FINANCIAL CORPORATION, AVELINO E. DEATO, JR., MIGUEL F. VIOLAGO, BENJAMIN
F. SANTIAGO, SOCORRO R. GOMEZ, NERISSA T. GLORIA, FILEMON C. MARQUEZ, DOMINGO SANTIAGO
AND HILARIO P. LOPEZ, respondents.

Tomargo, Luzano & Associates for petitioner.

Edgardo V. Cruz for private respondents.



FELICIANO, J.:

In this Petition for Review on Certiorari, petitioner asks us to review and set aside the Order of Judge
Salvador A. Tensuan dated 3 August 1992, dismissing petitioner's complaint in Civil Case No. 91-2220
entitled "Philippine Banking Corporation vs. Circle Financial Corporation, et al."

Petitioner Philippine Banking Corporation (hereafter "Bank") is a commercial banking corporation with
principal office at Makati, Metro Manila. Petitioner Bank instituted a complaint for collection of a sum of
money, with a prayer for preliminary attachment, at the Regional Trial Court of Makati. It appears from
the allegations of the Bank's complaint that respondent Circle Financial Co. (hereafter "Circle"),
sometime in 1983 and 1984, through its representatives, obtained several loans aggregating
P1,000,000.00 from petitioner. Respondent Circle, for value received, delivered to petitioner Bank four
(4) promissory notes, each of which contained the stipulation that:

I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela any legal action which may
arise out of this promissory note.

As security for the re-payment by respondent Circle of the sums loaned by petitioner Bank, eight (8)
individuals, who were impleaded as defendants in the complaint namely, Avelino Deato, Miguel
Violago, Benjamin Santiago, Socorro Gomez, Nerissa Gloria, Filemon Marquez, Domingo Santiago and
Hilario Lopez executed a Continuing Surety Agreement and undertook to
pay jointly and severally respondent Circle's obligations. Only five (5) out of eight (8) individual obligors
are respondents in present case, namely: Domingo Santiago, Hilario Lopez, Avelino Deato, Benjamin P.
Santiago and Socorro Gomez.

On their due dates, Circle failed to pay its obligations under the promissory notes. Thereupon, petitioner
Bank demanded payment from the eight (8) individual sureties conformably with their promises
contained in the Continuing Surety Agreement; the individual obligors, however, also failed to pay.

Petitioner moved for issuance of a writ of preliminary attachment, alleging that respondent Circle had
become insolvent and had been placed under receivership by the Central Bank. The trial judge granted
the motion and issued a writ of preliminary attachment. The sheriff's return indicated, however, that no
properties belonging to the respondent Circle and the individual obligors could be found. Per sheriff's
return, summons was served upon Domingo Santiago, 1 Hilario P. Lopez, 2 Avelino Deato, 3 Benjamin P.
Santiago, 4 and Socorro Gomez. 5 The sheriff failed to serve summons on (a) Miguel Violago, who had
died; (b) Nerissa T. Gloria 6 and Filemon Marquez, 7 whose whereabouts were unknown; and (c) Circle,
which had ceased to engage in business at the address given by petitioner and could not be located.

A motion to dismiss was filed by the respondents (Circle and the five [5] individual sureties served with
summons) and averred that the venue of the action was improperly laid since an agreement had fixed
the venue of actions arising from the promissory notes in Valenzuela, Metro Manila, only. Respondents
called the trial court's attention to the stipulation contained in the promissory note, quoted in limine.

Acting upon respondent's motion, respondent Judge Tensuan issued the challenged Order which read as
follows:

Acting on defendant's motion to dismiss on grounds of improper venue in relation with actionable
promissory notes which stipulate that the parties "expressly submit to the jurisdiction of the Courts of
Valenzuela, Metro Manila any legal action which may arise", and,

Finding said motion to be impressed with merit consistent with
Sec. 13, Rule 14 of the Rules of Court as well as in line with the doctrinal rule in Bautista vs. Hon. Juan de
Borja, et al. (18 SCRA 474) that the proper venue for an action is that stipulated in a document "in case
of any litigation herefrom or in connection herewith" upon a rationale that had the parties intended to
reserve the right to choose venue under Section 2 (b), Rule 4 of the Rules of Court, such reservation
should have been reflected in the document as against the rationale in Polytrade Corporation vs. Blanco
(30 SCRA 187) which should allow choice of venue where an actionable document does not set forth
qualifying or restrictive words in point, and

In order to more clearly define the parameters of the rule on proper venue vis-a-vis a clear perception
that a stipulation to "expressly submit to the jurisdiction of the Courts of Valenzuela, Metro Manila"
amount to unequivocal agreement to sue and be sued in Valenzuela, Metro Manila.

WHEREFORE, premises considered and finding the motion to be meritorious, same is hereby granted
and the above-entitled case is accordingly dismissed. Without pronouncement as to costs.

SO ORDERED. 8

Petitioner moved for reconsideration of the above Order of the trial court, without success.

Hence, this Petition.

We consider that the Petition is meritorious.

It is settled in this jurisdiction that the parties, by written agreement, may change or transfer the venue
of an action from one province to another. 9 We have many times sustained the validity and
enforceability of contractual stipulations concerning venue, it is, of course, the tenor of their agreement
which is of critical relevance. The relevant task, in other words, is determining the intent of the parties
as manifested in the words employed by them and, where such words are less than clear, in other
recognized indicators of the will of the contracting parties.

Petitioner Bank contends that the stipulation contained in the promissory notes is merely an agreement
to add the courts of Valenzuela to the tribunals to which the parties may resort. Petitioner thus insists
that the venue stipulation set out in the notes did not restrict or limit the permissible venue of actions
arising out of those notes to the courts of Valenzuela, to the exclusion of all the other courts recourse to
any one of which is authorized or permitted under the Rules of Court. Thus, venue was properly laid by
petitioner Bank in the place where its principal offices are located: i.e., Makati, Metropolitan Manila.

Private respondents, in opposition, aver that the words used in the stipulation here involved are clear
and unambiguous. A promise to submit to the jurisdiction of a specific court, without an express
reservation of the right to resort to one or more of the tribunals otherwise accessible under the Rules of
Court, is an agreement definitely fixing the permissible venue in only one place, i.e., Valenzuela, to the
exclusion of other competent courts.

A careful reading of the terms of the stipulation "I/We hereby expressly submit to the jurisdiction of
the courts of Valenzuela any legal action which may arise out of this promissory note" shows that the
stipulation does not require the laying of venue in Valenzuela exclusively or mandatorily. The plain or
ordinary import of the stipulation is the authorizing of, or permission to bring, suit in Valenzuela; there is
not the slightest indication of an intent to bar suit in other competent courts.

Permissive stipulations like the one here considered have invariably received judicial approval and we
have declared that either of the parties is authorized to lay venue of an action in the court named in the
stipulation. The stipulation her does not purport to deprive either party of it right to elect, or option to
have resort to, another competent court as expressly permitted by Section 2(b) of Rule 4 of the Rules of
Court, should such party choose to initiate a suit. The stipulation here merely operated to confer or
confirm a right upon a party to elect recourse to the courts of Valenzuela or, alternatively, to go before
any of the tribunals envisaged by the rules on venue, i.e., the courts of Makati, Quezon City and Bulacan.
10

In principle, the stipulation on venue here involved must be distinguished from stipulations which
purport to require or compel the parties to lay venue of an action in a specified place, and in that
particular place only. The latter
type of venue stipulation must clearly indicate, through qualifying and restrictive words, that the parties
deliberately intended to exclude causes or actions from the operation of the ordinary permissive rules
on venue, 11 and that they intended contractually to designate a specific venue to the exclusion of any
other court also competent and accessible to the parties under the ordinary rules on the venue of
actions. Stipulations of this exclusionary nature may, under certain circumstances, be characterized as
unreasonable or as contrary to public policy 12 and, accordingly, not judicially enforceable.

In practice, the task, as noted earlier, of this Court when confronted with issues of this kind is always
basically that of contract interpretation. In the case at bar, neither qualifying nor restrictive words (e.g.,
"must," "only" or "exclusively") were employed which could yield an intent on the part of the parties
mandatorily to restrict the venue of actions arising out of the promissory notes to the courts of
Valenzuela only. Private respondents suggest that the use of words "any legal action" expressed a
supposed agreement to bar actions before any court other than a Valenzuela court. We do not agree,
for we see no necessary or customary connection between the words "any legal action" and an intent
strictly to limit permissible venue to the Valenzuela courts. Intent so to establish an inflexible restriction
of otherwise permissible venue to one single place is not lightly to be presumed or inferred from
stipulations which, like that here before us, include no qualifying or exclusionary terms. Express
reservation of the right to elect venue under the ordinary rules was, accordingly, unnecessary in the
case at bar.

Such is the thrust of the great bulk of the caselaw of this Court where this issue was directly raised and
discussed.

In Polytrade Corporation v. Blanco, 13 the stipulation on venue there involved read:

The parties agree to sue and be sued in the courts of Manila

The Court, in upholding that stipulation and ruling that venue had been properly laid in the then Court
of First Instance of Bulacan (the place of defendant's residence), speaking through Mr. Justice Sanchez,
said:

. . . An accurate reading, however, of the stipulation, "The parties agree to sue and be sued in the Courts
of Manila," does not preclude the filing of suits in the residence of plaintiff or defendant. The plain
meaning is that the parties merely consented to be sued in Manila. Qualifying or restrictive words which
would indicate that Manila and Manila alone is the venue are totally absent therefrom. We cannot read
into that clause that plaintiff and defendant bound themselves to file suits with respect to the last two
transactions in question only or exclusively in Manila. For, that agreement did not change or transfer
venue. It simply is permissive. The parties solely agreed to add the courts of Manila as tribunals to which
they may resort. They did not waive their right to pursue remedy in the courts specifically mentioned in
Section 2 (b) of Rule 4. Renuntiatio non praesumitir. 14 (Emphasis supplied)

In Nicolas v. Reparations Commission, 15 the stipulation on venue provided that:

All legal actions arising out of this contract . . . may be brought in and submitted to the jurisdiction of the
proper courts in the City of Manila. 16

This Court read the above stipulation as merely permissive, relying upon and reinforcing Polytrade:

. . . the venue in personal actions is fixed for the convenience of the plaintiff and his witnesses and to
promote the ends of justice. We cannot conceive how the interests of justice may be served by
confining the situs of the action to Manila, considering that the residences or offices of all the parties,
including the situs of the acts sought to be restrained or required to be done, are all within the territorial
jurisdiction of Rizal.

While the parties have agreed to submit their dispute to the jurisdiction of the Manila courts, there is
nothing in the language used . . . which clearly shows that the intention of the parties was to limit the
venue of the action to the City of Manila only. Such agreements should be construed reasonably and
should not be applied in such a manner that it would work more to the inconvenience of the parties
without promoting the ends of justice. 17 (Emphasis supplied)

In Lamis Enterprises v. Lagamon, 18 the promissory note sued on had the following stipulation:

In case of litigation, jurisdiction shall be vested in the courts of Davao City. 19

The collection suit was instituted in the then Court of First Instance of Tagum, Davao. The Supreme
Court rejected the defense of improper venue and held:

. . . it is alleged that the proper venue for Civil Case No. 1395 should be Davao City where the plaintiff
resides and as stipulated in the promissory note dated February 26, 1979 and in the chattel mortgage
dated February 27, 1979. However, the respondent judge found that Maningo has not only legal
residence but also physical and actual residence in Busaon, Tagum, Davao and we are not inclined to
disturb this finding. Anent the claim that Davao City had been stipulated as the venue, suffice it to say
that a stipulation as to venue does not preclude the filing of suits in the residence of plaintiff or
defendant under Section 2(b), Rule 4, Rules of Court, in the absence of qualifying or restrictive words in
the agreement which would indicate that the place named is the only venue agreed upon by the parties.
The stipulation did not deprive Maningo of his right to pursue remedy in the court specifically
mentioned in Section 2(b) of Rule 4, Rules of Courts, Renuntiatio non praesumitir. . . . 20 (Emphasis
supplied)

In Western Minolco v. Court of Appeals, 21 the clause on venue read:

The parties stipulate that the venue of the actions referred to in Section 12.01 [Article XII of the
Agreement] shall be in the City of Manila.

The initial action was commenced in the Court of First Instance of Baguio and Benguet. This Court took
the occasion to reiterate once more the Polytrade doctrine:

. . . In any event, it is not entirely amiss to restate the doctrine that stipulations in a contract, which
specify a definite place for the institution of an action arising in connection therewith, do not, as a rule,
supersede the general rules on the matter set out in Rule 4 of the Rules of Court, but should be
construed merely as an agreement on an additional forum, not as limiting venue to the specified place.
22 (Emphasis supplied)

It is not necessary top pretend that the decisions of the Supreme Court have been absolutely consistent
in this regard. There have been a few decisions notably Bautista v. de Borja 23 and Hoechst
Philippines v. Torres 24 which are not easy to reconcile with the line of cases beginning with
Polytrade discussed above. It is useful therefore to make clear that to the extent Bautista and Hoechst
Philippines are inconsistent with Polytrade (an en banc decision later in time than Bautista) and
subsequent cases reiterating Polytrade, Bautista and Hoechst Philippines have been rendered obsolete
by the Polytrade line of cases.

We note, finally, that no one of the private respondents has claimed to have been put to undue
hardship or inconvenience as a result of the institution of the action in Makati. Venue relates to the trial
and touches more upon the convenience of the parties rather than upon the substance or merits of the
case. 25

WHEREFORE, the Petition for Review on Certiorari is hereby GRANTED DUE COURSE and the Orders
dated 3 August 1992 and 28 August 1992 of public respondent Judge Salvador S. Tensuan are hereby
REVERSED and SET ASIDE. The case is hereby REMANDED to the court of origin for resolution on the
merits, with all deliberate dispatch. No pronouncements as to costs.

SO ORDERED.






Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 160053 August 28, 2006

SPS. RENATO & ANGELINA LANTIN, Petitioners,
vs.
HON. JANE AURORA C. LANTION, Presiding Judge of the Regional Trial Court of Lipa City, Fourth Judicial
Region, Branch 13, PLANTERS DEVELOPMENT BANK, ELIZABETH C. UMALI, ALICE PERCE, JELEN MOSCA,
REGISTER OF DEEDS FOR LIPA CITY, BATANGAS, THE CLERK OF COURT and EX-OFFICIO SHERIFF OF THE
REGIONAL TRIAL COURT OF BATANGAS, Respondents.

D E C I S I O N

QUISUMBING, J.:

This is a petition for certiorari assailing the orders dated May 15, 20031 and September 15, 20032 in
Civil Case No. 2002-0555 issued by public respondent, Presiding Judge Jane Aurora C. Lantion, of the
Regional Trial Court (RTC) of Lipa City, Batangas.

The facts of the case are as follows:

Petitioners Renato and Angelina Lantin took several peso and dollar loans from respondent Planters
Development Bank and executed several real estate mortgages and promissory notes to cover the loans.
They defaulted on the payments so respondent bank foreclosed the mortgaged lots. The foreclosed
properties, in partial satisfaction of petitioners debt, were sold at a public auction where the
respondent bank was the winning bidder. On November 8, 2003, petitioners filed against Planters
Development Bank and its officers Elizabeth Umali, Alice Perce and Jelen Mosca (private respondents), a
Complaint for Declaration of Nullity and/or Annulment of Sale and/or Mortgage, Reconveyance,
Discharge of Mortgage, Accounting, Permanent Injunction, and Damages with the RTC of Lipa City,
Batangas. Petitioners alleged that only their peso loans were covered by the mortgages and that these
had already been fully paid, hence, the mortgages should have been discharged. They challenged the
validity of the foreclosure on the alleged non-payment of their dollar loans as the mortgages did not
cover those loans.

Private respondents moved to dismiss the complaint on the ground of improper venue since the loan
agreements restricted the venue of any suit in Metro Manila.

On May 15, 2003, the respondent judge dismissed the case for improper venue.

Petitioners sought reconsideration. They argued that the trial court in effect prejudged the validity of
the loan documents because the trial court based its dismissal on a venue stipulation provided in the
agreement. The motion for reconsideration was denied and the lower court held that the previous order
did not touch upon the validity of the loan documents but merely ruled on the procedural issue of
venue.

Petitioners now come before us alleging that:

I

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN HOLDING THAT THE VENUE STIPULATIONS IN THE "REAL ESTATE MORTGAGE" AND
"PROMISSORY NOTES" FALL WITHIN THE PURVIEW OF SECTION 4(B) OF RULE 4 OF THE 1997 RULES OF
CIVIL PROCEDURE IN THAT IT LIMITED THE VENUE OF ACTIONS TO A DEFINITE PLACE.

II

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN NOT FINDING THAT THE MERE USE OF THE WORD "EXCLUSIVELY" DOES NOT, BY
ITSELF, MEAN THAT SUCH STIPULATIONS AUTOMATICALLY PROVIDE FOR AN "EXCLUSIVE VENUE", AS
CONTEMPLATED BY SECTION 4(B) OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE, SPECIALLY
WHEN THE TENOR OR LANGUAGE OF THE ENTIRE VENUE STIPULATION CLEARLY PROVIDES OTHERWISE.

III

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN DISREGARDING THE FACT THAT HEREIN PETITIONERS COMPLAINT INVOLVES
SEVERAL CAUSES OF ACTION WHICH DO NOT ARISE SOLELY FROM THE "REAL ESTATE MORTGAGE" AND
"PROMISSORY NOTES" AND WHICH OTHER CAUSES OF ACTION MAY BE FILED IN OTHER VENUES UNDER
SECTIONS 1 AND 2 OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE.

IV

THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN DISREGARDING THE PRINCIPLE THAT THE RULE ON VENUE OF ACTIONS IS
ESTABLISHED FOR THE CONVENIENCE OF THE PLAINTIFFS.3

The main issue in the present petition is whether respondent judge committed grave abuse of discretion
when she dismissed the case for improper venue.

Petitioners contend that, since the validity of the loan documents were squarely put in issue, necessarily
this meant also that the validity of the venue stipulation also was at issue. Moreover, according to the
petitioners, the venue stipulation in the loan documents is not an exclusive venue stipulation under
Section 4(b) of Rule 4 of the 1997 Rules of Civil Procedure.4 The venue in the loan agreement was not
specified with particularity. Besides, petitioners posit, the rule on venue of action was established for
the convenience of the plaintiff, herein petitioners. Further, petitioners also contend that since the
complaint involves several causes of action which did not arise solely from or connected with the loan
documents, the cited venue stipulation should not be made to apply.

Private respondents counter that, in their complaint, petitioners did not assail the loan documents, and
the issue of validity was merely petitioners afterthought to avoid being bound by the venue stipulation.
They also aver that the venue stipulation was not contrary to the doctrine in Unimasters,5 which
requires that a venue stipulation employ categorical and suitably limiting language to the effect that the
parties agree that the venue of actions between them should be laid only and exclusively at a definite
place. According to private respondents, the language of the stipulation is clearly exclusive.

At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997 Rules of Civil
Procedure, the general rules on venue of actions shall not apply where the parties, before the filing of
the action, have validly agreed in writing on an exclusive venue. The mere stipulation on the venue of an
action, however, is not enough to preclude parties from bringing a case in other venues. The parties
must be able to show that such stipulation is exclusive.6 In the absence of qualifying or restrictive
words, the stipulation should be deemed as merely an agreement on an additional forum, not as limiting
venue to the specified place.7

The pertinent provisions of the several real estate mortgages and promissory notes executed by the
petitioner respectively read as follows:

18. In the event of suit arising out of or in connection with this mortgage and/or the promissory note/s
secured by this mortgage, the parties hereto agree to bring their causes of auction (sic) exclusively in the
proper court of Makati, Metro Manila or at such other venue chosen by the Mortgagee, the Mortgagor
waiving for this purpose any other venue.8 (Emphasis supplied.)

I/We further submit that the venue of any legal action arising out of this note shall exclusively be at the
proper court of Metropolitan Manila, Philippines or any other venue chosen by the BANK, waiving for
this purpose any other venue provided by the Rules of Court.9 (Emphasis supplied.)

Clearly, the words "exclusively" and "waiving for this purpose any other venue" are restrictive and used
advisedly to meet the requirements.

Petitioners claim that effecting the exclusive venue stipulation would be tantamount to a prejudgment
on the validity of the loan documents. We note however that in their complaint, petitioners never
assailed the validity of the mortgage contracts securing their peso loans. They only assailed the terms
and coverage of the mortgage contracts. What petitioners claimed is that their peso loans had already
been paid thus the mortgages should be discharged, and that the mortgage contracts did not include
their dollar loans. In our view, since the issues of whether the mortgages should be properly discharged
and whether these also cover the dollar loans, arose out of the said loan documents, the stipulation on
venue is also applicable thereto.

Considering all the circumstances in this controversy, we find that the respondent judge did not commit
grave abuse of discretion, as the questioned orders were evidently in accord with law and jurisprudence.

WHEREFORE, the petition is DISMISSED. The assailed orders dated May 15, 2003 and September 15,
2003 of the Regional Trial Court of Lipa City, Batangas, in Civil Case No. 2002-0555 are AFFIRMED.

Costs against petitioners.
















THIRD DIVISION


ANGELINA SORIENTE and ALL OTHER PERSONS CLAIMING RIGHTS UNDER HER,
Petitioners,



- versus -



THE ESTATE OF THE LATE ARSENIO E. CONCEPCION, represented by NENITA S. CONCEPCION,
Respondents.


G.R. No. 160239


Present:

CORONA, J., Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.


Promulgated:

November 25, 2009

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



DECISION


PERALTA, J.:


This is a petition for review on certiorari[1] of the Order[2] dated October 3, 2003 of the Regional Trial
Court of Mandaluyong City, Branch 213, National Capital Judicial Region in Civil Case No. MC-03-407-A,
which affirmed the Decision dated April 8, 2003 of the Metropolitan Trial Court of Mandaluyong City,
Branch 59 in Civil Case No. 17973, ordering petitioner to vacate the property, subject matter of this
unlawful detainer case, and surrender the possession thereof to respondent.

The facts, as stated by the trial court,[3] are as follows:

Respondent Nenita S. Concepcion established that she was the registered owner of the lot occupied by
petitioner Angelina Soriente at No. 637 Cavo F. Sanchez Street, Mandaluyong City, Metro Manila. The
lot, with an area of 295 square meters, is covered by Transfer Certificate of Title (TCT) No. 12892[4]
issued by the Register of Deeds of Metro Manila, District II.

During the lifetime of Arsenio E. Concepcion, who acquired the lot in 1978, he allowed and tolerated the
occupancy of the lot by petitioner, who was already staying on the property. Petitioner was allowed to
stay on the lot for free, but on a temporary basis until such time that Concepcion and/or his family
needed to develop the lot.

After Arsenio E. Concepcion died on December 27, 1989, his family initiated steps to develop the lot,
but petitioners occupancy of the lot prevented them from pursuing their plan.

Verbal demands to vacate the lot was made on petitioner. Petitioner pleaded for time to transfer to
another place, but she never left.

In June 2000, Elizabeth Concepcion-Dela Cruz, daughter of respondent, filed a complaint for conciliation
proceedings before the barangay at the instance of respondent. However, the parties did not reach a
settlement, which resulted in the issuance of a Certificate to File Action[5] dated February 17, 2001 by
the Barangay Captain of Barangay Hagdan Bato Itaas, Mandaluyong City.

Respondent sent petitioner a demand letter dated September 22, 2000 by registered mail, demanding
that she peacefully surrender the property and extending financial assistance for her relocation. Despite
receipt of the demand letter, petitioner did not vacate the premises.

On April 27, 2001, respondent filed against petitioner a Complaint[6] for unlawful detainer with the
Metropolitan Trial Court of Mandaluyong City, Branch 59 (trial court). The Complaint was docketed as
Civil Case No. 17973. The Complaint alleged that respondent was the registered owner of the subject
property, while petitioner had no title to the property and her free occupancy thereof was merely
tolerated by respondent. Moreover, petitioner was occupying the premises together with her family,
and she had maintained boarders for a fee. Respondent prayed that petitioner be ordered to vacate the
lot, surrender the possession thereof to respondent, pay monthly rent of P5,000.00 from June 2000
until she vacates the premises, and pay actual, moral and exemplary damages, as well as litigation
expenses.

It appears from the records of the case that petitioner Soriente, as a defendant in the lower court, did
not file a separate Answer, but affixed her signature to the Answer filed by defendant Alfredo Caballero
in another ejectment case, docketed as Civil Case No. 17974, which was filed by respondent against
Caballero. Hence, respondent, through counsel, filed a Motion to Render Judgment[7] under Section 7,
Rule 70 of the 1997 Revised Rules of Civil Procedure for Sorientes failure to file an Answer to the
Complaint. Petitioner filed an Opposition to the Motion to Render Judgment.[8]
In an Order[9] dated December 5, 2001, the trial court denied the Motion to Render Judgment. It stated
that the allegations of the Complaint in Civil Case No. 17973 and 17974 are similar, the only substantial
difference being the time when defendants occupied the subject property allegedly through the
tolerance of Arsenio Concepcion. The trial court believed that in signing the Answer filed in Civil Case
No. 17974, Soriente intended to adopt the same as her own, as both defendants Caballero and Soriente
had a common defense against plaintiffs (respondents) separate claim against them. The trial court
denied the Motion to Render Judgment in the interest of justice and considered that the two cases,
including Civil Case No. 17932 against Severina Sadol, had been consolidated.

Pursuant to Section 7 of the 1991 Revised Rule on Summary Procedure, the trial court set a preliminary
conference on October 9, 2001 at 8:30 a.m. The preliminary conference was reset to November 15,
2001, and then to December 18, 2001 because the Motion to Render Judgment was still pending
resolution. On December 18, 2001, the preliminary conference was reset to January 24, 2002 as prayed
for by defendants on the ground that their common counsel was absent despite proper notice, and
plaintiff (respondent) did not object to the resetting.[10]

On January 24, 2002, the scheduled preliminary conference was again reset to March 5, 2002 because
no notice was sent to defendants counsel, and plaintiff (respondent) and her counsel were both absent
despite proper notice.

On March 5, 2002, the trial court reset the preliminary conference to April 16, 2002 on the ground that
there was no notice sent to defendants counsel.

In the scheduled preliminary conference held on February 18, 2003, only plaintiffs (respondents)
counsel and defendants Severina Sadol and Alfredo Caballero were present. Plaintiffs (respondents)
counsel submitted a secretarys certificate attesting to the existence of a board resolution authorizing
him to enter into a compromise agreement. A representative of defendant (petitioner) Angelina
Soriente appeared, but failed to submit a Special Power of Attorney authorizing her to enter into a
compromise agreement. Counsel for defendants was not in court, and there was no proof of service on
her for the hearing. However, defendants Sadol and Caballero informed the court that they informed
their counsel of the hearing scheduled that day. In view of the absence of defendant Angelina Soriente
or her authorized representative, plaintiffs (respondents) counsel moved that the case be submitted
for decision, and that he be given 15 days within which to submit his position paper.[11]

In its Order*12+ dated February 18, 2003, the trial court granted the motion of plaintiffs (respondents)
counsel and considered the case against defendant (petitioner) Angelina Soriente submitted for decision
in accordance with Section 7 of the Rules on Summary Procedure.[13]

On April 8, 2003, the trial court rendered a Decision[14] holding that respondent established by
preponderance of evidence that she was entitled to the relief prayed for. The dispositive portion of the
Decision reads:

WHEREFORE, judgment is hereby rendered ordering defendant Angelina Soriente and all other
persons claiming rights under her to:

1. Vacate the subject premises and surrender the possession thereof to plaintiff;
2. Pay the amount of PESOS: FIVE THOUSAND (P5,000.00) per month as reasonable compensation for
use and occupation of the premises as of June 2000 until she finally vacates the subject premises;
3. Pay the amount *of+ PESOS: THREE THOUSAND (P3,000.00) as attorneys fees; and
4. Pay the litigation expenses and cost of suit.[15]


Petitioner appealed the trial courts Decision to the RTC of Mandaluyong City, Branch 213, raising the
following issues:

1. The lower court erred in holding that the plaintiff was able to establish that she is the registered
owner of the lot occupied by the defendant-appellant instead of dismissing the complaint outright for
lack of legal capacity to sue.
2. The lower court erred in holding that the plaintiff was able to establish by preponderance of
evidence that she is entitled to the relief prayed for despite lack of jurisdiction.
3. The lower court erred in holding that this instant case subject of this appeal be decided in
accordance with Section 7 of the Rules on Summary Procedure.[16]


In an Order*17+ dated October 3, 2003, the RTC affirmed the trial courts Decision, disposing thus:

PRESCINDING FROM THE FOREGOING CONSIDERATIONS, judgment is hereby rendered AFFIRMING IN
TOTO the decision dated April 8, 2003 rendered by the Metropolitan Trial Court, Branch 59,
Mandaluyong City.[18]


The RTC held:


Case records readily disclosed that the ownership of the subject lot belongs to the late Arsenio E.
Concepcion, married to herein Plaintiff-Appellee Nenita S. Concepcion, as evidenced by the Transfer
Certificate of Title No. 12892 (Annex A in the complaint for Unlawful Detainer). This Certificate of Title
shall be received as evidence in all courts of the Philippines and shall be conclusive as to all matters
contained therein principally, the identity of the owner of the land covered thereby except as provided
in the Land Registration Act. Said title can be attacked only for fraud within one year after the date of
the issuance of the decree of registration. Such attack must be direct and not by a collateral proceeding.
The title represented by the certificate cannot be changed, altered, modified, enlarged or diminished in
a collateral proceeding such as this instant appeal from the decision rendered by the Metropolitan Trial
Court of Mandaluyong City in an ejectment case. As should be known by Appellant Soriente through
counsel, no title to registered land in derogation to that of the registered owner shall be acquired by
prescription or adverse possession. Prescription is unavailing not only against the registered owner
Arsenio E. Concepcion but also against his hereditary successors because the latter merely steps into the
shoes of the decedent by operation of law and are merely the continuation of the personalities of their
predecessors-in-interest (Barcelona v. Barcelona, 100 Phil 251; PD 1529, Sec. 47). x x x

x x x x

Noteworthy to mention in the case at bar is the ruling laid down in Calubayan v. Pascual, 21 SCRA 146,
where the Supreme Court [held+ that a person who occupies the land of another at the latters
tolerance or permission, without any contract between them, is necessarily bound by an implied
promise that he will vacate upon demand, failing which a summary action for ejectment is the proper
remedy against [him]. x x x[19]


Petitioner filed this petition raising the following issues:

I
THE REGIONAL TRIAL COURT ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT IN HOLDING
THAT THE PLAINTIFF WAS ABLE TO ESTABLISH THAT SHE IS THE REGISTERED OWNER OF THE LOT
OCCUPIED BY THE DEFENDANT-APPELLANT INSTEAD OF DISMISSING THE COMPLAINT OUTRIGHT FOR
LACK OF LEGAL CAPACITY TO SUE.

II
THE REGIONAL TRIAL COURT ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT IN HOLDING
THAT THE PLAINTIFF WAS ABLE TO ESTABLISH BY PREPONDERANCE OF EVIDENCE THAT SHE IS ENTITLED
TO THE RELIEF PRAYED FOR DESPITE LACK OF JURISDICTION.

III
THE REGIONAL TRIAL COURT ERRED IN HOLDING THAT THIS INSTANT CASE SUBJECT OF THIS APPEAL BE
DECIDED IN ACCORDANCE WITH SECTION 7 OF THE RULES ON SUMMARY PROCEDURE.[20]


Petitioner appealed from the RTCs decision directly to this Court on pure questions of law. There is a
question of law in a given case when the doubt or difference arises as to what the law is on a certain
state of facts; there is a question of fact when the doubt or difference arises as to the truth or the
falsehood of alleged facts.[21]

Moreover, Republic v. Sandiganbayan[22] ruled:


x x x A question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts; or when the issue does not call for an examination of the
probative value of the evidence presented, the truth or falsehood of facts being admitted. A question of
fact exists when the doubt or difference arises as to the truth or falsehood of facts or when the query
invites calibration of the whole evidence considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding circumstances as well as their relation to each other and
to the whole, and the probability of the situation.[23]


The Court notes that petitioner raised both questions of fact and law in her petition. The Court shall
resolve only the pertinent questions of law raised.

First, petitioner questioned respondent Nenita Concepcions capacity to sue as a representative of the
Estate of her husband, Arsenio Concepcion, alleging absence of proof of the issuance of the requisite
letters testamentary or letters of administration evidencing her legal capacity to sue in behalf of the
Estate of Arsenio Concepcion in contravention of Section 4, Rule 8 of the 1997 Rules of Civil Procedure,
thus:

Sec. 4. Capacity. Facts showing the capacity of a party to sue or be sued in a representative capacity
or the legal existence of an organized association of persons that is made a party, must be averred. A
party desiring to raise an issue as to the legal existence of any party or the capacity of any party to sue
or be sued in a representative capacity, shall do so by specific denial, which shall include such supporting
particulars as are peculiarly within the pleaders knowledge.


Petitioner asserts that lack of legal capacity to sue is a ground for dismissal under Section 1 (d) of Rule
16 of the Revised Rules of Court, and considering that a motion to dismiss is a prohibited pleading under
the summary procedure, the trial court failed to exercise its duty to order the outright dismissal of the
complaint as mandated under Section 4[24] of the 1991 Revised Rule on Summary Procedure.

Petitioners contention lacks merit.

Section 4, Rule 8 of the 1997 Rules of Civil Procedure provides:


Sec. 4. Capacity. x x x A party desiring to raise an issue as to the legal existence of any party or the
capacity of any party to sue or be sued in a representative capacity, shall do so by specific denial, which
shall include such supporting particulars as are peculiarly within the pleaders knowledge.*25+

Based on the provision cited above, the RTC correctly ruled:

The argument is not tenable. This court, upon cursory reading of the provisions of Rule 8, Section 4 of
the Rules of Court, in relation to the Rules on Summary Procedure, finds it relevant to note x x x that
although a Motion to Dismiss or a Motion for Bill of Particulars cannot be availed of to challenge the
capacity of the party under the Rules on Summary Procedure, the DefendantAppellant should have at
least SPECIFICALLY DENIED such capacity of the party in the Answer, which should have included such
supporting particulars as are peculiarly within the pleaders knowledge. The case records clearly
disclosed that no such specific denial was made by the appellant and this court believes that the lower
court had carefully and dutifully taken into account the applicable rules particularly Section 4 of the
Revised Rules on Summary Procedure, in relation to Section 4, Rule 8 of the Rules of Court and pertinent
jurisprudence, before rendering the assailed decision dated April 8, 2003. The presumption of the
regular performance of duties applies in this case and the same shall prevail over mere allegations of the
herein Defendant-Appellant.[26]


Further, as the successor-in-interest of the late Arsenio E. Concepcion and co-owner of the subject
property, respondent Nenita S. Concepcion is entitled to prosecute the ejectment case not only in a
representative capacity, but as a real party-in-interest. Article 487 of the Civil Code states, Any one of
the co-owners may bring an action in ejectment. Hence, assuming that respondent failed to submit the
proper documents showing her capacity to sue in a representative capacity for the estate of her
deceased husband, the Court, in the interest of speedy disposition of cases, may deem her capacitated
to prosecute the ejectment case as a real party-in-interest being a co-owner of the subject property
considering that the trial court has jurisdiction over the subject matter and has also acquired jurisdiction
over the parties, including respondent Nenita S. Concepcion.

Second, petitioner questions whether respondent has established by a preponderance of evidence that
she is entitled to the relief prayed for, which is the ejectment of petitioner from the subject property.
Petitioner contends that respondent admitted in her Complaint that her right to the subject property
arose only in 1978, when the late Arsenio E. Concepcion acquired the same. Petitioner alleges that to
the contrary, substantial evidence exists that she and her predecessors-in-interest have continuously
and openly occupied and possessed, in the concept of owner, the subject property since time
immemorial.

The Court holds that the RTC correctly affirmed the ejectment of petitioner from the property.

To make out a case of unlawful detainer under Section 1,[27] Rule 70 of the Rules of Court, the
Complaint must allege that the defendant is unlawfully withholding from the plaintiff the possession of
certain real property after the expiration or termination of the formers right to hold possession by
virtue of a contract, express or implied, and that the action is being brought within one year from the
time the defendants possession became unlawful.*28+

The Complaint alleged that petitioner occupied the subject property by tolerance of the late Arsenio
Concepcion. While tolerance is lawful, such possession becomes illegal upon demand to vacate by the
owner and the possessor by tolerance refuses to comply with such demand.[29] Respondent sent
petitioner a demand letter dated September 22, 2000 to vacate the subject property, but petitioner did
not comply with the demand. A person who occupies the land of another at the latters tolerance or
permission, without any contract between them, is necessarily bound by an implied promise that he will
vacate upon demand, failing which a summary action for ejectment is the proper remedy against
him.[30] Under Section 1, Rule 70 of the Rules of Court, the one-year period within which a complaint
for unlawful detainer can be filed should be counted from the date of demand, because only upon the
lapse of that period does the possession become unlawful.[31] Respondent filed the ejectment case
against petitioner on April 27, 2001, which was less than a year from the date of formal demand.
Clearly, therefore, the action was filed within the one-year period prescribed for filing an ejectment or
unlawful detainer case.

The sole issue for resolution in an unlawful detainer case is physical or material possession.[32] All that
the trial court can do is to make an initial determination of who is the owner of the property, so that it
can resolve who is entitled to its possession absent other evidence to resolve ownership.[33] Courts in
ejectment cases decide questions of ownership only it is necessary to decide the question of
possession.[34] The reason for this rule is to prevent the defendant from trifling with the summary
nature of an ejectment suit by the simple expedient of asserting ownership over the disputed
property.[35]

In this case, the trial court found that respondent owns the property on the basis of Transfer Certificate
of Title No. 12892,*36+ which was issued in the name of Arsenio E. Concepcion, x x x married to Nenita
L. Songco. It is settled rule that the person who has a Torrens title over a land is entitled to possession
thereof.[37] Hence, as the registered owner of the subject property, respondent is preferred to possess
it.[38]

The validity of respondents certificate of title cannot be attacked by petitioner in this case for
ejectment. Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to
collateral attack.[39] It cannot be altered, modified or cancelled, except in a direct proceeding for that
purpose in accordance with law.[40] The issue of the validity of the title of the respondents can only be
assailed in an action expressly instituted for that purpose.[41] Whether or not the petitioner has the
right to claim ownership over the property is beyond the power of the trial court to determine in an
action for unlawful detainer.[42]

Although petitioner alleges that substantial evidence exists that she and her predecessors-in-interest
had continuously and openly occupied and possessed, in the concept of owner, the subject property
since time immemorial, petitioner failed to present evidence to substantiate her allegation. Whereas
respondent holds a Torrens title over the subject property; hence, she is entitled to the possession of
the property.[43]
The court's adjudication of ownership in an ejectment case is merely provisional, and affirmance of the
trial courts decision would not bar or prejudice an action between the same parties involving title to the
property, if and when such action is brought seasonably before the proper forum.[44]

Lastly, petitioner contends that the lower court erred in deciding this case in accordance with Section 7
of the Rules on Summary Procedure, thus:

SEC. 7. Preliminary conference; appearance of parties. Not later than thirty (30) days after the last
answer is filed, a preliminary conference shall be held. The rules on pre-trial in ordinary cases shall be
applicable to the preliminary conference unless inconsistent with the provisions of this Rule.

The failure of the plaintiff to appear in the preliminary conference shall be a cause for the dismissal of
his complaint. The defendant who appears in the absence of the plaintiff shall be entitled to judgment
on his counterclaim in accordance with Section 6 hereof. All cross-claims shall be dismissed.

If a sole defendant shall fail to appear, the plaintiff shall be entitled to judgment in accordance with
Section 6 hereof. This Rule shall not apply where one of two or more defendants sued under a common
cause of action who had pleaded a common defense shall appear at the preliminary conference.[45]

Section 6 of the 1991 Revised Rules on Summary Procedure, which is referred to by Section 7 above,
states:

SEC. 6. Effect of failure to answer. Should the defendant fail to answer the complaint within the
period above provided, the court, motu proprio, or on motion of the plaintiff, shall render judgment as
may be warranted by the facts alleged in the complaint and limited to what is prayed for therein:
Provided, however, That the court may in its discretion reduce the amount of damages and attorneys
fees claimed for being excessive or otherwise unconscionable. This is without prejudice to the
applicability of Section 4, Rule 18 of the Rules of Court, if there are two or more defendants.


Petitioner asserts that considering that the cases against her, defendants Caballero and Sadol were
consolidated, and she and defendant Caballero signed and filed one common Answer to the Complaint,
thus, pleading a common defense, the trial court should not have rendered judgment on her case based
on Section 7 of the 1991 Revised Rules on Summary Procedure when she failed to appear in the
preliminary conference.

The contention lacks merit.

The Court notes that the ejectment case filed by respondent against petitioner was docketed in the trial
court as Civil Case No. 17973, the case against Alfredo Caballero was docketed as Civil Case No. 17974,
while the case against Severina Sadol was docketed as Civil Case No. 17932. These cases were
consolidated by the trial court.

Under Section 7 of the 1991 Revised Rules on Summary Procedure, if a sole defendant shall fail to
appear in the preliminary conference, the plaintiff shall be entitled to judgment in accordance with
Section 6 of the Rule, that is, the court shall render judgment as may be warranted by the facts alleged
in the Complaint and limited to what is prayed for therein. However, *t+his Rule (Sec. 7) shall not apply
where one of two or more defendants sued under a common cause of action, who had pleaded a
common defense, shall appear at the preliminary conference. Petitioner claims that the preceding
provision applies to her as a defendant, since the ejectment cases were consolidated by the trial court,
and she and Caballero filed the same Answer to the Complaint; hence, the trial court should not have
rendered judgment against her when she failed to appear in the preliminary conference.[46]

The Court holds that the italicized provision above does not apply in the case of petitioner, since she and
Caballero were not co-defendants in the same case. The ejectment case filed against petitioner was
distinct from that of Caballero, even if the trial court consolidated the cases and, in the interest of
justice, considered the Answer filed by Caballero in Civil Case No. 17974 as the Answer also of petitioner
since she affixed her signature thereto.

Considering that petitioner was sued in a separate case for ejectment from that of Caballero and Sadol,
petitioners failure to appear in the preliminary conference entitled respondent to the rendition of
judgment by the trial court on the ejectment case filed against petitioner, docketed as Civil Case No.
17973, in accordance with Section 7 of the 1991 Revised Rules on Summary Procedure.

WHEREFORE, the petition is DENIED. The Order dated October 3, 2003 of the Regional Trial Court of
Mandaluyong City, Branch 213, National Capital Judicial Region in Civil Case No. MC-03-407-A is
AFFIRMED.








G.R. No. 156809 March 4, 2009
ESTATE OF FELOMINA G. MACADANGDANG, represented by Court Appointed Administrator
ATTY. OSWALDO MACADANGDANG, Petitioner,
vs.
LUCIA GAVIOLA, AGAPITO ROMERO, CRISTINA QUIONES, BOY LAURENTE,AGUSTINA TUNA,
SOTERO TAPON, BUENAVENTURA MURING, SR., ROGELIO PASAJE, FE TUBORO, ESTANISLAO
PEN, PABLO NAVALES, and JOSE DAGATAN, Respondents.
D E C I S I O N
CARPIO, J .:
The Case
Before the Court is a petition for review assailing the 26 July 2002 Decision
1
and the 10 December 2002
Resolution
2
of the Court of Appeals in CA-G.R. SP No. 62002.
The Antecedent Facts
On 18 January 2000, Atty. Oswaldo Macadangdang (Atty. Macadangdang), acting as administrator of the
Estate of Felomina G. Macadangdang (petitioner), filed an action for Unlawful Detainer with Damages
against Lucia Gaviola, Agapito Romero, Cristina Quiones, Boy Laurente, Agustina Tuna, Sotero Tapon,
Buenaventura Muring, Sr., Rogelio Pasaje, Fe Tuboro, Estanislao Pen, Pablo Navales, and Jose Dagatan
(respondents). Respondents were occupying, by mere tolerance, portions of four parcels of land in the
name of the late Felomina G. Macadangdang, covered by Transfer Certificate of Title Nos. T-6084, T-
6085, T-6086, and T-6087, all in the Registry of Deeds of Davao City.
In a Decision
3
dated 27 June 2000, the Municipal Trial Court in Cities (MTCC), Branch 4, Davao City,
ruled in favor of petitioner, as follows:
WHEREFORE, judgment is hereby rendered ordering the defendants and all the persons claiming rights
under them to:
a) vacate their respective possession over the subject premises, and remove their structures
built therein at their expense;
b) pay plaintiff the sum of P500.00 a month, for each defendant, for the use and occupation
of the said premises commencing the date of this decision until they vacate the same;
c) pay plaintiff the sum of P5,000.00, each defendant, as attorneys fee; and
d) cost of suit.
Defendants counterclaims being compulsory are dismissed.
SO ORDERED.
4

Respondents appealed from the MTCCs Decision.
The Ruling of the Trial Court
In an Order
5
dated 14 September 2000, the Regional Trial Court (RTC) of Davao City dismissed the
appeal for respondents failure to file an appeal memorandum.
On petitioners motion, the RTC remanded the case to the MTCC for execution of judgment in its
Order
6
dated 22 September 2000.
On 3 October 2000, respondents filed a Motion for Reconsideration/New Trial.
In an Order
7
dated 16 October 2000, the MTCC ordered the issuance of a writ of execution after payment
of the execution fee.
In an Order
8
dated 30 October 2000, the RTC denied respondents motion for reconsideration. The RTC
ruled that it no longer had jurisdiction over the motion after the dismissal of respondents appeal.
Respondents filed a petition for review before the Court of Appeals assailing the RTCs 14 September
2000 Order.
The Ruling of the Court of Appeals
In its Decision promulgated on 26 July 2002, the Court of Appeals set aside the 14 September 2000
Order and remanded the case to the RTC.
The Court of Appeals ruled that as a matter of policy, the dismissal of an appeal on purely technical
grounds is frowned upon. The Court of Appeals ruled that rules of procedure are intended to promote and
not defeat substantial justice and should not be applied in a very rigid and technical sense. The Court of
Appeals further ruled that litigants should be afforded every opportunity to establish the merits of their
cases without the constraints of technicalities.
The Court of Appeals ruled that a distinction should be made between failure to file a notice of appeal
within the reglementary period and failure to file the appeal memorandum within the period granted by the
appellate court. The Court of Appeals ruled that failure to file a notice of appeal within the reglementary
period would result to failure of the appellate court to obtain jurisdiction over the appealed decision. Thus,
the assailed decision would become final and executory upon failure to move for reconsideration. On the
other hand, failure to file the appeal memorandum within the period granted by the appellate court would
only result to abandonment of appeal, which could lead to its dismissal upon failure to move for its
reconsideration. Thus, the RTC erred in denying respondents motion for reconsideration on the ground of
lack of jurisdiction.
Finally, the Court of Appeals ruled that while the negligence of counsel binds the client, the rule is not
without exceptions such as when its application would result to outright deprivation of the clients liberty or
property, or when a client would suffer due to the counsels gross or palpable mistake or negligence.
Petitioner moved for the reconsideration of the Decision of the Court of Appeals.
In its 10 December 2002 Resolution, the Court of Appeals denied the motion for lack of merit.
Hence, the petition before this Court.
The Issue
The sole issue in this case is whether the Court of Appeals erred in reversing the RTCs dismissal of
respondents appeal for failure to file an appeal memorandum.
The Ruling of this Court
The petition has merit.
Petitioners allege that the Court of Appeals erred when it allowed the filing of a motion for reconsideration
before the RTC. Petitioners allege that the case stemmed from an unlawful detainer case where the
Rules on Summary Procedure apply. Petitioners allege that under the Rules on Summary Procedure, a
motion for reconsideration is a prohibited pleading. Petitioners also allege that due to the mandatory
character of Section 7(b), Rule 40 of the 1997 Rules of Civil Procedure, the RTC correctly dismissed the
appeal. Petitioners also pointed out that respondents Motion for Reconsideration/New Trial was neither
verified nor accompanied by affidavits of merit as required under Section 2, Rule 37 of the 1997 Rules of
Civil Procedure.
Applicability of the Rules on Summary Procedure
Jurisdiction over forcible entry and unlawful detainer cases falls on the Metropolitan Trial Courts, the
Municipal Trial Courts in Cities, the Municipal Trial Courts, and the Municipal Circuit Trial Courts.
9
Since
the case before the the MTCC was an unlawful detainer case, it was governed by the Rules on Summary
Procedure. The purpose of the Rules on Summary Procedure is to prevent undue delays in the
disposition of cases and to achieve this, the filing of certain pleadings is prohibited,
10
including the filing of
a motion for reconsideration.
11

However, the motion for reconsideration that petitioners allege to be a prohibited pleading was filed
before the RTC acting as an appellate court. The appeal before the RTC is no longer covered by the
Rules on Summary Procedure. The Rules on Summary Procedure apply before the appeal to the RTC.
Hence, respondents motion for reconsideration filed with the RTC is not a prohibited pleading.
Procedure on Appeal
Section 7, Rule 40 of the 1997 Rules of Civil Procedure provides:
Sec. 7. Procedure in the Regional Trial Court. -
(a) Upon receipt of the complete records or the record on appeal, the clerk of court of the
Regional Trial Court shall notify the parties of such fact.
(b) Within fifteen (15) days from such notice, it shall be the duty of the appellant to submit a
memorandum which shall briefly discuss the errors imputed to the lower court, a copy of
which shall be furnished by him to the adverse party. Within fifteen (15) days from receipt of
the appellants memorandum, the appellee may file his memorandum.Failure of the
appellant to file a memorandum shall be a ground for dismissal of the appeal.
(c) Upon the filing of the memorandum of the appellee, or the expiration of the period to do
so, the case shall be considered submitted for decision. The Regional Trial Court shall
decide the case on the basis of the entire record of the proceedings had in the court of origin
and such memoranda as are filed. (Emphasis supplied)
In this case, the RTC dismissed respondents appeal for their failure to file an appeal memorandum in
accordance with Section 7(b), Rule 40 of the 1997 Rules of Civil Procedure. The Court of Appeals
reversed the RTCs dismissal of the appeal.1avvphi1
The Court of Appeals ruled that while the negligence of counsel binds the client, the circumstances in this
case warrant a departure from this general rule. The Court of Appeals ruled that respondents counsel
only realized his failure to submit the appeal memorandum when he received a copy of the dismissal of
the appeal. The Court of Appeals ruled that exceptions to the general rule are recognized to accord relief
to a client who suffered by reason of the counsels gross or palpable mistake or negligence.
We do not agree with the Court of Appeals.
The general rule is that a client is bound by the acts, even mistakes, of his counsel in the realm of
procedural technique.
12
There are exceptions to this rule, such as when the reckless or gross negligence
of counsel deprives the client of due process of law, or when the application of the general rule results in
the outright deprivation of ones property through a technicality.
13

In this case, respondents counsel advanced this reason for his failure to submit the appeal
memorandum:
c. That there was a delay in the filing of defendants-appellants[] appeal memorandum due to the heavy
backlog of legal paperwork piled on the table of the undersigned counsel, and he realized his failure to
submit defendants[] appeal memorandum when he received a copy of the dismissal of the case. This is
to consider that he is the only lawyer in his law office doing a herculean task.
14

We find no reason to exempt respondents from the general rule. The cause of the delay in the filing of the
appeal memorandum, as explained by respondents counsel, was not due to gross negligence. It could
have been prevented by respondents counsel if he only acted with ordinary diligence and prudence in
handling the case. For a claim of gross negligence of counsel to prosper, nothing short of clear
abandonment of the clients cause must be shown.
15
In one case, the Court ruled that failure to file
appellants brief can qualify as simple negligence but it does not amount to gross neglience to justify the
annulment of the proceedings below.
16

Finally, respondents were not deprived of due process of law. The right to appeal is not a natural right or
a part of due process.
17
It is merely a statutory privilege and may be exercised only in the manner and in
accordance with the provisions of the law.
18
The Court notes that in their memoranda,
19
respondents
admitted that they signed an agreement that they would vacate the land they occupy not later than 28
February 1998. They refused to vacate the land only because they were not relocated as promised by the
owner. Respondents claimed that the land was later declared alienable and disposable, and the decision
was affirmed by this Court. Hence, respondents alleged that petitioner no longer had the right to drive
them out of the land. However, respondents did not even indicate the case number and title, as well as
the date of promulgation of the alleged Supreme Court decision, in their memoranda.
WHEREFORE, we GRANT the petition. We SET ASIDE the 26 July 2002 Decision and the 10 December
2002 Resolution of the Court of Appeals in CA-G.R. SP No. 62002.
SO ORDERED.
ANTONIO T. CARPIO




Republic of the Philippines
Supreme Court
Manila


SECOND DIVISION


SPS. HEBER & CHARLITA EDILLO,
Petitioners,




- versus -




SPS. NORBERTO & DESIDERIA DULPINA,
Respondents.

G.R. No. 188360


Present:

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


Promulgated:


January 21, 2010

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


D E C I S I O N

BRION, J.:

We resolve in this Decision the Petition for Review on Certiorari[1] filed by defendants-petitioners
Spouses Heber and Charlita Edillo (defendants-petitioners) who seek to reverse and set aside the
Resolutions dated January 28, 2009[2] and June 11, 2009[3] of the Special Former Special Division of
Five of the Court of Appeals (CA) in CA-G.R. SP No. 02436-MIN. The first assailed CA Resolution
dismissed outright the defendants-petitioners Petition for Review for failure to state the factual
background of the case; the second assailed CA Resolution denied the defendants-petitioners Motion
for Reconsideration.

FACTUAL BACKGROUND

The facts of the case, gathered from the parties pleadings and annexes, are briefly summarized below.

On February 21, 2006, plaintiffs-respondents Spouses Norberto and Desideria Dulpina (plaintiffs-
respondents) filed a Complaint for Forcible Entry against the defendants-petitioners with the Municipal
Circuit Trial Court of Del Carmen-San Isidro-San Benito, Surigao del Norte (MCTC).[4]

The plaintiffs-respondents alleged that they purchased from Wencelito Camingue a 235-square meter
residential lot and house located in Poblacion, San Isidro, Surigao del Norte, through a Deed of Sale[5]
dated May 14, 1990. On August 8, 2005, defendant-petitioner Heber Edillo, without their consent and
against their express prohibition, suddenly fenced off and occupied a 50-square meter portion of the
western part of the disputed property while uttering threats against plaintiffs-respondents. On January
26, 2006, they sent the defendants-petitioners a notice to vacate the disputed property, but the
defendants-petitioners refused to comply.[6]

In their Answer dated March 1, 2006, the defendants-petitioners countered that the Complaint states
no cause of action because the plaintiffs-respondents failed to allege that they were in prior physical
possession of the disputed property.[7] They also alleged that they acquired the disputed property
through three (3) separate Deeds of Absolute Sale[8] from Apolinar Saragoza,[9] Felomino
Forcadilla,[10] and Wenceslao Caunzad.[11]

THE MCTC RULING

On May 23, 2007, the MCTC rendered judgment dismissing the Complaint. It ordered the plaintiffs-
respondents to pay the defendants-petitioners P10,000.00 as actual damages and another P10,000.00
as attorneys fees.*12+ The plaintiffs-respondents counsel received a copy of the MCTC Judgment on
May 31, 2007.[13]

On June 5, 2007, the plaintiffs-respondents filed a Motion for Reconsideration[14] which the MCTC
denied in its Resolution of June 8, 2007.[15]

On July 30, 2007, the plaintiffs-respondents filed a Notice of Appeal with the MCTC, which the latter
granted.

On August 15, 2007, the plaintiffs-respondents filed their Appeal Memorandum with the Regional Trial
Court, Branch 31, Dapa, Surigao del Norte (RTC).[16]

THE RTC RULING

The RTC decided the appeal on November 7, 2007. It set aside the MCTC judgment and ordered the
defendants-petitioners to vacate the subject property and to restore the plaintiffs-respondents to their
possession. It likewise ordered the payment of P10,000.00 as attorneys fees and the cost of suit.[17]

After the RTC denied[18] their Motion for Reconsideration,[19] the defendants-petitioners elevated the
case to the CA through a Petition for Review under Rule 42 of the Rules of Court.[20] They argued that
the plaintiffs-respondents appeal with the RTC was filed out of time since the Revised Rules of Summary
Procedure (RRSP) prohibits the filing of a motion for reconsideration.

THE CA RULING

The CA dismissed the Petition in its Resolution of January 28, 2009[21] on the ground that it does not
contain a statement of the factual background of the case, in violation of Sections 2 and 3 of Rule 42 of
the Rules of Court. A special division of five (5) justices, with Associate Justice Ruben C. Ayson
dissenting,[22] rendered the resolution.

The defendants-petitioners moved to reconsider the dismissal, to amend the petition, and to admit their
First Amended Petition.[23] The CA denied the motions in its Resolution of June 11, 2009, noting that
the amended petition did not correct the infirmity of the original petition.[24]

Faced with this development, the defendants-petitioners filed the present Petition for Review on
Certiorari under Rule 45 of the Rules of Court.


THE PETITION

The defendants-petitioners argue that the CAs outright dismissal of the petition was unwarranted since
the Petition for Review and the Amended Petition (filed with the Motion for Reconsideration of the
Dismissal of the Original Petition) sufficiently recited the factual background of the case. They submit
that the annexes to the original and amended petitions, consisting of the Complaint, the Answer, the
other pleadings, and the MCTC and RTC Decisions, also contain this factual background. They point out
that a relaxation of technical rules is justified by the merits of the case the RTC had no jurisdiction to
entertain the plaintiffs-respondents appeal because the MCTC Decision had become final and
executory; the Motion for Reconsideration the plaintiffs-respondents filed is a prohibited pleading in
summary proceedings and did not stop the running of the period for the decisions finality.

For their part, the plaintiffs-respondents submit that the requirements set forth in Section 2 of Rule 42
of the Revised Rules of Court are mandatory and the defendants-petitioners have no discretion but to
comply, citing Galang v. Court of Appeals[25] and Tan v. Court of Appeals.[26]

OUR RULING

We find for the defendants-petitioners.

Procedure on Appeal; Liberal Construction of Rules

An appeal to the CA from an RTC Decision rendered in the exercise of its appellate jurisdiction is via a
Petition for Review under Rule 42 of the Revised Rules of Court. Section 2 of Rule 42 prescribes the
following requirements:

SEC. 2. Form and contents. The petition shall be filed in seven (7) legible copies, with the original copy
intended for the court being indicated as such by the petitioner, and shall (a) state the full names of the
parties to the case, without impleading the lower courts or judges thereof either as petitioners or
respondents; (b) indicate the specific material dates showing that it was filed on time; (c) set forth
concisely a statement of the matters involved, the issues raised, the specification of errors of fact or law,
or both, allegedly committed by the Regional Trial Court, and the reasons or arguments relied upon for
the allowance of the appeal; (d) be accompanied by clearly legible duplicate originals or true copies of
the judgments or final orders of both lower courts, certified correct by the clerk of court of the Regional
Trial Court, the requisite number of plain copies thereof and of the pleadings and other material
portions of the record as would support the allegations of the petition.

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

Non-compliance with these requirements is sufficient ground for the dismissal of the Petition, pursuant
to Section 3 of the same Rule, which reads:

SEC. 3. Effect of failure to comply with requirements. The failure of the petitioner to comply with any
of the foregoing requirements regarding the payment of the docket and other lawful fees, the deposit
for costs, proof of service of the petition, and the contents of and the documents which should
accompany the petition shall be sufficient ground for the dismissal thereof.

In not a few cases, we have ruled that the right to appeal is neither a natural right nor a part of due
process; it is a mere statutory privilege that may be exercised only in the manner and strictly in
accordance with the provisions of law allowing the appeal.[27] The party who seeks to appeal must
comply with the requirements of the law and the rules; failure to comply leads to the dismissal and the
loss of the right to appeal.[28]

But while we have so ruled, we recognize nonetheless that the right to appeal is an essential part of our
system of judicial processes, and courts should proceed with caution in order not to deprive a party of
the right to appeal. We invariably made this recognition due to our overriding concern that every party-
litigant be given the amplest opportunity to ventilate and secure the resolution of his cause, free from
the constraints of technicalities.[29] This line of rulings is based, no less, on the Rules of Court which
itself calls for a liberal construction of its provisions, with the objective of securing for the parties a just,
speedy and inexpensive disposition of every action and proceeding.[30] In this line of rulings, we have
repeatedly stressed that litigation is not merely a game of technicalities. The law and jurisprudence
grant to courts in the exercise of their discretion along the lines laid down by this Court the
prerogative to relax compliance with procedural rules of even the most mandatory character, mindful of
the duty to reconcile both the need to put an end to litigation speedily and the parties right to an
opportunity to be heard.[31]

We are aware of the plaintiffs-respondents cited cases of Galang v. Court of Appeals*32+ and Tan v.
Court of Appeals,[33] but these rulings are not fully applicable to the present case as they are not
squarely in point.

Galang involved the dismissal of a petition with the CA for nonpayment of costs within three (3) days
from notice of the order. It involved a direct failure to comply with a CA directive a matter vastly
different from, and greater than, the question of sufficiency posed in this case. Tan, on the other hand,
involved a motion for reconsideration that was considered a mere scrap of paper for lack of a notice of
hearing. This is a matter that, at its core, is a due process concern the failure to afford the opposing
party the opportunity to respond to the motion in a duly scheduled hearing.

A commonality and the weightier reason (although not so given this characterization) behind our rulings
in these cited cases is the lack of merit of the respective petitioners underlying cases. In both cases, we
took into account the relative merits of the parties cases and found that a liberal interpretation, applied
to the interlocutory issues before us, would be for naught because the petitioners underlying cases
clearly lacked merit. As we ruled then, so do we rule now. We assess, albeit preliminarily, if the appeal
is meritorious on its face and relax the applicable rule of procedure only after a prima facie finding of
merit.[34]

That there was substantial compliance with the Rules because the background facts can be found within
the four corners of the petition and its incorporated annexes, is not a novel ruling for this Court. In the
case of Deloso v. Marapao[35] (involving the same deficiency for lack of a specific and separate
statement of facts outlining the factual background relied upon), we said:

An examination of the petition filed with the Court of Appeals reveals that while it does not contain a
separate section on statement of facts, the facts of the case are, in fact, integrated in the petition
particularly in the discussion/argument portion. Moreover, the decision of the DARAB which contains
the facts of the case was attached to the petition and was even quoted by the appellate court. The
petition also sufficiently discusses the errors committed by the DARAB in its assailed decision.

There was, therefore, substantial compliance with Sec. 6, Rule 43 of the Rules of Court. It is settled that
liberal construction of the Rules may be invoked in situations where there may be some excusable
formal deficiency or error in a pleading, provided that the same does not subvert the essence of the
proceeding and connotes at least a reasonable attempt at compliance with the Rules. After all, rules of
procedure are not to be applied in a very rigid, technical sense; they are used only to help secure
substantial justice.[36]

Given this precedent, it only remains for us to determine if we can apply a liberal construction of the
Rules because a meaningful litigation of the case can ensue given the Petitions prima facie merit.

The defendants-petitioners
meritorious case; a motion for
reconsideration is a prohibited
pleading in summary procedure.

Our examination of the defendants-petitioners petition preliminarily tells us that it is not without merit,
which merit would remain unventilated unless we relax our application of the technical requirements
applicable to their appeal. The question, too, that the defendants-petitioners pose is not a minor one as
it involves a very basic question of law whether the RTC has jurisdiction to entertain an appeal from a
final and executory MCTC decision. According to the defendants-petitioners, the plaintiffs-respondents
filing of a motion for reconsideration of the MCTC judgment did not stop the running of the period for
appeal since a motion for reconsideration is a prohibited pleading under the RRSP.

We agree with the defendants-petitioners.

Jurisdiction over forcible entry and unlawful detainer cases belongs to the Metropolitan Trial Courts, the
Municipal Trial Courts in Cities, the Municipal Trial Courts, and the Municipal Circuit Trial Courts.[37]
The RRSP applies to prevent undue delays in the disposition of cases; to achieve this end, the filing of
certain pleadings a motion for reconsideration, among others is prohibited.[38]

Specifically, Section 19(c) of the Rules of Summary Procedure and Section 13(c) of Rule 70 of the Rules of
Court consider a motion for reconsideration of a judgment a prohibited pleading.[39] Thus, when the
plaintiffs-respondents filed on June 5, 2007 a Motion for Reconsideration of the MCTC Judgment, the
motion did not stop the running of the period for appeal. With the continuous running of this period,
the May 23, 2007 MCTC judgment (which the plaintiffs-respondents received through counsel on May
31, 2007) had long lapsed to finality when the plaintiffs-respondents filed their Notice of Appeal on July
30, 2007.

The Doctrine of Immutability

A judgment that has become final and executory is immutable and unalterable;[40] the judgment may
no longer be modified in any respect, even if the modification is meant to correct what is perceived to
be an erroneous conclusion of fact or law, and regardless of whether the modification is attempted to
be made by the court rendering it or by the highest Court of the land.[41] While there are recognized
exceptions e.g., the correction of clerical errors, the so-called nunc pro tunc entries which cause no
prejudice to any party, void judgments, and whenever circumstances transpire after the finality of the
decision rendering its execution unjust and inequitable[42] none of these exceptions apply to the
present case.

Litigation must at some time end, even at the risk of occasional errors. Public policy dictates that once a
judgment becomes final, executory and unappealable, the prevailing party should not be denied the
fruits of his victory by some subterfuge devised by the losing party. Unjustified delay in the enforcement
of a judgment sets at naught the role and purpose of the courts to resolve justiciable controversies with
finality.[43]

In the present case, the lapse of the period for appeal rendered the RTC without any jurisdiction to
entertain, much less grant, the plaintiffs-respondents appeal from the final and immutable MCTC
judgment. This very basic legal reality would forever be lost if we allow the CA to dismiss the
defendants-petitioners appeal outright on the basis of a technicality that, after all, has been
substantially complied with.

WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the Resolutions dated
January 28, 2009 and June 11, 2009 of the Special Former Special Division of Five of the Court of Appeals
in CA-G.R. SP No. 02436-MIN. The Decision dated November 7, 2007 and Order dated July 1, 2008 of the
Regional Trial Court, Branch 31, Dapa, Surigao del Norte are ANNULLED. The Judgment dated May 23,
2007 of the Municipal Circuit Trial Court, Del Carmen-San Isidro-San Benito, Surigao del Norte is
REINSTATED. Costs against the plaintiffs-respondents.

SO ORDERED.