ALLAN C.

GO, doing business under the

name and style ACG Express Liner,
Petitioner,

- versus -

MORTIMER F. CORDERO,
Respondent.
x-----------------------------------------x
G.R. No. 164703

MORTIMER F. CORDERO,
Petitioner,


- versus -



ALLAN C. GO, doing business
under the name and style
ACG Express Liner, FELIPE M.
LANDICHO and VINCENT D. TECSON,
Respondents.

G.R. No. 164747

Present:

PUNO, C.J., Chairperson,
CARPIO MORALES,
LEONARDO-DE CASTRO,
BERSAMIN, and
VILLARAMA, JR., JJ.

Promulgated:

May 4, 2010
x-----------------------------------------------------------------------------------------x

DECISION

VILLARAMA, JR., J .:
For review is the Decision
[1]
dated March 16, 2004 as modified by the Resolution
[2]
dated July 22, 2004 of the Court
of Appeals (CA) in CA-G.R. CV No. 69113, which affirmed with modifications the Decision
[3]
dated May 31, 2000 of the
Regional Trial Court (RTC) of Quezon City, Branch 85 in Civil Case No. 98-35332.
The factual antecedents:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana Marketing Corporation (Pamana), ventured into
the business of marketing inter-island passenger vessels. After contacting various overseas fast ferry manufacturers from
all over the world, he came to meet Tony Robinson, an Australian national based in Brisbane, Australia, who is the
Managing Director of Aluminium Fast Ferries Australia (AFFA).
Between June and August 1997, Robinson signed documents appointing Cordero as the exclusive distributor of
AFFA catamaran and other fast ferry vessels in the Philippines. As such exclusive distributor, Cordero offered for sale to
prospective buyers the 25-meter Aluminium Passenger catamaran known as the SEACAT 25.
[4]

After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan C. Go who is the owner/operator of
ACG Express Liner of Cebu City, a single proprietorship, Cordero was able to close a deal for the purchase of two (2)
SEACAT 25 as evidenced by the Memorandum of Agreement dated August 7, 1997.
[5]
Accordingly, the parties executed
Shipbuilding Contract No. 7825 for one (1) high-speed catamaran (SEACAT 25) for the price of US$1,465,512.00.
[6]
Per
agreement between Robinson and Cordero, the latter shall receive commissions totalling US$328,742.00, or 22.43% of
the purchase price, from the sale of each vessel.
[7]

Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and on one (1) occasion even
accompanied Go and his family and Landicho, to monitor the progress of the building of the vessel. He shouldered all the
expenses for airfare, food, hotel accommodations, transportation and entertainment during these trips. He also spent for
long distance telephone calls to communicate regularly with Robinson, Go, Tecson and Landicho.
However, Cordero later discovered that Go was dealing directly with Robinson when he was informed by Dennis
Padua of Wartsila Philippines that Go was canvassing for a second catamaran engine from their company which provided
the ship engine for the first SEACAT 25. Padua told Cordero that Go instructed him to fax the requested quotation of the
second engine to the Park Royal Hotel in Brisbane where Go was then staying. Cordero tried to contact Go and Landicho
to confirm the matter but they were nowhere to be found, while Robinson refused to answer his calls. Cordero
immediately flew to Brisbane to clarify matters with Robinson, only to find out that Go and Landicho were already there
in Brisbane negotiating for the sale of the second SEACAT 25. Despite repeated follow-up calls, no explanation was
given by Robinson, Go, Landicho and Tecson who even made Cordero believe there would be no further sale between
AFFA and ACG Express Liner.
In a handwritten letter dated June 24, 1998, Cordero informed Go that such act of dealing directly with Robinson
violated his exclusive distributorship and demanded that they respect the same, without prejudice to legal action against
him and Robinson should they fail to heed the same.
[8]
Corderos lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law
firm, also wrote ACG Express Liner assailing the fraudulent actuations and misrepresentations committed by Go in
connivance with his lawyers (Landicho and Tecson) in breach of Corderos exclusive distributorship appointment.
[9]

Having been apprised of Corderos demand letter, Thyne & Macartney, the lawyer of AFFA and Robinson, faxed a
letter toACCRA law firm asserting that the appointment of Cordero as AFFAs distributor was for the purpose of one (1)
transaction only, that is, the purchase of a high-speed catamaran vessel by ACG Express Liner in August 1997. The letter
further stated that Cordero was offered the exclusive distributorship, the terms of which were contained in a draft
agreement which Cordero allegedly failed to return to AFFA within a reasonable time, and which offer is already being
revoked by AFFA.
[10]

As to the response of Go, Landicho and Tecson to his demand letter, Cordero testified before the trial court that on
the same day, Landicho, acting on behalf of Go, talked to him over the telephone and offered to amicably settle their
dispute. Tecson and Landicho offered to convince Go to honor his exclusive distributorship with AFFA and to purchase
all vessels for ACG Express Liner through him for the next three (3) years. In an effort to amicably settle the matter,
Landicho, acting in behalf of Go, set up a meeting with Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m. at the
Mactan Island Resort Hotel lobby. On said date, however, only Landicho and Tecson came and no reason was given for
Gos absence. Tecson and Landicho proposed that they will convince Go to pay him US$1,500,000.00 on the condition
that they will get a cut of 20%. And so it was agreed between him, Landicho and Tecson that the latter would give him a
weekly status report and that the matter will be settled in three (3) to four (4) weeks and neither party will file an action
against each other until a final report on the proposed settlement. No such report was made by either Tecson or Landicho
who, it turned out, had no intention to do so and were just buying time as the catamaran vessel was due to arrive from
Australia. Cordero then filed a complaint with the Bureau of Customs (BOC) to prohibit the entry of SEACAT 25
from Australia based on misdeclaration and undervaluation. Consequently, an Alert Order was issued by Acting BOC
Commissioner Nelson Tan for the vessel which in fact arrived on July 17, 1998. Cordero claimed that Go and Robinson
had conspired to undervalue the vessel by around US$500,000.00.
[11]

On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to hold Robinson, Go, Tecson and
Landicho liable jointly and solidarily for conniving and conspiring together in violating his exclusive distributorship in
bad faith and wanton disregard of his rights, thus depriving him of his due commissions (balance of unpaid commission
from the sale of the first vessel in the amount of US$31,522.01 and unpaid commission for the sale of the second vessel in
the amount of US$328,742.00) and causing him actual, moral and exemplary damages, including P800,000.00
representing expenses for airplane travel to Australia, telecommunications bills and entertainment, on account of AFFAs
untimely cancellation of the exclusive distributorship agreement. Cordero also prayed for the award of moral and
exemplary damages, as well as attorneys fees and litigation expenses.
[12]

Robinson filed a motion to dismiss grounded on lack of jurisdiction over his person and failure to state a cause of
action, asserting that there was no act committed in violation of the distributorship agreement. Said motion was denied by
the trial court onDecember 20, 1999. Robinson was likewise declared in default for failure to file his answer within the
period granted by the trial court.
[13]
As for Go and Tecson, their motion to dismiss based on failure to state a cause of
action was likewise denied by the trial court on February 26, 1999.
[14]
Subsequently, they filed their Answer denying that
they have anything to do with the termination by AFFA of Corderos authority as exclusive distributor in
the Philippines. On the contrary, they averred it was Cordero who stopped communicating with Go in connection with the
purchase of the first vessel from AFFA and was not doing his part in making progress status reports and airing the clients
grievances to his principal, AFFA, such that Go engaged the services of Landicho to fly to Australia and attend to the
documents needed for shipment of the vessel to the Philippines. As to the inquiry for the Philippine price for a Wartsila
ship engine for AFFAs other on-going vessel construction, this was merely requested by Robinson but which Cordero
misinterpreted as indication that Go was buying a second vessel. Moreover, Landicho and Tecson had no transaction
whatsoever with Cordero who had no document to show any such shipbuilding contract. As to the supposed meeting to
settle their dispute, this was due to the malicious demand of Cordero to be given US$3,000,000 as otherwise he will
expose in the media the alleged undervaluation of the vessel with the BOC. In any case, Cordero no longer had cause of
action for his commission for the sale of the second vessel under the memorandum of agreement dated August 7,
1997 considering the termination of his authority by AFFAs lawyers on June 26, 1998.
[15]

Pre-trial was reset twice to afford the parties opportunity to reach a settlement. However, on motion filed by
Cordero through counsel, the trial court reconsidered the resetting of the pre-trial to another date for the third time as
requested by Go, Tecson and Landicho, in view of the latters failure to appear at the pre-trial conference on January 7,
2000 despite due notice. The trial court further confirmed that said defendants misled the trial court in moving for
continuance during the pre-trial conference held onDecember 10, 1999, purportedly to go abroad for the holiday season
when in truth a Hold-Departure Order had been issued against them.
[16]
Accordingly, plaintiff Cordero was allowed to
present his evidence ex parte.
Corderos testimony regarding his transaction with defendants Go, Landicho and Tecson, and the latters offer of
settlement, was corroborated by his counsel who also took the witness stand. Further, documentary evidence including
photographs taken of the June 29, 1998 meeting with Landicho, Tecson and Atty. Tabujara at Shangri-las Mactan Island
Resort, photographs taken in Brisbane showing Cordero, Go with his family, Robinson and Landicho, and also various
documents, communications, vouchers and bank transmittals were presented to prove that: (1) Cordero was properly
authorized and actually transacted in behalf of AFFA as exclusive distributor in the Philippines; (2) Cordero spent
considerable sums of money in pursuance of the contract with Go and ACG Express Liner; and (3) AFFA through
Robinson paid Cordero his commissions from each scheduled payment made by Go for the first SEACAT 25 purchased
from AFFA pursuant to Shipbuilding Contract No. 7825.
[17]

On May 31, 2000, the trial court rendered its decision, the dispositive portion of which reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in favor of Plaintiff and
against defendants Allan C. Go, Tony Robinson, Felipe Landicho, and Vincent Tecson. As prayed for,
defendants are hereby ordered to pay Plaintiff jointly and solidarily, the following:

1. On the First Cause of Action, the sum total of SIXTEEN MILLION TWO HUNDRED
NINETY ONE THOUSAND THREE HUNDRED FIFTY TWO AND FORTY THREE
CENTAVOS (P16,291,352.43) as actual damages with legal interest from 25 June 1998 until
fully paid;

2. On the Second Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as moral
damages;

3. On the Third Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as
exemplary damages; and

4. On the Fourth Cause of Action, the sum of ONE MILLION PESOS (P1,000,000.00) as
attorneys fees;

Costs against the defendants.

SO ORDERED.
[18]

Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming that they have been unduly prejudiced by
the negligence of their counsel who was allegedly unaware that the pre-trial conference on January 28, 2000 did not push
through for the reason that Cordero was then allowed to present his evidence ex-parte, as he had assumed that the said ex-
parte hearing was being conducted only against Robinson who was earlier declared in default.
[19]
In its Order dated July
28, 2000, the trial court denied the motion for new trial.
[20]
In the same order, Corderos motion for execution pending
appeal was granted. Defendants moved to reconsider the said order insofar as it granted the motion for execution pending
appeal.
[21]
On August 8, 2000, they filed a notice of appeal.
[22]

On August 18, 2000, the trial court denied the motion for reconsideration and on August 21, 2000, the writ of
execution pending appeal was issued.
[23]
Meanwhile, the notice of appeal was denied for failure to pay the appellate court
docket fee within the prescribed period.
[24]
Defendants filed a motion for reconsideration and to transmit the case records
to the CA.
[25]

On September 29, 2000, the CA issued a temporary restraining order at the instance of defendants in the certiorari
case they filed with said court docketed as CA-G.R. SP No. 60354 questioning the execution orders issued by the trial
court. Consequently, as requested by the defendants, the trial court recalled and set aside its November 6, 2000 Order
granting the ex-parte motion for release of garnished funds, cancelled the scheduled public auction sale of levied real
properties, and denied the ex-parte Motion for Break-Open Order and Ex-Parte Motion for Encashment of Check filed by
Cordero.
[26]
On November 29, 2000, the trial court reconsidered its Order dated August 21, 2000 denying due course to
the notice of appeal and forthwith directed the transmittal of the records to the CA.
[27]

On January 29, 2001, the CA rendered judgment granting the petition for certiorari in CA-G.R. SP No. 60354 and
setting aside the trial courts orders of execution pending appeal. Cordero appealed the said judgment in a petition for
review filed with this Court which was eventually denied under our Decision dated September 17, 2002.
[28]

On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court (1) in allowing Cordero to
present his evidence ex-parte after the unjustified failure of appellants (Go, Tecson and Landicho) to appear at the pre-
trial conference despite due notice; (2) in finding that it was Cordero and not Pamana who was appointed by AFFA as the
exclusive distributor in the Philippines of its SEACAT 25 and other fast ferry vessels, which is not limited to the sale of
one (1) such catamaran to Go on August 7, 1997; and (3) in finding that Cordero is entitled to a commission per vessel
sold for AFFA through his efforts in the amount equivalent to 22.43% of the price of each vessel or US$328,742.00, and
with payments of US$297,219.91 having been made to Cordero, there remained a balance of US$31,522.09 still due to
him. The CA sustained the trial court in ruling that Cordero is entitled to damages for the breach of his exclusive
distributorship agreement with AFFA. However, it held that Cordero is entitled only to commission for the sale of the
first catamaran obtained through his efforts with the remaining unpaid sum of US$31,522.09 orP1,355,449.90 (on the
basis of US$1.00=P43.00 rate) with interest at 6% per annum from the time of the filing of the complaint until the same is
fully paid. As to the P800,000.00 representing expenses incurred by Cordero for transportation, phone bills,
entertainment, food and lodging, the CA declared there was no basis for such award, the same being the logical and
necessary consequences of the exclusive distributorship agreement which are normal in the field of sales and distribution,
and the expenditures having redounded to the benefit of the distributor (Cordero).
On the amounts awarded by the trial court as moral and exemplary damages, as well as attorneys fees, the CA
reduced the same to P500,000.00, P300,000.00 and P50,000.00, respectively. Appellants were held solidarily liable
pursuant to the provisions of Article 1207 in relation to Articles 19, 20, 21 and 22 of the New Civil Code. The CA
further ruled that no error was committed by the trial court in denying their motion for new trial, which said court found to
be pro forma and did not raise any substantial matter as to warrant the conduct of another trial.
By Resolution dated July 22, 2004, the CA denied the motions for reconsideration respectively filed by the
appellants and appellee, and affirmed the Decision dated March 16, 2004 with the sole modification that the legal interest
of 6% per annum shall start to run from June 24, 1998 until the finality of the decision, and the rate of 12% interest per
annum shall apply once the decision becomes final and executory until the judgment has been satisfied.
The case before us is a consolidation of the petitions for review under Rule 45 separately filed by Go (G.R. No.
164703) and Cordero (G.R. No. 164747) in which petitioners raised the following arguments:

G.R. No. 164703
(Petitioner Go)

I. THE HONORABLE COURT OF APPEALS DISREGARDED THE RULES OF COURT AND
PERTINENT JURISPRUDENCE AND ACTED WITH GRAVE ABUSE OF DISCRETION IN
NOT RULING THAT THE RESPONDENT IS NOT THE REAL PARTY-IN-INTEREST AND
IN NOT DISMISSING THE INSTANT CASE ON THE GROUND OF LACK OF CAUSE OF
ACTION;

II. THE HONORABLE COURT OF APPEALS IGNORED THE LAW AND JURISPRUDENCE
AND ACTED WITH GRAVE ABUSE OF DISCRETION IN HOLDING HEREIN PETITIONER
RESPONSIBLE FOR THE BREACH IN THE ALLEGED EXCLUSIVE DISTRIBUTORSHIP
AGREEMENT WITH ALUMINIUM FAST FERRIES AUSTRALIA;

III. THE HONORABLE APPELLATE COURT MISAPPLIED THE LAW AND ACTED WITH
GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER LIABLE IN SOLIDUM WITH
THE CO-DEFENDANTS WITH RESPECT TO THE CLAIMS OF RESPONDENT;

IV. THE HONORABLE COURT OF APPEALS MISAPPLIED LAW AND JURISPRUDENCE AND
GRAVELY ABUSED ITS DISCRETION WHEN IT FOUND PETITIONER LIABLE FOR
UNPAID COMMISSIONS, DAMAGES, ATTORNEYS FEES, AND LITIGATION EXPENSES;
and

V. THE HONORABLE APPELLATE COURT ACTED CONTRARY TO LAW AND
JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN IT EFFECTIVELY
DEPRIVED HEREIN PETITIONER OF HIS RIGHT TO DUE PROCESS BY AFFIRMING THE
LOWER COURTS DENIAL OF PETITIONERS MOTION FOR NEW TRIAL.
[29]



G.R. No. 164747
(Petitioner Cordero)

I.

THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE JUDGMENT OF THE TRIAL
COURT AWARDING PETITIONER ACTUAL DAMAGES FOR HIS COMMISSION FOR
THE SALE OF THE SECOND VESSEL, SINCE THERE IS SUFFICIENT EVIDENCE ON RECORD
WHICH PROVES THAT THERE WAS A SECOND SALE OF A VESSEL.

A. THE MEMORANDUM OF AGREEMENT DATED 7 AUGUST 1997 PROVIDES
THAT RESPONDENT GO WAS CONTRACTUALLY BOUND TO BUY TWO (2)
VESSELS FROM AFFA.

B. RESPONDENT GOS POSITION PAPER AND COUNTER-AFFIDAVIT/POSITION
PAPER THAT WERE FILED BEFORE THE BUREAU OF CUSTOMS, ADMITS UNDER
OATH THAT HE HAD INDEED PURCHASED A SECOND VESSEL FROM AFFA.

C. RESPONDENTS ADMITTED IN THEIR PRE-TRIAL BRIEF THAT THEY HAD
PURCHASED A SECOND VESSEL.

II.

THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER IS NOT ENTITLED TO HIS
COMMISSIONS FOR THE PURCHASE OF A SECOND VESSEL, SINCE IT WAS PETITIONERS
EFFORTS WHICH ACTUALLY FACILITATED AND SET-UP THE TRANSACTION FOR
RESPONDENTS.

III.

THE COURT OF APPEALS ERRED IN NOT IMPOSING THE PROPER LEGAL INTEREST RATE
ON RESPONDENTS UNPAID OBLIGATION WHICH SHOULD BE TWELVE PERCENT (12%)
FROM THE TIME OF THE BREACH OF THE OBLIGATION.

IV.

THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE ORIGINAL AMOUNT OF
CONSEQUENTIAL DAMAGES AWARDED TO PETITIONER BY THE TRIAL COURT
CONSIDERING THE BAD FAITH AND FRAUDULENT CONDUCT OF RESPONDENTS IN
MISAPPROPRIATING THE MONEY OF PETITIONER.
[30]



The controversy boils down to two (2) main issues: (1) whether petitioner Cordero has the legal personality to sue
the respondents for breach of contract; and (2) whether the respondents may be held liable for damages to Cordero for his
unpaid commissions and termination of his exclusive distributorship appointment by the principal, AFFA.


I . Real Party-in-I nterest

First, on the issue of whether the case had been filed by the real party-in-interest as required by Section 2, Rule 3 of
the Rules of Court, which defines such party as the one (1) to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. The purposes of this provision are: 1) to prevent the prosecution of actions by
persons without any right, title or interest in the case; 2) to require that the actual party entitled to legal relief be the one to
prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage litigation and keep it within certain bounds,
pursuant to sound public policy.
[31]
A case is dismissible for lack of personality to sue upon proof that the plaintiff is not
the real party-in-interest, hence grounded on failure to state a cause of action.
[32]

On this issue, we agree with the CA in ruling that it was Cordero and not Pamana who is the exclusive distributor of
AFFA in the Philippines as shown by the Certification dated June 1, 1997 issued by Tony Robinson.
[33]
Petitioner Go
mentions the following documents also signed by respondent Robinson which state that Pamana Marketing Corporation
represented by Mr. Mortimer F. Cordero was actually the exclusive distributor: (1) letter dated 1 June 1997
[34]
; (2)
certification dated 5 August 1997
[35]
; and (3) letter dated 5 August 1997 addressed to petitioner Cordero
concerning commissions to be paid to Pamana Marketing Corporation.
[36]
Such apparent inconsistency in naming
AFFAs exclusive distributor in the Philippines is of no moment. For all intents and purposes, Robinson and AFFA dealt
only with Cordero who alone made decisions in the performance of the exclusive distributorship, as with other clients to
whom he had similarly offered AFFAs fast ferry vessels. Moreover, the stipulated commissions from each progress
payments made by Go were directly paid by Robinson to Cordero.
[37]
Respondents Landicho and Tecson were only too
aware of Corderos authority as the person who was appointed and acted as exclusive distributor of AFFA, which can be
gleaned from their act of immediately furnishing him with copies of bank transmittals everytime Go remits payment to
Robinson, who in turn transfers a portion of funds received to the bank account of Cordero in the Philippines as his
commission. Out of these partial payments of his commission, Cordero would still give Landicho and Tecson their
respective commission, or cuts from his own commission. Respondents Landicho and Tecson failed to refute the
evidence submitted by Cordero consisting of receipts signed by them. Said amounts were apart from the earlier expenses
shouldered by Cordero for Landichos airline tickets, transportation, food and hotel accommodations for the trip
to Australia.
[38]

Moreover, petitioner Go, Landicho and Tecson never raised petitioner Corderos lack of personality to sue on
behalf of Pamana,
[39]
and did so only before the CA when they contended that it is Pamana and not Cordero, who was
appointed and acted as exclusive distributor for AFFA.
[40]
It was Robinson who argued in support of his motion to
dismiss that as far as said defendant is concerned, the real party plaintiff appears to be Pamana, against the real party
defendant which is AFFA.
[41]
As already mentioned, the trial court denied the motion to dismiss filed by Robinson.
We find no error committed by the trial court in overruling Robinsons objection over the improper resort to
summons by publication upon a foreign national like him and in an action in personam, notwithstanding that he raised it
in a special appearance specifically raising the issue of lack of jurisdiction over his person. Courts acquire jurisdiction
over the plaintiffs upon the filing of the complaint, while jurisdiction over the defendants in a civil case is acquired either
through the service of summons upon them in the manner required by law or through their voluntary appearance in court
and their submission to its authority.
[42]
A party who makes a special appearance in court challenging the jurisdiction of
said court based on the ground of invalid service of summons is not deemed to have submitted himself to the jurisdiction
of the court.
[43]

In this case, however, although the Motion to Dismiss filed by Robinson specifically stated as one (1) of the
grounds the lack of personal jurisdiction, it must be noted that he had earlier filed a Motion for Time to file an
appropriate responsive pleading even beyond the time provided in the summons by publication.
[44]
Such motion did not
state that it was a conditional appearance entered to question the regularity of the service of summons, but an appearance
submitting to the jurisdiction of the court by acknowledging the summons by publication issued by the court and praying
for additional time to file a responsive pleading. Consequently, Robinson having acknowledged the summons by
publication and also having invoked the jurisdiction of the trial court to secure affirmative relief in his motion for
additional time, he effectively submitted voluntarily to the trial courts jurisdiction. He is now estopped from asserting
otherwise, even before this Court.
[45]


I I . Breach of Exclusive Distributorship,
Contractual I nterference and
Respondents Liability for Damages

In Yu v. Court of Appeals,
[46]
this Court ruled that the right to perform an exclusive distributorship agreement and
to reap the profits resulting from such performance are proprietary rights which a party may protect. Thus, injunction is
the appropriate remedy to prevent a wrongful interference with contracts by strangers to such contracts where the legal
remedy is insufficient and the resulting injury is irreparable. In that case, the former dealer of the same goods purchased
the merchandise from the manufacturer inEngland through a trading firm in West Germany and sold these in
the Philippines. We held that the rights granted to the petitioner under the exclusive distributorship agreement may not be
diminished nor rendered illusory by the expedient act of utilizing or interposing a person or firm to obtain goods for which
the exclusive distributorship was conceptualized, at the expense of the sole authorized distributor.
[47]

In the case at bar, it was established that petitioner Cordero was not paid the balance of his commission by
respondent Robinson. From the time petitioner Go and respondent Landicho directly dealt with respondent Robinson in
Brisbane, and ceased communicating through petitioner Cordero as the exclusive distributor of AFFA in the Philippines,
Cordero was no longer informed of payments remitted to AFFA in Brisbane. In other words, Cordero had clearly been
cut off from the transaction until the arrival of the first SEACAT 25 which was sold through his efforts. When Cordero
complained to Go, Robinson, Landicho and Tecson about their acts prejudicial to his rights and demanded that they
respect his exclusive distributorship, Go simply let his lawyers led by Landicho and Tecson handle the matter and tried to
settle it by promising to pay a certain amount and to purchase high-speed catamarans through Cordero. However,
Cordero was not paid anything and worse, AFFA through its lawyer in Australia even terminated his exclusive dealership
insisting that his services were engaged for only one (1) transaction, that is, the purchase of the first SEACAT 25 in
August 1997.
Petitioner Go argues that unlike in Yu v. Court of Appeals
[48]
there is no conclusive proof adduced by petitioner
Cordero that they actually purchased a second SEACAT 25 directly from AFFA and hence there was no violation of the
exclusive distributorship agreement. Further, he contends that the CA gravely abused its discretion in holding them
solidarily liable to Cordero, relying on Articles 1207, 19 and 21 of the Civil Code despite absence of evidence,
documentary or testimonial, showing that they conspired to defeat the very purpose of the exclusive distributorship
agreement.
[49]

We find that contrary to the claims of petitioner Cordero, there was indeed no sufficient evidence that respondents
actually purchased a second SEACAT 25 directly from AFFA. But this circumstance will not absolve respondents from
liability for invading Corderos rights under the exclusive distributorship. Respondents clearly acted in bad faith in
bypassing Cordero as they completed the remaining payments to AFFA without advising him and furnishing him with
copies of the bank transmittals as they previously did, and directly dealt with AFFA through Robinson regarding
arrangements for the arrival of the first SEACAT 25 in Manila and negotiations for the purchase of the second vessel
pursuant to the Memorandum of Agreement which Cordero signed in behalf of AFFA. As a result of respondents
actuations, Cordero incurred losses as he was not paid the balance of his commission from the sale of the first vessel and
his exclusive distributorship revoked by AFFA.
Petitioner Go contends that the trial and appellate courts erred in holding them solidarily liable for Corderos
unpaid commission, which is the sole obligation of the principal AFFA. It was Robinson on behalf of AFFA who, in the
letter datedAugust 5, 1997 addressed to Cordero, undertook to pay commission payments to Pamana on a staggered
progress payment plan in the form of percentage of the commission per payment. AFFA explicitly committed that it will,
upon receipt of progress payments, pay to Pamana their full commission by telegraphic transfer to an account nominated
by Pamana within one to two days of [AFFA] receiving such payments.
[50]
Petitioner Go further maintains that he had
not in any way violated or caused the termination of the exclusive distributorship agreement between Cordero and AFFA;
he had also paid in full the first and only vessel he purchased from AFFA.
[51]

While it is true that a third person cannot possibly be sued for breach of contract because only parties can breach
contractual provisions, a contracting party may sue a third person not for breach but for inducing another to commit such
breach.
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract shall be liable for
damages to the other contracting party.

The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the third person
of the existence of a contract; and (3) interference of the third person is without legal justification.
[52]

The presence of the first and second elements is not disputed. Through the letters issued by Robinson attesting that
Cordero is the exclusive distributor of AFFA in the Philippines, respondents were clearly aware of the contract between
Cordero and AFFA represented by Robinson. In fact, evidence on record showed that respondents initially dealt with and
recognized Cordero as such exclusive dealer of AFFA high-speed catamaran vessels in the Philippines. In that capacity as
exclusive distributor, petitioner Go entered into the Memorandum of Agreement and Shipbuilding Contract No. 7825 with
Cordero in behalf of AFFA.
As to the third element, our ruling in the case of So Ping Bun v. Court of Appeals
[53]
is instructive, to wit:
A duty which the law of torts is concerned with is respect for the property of others, and a cause of
action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the
other of his private property. This may pertain to a situation where a third person induces a party to
renege on or violate his undertaking under a contract. In the case before us, petitioners Trendsetter
Marketing asked DCCSI to execute lease contracts in its favor, and as a result petitioner deprived
respondent corporation of the latters property right. Clearly, and as correctly viewed by the appellate
court, the three elements of tort interference above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for the sole
purpose of furthering his own financial or economic interest. One view is that, as a general rule,
justification for interfering with the business relations of another exists where the actors motive is to
benefit himself. Such justification does not exist where his sole motive is to cause harm to the
other. Added to this, some authorities believe that it is not necessary that the interferers interest
outweigh that of the party whose rights are invaded, and that an individual acts under an economic
interest that is substantial, not merely de minimis, such that wrongful and malicious motives are
negatived, for he acts in self-protection. Moreover, justification for protecting ones financial position
should not be made to depend on a comparison of his economic interest in the subject matter with that of
others. It is sufficient if the impetus of his conduct lies in a proper business interest rather than in
wrongful motives.

As early as Gilchrist vs. Cuddy, we held that where there was no malice in the interference of a
contract, and the impulse behind ones conduct lies in a proper business interest rather than in
wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially
interested, and such interest motivates his conduct, it cannot be said that he is an officious or malicious
intermeddler.

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the
warehouse to his enterprise at the expense of respondent corporation. Though petitioner took interest in
the property of respondent corporation and benefited from it, nothing on record imputes deliberate
wrongful motives or malice in him.

x x x

While we do not encourage tort interferers seeking their economic interest to intrude into existing
contracts at the expense of others, however, we find that the conduct herein complained of did not
transcend the limits forbidding an obligatory award for damages in the absence of any malice. The
business desire is there to make some gain to the detriment of the contracting parties. Lack of malice,
however, precludes damages. But it does not relieve petitioner of the legal liability for entering into
contracts and causing breach of existing ones. The respondent appellate court correctly confirmed the
permanent injunction and nullification of the lease contracts between DCCSI and Trendsetter Marketing,
without awarding damages. The injunction saved the respondents from further damage or injury caused
by petitioners interference.
[54]
[EMPHASIS SUPPLIED.]

Malice connotes ill will or spite, and speaks not in response to duty. It implies an intention to do ulterior and
unjustifiable harm. Malice is bad faith or bad motive.
[55]
In the case of Lagon v. Court of Appeals,
[56]
we held that to
sustain a case for tortuous interference, the defendant must have acted with malice or must have been driven by purely
impure reasons to injure the plaintiff; in other words, his act of interference cannot be justified. We further explained
that the word induce refers to situations where a person causes another to choose one course of conduct by persuasion
or intimidation. As to the allegation of private respondent in said case that petitioner induced the heirs of the late Bai
Tonina Sepi to sell the property to petitioner despite an alleged renewal of the original lease contract with the deceased
landowner, we ruled as follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such knowledge alone was not
sufficient to make him liable for tortuous interference. x x x

Furthermore, the records do not support the allegation of private respondent that
petitioner induced the heirs of Bai Tonina Sepi to sell the property to him. The word induce refers to
situations where a person causes another to choose one course of conduct by persuasion or
intimidation. The records show that the decision of the heirs of the late Bai Tonina Sepi to sell the
property was completely of their own volition and that petitioner did absolutely nothing to influence their
judgment. Private respondent himself did not proffer any evidence to support his claim. In short, even
assuming that private respondent was able to prove the renewal of his lease contract with Bai Tonina
Sepi, the fact was that he was unable to prove malice or bad faith on the part of petitioner in purchasing
the property. Therefore, the claim of tortuous interference was never established.
[57]


In their Answer, respondents denied having anything to do with the unpaid balance of the commission due to
Cordero and the eventual termination of his exclusive distributorship by AFFA. They gave a different version of the
events that transpired following the signing of Shipbuilding Contract No. 7825. According to them, several builder-
competitors still entered the picture after the said contract for the purchase of one (1) SEACAT 25 was sent to Brisbane in
July 1997 for authentication, adding that the contract was to be effective on August 7, 1997, the time when their funds was
to become available. Go admitted he called the attention of AFFA if it can compete with the prices of other builders, and
upon mutual agreement, AFFA agreed to give them a discounted price under the following terms and conditions: (1) that
the contract price be lowered; (2) that Go will obtain another vessel; (3) that to secure compliance of such conditions, Go
must make an advance payment for the building of the second vessel; and (4) that the payment scheme formerly agreed
upon as stipulated in the first contract shall still be the basis and used as the guiding factor in remitting money for the
building of the first vessel. This led to the signing of another contract superseding the first one (1), still to be dated 07
August 1997. Attached to the answer were photocopies of the second contract stating a lower purchase price
(US$1,150,000.00) and facsimile transmission of AFFA to Go confirming the transaction.
[58]

As to the cessation of communication with Cordero, Go averred it was Cordero who was nowhere to be contacted
at the time the shipbuilding progress did not turn good as promised, and it was always Landicho and Tecson who, after
several attempts, were able to locate him only to obtain unsatisfactory reports such that it was Go who would still call up
Robinson regarding any progress status report, lacking documents for MARINA, etc., and go to Australia for ocular
inspection. Hence, in May 1998 on the scheduled launching of the ship in Australia, Go engaged the services of
Landicho who went to Australia to see to it that all documents needed for the shipment of the vessel to the Philippines
would be in order. It was also during this time that Robinsons request for inquiry on the Philippine price of a Wartsila
engine for AFFAs then on-going vessel construction, was misinterpreted by Cordero as indicating that Go was buying a
second vessel.
[59]

We find these allegations unconvincing and a mere afterthought as these were the very same averments contained
in the Position Paper for the Importer dated October 9, 1998, which was submitted by Go on behalf of ACG Express
Liner in connection with the complaint-affidavit filed by Cordero before the BOC-SGS Appeals Committee relative to
the shipment valuation of the first SEACAT 25 purchased from AFFA.
[60]
It appears that the purported second contract
superseding the original Shipbuilding Contract No. 7825 and stating a lower price of US$1,150,000.00 (not
US$1,465,512.00) was only presented before the BOC to show that the vessel imported into the Philippines was not
undervalued by almost US$500,000.00. Cordero vehemently denied there was such modification of the contract and
accused respondents of resorting to falsified documents, including the facsimile transmission of AFFA supposedly
confirming the said sale for only US$1,150,000.00. Incidentally, another document filed in said BOC case, the Counter-
Affidavit/Position Paper for the Importer dated November 16, 1998,
[61]
states in paragraph 8 under the Antecedent facts
thereof, that --
8. As elsewhere stated, the total remittances made by herein Importer to AFFA does not
alone represent the purchase price for Seacat 25. It includes advance payment for
the acquisition of another vessel as part of the deal due to the discounted price.
[62]

which even gives credence to the claim of Cordero that respondents negotiated for the sale of the second vessel and that
the nonpayment of the remaining two (2) instalments of his commission for the sale of the first SEACAT 25 was a result
of Go and Landichos directly dealing with Robinson, obviously to obtain a lower price for the second vessel at the
expense of Cordero.
The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter into another contract directly with
ACG Express Liner to obtain a lower price for the second vessel resulted in AFFAs breach of its contractual obligation
to pay in full the commission due to Cordero and unceremonious termination of Corderos appointment as exclusive
distributor. Following our pronouncement in Gilchrist v. Cuddy (supra), such act may not be deemed malicious if
impelled by a proper business interest rather than in wrongful motives. The attendant circumstances, however,
demonstrated that respondents transgressed the bounds of permissible financial interest to benefit themselves at the
expense of Cordero. Respondents furtively went directly to Robinson afterCordero had worked hard to close the deal for
them to purchase from AFFA two (2) SEACAT 25, closely monitored the progress of building the first vessel
sold, attended to their concerns and spent no measly sum for the trip to Australia with Go, Landicho and Gos family
members. But what is appalling is the fact that even as Go, Landicho and Tecson secretly negotiated with Robinson for
the purchase of a second vessel, Landicho and Tecson continued to demand and receive from Cordero their
commission or cut from Corderos earned commission from the sale of the first SEACAT 25.
Cordero was practically excluded from the transaction when Go, Robinson, Tecson and Landicho suddenly
ceased communicating with him, without giving him any explanation. While there was nothing objectionable in
negotiating for a lower price in the second purchase of SEACAT 25, which is not prohibited by the Memorandum of
Agreement, Go, Robinson, Tecson and Landicho clearly connived not only in ensuring that Cordero would have no
participation in the contract for sale of the second SEACAT 25, but also that Cordero would not be paid the balance of
his commission from the sale of the first SEACAT 25. This, despite their knowledge that it was commission already
earned by and due to Cordero. Thus, the trial and appellate courts correctly ruled that the actuations of Go, Robinson,
Tecson and Landicho were without legal justification and intended solely to prejudice Cordero.
The existence of malice, ill will or bad faith is a factual matter. As a rule, findings of fact of the trial court, when
affirmed by the appellate court, are conclusive on this Court.
[63]
We see no compelling reason to reverse the findings of
the RTC and the CA that respondents acted in bad faith and in utter disregard of the rights of Cordero under the exclusive
distributorship agreement.
The failure of Robinson, Go, Tecson and Landico to act with fairness, honesty and good faith in securing better
terms for the purchase of high-speed catamarans from AFFA, to the prejudice of Cordero as the duly appointed exclusive
distributor, is further proscribed by Article 19 of the Civil Code:
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith.

As we have expounded in another case:
Elsewhere, we explained that when a right is exercised in a manner which does not conform with the
norms enshrined in Article 19 and results in damage to another, a legal wrong is thereby committed for
which the wrongdoer must be responsible. The object of this article, therefore, is to set certain standards
which must be observed not only in the exercise of ones rights but also in the performance of ones
duties. These standards are the following: act with justice, give everyone his due and observe honesty and
good faith. Its antithesis, necessarily, is any act evincing bad faith or intent to injure. Its elements are the
following: (1) There is a legal right or duty; (2) which is exercised in bad faith; (3) for the sole intent of
prejudicing or injuring another. When Article 19 is violated, an action for damages is proper under
Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising from a violation of law x x x.
Article 21, on the other hand, states:
Art. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the damage.
Article 21 refers to acts contra bonus mores and has the following elements: (1) There is an act which is
legal; (2) but which is contrary to morals, good custom, public order, or public policy; and (3) it is done
with intent to injure.
A common theme runs through Articles 19 and 21, and that is, the act complained of must be
intentional.
[64]


Petitioner Gos argument that he, Landicho and Tecson cannot be held liable solidarily with Robinson for actual,
moral and exemplary damages, as well as attorneys fees awarded to Cordero since no law or contract provided for
solidary obligation in these cases, is equally bereft of merit. Conformably with Article 2194 of the Civil Code, the
responsibility of two or more persons who are liable for the quasi-delict is solidary.
[65]
In Lafarge Cement Philippines,
Inc. v. Continental Cement Corporation,
[66]
we held:
[O]bligations arising from tort are, by their nature, always solidary. We have assiduously
maintained this legal principle as early as 1912 in Worcester v. Ocampo, in which we held:

x x x The difficulty in the contention of the appellants is that they fail to recognize
that the basis of the present action is tort. They fail to recognize the universal doctrine that
each joint tort feasor is not only individually liable for the tort in which he participates, but
is also jointly liable with his tort feasors. x x x

It may be stated as a general rule that joint tort feasors are all the persons who
command, instigate, promote, encourage, advise, countenance, cooperate in, aid or abet the
commission of a tort, or who approve of it after it is done, if done for their benefit. They
are each liable as principals, to the same extent and in the same manner as if they had
performed the wrongful act themselves. x x x

Joint tort feasors are jointly and severally liable for the tort which they commit. The
persons injured may sue all of them or any number less than all. Each is liable for the
whole damages caused by all, and all together are jointly liable for the whole damage. It is
no defense for one sued alone, that the others who participated in the wrongful act are not
joined with him as defendants; nor is it any excuse for him that his participation in the tort
was insignificant as compared to that of the others. x x x

Joint tort feasors are not liable pro rata. The damages can not be apportioned
among them, except among themselves. They cannot insist upon an apportionment, for the
purpose of each paying an aliquot part. They are jointly and severally liable for the whole
amount. x x x

A payment in full for the damage done, by one of the joint tort feasors, of course
satisfies any claim which might exist against the others. There can be but satisfaction. The
release of one of the joint tort feasors by agreement generally operates to discharge all. x x
x

Of course, the court during trial may find that some of the alleged tort feasors are
liable and that others are not liable. The courts may release some for lack of evidence
while condemning others of the alleged tort feasors. And this is true even though they are
charged jointly and severally.
[67]
[EMPHASIS SUPPLIED.]

The rule is that the defendant found guilty of interference with contractual relations cannot be held liable for
more than the amount for which the party who was inducted to break the contract can be held liable.
[68]
Respondents Go,
Landicho and Tecson were therefore correctly held liable for the balance of petitioner Corderos commission from the
sale of the first SEACAT 25, in the amount of US$31,522.09 or its peso equivalent, which AFFA/Robinson did not pay
in violation of the exclusive distributorship agreement, with interest at the rate of 6% per annum from June 24, 1998 until
the same is fully paid.
Respondents having acted in bad faith, moral damages may be recovered under Article 2219 of the Civil
Code.
[69]
On the other hand, the requirements of an award of exemplary damages are: (1) they may be imposed by way
of example in addition to compensatory damages, and only after the claimants right to them has been established; (2)
that they cannot be recovered as a matter of right, their determination depending upon the amount of compensatory
damages that may be awarded to the claimant; and (3) the act must be accompanied by bad faith or done in a wanton,
fraudulent, oppressive or malevolent manner.
[70]
The award of exemplary damages is thus in order. However, we find
the sums awarded by the trial court as moral and exemplary damages as reduced by the CA, still excessive under the
circumstances.
Moral damages are meant to compensate and alleviate the physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injuries unjustly
caused. Although incapable of pecuniary estimation, the amount must somehow be proportional to and in approximation
of the suffering inflicted. Moral damages are not punitive in nature and were never intended to enrich the claimant at the
expense of the defendant. There is no hard-and-fast rule in determining what would be a fair and reasonable amount of
moral damages, since each case must be governed by its own peculiar facts. Trial courts are given discretion in
determining the amount, with the limitation that it should not be palpably and scandalously excessive. Indeed, it must be
commensurate to the loss or injury suffered.
[71]

We believe that the amounts of P300,000.00 and P200,000.00 as moral and exemplary damages, respectively,
would be sufficient and reasonable. Because exemplary damages are awarded, attorneys fees may also be awarded in
consonance with Article 2208 (1).
[72]
We affirm the appellate courts award of attorneys fees in the amount
of P50,000.00.
WHEREFORE, the petitions are DENIED. The Decision dated March 16, 2004 as modified by the Resolution
dated July 22, 2004 of the Court of Appeals in CA-G.R. CV No. 69113 are
hereby AFFIRMED with MODIFICATION in that the awards of moral and exemplary damages are hereby reduced
to P300,000.00 and P200,000.00, respectively.
With costs against the petitioner in G.R. No. 164703.
SO ORDERED.






Allan C. Go, doing business under the name and style of ACG Express Liner vs. Mortimer F. Cordero/Mortimer
F. Cordero vs. Allan C. Go, doing business under the name and style of ACG Express Liner, et al.,G.R. No.
164703/G.R. No. 164747, May 4, 2010
Post under Remedial Law, villarama doctrines at Wednesday, November 30, 2011 Posted by Schizophrenic Mind
Appeal; findings of fact of lower courts conclusive upon Supreme Court. The existence of malice, ill will or bad faith
is a factual matter. As a rule, findings of fact of the trial court, when affirmed by the appellate court, are conclusive on this
Court. We see no compelling reason to reverse the findings of the RTC and the CA that respondents acted in bad faith and
in utter disregard of the rights of Cordero under the exclusive distributorship agreement.


Jurisdiction; submission to jurisdiction by voluntaryappearance and request for affirmative relief. We find no error
committed by the trial court in overruling Robinsons objection over the improper resort to summons by publication upon
a foreign national like him and in an action in personam, notwithstanding that he raised it in a
special appearance specifically raising the issue of lack of jurisdiction over his person. Courts acquire jurisdiction over
the plaintiffs upon the filing of the complaint, while jurisdiction over the defendants in a civil case is acquired either
through the service of summons upon them in the manner required by law or through their voluntary appearance in court
and their submission to its authority. A party who makes a special appearance in court challenging the jurisdiction of said
court based on the ground of invalid service of summons is not deemed to have submitted himself to the jurisdiction of the
court. In this case, however, although the Motion to Dismiss filed by Robinson specifically stated as one (1) of the
grounds the lack of personal jurisdiction, it must be noted that he had earlier filed a Motion for Time to file an
appropriate responsive pleading even beyond the time provided in the summons by publication. Such motion did not state
that it was a conditionalappearance entered to question the regularity of the service of summons, but
an appearance submitting to the jurisdiction of the court by acknowledging the summons by publication issued by the
court and praying for additional time to file a responsive pleading. Consequently, Robinson having acknowledged the
summons by publication and also having invoked the jurisdiction of the trial court to secure affirmative relief in his
motion for additional time, he effectively submitted voluntarily to the trial courts jurisdiction. He is now estopped from
asserting otherwise, even before this Court.


Parties; real party-in-interest. First, on the issue of whether the case had been filed by the real party-in-interest as
required by Section 2, Rule 3 of the Rules of Court, which defines such party as the one (1) to be benefited or injured by
the judgment in the suit, or the party entitled to the avails of the suit. The purposes of this provision are: 1) to prevent the
prosecution of actions by persons without any right, title or interest in the case; 2) to require that the actual party entitled
to legal relief be the one to prosecute the action; 3) to avoid a multiplicity of suits; and 4) to discourage litigation and keep
it within certain bounds, pursuant to sound public policy. A case is dismissible for lack of personality to sue upon proof
that theplaintiff is not the real party-in-interest, hence grounded on failure to state a cause of action.




On this issue, we agree with the CA in ruling that it was Cordero and not Pamana who is the exclusive distributor of
AFFA in the Philippines as shown by the Certification dated June 1, 1997 issued by Tony Robinson. Petitioner Go
mentions the following documents also signed by respondent Robinson which state that Pamana Marketing Corporation
represented by Mr. Mortimer F. Cordero was actually the exclusive distributor: (1) letter dated 1 June 1997;
(2)certification dated 5 August 1997; and (3) letter dated 5 August 1997 addressed to petitioner Cordero concerning
commissions to be paid to Pamana Marketing Corporation. Such apparent inconsistency in naming AFFAs exclusive
distributor in the Philippines is of no moment. For all intents and purposes, Robinson and AFFA dealt only
with Cordero who alone made decisions in the performance of the exclusive distributorship, as with other clients to whom
he had similarly offered AFFAs fast ferry vessels. Moreover, the stipulated commissions from each progress payments
made by Go were directly paid by Robinson to Cordero. Respondents Landicho and Tecson were only too aware
of Corderos authority as the person who was appointed and acted as exclusive distributor of AFFA, which can be gleaned
from their act of immediately furnishing him with copies of bank transmittals everytime Go remits payment to Robinson,
who in turn transfers a portion of funds received to the bank account of Cordero in the Philippines as his commission. Out
of these partial payments of his commission, Cordero would still give Landicho and Tecson their respective
commission, or cuts from his own commission. Respondents Landicho and Tecson failed to refute the evidence
submitted by Cordero consisting of receipts signed by them. Said amounts were apart from the earlier expenses
shouldered by Cordero for Landichos airline tickets, transportation, food and hotel accommodations for the trip to
Australia. Allan C. Go,doing business under the name and style of ACG Express Liner vs. Mortimer
F. Cordero/Mortimer F. Cordero vs. Allan C. Go, doing business under the name and style of ACG Express
Liner, et al.,G.R. No. 164703/G.R. No. 164747, May 4, 2010












G.R. No. 157447. April 29, 2005
NEMENCIO C. EVANGELISTA, PASCUAL G. QUINTO, LUIS B. BUENA, EUSEBIA V. TABLADA, CANUTO
G. TISBE, DAVID R. CARULLO, SOFONIAS E. COLEGADO, FELIX B. BUENA, TORIBIO C.
EVANGELISTA, LEBRADA A. NICOLAS, ALECIA J. RAMOS, MILA G. DE LOS REYES, SALVADOR I. DE
LA TORRE, MOISES CRUZ, RUFINO INFANTE, ALICIA ASTROLOGO, TRINIDAD LUMIQUED,
LUZMINIDA QUINIQUINI, & TEODORA C. TEMERAS, Petitioners,
vs.
CARMELINO M. SANTIAGO, Respondents.
D E C I S I O N
CHICO-NAZARIO, J .:
In this Petition for Review under Rule 45 of the Rules of Court, petitioners pray for the reversal of the Decision of the
Court of Appeals in CA-G.R. CV No. 64957,
1
affirming the Order of the Regional Trial Court (RTC) of San Mateo, Rizal,
Branch 77, in Civil Case No. 1220,
2
dismissing petitioners Complaint for declaration of nullity of Original Certificate of
Title (OCT) No. 670 and all other titles emanating therefrom.
In their Complaint, petitioners alleged that they occupied and possessed parcels of land, located in Sitio Panayawan,
Barangay San Rafael, Montalban (now Rodriquez), Province of Rizal (Subject Property), by virtue of several Deeds of
Assignment, dated 15 April 1994 and 02 June 1994, executed by a certain Ismael Favila y Rodriguez.
3

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

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

OCT No. 670 was issued in the name of respondents mother, Isabel Manahan y Francisco, and three other individuals,
pursuant to Decree No. 10248, dated 13 February 1913, in Case No. 8502 of the Court of Land Registration of the
Philippine Islands. The whole property covered by OCT No. 670 was subsequently adjudicated in favor of Isabel
Manahan Santiago (formerly Isabel Manahan y Francisco). Consequently, OCT No. 670 was cancelled and TCT No. T-
53028 was issued exclusively in the name of Isabel Manahan Santiago. On 28 December 1968, Isabel Manahan Santiago
executed a Deed of Donation transferring the property to her son, respondent herein, who subsequently secured TCTs No.
281660, No. N-39258 and No. 205270 in his own name.
6

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

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

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

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

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

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

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

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

After the preliminary hearing, the trial court issued the questioned Order, dated 05 February 1999, dismissing petitioners
Complaint. Pertinent portions of the Order of the trial court read:
After considering the testimonial and documentary evidence presented, this Court is inclined not to grant plaintiffs (sic)
prayer. Finding credence and giving weight to plaintiffs (sic) lone but "expert witness", it is crystal clear that, to quote:
1. "a parcel of land titled illegally will revert to the State
2. it is the State who must file the corresponding case of annulment of title through the Office of the Solicitor General, and
3. a land illegally titled in the name of private individual, the State through the Office of the Solicitor General should file
the corresponding case for cancellation of title." (TSN August 26, 1997).
The above quoted testimony is straight from horse (sic) mouth so to speak as this was the testimony of the plaintiffs (sic)
expert witness. And judging from the said testimony alone aforecited, plaintiffs (sic) cause [of action] is bound to fail.
"Plaintiffs (sic) own testimony" wrote "finis" to their case. From the record, this case was initiated and filed by private
individuals, Nemencio Evangelista, et. al., contradicting their witness (sic) testimony. To reiterate, this Court finds
credence to the testimony of the plaintiffs (sic) witness, i.e., is (sic) the State through the Office of the Solicitor General
who must initiate and file a case of this nature when title to a land is being claimed to be obtained through fraud and
allegedly spurious.
The opinion of this Court anent the testimony of the witness is not without basis. Explicit is the pronouncement of the
Supreme Court in the recent case of Heirs of Marciano Nagano v. Court of Appeals, to wit:
An action for reversion has to be instituted by the Solicitor General pursuant to Section 101, Commonwealth Act No. 141.
(282 SCRA 43).
As to the documentary evidence, having gone through with the "Deed of Assignment/s" purportedly executed by and
between a certain Ismael Favila y Rodriguez and the plaintiffs, which is the principal if not the only basis of plaintiffs
claim ownership and possession of the subject parcel of land, the same does not hold water in a manner of speaking, for
being self-serving. "Assignor Ismael Favila y Rodriguez" claimed in said Deed that he is the Attorney-in-Fact by virtue of
an alleged Special Power of Attorney executed in his favor by his "mga kapatid" on February 23, 1965, but said Special
Power of Attorney was not presented before this Court, thus there arises a doubt as to its existence and execution not to
mention doubt on the existence of his "mga kapatid" who as alleged executed said Special Power Attorney (sic) in his
favor.
Even if this Court granting arguendo would admit the authenticity of said "Deeds of Assignment/s", that will not alter the
outcome of the pending incident/s before this Court. Why? Because the said "Deed of Assignment/s" which were based on
Spanish title have lost their evidentiary value pursuant to the Presidential Decree No. 892 i.e. "DISCONTINUANCE OF
THE SPANISH MORTGAGE SYSTEM OF REGISTRATION AND OF THE USE OF SPANISH TITLES AS
EVIDENCE IN LAND REGISTRATION PROCEEDINGS."

There is no need to elaborate on the above-cited provisions of PD 892 as they are self-explanatory. Suffice it to say that
there is no showing, that plaintiffs complied with the said law i.e. to "apply for registration of their lands under Act No.
496, otherwise known as the Land Registration Act, within six (6) months from the effectivity of this decree (February 16,
1976). Thereafter, Spanish titles cannot be used as evidence of land ownership in any registration proceedings under the
Torrens System."
This being the case and likewise being clear that plaintiffs were not the lawful owners of the land subject of this case, for
they did not comply with PD 892, the said plaintiffs do not have the legal standing to bring before this Court the instant
complaint
Moreover, the principal issue in this case is for the declaration of nullity of defendants title, which has nothing to do with
plaintiffs (sic) claim of ownership and possession even if we set aside, albeit momentarily, the truth that plaintiffs (sic)
claim were based on barred Spanish Title/s, and thus plaintiffs were never the owners of the parcel of land subject of this
case.
Further, defendants (sic) title especially so with the mother title OCT 670 was entered and issued in 1913 or more than
Eighty Three (83) years ago, the same not having been questioned by any party. Only now that it is being questioned, but
sad to say, plaintiffs who are on the offensive and relying on their lone expert witness, instead of bolstering their case,
unwittingly sealed their fate
17

After the trial court denied petitioners Motion for Reconsideration in its Order, dated 20 July 1999,
18
petitioners appealed
both Orders of the trial court to the Court of Appeals.
The Court of Appeals, in its Decision, dated 29 July 2002,
19
affirmed the Order of the trial court, dated 05 February 1999,
dismissing petitioners Complaint. The Court of Appeals denied petitioners Motion for Reconsideration in its Resolution,
dated 14 February 2003.
20

Thus, petitioners filed this Petition for Review
21
under Rule 45 of the Rules of Court, raising the following issues and
praying for the reversal of the aforementioned Decision of the Court of Appeals affirming the Order of dismissal of the
trial court:
I. Whether the lower courts dismissal of the petitioners complaint should be proscribed by the rules of evidence it being
based inter alia on Engr. Navals testimony, which was indisputably not based on facts but conclusion of law.
II. Whether the lower courts dismissal of petitioners complaint should be proscribed by the rules of evidence it being
done sans ample evidence except bare allegations of respondent.
III. Whether the provision of P.D. 892, i.e., Spanish titles cannot be used as evidence of land ownership in any registration
proceedings under the Torrens system, holds of an exception.
IV. Whether an action for quieting of title, specifically where petitioners are in possession of subject land, can be subject
of prescription.
In his Comment,
22
the respondent, for the most part, reiterated the findings of the trial court and the Court of Appeals.
The Court believes that the trial court rightfully dismissed petitioners Complaint, but for reasons different from those
relied upon by the trial court and the Court of Appeals.
According to the respondent, petitioners had no legal capacity to file the Complaint, and thus, the Complaint filed before
the trial court stated no cause of action.
Before anything else, it should be clarified that "the plaintiff has no legal capacity to sue"
23
and "the pleading asserting the
claim states no cause of action"
24
are two different grounds for a motion to dismiss or are two different affirmative
defenses. Failure to distinguish between "the lack of legal capacity to sue" from "the lack of personality to sue" is a fairly
common mistake. The difference between the two is explained by this Court inColumbia Pictures, Inc. v. Court of
Appeals:
25

Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue and that the
complaint states no cause of action. Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil
rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation
he claims. On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real
party-in-interest, hence grounded on failure to state a cause of action. The term "lack of capacity to sue" should not be
confused with the term "lack of personality to sue." While the former refers to a plaintiffs general disability to sue, such
as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a
party, the latter refers to the fact that the plaintiff is not the real party- in-interest. Correspondingly, the first can be a
ground for a motion to dismiss based on the ground of lack of legal capacity to sue; whereas the second can be used as a
ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of
action.
In the present case, this Court may assume that the respondent is raising the affirmative defense that the Complaint filed
by the petitioners before the trial court stated no cause of action because the petitioners lacked the personality to sue, not
being the real party-in-interest. It is the respondents contention that only the State can file an action for annulment of his
certificates of title, since such an action will result in the reversion of the ownership of the Subject Property to the State.
The affirmative defense that the Complaint stated no cause of action, similar to a motion to dismiss based on the same
ground, requires a hypothetical admission of the facts alleged in the Complaint. In the case of Garcon v. Redemptorist
Fathers,
26
this Court laid down the rules as far as this ground for dismissal of an action or affirmative defense is
concerned:
It is already well-settled by now that, in a motion to dismiss a complaint based on lack of cause of action, the question
submitted to the court for determination is the sufficiency of the allegations of fact made in the complaint to constitute a
cause of action, and not on whether these allegations of fact are true, for said motion must hypothetically admit the truth
of the facts alleged in the complaint; that the test of the sufficiency of the facts alleged in the complaint is whether or not,
admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of said
complaint. Stated otherwise, the insufficiency of the cause of action must appear in the face of the complaint in order to
sustain a dismissal on this ground, for in the determination of whether or not a complaint states a cause of action, only the
facts alleged therein and no other matter may be considered, and the court may not inquire into the truth of the allegations,
and find them to be false before a hearing is had on the merits of the case; and it is improper to inject in the allegations of
the complaint facts not alleged or proved, and use these as basis for said motion.
In resolving whether or not the Complaint in the present case stated a cause of action, the trial court should have limited
itself to examining the sufficiency of the allegations in the Complaint. It was proscribed from inquiring into the truth of
the allegations in the Complaint or the authenticity of any of the documents referred or attached to the Complaint, since
these are deemed hypothetically admitted by the respondent. The trial court evidently erred in making findings as to the
authenticity of the Deeds of Assignment executed by Ismael Favila in favor of petitioners on 15 April 1994 and 02 June
1994; and questioning the existence and execution of the Special Power of Attorney in favor of said Ismael Favila by his
siblings on 25 February 1965. These matters may only be resolved after a proper trial on the merits.
Petitioners alleged in their Complaint, and respondent hypothetically admitted that: (1) Petitioners predecessors-in-
interest, in the concept of owners, had been in actual, physical, open, continuous and adverse possession of the Subject
Property against the whole world since time immemorial; (2) The Subject Property was part of the vast tract of land called
"Hacienda Quibiga" awarded to Don Hermogenes Rodriguez by the Queen of Spain by virtue of a Spanish title; (3) Ismael
Favila, an heir and successor-in-interest of Don Hermogenes Rodriguez, acting as Attorney-in-Fact pursuant to a Special
Power of Attorney executed by his "mga kapatid" on 25 February 1965, executed Deeds of Assignment covering the
Subject Property in favor of petitioners; (4) Petitioners still occupied and possessed the Subject Property, on which their
houses were erected, when they discovered that the Subject Property was already covered by Torrens certificates of title in
the name of respondent; and (5) That petitioners filed the Complaint to prevent their eviction by the respondent. To
determine whether these allegations are sufficient to constitute a cause of action, it is important for this Court to establish
first the nature of petitioners action.
Indeed, petitioners Complaint filed before the trial court was captioned as an action for declaration of nullity of
respondents certificates of title. However, the caption of the pleading should not be the governing factor, but rather the
allegations therein should determine the nature of the action, because even without the prayer for a specific remedy, the
courts may nevertheless grant the proper relief as may be warranted by the facts alleged in the Complaint and the evidence
introduced.
27

The trial court believed that petitioners action was ultimately one for reversion of the Subject Property to the public
domain. Based on the testimony of Engineer Naval and the case of Nagao v. Court of Appeals,
28
it declared that the
State, represented by the Office of the Solicitor General, is the party-in-interest in an action for cancellation of a certificate
of title illegally issued in the name of a private individual, because the eventual effect of such cancellation is the reversion
of the property to the State.
The Court disagrees in this pronouncement of the trial court, and calls for a far closer review of its decision inNagao v.
Court of Appeals,
29
wherein the Court held that
It is then clear from the allegations in the complaint that private respondents claim ownership of the 2,250 square meter
portion for having possessed it in the concept of an owner, openly, peacefully, publicly, continuously and adversely since
1920. This claim is an assertion that the lot is private land, or that even assuming it was part of the public domain, private
respondents had already acquired imperfect title thereto under Section 48(b) of C.A. No. 141, otherwise known as the
Public Land Act, as amended by R.A. No. 1942
Under Section 48, a subject lot is, for all legal intents and purposes, segregated from the public domain, because the
beneficiary is "conclusively presumed to have performed all the conditions essential to a Government grant and shall be
entitled to a certificate of title under the provisions of this chapter."
Consequently, merely on the basis of the allegations in the complaint, the lot in question is apparently beyond the
jurisdiction of the Director of the Bureau of Lands and could not be the subject of a Free Patent. Hence, dismissal of
private respondents complaint was premature and trial on the merits should have been conducted to thresh out evidentiary
matters.
It would have been entirely different if the action were clearly for reversion, in which case, it would have to be instituted
by the Solicitor General pursuant to Section 101 of C.A. No. 141, which provides:
Sec. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be
instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the [Republic] of
the Philippines.
In the more recent case of Heirs of Ambrocio Kionisala v. Heirs of Honorio Dacut,
30
the difference between an action for
declaration of nullity of land titles from an action for reversion was more thoroughly discussed as follows:
An ordinary civil action for declaration of nullity of free patents and certificates of title is not the same as an action for
reversion. The difference between them lies in the allegations as to the character of ownership of the realty whose title is
sought to be nullified. In an action for reversion, the pertinent allegations in the complaint would admit State ownership of
the disputed land. Hence, in Gabila vs. Barriga [41 SCRA 131], where the plaintiff in his complaint admits that he has no
right to demand the cancellation or amendment of the defendants title because even if the title were canceled or amended
the ownership of the land embraced therein or of the portion affected by the amendment would revert to the public
domain, we ruled that the action was for reversion and that the only person or entity entitled to relief would be the
Director of Lands.
On the other hand, a cause of action for declaration of nullity of free patent and certificate of title would require
allegations of the plaintiffs ownership of the contested lot prior to the issuance of such free patent and certificate of title
as well as the defendants fraud or mistake, as the case may be, in successfully obtaining these documents of title over the
parcel of land claimed by plaintiff. In such a case, the nullity arises strictly not from the fraud or deceit but from the fact
that the land is beyond the jurisdiction of the Bureau of Lands to bestow and whatever patent or certificate of title
obtained therefore is consequently void ab initio. The real party-in-interest is not the State but the plaintiff who alleges a
pre-existing right of ownership over the parcel of land in question even before the grant of title to the defendant
In their Complaint, petitioners never alleged that the Subject Property was part of the public domain. On the contrary,
petitioners asserted title over the Subject Property by virtue of their actual, physical, open, continuous and adverse
possession thereof, in the concept of owners, by themselves and through their predecessors-in-interest, since time
immemorial. The Deeds of Assignment executed in their favor and attached to their Complaint referred to a Spanish title
granted by the Queen of Spain to their predecessor-in-interest, Don Hermogenes Rodriguez. Clearly, petitioners are
asserting private title over the Subject Property, and consequently, their action could not be one for reversion.
In their instant Petition, petitioners further averred that rather than an action for nullity of respondents certificates of title,
theirs was more appropriately an action to remove a cloud on or to quiet their title over the Subject Property.
Article 476 of the Civil Code, on removal of a cloud on or quieting of title, provides that:
Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record,
claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective,
voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet
the title.
An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein.
Respondents certificates of title over the Subject Property appeared valid or effective; but according to the petitioners,
they were fake, spurious and/or fraudulent, and a cloud on their title to the same property that needed to be removed. A
cloud on title has been defined as follows:
Cloud on Title. A cloud on title is an outstanding instrument, record, claim, encumbrance or proceeding which is
actually invalid or inoperative, but which may nevertheless impair or affect injuriously the title to property. The matter
complained of must have a prima facie appearance of validity or legal efficacy. The cloud on title is a semblance of title
which appears in some legal form but which is in fact unfounded. The invalidity or inoperativeness of the instrument is
not apparent on the face of such instrument, and it has to be proved by extrinsic evidence
31

Even as this Court agrees with the petitioners that their action was one for removal of a cloud on or quieting of title, it
does arrive at the same conclusion as the trial court and the Court of Appeals that petitioners had no personality to file the
said action, not being the parties-in-interest, and their Complaint should be dismissed for not stating a cause of action.
According to Article 477 of the Civil Code, the plaintiff, in an action to remove a cloud on or to quiet title, must have
legal or equitable title to, or interest in, the real property which is the subject matter of the action.
32
Petitioners failed to
establish in their Complaint that they had any legal or equitable title to, or legitimate interest in, the Subject Property so as
to justify their right to file an action to remove a cloud on or to quiet title.
Title to real property refers to that upon which ownership is based. It is the evidence of the right of the owner or the extent
of his interest, by which means he can maintain control and, as a rule, assert right to exclusive possession and enjoyment
of the property.
33

In their Complaint, petitioners claimed title to the Subject Property by virtue of their actual and continuous possession of
the same since time immemorial, by themselves and through their predecessors-in-interest. Yet, the Deeds of Assignment
executed by Ismael Favila in their favor, attached to and an integral part of their Complaint, revealed that petitioners
predecessors-in-interest based their right to the Subject Property on the Spanish title awarded to Don Hermogenes
Rodriguez.
There existed a contradiction when petitioners based their claim of title to the Subject Property on their possession thereof
since time immemorial, and at the same time, on the Spanish title granted to Don Hermogenes Rodriguez. Possession
since time immemorial carried the presumption that the land had never been part of the public domain or that it had been
private property even before the Spanish conquest.
34
If the Subject Property was already private property before the
Spanish conquest, then it would have been beyond the power of the Queen of Spain to award or grant to anyone.
The title to and possession of the Subject Property by petitioners predecessors-in-interest could be traced only as far back
as the Spanish title of Don Hermogenes Rodriguez. Petitioners, having acquired portions of the Subject Property by
assignment, could acquire no better title to the said portions than their predecessors-in-interest, and hence, their title can
only be based on the same Spanish title.
Respondent maintained that P.D. No. 892 prevents petitioners from invoking the Spanish title as basis of their ownership
of the Subject Property. P.D. No. 892 strengthens the Torrens system by discontinuing the system of registration under the
Spanish Mortgage Law, and by categorically declaring all lands recorded under the latter system, not yet covered by
Torrens title, unregistered lands. It further provides that within six months from its effectivity, all holders of Spanish titles
or grants should apply for registration of their land under what is now P.D. No. 1529, otherwise known as the Land
Registration Decree. Thereafter, Spanish titles can no longer be used as evidence of land ownership in any registration
proceedings under the Torrens system.
35
Indubitably, P.D. No. 892 divests the Spanish titles of any legal force and effect
in establishing ownership over real property.
P.D. No. 892 became effective on 16 February 1976. The successors of Don Hermogenes Rodriguez had only until 14
August 1976 to apply for a Torrens title in their name covering the Subject Property. In the absence of an allegation in
petitioners Complaint that petitioners predecessors-in-interest complied with P.D. No. 892, then it could be assumed that
they failed to do so. Since they failed to comply with P.D. No. 892, then the successors of Don Hermogenes Rodriguez
were already enjoined from presenting the Spanish title as proof of their ownership of the Subject Property in registration
proceedings.
Registration proceedings under the Torrens system do not create or vest title, but only confirm and record title already
created and vested.
36
By virtue of P.D. No. 892, the courts, in registration proceedings under the Torrens system, are
precluded from accepting, confirming and recording a Spanish title. Reason therefore dictates that courts, likewise, are
prevented from accepting and indirectly confirming such Spanish title in some other form of action brought before them
(i.e., removal of cloud on or quieting of title), only short of ordering its recording or registration. To rule otherwise would
open the doors to the circumvention of P.D. No. 892, and give rise to the existence of land titles, recognized and affirmed
by the courts, but would never be recorded under the Torrens system of registration. This would definitely undermine the
Torrens system and cause confusion and instability in property ownership that P.D. No. 892 intended to eliminate.
Petitioners argued that the Spanish title may still be presented as proof of ownership on the basis of the exception
provided in the fourth whereas clause of P.D. No. 892, which reads:
WHEREAS, Spanish titles to lands which have not yet been brought under the operation of the Torrens system, being
subject to prescription, are now ineffective to prove ownership unless accompanied by proof of actual possession; . . .
Since Petitioners alleged that they were in actual possession of the Subject Property, then they could still present the
Spanish title as evidence of their ownership of the Subject Property.
37

This Court cannot sustain petitioners argument. Actual proof of possession only becomes necessary because, as the same
whereas clause points out, Spanish titles are subject to prescription. A holder of a Spanish title may still lose his
ownership of the real property to the occupant who actually possesses the same for the required prescriptive
period.
38
Because of this inherent weakness of a Spanish title, the applicant for registration of his Spanish title under the
Torrens system must also submit proof that he is in actual possession of the real property, so as to discount the possibility
that someone else has acquired a better title to the same property by virtue of prescription.
Moreover, legislative intent must be ascertained from a consideration of the statute as a whole, and not just a particular
provision alone. A word or phrase taken in the abstract may easily convey a meaning quite different from the one actually
intended and evident when the word or phrase is considered with those with which it is associated. An apparently general
provision may have a limited application if read together with other provisions of the statute.
39

The fourth whereas clause of P.D. No. 892 should be interpreted and harmonized with the other provisions of the whole
statute.
40
Note that the tenor of the whole presidential decree is to discontinue the use of Spanish titles and to strip them of
any probative value as evidence of ownership. It had clearly set a deadline for the filing of applications for registration
of all Spanish titles under the Torrens system (i.e., six months from its effectivity or on 14 August 1976), after which, the
Spanish titles may no longer be presented to prove ownership.
All holders of Spanish titles should have filed applications for registration of their title on or before 14 August 1976. In a
land registration proceeding, the applicant should present to the court his Spanish title plus proof of actual possession of
the real property. However, if such land registration proceeding was filed and initiated after 14 August 1976, the applicant
could no longer present his Spanish title to the court to evidence his ownership of the real property, regardless of whether
the real property was in his actual possession.
Therefore, the fact that petitioners were in actual possession of the Subject Property when they filed the Complaint with
the trial court on 29 April 1996 does not exclude them from the application of P.D. No. 892, and their Spanish title remain
inadmissible as evidence of their ownership of the Subject Property, whether in a land registration proceeding or in an
action to remove a cloud on or to quiet title.
The preceding discussion does not bar holders of Spanish titles from claiming ownership of the real property on some
other basis, such as those provided in either the Land Registration Decree
41
or the Public Land Act.
42
Petitioners though
failed to allege any other basis for their titles in their Complaint aside from possession of the Subject Property from time
immemorial, which this Court has already controverted; and the Spanish title, which is already ineffective to prove
ownership over the Subject Property.
Therefore, without legal or equitable title to the Subject Property, the petitioners lacked the personality to file an action for
removal of a cloud on, or quieting of, title and their Complaint was properly dismissed for failing to state a cause of
action. In view of the dismissal of the case on this ground, it is already unnecessary for this Court to address the issue of
prescription of the action.
Wherefore, this Court DENIES the instant petition and AFFIRMS the Decision of the Court of Appeals, dated 29 July
2002, and the Order of the Regional Trial Court of San Mateo, Rizal, Branch 77, dated 05 February 1999, dismissing
petitioners Complaint for failure to state a cause of action.
SO ORDERED.


























MARIANO NOCOM, G.R. No. 182984
Petitioner,

Present:


CAMERINO Respondents. Promulgated:

February 10, 2009

X ---------------------------------------------------------------------------------------- X

DECISION

AZCUNA, J .:

This is a petition for review on certiorari seeking to reverse and set aside the Decision dated February 14, 2008 of
the Court of Appeals (CA) which affirmed the Joint Order dated June 9, 2005 and Summary Judgment dated June 15,
2006 of the Regional Trial Court (RTC) of Muntinlupa City, Branch 203 and dismissed petitioners appeal under Rule 41
of the Rules of Court for lack of jurisdiction and its Resolution dated May 23, 2008 which denied petitioners motion for
reconsideration.
The present case is an offshoot of the prior case, G.R. No. 161029, entitled Springsun Management Systems
Corporation v. Oscar Camerino, Efren Camerino, Cornelio Mantile, Nolasco Del Rosario, and Domingo Enriquez,
which was promulgated on January 19, 2005 (449 SCRA 65) and became final and executory on May 4, 2005 as recorded
in the Book of Entries of Judgment.

The factual antecedents are as follows:

G.R. No. 161029:

Respondent Oscar Camerino and respondents-intervenors Efren Camerino, Cornelio Mantile, the deceased
Nolasco Del Rosario, represented by Mildred Del Rosario, and Domingo Enriquez were the tenants who were tilling on
the parcels of land planted to rice and corn previously owned by Victoria Homes, Inc. covered by Transfer Certificate of
Title (TCT) Nos. 289237, now S-6135 (109,451 square meters); S-72244 (73,849 square meters); and 289236, now S-
35855 (109,452 square meters). On February 9, 1983, without notifying the respondents, Victoria Homes, Inc. sold the
said lots to Springsun Management Systems Corporation (SMSC) for P9,790,612. The three deeds of sale were duly
registered with the Registry of Deeds of Rizal and new titles were issued in the name of SMSC.

Subsequently, SMSC mortgaged to Banco Filipino (BF) the said lots as collaterals for its loans amounting
to P11,545,000. As SMSC failed to pay the loans due, BF extrajudicially foreclosed the mortgage and, later, was
adjudged the highest bidder. On May 10, 2000, SMSC redeemed the lots from BF. Earlier, on March 7, 1995,
respondents filed a complaint against SMSC and BF for Prohibition/Certiorari, Reconveyance/Redemption, Damages,
Injunction with Preliminary Injunction and Temporary Restraining Order, docketed as Civil Case No. 95-020, with the
RTC of Muntinlupa City, Branch 256.

On January 25, 2002, the RTC of Muntinlupa City, Branch 256, found respondents to be tenants who have been
tilling on the subject land planted to rice and corn since 1967 and, thus, authorized them to redeem the subject lots. The
dispositive portion of the decision states:


WHEREFORE, judgment is hereby as follows:

1. Declaring that plaintiffs are entitled (sic) to redeem, and ordering the defendant
Springsun Management Systems Corporation (now petitioner) to allow plaintiffs to
redeem the landholdings in question within 180 days from finality of this decision at
the total price of P9,790,612.00; upon full payment of the redemption price, the
defendant Springsun Management Systems Corporation is ordered to deliver
plaintiffs the titles and the corresponding Deed of Redemption so that the titles to the
properties in litigation can be transferred in the name of the plaintiffs;

2. Declaring plaintiffs entitled to possession, and ordering the defendant Springsun
Management Systems Corporation and all persons claiming under it to vacate the
lands in question and to surrender the same to the plaintiffs;

3. Dismissing the case against Banco Filipino Savings and Mortgage Bank;

4. Ordering the defendant Springsun Management Systems Corporation to pay plaintiffs
the sum of P200,000.00 as attorneys fees, plus costs.

SO ORDERED.
[1]



On September 23, 2003, the CA, in CA-G.R. SP No. 72475, affirmed with modification the RTC by declaring the
respondents to be tenants or agricultural lessees on the disputed lots and, thus, entitled to exercise their right of
redemption, but deleted the award of P200,000 attorneys fees for lack of legal basis.

On January 19, 2005, this Court, in G.R. No. 161029, affirmed the CA and reiterated that being agricultural tenants
of Victoria Homes, Inc. that had sold the lots to SMSC without notifying them, respondents had the right to redeem the
subject properties from SMSC.

This Court denied SMSCs motions for reconsideration and for leave to file a second motion for reconsideration
and, on May 4, 2005, an Entry of Judgment was made.

The present G.R. No. 182984:

On December 3, 2003, petitioner Mariano Nocom gave the respondents several Philtrust Bank Managers Checks
amounting toP500,000 each, which the latter encashed, representing the price of their inchoate and contingent rights
over the subject lots which they sold to him.

On December 18, 2003, respondents, with the marital consent of their wives, executed an Irrevocable Power of
Attorney which was notarized by their counsel Atty. Arturo S. Santos. Thus,

IRREVOCABLE POWER OF
ATTORNEY
[2]


KNOW ALL MEN BY THESE PRESENTS:

WE, OSCAR CAMERINO, of legal age, Filipino, married to Teresita L. Magbanua: EFREN
CAMERINO, of legal age, Filipino, married to Susana Camerino, CORNELIO MANTILE, of legal age,
Filipino, married to Maria Fe Alon, NOLASCO DEL ROSARIO, of legal age, Filipino, married to
Mildred Joplo, and DOMINGO ENRIQUEZ, of legal age, Filipino, married to Dionicia Enriquez whose
residences are stated under our respective names, hereby APPOINT, NAME, and CONSTITUTE
MARIANO NOCOM, of legal age, Filipino, married to Anacoreta Nocom and with office at No. 2315
Aurora Blvd, Pasay City, in an irrevocable manner, coupled with interest, for us and in our stead, to do all
or any of the following acts and deeds:

1. To sell, assign, transfer, dispose of, mortgage and alienate the properties described in TCT
Nos. 120542, 120541 and 123872 of the Register of Deeds of Muntinlupa City, currently in the
name of Springsun Management Systems Corporation, consisting of 292,752 square meters
subject matter of Civil Case No. 95-020 of the Regional Trial Court of Muntinlupa City, Branch
256. The said court, in its decision dated January 25, 2002 which was affirmed with modification
of the Court of Appeals in its decision dated September 24, 2003 in CA-G.R. SP No. 72475,
adjudged that we are legally entitled to redeem the lands from Springsun Management Systems
Corporation;

2. To comply with the said decision by paying the redemption price to Springsun Management
Systems Corporation and/or to the court, and upon such payment, to secure execution of the
judgment so that the titles can be issued in the name of our attorney-in-fact;

3. To accept and receive for his exclusive benefit all the proceeds which may be derived from
the sale, mortgage, transfer or deposition thereof;

4. To sign and execute all the necessary papers, deed and documents that may be necessary or
the accomplishment of purposes of the Deed of Assignment, and to issue receipts and proper
discharges therefor;

5. To negotiate, deal and transact with all the persons and entities involved in Civil Case No.
95-020, RTC, Muntinlupa City, Branch 256, with full power and authority to compromise with
them;

6. To procure all documents and papers in government agencies relative to the said properties
and case in court; and

7. To procure the necessary transfer certificate of titles in his name as the absolute owner of
said properties.

GIVING AND GRANTING full power and authority to our said attorney-in-fact to do all things
requisite and necessary with legal effects as if done by us when present.

IN WITNESS WHEREOF, We have hereunto affixed [our] signatures this 18
th
day of December,
2003.

(Sgd.) OSCAR CAMERINO (Sgd.) EFREN CAMERINO
Principal Principal
Sparrow St., Diamond Park San Antonio, San Pedro
Victoria Homes, Tunasan Laguna
Muntinlupa City


(Sgd.) CORNELIO MANTILE (Sgd.) NOLASCO DEL ROSARIO
Principal Principal
Victoria Ave., Tunasan Esmido St., Diamond Park
Muntinlupa City Victoria Homes, Muntinlupa City
(Sgd.) DOMINGO ENRIQUEZ
Principal
Tunasan Proper, Arandia
Tunasan, Muntinlupa City


WITH OUR MARITAL CONSENT:

(Sgd.) TERESITA MAGBANUA (Sgd.) SUSANA CAMERINO
Wife of Oscar Camerino Wife of Efren Camerino


(Sgd.) MARIA FE ALON ALON (Sgd.) MILDRED JOPLO
Wife of Cornelio Mantile Wife of Nolasco del Rosario


(Sgd.) DIONICIA ENRIQUEZ
Wife of Domingo Enriquez

CONFORME:

(Sgd.) MARIANO NOCOM
Attorney-in-Fact


Meanwhile, on July 21, 2005, the respondents, in Civil Case No. 95-020 of the RTC of Muntinlupa City, Branch
256, filed a Motion for Execution with Prayer to Order the Register of Deeds of Muntinlupa City to divest SMSC of title
to the subject lots and have the same vested on them. As SMSC refused to accept the redemption amount of P9,790,612
plus P147,059.18 as commission given by the petitioner, the respondents deposited, on August 4, 2005, the amounts
of P9,790,612, P73,529.59, and P73,529.59, duly evidenced by official receipts, with the RTC of Muntinlupa City, Branch
256. The RTC of Muntinlupa City, Branch 256 granted respondents motion for execution and, consequently, TCT Nos.
120542, 120541 and 123872 in the name of SMSC were cancelled and TCT Nos. 15895, 15896 and 15897 were issued in
the names of the respondents. It also ordered that the Irrevocable Power of Attorney, executed on December 18,
2003 by respondents in favor of petitioner, be annotated in the memorandum of encumbrances of TCT Nos. 15895,
15896, and 15897.

On October 24, 2005, respondent Oscar Camerino filed a complaint against petitioner, captioned as Petition to
Revoke Power of Attorney, docketed as Civil Case No. 05-172, in the RTC of Muntinlupa City, Branch 203, seeking to
annul the Irrevocable Power of Attorney dated December 18, 2003, the turnover of the titles to the properties in his
favor, and the payment of attorneys fees and other legal fees.

Respondent Oscar Camerinos complaint alleged that he and co-respondents were asked by their counsel, Atty.
Arturo S. Santos, to sign a document with the representation that it was urgently needed in the legal proceedings against
SMSC; that the contents of the said document were not explained to him; that in the first week of September 2005, he
learned that TCT Nos. 15895, 15896 and 15897 were issued in their favor by the Register of Deeds; that he discovered
that the annotation of the Irrevocable Power of Attorney on the said titles was pursuant to the Order of the RTC of
Muntinlupa City, Branch 256 dated August 31, 2005; that the Irrevocable Power of Attorney turned out to be the same
document which Atty. Santos required him and the other respondents to sign on December 18, 2003; that despite repeated
demands, petitioner refused to surrender the owners duplicate copies of the said titles; that petitioner had retained
ownership over the subject lots; that he had no intention of naming, appointing, or constituting anyone, including
petitioner, to sell, assign, dispose, or encumber the subject parcels of land; and that he executed an Affidavit of Adverse
Claim which was annotated on the titles involving the subject lots.

In his Answer with Counterclaim, petitioner countered that on September 3, 2003, Atty. Santos informed him of
the desire of his clients, herein respondents, to sell and assign to him their inchoate and contingent rights and interests
over the subject lots because they were in dire need of money and could no longer wait until the termination of the
proceedings as SMSC would probably appeal the CAs Decision to this Court; that they did not have the amount
of P9,790,612 needed to redeem the subject lots; that on December 18, 2003, he decided to buy the contingent rights of
the respondents and paid each of them P500,000 or a total ofP2,500,000 as evidenced by Philtrust Bank Managers Check
Nos. MV 0002060 (for respondent Oscar Camerino), MV 0002061 (for respondent Efren Camerino), MV 0002062 (for
respondent Cornelio Mantile), MV 0002063 (for Nolasco Del Rosario), and MV 0002064 (for Domingo Enriquez) which
they personally encashed on December 19, 2003; that on August 4, 2005, he also paid the amount of P147,059.18 as
commission; that simultaneous with the aforesaid payment, respondents and their spouses voluntarily signed the
Irrevocable Power of Attorney dated December 18, 2003; that being coupled with interest, the Irrevocable Power of
Attorney cannot be revoked or cancelled at will by any of the parties; and that having received just and reasonable
compensation for their contingent rights, respondents had no cause of action or legal right over the subject lots. Petitioner
prayed for the dismissal of the complaint and the payment of P1,000,000 moral damages, P500,000 exemplary damages,
and P500,000 attorneys fees plus costs.

On January 17, 2006, petitioner filed a Motion for Preliminary Hearing on his special and/or affirmative defense
that respondent Oscar Camerino had no cause of action or legal right over the subject lots because the latter and his wife
received the proceeds of the Philtrust Bank Managers check in the sum of P500,000 which they personally encashed on
December 19, 2003 and that being coupled with interest, the Irrevocable Power of Attorney cannot be revoked or
cancelled at will by any of the parties.

On January 26, 2006, respondents Efren Camerino, Cornelio Mantile and Mildred Del Rosario, in her capacity as
legal heir and representative of Nolasco Del Rosario, filed a Motion for Leave of Court to Admit the Complaint-in-
Intervention with the attached Complaint-in-Intervention, dated January 26, 2006, seeking the nullification of the
Irrevocable Power of Attorney for being contrary to law and public policy and the annotation of the Irrevocable Power
of Attorney on the titles of the subject lots with prayer that petitioner be ordered to deliver to them the copies of the
owners duplicate certificate of TCT Nos. 15895, 15896, and 15897. Their Complaint-in-Intervention alleged that they
had a legal interest in the subject matter of the controversy and would either be directly injured or benefited by the
judgment in Civil Case No. 05-172; that they were co-signatories or co-grantors of respondent Oscar Camerino in the
Irrevocable Power of Attorney they executed in favor of the petitioner; that their consent was vitiated by fraud,
misrepresentation, machination, mistake and undue influence perpetrated by their own counsel, Atty. Santos, and
petitioner; that sometime in December 2003, Atty. Santos called for a meeting which was attended by petitioner and one
Judge Alberto Lerma where petitioner gave them checks in the amount of P500,000 each as Christmas gifts; and that
the Irrevocable Power of Attorney was void ab initio as the same was contrary to law and public policy and for being a
champertous contract.

On January 30, 2006, respondent Oscar Camerino filed a Motion for Summary Judgment alleging that since the
existence of the Irrevocable Power of Attorney was admitted by petitioner, the only issue to be resolved was whether
the said document was coupled with interest and whether it was revocable in contemplation of law and jurisprudence; that
Summary Judgment was proper because petitioner did not raise any issue relevant to the contents of the Irrevocable
Power of Attorney; and that in an Affidavit dated January 23, 2005, he admitted receipt of a check amounting
to P500,000.00 which was given to him by petitioner as financial assistance.

On February 3, 2006, petitioner opposed respondent Oscar Camerinos motion on the ground that there were
factual issues that required the presentation of evidence.

On February 14, 2006, petitioner filed a Motion to Dismiss the complaint on the ground that the petition for the
cancellation of the Irrevocable Power of Attorney was actually an action to recover the titles and ownership over the
properties; that since respondent Oscar Camerino alleged in paragraph 29 of his Motion for Summary Judgment that the
assessed value of the subject lots amounted to P600,000,000, the case partook of the nature of a real action and, thus, the
docket fees of P3,929 was insufficient; and that due to insufficient docket fee, his complaint should be dismissed as the
RTC was not vested with jurisdiction over the subject matter of the complaint.

On February 22, 2006, respondent Oscar Camerino opposed petitioners motion for preliminary hearing of special
and/or affirmative defenses alleging that it was dilatory and that he had a cause of action.

On March 9, 2006, respondent Oscar Camerino filed his Reply to petitioners Opposition to the Motion for
Summary Judgment claiming that the determinative issue of whether or not the amount of P500,000 given to him by
petitioner rendered the power of attorney irrevocable can be determined from the allegations in the pleadings and
affidavits on record without the need of introduction of evidence.

On May 5, 2006, respondent Oscar Camerino filed an Opposition to petitioners Motion to Dismiss stating that the
instant case was a personal action for the revocation of the Irrevocable Power of Attorney and not for the recovery of
real property and, thus, the correct docket fees were paid.

On June 9, 2006, the RTC of Muntinlupa City, Branch 203 admitted the Complaint-in-Intervention because the
movants-intervenors ([herein respondents] Efren Camerino, Cornelio Mantile, and Mildred Del Rosario as legal heir of
Nolasco Del Rosario) have legal interest in the subject properties in litigation and in the success of the petitioner [herein
respondent Oscar Camerino], who was precisely their co-plaintiff in Civil Case No. 95-020, entitled Oscar Camerino, et
al. v. Springsun Management Systems Corporation et al., where they are the prevailing parties against the defendant
therein [SMSC], with respect to the same properties, subject of this case, in a decision rendered by Branch 256 of this
Court. The RTC, Branch 203, also granted the Motion for Summary Judgment because a meticulous scrutiny of the
material facts admitted in the pleadings of the parties reveals that there is really no genuine issue of fact presented therein
that needs to be tried to enable the court to arrive at a judicious resolution of a matter of law if the issues presented by the
pleadings are not genuine issues as to any material fact but are patently unsubstantial issues that do not require a hearing
on the merits. Thus,

The instant Motion to Dismiss by the respondent is therefore DENIED, PROVIDED, the petitioner
should pay the balance of the docket fees remaining unpaid, if any, pursuant to Rule 141, Section 7 of the
Rules of Court, as amended by A.M. No. 04-2-04-SC within the applicable prescriptive or reglementary
period.

The Motion for Intervention timely filed by intervenors Efren Camerino, Cornelio Mantile and
Mildred Del Rosario, in her capacity as legal heir of Nolasco Del Rosario, as opposed by the respondent,
is hereby GRANTED.
x x x

Petitioners Motion for Summary Judgment is therefore GRANTED.

Consequently, respondents Motion for Preliminary Hearing on his Special and Affirmative
Defenses is deemed moot and academic.

SO ORDERED.
[3]



On June 15, 2006, the RTC of Muntinlupa City, Branch 203 rendered a Summary Judgment annulling the
Irrevocable Power of Attorney for being contrary to law and public policy. The pertinent portions of the trial courts
decision state that:

Irrespective of whether the Power of Attorney in question is coupled with interest, or not, the
same can be revoked or annulled, firstly, because it is contrary to law and secondly it is against public
policy.

As aptly pointed out by the intervenors, the assailed Special Power of Attorney which under its
ultimate paragraph among others, authorizes the respondent (Nocom) to procure the necessary
Transfer Certificate of Title in his name, as the absolute owner of the said properties is a disguised
conveyance or assignment of the signatories statutory rights of redemption and therefore prohibited
under the provisions of Republic Act No. 3844, Sec. 62 which provides:

Sec. 62. Limitation on Land Rights.

Except in case of heredity succession by one heir, landholdings acquired under this Code may
not be resold, mortgaged, encumbered, or transferred until after the lapse of ten years from the date of
full payment and acquisition and after such ten year period, any transfer, sale or disposition may be
made only in favor of persons qualified to acquire economic family-size farm units in accordance with
the provisions of this Code xxx. (underlining supplied)

The assailed power of attorney which was executed on December 18, 2003 is void ab
initio for being contrary to the express prohibition or spirit of the aforesaid law or the declared state
and public policy on the qualification of the beneficiaries of the agrarian reform program. It bears
stressing that the redemption price of the subject lots was paid only on August 4, 2005 or 1 year, 8
months and 14 days after the execution of the assailed power of attorney.

If pursuant to the spirit of the Agrarian Reform Law, the tenant cannot even sell or dispose of
his landholding within ten (10) years after he already acquired the same or even thereafter to persons
not qualified to acquire economic size farm units in accordance with the provisions of the Agrarian
Reform Code, with more reason should the tenant not be allowed to alienate or sell his landholding
before he actually acquires the same.

The right of redemption of the petitioner and his co-plaintiffs in Civil Case No. 95-020 as
upheld by the Court of Appeals and the Supreme Court is founded on a piece of social legislation
known as Agrarian Reform Code.

Enunciated in the case of Association of Small Landowners in the Philippines, et al., vs. Hon.
Secretary of Agrarian Reform (G.R. No. 78742, July 14, 1989) is the policy of the State on agrarian
reform legislation. Said State policy emphasizes the Land for the Landless slogan that underscores
the acute imbalance in the distribution of land among the people.

Furthermore, the assailed Special Power of Attorney is a champertous contract and therefore
void for being against public policy. The pleadings of the parties show that the same special power of
attorney was executed by the petitioner, et al. through the intercession of Atty. Arturo Santos and at
the behest of the respondent. In his own answer to the instant petition which he is estopped to deny,
the respondent alleges that the actual agreement was for the respondent to pay the expenses of the
proceedings to enforce the rights of the petitioner and his co-plaintiffs in Civil Case No. 95-020
without any provision for reimbursement. In other words, the respondents, through the intercession of
Atty. Santos, petitioners attorney, had agreed to carry on with the action for the petitioner et al. at his
own expense in consideration of procuring for himself the title to the lots in question as the absolute
owner thereof, with the respondent paying the redemption price of said lots, as well as separate
amounts of Five Hundred Thousand (P500,000.00) to each of the five (5) co-plaintiffs in Civil Case
No. 95-020, including herein petitioner, or a total sum of Two Million Five Hundred Thousand Pesos
(P2,500,000.00).

Under the premises, the aforesaid contract brokered by Atty. Arturo Santos has all really the
earmarks of a champertous contract which is against public policy as it violates the fiduciary relations
between the lawyer and his client, whose weakness or disadvantage is being exploited by the
former. In other words, the situation created under the given premises is a clear circumvention of the
prohibition against the execution of champertous contracts between a lawyer and a client.

A champertous contract is defined as a contract between a stranger and a party
to a lawsuit, whereby the stranger pursues the partys claim in consideration of
receiving part or any of the proceeds recovered under the judgment; a bargain by a
stranger with a party to a suit, by which such third person undertakes to carry on the
litigation at his own cost and risk, in consideration of receiving, if successful, a part of
the proceeds or subject sought to be recovered. (Blacks Dictionary; Schnabel v. Taft
Broadcasting Co., Inc. Mo. App. 525 S.W. 2d 819, 823). An Agreement whereby the
attorney agrees to pay expenses of proceedings to enforce the clients rights is
champertous. [JBP Holding Corporation v. U.S. 166 F. Supp. 324 (1958)]. Such
agreements are against public policy especially where as in this case, the attorney has
agreed to carry on the action at its own expense in consideration of some bargain to
have part of the thing in dispute. [See Sampliner v. Motion Pictures Patents Co., et
al., 225 F. 242 (1918). The execution of these contracts violates the fiduciary
relationship between the lawyer and his client, for which the former must incur
administrative sanction.

The intention of the law in prohibiting this kind of contract is to prevent a lawyer from
acquiring an interest in the subject of the litigation and to avoid a conflict of interest between him and
his client.

In the instant case, it seems that Atty. Santos and the respondent colluded and conspired to
circumvent these prohibitions. Considering therefore that Atty. Santos, then petitioners counsel,
brokered the alleged deal between petitioners et al. and the respondent with respect to the lands subject
of litigation in Civil Case No. 95-020, the deal contracted is illegal for being a champertous agreement
and therefore it cannot be enforced.

Be that as it may, granting the agency established in the assailed Power of Attorney is coupled
with interest, the petitioner and his co-plaintiffs in Civil Case No. 95-020, who are the present
intervenors, are not revoking the Power of Attorney at will but have precisely gone to court and filed
the instant petition for its cancellation or revocation. What is prohibited by law and jurisprudence is
the arbitrary and whimsical revocation of a power of attorney or agency coupled with interest, at will
by a party, without court declaration.

WHEREFORE, judgment is hereby rendered as follows:

(1) Nullifying the Irrevocable Power of Attorney in question dated December 18, 2003, signed
by the petitioner [herein respondent Oscar Camerino] and his co-plaintiffs [herein respondents who were
the movant-intervenors] in Civil Case No. 95-020 in favor of the respondent [herein petitioner];

(2) Ordering the respondent to turnover the Certificates of Title Nos. 15895, 15896 and 15897
covering the lots, the subject of this case, to the petitioner and the intervenors;

(3) Ordering the respondent to pay the petitioner attorneys fees and all other legal fees incurred
by the latter in connection with this case;

(4) Ordering the petitioner and the intervenors to return to the respondent the amount
of P7,790,612 paid by the latter as redemption price of the lots in question plus commission
of P147,049.18; and

(5) Ordering the petitioner Oscar Camerino and the intervenors Efren Camerino, Cornelio
Mantile, Nolasco Del Rosario or his heirs and Domingo Enriquez, who are petitioners co-plaintiffs in
Civil Case No. 95-020, to return to the respondent the total amount of P2,500,000.00 orP500,000.00 from
each of them paid by the respondent to them under Philtrust Bank Check Nos. MV 0002060, MV
0002061, MV 0002062, MV 0002063, and MV 0002064 which checks were encashed by them with the
drawee bank.

SO ORDERED.
[4]



On July 3, 2006 petitioner filed an Omnibus Motion for Reconsideration seeking to set aside the trial courts Joint
Order datedJune 9, 2005 and Summary Judgment dated June 15, 2006 which was opposed by the respondents.
On July 4, 2006, respondents filed a Motion for Execution Pending Final Decision/Appeal which was opposed by
petitioner.

On August 14, 2006, the trial court issued an order denying petitioners Omnibus Motion for Reconsideration.
Within the reglementary period, petitioner filed a Notice of Appeal and paid the corresponding appeal docket fees.

On February 14, 2008, the CA affirmed the trial courts Joint Order dated June 9, 2006 and Summary Judgment
dated June 15, 2006 and dismissed the petitioners appeal for lack of jurisdiction. The CA ruled that as the RTC rendered
the assailed Summary Judgment based on the pleadings and documents on record, without any trial or reception of
evidence, the same did not involve factual matters. The CA found the issues raised by the petitioner in his appeal to be
questions of law, to wit: (a) whether Summary Judgment was proper under the admitted facts and circumstances
obtaining in the present case; (b) whether undue haste attended the rendition of the Summary Judgment; (c) whether the
Summary Judgment was valid for failure of the RTC to implead an indispensable party; (d) whether the RTC erred in
allowing the intervention of respondents Efren Camerino, Cornelio Mantile, and Mildred Del Rosario; and (e) whether the
RTC erred in taking cognizance of the case despite nonpayment of the required docket fees. The CA concluded that since
the issues involved questions of law, the proper mode of appeal should have been through a petition for review
on certiorari under Rule 45 of the Rules of Court directly to this Court and not through an ordinary appeal under Rule 41
thereof and, thus, petitioners appeal to the CA should be dismissed outright pursuant to this Courts Circular No. 2-90,
dated March 9, 1990, mandating the dismissal of appeals involving pure questions of law erroneously brought to the CA.

In its Resolution of May 23, 2008, the CA denied petitioners Motion for Reconsideration dated February 26,
2008.

Hence, this present petition.

Petitioner raises the following issues:

I

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR IN
DISMISSING PETITIONERS APPEAL.

II

WHETHER OR NOT THE COURT OF APPEALS ERRED IN UPHOLDING THE SUMMARY
JUDGMENT OF THE TRIAL COURT DESPITE THE GENUINE ISSUE OF FACT RAISED IN
PETITIONERS ANSWER.

III

WHETHER OR NOT THE COURT OF APPEALS IS CORRECT IN NOT VOIDING THE ASSAILED
SUMMARY JUDGMENT FOR FAILURE OF RESPONDENTS TO IMPLEAD AN INDISPENSABLE
PARTY.

IV

WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT DISMISSING CIVIL CASE NO.
05-172 FOR NON-PAYMENT OF THE CORRECT DOCKET FEES.



Petitioner contends that the CA erred in dismissing his appeal as the case involves questions of fact; that summary
judgment was not proper as there were genuine issues of fact raised in his Answer; that respondents failed to implead their
lawyer, Atty. Arturo S. Santos, as an indispensable party-defendant, who, according to them, allegedly connived with him
in making them sign the Irrevocable Power of Attorney in his favor; and that since the case partakes of the nature of an
action to recover ownership and titles to the properties, respondents complaint should be dismissed for failure to pay the
correct docket fees.

Respondent Oscar Camerino argues that the sole issue to be resolved pertains to the legal issue of whether the
Special Power of Attorney (SPA) denominated as irrevocable may be revoked; that three material facts have been
established, i.e., that the SPA was executed, that Atty. Santos facilitated the signing and execution of the SPA, and that
petitioner paid P500,000 to each of the respondents in consideration for the signing of the SPA and, thus, summary
judgment was proper; and that pure questions of law are not proper in an ordinary appeal under Rule 41 of the Rules.

Respondents Efren Camerino, Cornelio Mantile, and Mildred Del Rosario, in her capacity as legal heir of Nolasco
Del Rosario, aver that petitioners petition is insufficient in form, i.e., due to defective verification as the word personal
was not stated when referring to personal knowledge, and in substance, i.e., there is no genuine issue to be resolved as
the factual allegations of the petitioner are unsubstantial and that Atty. Santos is not an indispensable party to the case.

The petition has merit.

In dismissing petitioners appeal, the CA erroneously relied on the rationale that the petitioners appeal raised
questions of law and, therefore, it had no recourse but to dismiss the same for lack of jurisdiction. The summary
judgment rendered by the trial court has the effect of an adjudication on the merits and, thus, the petitioner, being the
aggrieved party, correctly appealed the adverse decision of the RTC to the CA by filing a notice of appeal coupled with
the appellants brief under Rule 41 of the Rules.

Contrary to the findings of the RTC and the CA, the present case involves certain factual issues which remove it
from the coverage of a summary judgment.

Under Section 1, Rule 35 of the Rules of Court, a party seeking to recover upon a claim, counterclaim, or cross-
claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with
supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof.

Summary judgment is a procedural device resorted to in order to avoid long drawn out litigations and useless
delays. When the pleadings on file show that there are no genuine issues of fact to be tried, the Rules allow a party to
obtain immediate relief by way of summary judgment, that is, when the facts are not in dispute, the court is allowed to
decide the case summarily by applying the law to the material facts. Conversely, where the pleadings tender a genuine
issue, summary judgment is not proper. A genuine issue is such issue of fact which requires the presentation of
evidence as distinguished from a sham, fictitious, contrived or false claim. Section 3 of the said rule provides two (2)
requisites for summary judgment to be proper: (1) there must be no genuine issue as to any material fact, except for the
amount of damages; and (2) the party presenting the motion for summary judgment must be entitled to a judgment as a
matter of law.
[5]
A summary judgment is permitted only if there is no genuine issue as to any material fact and a moving
party is entitled to a judgment as a matter of law. A summary judgment is proper if, while the pleadings on their face
appear to raise issues, the affidavits, depositions, and admissions presented by the moving party show that such issues are
not genuine.
[6]


The present case should not be decided via a summary judgment. Summary judgment is not warranted when
there are genuine issues which call for a full blown trial. The party who moves for summary judgment has the burden of
demonstrating clearly the absence of any genuine issue of fact, or that the issue posed in the complaint is patently
unsubstantial so as not to constitute a genuine issue for trial. Trial courts have limited authority to render summary
judgments and may do so only when there is clearly no genuine issue as to any material fact. When the facts as pleaded
by the parties are disputed or contested, proceedings for summary judgment cannot take the place of trial.
[7]


Summary judgment is generally based on the facts proven summarily by affidavits, depositions, pleadings, or
admissions of the parties. In this present case, while both parties acknowledge or admit the existence of the Irrevocable
Power of Attorney, the variance in the allegations in the pleadings of the petitioner vis--vis that of the respondents
require the presentation of evidence on the issue of the validity of the Irrevocable Power of Attorney to determine
whether its execution was attended by the vices of consent and whether the respondents and their spouses did not freely
and voluntarily execute the same. In his Answer with Counterclaim, petitioner denied the material allegations of
respondent Oscar Camerinos complaint for being false and baseless as respondents were informed that the document
they signed was the Irrevocable Power of Attorney in his favor and that they had received the full consideration of the
transaction and, thus, had no legal right over the three parcels of land. Indeed, the presentation of evidence is necessary to
determine the validity and legality of the Irrevocable Power of Attorney, dated December 18, 2003, executed by the
respondents in favor of the petitioner. From said main factual issue, other relevant issues spring therefrom, to
wit: whether the said Irrevocable Power of Attorney was coupled with interest; whether it had been obtained through
fraud, deceit, and misrepresentation or other vices of consent; whether the five (5) Philtrust Bank Managers checks given
by petitioner to the respondents amounting to P500,000 each were in consideration of the inchoate and contingent rights
of the respondents in favor of the petitioner; whether Atty. Santos connived with petitioner in causing the preparation of
the said document and, therefore, should be impleaded as party-defendant together with the petitioner; whether
respondents deposited the amount of P9,790,612.00 plusP147,059.18 with the RTC of Muntinlupa City, Branch 256; and
whether the sale of respondents inchoate and contingent rights amounted to a champertous contract.

The incongruence and disparity in the material allegations of both parties have been evident. Respondent Oscar
Camerino alleged in his complaint that he and his co-respondents were required by their counsel, Atty. Santos, to sign a
document on the representation that it was urgently needed in the legal proceedings against SMSC which turned out to be
the Irrevocable Power of Attorney; but petitioner disproved the vitiated consent on the part of the respondents as they
knew fully well that the document they signed, voluntarily and intelligently, on December 18, 2003, was the said
Irrevocable Power of Attorney. Respondent Oscar Camerino alleged in his complaint that he has no intention of
naming, appointing or constituting anyone, including the petitioner, to sell, assign, dispose or encumber the lots in
question; but petitioner maintained that respondent Oscar Camerino agreed to sell and assign to him his inchoate and
contingent rights and interests over the subject lot for and in consideration of the sum of P500,000, plus the redemption
price of P9,790,612. Respondents claimed that the amount they received was grossly disproportionate to the value of the
subject land; but petitioner countered that the respondents did not have the amount of P9,790,612 needed to redeem the
subject lots, so he decided to buy their contingent rights and paid each of them P500,000 or a total of P2,500,000 as
evidenced by five (5) Philtrust Bank Managers Check which they personally encashed on December 19, 2003, that he
also paid the amount ofP147,059.18 as commission on August 4, 2005, that simultaneous with the aforesaid payment,
respondents and their spouses voluntarily signed the Irrevocable Power of Attorney dated December 18, 2003, and that
being coupled with interest, the Irrevocable Power of Attorney cannot be revoked at will by any of the parties.

Respondents maintain that they were deceived into executing the Irrevocable Power of Attorney in favor of the
petitioner which was done through the maneuverings of their own lawyer, Atty. Santos, who, according to them, had
connived with petitioner in order to effect the fraudulent transaction. In this regard, respondents should have impleaded
Atty. Santos as an indispensable party-defendant early on when the case was still with the RTC, but they failed to do
so. However, their procedural lapse did not constitute a sufficient ground for the dismissal of Civil Case No. 05-172.

In Domingo v. Scheer,
[8]
the Court explained that the non-joinder of an indispensable party is not a ground for the
dismissal of an action. Section 7, Rule 3 of the Rules, as amended, requires indispensable parties to be joined as plaintiffs
or defendants. The joinder of indispensable parties is mandatory. Without the presence of indispensable parties to the suit,
the judgment of the court cannot attain real finality. Strangers to a case are not bound by the judgment rendered by the
court. The absence of an indispensable party renders all subsequent actions of the court null and void. There is lack of
authority to act not only of the absent party but also as to those present. The responsibility of impleading all the
indispensable parties rests on the petitioner or plaintiff. However, the non-joinder of indispensable parties is not a ground
for the dismissal of an action. Parties may be added by order of the court on motion of the party or on its own initiative at
any stage of the action and/or such times as are just. If the petitioner or plaintiff refuses to implead an indispensable party
despite the order of the court, the latter may dismiss the complaint or petition for the petitioner or plaintiffs failure to
comply therefor. The remedy is to implead the non-party claimed to be indispensable. In the present case, the RTC and
the CA did not require the respondents to implead Atty. Santos as party-defendant or respondent in the case. The
operative act that would lead to the dismissal of Civil Case No. 05-172 would be the refusal of respondents to comply
with the directive of the court for the joinder of an indispensable party to the case.

In his petition, petitioner prays for the reversal of the Decision dated February 14, 2008 of the CA which affirmed
the Joint Order dated June 9, 2005 and Summary Judgment dated June 15, 2006 of the RTC of Muntinlupa City, Branch
203 and dismissed petitioners appeal under Rule 41 of the Rules for lack of jurisdiction and its Resolution dated May 23,
2008 which denied petitioners motion for reconsideration; the annulment of the RTCs Summary Judgment rendered
on June 15, 2006; and the dismissal of Civil Case No. 05-172 filed with the RTC on the ground that respondents failed to
pay the correct docket fees as the action actually sought the recovery of ownership over the subject properties.

The record shows that Civil Case No. 05-172 is a complaint filed by respondent Oscar Camerino against
petitioner, denominated as Petition to Revoke Power of Attorney, that seeks to nullify the Irrevocable Power of
Attorney coupled with interest dated December 18, 2003; that petitioner be ordered to turn over TCT No. 15898, 15896,
and 15897 to him; and that petitioner be ordered to pay the attorneys fees and other legal fees as a consequence of the
suit. This case is therefore not an action to recover the titles and ownership over the subject properties. For now, the
nature of the suit remains that of personal action and not a real action in contemplation of Rule 4 of the Rules. Hence, the
docket fees paid by the respondents were in order. Should the complaint be amended to seek recovery of ownership of the
land, then the proper docket fees should be paid and collected.

While the RTC erred in rendering the summary judgment, Civil Case No. 05-172 should not perforce be
dismissed. Instead, this present case should be remanded to the RTC for further proceedings and proper disposition
according to the rudiments of a regular trial on the merits and not through an abbreviated termination of the case by
summary judgment.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated February
14, 2008 which affirmed the Joint Order dated June 9, 2005 and Summary Judgment dated June 15, 2006 of the Regional
Trial Court of Muntinlupa City, Branch 203 and dismissed petitioners appeal under Rule 41 of the Rules of Court on the
ground of lack of jurisdiction and the Resolution of the Court of Appeals dated May 23, 2008 which denied petitioners
motion for reconsideration in CA-G.R. CV No. 87656 are REVERSED and SET ASIDE. The case is REMANDED to
the Regional Trial Court of MuntinlupaCity, Branch 203, for further proceedings in accordance with this Decision.

No costs.

SO ORDERED.




















G.R. No. 141538 March 23, 2004
HERMANA R. CEREZO, petitioner,
vs.
DAVID TUAZON, respondent.
The Case
This is a petition for review on certiorari
1
to annul the Resolution
2
dated 21 October 1999 of the Court of Appeals in CA-
G.R. SP No. 53572, as well as its Resolution dated 20 January 2000 denying the motion for reconsideration. The Court of
Appeals denied the petition for annulment of the Decision
3
dated 30 May 1995 rendered by the Regional Trial Court of
Angeles City, Branch 56 ("trial court"), in Civil Case No. 7415. The trial court ordered petitioner Hermana R. Cerezo
("Mrs. Cerezo") to pay respondent David Tuazon ("Tuazon") actual damages, loss of earnings, moral damages, and costs
of suit.
Antecedent Facts
Around noontime of 26 June 1993, a Country Bus Lines passenger bus with plate number NYA 241 collided with a
tricycle bearing plate number TC RV 126 along Captain M. Palo Street, Sta. Ines, Mabalacat, Pampanga. On 1 October
1993, tricycle driver Tuazon filed a complaint for damages against Mrs. Cerezo, as owner of the bus line, her husband
Attorney Juan Cerezo ("Atty. Cerezo"), and bus driver Danilo A. Foronda ("Foronda"). The complaint alleged that:
7. At the time of the incident, plaintiff [Tuazon] was in his proper lane when the second-named defendant
[Foronda], being then the driver and person in charge of the Country Bus with plate number NYA 241, did then
and there willfully, unlawfully, and feloniously operate the said motor vehicle in a negligent, careless, and
imprudent manner without due regard to traffic rules and regulations, there being a "Slow Down" sign near the
scene of the incident, and without taking the necessary precaution to prevent loss of lives or injuries, his
negligence, carelessness and imprudence resulted to severe damage to the tricycle and serious physical injuries to
plaintiff thus making him unable to walk and becoming disabled, with his thumb and middle finger on the left
hand being cut[.]
4

On 1 October 1993, Tuazon filed a motion to litigate as a pauper. Subsequently, the trial court issued summons against
Atty. Cerezo and Mrs. Cerezo ("the Cerezo spouses") at the Makati address stated in the complaint. However, the
summons was returned unserved on 10 November 1993 as the Cerezo spouses no longer held office nor resided in Makati.
On 18 April 1994, the trial court issued alias summons against the Cerezo spouses at their address in Barangay Sta. Maria,
Camiling, Tarlac. The alias summons and a copy of the complaint were finally served on 20 April 1994 at the office of
Atty. Cerezo, who was then working as Tarlac Provincial Prosecutor. Atty. Cerezo reacted angrily on learning of the
service of summons upon his person. Atty. Cerezo allegedly told Sheriff William Canlas: "Punyeta, ano ang gusto mong
mangyari? Gusto mong hindi ka makalabas ng buhay dito? Teritoryo ko ito. Wala ka sa teritoryo mo."
5

The records show that the Cerezo spouses participated in the proceedings before the trial court. The Cerezo spouses filed a
comment with motion for bill of particulars dated 29 April 1994 and a reply to opposition to comment with motion dated
13 June 1994.
6
On 1 August 1994, the trial court issued an order directing the Cerezo spouses to file a comment to the
opposition to the bill of particulars. Atty. Elpidio B. Valera ("Atty. Valera") of Valera and Valera Law Offices appeared
on behalf of the Cerezo spouses. On 29 August 1994, Atty. Valera filed an urgent ex-parte motion praying for the
resolution of Tuazons motion to litigate as a pauper and for the issuance of new summons on the Cerezo spouses to
satisfy proper service in accordance with the Rules of Court.
7

On 30 August 1994, the trial court issued an order resolving Tuazons motion to litigate as a pauper and the Cerezo
spouses urgent ex-parte motion. The order reads:
At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that he is presently jobless; that at the time of
the filing of this case, his son who is working in Malaysia helps him and sends him once in a while P300.00 a
month, and that he does not have any real property. Attached to the Motion to Litigate as Pauper are his Affidavit
that he is unemployed; a Certification by the Barangay Captain of his poblacion that his income is not enough for
his familys subsistence; and a Certification by the Office of the Municipal Assessor that he has no landholding in
the Municipality of Mabalacat, Province of Pampanga.
The Court is satisfied from the unrebutted testimony of the plaintiff that he is entitled to prosecute his complaint
in this case as a pauper under existing rules.
On the other hand, the Court denies the prayer in the Appearance and Urgent Ex-Parte Motion requiring new
summons to be served to the defendants. The Court is of the opinion that any infirmity in the service of the
summons to the defendant before plaintiff was allowed to prosecute his complaint in this case as a pauper has
been cured by this Order.
If within 15 days from receipt of this Order, the defendants do not question on appeal this Order of this Court, the
Court shall proceed to resolve the Motion for Bill of Particulars.
8

On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion for reconsideration. The trial court denied the
motion for reconsideration.
On 14 November 1994, the trial court issued an order directing the Cerezo spouses to file their answer within fifteen days
from receipt of the order. The Cerezo spouses did not file an answer. On 27 January 1995, Tuazon filed a motion to
declare the Cerezo spouses in default. On 6 February 1995, the trial court issued an order declaring the Cerezo spouses in
default and authorizing Tuazon to present his evidence.
9

On 30 May 1995, after considering Tuazons testimonial and documentary evidence, the trial court ruled in Tuazons
favor. The trial court made no pronouncement on Forondas liability because there was no service of summons on him.
The trial court did not hold Atty. Cerezo liable as Tuazon failed to show that Mrs. Cerezos business benefited the family,
pursuant to Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely liable for the damages sustained by
Tuazon arising from the negligence of Mrs. Cerezos employee, pursuant to Article 2180 of the Civil Code. The
dispositive portion of the trial courts decision reads:
WHEREFORE, judgment is hereby rendered ordering the defendant Hermana Cerezo to pay the plaintiff:
a) For Actual Damages - P69,485.35
1) Expenses for operation and medical Treatment
2) Cost of repair of the tricycle
b) For loss of earnings - 39,921.00
c) For moral damages - 43,300.00
d) And to pay the cost of the suit. - 20,000.00
The docket fees and other expenses in the filing of this suit shall be lien on whatever judgment may be rendered in
favor of the plaintiff.
SO ORDERED.
10

Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July 1995, Mrs. Cerezo filed before the trial court a
petition for relief from judgment on the grounds of "fraud, mistake or excusable negligence." Testifying before the trial
court, both Mrs. Cerezo and Atty. Valera denied receipt of notices of hearings and of orders of the court. Atty. Valera
added that he received no notice before or during the 8 May 1995 elections, "when he was a senatorial candidate for the
KBL Party, and very busy, using his office and residence as Party National Headquarters." Atty. Valera claimed that he
was able to read the decision of the trial court only after Mrs. Cerezo sent him a copy.
11

Tuazon did not testify but presented documentary evidence to prove the participation of the Cerezo spouses in the case.
Tuazon presented the following exhibits:
Exhibit 1 - Sheriffs return and summons;
Exhibit 1-A - Alias summons dated April 20, 1994;
Exhibit 2 - Comment with Motion;
Exhibit 3 - Minutes of the hearing held on August 1, 1994;
Exhibit 3-A - Signature of defendants counsel;
Exhibit 4 - Minutes of the hearing held on August 30, 1994;
Exhibit 4-A - Signature of the defendants counsel;
Exhibit 5 - Appearance and Urgent Ex-Parte Motion;
Exhibit 6 - Order dated November 14, 1994;
Exhibit 6-A - Postal certification dated January 13, 1995;
Exhibit 7 - Order dated February [illegible];
Exhibit 7-A - Courts return slip addressed to Atty. Elpidio Valera;
Exhibit 7-B - Courts return slip addressed to Spouses Juan and Hermana Cerezo;
Exhibit 8 - Decision dated May [30], 1995
Exhibit 8-A - Courts return slip addressed to defendant Hermana Cerezo;
Exhibit 8-B - Courts return slip addressed to defendants counsel, Atty. Elpidio Valera;
Exhibit 9 - Order dated September 21, 1995;
Exhibit 9-A - Second Page of Exhibit 9;
Exhibit 9-B - Third page of Exhibit 9;
Exhibit 9-C - Fourth page of Exhibit 9;
Exhibit 9-D - Courts return slip addressed to Atty. Elpidio Valera;
and
Exhibit 9-E - Courts return slip addressed to plaintiffs counsel, Atty. Norman Dick de
Guzman.
12

On 4 March 1998, the trial court issued an order
13
denying the petition for relief from judgment. The trial court stated that
having received the decision on 25 June 1995, the Cerezo spouses should have filed a notice of appeal instead of resorting
to a petition for relief from judgment. The trial court refused to grant relief from judgment because the Cerezo spouses
could have availed of the remedy of appeal. Moreover, the Cerezo spouses not only failed to prove fraud, accident,
mistake or excusable negligence by conclusive evidence, they also failed to prove that they had a good and substantial
defense. The trial court noted that the Cerezo spouses failed to appeal because they relied on an expected settlement of the
case.
The Cerezo spouses subsequently filed before the Court of Appeals a petition for certiorari under Section 1 of Rule 65.
The petition was docketed as CA-G.R. SP No. 48132.
14
The petition questioned whether the trial court acquired
jurisdiction over the case considering there was no service of summons on Foronda, whom the Cerezo spouses claimed
was an indispensable party. In a resolution
15
dated 21 January 1999, the Court of Appeals denied the petition
for certiorari and affirmed the trial courts order denying the petition for relief from judgment. The Court of Appeals
declared that the Cerezo spouses failure to file an answer was due to their own negligence, considering that they
continued to participate in the proceedings without filing an answer. There was also nothing in the records to show that
the Cerezo spouses actually offered a reasonable settlement to Tuazon. The Court of Appeals also denied Cerezo spouses
motion for reconsideration for lack of merit.
The Cerezo spouses filed before this Court a petition for review on certiorari under Rule 45. Atty. Cerezo himself signed
the petition, docketed as G.R. No. 137593. On 13 April 1999, this Court rendered a resolution denying the petition for
review on certiorari for failure to attach an affidavit of service of copies of the petition to the Court of Appeals and to the
adverse parties. Even if the petition complied with this requirement, the Court would still have denied the petition as the
Cerezo spouses failed to show that the Court of Appeals committed a reversible error. The Courts resolution was entered
in the Book of Entries and Judgments when it became final and executory on 28 June 1999.
16

Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July 1999 a petition for annulment of judgment
under Rule 47 with prayer for restraining order. Atty. Valera and Atty. Dionisio S. Daga ("Atty. Daga") represented Mrs.
Cerezo in the petition, docketed as CA-G.R. SP No. 53572.
17
The petition prayed for the annulment of the 30 May 1995
decision of the trial court and for the issuance of a writ of preliminary injunction enjoining execution of the trial courts
decision pending resolution of the petition.
The Court of Appeals denied the petition for annulment of judgment in a resolution dated 21 October 1999. The resolution
reads in part:
In this case, records show that the petitioner previously filed with the lower court a Petition for Relief from
Judgment on the ground that they were wrongfully declared in default while waiting for an amicable settlement of
the complaint for damages. The court a quo correctly ruled that such petition is without merit. The defendant
spouses admit that during the initial hearing they appeared before the court and even mentioned the need for an
amicable settlement. Thus, the lower court acquired jurisdiction over the defendant spouses.
Therefore, petitioner having availed of a petition for relief, the remedy of an annulment of judgment is no longer
available. The proper action for the petitioner is to appeal the order of the lower court denying the petition for
relief.
Wherefore, the instant petition could not be given due course and should accordingly be dismissed.
SO ORDERED.
18

On 20 January 2000, the Court of Appeals denied the Cerezo spouses motion for reconsideration.
19
The Court of Appeals
stated:
A distinction should be made between a courts jurisdiction over a person and its jurisdiction over the subject
matter of a case. The former is acquired by the proper service of summons or by the parties voluntary
appearance; while the latter is conferred by law.
Resolving the matter of jurisdiction over the subject matter, Section 19(1) of B[atas] P[ambansa] 129 provides
that Regional Trial Courts shall exercise exclusive original jurisdiction in all civil actions in which the subject of
the litigation is incapable of pecuniary estimation. Thus it was proper for the lower court to decide the instant case
for damages.
Unlike jurisdiction over the subject matter of a case which is absolute and conferred by law; any defects [sic] in
the acquisition of jurisdiction over a person (i.e., improper filing of civil complaint or improper service of
summons) may be waived by the voluntary appearance of parties.
The lower court admits the fact that no summons was served on defendant Foronda. Thus, jurisdiction over the
person of defendant Foronda was not acquired, for which reason he was not held liable in this case. However, it
has been proven that jurisdiction over the other defendants was validly acquired by the court a quo.
The defendant spouses admit to having appeared in the initial hearings and in the hearing for plaintiffs motion to
litigate as a pauper. They even mentioned conferences where attempts were made to reach an amicable settlement
with plaintiff. However, the possibility of amicable settlement is not a good and substantial defense which will
warrant the granting of said petition.
x x x
Assuming arguendo that private respondent failed to reserve his right to institute a separate action for damages in
the criminal action, the petitioner cannot now raise such issue and question the lower courts jurisdiction because
petitioner and her husband have waived such right by voluntarily appearing in the civil case for damages.
Therefore, the findings and the decision of the lower court may bind them.
Records show that the petitioner previously filed with the lower court a Petition for Relief from Judgment on the
ground that they were wrongfully declared in default while waiting for an amicable settlement of the complaint
for damages. The court a quo correctly ruled that such petition is without merit, jurisdiction having been acquired
by the voluntary appearance of defendant spouses.
Once again, it bears stressing that having availed of a petition for relief, the remedy of annulment of judgment is
no longer available.
Based on the foregoing, the motion for reconsideration could not be given due course and is hereby DENIED.
SO ORDERED.
20

The Issues
On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone representing her, filed the present petition for review
on certiorari before this Court. Mrs. Cerezo claims that:
1. In dismissing the Petition for Annulment of Judgment, the Court of Appeals assumes that the issues raised in
the petition for annulment is based on extrinsic fraud related to the denied petition for relief notwithstanding that
the grounds relied upon involves questions of lack of jurisdiction.
2. In dismissing the Petition for Annulment, the Court of Appeals disregarded the allegation that the lower
court[s] findings of negligence against defendant-driver Danilo Foronda [whom] the lower court did not summon
is null and void for want of due process and consequently, such findings of negligence which is [sic] null and void
cannot become the basis of the lower court to adjudge petitioner-employer liable for civil damages.
3. In dismissing the Petition for Annulment, the Court of Appeals ignored the allegation that defendant-driver
Danilo A. Foronda whose negligence is the main issue is an indispensable party whose presence is compulsory
but [whom] the lower court did not summon.
4. In dismissing the Petition for Annulment, the Court of Appeals ruled that assuming arguendo that private
respondent failed to reserve his right to institute a separate action for damages in the criminal action, the petitioner
cannot now raise such issue and question the lower courts jurisdiction because petitioner [has] waived such right
by voluntarily appearing in the civil case for damages notwithstanding that lack of jurisdiction cannot be
waived.
21

The Courts Ruling
The petition has no merit. As the issues are interrelated, we shall discuss them jointly.
Remedies Available to a Party Declared in Default
An examination of the records of the entire proceedings shows that three lawyers filed and signed pleadings on behalf of
Mrs. Cerezo, namely, Atty. Daga, Atty. Valera, and Atty. Cerezo. Despite their number, Mrs. Cerezos counsels failed to
avail of the proper remedies. It is either by sheer ignorance or by malicious manipulation of legal technicalities that they
have managed to delay the disposition of the present case, to the detriment of pauper litigant Tuazon.
Mrs. Cerezo claims she did not receive any copy of the order declaring the Cerezo spouses in default. Mrs. Cerezo asserts
that she only came to know of the default order on 25 June 1995, when she received a copy of the decision. On 10 July
1995, Mrs. Cerezo filed before the trial court a petition for relief from judgment under Rule 38, alleging "fraud, mistake,
or excusable negligence" as grounds. On 4 March 1998, the trial court denied Mrs. Cerezos petition for relief from
judgment. The trial court stated that Mrs. Cerezo could have availed of appeal as a remedy and that she failed to prove
that the judgment was entered through fraud, accident, mistake, or excusable negligence. Mrs. Cerezo then filed before the
Court of Appeals a petition for certiorari under Section 1 of Rule 65 assailing the denial of the petition for relief from
judgment. On 21 January 1999, the Court of Appeals dismissed Mrs. Cerezos petition. On 24 February 1999, the
appellate court denied Mrs. Cerezos motion for reconsideration. On 11 March 1999, Mrs. Cerezo filed before this Court a
petition for review on certiorari under Rule 45, questioning the denial of the petition for relief from judgment. We denied
the petition and our resolution became final and executory on 28 June 1999.
On 6 July 1999, a mere eight days after our resolution became final and executory, Mrs. Cerezo filed before the Court of
Appeals a petition for annulment of the judgment of the trial court under Rule 47. Meanwhile, on 25 August 1999, the
trial court issued over the objection of Mrs. Cerezo an order of execution of the judgment in Civil Case No. 7415. On 21
October 1999, the Court of Appeals dismissed the petition for annulment of judgment. On 20 January 2000, the Court of
Appeals denied Mrs. Cerezos motion for reconsideration. On 7 February 2000, Mrs. Cerezo filed the present petition for
review on certiorari under Rule 45 challenging the dismissal of her petition for annulment of judgment.
Lina v. Court of Appeals
22
enumerates the remedies available to a party declared in default:
a) The defendant in default may, at any time after discovery thereof and before judgment, file a motion under
oath to set aside the order of default on the ground that his failure to answer was due to fraud, accident, mistake
or excusable negligence, and that he has a meritorious defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the defendant discovered the default, but before the same has
become final and executory, he may file a motion for new trial under Section 1 (a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and executory, he may file
apetition for relief under Section 2 [now Section 1] of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to the evidence or to the law, even if
no petition to set aside the order of default has been presented by him (Sec. 2, Rule 41). (Emphasis added)
Moreover, a petition for certiorari to declare the nullity of a judgment by default is also available if the trial court
improperly declared a party in default, or even if the trial court properly declared a party in default, if grave abuse of
discretion attended such declaration.
23

Mrs. Cerezo admitted that she received a copy of the trial courts decision on 25 June 1995. Based on this admission, Mrs.
Cerezo had at least three remedies at her disposal: an appeal, a motion for new trial, or a petition for certiorari.
Mrs. Cerezo could have appealed under Rule 41
24
from the default judgment within 15 days from notice of the judgment.
She could have availed of the power of the Court of Appeals to try cases and conduct hearings, receive evidence, and
perform all acts necessary to resolve factual issues raised in cases falling within its appellate jurisdiction.
25

Mrs. Cerezo also had the option to file under Rule 37
26
a motion for new trial within the period for taking an appeal. If the
trial court grants a new trial, the original judgment is vacated, and the action will stand for trial de novo. The recorded
evidence taken in the former trial, as far as the same is material and competent to establish the issues, shall be used at the
new trial without retaking the same.
27

Mrs. Cerezo also had the alternative of filing under Rule 65
28
a petition for certiorari assailing the order of default within
60 days from notice of the judgment. An order of default is interlocutory, and an aggrieved party may file an appropriate
special civil action under Rule 65.
29
In a petition for certiorari, the appellate court may declare void both the order of
default and the judgment of default.
Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within the reglementary periods provided under the
Rules of Court. However, Mrs. Cerezo opted to file a petition for relief from judgment, which is availableonly in
exceptional cases. A petition for relief from judgment should be filed within the reglementary period of 60 days from
knowledge of judgment and six months from entry of judgment, pursuant to
Rule 38 of the Rules of Civil Procedure.
30
Tuason v. Court of Appeals
31
explained the nature of a petition for relief from
judgment:
When a party has another remedy available to him, which may either be a motion for new trial or appeal from an
adverse decision of the trial court, and he was not prevented by fraud, accident, mistake or excusable negligence
from filing such motion or taking such appeal, he cannot avail himself of this petition. Indeed, relief will not be
granted to a party who seeks avoidance from the effects of the judgment when the loss of the remedy at law was
due to his own negligence; otherwise the petition for relief can be used to revive the right to appeal which has
been lost thru inexcusable negligence.
Evidently, there was no fraud, accident, mistake, or excusable negligence that prevented Mrs. Cerezo from filing an
appeal, a motion for new trial or a petition for certiorari. It was error for her to avail of a petition for relief from judgment.
After our resolution denying Mrs. Cerezos petition for relief became final and executory, Mrs. Cerezo, in her last ditch
attempt to evade liability, filed before the Court of Appeals a petition for annulment of the judgment of the trial court.
Annulment is available only on the grounds of extrinsic fraud and lack of jurisdiction. If based on extrinsic fraud, a party
must file the petition within four years from its discovery, and if based on lack of jurisdiction, before laches or estoppel
bars the petition. Extrinsic fraud is not a valid ground if such fraud was used as a ground, or could have been used as a
ground, in a motion for new trial or petition for relief from judgment.
32

Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her ground for filing the petition for annulment of
judgment. However, a party may avail of the remedy of annulment of judgment under Rule 47 only if the ordinary
remedies of new trial, appeal, petition for relief from judgment, or other appropriate remedies are no longer available
through no fault of the party.
33
Mrs. Cerezo could have availed of a new trial or appeal but through her own fault she
erroneously availed of the remedy of a petition for relief, which was denied with finality. Thus, Mrs. Cerezo may no
longer avail of the remedy of annulment.
In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezos person. Mrs. Cerezo actively participated in
the proceedings before the trial court, submitting herself to the jurisdiction of the trial court. The defense of lack of
jurisdiction fails in light of her active participation in the trial court proceedings. Estoppel or laches may also bar lack of
jurisdiction as a ground for nullity especially if raised for the first time on appeal by a party who participated in the
proceedings before the trial court, as what happened in this case.
34

For these reasons, the present petition should be dismissed for utter lack of merit. The extraordinary action to annul a final
judgment is restricted to the grounds specified in the rules. The reason for the restriction is to prevent this extraordinary
action from being used by a losing party to make a complete farce of a duly promulgated decision that has long become
final and executory. There would be no end to litigation if parties who have unsuccessfully availed of any of the
appropriate remedies or lost them through their fault could still bring an action for annulment of judgment.
35
Nevertheless,
we shall discuss the issues raised in the present petition to clear any doubt about the correctness of the decision of the trial
court.
Mrs. Cerezos Liability and the Trial Courts Acquisition of Jurisdiction
Mrs. Cerezo contends that the basis of the present petition for annulment is lack of jurisdiction. Mrs. Cerezo asserts that
the trial court could not validly render judgment since it failed to acquire jurisdiction over Foronda. Mrs. Cerezo points
out that there was no service of summons on Foronda. Moreover, Tuazon failed to reserve his right to institute a separate
civil action for damages in the criminal action. Such contention betrays a faulty foundation. Mrs. Cerezos contention
proceeds from the point of view of criminal law and not of civil law, while the basis of the present action of Tuazon is
quasi-delict under the Civil Code, not delict under the Revised Penal Code.
The same negligent act may produce civil liability arising from a delict under Article 103 of the Revised Penal Code, or
may give rise to an action for a quasi-delict under Article 2180 of the Civil Code. An aggrieved party may choose
between the two remedies. An action based on a quasi-delict may proceed independently from the criminal action.
36
There
is, however, a distinction between civil liability arising from a delict and civil liability arising from a quasi-delict. The
choice of remedy, whether to sue for a delict or a quasi-delict, affects the procedural and jurisdictional issues of the
action.
37

Tuazon chose to file an action for damages based on a quasi-delict. In his complaint, Tuazon alleged that Mrs. Cerezo,
"without exercising due care and diligence in the supervision and management of her employees and buses," hired
Foronda as her driver. Tuazon became disabled because of Forondas "recklessness, gross negligence and imprudence,"
aggravated by Mrs. Cerezos "lack of due care and diligence in the selection and supervision of her employees,
particularly Foronda."
38

The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil Code. Article 2180 states in part:
Employers shall be liable for the damages caused by their employees and household helpers acting within the
scope of their assigned tasks, even though the former are not engaged in any business or industry.
Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to the case. An indispensable party is one
whose interest is affected by the courts action in the litigation, and without whom no final resolution of the case is
possible.
39
However, Mrs. Cerezos liability as an employer in an action for a quasi-delict is not only solidary, it is also
primary and direct. Foronda is not an indispensable party to the final resolution of Tuazons action for damages against
Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is solidary.
40
Where there is a solidary
obligation on the part of debtors, as in this case, each debtor is liable for the entire obligation. Hence, each debtor is liable
to pay for the entire obligation in full. There is no merger or renunciation of rights, but only mutual
representation.
41
Where the obligation of the parties is solidary, either of the parties is indispensable, and the other is not
even a necessary party because complete relief is available from either.
42
Therefore, jurisdiction over Foronda is not even
necessary as Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and direct, while the employers liability based on a
delict is merely subsidiary.
43
The words "primary and direct," as contrasted with "subsidiary," refer to the remedy
provided by law for enforcing the obligation rather than to the character and limits of the obligation.
44
Although liability
under Article 2180 originates from the negligent act of the employee, the aggrieved party may sue the employer directly.
When an employee causes damage, the law presumes that the employer has himself committed an act of negligence in not
preventing or avoiding the damage. This is the fault that the law condemns. While the employer is civilly liable in a
subsidiary capacity for the employees criminal negligence, the employer is also civilly liable directly and separately for
his own civil negligence in failing to exercise due diligence in selecting and supervising his employee. The idea that the
employers liability is solely subsidiary is wrong.
45

The action can be brought directly against the person responsible (for another), without including the author of the
act. The action against the principal is accessory in the sense that it implies the existence of a prejudicial act
committed by the employee, but it is not subsidiary in the sense that it can not be instituted till after the judgment
against the author of the act or at least, that it is subsidiary to the principal action; the action for responsibility (of
the employer) is in itself a principal action.
46

Thus, there is no need in this case for the trial court to acquire jurisdiction over Foronda. The trial courts acquisition of
jurisdiction over Mrs. Cerezo is sufficient to dispose of the present case on the merits.
In contrast, an action based on a delict seeks to enforce the subsidiary liability of the employer for the criminal negligence
of the employee as provided in Article 103 of the Revised Penal Code. To hold the employer liable in a subsidiary
capacity under a delict, the aggrieved party must initiate a criminal action where the employees delict and corresponding
primary liability are established.
47
If the present action proceeds from a delict, then the trial courts jurisdiction over
Foronda is necessary. However, the present action is clearly for the quasi-delict of Mrs. Cerezo and not for the delict of
Foronda.
The Cerezo spouses contention that summons be served anew on them is untenable in light of their participation in the
trial court proceedings. To uphold the Cerezo spouses contention would make a fetish of a technicality.
48
Moreover, any
irregularity in the service of summons that might have vitiated the trial courts jurisdiction over the persons of the Cerezo
spouses was deemed waived when the Cerezo spouses filed a petition for relief from judgment.
49

We hold that the trial court had jurisdiction and was competent to decide the case in favor of Tuazon and against Mrs.
Cerezo even in the absence of Foronda. Contrary to Mrs. Cerezos contention, Foronda is not an indispensable party to the
present case. It is not even necessary for Tuazon to reserve the filing of a separate civil action because he opted to file a
civil action for damages against Mrs. Cerezo who is primarily and directly liable for her own civil negligence. The words
of Justice Jorge Bocobo in Barredo v. Garcia still hold true today as much as it did in 1942:
x x x [T]o hold that there is only one way to make defendants liability effective, and that is, to sue the driver and
exhaust his (the latters) property first, would be tantamount to compelling the plaintiff to follow a devious and
cumbersome method of obtaining relief. True, there is such a remedy under our laws, but there is also a more
expeditious way, which is based on the primary and direct responsibility of the defendant under article [2180] of
the Civil Code. Our view of the law is more likely to facilitate remedy for civil wrongs, because the procedure
indicated by the defendant is wasteful and productive of delay, it being a matter of common knowledge that
professional drivers of taxis and other similar public conveyances do not have sufficient means with which to pay
damages. Why, then, should the plaintiff be required in all cases to go through this roundabout, unnecessary, and
probably useless procedure? In construing the laws, courts have endeavored to shorten and facilitate the pathways
of right and justice.
50

Interest at the rate of 6% per annum is due on the amount of damages adjudged by the trial court.
51
The 6% per
annum interest shall commence from 30 May 1995, the date of the decision of the trial court. Upon finality of this
decision, interest at 12% per annum, in lieu of 6% per annum, is due on the amount of damages adjudged by the trial
court until full payment.
WHEREFORE, we DENY the instant petition for review. The Resolution dated 21 October 1999 of the Court of
Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20 January 2000 denying the motion for
reconsideration, is AFFIRMED with the MODIFICATION that the amount due shall earn legal interest at 6% per
annum computed from 30 May 1995, the date of the trial courts decision. Upon finality of this decision, the amount due
shall earn interest at 12% per annum, in lieu of 6% per annum, until full payment.
SO ORDERED.













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


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 foundEriks 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. UponKenzars 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.


ROGER V. NAVARRO,
Petitioner,




- versus -




HON. JOSE L. ESCOBIDO, Presiding Judge, RTC
Branch 37, Cagayan de Oro City, and KAREN T.
GO, doing business under the name KARGO
ENTERPRISES,
Respondents.

G.R. No. 153788


Present:

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



Promulgated:


November 27, 2009

x ---------------------------------------------------------------------------------------- x
This is a petition for review on certiorari
[1]
that seeks to set aside the Court of Appeals (CA)
Decision
[2]
dated October 16, 2001 and Resolution
[3]
dated May 29, 2002 in CA-G.R. SP. No. 64701. These CA rulings
affirmed the July 26, 2000
[4]
and March 7, 2001
[5]
orders of the Regional Trial Court (RTC), Misamis Oriental, Cagayan de
Oro City, denying petitioner Roger V. Navarros (Navarro) motion to dismiss.

BACKGROUND FACTS

On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos. 98-599 (first
complaint)
[6]
and 98-598 (second complaint),
[7]
before the RTC for replevin and/or sum of money with damages against
Navarro. In these complaints, Karen Go prayed that the RTC issue writs of replevin for the seizure of two (2) motor
vehicles in Navarros possession.

The first complaint stated:

1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a
resident of Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES,
an entity duly registered and existing under and by virtue of the laws of the Republic of the Philippines,
which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER NAVARRO is a
Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro City, where he may be
served with summons and other processes of the Honorable Court; that defendant JOHN DOE
whose real name and address are at present unknown to plaintiff is hereby joined as party defendant as he
may be the person in whose possession and custody the personal property subject matter of this suit may
be found if the same is not in the possession of defendant ROGER NAVARRO;

2. That KARGO ENTERPRISES is in the business of, among others, buying and selling
motor vehicles, including hauling trucks and other heavy equipment;

3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated
that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is more
particularly described as follows

Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378

as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and
between KARGO ENTERPRISES, thenrepresented by its Manager, the aforementioned GLENN O.
GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the above
LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO delivered
unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND THREE
HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in payment of the
agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF COMMUNICATIONS
CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113, respectively dated January 8,
1998 and February 8, 1998, were presented for payment and/or credit, the same were dishonored and/or
returned by the drawee bank for the common reason that the current deposit account against which the
said checks were issued did not have sufficient funds to cover the amounts thereof; that the total amount
of the two (2) checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED
SIXTY-SIX & 66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant
ROGER NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT
WITH RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER
NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED
SIXTY-SIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for
in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in
vain to the great damage and injury of herein plaintiff; xxx

4. That the aforedescribed motor vehicle has not been the subject of any tax assessment
and/or fine pursuant to law, or seized under an execution or an attachment as against herein plaintiff;

xxx

8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the
immediate delivery of the above-described motor vehicle from defendants unto plaintiff pending the final
determination of this case on the merits and, for that purpose, there is attached hereto an affidavit duly
executed and bond double the value of the personal property subject matter hereof to answer for damages
and costs which defendants may suffer in the event that the order for replevin prayed for may be found
out to having not been properly issued.


The second complaint contained essentially the same allegations as the first complaint, except that the Lease
Agreement with Option to Purchase involved is dated October 1, 1997 and the motor vehicle leased is described as
follows:

Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403

The second complaint also alleged that Navarro delivered three post-dated checks, each for the amount
of P100,000.00, to Karen Go in payment of the agreed rentals; however, the third check was dishonored when presented
for payment.
[8]


On October 12, 1998
[9]
and October 14, 1998,
[10]
the RTC issued writs of replevin for both cases; as a result, the
Sheriff seized the two vehicles and delivered them to the possession of Karen Go.

In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated no cause of
action,since Karen Go was not a party to the Lease Agreements with Option to Purchase (collectively, the lease
agreements) the actionable documents on which the complaints were based.

On Navarros motion, both cases were duly consolidated on December 13, 1999.

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not state a cause of
action.

In response to the motion for reconsideration Karen Go filed dated May 26, 2000,
[11]
the RTC issued another
order datedJuly 26, 2000 setting aside the order of dismissal. Acting on the presumption that Glenn Gos leasing
business is a conjugal property, the RTC held that Karen Go had sufficient interest in his leasing business to file the
action against Navarro. However, the RTC held that Karen Go should have included her husband, Glenn Go, in the
complaint based on Section 4, Rule 3 of the Rules of Court (Rules).
[12]
Thus, the lower court ordered Karen Go to file a
motion for the inclusion of Glenn Go as co-plaintiff.

When the RTC denied Navarros motion for reconsideration on March 7, 2001, Navarro filed a petition
for certiorari with the CA, essentially contending that the RTC committed grave abuse of discretion when it
reconsidered the dismissal of the case and directed Karen Go to amend her complaints by including her husband Glenn
Go as co-plaintiff. According to Navarro, a complaint which failed to state a cause of action could not be converted into
one with a cause of action by mere amendment or supplemental pleading.

On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs order.
[13]
The CA also denied
Navarros motion for reconsideration in its resolution of May 29, 2002,
[14]
leading to the filing of the present petition.

THE PETITION

Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did not have
the requisite juridical personality to sue, the actual parties to the agreement are himself and Glenn Go. Since it was
Karen Go who filed the complaints and not Glenn Go, she was not a real party-in-interest and the complaints failed to
state a cause of action.

Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn Go as a co-
plaintiff, instead of dismissing the complaint outright because a complaint which does not state a cause of action cannot
be converted into one with a cause of action by a mere amendment or a supplemental pleading. In effect, the lower court
created a cause of action for Karen Go when there was none at the time she filed the complaints.

Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the theory of the
complaints, to his great prejudice. Navarro claims that the lower court gravely abused its discretion when it assumed that
the leased vehicles are part of the conjugal property of Glenn and Karen Go. Since Karen Go is the registered owner of
Kargo Enterprises, the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred when
it ordered the inclusion of Glenn Go as a co-plaintiff.

Navarro likewise faults the lower court for setting the trial of the case in the same order that required Karen Go
to amend her complaints, claiming that by issuing this order, the trial court violated Rule 10 of the Rules.

Even assuming the complaints stated a cause of action against him, Navarro maintains that the complaints were
premature because no prior demand was made on him to comply with the provisions of the lease agreements before the
complaints for replevin were filed.

Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints, the vehicles
were illegally seized from his possession and should be returned to him immediately.

Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real interest in the
subject of the complaint, even if the lease agreements were signed only by her husband, Glenn Go; she is the owner of
Kargo Enterprises and Glenn Go signed the lease agreements merely as the manager of Kargo Enterprises. Moreover,
Karen Go maintains that Navarros insistence that Kargo Enterprises is Karen Gos paraphernal property is without
basis. Based on the law and jurisprudence on the matter, all property acquired during the marriage is presumed to be
conjugal property. Finally, Karen Go insists that her complaints sufficiently established a cause of action against
Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was merely to comply with the rule
that spouses should sue jointly, and was not meant to cure the complaints lack of cause of action.

THE COURTS RULING

We find the petition devoid of merit.


Karen Go is the real party-in-interest


The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the name of
the real party-in-interest, i.e., 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.
[15]



Interestingly, although Navarro admits that Karen Go is the registered owner of the business name Kargo
Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According to Navarro, while the lease
contracts were in Kargo Enterprises name, this was merely a trade name without a juridical personality, so the actual
parties to the lease agreements were Navarro and Glenn Go, to the exclusion of Karen Go.

As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered the inclusion
of Glenn Go as co-plaintiff, since this in effect created a cause of action for the complaints when in truth, there was
none.

We do not find Navarros arguments persuasive.

The central factor in appreciating the issues presented in this case is the business name Kargo Enterprises. The
name appears in the title of the Complaint where the plaintiff was identified as KAREN T. GO doing business under the
name KARGO ENTERPRISES, and this identification was repeated in the first paragraph of the Complaint. Paragraph
2 defined the business KARGO ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the
defendant leased from plaintiff a certain motor vehicle that was thereafter described. Significantly, the Complaint
specifies and attaches as its integral part the Lease Agreement that underlies the transaction between the plaintiff and the
defendant. Again, the name KARGO ENTERPRISES entered the picture as this Lease Agreement provides:

This agreement, made and entered into by and between:

GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the
LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager,

xxx

thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In other words, by
the express terms of this Lease Agreement, Glenn Go did sign the agreement only as the manager of Kargo Enterprises
and the latter is clearly the real party to the lease agreements.

As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural person, nor
a juridical person, as defined by Article 44 of the Civil Code:

Art. 44. The following are juridical persons:

(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose, created by law; their
personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the law grants a
juridical personality, separate and distinct from that of each shareholder, partner or member.


Thus, pursuant to Section 1, Rule 3 of the Rules,
[16]
Kargo Enterprises cannot be a party to a civil action. This
legal reality leads to the question: who then is the proper party to file an action based on a contract in the name of Kargo
Enterprises?

We faced a similar question in Juasing Hardware v. Mendoza,
[17]
where we said:

Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The
law merely recognizes the existence of a sole proprietorship as a form of business organization conducted
for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and
permits, register the business name, and pay taxes to the national government. It does not vest juridical or
legal personality upon the sole proprietorship nor empower it to file or defend an action in court.

Thus, the complaint in the court below should have been filed in the name of the owner of
Juasing Hardware. The allegation in the body of the complaint would show that the suit is brought by
such person as proprietor or owner of the business conducted under the name and style Juasing
Hardware. The descriptive words doing business as Juasing Hardware may be added to the title of the
case, as is customarily done.
[18]
[Emphasis supplied.]


This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:

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.

As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit from or be injured
by a judgment in this case. Thus, contrary to Navarros contention, Karen Go is the real party-in-interest, and it is legally
incorrect to say that her Complaint does not state a cause of action because her name did not appear in the Lease
Agreement that her husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease
Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a question we do not decide, as
this is a matter for the trial court to consider in a trial on the merits.

Glenn Gos Role in the Case

We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go,
[19]
who described
herself in the Complaints to be a Filipino, of legal age, married to GLENN O. GO, a resident of Cagayan de Oro City,
and doing business under the trade name KARGO ENTERPRISES.
[20]
That Glenn Go and Karen Go are married to
each other is a fact never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered in
the name of a married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are
paraphernal or conjugal properties. To restate the parties positions, Navarro alleges that Kargo Enterprises is Karen
Gos paraphernal property, emphasizing the fact that the business is registered solely in Karen Gos name. On the other
hand, Karen Go contends that while the business is registered in her name, it is in fact part of their conjugal property.

The registration of the trade name in the name of one person a woman does not necessarily lead to the
conclusion that the trade name as a property is hers alone, particularly when the woman is married. By law, 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.
[21]
Our examination of the records of the
case does not show any proof that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all,
only the bare allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v.
Miat:
[22]


Petitioners also overlook Article 160 of the New Civil Code. It provides that all property of the
marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to the
husband or to the wife. This article does not require proof that the property was acquired with
funds of the partnership. The presumption applies even when the manner in which the property was
acquired does not appear.
[23]
[Emphasis supplied.]

Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a sole proprietorship is
conjugal or paraphernal property, we hold that it is conjugal property.

Article 124 of the Family Code, on the administration of the conjugal property, provides:

Art. 124. The administration and enjoyment of the conjugal partnership property shall
belong to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be availed of within five years from the
date of the contract implementing such decision.

xxx

This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in managing their
conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain the consent of the other before
performing an act of administration or any act that does not dispose of or encumber their conjugal property.

Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in their
marriage settlements. In other words, the property relations of the husband and wife shall be governed primarily by
Chapter 4 on Conjugal Partnership of Gains of the Family Code and, suppletorily, by the spouses marriage settlement
and by the rules on partnership under the Civil Code. In the absence of any evidence of a marriage settlement between
the spouses Go, we look at the Civil Code provision on partnership for guidance.

A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code, which states:

Art. 1811. A partner is a co-owner with the other partners of specific partnership property.

The incidents of this co-ownership are such that:

(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an
equal right with his partners to possess specific partnership property for partnership purposes;
xxx


Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the properties
registered under this name; hence, both have an equal right to seek possession of these properties. Applying Article 484
of the Civil Code, which states that in default of contracts, or special provisions, co-ownership shall be governed by the
provisions of this Title, we find further support in Article 487 of the Civil Code that allows any of the co-owners to
bring an action in ejectment with respect to the co-owned property.

While ejectment is normally associated with actions involving real property, we find that this rule can be applied
to the circumstances of the present case, following our ruling in Carandang v. Heirs of De Guzman.
[24]
In this case, one
spouse filed an action for the recovery of credit, a personal property considered conjugal property, without including the
other spouse in the action. In resolving the issue of whether the other spouse was required to be included as a co-plaintiff
in the action for the recovery of the credit, we said:


Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the
spouses Carandang, seems to be either an indispensable or a necessary party. If she is an indispensable
party, dismissal would be proper. If she is merely a necessary party, dismissal is not warranted, whether
or not there was an order for her inclusion in the complaint pursuant to Section 9, Rule 3.

Article 108 of the Family Code provides:

Art. 108. The conjugal partnership shall be governed by the rules on the contract
of partnership in all that is not in conflict with what is expressly determined in this
Chapter or by the spouses in their marriage settlements.

This provision is practically the same as the Civil Code provision it superseded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract
of partnership in all that is not in conflict with what is expressly determined in this
Chapter.

In this connection, Article 1811 of the Civil Code provides that [a] partner is a co-owner with
the other partners of specific partnership property. Taken with the presumption of the conjugal nature of
the funds used to finance the four checks used to pay for petitioners stock subscriptions, and with the
presumption that the credits themselves are part of conjugal funds, Article 1811 makes Quirino and
Milagros de Guzman co-owners of the alleged credit.

Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring
an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v.
Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of co-
owned property without the necessity of joining all the other co-owners as co-plaintiffs because the
suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in that
of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code, which provides that
any of the co-owners may bring an action for ejectment, covers all kinds of action for the recovery of
possession.

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.
[25]
[Emphasis supplied.]

Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession of the
Kargo Enterprises-leased vehicles which they co-own. This conclusion is consistent with Article 124 of the Family
Code, supporting as it does the position that either spouse may act on behalf of the conjugal partnership, so long as they
do not dispose of or encumber the property in question without the other spouses consent.

On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to recover
possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the suit, based on Section 4,
Rule 4 of the Rules, which states:

Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by
law.


Non-joinder of indispensable parties not ground to dismiss action

Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of cases
[26]
that
the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for dismissal of action. As we stated
inMacababbad v. Masirag:
[27]


Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder 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.


In Domingo v. Scheer, this Court held that the proper remedy when a party is left out 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 opportunity to
amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to
include the indispensable party is directed 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.

In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a party plaintiff is
fully in order.

Demand not required prior
to filing of replevin action


In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro apparently likens
a replevin action to an unlawful detainer.

For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant to Section 2,
Rule 60 of the Rules, which states:

Sec. 2. Affidavit and bond.

The applicant must show by his own affidavit or that of some other person who personally knows the
facts:

(a) That the applicant is the owner of the property claimed, particularly describing it, or is entitled
to the possession thereof;

(b) That the property is wrongfully detained by the adverse party, alleging the cause of detention
thereof according to the best of his knowledge, information, and belief;

(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant to law,
or seized under a writ of execution or preliminary attachment, or otherwise placed
under custodia legis, or if so seized, that it is exempt from such seizure or custody; and

(d) The actual market value of the property.

The applicant must also give a bond, executed to the adverse party in double the value of the property as
stated in the affidavit aforementioned, for the return of the property to the adverse party if such return be
adjudged, and for the payment to the adverse party of such sum as he may recover from the applicant in
the action.


We see nothing in these provisions which requires the applicant to make a prior demand on the possessor of the
property before he can file an action for a writ of replevin. Thus, prior demand is not a condition precedent to an action
for a writ of replevin.

More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he has already
admitted in his Answers that he had received the letters that Karen Go sent him, demanding that he either pay his unpaid
obligations or return the leased motor vehicles. Navarros position that a demand is necessary and has not been made is
therefore totally unmeritorious.

WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs against
petitioner Roger V. Navarro.

SO ORDERED.

















[G.R. No. 161065. April 15, 2005]
EUFEMIO C. DOMINGO, CELSO D. GANGAN, PACASIO S. BANARIA, SOFRONIO B. URSAL, ALBERTO
P. CRUZ, MARIA L. MATIB, RACHEL U. PACPACO, ANGELO G. SANCHEZ, and SHERWIN A. SIP-
AN,petitioners, vs. HON. GUILLERMO N. CARAGUE, in his capacity as Chairman, Commission on
Audit, HON. EMMANUEL M. DALMAN and HON. RAUL C. FLORES, in their capacities as
Commissioners, Commission on Audit, respondents.
Judicial power is the power to hear and decide cases pending between parties who have the right to sue in courts of
law and equity.
[1]
Corollary to this dictum is the principle of locus standi of a litigant. He who is directly affected and
whose interest is immediate and substantial has the standing to sue. Thus, a party must show a personal stake in the
outcome of the case or an injury to himself that can be redressed by a favorable decision in order to warrant an invocation
of the courts jurisdiction and justify the exercise of judicial power on his behalf.
Assailed in this petition for certiorari is the legality of Resolution No. 2002-05 of the Commission on Audit (COA)
providing for Organizational Restructuring Plan. The above-named petitioners basically alleged therein that this Plan is
intrinsically void for want of an enabling law authorizing COA to undertake the same and providing for the necessary
standards, conditions, restrictions, limitations, guidelines, and parameters. Petitioners further alleged that in initiating
such Organizational Restructuring Plan without legal authority, COA committed grave abuse of discretion amounting to
lack or excess of jurisdiction.
At this point, it is pertinent to state that the COA is a quasi-judicial body and that its decision, order or ruling may be
brought to the Supreme Court on certiorari by the aggrieved party.
[2]

Petitioners Eufemio C. Domingo, Celso C. Gangan, Pascasio S. Banaria are retired Chairmen, while Sofronio B.
Ursal, and Alberto P. Cruz are retired Commissioners of COA. All claim to maintain a deep-seated abiding interest in
the affairs of COA,
[3]
especially in its Organizational Restructuring Plan, as concerned taxpayers.
The other petitioners are incumbent officers or employees of COA. Maria L. Matib and Angelo G. Sanchez are State
Auditor III and State Auditor II, respectively, assigned to the Cordillera Administrative Region (CAR). Prior to the
implementation of the questioned COA Organizational Restructuring Plan, they were Resident Auditors and later Audit
Team Leaders. Petitioner Rachel U. Pacpaco is a State Auditor III assigned to CAR and a Team Supervisor, while
petitioner Sherwin A. Sipi-an is a State Auditor I also assigned at the CAR. These petitioners claim that they were
unceremoniously divested of their designations/ranks as Unit Head, Team Supervisor, and Team Leader upon
implementation of the COA Organizational Restructuring Plan without just cause and without due process, in violation of
Civil Service Law. Moreover, they were deprived of their respective Representation and Transportation Allowances
(RATA), thus causing them undue financial prejudice.
Petitioners now invoke this Courts judicial power to strike down the COA Organizational Restructuring Plan for
being unconstitutional or illegal.
Initially, for our resolution is the issue of whether petitioners have the legal standing to institute the instant petition.
Petitioners invoke our ruling in Chavez v. Public Estates Authority,
[4]
Agan, Jr. v. Philippine International Air
Terminals Co., Inc.,
[5]
andInformation Technology Foundation of the Philippines v. Commission on Elections
[6]
that where
the subject matter of a case is a matter of public concern and imbued with public interest, then this fact alone gives them
legal standing to institute the instant petition. Petitioners contend that the COA Organizational Restructuring Plan is not
just a mere reorganization but a revamp or overhaul of the COA, with a spillover effect upon its audit performance.
This will have an impact upon the rest of the government bodies subject to its audit supervision, thus, should be treated as
a matter of transcendental importance. Consequently, petitioners legal standing should be recognized and upheld.
Respondents, through the Office of the Solicitor General (OSG), counter that petitioners have no legal standing to file
the present petition since following our ruling in Kilusang Mayo Uno Labor Center v. Garcia, Jr.,
[7]
they have not shown
a personal stake in the outcome of the case or an actual or potential injury that can be redressed by our favorable
decision. Petitioners themselves admitted that they do not seek any affirmative relief nor impute any improper or
improvident act against the said respondents and are not motivated by any desire to seek affirmative relief from COA or
from respondents that would redound to their personal benefit or gain. It is clear then that petitioners failed to show any
present substantial interest in the outcome of this case, citing Kilosbayan v. Morato.
[8]
Nor may petitioners claim that as
taxpayers, they have legal standing since nowhere in their petition do they claim that public funds are being spent in
violation of law or that there is a misapplication of the taxpayers money, as we ruled in Dumlao v. Comelec.
[9]

Petitioners reliance upon our rulings in Chavez,
[10]
Agan, Jr.,
[11]
and Information Technology Foundation
[12]
is
flawed.
In Chavez, we ruled that the petitioner has legal standing since he is a taxpayer and his purpose in filing the petition
is to compel the Public Estate Authority (PEA) to perform its constitutional duties with respect to: (a) the right of the
citizens to information on matters of public concern; and (b) the application of a constitutional provision intended to
insure the equitable distribution of alienable lands of the public domain among Filipino citizens. The thrust of the first is
to compel PEA to disclose publicly information on the sale of Government lands worth billions of pesos, as mandated by
the Constitution and statutory law. The thrust of the second is to prevent PEA from alienating hundreds of hectares of
alienable lands of the public domain, thereby compelling it to comply with a constitutional duty to the nation. We held
that these matters are of transcendental public importance.
[13]

In Agan, Jr., we held that petitioners have legal standing as they have a direct and substantial interest to protect. By
the implementation of the PIATCO contracts, they stand to lose their source of livelihood, a property right zealously
protected by the Constitution. Such financial prejudice on their part is sufficient to confer upon them the requisite locus
standi.
[14]

In Information Technology Foundation, there were two reasons why petitioners standing was recognized. First, the
nations political and economic future virtually hangs in the balance, pending the outcome of the 2004 elections.
Accordingly, the award for the automation of the electoral process was a matter of public concern, imbued with public
interest. Second, the individual petitioners, as taxpayers, asserted a material interest in seeing to it that public funds are
properly used.
Here, petitioners have not shown any direct and personal interest in the COA Organizational Restructuring Plan.
There is no indication that they have sustained or are in imminent danger of sustaining some direct injury as a result of its
implementation. In fact, they admitted that they do not seek any affirmative relief nor impute any improper or
improvident act against the respondents and are not motivated by any desire to seek affirmative relief from COA or
from respondents that would redound to their personal benefit or gain. Clearly, they do not have any legal standing to file
the instant suit.
We are well aware of the averments of petitioners Matib, Pacpaco, Sanchez, and Sipi-An that they were demoted and
unceremoniously divested of their previous designations as Unit Head, Team Supervisor, or Team Leader; that they were
deprived of their RATA; that they were relegated to being mere Team Members, entitled to only a reimbursable
transportation allowance; and that they were denied due process.
Such averments lack merit. Actually, they were not demoted. Under Section 11, Rule VII of the Omnibus Rules
Implementing Book V of the Administrative Code of 1987, a demotion is the movement from one position to
another involving the issuance of an appointment with diminution in duties, responsibilities, status, or rank which may
or may not involve reduction in salary.
[15]
A demotion by assigning an employee to a lower position in the same service
which has a lower rate of compensation is tantamount to removal, if no cause is shown for it.
[16]

Here, there have been no new appointments issued to Matib, Pacpaco, Sanchez, and Sipi-An under the COA
Organizational Restructuring Plan. Thus, their contention that they have been demoted is baseless.
Moreover, the change in their status from COA auditors (receiving monthly RATA) to COA auditors (receiving only
reimbursable RATA) cannot be attributed to the COA Organizational Restructuring Plan but to the implementation of the
Audit Team Approach (ATAP), pursuant to COA Resolution No. 96-305 dated April 16, 1996.
Under the ATAP, an audit team, not a resident auditor, is deployed to conduct an audit. An audit team may be
composed of two (2) or more members under an Audit Team Leader. Whenever practicable, an Audit Team Supervisor
supervises at least three (3) audit teams. The composition of an audit team is not permanent. Hence, an Audit Team
Member may be designated or assigned as an Audit Team Leader for one assignment and subsequently as a Team
Member in another engagement. The designation depends upon the position or rank of the one who is designated as an
Audit Team Leader. Thus, a State Auditor III who may have been assigned as an Audit Team Leader in one engagement
may find himself relegated to being an Audit Team Member in another engagement, if a State Auditor IV or State Auditor
V is designated as the Audit Team Leader.
Pursuant to the COA Organizational Restructuring Plan, the COA issued Memorandum No. 2002-034
[17]
providing
for the guidelines regarding the payment of RATA, thus:
1. All holders of State Auditor IV position shall be entitled to fixed commutable RATA wherever they are
assigned.
2. Henceforth, only State Auditors IV shall be assigned as new Unit Heads or Team Leaders.
3. State Auditors below State Auditor IV assigned as Unit Heads or Team Leaders who have been receiving
fixed RATA shall continue to be designated as such and to receive the RATA until relieved of the
designation for incompetence, inefficiency, or misconduct.
All others who collect RATA on reimbursable basis, including those paid on a daily basis under COA Resolution No. 99-
007 dated June 7, 1999, are likewise entitled thereto.
Matib, Pacpaco, Sanchez, and Sipi-An are not qualified to be Audit Team Leaders or to receive fixed monthly RATA
since none of them holds the rank or position of State Auditor IV. But this does not mean that they are not entitled to
receive reimbursable RATA if they are designated as Audit Team Leaders. It is clear from the text of the said COA
Memorandum that the principle of non-diminution of benefits has been upheld.
Thus, in the implementation of the COA Organizational Restructuring Plan, we fail to see how petitioners could have
sustained personal injury as they have not shown to have a personal stake therein. Accordingly, they are wanting in legal
standing to institute the instant petition. Corollarily, we find no reason to delve into the constitutionality or legality of the
COA Organizational Restructuring Plan.
WHEREFORE, the petition is DISMISSED. No pronouncement as to costs.
SO ORDERED.















G.R. No. 161065. April 15, 2005
EUFEMIO C. DOMINGO, CELSO D. GANGAN, PACASIO S. BANARIA, SOFRONIO B. URSAL,
ALBERTO P. CRUZ, MARIA L. MATIB, RACHEL U. PACPACO, ANGELO G. SANCHEZ, and
SHERWIN A. SIP-AN, Petitioners,
vs.
HON. GUILLERMO N. CARAGUE, in his capacity as Chairman, Commission on Audit, HON. EMMANUEL
M. DALMAN and HON. RAUL C. FLORES, in their capacities as Commissioners, Commission on
Audit,Respondents.s jurisdiction and justify the exercise of judicial power on his behalf.
FACTS:
This case was a petition for certiorari is the legality of a resolution No. of the Commission on Audit (COA)
providing for Organizational Restructuring Plan. The petitioners alleged therein that this Plan is intrinsically
void for want of an enabling law which gives that COA to undertake the same and providing for the necessary
standards, conditions, restrictions, limitations, guidelines, and parameters. Petitioners further alleged COA
committed grave abuse of discretion amounting to lack or excess of jurisdiction. Respondents, through the
Office of the Solicitor General (OSG), countered that petitioners have no legal standing to file the present
petition since they have not shown "a personal stake in the outcome of the case" or an actual or potential injury
that can be redressed by our favorable decision. In essence, it is alleged that the petitioners are not a party in
interest, but the petitioners claim otherwise by reason that the matter is of public concern. The said
Organizational Restructuring Plan is not just a mere reorganization but a revamp or overhaul of the COA, with a
"spillover effect" upon its audit performance. This will have an impact upon the rest of the government bodies
subject to its audit supervision, thus, should be treated as a matter of transcendental importance.
ISSUE: Whether petitioners have the legal standing to institute the instant petition.
HELD: The Supreme Court decided, NO.It stated that:
(Locus Standi)
There was no showing that they had any direct and personal interest in the COA Organizational
Restructuring Plan. There was also of an admission that "they do not seek any affirmative relief nor impute any
improper or improvident act against the respondents" and "are not motivated by any desire to seek affirmative
relief from COA or from respondents that would redound to their personal benefit or gain." Hence, the
petitioners do not have any legal standing to file the instant suit. This case was decided by the Supreme Court
En Banc.He who is directly affected and whose interest is immediate and substantial has the standing to sue. A
party must show a personal stake in the outcome of the case or an injury to himself that can be redressed by a
favorable decision in order to warrant an invocation of the court




G.R. No. 166620
ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V. PADRIGANO, JEAN R. DE MESA, LEAH
P. DELA CRUZ, ANDY V. MACASAQUIT, SENEN B. CORDOBA, ALBERT BRILLANTES, GLORIA BISDA,
JOVITA V. CONCEPCION, TERESITA G. CARVAJAL, ROSANNA T. MALIWANAG, RICHARD ODERON,
CECILIA ESTERNON, BENEDICTO CABRAL, MA. VICTORIA E. LAROCO, CESAR ANDRA, FELICISIMO
GALACIO, ELSA R. CALMA, FILOMENA A. GALANG, JEAN PAUL MELEGRITO, CLARO G. SANTIAGO,
JR., EDUARDO FRIAS, REYNALDO O. ANDAL, NEPHTALIE IMPERIO, RUEL BALAGTAS, VICTOR R.
ORTIZ, FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE C. MONSALVE, JR., ARTURO
ADSUARA, F.C. LADRERO, JR., NELSON PADUA, MARCELA C. SAYAO, ANGELITO MALAKAS,
GLORIA RAMENTO, JULIANA SUPLEO, MANUEL MENDRIQUE, E. TAYLAN, CARMELA BOBIS,
DANILO VARGAS, ROY-LEO C. PABLO, ALLAN VILLANUEVA, VICENTE R. VELASCO, JR., IMELDA
ERENO, FLORIZA M. CATIIS, RANIEL R. BASCO, E. JALIJALI, MARIO C. CARAAN, DOLORES M.
AVIADO, MICHAEL P. LAPLANA, GUILLERMO G. SORIANO, ALICE E. SOJO, ARTHUR G. NARNE,
LETICIA SORIANO, FEDERICO RAMOS, JR., PETERSON CAAMPUED, RODELIO L. GOMEZ, ANTONIO
D. GARCIA, JR., ANTONIO GALO, A. SANCHEZ, SOL E. TAMAYO, JOSEPHINE A.M. COCJIN, DAMIAN
QUINTO, JR., EDLYN MARIANO, M.A. MALANUM, ALFREDO S. ESTRELLA, and JESUS MEL SAYO,
Petitioners,
- versus -

EDUARDO R. ERMITA, in his capacity as Executive Secretary,THE DIRECTOR GENERAL OF THE
PHILIPPINE INFORMATION AGENCY andTHE NATIONAL TREASURER,
Respondents

The present controversy arose from a Petition for Certiorari and prohibition challenging the constitutionality of Executive
Order No. 378 dated October 25, 2004, issued by President Gloria Macapagal Arroyo (President Arroyo). Petitioners
characterize their action as a class suit filed on their own behalf and on behalf of all their co-employees at the National
Printing Office (NPO).

The NPO was formed on July 25, 1987, during the term of former President Corazon C. Aquino (President
Aquino), by virtue of Executive Order No. 285
[1]
which provided, among others, the creation of the NPO from the merger
of the Government Printing Office and the relevant printing units of the Philippine Information Agency (PIA). Section 6
of Executive Order No. 285 reads:

SECTION 6. Creation of the National Printing Office. There is hereby created a National
Printing Office out of the merger of the Government Printing Office and the relevant printing units of the
Philippine Information Agency. The Office shall have exclusive printing jurisdiction over the following:

a. Printing, binding and distribution of all standard and accountable forms of national,
provincial, city and municipal governments, including government corporations;

b. Printing of officials ballots;

c. Printing of public documents such as the Official Gazette, General Appropriations
Act, Philippine Reports, and development information materials of the Philippine Information Agency.

The Office may also accept other government printing jobs, including government publications,
aside from those enumerated above, but not in an exclusive basis.

The details of the organization, powers, functions, authorities, and related management aspects
of the Office shall be provided in the implementing details which shall be prepared and promulgated in
accordance with Section II of this Executive Order.

The Office shall be attached to the Philippine Information Agency.


On October 25, 2004, President Arroyo issued the herein assailed Executive Order No. 378, amending Section 6
of Executive Order No. 285 by, inter alia, removing the exclusive jurisdiction of the NPO over the printing services
requirements of government agencies and instrumentalities. The pertinent portions of Executive Order No. 378, in
turn, provide:

SECTION 1. The NPO shall continue to provide printing services to government agencies
and instrumentalities as mandated by law. However, it shall no longer enjoy exclusive jurisdiction
over the printing services requirements of the government over standard and accountable
forms. It shall have to compete with the private sector, except in the printing of election
paraphernalia which could be shared with the Bangko Sentral ng Pilipinas, upon the discretion of the
Commission on Elections consistent with the provisions of the Election Code of 1987.

SECTION 2. Government agencies/instrumentalities may source printing services outside NPO
provided that:

2.1 The printing services to be provided by the private sector is superior in quality and at a
lower cost than what is offered by the NPO; and

2.2 The private printing provider is flexible in terms of meeting the target completion time of
the government agency.

SECTION 3. In the exercise of its functions, the amount to be appropriated for the
programs, projects and activities of the NPO in the General Appropriations Act (GAA) shall be
limited to its income without additional financial support from the government.(Emphases and
underscoring supplied.)


Pursuant to Executive Order No. 378, government agencies and instrumentalities are allowed to source their
printing services from the private sector through competitive bidding, subject to the condition that the services offered by
the private supplier be of superior quality and lower in cost compared to what was offered by the NPO. Executive Order
No. 378 also limited NPOs appropriation in the General Appropriations Act to its income.

Perceiving Executive Order No. 378 as a threat to their security of tenure as employees of the NPO, petitioners
now challenge its constitutionality, contending that: (1) it is beyond the executive powers of President Arroyo to amend
or repeal Executive Order No. 285 issued by former President Aquino when the latter still exercised legislative powers;
and (2) Executive Order No. 378 violates petitioners security of tenure, because it paves the way for the gradual abolition
of the NPO.

We dismiss the petition.

Before proceeding to resolve the substantive issues, the Court must first delve into a procedural matter. Since
petitioners instituted this case as a class suit, the Court, thus, must first determine if the petition indeed qualifies as
one. In Board of Optometry v. Colet,
[2]
we held that [c]ourts must exercise utmost caution before allowing a class suit,
which is the exception to the requirement of joinder of all indispensable parties. For while no difficulty may arise if the
decision secured is favorable to the plaintiffs, a quandary would result if the decision were otherwise as those who were
deemed impleaded by their self-appointed representatives would certainly claim denial of due process.

Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:

Sec. 12. Class suit. When the subject matter of the controversy is one of common or general
interest to many persons so numerous that it is impracticable to join all as parties, a number of them
which the court finds to be sufficiently numerous and representative as to fully protect the interests of all
concerned may sue or defend for the benefit of all. Any party in interest shall have the right to intervene
to protect his individual interest.

From the foregoing definition, the requisites of a class suit are: 1) the subject matter of controversy is one of
common or general interest to many persons; 2) the parties affected are so numerous that it is impracticable to bring
them all to court; and 3) the parties bringing the class suit are sufficiently numerous or representative of the class and
can fully protect the interests of all concerned.

In Mathay v. The Consolidated Bank and Trust Company,
[3]
the Court held that:

An action does not become a class suit merely because it is designated as such in the pleadings. Whether
the suit is or is not a class suit depends upon the attending facts, and the complaint, or other pleading
initiating the class action should allege the existence of the necessary facts, to wit, the existence of a
subject matter of common interest, and the existence of a class and the number of persons in the alleged
class,

in order that the court might be enabled to determine whether the members of the class are
so numerous as to make it impracticable to bring them all before the court, to contrast the number
appearing on the record with the number in the class and to determine whether claimants on
record adequately represent the class and the subject matter of general or common
interest. (Emphases ours.)


Here, the petition failed to state the number of NPO employees who would be affected by the assailed Executive
Order and who were allegedly represented by petitioners. It was the Solicitor General, as counsel for respondents, who
pointed out that there were about 549 employees in the NPO.
[4]
The 67 petitioners undeniably comprised a small fraction
of the NPO employees whom they claimed to represent. Subsequently, 32 of the original petitioners executed an
Affidavit of Desistance, while one signed a letter denying ever signing the petition,
[5]
ostensibly reducing the number of
petitioners to 34. We note that counsel for the petitioners challenged the validity of the desistance or withdrawal of some
of the petitioners and insinuated that such desistance was due to pressure from people close to the seat of
power.
[6]
Still, even if we were to disregard the affidavit of desistance filed by some of the petitioners, it is highly
doubtful that a sufficient, representative number of NPO employees have instituted this purported class suit. A perusal of
the petition itself would show that of the 67 petitioners who signed the Verification/Certification of Non-Forum
Shopping, only 20 petitioners were in fact mentioned in the jurat as having duly subscribed the petition before the notary
public. In other words, only 20 petitioners effectively instituted the present case.

Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council of the Philippines, Inc.,
[7]
we observed that an
element of a class suit or representative suit is the adequacy of representation. In determining the question of fair and
adequate representation of members of a class, the court must consider (a) whether the interest of the named party is
coextensive with the interest of the other members of the class; (b) the proportion of those made a party, as it so bears, to
the total membership of the class; and (c) any other factor bearing on the ability of the named party to speak for the rest of
the class.

Previously, we held in Ibaes v. Roman Catholic Church
[8]
that where the interests of the plaintiffs and the other
members of the class they seek to represent are diametrically opposed, the class suit will not prosper.

It is worth mentioning that a Manifestation of Desistance,
[9]
to which the previously mentioned Affidavit of
Desistance
[10]
was attached, was filed by the President of the National Printing Office Workers Association
(NAPOWA). The said manifestation expressed NAPOWAs opposition to the filing of the instant petition in any
court. Even if we take into account the contention of petitioners counsel that the NAPOWA President had no legal
standing to file such manifestation, the said pleading is a clear indication that there is a divergence of opinions and views
among the members of the class sought to be represented, and not all are in favor of filing the present suit. There is here
an apparent conflict between petitioners interests and those of the persons whom they claim to represent. Since it cannot
be said that petitioners sufficiently represent the interests of the entire class, the instant case cannot be properly treated as
a class suit.

As to the merits of the case, the petition raises two main grounds to assail the constitutionality of Executive Order
No. 378:

First, it is contended that President Arroyo cannot amend or repeal Executive Order No. 285 by the mere
issuance of another executive order (Executive Order No. 378). Petitioners maintain that former President Aquinos
Executive Order No. 285 is a legislative enactment, as the same was issued while President Aquino still had legislative
powers under the Freedom Constitution;
[11]
thus, only Congress through legislation can validly amend Executive Order
No. 285.

Second, petitioners maintain that the issuance of Executive Order No. 378 would lead to the eventual abolition of
the NPO and would violate the security of tenure of NPO employees.

Anent the first ground raised in the petition, we find the same patently without merit.

It is a well-settled principle in jurisprudence that the President has the power to reorganize the offices and
agencies in the executive department in line with the Presidents constitutionally granted power of control over executive
offices and by virtue of previous delegation of the legislative power to reorganize executive offices under existing
statutes.

In Buklod ng Kawaning EIIB v. Zamora,
[12]
the Court pointed out that Executive Order No. 292 or the
Administrative Code of 1987 gives the President continuing authority to reorganize and redefine the functions of the
Office of the President. Section 31, Chapter 10, Title III, Book III of the said Code, is explicit:

Sec. 31. Continuing Authority of the President to Reorganize his Office. The President,
subject to the policy in the Executive Office and in order to achieve simplicity, economy and
efficiency, shall have continuing authority to reorganize the administrative structure of the Office
of the President. For this purpose, he may take any of the following actions:

(1) Restructure the internal organization of the Office of the President
Proper, including the immediate Offices, the President Special Assistants/Advisers
System and the Common Staff Support System, by abolishing, consolidating or
merging units thereof or transferring functions from one unit to another;

(2) Transfer any function under the Office of the President to any other
Department or Agency as well as transfer functions to the Office of the
President from other Departments and Agencies; and

(3) Transfer any agency under the Office of the President to any other
department or agency as well as transfer agencies to the Office of the
President from other Departments or agencies. (Emphases ours.)


Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, thus:

But of course, the list of legal basis authorizing the President to reorganize any department or
agency in the executive branch does not have to end here. We must not lose sight of the very source of
the power that which constitutes an express grant of power. Under Section 31, Book III of Executive
Order No. 292 (otherwise known as the Administrative Code of 1987), the President, subject to the
policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have the
continuing authority to reorganize the administrative structure of the Office of the President. For this
purpose, he may transfer the functions of other Departments or Agencies to the Office of the
President. In Canonizado v. Aguirre [323 SCRA 312 (2000)], we ruled that reorganization involves
the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or
redundancy of functions. It takes place when there is an alteration of the existing structure of
government offices or units therein, including the lines of control, authority and responsibility
between them. The EIIB is a bureau attached to the Department of Finance. It falls under the Office of
the President. Hence, it is subject to the Presidents continuing authority to reorganize.
[13]
(Emphasis
ours.)


It is undisputed that the NPO, as an agency that is part of the Office of the Press Secretary (which in various times
has been an agency directly attached to the Office of the Press Secretary or as an agency under the Philippine Information
Agency), is part of the Office of the President.
[14]


Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted above authorizes the President
(a) torestructure the internal organization of the Office of the President Proper, including the immediate Offices, the
President Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating or
merging units thereof or transferring functions from one unit to another, and (b) to transfer functions or offices from the
Office of the President to any other Department or Agency in the Executive Branch, and vice versa.

Concomitant to such power to abolish, merge or consolidate offices in the Office of the President Proper and to
transfer functions/offices not only among the offices in the Office of President Proper but also the rest of the Office of the
President and the Executive Branch, the President implicitly has the power to effect less radical or less substantive
changes to the functional and internal structure of the Office of the President, including the modification of functions of
such executive agencies as the exigencies of the service may require.

In the case at bar, there was neither an abolition of the NPO nor a removal of any of its functions to be transferred
to another agency. Under the assailed Executive Order No. 378, the NPO remains the main printing arm of the
government for all kinds of government forms and publications but in the interest of greater economy and encouraging
efficiency and profitability, it must now compete with the private sector for certain government printing jobs, with the
exception of election paraphernalia which remains the exclusive responsibility of the NPO, together with the Bangko
Sentral ng Pilipinas, as the Commission on Elections may determine. At most, there was a mere alteration of the main
function of the NPO by limiting the exclusivity of its printing responsibility to election forms.
[15]


There is a view that the reorganization actions that the President may take with respect to agencies in the Office of
the President are strictly limited to transfer of functions and offices as seemingly provided in Section 31 of the
Administrative Code of 1987.

However, Section 20, Chapter 7, Title I, Book III of the same Code significantly provides:

Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall
exercise such other powers and functions vested in the President which are provided for under the
laws and which are not specifically enumerated above, or which are not delegated by the President in
accordance with law. (Emphasis ours.)


Pursuant to Section 20, the power of the President to reorganize the Executive Branch under Section 31 includes
such powers and functions that may be provided for under other laws. To be sure, an inclusive and broad interpretation of
the Presidents power to reorganize executive offices has been consistently supported by specific provisions in general
appropriations laws.

In the oft-cited Larin v. Executive Secretary,
[16]
the Court likewise adverted to certain provisions of Republic Act
No. 7645, the general appropriations law for 1993, as among the statutory bases for the Presidents power to reorganize
executive agencies, to wit:

Section 48 of R.A. 7645 provides that:
Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the
Executive Branch. The heads of departments, bureaus and offices and agencies are
hereby directed to identify their respective activities which are no longer essential in the
delivery of public services and which may be scaled down, phased out or abolished,
subject to civil [service] rules and regulations. x x x. Actual scaling down, phasing out or
abolition of the activities shall be effected pursuant to Circulars or Orders issued for the
purpose by the Office of the President.
Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of
offices only and does not cover the creation of offices or transfer of functions. Nevertheless, the act
of creating and decentralizing is included in the subsequent provisionof Section 62, which provides
that:
Sec. 62. Unauthorized organizational changes. Unless otherwise created by
law or directed by the President of the Philippines, no organizational unit or changes in
key positions in any department or agency shall be authorized in their respective
organization structures and be funded from appropriations by this Act.
The foregoing provision evidently shows that the President is authorized to effect
organizational changes including the creation of offices in the department or agency concerned.
The contention of petitioner that the two provisions are riders deserves scant consideration. Well
settled is the rule that every law has in its favor the presumption of constitutionality. Unless and until a
specific provision of the law is declared invalid and unconstitutional, the same is valid and binding for all
intents and purposes.
[17]
(Emphases ours)


Buklod ng Kawaning EIIB v. Zamora,
[18]
where the Court upheld as valid then President Joseph Estradas
Executive Order No. 191 deactivating the Economic Intelligence and Investigation Bureau (EIIB) of the Department of
Finance, hewed closely to the reasoning in Larin. The Court, among others, also traced from the General Appropriations
Act
[19]
the Presidents authority to effect organizational changes in the department or agency under the executive
structure, thus:

We adhere to the precedent or ruling in Larin that this provision recognizes the authority of the
President to effect organizational changes in the department or agency under the executive structure. Such
a ruling further finds support in Section 78 of Republic Act No. 8760. Under this law, the heads of
departments, bureaus, offices and agencies and other entities in the Executive Branch are directed (a) to
conduct a comprehensive review of their respective mandates, missions, objectives, functions, programs,
projects, activities and systems and procedures; (b) identify activities which are no longer essential in the
delivery of public services and which may be scaled down, phased-out or abolished; and (c) adopt
measures that will result in the streamlined organization and improved overall performance of their
respective agencies. Section 78 ends up with the mandate that the actual streamlining and productivity
improvement in agency organization and operation shall be effected pursuant to Circulars or Orders issued
for the purpose by the Office of the President. x x x.
[20]
(Emphasis ours)


Notably, in the present case, the 2003 General Appropriations Act, which was reenacted in 2004 (the year of the
issuance of Executive Order No. 378), likewise gave the President the authority to effect a wide variety of organizational
changes in any department or agency in the Executive Branch. Sections 77 and 78 of said Act provides:

Section 77. Organized Changes. Unless otherwise provided by law or directed by the
President of the Philippines, no changes in key positions or organizational units in any department or
agency shall be authorized in their respective organizational structures and funded from appropriations
provided by this Act.

Section 78. Institutional Strengthening and Productivity Improvement in Agency Organization
and Operations and Implementation of Organization/Reorganization Mandated by Law. The
Government shall adopt institutional strengthening and productivity improvementmeasures to
improve service delivery and enhance productivity in the government, as directed by the President of
the Philippines. The heads of departments, bureaus, offices, agencies, and other entities of the
Executive Branch shall accordingly conduct a comprehensive review of their respective mandates,
missions, objectives, functions, programs, projects, activities and systems and procedures; identify areas
where improvements are necessary; and implement corresponding structural, functional and
operational adjustments that will result in streamlined organization and operations and improved
performance and productivity: PROVIDED, That actual streamlining and productivity improvements
in agency organization and operations, as authorized by the President of the Philippines for the purpose,
including the utilization of savings generated from such activities, shall be in accordance with the rules
and regulations to be issued by the DBM, upon consultation with the Presidential Committee on
Effective Governance: PROVIDED, FURTHER, That in the implementation of
organizations/reorganizations, or specific changes in agency structure, functions and operations as
a result of institutional strengthening or as mandated by law, the appropriation, including the
functions, projects, purposes and activities of agencies concerned may be realigned as may be
necessary: PROVIDED, FINALLY, That any unexpended balances or savings in appropriations may be
made available for payment of retirement gratuities and separation benefits to affected personnel, as
authorized under existing laws. (Emphases and underscoring ours.)


Implicitly, the aforequoted provisions in the appropriations law recognize the power of the President to reorganize
even executive offices already funded by the said appropriations act, including the power to implement structural,
functional, and operational adjustments in the executive bureaucracy and, in so doing, modify or realign appropriations
of funds as may be necessary under such reorganization. Thus, insofar as petitioners protest the limitation of the NPOs
appropriations to its own income under Executive Order No. 378, the same is statutorily authorized by the above
provisions.

In the 2003 case of Bagaoisan v. National Tobacco Administration,
[21]
we upheld the streamlining of the
National Tobacco Administration through a reduction of its personnel and deemed the same as included in the power of
the President to reorganize executive offices granted under the laws, notwithstanding that such streamlining neither
involved an abolition nor a transfer of functions of an office. To quote the relevant portion of that decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora, in his capacity
as the Executive Secretary, et al.,this Court has had occasion to also delve on the Presidents power to
reorganize the Office of the President under Section 31(2) and (3) of Executive Order No. 292 and the
power to reorganize the Office of the President Proper. x x x
x x x x
The first sentence of the law is an express grant to the President of a continuing authority to reorganize
the administrative structure of the Office of the President. The succeeding numbered paragraphs are
not in the nature of provisos that unduly limit the aim and scope of the grant to the President of the
power to reorganize but are to be viewed in consonance therewith. Section 31(1) of Executive Order
No. 292 specifically refers to the Presidents power to restructure the internal organization of the Office
of the President Proper, by abolishing, consolidating or merging units hereof or transferring functions
from one unit to another, while Section 31(2) and (3) concern executive offices outside the Office of the
President Proper allowing the President to transfer any function under the Office of the President to any
other Department or Agency and vice-versa, and the transfer of any agency under the Office of the
President to any other department or agency and vice-versa.
In the present instance, involving neither an abolition nor transfer of offices, the assailed
action is a mere reorganization under the general provisions of the law consisting mainly
of streamlining the NTA in the interest of simplicity, economy and efficiency. It is an act well
within the authority of the President motivated and carried out, according to the findings of the
appellate court, in good faith, a factual assessment that this Court could only but accept.
[22]
(Emphases
and underscoring supplied.)


In the more recent case of Tondo Medical Center Employees Association v. Court of Appeals,
[23]
which
involved a structural and functional reorganization of the Department of Health under an executive order, we
reiterated the principle that the power of the President to reorganize agencies under the executive department by
executive or administrative order is constitutionally and statutorily recognized. We held in that case:

This Court has already ruled in a number of cases that the President may, by executive or
administrative order, direct the reorganization of government entities under the Executive
Department. This is also sanctioned under the Constitution, as well as other statutes.

Section 17, Article VII of the 1987 Constitution, clearly states: [T]he president shall
have control of all executive departments, bureaus and offices. Section 31, Book III, Chapter 10 of
Executive Order No. 292, also known as the Administrative Code of 1987 reads:

SEC. 31. Continuing Authority of the President to Reorganize his Office - The
President, subject to the policy in the Executive Office and in order to achieve simplicity,
economy and efficiency, shall have continuing authority to reorganize the administrative
structure of the Office of the President. For this purpose, he may take any of the
following actions:

x x x x

In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale behind the
Presidents continuing authority under the Administrative Code to reorganize the administrative structure
of the Office of the President. The law grants the President the power to reorganize the Office of the
President in recognition of the recurring need of every President to reorganize his or her office to
achieve simplicity, economy and efficiency. To remain effective and efficient, it must be capable of
being shaped and reshaped by the President in the manner the Chief Executive deems fit to carry out
presidential directives and policies.

The Administrative Code provides that the Office of the President consists of the Office of the
President Proper and the agencies under it. The agencies under the Office of the President are identified
in Section 23, Chapter 8, Title II of the Administrative Code:

Sec. 23. The Agencies under the Office of the President.The agencies under the
Office of the President refer to those offices placed under the chairmanship of the
President, those under the supervision and control of the President, those under the
administrative supervision of the Office of the President, those attached to it for policy
and program coordination, and those that are not placed by law or order creating them
under any specific department.

x x x x

The power of the President to reorganize the executive department is likewise recognized in
general appropriations laws. x x x.

x x x x

Clearly, Executive Order No. 102 is well within the constitutional power of the President to
issue. The President did not usurp any legislative prerogative in issuing Executive Order No. 102. It
is an exercise of the Presidents constitutional power of control over the executive department,
supported by the provisions of the Administrative Code, recognized by other statutes, and
consistently affirmed by this Court.
[24]
(Emphases supplied.)


Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive Secretary
[25]
that:

The Constitutions express grant of the power of control in the President justifies an executive
action to carry out reorganization measures under a broad authority of law.

In enacting a statute, the legislature is presumed to have deliberated with full knowledge of all
existing laws and jurisprudence on the subject. It is thus reasonable to conclude that in passing a statute
which places an agency under the Office of the President, it was in accordance with existing laws and
jurisprudence on the Presidents power to reorganize.

In establishing an executive department, bureau or office, the legislature necessarily ordains an
executive agencys position in the scheme of administrative structure. Such determination is primary, but
subject to the Presidents continuing authority to reorganize the administrative structure. As far as
bureaus, agencies or offices in the executive department are concerned, the power of control may justify
the President to deactivate the functions of a particular office. Or a law may expressly grant the President
the broad authority to carry out reorganization measures. The Administrative Code of 1987 is one such
law.
[26]



The issuance of Executive Order No. 378 by President Arroyo is an exercise of a delegated legislative power
granted by the aforementioned Section 31, Chapter 10, Title III, Book III of the Administrative Code of 1987, which
provides for the continuing authority of the President to reorganize the Office of the President, in order to achieve
simplicity, economy and efficiency. This is a matter already well-entrenched in jurisprudence. The reorganization
of such an office through executive or administrative order is also recognized in the Administrative Code of
1987. Sections 2 and 3, Chapter 2, Title I, Book III of the said Code provide:

Sec. 2. Executive Orders. - Acts of the President providing for rules of a general or permanent
character in implementation or execution of constitutional or statutory powers shall be promulgated
in executive orders.

Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of
governmental operations in pursuance of his duties as administrative head shall be promulgated
in administrative orders. (Emphases supplied.)


To reiterate, we find nothing objectionable in the provision in Executive Order No. 378 limiting the appropriation
of the NPO to its own income. Beginning with Larin and in subsequent cases, the Court has noted certain provisions in
the general appropriations laws as likewise reflecting the power of the President to reorganize executive offices or
agencies even to the extent of modifying and realigning appropriations for that purpose.

Petitioners contention that the issuance of Executive Order No. 378 is an invalid exercise of legislative power on
the part of the President has no legal leg to stand on.

In all, Executive Order No. 378, which purports to institute necessary reforms in government in order to improve
and upgrade efficiency in the delivery of public services by redefining the functions of the NPO and limiting its funding
to its own income and to transform it into a self-reliant agency able to compete with the private sector, is well within the
prerogative of President Arroyo under her continuing delegated legislative power to reorganize her own office. As
pointed out in the separate concurring opinion of our learned colleague, Associate Justice Antonio T. Carpio, the
objective behind Executive Order No. 378 is wholly consistent with the state policy contained in Republic Act No. 9184
or the Government Procurement Reform Act to encourage competitiveness by extending equal opportunity to private
contracting parties who are eligible and qualified.
[27]


To be very clear, this delegated legislative power to reorganize pertains only to the Office of the President and the
departments, offices and agencies of the executive branch and does not include the Judiciary, the Legislature or the
constitutionally-created or mandated bodies. Moreover, it must be stressed that the exercise by the President of the power
to reorganize the executive department must be in accordance with the Constitution, relevant laws and prevailing
jurisprudence.

In this regard, we are mindful of the previous pronouncement of this Court in Dario v. Mison
[28]
that:

Reorganizations in this jurisdiction have been regarded as valid provided they are pursued
in good faith. As a general rule, a reorganization is carried out in good faith if it is for the purpose of
economy or to make bureaucracy more efficient. In that event, no dismissal (in case of a dismissal) or
separation actually occurs because the position itself ceases to exist. And in that case, security of tenure
would not be a Chinese wall. Be that as it may, if the abolition, which is nothing else but a separation or
removal, is done for political reasons or purposely to defeat security of tenure, or otherwise not in good
faith, no valid abolition takes place and whatever abolition is done, is void ab initio. There is an
invalid abolition as where there is merely a change of nomenclature of positions, or where claims of
economy are belied by the existence of ample funds. (Emphasis ours.)


Stated alternatively, the presidential power to reorganize agencies and offices in the executive branch of
government is subject to the condition that such reorganization is carried out in good faith.

If the reorganization is done in good faith, the abolition of positions, which results in loss of security of tenure of
affected government employees, would be valid. In Buklod ng Kawaning EIIB v. Zamora,
[29]
we even observed that there
was no such thing as an absolute right to hold office. Except those who hold constitutional offices, which provide for
special immunity as regards salary and tenure, no one can be said to have any vested right to an office or salary.
[30]


This brings us to the second ground raised in the petition that Executive Order No. 378, in allowing government
agencies to secure their printing requirements from the private sector and in limiting the budget of the NPO to its income,
will purportedly lead to the gradual abolition of the NPO and the loss of security of tenure of its present employees. In
other words, petitioners avow that the reorganization of the NPO under Executive Order No. 378 is tainted with bad
faith. The basic evidentiary rule is that he who asserts a fact or the affirmative of an issue has the burden of proving it.
[31]


A careful review of the records will show that petitioners utterly failed to substantiate their claim. They failed to
allege, much less prove, sufficient facts to show that the limitation of the NPOs budget to its own income would indeed
lead to the abolition of the position, or removal from office, of any employee. Neither did petitioners present any shred of
proof of their assertion that the changes in the functions of the NPO were for political considerations that had nothing to
do with improving the efficiency of, or encouraging operational economy in, the said agency.

In sum, the Court finds that the petition failed to show any constitutional infirmity or grave abuse of discretion
amounting to lack or excess of jurisdiction in President Arroyos issuance of Executive Order No. 378.

WHEREFORE, the petition is hereby DISMISSED and the prayer for a Temporary Restraining Order and/or a
Writ of Preliminary Injunction is hereby DENIED. No costs.

SO ORDERED.
SAN MIGUEL CORPORATION, G.R. No. 155178
Petitioner,

Present:

PUNO, C.J., Chairperson,
CARPIO,
- versus - AZCUNA,
VELASCO, JR.,
*
and
LEONARDO-DE CASTRO, JJ.


ANGEL C. PONTILLAS, Promulgated:
Respondent. May 7, 2008

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

The Case

Before the Court is a petition for review assailing the 26 March 2002 Decision
[1]
and the 20 August
2002 Resolution
[2]
of the Court of Appeals in CA-G.R. SP No. 50680.

The Antecedent Facts

On 24 October 1980, San Miguel Corporation (petitioner) employed Angel C. Pontillas (respondent) as a daily wage
company guard. In 1984,
[3]
respondent became a monthly-paid employee which entitled him to yearly increases in
salary. Respondent alleged that his yearly salary increases were only a percentage of what the other security guards
received.

On 19 October 1993, respondent filed an action for recovery of damages due to discrimination under Article
100
[4]
of the Labor Code of the Philippines (Labor Code), as amended, as well as for recovery of salary differential
and backwages, against petitioner, Capt. Segundino D. Fortich (Capt. Fortich), Company Security Commander and head
of the Mandaue Security Department, and Director Francisco Manzon, Vice President and Brewery Director. During the
mandatory conference on 23 November 1993, respondent questioned the rate of salary increase given him by petitioner.

On 6 December 1993, Ricardo F. Elizagaque (Elizagaque), petitioners Vice President and VisMin Operations
Center Manager, issued a Memorandum ordering, among others, the transfer of responsibility of the Oro Verde
Warehouse to the newly-organizedVisMin Logistics Operations effective 1 January 1994. In compliance
with Elizagaques Memorandum, Capt. Fortich issued a Memorandum dated 7 February 1994 addressed to
Comdr. Danilo C. Flores (Comdr. Flores), VisMin Logistics Operations Manager, effecting the formal transfer of
responsibility of the security personnel and equipment in the Oro Verde Warehouse to Major Teodulo F. Enriquez (Major
Enriquez), Security Officer of the VisMin Logistics Operations, effective 14 February 1994. Simultaneously,
Capt. Fortich gave the same information to his Supervising Security Guards for them to relay the information to the
company security guards.

Respondent continued to report at Oro Verde Warehouse. He alleged that he was not properly notified of the
transfer and that he did not receive any written order from Capt. Fortich, his immediate superior. Respondent also alleged
that he was wary of the transfer because of his pending case against petitioner. He further claimed that two other security
guards continue to report at OroVerde Warehouse despite the order to transfer.

Petitioner alleged that respondent was properly notified of the transfer but he refused to receive 14 memoranda
issued by Major Enriquez from 14-27 February 1994. Petitioner also alleged that respondent was given notices of Guard
Detail dated 9 February 1994and 15 February 1994 but he still refused to report for duty at the VisMin Logistics
Operations.

In a letter dated 28 February 1994, petitioner informed respondent that an administrative investigation would be
conducted on 4 March 1994 relative to his alleged offenses of Insubordination or Willful Disobedience in Carrying Out
Reasonable Instructions of his superior. During the investigation, respondent was given an opportunity to present his
evidence and be assisted by counsel. In a letter dated 7 April 1994, petitioner informed respondent of its decision to
terminate him for violating company rules and regulations, particularly for Insubordination or Willful Disobedience in
Carrying Out Reasonable Instructions of his superior.

On 15 June 1994, respondent filed an amended complaint against petitioner for illegal dismissal and payment
of backwages, termination pay, moral and exemplary damages, and attorneys fees.

The Ruling of the Labor Arbiter

In a Decision dated 25 October 1996,
[5]
the Labor Arbiter dismissed respondents complaint for lack of merit. The
Labor Arbiter recognized the management prerogative to transfer its employees from one station to another. The Labor
Arbiter found nothing prejudicial, unjust, or unreasonable to petitioners decision to merge the functions of the Materials
Management of theMandaue Brewery and the Physical Distribution Group which resulted to the forming of
the VisMin Logistics Operations. The Labor Arbiter ruled that as a consequence of the merger, the instructions and orders
to all security personnel should necessarily come from the security officer of the new organization. Hence, respondents
allegation that his transfer order should come from Capt. Fortichand not from Major Enriquez was misleading. The Labor
Arbiter ruled that respondent was informed of the impending merger, verbally and in writing, as early as 6 December
1993.

The Labor Arbiter further ruled that petitioner did not violate Article 100 of the Labor Code. The Labor Arbiter
ruled that respondents claim that giving him a day-off twice a month resulted to diminution of his monthly take-home
pay was an erroneous interpretation of the Labor Code, which even required employers to give their employees a rest day
per week. The Labor Arbiter also ruled that there was no basis for the allegation that respondent was discriminated
against in the annual salary increases.

The Labor Arbiter ruled that respondent was accorded due process before his termination from the service. He was
investigated with the assistance of counsel, and he was able to confront petitioners witnesses and present evidence in his
favor.


Respondent appealed from the Labor Arbiters Decision.


The Ruling of the NLRC

In its 23 May 1997 Decision,
[6]
the National Labor Relations Commission (NLRC) set aside the Labor Arbiters
Decision. The NLRC ruled that respondent was not informed of his transfer from Oro Verde Warehouse
to VisMin Logistics Operations. The notices allegedly sent to respondent did not indicate any receipt from
respondent. The NLRC also ruled that the notations in the notices stating Refused to sign appeared to be written by
the same person on just one occasion. The NLRC found that respondent was waiting for a formal notice from
Capt. Fortich, who only instructed his Supervising Security Guard, Rodrigo T.Yocte, to remind respondent of his transfer
and new assignment. The NLRC declared that the notices sent by Major Enriquez had no binding effect because he was
not respondents superior. The NLRC held that it was premature to charge respondent with insubordination for his failure
to comply with the order of someone who was not his department head. The NLRC stated that respondent had good
reason to continue reporting at Oro Verde Warehouse.

The NLRC further ruled that respondent was a victim of discrimination. The NLRC declared that petitioner failed to
justify why respondent was not entitled to the full rate of salary increases enjoyed by other security guards.

The dispositive portion of the NLRCs Decision reads:

WHEREFORE, the decision of the Executive Labor Arbiter is hereby VACATED and SET ASIDE
and judgment is hereby rendered:

1. Declaring the dismissal of complainant to be without any just cause and, therefore, illegal;

2. Ordering respondent San Miguel Corporation to reinstate the complainant to his former position
without loss of seniority rights and other privileges and with full backwages, inclusive of
allowances and other benefits or their monetary equivalent, computed from April 8, 1994 up to
his actual reinstatement. However, should reinstatement be no longer feasible, respondent San
Miguel Corporation shall pay to complainant, in addition to his full backwages, separation pay of
one (1) month pay for every year of service, a period of six (6) months to be considered as one (1)
whole year;

3. Ordering respondent San Miguel Corporation to pay to complainant moral damages
of P50,000.00 and exemplary damages of P20,000.00; and

4. Ordering respondent San Miguel Corporation to pay to complainant the sum equivalent to ten
percent (10%) of the total monetary award, for and as attorneys fees.

SO ORDERED.
[7]


Petitioner filed a motion for reconsideration. In its 27 February 1998 Resolution,
[8]
the NLRC partially granted the
motion by deleting the award of moral and exemplary damages. The NLRC ruled that there was no showing on record
that the discrimination against respondent was tainted with bad faith. Thus:

WHEREFORE, in view of all the foregoing, the instant motion for reconsideration is hereby
PARTIALLY GRANTED only with respect to the award of moral and exemplary damages which are
hereby deleted.

SO ORDERED.
[9]



Petitioner filed a petition for certiorari before the Court of Appeals.




The Ruling of the Court of Appeals

In its 26 March 2002 Decision, the Court of Appeals affirmed with modification the NLRCs Decision.

The Court of Appeals ruled that under Article 282(a) of the Labor Code, as amended, an employer may terminate an
employment for serious misconduct or willful disobedience by the employee of the lawful orders of his employer or his
representative in connection with his work. However, disobedience requires the concurrence of at least two requisites: (1)
the employees assailed conduct must have been willful or intentional, and the willfulness must be characterized by a
wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the
employee and must pertain to the duties which he had been engaged to discharge.

The Court of Appeals ruled that there was no sufficient evidence that would show that respondents failure to report
to his new superior was willful and characterized by a perverse and wrongful attitude. The Court of Appeals ruled that
respondent was waiting for his former superior to formally inform him of his new assignment. The Court of Appeals
further ruled that respondent was suspicious of petitioners intention to transfer him in view of the pendency of the case he
filed against petitioner. The Court of Appeals ruled that there was a clear indication that respondent was a victim of
retaliatory measures from petitioner.

The dispositive portion of the Court of Appeals Decision reads:

IN VIEW OF THE FOREGOING, the assailed decision and resolution of public respondent NLRC
are hereby AFFIRMED with the modification that, in lieu of reinstatement, private respondent should be
paid separation pay, equivalent to one (1) month salary for every year of service. No pronouncement as to
costs.

SO ORDERED.
[10]


Petitioner filed a motion for reconsideration. In its 20 August 2002 Resolution, the Court of Appeals denied the
motion.

Hence, the petition before this Court.


The Issue

The issue in this case is the legality of respondents dismissal from employment.

The Ruling of this Court

The petition has merit.

Validity of Notice of Appeal

We first discuss a side issue which petitioner raises before the Court. Petitioner alleges that there was no valid
substitution of respondents counsel. Petitioner alleges that Atty. Vigilius M. Santiago (Atty. Santiago) filed a notice of
entry of appearance as respondents counsel of record and filed an appeal from the Labor Arbiters Decision without
complying with Section 26, Rule 138 of the Rules of Court. Since there was no valid substitution of counsel, the appeal
filed by Atty. Santiago was ineffective. Petitioner alleges that since Atty. Ricardo Cipriano (Atty. Cipriano), the counsel
of record, did not appeal from the Labor Arbiters Decision, the Decision became final and executory.

The contention has no merit.

A party may have two or more lawyers working in collaboration in a given litigation.
[11]
Substitution of counsel
should not be presumed from the mere filing of a notice of appearance of a new lawyer.
[12]
The fact that a second attorney
enters his appearance for the same party does not necessarily raise the presumption that the authority of the first attorney
has been withdrawn.
[13]
The entry of appearearance of Atty. Santiago should not give rise to the presumption that
Atty. Cipriano withdrew his appearance as counsel in the absence of a formal withdrawal of appearance. Atty. Santiago
should only be treated as collaborating counsel despite his appearance as the new counsel of record. Petitioner even
observed that the NLRCs Decision was not sent to Atty. Santiago but to Atty. Cipriano. Even in its petition before the
Court, petitioner sent copies of the petition not only to Atty. Santiago but also to Atty. Cipriano, thus acknowledging that
Atty. Cipriano remains as respondents counsel.

Since a lawyer is presumed to be properly authorized to represent any cause in which he appears,
[14]
Atty. Santiago
is presumed to be acting within his authority as collaborating counsel when he filed the appeal from the Labor Arbiters
Decision. For as long as Atty. Santiago filed the notice of appeal within the reglementary period, reckoned from the time
Atty. Cipriano received the Labor Arbiters Decision, the NLRC did not abuse its discretion in entertaining the appeal.


Validity of Dismissal from Employment

Respondent was dismissed for a just cause.

An employer may terminate an employment for serious misconduct or willful disobedience by the employee of the
lawful orders of his employer or representative in connection with his work.
[15]
Willful disobedience requires the
concurrence of two elements: (1) the employees assailed conduct must have been willful, that is, characterized by a
wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the
employee, and must pertain to the duties which he had been engaged to discharge.
[16]


The records show that respondent was not singled out for the transfer. Respondents transfer was the effect of the
integration of the functions of the Mandaue Brewery Materials Management and the Physical Distribution group into a
unified logistics organization, the VisMin Logistics Operations. The 6 December 1993 Memorandum
of Elizagaque showed the transfer to the VisMin Logistics Operations of the following functions:

1. Bottle Yard Operations (including direct loading of route/overland truck and Remuco forklift operations); and

2. Transporation Management (car/service pick-ups, dump trucks, flatbed and firetruck)
[17]


The Memorandum also showed that the following assets were also transferred to the new VisMin Logistics Operations:
1. Oro Verde Warehouse
2. Raw Sugar Warehouse
3. ARMS Bldg. & Training Center
4. Malt Bagging Plant
5. Weigh Bridge
6. Planters Warehouse, Wharf & Offices
7. Cars/Service Pick-ups
8. Dump Trucks
9. Flat Bed
10. Fire Truck
11. Gas Station
12. B. Yeast Tanker
[18]

In other words, the entire Oro Verde Warehouse, to which unit respondent belonged, was affected by the integration.

We do not agree that respondent was not formally notified of the transfer. The Memorandum dated 7 February
1994 of Capt.Fortich to Comdr. Flores states:

2. This is to formalize the transfer of security operations and control of all security personnel and
equipment at subject warehouses, effective 14 Feb 94.

3. Security personnel involved will be verbally informed of the transfer for smooth transition and
proper coordination will be made to the SecutiyOfficer of VISMIN Logistics Operations.
[19]


As early as 9 February 1994, Major Enriquez, the head of the VisMin Logistics Operations and thus, respondents new
superior, issued a guard detail for 14-20 February 1994.
[20]
All agency guards signed the detail, except respondent who
refused to sign.
[21]
On 15 February 1994, Major Enriquez again issued a guard detail for 21-27 February 1994.
[22]
Again,
all security guards concerned signed the detail except respondent who refused to sign. Major Enriquez issued successive
memoranda
[23]
to respondent officially informing him of his transfer to the VisMin Logistics Operations but respondent
refused to sign all the notices.

The employer exercises the prerogative to transfer an employee for valid reasons and according to the requirements
of its business, provided the transfer does not result in demotion in rank or diminution of the employees salary, benefits,
and other privileges.
[24]
In this case, we found that the order of transfer was reasonable and lawful considering the
integration of Oro Verde Warehouse with VisMin Logistics Operations. Respondent was properly informed of the
transfer but he refused to receive the notices on the pretext that he was wary because of his pending case against
petitioner. Respondent failed to prove that petitioner was acting in bad faith in effecting the transfer. There was no
demotion involved, or even a diminution of his salary, benefits, and other privileges. Respondents persistent refusal to
obey petitioners lawful order amounts to willful disobedience under Article 282 of the Labor Code.

WHEREFORE, we GRANT the petition. We SET ASIDE the 26 March 2002 Decision and the 20 August
2002Resolution of the Court of Appeals in CA-G.R. SP No. 50680. We REINSTATE the 25 October 1996 Decision of
the Labor Arbiter.
SO ORDERED.