Civpro Cases 121514

Republic of the Philippines
Mina with plaintiff Pilar Lazo from 1933-1958, while married to Antonia
Pacson. Joaquin Mina died in August, 1958, leaving no descendants
norascendants except his widow, the defendant herein Antonia Pacson. On
April 9, 1958, Joaquin Mina, then still living, executed a deed of absolute sale
(Annex "B" to Complaint) of three parcels of land situated in the municipality
of Muoz, Nueva Ecija, in favor of the defendants Crispino Medina and
Cresencia Mina for the sum of P12,000. On April 15, 1958 again he executed
another deed of sale (Annex "C" to Complaint) of 13 parcels of land covered
by 12 transfer certificates of title to the same spouses Crispino Medina and
Cresencia Mina. Both deeds of sale bear the conformity of his wife Antonia
Pacson.
SUPREME COURT
Manila
EN BANC
G.R. No. L-17828
August 31, 1963
LIGAYA MINA, JAIME MINA, SILVINA MINA, FAUSTA MINA,

PABLO MINA and MIGUEL MINA, the minors represented by PILAR LAZO
as guardian-ad-litem, plaintiffs-appellants,
vs.
ANTONIA PACSON,
defendants-appellees.
CRISPINO
MEDINA
and
CRESENCIA
MINA,
F. A. Pelmoka for plaintiffs-appellants.

Castelo Law Office for defendants-appellees.
LABRADOR, J.:
This is an appeal from an order of the Court of First Instance of Nueva Ecija,
Hon. Felix Makasiar, presiding, in its Civil Case No. 3296, entitled "Ligaya
Mina, et al., plaintiffs vs. Crispino Medina, et al., defendants," dismissing the
complaint filed in this case. The appellant also appeals against the order
denying the motion for reconsideration of the order of dismissal.
The facts necessary to understand the nature of the issues presented in this
appeal, as gleaned from the pleadings, may be briefly stated as follows:
Plaintiffs Ligaya, Jaime, Silvina, Fausta, Pablo and Miguel, all surnamed
Mina, are alleged to be the illegitimate children of the deceased Joaquin
In the complaint filed in the Court of First Instance of Nueva Ecija in the case
which originated this appeal, it is alleged that plaintiffs are illegitimate
children of the deceased Joaquin Mina begotten by him with Pilar Lazo
during the period from 1933 to 1958 while Joaquin Mina was lawfully married
to Antonia Pacson; that the plaintiff Pablo Mina is a recognized illegitimate
child of the deceased Joaquin Mina; that Joaquin Mina died intestate leaving
no ascendants or descendants, except his widow Antonia Pacson; that he
left various parcels of land enumerated in the complaint but that on April 9,
1950 the defendants connived and secured from Joaquin Mina, who was ill
and did not know what he was doing, the execution of the two deeds of sale
without consideration, fictitiously and fraudulently, transferring his
propertiesto the spouses Crispino Medina and Cresencia Mina; and that by
reason of said acts, defendants have caused moral anguish, anxiety and
embarrassment to plaintiffs, causing them damages amounting to P10,000;
that plaintiffs pray that they be declared recognized illegitimate children of the
deceased Joaquin Mina, entitled to share in the properties left by him as
such illegitimate children; that the deeds of sale, Annexes "B" and "C" be
declared fictitious, fraudulent and therefore, null and void; and that
defendants be required to deliver to plaintiffs' possession one-fourth of said
properties together with P10,000 for moral damages.
Upon the filing of the complaint the defendants presented a motion to dismiss
the complaint on the ground of res judicata, alleging that a similar action had
previously been presented as Civil Case No. 3015 in the same court, and by
the same parties against Crispino Medina and Cresencia Mina, in which the
same allegations of plaintiffs' status and fraudulent conveyance of the
properties to defendants are alleged, together with a prayer for moral
damages in the sum of P20,000. It appears, however, that in the complaint
filed in said Civil Case No. 3015, no prayer is made for the declaration of the
filiation of the plaintiffs in relation or with respect to the deceased Joaquin

Mina.
The motion to dismiss also copied an order of the court issued in said Civil
Case No. 3015 which reads as follows:
Acting on the Motion filed by the defendants on December 22, 1958 for the
reconsideration of the order dated December 8, 1958, and considering that
the present action is not only for annulment of deeds of sale but also for
partition (paragraphs 8 and 11 of the complaint and paragraph 4 of the
prayer thereof); that to avoid multiplicity of suits, the complex action to
establish filiation andfor partition or for recovery of inheritance may be
brought in the same case (Lopez v. Lopez, 68 Phil. 227; Escoval vs. Escoval,
48 O.G. 615; Edades vs. Edades, L-8964, July 31, 1956); and that Antonia
Pacson, the surviving widow and the other intestate heirs of the deceased
Joaquin Mina, or necessary parties are not made a party in this case (Briz v.
Briz, 43 Phil. 763), the plaintiffs are hereby directed to amend their complaint
within fifteen (15) days from receipt hereof by including as party defendant
the surviving widow of the deceased Joaquin Mina and other necessary
parties.
After a careful consideration of the joint motion to dismiss of defendants

Antonia Pacson and the spouses Crispino Medina and Cresencia Mina,
dated November 11, 1959, the opposition thereto dated November 24, 1959,
and the reply of the defendants to the opposition, dated December 7, 1959,
the Court is of the opinion that said motion to dismiss is well taken; hence
this case is hereby dismissed without costs.
Plaintiffs' motion for time to submit rejoinder, dated December 10, 1959, is
hereby denied because it will only unnecessarily delay the termination of this
case.
So ordered.
Cabanatuan City, December 18, 1959.
A motion for the reconsideration of the order of the court dismissing the
action having been denied, the plaintiffs in the present case prosecuted this
appeal directly to this Court.1wph1.t
Should the plaintiffs fail to comply with this order, this case will be dismissed.
Lastly, another order of the same court dated February 9, 1959 was quoted,
the dispositive part of which reads:
The fifteen-day period granted to the plaintiffs having elapsed without said
order having been complied with, the Court hereby dismisses this case,
without pronouncement aa to costs.
Opposition to the motion to dismiss was presented on behalf of the plaintiffs

by their attorney to which a reply was filed on behalf of the defendants. A
rejoinder was also filed after which Judge Genaro Tan Torres, then presiding
over the court, sustained the motion to dismiss in an order which reads as
follows:
As shown above the question to be resolved is whether or not the order

dismissing the previous Civil Case No. 3015 bars the present civil action No.
3296 of the Court of First Instance of Nueva Ecija.
In the first error assigned by the appellants in their brief it is argued that the
dismissal of the complaint in the previous action was in fact "at the indirect
instance of the plaintiffs through inaction or omission." We do not find this
claim justified by the facts of the case. The order of the court dismissing the
complaint in the first case contains the following warning: "Should the
plaintiffs fail to comply with this order, this case will be dismissed." In the face
of this express warning given in the court's order the dismissal can not be
said to have been "at the indirect instance of the plaintiffs; it was in fact
caused by plaintiffs' refusal to comply with the express mandate contained in
the order of dismissal. The dismissal, therefore, was justified under Rule 30,
Section 3 of the Rules of Court, which reads:
SEC. 3. Failure to prosecute. When plaintiff fails to appear at the time of

the trial, or to prosecute his action for an unreasonable length of time, or to
comply with these rules of any order of the court, the action may be
dismissed upon motion of the defendant or upon the court's own motion. This
dismissal shall have the effect of an adjudication upon the merits, unless
otherwise provided by court.
The above provision of the Rules was invoked in the case, of Garchitorena,
et al. vs. De los Santos, et al., G.R. No. L-17045, June 30, 1962, wherein this
Court held:
To order an amendment to a complaint within a certain period in order to

implead as party plaintiff or defendant one who is not a party to the case lies
within the discretion of the Court. And where it appears that the person to be
impleaded is an indispensable party, the party to whom such order is
directed has no other choice but to comply with it. His refusal or failure to
comply with the order is a ground for the dismissal of his complaint pursuant
to Section 3, Rule, 30, of the Rules of Court. . . .
Under the second assignment of error it is argued that the dismissal of the
previous case was brought about by the negligence, gross or criminal, of
plaintiffs' lawyer for which the plaintiffs-appellants should not be made to
suffer. The argument is not true to fact. The failure to amend was a result not
of the neglect of the lawyer alone but also of the plaintiffs-appellants
themselves. Had the plaintiffs taken even an ordinary interest in the result of
the action that they had filed, they would have been able to secure
information from their lawyer that the case had been dismissed for failure to
amend. Upon receipt of such information, plaintiffs could have applied to the
court for relief under Rule 38 of the Rules of Court and could have had the
complaint amended as directed in the order of dismissal. It is not alone
negligence of their counsel, therefore, but of themselves also that the
required amendment was not made. But assuming for the sake of argument
that the failure was due to the lawyer alone, such failure would not relieve
them of the responsibility resulting from the neglect of their lawyer, for the
client is bound by the action of his counsel. (Isaac v. Mendoza, G. R. No. L2830, June 21, 1951; Vivero v. Santos, et al., G. R. No. L-8105, Feb. 28,
1956; Fernandez v. Tan Tiong Tick, G.R. No. L-15877, April 28, 1961;
Gordulan v. Gordulan, G.R. No. L-17722, Oct. 9, 1962; Valerio v. Sec. of

Agriculture, G.R. No. L-18587, April 23, 1963.)
In the third assigiament of error it is claimed that there is no complete identity

between the parties in the first case and those in the case at bar. The
statement is true because in the previous case Antonia Pacson was not
included as party-defendlant. As a matter of fact the order decided that
Pacson was to be included as party-defendant. As to the latter, therefore, the
previous order of dismissal does not bar the present complaint, not only
because she was not made a party but also because the issue of filiation of
the parties-plaintiffs was not raised in the previous case, although such issue
was necessary for the plaintiffs to be able to maintain their right of action. In
view of this fact, the present action should be considered barred in respect to
the action for the annulment of the deeds of sale and as regards the
defendants spouses Crispino Medina and Cresencia Mina; but as to the case
for the declaration of the plaintiffs as illegitimate children and heirs of the
deceased Joaquin Mina this latter case is not barred by the previous action
as above explained and may still be prosecuted.
WHEREFORE, the order of dismissal is hereby modified in the sense that

the action for the recognition of the filiation of the plaintiffs should be allowed
to continue against the defendant Antonia Pacson; but the dismissal of the
action for the annulment of the deeds of sale is affirmed. Without costs.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-47494
May 15, 1978
AIDA ROBLES, Accompanied by her husband Rafael Penolio, petitioners,
As found by account Court of Appeals, petitioner Aida Robles is account

granddaughter of account deceased Eligio A. Robles (being account child of
Eligio's deceased son Jose). In his lifetime, Eulogio registered his title to Lot
No. 1304 with an area of 4.2038 hectares of account Escalante Cadastre and
account certificate of title thereto was issued in his name and that of his wife
Melania Cuaycong. Eligio had also started registration proceedings for
another lot, No. 1305-A with an area of 5.8685 hectares and after his death,
title thereto was issued in account name of his surviving spouse and in
account name of "the heirs of Eulogio Robles". These two properties
pertaining to account conjugal estate of Eligio and Melamia constitute
account disputed properties at bar.
vs.
COURT OF APPEALS,* ANICETO B. PARREO, and THE REGISTER OF
DEEDS OF NEGROS OCCIDENTAL, respondents.
Ramon C. Ditching & Rolando C. Medalla for petitioners.
Arsenio Acua & Associates for respondents.
TEEHANKEE, J.:
The Court sets aside respondent court's decision which would require
petitioner to implead certain parties and remands account appeal for
determination on its merits. The vendors-co-heirs of petitioner are not
indispensable parties in account action brought by her for cancellation of
account vendee's titles insofar as they were issued for account whole of
account properties sold to account exclusion of petitioner's share
notwithstanding that she was not a party to account sale and for redemption
as a co-heir of account properties thus sold to respondent vendee under
Article 1088 of account Civil Code.
On June 20, 1957, Melania as surviving spouse and nine other children
besides Eva Robles, another granddaughter of account deceased Eulogio
(sister of petitioner Aida), who were account deceased heirs to account
extent of 43/44 executed a general Power of attorney in favor of Francisco (a
son) to alienate and encumber account disputed properties, reciting therein
that account signatories are account owners of account properties, although
they were not joined by petitioner Aida who is also an heir of account
deceased's estate to account extent of 1/44.
In October, 1960, Francisco by virtue of account power of attorney executed

a private deed of sale of account properties in favor of respondent Aniceto B.
Parreno and later executed on January 20, 1965 a notarized deed of sale of
account properties in favor of said respondent for account price of p4.300.00.
The power of attorney was registered in account office of account respondent

Register of Deeds of Negros Occidental and was apparently treated as a
Declaration of Heirship and thereafter new transfer titles to account whole of
d properties were issued in favor of account vendee Parreo.
On September 18, 1967, petitioner Aida Robles as plaintiff filed a complaint

in account Negros Occidental court Of first instance against respondents
Parreo and Register of Deeds praying for cancellation of account titles
issued in respondent Parreo's name and that she be allowed as a 1/44 coheir and co-owner of account properties to redeem account same from said
respon. dent vendee.
The lower court dismissed account complaint and on appeal respondent c

held that account sellers (the other co-heirs) were indispensable parties and
should have been impleaded and rendered its decision that "the judgment of
account LOWER COURT is hereby set aside and let this case be, as it is,
hereby ordered remanded to account LOWER COURT so that plaintiff can
be required to implead account indispensable and necessary parties in
account case and for subsequent hearing for account issuance of a new
judgment."
Respondent appellate court held that "(T)here is a procedural error in

account CASE BELOW. Since plaintiff was suing defendant for cancellation
of his ownership of account DISPUTED PROPERTY sold to him by account
SELLERS. account latter were indispensable parties and should have been
impleaded. They had a right to justify account legality of their sale of account
DISPUTED PROPERTY to defendant in order to free themselves from
damages in favor of defendant if account sale should be adjudged invalid.
Moreover, they should be given account chance to justify account sale if only
to avoid possible criminal responsibility for estafa on false allegation of
ownership (Art. 315, 2[a], Revised Penal Code)," and added that "The
general rule is that if an indispensable party is not impleaded, account case
should be dismissed ... Rather than affirm account decision dismissing
plaintiff's complaint, which will not definitely settle account con controversy
between account plaintiff and account other parties, this case should be
remanded to the LOWER COURT ...
Petitioner's motion for reconsideration stressing that her act is one for legal
redemption against respondent as vendee against whom precisely account
right of redemption is exercised) was denied by respondent court which ruled
that the SELLERS would not be indispensable parties if what they had sold
to defendant was only their respective participations in account DISPUTED
PROPERTY. But what was sold was account entirety of account DISPUTED
PROPERTY, with account SELLERS claiming full ownership over account
same. The SELLERS took account position that plaintiff was not a co-owner
of account DISPUTED PROPERTY. As a matter of fact, in account 'NOTICE
OF DECLARATION OF HEIRSHIP', account SELLERS excluded plaintiff as
an heir of ELIGIO and therefore not a co-owner of account DISPUTED
PROPERTY. If plaintiff is held entitled to redeem and account redemption is
held binding on account SELLERS, defendant will have causes of action, civil
and criminal against account SELLERS for having sold to him. as all account
owners thereof, account entirety of account DISPUTED PROPERTY. Without

account SELLERS being made parties in account CASE BELOW, account
redemption should not be allowed."
Hence, this petition which asserts that petitioner's co-heirs who sold account
properties to respondent Parreno are not indispensable parties but that her
suit could be completely adjudicated without them, much more so with regard
to her action as co-heir for legal redemption of account properties from said
respondent-vendee under Article 1088 of account Civil Code.
We find merit in the petition.
Petitioner's action for cancellation of titles was in reality not one "for
cancellation of (respondent's) ownership of account disputed property sold to
him by account sellers" as perceived by respondent court but rather one
questioning account validity of respondent Register of Deeds' issuing
account titles to account whole of account properties in disregard of
petitioner's 1/44 share therein and against existing laws and regulations. As
stated in account petition, 1 respondent Register of Deeds was impleaded
"because, by his obvious negligence or act of indiscretion, he unduly
accommodated respondent Parreno to cure a legal defect or legal deficiency
of account documents covering account sale, via a short-cut method, by
allowing account General Power of Attorney to be registered as a
'Declaration of Heirship' (which, in effect. left out account petitioner and
transferred ownership of account disputed property in 'totality' to respondent
Parreno instead of requiring account presentation of a separate and true
'Declaration of Heirship' executed by all account heirs. This requirement is all
account more necessary, if it is noted that account General Power of
Attorney presented was no longer account original copy, but only a certified
true copy from account Notary Public, and was executed by account vendor
coheirs on June 20, 1957, or nearly eight (8) years prior to account date of
its registration on February 23, 1965. Furthermore, account Register of
Deeds did not require account presentation of a 'written notice to all possible
redemptioners'. All these faults, which fag squarely on account shoulders of
respondents Parreno and account Register of Deeds resulted in account
irregular issuance of titles which are now sought to be cancelled"
The vendors-co-heirs of petitioner are not indispensable parties insofar as

this phase of account action against account Register of Deeds is concerned.
The fact cited by respondent court that they have a right to justify account
legality of their sale to respondent to avoid being held liable for damages or
possible criminal responsibility if account sale should be adjudged invalid
does not make them indispensable parties without whom petitioner's action
cannot be completely adjudicated. Respondent Parreno could have called
them as witnesses on his behalf or impleaded them as third-parties
defendants in a third-party complaint to justify account sale of account
properties or else answer to him by was of damages (but it is too late now for
such a third-party complaint); at any rate, said respondent still has account
right of finding a separate action against account vendors-co-heirs by way of
enforcing account warranty made by them as vendors of account properties.
The imprecision of petitioner's complaint has caused some confusion. But it

appears evident that account action for cancellation of titles impleading
account Register of Deeds is one assailing this acts as wrongful and without
authority in law, but that petitioner "action for cancellation file issued in favor
of respondent Parreno pertains only to her own rights and in one's and
interest and does not affect the true rights and interests of the vendors-coheirs. Against respondent Parreno the action instituted is based on account
premise that he did not acquire all the rights and interests on account
property, subject of sale. His acquisition is limited only to account rights and
interests of account vendors-co-heirs who signed account General Power of
Attorney and does not include account rights and interests of a co-heir,
herein petitioner, Aida Robles, who did not sign," as is clearly in account
petition. 2
Such action for cancellation is really secondary and is but a means of

enforcing petitioner's claim as a co-heir and undivided co-owner of 1/44 of
account properties as a granddaughter of account decreased Eulogio
Robles, which has been found as a fact by respondent court a well as by
account trial court which held that 'The court accepts as a sufficiently
established fact that plaintiff being account daughter of Jose Robles and
therefore one of account granddaughters of Eulogio Robles, is one among
account latter's heirs, in account same manner as plaintiff's sister, Eva
Robles. The court also takes note that plaintiff was not a signatory to account
general power of attorney, Exh. 'A' pursuant to which conveyance to account
defendant of said lots were made by Francisco Robles. 3
Petitioner's principal action is really therefore one for legal redemption under
Article 1088 of account Civil Code. 4 Insofar as account exercise of such
right of redemption is concerned, petitioner as a co-heir and respondent
Parreno as account buyer are account only indispensable parties to account
exclusion of account seners-coheirs This was expressly so ruled by account
Court in Castillo vs. Samonte, 5 where we held that "the trial court had no
obligation to order account inclusion of account vendor either as a party
plaintiff or party defendant in account case, because while he may be a
necessary party, still he is not indispensable in account sense that account
matter before it could not be completely adjudicated without him. The deed of
sale in favor of appellant clearly states that what is being sold is an undivided
1/5 portion of account land jointly owned by account vendor and his brothers
and nephew, The vendee-appellant is, therefore, conclusively presumed to
know account law that under such circumstances, account coheirs are
entitled to redeem account portion being sold within 30 days from notice in
writing of account sale, under Article 1088 of account New civil Code. In
effect, he is a vendee with notice of account right of redemption by account
vendor's co-heirs," and that "moreover, if vendee-appellant believed he had a
claim against account vendor by reason of account warranty, it was his duty
to have filed a third-party complaint against account latter ...
Respondent court should therefore have adjudged account appeal on its

merits, and if account facts be as they are indicated in its decision, to wit,
account petitioner is indeed a co-heir and co-owner of 1/44 of account
properties and that her co-owners-coheirs had sold account same or their
hereditary rights thereto without notice to her, petitioner's action for
redemption of account properties must be sustained.
ACCORDINGLY, account judgment of respondent court is hereby set aside

and account case- is remanded to it for determination of account merits of
account appeal in consonance with account Court's observations in this
decision. No costs.

SUPREME COURT
Manila
truck; truck driver Felix B. Calip, Jr.; the beneficial owners of the truck,
Gorgonio Co Adarme, Felisa T. Co (also known as Felisa Tan), and Cirilia
Chua Siok Bieng, and the truck insurer, Western Guaranty Corporation.
SECOND DIVISION
G.R. No. 106436
December 3, 1994
VIRGILIO D. IMSON, petitioner,

vs.
HON. COURT OF APPEALS, HOLIDAY HILLS STOCK AND BREEDING
FARM CORPORATION, FNCB FINANCE CORPORATION, respondents.
The Complaint prayed that defendants be ordered to pay, jointly and

severally, two hundred seventy thousand pesos (P270,000.00) as
compensatory damages, fifty thousand pesos (P50,000.00) each as moral
and exemplary damages, and attorney's fees, litigation expenses, and cost of
suit. 8
Defendants driver and beneficial owners failed to answer and were declared
in default. 4 On May 29, 1987, however, petitioner and defendant insurer,
entered into a compromise agreement which provided, inter alia:
1.
Defendant Western Guaranty Corporation (Western Guaranty for
short) admits that its total liability under the laws and the insurance contract
sued upon is P70,000.00;
Polotan Law Office for petitioner.
Felix R. Solomon for private respondents.
2.
In full settlement of its liability under the laws and the said insurance
contract, defendant Western Guaranty shall pay plaintiff (herein petitioner)
the amount of P70,000.00 upon the signing of this compromise agreement;
PUNO, J.:
3.
This compromise agreement shall in no way waive nor prejudice
plaintiffs (herein petitioner's) rights to proceed against the other defendants
with respect the remainder of his claims;
The case at bench arose from a vehicular collision on December 11, 1983,
involving petitioner's Toyota Corolla and a Hino diesel truck registered under
the names of private respondents FNCB Finance Corporation and Holiday
Hills Stock and Breeding Farm Corporation. The collision seriously injured
petitioner and totally wrecked his car.
4.
This compromise agreement shall be a full and final settlement of the
issues between plaintiff (herein petitioner) and defendant Western Guaranty
in their complaint and answer and, from now on, they shall have no more
right against one another except the enforcement of this compromise
agreement.
On January 6, 1984, petitioner filed with the RTC Baguio City 1 a Complaint
for Damages 2 Sued were private respondents as registered owners of the
In consequence of the compromise agreement, the trial court dismissed the

Complaint for Damages against Western Guaranty Corporation on June 16,
1987. 8 A copy of the Order of dismissal was received by private respondent

Holiday Hills Stock and Breeding Farm Corporation on July 13, 1987. Nearly
eighteen (18) months later, said private respondent moved to dismiss the
case against all the other defendants. It argued that since they are all
indispensable parties under a common cause of action, the dismissal of the
case against defendant insurer must result in the dismissal of the suit against
all of them. The trial court denied the motion.
Private respondent Holiday Hills Stock and Breeding Farm Corporation

assailed the denial order through a Petition for Certiorari, Prohibition and
Mandamus With Restraining Order filed with respondent Court of Appeals.
The Petition was docketed as CA-G.R. SP No. 17651. On July 10, 1992, the
Court of Appeals, 7 through its Special Sixth Division, 8 reversed the trial
court, as it ruled:
The petitioner (herein private respondent Holiday Hills Stock and Breeding
Farm Corporation) cites the doctrine laid down in Lim Tanhu v. Hon.
Ramolete, 66 SCRA 425, as applied later in Co v. Acosta, 134 SCRA 185, to
support its averment that the court a quo gravely abused its discretion in
refusing to dismiss the case.
Essentially, the doctrine adverted to essays that in a common cause of action

where all the defendants are indispensable parties, the court's power to act is
integral and cannot be split, such that it cannot relieve any of them and at the
same time render judgment against the rest.
pay or settle claims arising under its policy coverage, is untenable, for the
cited law perceives the existence of a just cause, and according to the
answer filed by the Western Guaranty Corporation . . . the proximate cause
of the accident was the fault of the plaintiff (herein petitioner), hence it was
not liable for damages. There is in fact a congruence of affirmative defense
among the answering defendants.
Moreover, it is undisputed that the injury caused is covered by the insurance

company concerned. Thus, when the said insurer settled its liability with the
private respondent (petitioner herein) . . . , the other defendants, as the
insured and indispensable parties to a common cause of action, necessarily
benefited from such settlement including the defaulted defendants, for as
stated in the aforecited cases, it is deemed that anything done by or for the
answering defendant is done by or for the ones in default since it is implicit in
the rule that default is in essence a mere formality that deprives them of no
more than to take part in the trial, but if the complaint is dismissed as to the
answering defendant, it should also be dismissed as to them. 9 (Citations
omitted.)
Petitioner now comes to this Court with the following assignments of error:
A.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE

ERROR IN RULING THAT THE DEFENDANTS IN CIVIL CASE NO. 248-R
ARE INDISPENSABLE PARTIES;
We find applicability of the doctrine to the case at bar.

B.
A cursory reading of the complaint . . . reveals that the cause of action was
the alleged bad faith and gross negligence of the defendants resulting in the
injuries complained of and for which the action for damages was filed. The
inclusion of Western Guaranty Corporation was vital to the claim, it being the
insurer of the diesel truck without which, the claim could be set for naught.
Stated otherwise, it is an indispensable party as the petitioner (herein private
respondent stock and breeding farm corporation) . . . . Private respondent's
(herein petitioner's argument that the said insurance company was sued on a
different cause of action, i.e., its bounden duty under the insurance law to

ERROR IN RULING THAT IN CIVIL CASE NO. 248-R THERE IS A
COMMON CAUSE OF ACTION AGAINST THE DEFENDANTS THEREIN;
C.

ERROR IN RULING THAT IN CIVIL CASE NO. 248-R THE RULING OF
THIS HONORABLE COURT IN LIM TAN HU VS. RAMOLETE IS
APPLICABLE;
D.

ERROR IN RULING THAT THE DOCTRINE OF ESTOPPEL AND LACHES
ON MATTERS OF JURISDICTION IS NOT APPLICABLE IN CIVIL CASE
NO. 248-R.
execution and the satisfaction of his claim as variably as he might please.

Accordingly, in the case now before Us together with the dismissal of the
complaint against the non-defaulted defendants, the court should have
ordered also the dismissal thereof as to petitioner (referring to the defaulting
defendants in the case).
In sum, Lim Tanhu states that where a complaint alleges a common cause of
action against defendants who are all indispensable parties to the case, its
dismissal against any of them by virtue of a compromise agreement with the
plaintiff necessarily results in the dismissal of the case against the other
defendants, including those in default. The ruling is rooted on the rationale
that the court's power to act in a case involving a common cause of action
against indispensable parties "is integral and cannot be split such that it
cannot relieve any of them and at the same time render judgment against the
rest. 10
There is merit to the petition,.
In the case of Lim Tanhu v. Ramolete, 66 SCRA 425, 458-459 (1975) this
court held that:
. . . (I)n all instances where a common cause of action is alleged against

several defendants, some of whom answer and the others do not, the latter
or those in default acquire a vested right not only to own the defense
interposed in the answer of their co-defendant or co-defendants not in default
but also to expect a result of the litigation totally common with them in kind
and in amount whether favorable or unfavorable. The substantive unity of the
plaintiffs cause against all the defendants is carried through to its adjective
phase as ineluctably demanded by the homogeneity and indivisibility of
justice itself. . . . The integrity of the common cause of action against all the
defendants and the indispensability of all of them in the proceedings do not
permit any possibility of waiver of the plaintiffs right only as to one or some of
them, without including all of them, and so, as a rule, withdrawal must be
deemed to be a confession of weakness as to all. . . . . Where all the
defendants are indispensable parties, for which reason the absence of any of
them in the case would result in the court losing its competency to act validly,
any compromise that the plaintiff might wish to make with any of them must,
as a matter of correct procedure, have to await until after the rendition of the
judgment, at which stage the plaintiff may then treat the matter of its
For Lim Tanhu to apply to the case at bench, it must be established that: (1)
petitioner has common cause of action against private respondents and the
other defendants in Civil Case No. 248-R; and (2) all the defendants are
indispensable parties to the case.
Cause of action has a fixed meaning in this jurisdiction. It is the delict or

wrong by which the right of the plaintiff is violated by the defendant. 11 The
question as to whether a plaintiff has a cause of action is determined by the
averments in the pleadings pertaining to the acts of the defendant. Whether
such acts give him a right of action is determined by substantive law. 12
In the case at bench, it is clear that petitioner has different and separate
causes of action against the defendants in the case. The allegations in the
Complaint show that petitioner seeks to recover from the truck driver for his
wrong which caused injury to petitioner and his car. The cause of action
against him is based on quasi-delict under Article 2176 of the New Civil
Code. Quasi-delict, too, is the basis of the cause of action against
defendants beneficial and registered owners. But in their case, it is Article
2180 of the same Code which governs the rights of the parties.
However, with respect to defendant Western Guaranty Corporation,

petitioner's cause of action is based on contract. He seeks to recover from
the insurer on the basis of the third party liability clause of its insurance
contract with the owners of the truck. This is acknowledged by the second
paragraph of the compromise agreement between petitioner and defendant
insurer, thus:
2.
In full settlement of its liability under the laws and the said insurance
contract, defendant Western Guaranty shall pay plaintiff (herein petitioner)
the amount of P70,000.00 upon the signing of this compromise agreement.
Quite clearly then, Lim Tanhu will not apply to the case at bench for there is
no showing that petitioner has a common cause of action against the
defendants in Civil Case No. 248-R.
But this is not all. Defendants in Civil Case No. 248-R are not all
indispensable parties. An indispensable party is one whose interest will be
affected by the court's action in the litigation, and without whom no final
determination of the case can be had. The party's interest in the subject
matter of the suit and in the relief sought are so inextricably intertwined with
the other parties' that his legal presence as a party to the proceeding is an
absolute necessity. 13 In his absence there cannot be a resolution of the
dispute of the parties before the court which is effective, complete, or
equitable. 14
Conversely, a party is not indispensable to the suit if his interest in the

controversy or subject matter is distinct and divisible from the interest of the
other parties and will not necessarily be prejudiced by a judgment which
does complete justice to the parties in court. 15 He is not indispensable if his
presence would merely permit complete relief between him and those
already parties to the action, or will simply avoid multiple litigation. 16
necessary in order to adjudicate the whole controversy, but whose interests

are so far separable that a final decree can be made in their absence without
affecting them. 17 It is easy to see that if any of them had not been
impleaded as defendant, the case would still proceed without prejudicing the
party not impleaded. Thus, if petitioner did not sue Western Guaranty
Corporation, the omission would not cause the dismissal of the suit against
the other defendants. Even without the insurer, the trial court would not lose
its competency to act completely and validly on the damage suit. The insurer,
clearly, is not an indispensable party in Civil Case No. 248-R.
IN VIEW WHEREOF, the instant petition is GRANTED. The Decision, dated

July 10, 1992, of the Court of Appeals in CA-G.R. SP No. 17651 is
REVERSED AND SET ASIDE. The Complaint in Civil Case No. 248-R is
REINSTATED and REMANDED to the trial court for further proceedings. No
costs.
SO ORDERED.

SUPREME COURT
Manila
It is true that all of petitioner's claims in Civil Case No. 248-R is premised on
the wrong committed by defendant truck driver. Concededly, the truck driver
is an indispensable party to the suit. The other defendants, however, cannot
be categorized as indispensable parties. They are merely proper parties to
the case. Proper parties have been described as parties whose presence is
THIRD DIVISION
and Engine No. 2G-171-34. The decisions of both the appellate court and the
trial court rest on the following representation of the facts:
G.R. No. 103301
December 8, 1995
SERVICEWIDE SPECIALISTS INCORPORATED, petitioner,

vs.
HON. COURT OF APPEALS and ARMANDO CUSTODIO, JR., respondents.
VITUG, J.:
This petition of Servicewide Specialists, Incorporated, seeks a review on

certiorari of the 30th August 1991 decision of the Court of Appeals 1 in CAG.R. CV No. 20289 setting aside the judgment of the Regional Trial Court of
Manila, Branch 19, 2 which disposed of then Civil Case No. 83-18536, a suit
for replevin and damages, as follows:
WHEREFORE, judgment is hereby rendered, in favor of plaintiff and against

the defendant Armando Custodio, Jr., ordering him to deliver and return the
motor vehicle in question, complete with accessories and equipment; and in
the event that manual delivery of the said meter vehicle cannot be effected,
ordering said defendant to pay the sum of P54,642.50, plus interest at the
rate of 14% per annum, from June 18, 1983 until fully paid, and to pay the
costs.
SO ORDERED. 3
The litigation concerns a motor vehicle, a Colt Galant Sigma 1600E, 1977
model, 4-door sedan, colored Baikal White, with Serial No. A-121-UL-493
Plaintiff's evidence shows that, on August 29, 1977, Eleuterio Bondoc

executed and delivered to Carmark Philippines a promissory note in the sum
of P66,119.04, payable in installments, Exhibit A, and in order to secure
payment, a chattel mortgage was executed in favor of Carmark Philippines
over the aforementioned motor vehicle, Exhibit B, which was subsequently
assigned in favor of Filinvest Corporation, with the conformity of Eleuterio
Bondoc, Exhibit C.
On July 27, 1979, Eleuterio Bondoc, as vendor, executed a deed of sale with
assumption of mortgage of the balance of the account in favor of Cesar
Dollente, Exhibits D and D-1, which, upon approval by Filinvest Corporation,
Cesar Dollente executed and delivered to Filinvest Corporation a promissory
note in the amount of P37,528.83, payable in installments, Exhibit E. On
October 26, 1979, Cesar Dollente, as vendor, executed a deed of sale with
assumption of mortgage over the aforementioned vehicle for the balance of
his account in favor of Ernesto Dollente, Exhibit E. On September 28, 1979,
Ernesto Dollente executed and delivered to Filinvest Corporation a
promissory note for the sum of P37,528.83, payable in monthly installments.
This obligation was secured by a chattel mortgage executed between Cesar
Dollente and Ernesto Dollente, which was annotated and registered, Exhibit
B-1. Subsequently, Filinvest Corporation assigned all its rights and interests
on the promissory note and chattel mortgage to plaintiff, with notice to
Ernesto Dollente. The original defendant Ernesto Dollente, having defaulted
in the payment of the monthly installments which fell due on June 15, 1979
up to September 15, 1981, plaintiff demanded from said defendant the
payment of the entire balance, which includes interest thereon and to return
the motor vehicle in question. By reason of the refusal of the original
defendant to pay the entire balance and to surrender possession of the
subject motor vehicle, this case was filed and, upon its filing, upon motion, a
writ of seizure was issued and the same was implemented by the sheriff. A
counter-replevin bond having been filed, defendant Armando Custodio, Jr.
had obtained possession of the mortgaged vehicle.
Traversing the plaintiffs claim, defendant's evidence shows that, on

September 8, 1978, defendant Armando Custodio, Jr. obtained the motor
vehicle in question by purchase from Ernesto Dollente, Exhibit 1. Ernesto
Dollente bought the same on April 14, 1978 from Venus Motor Sales,
Exhibits 2 and 3. When defendant bought the said vehicle from Ernesto
Dollente, he was issued a clearance from the Constabulary Highway Patrol
Group, Exhibits 4 and 4-A. Since then defendant has been possessing the
vehicle in question. This vehicle was previously registered at Urdaneta,
Pangasinan. 4
Finding preponderance of the evidence in favor of herein petitioner, the lower

court ruled:
The claim of herein defendant that, Ernesto Dollente's breach of the chattel
mortgage should not bind him, because he is not a privy to such contract, is
hardly acceptable, for the reason that the registration of the chattel mortgage
is an effective and binding notice to him of its existence. The transaction of
Ernesto Dollente, which led to the transfer of the registration of this motor
vehicle in favor of defendant Armando Custodio, Jr., is doubtful and must
have been conveniently arranged or manipulated to effect this transfer. It is
settled that once a mortgage is registered with the Register of Deeds and in
the Land Transportation Commission, it is binding against anybody, including
defendant Armando Custodio, Jr. As correctly pointed out, in purchasing the
motor vehicle in question, defendant Armando Custodio, Jr. knew or, at least,
was presumed to know, by the mere fact that the mortgage was registered in
the Office of the Register of Deeds, as in this case, the said chattel mortgage
was subject to a mortgage lien. 5
On appeal to it, the Court of Appeals saw merit in the contention of private
respondent that the dismissal at the instance of petitioner himself of the
amended complaint against Ernesto Dollente after a failure of summons on
him, was "fatal to the entire action" Dollente being, in the considered view of
the appellate court, an indispensable party to the proceedings. The appellate
court elaborated:
. . . it is abundantly clear that the dismissal of the complaint as against the

principal defendant Dollente has robbed the action of any cause for survival.
The replevin suit owed its existence to an alleged right to possession of the
motor vehicle, which right in turn was founded on the alleged default of
Dollente. Now, since "the case against Ernesto Dollente" was dismissed,
albeit without prejudice, there remains no cause of action against said
defendant in the case. And since, there is no distinct cause of action against
the remaining defendant, herein appellant Custodio, there remains no
provable cause in the action. The plaintiff's right to possession of the car in
case which is "conditioned upon the fact of actual default on the part of the
principal obligor" the existence of which fact "may naturally be the subject of
controversy" could not properly be established in the absence, and after the
plaintiff-initiated exclusion, of the principal obligor and principal defendant.
There is no question, under the circumstances, that Dollente was an
indispensable party in the action. His presence is indispensable, essential
and compulsory if a final determination of the action should be achieved
(Sec. 7, Rule 3).
It was clearly an error for the trial court to have proceeded with the case
without the indispensable Dollente. The judgment rendered by the trial court
following such flawed proceedings is therefore ineffectual and ineffective. 6
While, in its present petition for review on certiorari, Servicewide has raised a
number of points, the crucial issue still remains, however, to be whether or
not an action filed by the mortgagee for replevin to effect a foreclosure of the
property covered by the chattel mortgage would require that the mortgagor
be so impleaded as an indispensable party thereto.
Rule 60 of the Rules of Court allows a plaintiff, in an action for the recovery
of possession of personal property, to apply for a writ of replevin if it can be
shown that he is "the owner of the property claimed . . . or is entitled to the
possession thereof." 7 The plaintiff need not be the owner so long as he is
able to specify his right to the possession of the property and his legal basis
therefor. The question then, insofar as the matter finds relation to the instant
case, is whether or not the plaintiff (herein petitioner) who has predicated his
right on being the mortgagee of a chattel mortgage should implead the
mortgagor in his complaint that seeks to recover possession of the
encumbered property in order to effect its foreclosure.
The answer has to be in the affirmative. 8 In a suit for replevin, a clear right
of possession must be established. A foreclosure under a chattel mortgage
may properly be commenced only once there is default on the part of the
mortgagor of his obligation secured by the mortgage. The replevin in the
instant case has been sought to pave the way for the foreclosure of the
object covered by the chattel mortgage. The conditions essential for that
foreclosure would be to show, firstly, the existence of the chattel mortgage
and, secondly, the default of the mortgagor. These requirements must be
established since the validity of the plaintiffs exercise of the right of
foreclosure are inevitably dependent thereon. It would thus seem,
considering particularly an adverse and independent claim of ownership by
private respondent, that the lower court acted improvidently when it granted
the dismissal of the complaint against Dollente, albeit on petitioner's (then
plaintiff) plea, on the ground that the "non-service of summons upon Ernesto
Dollente (would) only delay the determination of the merits of the case, to the
prejudice of the parties." 9 In Imson v. Court of Appeals, we have explained:
. . . An indispensable party is one whose interest will be affected by the

court's action in the litigation, and without whom no final determination of the
case can be had. The party's interest in the subject matter of the suit and in
the relief sought are so inextricably intertwined with the other parties' that his
legal presence as a party to the proceeding is an absolute necessity. In his
absence there cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable.
measures provided in Rule 14 of the Rules of Court regrettably have not

been properly availed of; for instance, substitute service of summons under
Section 8 thereof could have been resorted to. 13
WHEREFORE, the decision of the Court of Appeals is AFFIRMED. Costs

against petitioner.
SO ORDERED.

SUPREME COURT
Manila
Conversely, a party is not indispensable to the suit if his interest in the

controversy or subject matter is distinct and divisible from the interest of the
other parties and will not necessarily be prejudiced by a judgment which
does complete justice to the parties in court. He is not indispensable if his
presence would merely permit complete relief between him and those
already parties to the action or will simply avoid multiple litigation. 10
Without the presence of indispensable parties to a suit or proceeding, a

judgment of a court cannot attain real finality. 11
THIRD DIVISION
G.R. No. 140746
March 16, 2005
PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN,

Petitioner,
vs.
Having arrived at the foregoing conclusion, the Court need not take up the
other issues raised by petitioner.
STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE,

Respondents.
In passing, the failure of summons upon Ernesto Dollente, per the Sheriffs
Return dated July 19, 1983, 12 is said to have been due to defendant's being
no longer a resident "at the given address as per information gathered from
the present occupant of the premises." It appears that the remedial
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the Decision1 dated

July 23 1999 and Resolution2 dated November 4, 1999 of the Court of
Appeals in CA-G.R. CV No. 38453, entitled "Standard Insurance Company,
Inc., and Martina Gicale vs. PANTRANCO North Express, Inc., and
Alexander Buncan."
In the afternoon of October 28, 1984, Crispin Gicale was driving the
passenger jeepney owned by his mother Martina Gicale, respondent herein.
It was then raining. While driving north bound along the National Highway in
Talavera, Nueva Ecija, a passenger bus, owned by Pantranco North
Express, Inc., petitioner, driven by Alexander Buncan, also a petitioner, was
trailing behind. When the two vehicles were negotiating a curve along the
highway, the passenger bus overtook the jeepney. In so doing, the
passenger bus hit the left rear side of the jeepney and sped away.
Crispin reported the incident to the Talavera Police Station and respondent
Standard Insurance Co., Inc. (Standard), insurer of the jeepney. The total
cost of the repair was P21,415.00, but respondent Standard paid only
P8,000.00. Martina Gicale shouldered the balance of P13,415.00.
"WHEREFORE, and in view of the foregoing considerations, judgment is

hereby rendered in favor of the plaintiffs, Standard Insurance Company and
Martina Gicale, and against defendants Pantranco Bus Company and
Alexander Buncan, ordering the latter to pay as follows:
(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest
due thereon from November 27, 1984 until fully paid;
(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due
thereon from October 22, 1984 until fully paid;
(3) to pay the sum of P10,000.00 for attorneys fees;
(4) to pay the expenses of litigation and the cost of suit.
SO ORDERED."
On appeal, the Court of Appeals, in a Decision4 dated July 23, 1999,

affirmed the trial courts ruling, holding that:
Thereafter, Standard and Martina, respondents, demanded reimbursement
from petitioners Pantranco and its driver Alexander Buncan, but they refused.
This prompted respondents to file with the Regional Trial Court (RTC),
Branch 94, Manila, a complaint for sum of money.
In their answer, both petitioners specifically denied the allegations in the

complaint and averred that it is the Metropolitan Trial Court, not the RTC,
which has jurisdiction over the case.
"The appellants argue that appellee Gicales claim of P13,415.00 and

appellee insurance companys claim of P8,000.00 individually fell under the
exclusive original jurisdiction of the municipal trial court. This is not correct
because under the Totality Rule provided for under Sec. 19, Batas
Pambansa Bilang 129, it is the sum of the two claims that determines the
jurisdictional amount.
xxx
On June 5, 1992, the trial court rendered a Decision3 in favor of respondents
Standard and Martina, thus:
In the case at bench, the total of the two claims is definitely more than
P20,000.00 which at the time of the incident in question was the jurisdictional
amount of the Regional Trial Court.
Appellants contend that there was a misjoinder of parties. Assuming that

there was, under the Rules of Court (Sec. 11, Rule 7) as well as under the
Rules of Civil Procedure (ditto), the same does not affect the jurisdiction of
the court nor is it a ground to dismiss the complaint.
xxx
It does not need perspicacity in logic to see that appellees Gicales and
insurance companys individual claims against appellees (sic) arose from the
same vehicular accident on October 28, 1984 involving appellant Pantrancos
bus and appellee Gicales jeepney. That being the case, there was a
question of fact common to all the parties: Whose fault or negligence caused
the damage to the jeepney?
Petitioners filed a motion for reconsideration but was denied by the Appellate
Court in a Resolution dated November 4, 1999.
Hence, this petition for review on certiorari raising the following assignments
of error:
"I
WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE

SUBJECT OF THE ACTION CONSIDERING THAT RESPONDENTS
RESPECTIVE CAUSE OF ACTION AGAINST PETITIONERS DID NOT
ARISE OUT OF THE SAME TRANSACTION NOR ARE THERE
QUESTIONS OF LAW AND FACTS COMMON TO BOTH PETITIONERS
AND RESPONDENTS.
II
Appellants submit that they were denied their day in court because the case
was deemed submitted for decision "without even declaring defendants in
default or to have waived the presentation of evidence." This is incorrect. Of
course, the court did not declare defendants in default because that is done
only when the defendant fails to tender an answer within the reglementary
period. When the lower court ordered that the case is deemed submitted for
decision that meant that the defendants were deemed to have waived their
right to present evidence. If they failed to adduce their evidence, they should
blame nobody but themselves. They failed to be present during the
scheduled hearing for the reception of their evidence despite notice and
without any motion or explanation. They did not even file any motion for
reconsideration of the order considering the case submitted for decision.
WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS

CONSIDERING THAT BASED ON THE EVIDENCE ADDUCED AND LAW
APPLICABLE IN THE CASE AT BAR, RESPONDENTS HAVE NOT
SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR.
Finally, contrary to the assertion of the defendant-appellants, the evidence

preponderantly established their liability for quasi-delict under Article 2176 of
the Civil Code."
For their part, respondents contend that their individual claims arose out of
the same vehicular accident and involve a common question of fact and law.
Hence, the RTC has jurisdiction over the case.
III
WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT

TO DUE PROCESS."
I
Corollarily, Section 5(d), Rule 2 of the same Rules provides:
Petitioners insist that the trial court has no jurisdiction over the case since the
cause of action of each respondent did not arise from the same transaction
and that there are no common questions of law and fact common to both
parties. Section 6, Rule 3 of the Revised Rules of Court,5 provides:
"Sec. 6. Permissive joinder of parties. All persons in whom or against

whom any right to relief in respect to or arising out of the same transaction or
series of transactions is alleged to exist, whether jointly, severally, or in the
alternative, may, except as otherwise provided in these Rules, join as
plaintiffs or be joined as defendants in one complaint, where any question of
law or fact common to all such plaintiffs or to all such defendants may arise
in the action; but the court may make such orders as may be just to prevent
any plaintiff or defendant from being embarrassed or put to expense in
connection with any proceedings in which he may have no interest."
Permissive joinder of parties requires that: (a) the right to relief arises out of
the same transaction or series of transactions; (b) there is a question of law
or fact common to all the plaintiffs or defendants; and (c) such joinder is not
otherwise proscribed by the provisions of the Rules on jurisdiction and
venue.6
In this case, there is a single transaction common to all, that is, Pantrancos
bus hitting the rear side of the jeepney. There is also a common question of
fact, that is, whether petitioners are negligent. There being a single
transaction common to both respondents, consequently, they have the same
cause of action against petitioners.
To determine identity of cause of action, it must be ascertained whether the

same evidence which is necessary to sustain the second cause of action
would have been sufficient to authorize a recovery in the first.7 Here, had
respondents filed separate suits against petitioners, the same evidence
would have been presented to sustain the same cause of action. Thus, the
filing by both respondents of the complaint with the court below is in order.
Such joinder of parties avoids multiplicity of suit and ensures the convenient,
speedy and orderly administration of justice.
"Sec. 5. Joinder of causes of action. A party may in one pleading assert, in

the alternative or otherwise, as many causes of action as he may have
against an opposing party, subject to the following conditions:
xxx
(d) Where the claims in all the causes of action are principally for recovery of
money the aggregate amount claimed shall be the test of jurisdiction."
The above provision presupposes that the different causes of action which
are joined accrue in favor of the same plaintiff/s and against the same
defendant/s and that no misjoinder of parties is involved.8 The issue of
whether respondents claims shall be lumped together is determined by
paragraph (d) of the above provision. This paragraph embodies the "totality
rule" as exemplified by Section 33 (1) of B.P. Blg. 1299 which states, among
others, that "where there are several claims or causes of action between the
same or different parties, embodied in the same complaint, the amount of the
demand shall be the totality of the claims in all the causes of action,
irrespective of whether the causes of action arose out of the same or
different transactions."
As previously stated, respondents cause of action against petitioners arose

out of the same transaction. Thus, the amount of the demand shall be the
totality of the claims.
Respondent Standards claim is P8,000.00, while that of respondent Martina

Gicale is P13,415.00, or a total of P21,415.00. Section 19 of B.P. Blg. 129
provides that the RTC has "exclusive original jurisdiction over all other cases,
in which the demand, exclusive of interest and cost or the value of the
property in controversy, amounts to more than twenty thousand pesos
(P20,000.00)." Clearly, it is the RTC that has jurisdiction over the instant
case. It bears emphasis that when the complaint was filed, R.A. 7691
expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit

Trial Courts had not yet taken effect. It became effective on April 15, 1994.
II
Petitioner Pantranco filed an answer and participated during the trial and
presentation of respondents evidence. It was apprised of the notices of
hearing issued by the trial court. Indeed, it was afforded fair and reasonable
opportunity to explain its side of the controversy. Clearly, it was not denied of
its right to due process. What is frowned upon is the absolute lack of notice
and hearing which is not present here.
The finding of the trial court, affirmed by the Appellate Court, that petitioners
are negligent and thus liable to respondents, is a factual finding which is
binding upon us, a rule well-established in our jurisprudence. It has been
repeatedly held that the trial court's factual findings, when affirmed by the
Appellate Court, are conclusive and binding upon this Court, if they are not
tainted with arbitrariness or oversight of some fact or circumstance of
significance and influence. Petitioners have not presented sufficient ground
to warrant a deviation from this rule.10
WHEREFORE, the petition is DENIED. The assailed Decision dated July 23

1999 and Resolution dated November 4, 1999 of the Court of Appeals in CAG.R. CV No. 38453 are hereby AFFIRMED. Costs against petitioners.
III
There is no merit in petitioners contention that they were denied due

process. Records show that during the hearing, petitioner Pantrancos
counsel filed two motions for resetting of trial which were granted by the trial
court. Subsequently, said counsel filed a notice to withdraw. After
respondents had presented their evidence, the trial court, upon petitioners
motion, reset the hearing to another date. On this date, Pantranco failed to
appear. Thus, the trial court warned Pantranco that should it fail to appear
during the next hearing, the case will be submitted for resolution on the basis
of the evidence presented. Subsequently, Pantrancos new counsel
manifested that his client is willing to settle the case amicably and moved for
another postponement. The trial court granted the motion. On the date of the
hearing, the new counsel manifested that Pantrancos employees are on
strike and moved for another postponement. On the next hearing, said
counsel still failed to appear. Hence, the trial court considered the case
submitted for decision.
We have consistently held that the essence of due process is simply an

opportunity to be heard, or an opportunity to explain ones side or an
opportunity to seek for a reconsideration of the action or ruling complained
of.11
SO ORDERED.

SUPREME COURT
continue on an annual basis unless terminated by either party upon thirty

days written notice to the other prior to the expiration of the original term or
any extension thereof.
Manila
SECOND DIVISION
G.R. No. 162575
December 15, 2010
BEATRIZ SIOK PING TANG, Petitioner,

vs.
SUBIC BAY DISTRIBUTION, INC., Respondent.
DECISION
Section 6.3 of the Distributorship Agreement provides that respondent may

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

demand, thus, respondent tried to withdraw from these bank undertakings.
PERALTA, J.:
Before us is a petition for review on certiorari filed by petitioner Beatriz Siok

Ping Tang seeking to annul and set aside the Decision1 dated October 17,
2003 and the Resolution2 dated March 5, 2004 of the Court of Appeals (CA)
in CA-G.R. SP No. 74629.
The antecedent facts are as follows:
Petitioner is doing business under the name and style of Able Transport.
Respondent Subic Bay Distribution, Inc. (SBDI) entered in two Distributorship
Agreements with petitioner and Able Transport in April 2002. Under the
Agreements, respondent, as seller, will sell, deliver or procure to be delivered
petroleum products, and petitioner, as distributor, will purchase, receive and
pay for its purchases from respondent. The two Agreements had a period of
one year, commencing on October 2001 to October 2002, which shall
Petitioner then filed with the Regional Trial Court (RTC) of Quezon City
separate petitions3 against the banks for declaration of nullity of the several
bank undertakings and domestic letter of credit which they issued with the
application for the issuance of a temporary restraining order (TRO) and writ
of preliminary injunction. The cases were later consolidated and were
assigned to Branch 101. Petitioner asked for the annulment of the bank
undertakings/letter of credit which she signed on the ground that the
prevailing market rate at the time of respondent's intended drawings with
which petitioner will be charged of as interests and penalties is oppressive,
exorbitant, unreasonable and unconscionable rendering it against public
morals and policy; and that to make her automatically liable for millions of
pesos on the bank undertakings, these banks merely required the
submission of a mere certification from the company (respondent) that the
customer (petitioner) has not paid its account (and its statement of account of
the client) without first verifying the truthfulness of the alleged petitioner's
total liability to the drawer thereon. Therefore, such contracts are oppressive,
unreasonable and unconscionable as they would result in her obtaining
several millions of liability.
On November 28, 2002, a hearing was conducted for the issuance of the
TRO and the writ of preliminary injunction wherein the petitioner and the
bank representatives were present. On query of the respondent Judge
Normandie Pizarro (Judge Pizarro) to the bank representatives with regard to
the eventual issuance of the TRO, the latter all replied that they will abide by
the sound judgment of the court. The court then issued an Order4 granting
the TRO and requiring petitioner to implead respondent as an indispensable
party and for the latter to submit its position paper on the matter of the
issuance of the injunction. Petitioner and respondent submitted their
respective position papers.
On July 4, 2003, the CA issued a Resolution7 granting the TRO prayed for
by respondent after finding that it was apparent that respondent has a legal
right under the bank undertakings issued by UCPB, SBC, and IEBank; and
that until those undertakings were nullified, respondent's rights under the
same should be maintained.
On December 17, 2002, the RTC rendered an Order,5 the dispositive portion
of which reads:
On October 17, 2003, the CA rendered its assailed Decision, the decretal
portion of which reads:
ACCORDINGLY, let a Writ of Preliminary Injunction be issued restraining

and enjoining herein Respondent UCPB, IEB, SB and AUB from releasing
any funds to SBDI, pursuant to the Bank Undertakings and/or Domestic
Standby Letter of Credit until further orders from this Court. Consequently,
Petitioner is hereby DIRECTED to post a bond in the amount of TEN
MILLION PESOS (P10,000,000.00), to answer for whatever damages
respondent banks and SBDI may suffer should this Court finally decide that
petitioner was not entitled thereto. 6
WHEREFORE, the petition is hereby GRANTED. The Order dated

December 17, 2002 is hereby ANNULLED AND SET ASIDE. The writ of
preliminary injunction issued by the lower court is hereby LIFTED.9
The RTC found that both respondent and petitioner have reasons for the
enforcement or non-enforcement of the bank undertakings, however, as to
whether said reasons were justifiable or not, in view of the attending
circumstances, the RTC said that these can only be determined after a full
blown trial. It ruled that the outright denial of petitioner's prayer for the
issuance of injunction, even if the evidence warranted the reasonable
probability that real injury will occur if the relief for shall not be granted in
favor of petitioner, will not serve the ends of justice.
Respondent filed with the CA a petition for certiorari with prayer for the
issuance of a TRO and writ of preliminary injunction against respondent
Judge Pizarro and petitioner. Subsequently, petitioner filed her Comment and
respondent filed its Reply.
On July 11, 2003, the CA issued a Supplemental Resolution8 wherein the

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

reconsideration before resorting to a petition for certiorari, the CA said that it
is not a rigid rule, as jurisprudence had said, that when a definite question
has been properly raised, argued and submitted in the RTC and the latter
had decided the question, a motion for reconsideration is no longer

necessary before filing a petition for certiorari. The court found that both
parties had fully presented their sides on the issuance of the writ of
preliminary injunction and that the RTC had squarely resolved the issues
presented by both parties. Thus, respondent could not be faulted for not filing
a motion for reconsideration.
In a Resolution dated March 5, 2004, petitioner's motion for reconsideration

was denied.
Hence, this petition, wherein petitioner raises the following assignment of

errors:
I. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A

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

SERIOUS AND REVERSIBLE ERROR IN GIVING DUE COURSE AND
GRANTING PRIVATE RESPONDENT SBDI'S PETITION WHEN THE
LATTER ADMITTEDLY FAILED TO FILE A PRIOR MOTION FOR
RECONSIDERATION BEFORE THE TRIAL COURT, MORESO WHEN
INDISPENSABLE PARTIES WERE NOT IMPLEADED WHICH SHOULD
HAVE RENDERED THE COURT OF APPEALS IN WANT OF
JURISDICTION TO ACT.10
Petitioner claims that the CA decision is void for want of authority of the CA
to act on the petition as the banks should have been impleaded for being
indispensable parties, since they are the original party respondents in the
RTC; that the filing with the CA of respondent's petition for certiorari
emanated from the RTC Order wherein the banks were the ones against
whom the questioned Order was issued; that the banks are the ones who
stand to release hundred millions of pesos which respondent sought to draw

from the questioned bank undertakings and domestic standby letter of credit
through the certiorari proceedings, thus, they should be given an opportunity
to be heard. Petitioner claims that even the CA recognized the banks'
substantial interest over the subject matter of the case when, despite not
being impleaded as parties in the petition filed by respondent, the CA also
notified the banks of its decision.
Petitioner argues that a petition for certiorari filed without a prior motion for
reconsideration is a premature action and such omission constitutes a fatal
infirmity; that respondent explained its omission only when petitioner already
brought the same to the attention of the CA, thus, a mere afterthought and an
attempt to cure the fatal defects of its petition.
In its Comment, respondent contends that the banks which issued the bank
undertakings and letter of credit are not indispensable parties in the petition
for certiorari filed in the CA. Respondent argues that while the RTC
preliminarily resolved the issue of whether or not petitioner was entitled to an
injunctive relief, and the enforcement of any decision granting such would
necessarily involve the banks, the resolution of the issue regarding the
injunction does not require the banks' participation. This is so because on
one hand the entitlement or non-entitlement to an injunction is a matter
squarely between petitioner and respondent, the latter being the party that is
ultimately enjoined from benefiting from the banks' undertakings. On the
other hand, respondent contends that the issue resolved by the CA was
whether or not the RTC gravely abused its discretion in granting the
injunctive relief to respondent; that while the enforcement of any decision
enjoining the implementation of the injunction issued by the RTC would affect
the banks, the resolution of whether there is grave abuse of discretion
committed by the RTC does not require the banks' participation.
Respondent claims that while as a rule, a motion for reconsideration is

required before filing a petition for certiorari, the rule admits of exceptions,
which are, among others: (1) when the issues raised in the certiorari
proceedings have been duly raised and passed upon by the RTC or are the
same as those raised and passed upon in the RTC; (2) there is an urgent
necessity and time is of the essence for the resolution of the issues raised
and any further delay would prejudice the interests of the petitioner; and (3)
the issue raised is one purely of law, which are present in respondent's case.
In her Reply, petitioner claims that the decree that will compel and order the
banks to release any funds to respondent pending the resolution of her
petition in the RTC will have an injurious effect upon her rights and interest.
She reiterates her arguments in her petition.
Respondent filed a Rejoinder saying that it is misleading for petitioner to

allege that the decree sought by respondent before the CA is directed
against the banks; that even the dispositive portion of the CA decision did not
include any express directive to the banks; that there was nothing in the CA
decision which compelled and ordered the banks to release funds in favor of
respondent as the CA decision merely annulled the RTC Order and lifted the
writ of preliminary injunction. Respondent contends that the banks are not
persons interested in sustaining the RTC decision as this was obvious from
the separate answers they filed in the RTC wherein they uniformly
maintained that the bank undertakings/letter of credit are not oppressive,
unreasonable and unconscionable. Respondent avers that petitioner is the
only person interested in upholding the injunction issued by the RTC, since it
will enable her to prevent the banks from releasing funds to respondent.
Respondent insists that petitioner's petition before the RTC and the instant
petition have caused and continues to cause respondent grave and
irreparable damage.
Both parties were then required to file their respective memoranda, in which
they complied.
Petitioner's insistence that the banks are indispensable parties, thus, should
have been impleaded in the petition for certiorari filed by respondent in the
CA, is not persuasive.
In Arcelona v. Court of Appeals,11 we stated the nature of indispensable

party, thus:
An indispensable party is a party who has such an interest in the controversy

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

controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected by a
decree which does complete justice between them. Also, a person is not an
indispensable party if his presence would merely permit complete relief
between him and those already parties to the action, or if he has no interest
in the subject matter of the action. It is not a sufficient reason to declare a
person to be an indispensable party that his presence will avoid multiple
litigation.12
Applying the foregoing, we find that the banks are not indispensable parties
in the petition for certiorari which respondent filed in the CA assailing the
RTC Order dated December 17, 2002. In fact, several circumstances would
show that the banks are not parties interested in the matter of the issuance of
the writ of preliminary injunction, whether in the RTC or in the CA.
First. During the hearing of petitioner's prayer for the issuance of a TRO, the
RTC, in open court, elicited from the lawyer-representatives of the four banks
their position in the event of the issuance of the TRO, and all these
representatives invariably replied that they will abide and/or submit to the
sound judgment of the court.13
Second. When the RTC issued its Order dated December 17, 2002 granting
the issuance of the writ of preliminary injunction, the banks could have
challenged the same if they believe that they were aggrieved by such
issuance. However, they did not, and such actuations were in consonance
with their earlier position that they would submit to the sound judgment of the
RTC.
Third. When respondent filed with the CA the petition for certiorari with prayer
for the issuance of a TRO and writ of preliminary injunction, and a TRO was
subsequently issued, copies of the resolution were also sent14 to the banks,
although not impleaded, yet the latter took no action to question their noninclusion in the petition. Notably, the SBC filed an Urgent Motion for
Clarification15 on whether or not the issuance of the TRO has the effect of
restraining the bank from complying with the writ of preliminary injunction
issued by the RTC or nullifying /rendering ineffectual the said writ. In fact,
SBC even stated that the motion was filed for no other purpose, except to
seek proper guidance on the issue at hand so that whatever action or
position it may take with respect to the CA resolution will be consistent with
its term and purposes.
Fourth. When the CA rendered its assailed Decision nullifying the injunction
issued by the RTC, and copies of the decision were furnished these banks,
not one of these banks ever filed any pleading to assail their non-inclusion in
the certiorari proceedings.
Indeed, the banks have no interest in the issuance of the injunction, but only
the petitioner. The banks' interests as defendants in the petition for
declaration of nullity of their bank undertakings filed against them by
petitioner in the RTC are separable from the interests of petitioner for the
issuance of the injunctive relief.
Moreover, certiorari, as a special civil action, is an original action invoking the

original jurisdiction of a court to annul or modify the proceedings of a tribunal,
board or officer exercising judicial or quasi-judicial functions.16 It is an
original and independent action that is not part of the trial or the proceedings
on the complaint filed before the trial court.17 Section 5, Rule 65 of the Rules
of Court provides:
Section 5. Respondents and costs in certain cases. - When the petition filed
relates to the acts or omissions of a judge, court, quasi-judicial agency,
tribunal, corporation, board, officer or person, the petitioner shall join, as
private respondent or respondents with such public respondent or
respondents. the person or persons interested in sustaining the proceedings
in the court; and it shall be the duty of such private respondents to appear
and defend, both in his or their own behalf and in behalf of the public
respondent or respondents affected by the proceedings, and the costs
awarded in such proceedings in favor of the petitioner shall be against the
private respondents only, and not against the judge, court, quasi-judicial
agency, tribunal, corporation, board, officer or person impleaded as public
respondent or respondents.
xxxx
Clearly, in filing the petition for certiorari, respondent should join as party
defendant with the court or judge, the person interested in sustaining the
proceedings in the court, and it shall be the duty of such person to appear
and defend, both in his own behalf and in behalf of the court or judge
affected by the proceedings. In this case, there is no doubt that it is only the
petitioner who is the person interested in sustaining the proceedings in court
since she was the one who sought for the issuance of the writ of preliminary
injunction to enjoin the banks from releasing funds to respondent. As earlier
discussed, the banks are not parties interested in the subject matter of the
petition. Thus, it is only petitioner who should be joined as party defendant
with the judge and who should defend the judge's issuance of injunction.
Notably, the dispositive portion of the assailed CA Decision declared the

annulment of the Order dated December 17, 2002 and lifted the writ of
preliminary injunction issued by the RTC. The decision was directed against
the order of the judge. There was no order for the banks to release the funds
subject of their undertakings/letter of credit although such order to lift the
injunction would ultimately result to the release of funds to respondent.
Petitioner contends that respondent filed its petition for certiorari in the CA
without a prior motion for reconsideration, thus, constitutes a fatal infirmity.
We do not agree.
Concededly, the settled rule is that a motion for reconsideration is a condition

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

notwithstanding petitioner's invocation of the recognized exception, i.e., the
same questions raised before the public respondent were to be raised before
us, is not applicable. In said case, we ruled that petitioner failed to convince
us that his case falls under the recognized exceptions as the basis was only
petitioner's bare allegation. In this case before us, the CA found, and to
which we agree, that both parties have fully presented their respective
arguments in the RTC on petitioner's prayer for the issuance of the writ of
preliminary injunction, and that respondent's argument that petitioner is not
entitled to the injunctive relief had been squarely resolved by the RTC.
WHEREFORE, the petition is DENIED. The Decision dated October 17, 2003
and the Resolution dated March 5, 2004 of the Court of Appeals, in CA-G.R.
SP No. 74629, are hereby AFFIRMED.
SO ORDERED.
Respondent explained their omission of filing a motion for reconsideration

before resorting to a petition for certiorari based on exceptions (b), (c) and (i).
The CA brushed aside the filing of the motion for reconsideration based on
the ground that the questions raised in the certiorari proceedings have been
duly raised and passed upon by the lower court, or are the same as those
raised and passed upon in the lower court.lawp++!1 We agree.
Respondent had filed its position paper in the RTC stating the reasons why
the injunction prayed for by petitioner should not be granted. However, the
RTC granted the injunction. Respondent filed a petition for certiorari with the
CA and presented the same arguments which were already passed upon by
the RTC. The RTC already had the opportunity to consider and rule on the
question of the propriety or impropriety of the issuance of the injunction. We
found no reversible error committed by the CA for relaxing the rule since
respondent's case falls within the exceptions.
Petitioner's reliance on Philippine National Construction Corporation v.

National Labor Relations Commission,21 where we required the filing of a

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-55750
November 8, 1989
The equally questioned order of November 11, 1980 states:
RUBEN, BELLA, ARNULFO, CARUSO, ANITA, ELSIE, all surnamed

MELGAR, and ERLINA MELGAR ASECO, petitioners,
vs.
THE HON. CARLOS R. BUENVIAJE, JUDGE, COURT OF FIRST
INSTANCE OF CAMARINES SUR, BR. VII, and the SPOUSES OSCAR
PRADES and VICTORIA PRADES, respondents.
Rafael Triunfante for petitioners.
Romulo A. Badilla and Rolando Grageda Alberto for respondents.
Resolving defendant's motion for reconsideration filed on October 3, 1980

which, among other things, seeks dismissal of the complaint on the ground
that the "steps taken by the plaintiffs are procedurally erroneous and
substantially improper." In the light of the opposition interposed by counsel
for the plaintiff filed on November 10, 1980 which emphasized the argument
that said defendants as heirs of the estate of Felicidad Balla cannot properly
argue that they can sue as heirs and at the same time maintain that they
cannot be used as such heirs, and which opposition is found to be well taken,
the motion for reconsideration is as, it is, denied.
The Amended Complaint filed by counsel for the plaintiffs on November 7,

1980 is hereby admitted. Plaintiffs are required to furnish sufficient copies of
the Amended Complaint. (p. 27, Rollo)
The antecedents of the case are as follows:

PARAS, J.:
This is a petition for certiorari (not petition for review on certiorari) seeking
the annulment of the Order of Branch VII * of the Court of First Instance of
Camarines Sur in Iriga City dated September 23, 1980 denying the motion to
dismiss filed by the defendants, the petitioners herein, in Civil Case No. IR858, and its Order dated November 11, 1980 denying the motion for
reconsideration of the said September 23, 1980 order, as well as admitting
the amended complaint filed by the plaintiffs therein.
The questioned Order of September 23, 1980 reads as follows:
Resolving the motion to dismiss filed by defendants on the ground of lack of

sufficient cause of action in the light of the averments stated in the complaint,
this Court is of the belief and so holds that the said motion to dismiss cannot
be granted for lack of merit. (p. 16, Rollo)
In the early morning of January 11, 1980 a vehicular accident happened

along the National Highway of Barangay Agos, Polangui, Albay, whereby a
passenger bus bearing Plate No. PUB 4J 136 '79 owned and operated by the
late Felicidad Balla and driven by Domingo Casin swerved to the left lane
and came into head-on-collision with a Ford Fiera with Plate No. S 860 4F
'79 owned by Mateo Lim Relucio and driven by Ruben Lim Relucio coming
from the opposite direction. It then swerved further to the left this time
colliding head-on-with a passenger bus, FUSO with Plate No. PUB 45 255
'79 owned by Benjamin Flores and driven by Fabian Prades. As a result of
the accident, Felicidad Balla, owner and operator of the passenger bus with
Plate No. PUB 4J 136 '79, and mother of herein petitioners together with
Domingo Casin, driver of the bus, died on the spot. Ruben Lim Relucio,
driver of the service jeep and Fabian Prades, driver of the other passenger
bus died in the same accident. (Rollo, pp. 3, 10 & 19)
On July 4, 1980 the spouses Oscar Prades and Victoria Prades private
respondents herein as the only surviving forced heirs of the deceased Fabian
Prades, filed a complaint in the Court of First Instance of Camarines Sur

against the children of deceased Felicidad Balla, petitioners herein for
damages, docketed as Civil Case No. IR-858 (Rollo, p. 9). The complaint
(Rollo, p. 9) alleged, among others:
5.
That it was Felicidad Balla's driver Domino Casin of "Fuso" with Plate
No. PUB 4J 136 Pil '79, who drove his vehicle in a reckless and imprudent
manner which was the sole, direct and proximate cause of the incident which
resulted to the death of Fabian Prades;
6.
That both driver Domino Casin and owner Felicidad Balla of
passenger "Fuso" with Plate No. PUB 4J 136 Pil '79 died in said incident:
7.
That defendants' mother, Felicidad Balla, for allowing her driver
Casin to drive recklessly and not observing the required diligence in the
selection and supervision of her employee, despite her presence in the
illfated passenger bus, the estate of deceased Felicidad Balla should be held
liable to the damages suffered by plaintiff.
The defendants in the complaint, petitioners herein, moved for the dismissal
of the case on the ground that the complaint states no cause of action
against them, arguing that it is entirely incorrect to hold the children liable for
the alleged negligence of their deceased mother and to consider suing the
heirs of a deceased person the same as suing the estate of said deceased
person inasmuch as the last portion of Section 21 of Rule 3 of the Rules of
Court means that the creditor should institute the proper intestate
proceedings wherein which he may be able to interpose his claim (Rollo, p.
14).
Respondent court denied the motion to dismiss in its order of September 23,
1980 for lack of merit (Rollo, p. 16). On September 30, 1989 the defendants,
petitioners herein, filed a motion for reconsideration (Rollo, p. 17,) on the
ground that:
Distinction should be made between a suit against the estate of Felicidad

Balla and the present action which is a personal action against the children of
Felicidad Balla, considering that the children have absolutely no participation
directly or indirectly in the alleged negligent acts of Felicidad Balla, and there
is absolutely no logical basis to hold the children liable for damages resulting
from alleged negligent acts of Felicidad Balla. In fact that second sentence of
Article 1311 of the New Civil Code provides:
... The heir is not liable beyond the value of the property he received from the
decedent. ... 7
In their argument, the defendants adopted and cited the conclusion and
ruling of Branch V of the same court in two similar cases brought against
them by the owner of the 3rd vehicle that featured in the same accident and
by the widow of the deceased driver of the same vehicle docketed as Civil
Case Nos. 867-LV and 863-LV, respectively, wherein the defendants also
filed a motion to dismiss (Rollo, p. 19). Said court concluded that "the steps
taken by the plaintiffs are procedurally erroneous and substantially
improper." The same court directed the plaintiffs therein to file their redress in
accordance with the Rules of Court.
On November 7, 1980, plaintiff spouses, private respondents herein, filed

their comment and motion to admit amended complaint (Rollo, p. 21)
together with an amended complaint (Rollo, p. 23), amending the title of the
case naming as defendants the Estate of the late Felicidad Balla as
represented by the children named in the original complaint.
On November 11, 1980 respondent court issued its order denying the motion
for reconsideration and admitting the amended complaint (Rollo, p. 27).
Hence this petition filed with this Court on December 23, 1980 (Rollo, p. 3).
On June 5, 1981 the Court (Second Division) resolved to give due course to
the petition and required the parties to file their respective memoranda within
twenty days from notice (Rollo, p. 40).
On September 14, 1981 the Court (Second Division) resolved to consider the
case submitted for decision (Rollo, p. 66).
The sole issue in the instant case is whether or not the Court of First
Instance has the power to entertain a suit for damages arising from the death
of a person, filed against the estate of another deceased person as
represented by the heirs.
As aforestated, what was originally filed was a complaint for damages

against petitioners herein, who are the children and surviving forced heirs of
the deceased Felicidad Balla, owner and operator of the passenger bus
"FUSO" which allegedly caused the death of the deceased Fabian Prades.
Under Section 5 Rule 86 of the Rules of Court, actions that are abated by
death are: (1) All claims for money against the decedent, arising from
contract, express or implied, whether the same be due, not due or
contingent; (2) All claims for funeral expenses and expenses for the last
sickness of the decedent; and (3) Judgments for money against the decedent
(Aguas v. Llemos, 5 SCRA 959 [1962]). It is evident that the case at bar is
not among those enumerated. Otherwise stated, actions for damages caused
by the tortious conduct of the defendant survive the death of the latter.
The action can therefore be properly brought under Section 1, Rule 87 of the
Rules of Court, against an executor or administrator. The rule provides:
Section 1.
Actions which may and which may not be brought against
executor or administrator. No action upon a claim for the recovery of
money or debt or interest thereon shall be commenced against the executor
or administrator; but actions to recover real or personal property, or an
interest therein, from the state, or to enforce a lien thereon, and actions to
recover damages for an injury to person or property, real or personal, may be
commenced against him.
Hence, the inclusion of the "estate of Felicidad Balla" in the amended

complaint as defendant.
The point of controversy is however on the fact that no estate proceedings

exist for the reason that her children had not filed any proceedings for the
settlement of her estate, claiming that Balla left no properties (Rollo, p. 6).
Thus, while petitioners may have correctly moved for the dismissal of the
case and private respondents have forthwith corrected the deficiency by filing
an amended complaint, even before the lower court could act on petitioner's
motion for reconsideration of the denial of their motion to dismiss, the action
under Section 17 of Rule 3 of the Rules of Court, which allows the suit
against the legal representative of the deceased, that is, the executor or
administrator of his estate, would still be futile, for the same reason that there
appears to be no steps taken towards the settlement of the estate of the late
Felicidad Balla, nor has an executor or administrator of the estate been
appointed. From the statement made by the petitioners that "many persons
die without leaving any asset at all" (Reply to Respondents' Comment, p. 78;
Memorandum for Petitioners, Rollo, p. 5), which insinuates that the deceased
left no assets, it is reasonable to believe that the petitioners will not take any
step to expedite the early settlement of the estate, judicially or extra-judicially
if only to defeat the damage suit against the estate. (Note however the
deceased Balla apparently left the bus). Under the circumstances the
absence of an estate proceeding may be avoided by requiring the heirs to
take the place of the deceased (Javier v. Araneta, 90 Phil. 292 [1951]).
As restated in a much later case, in case of unreasonable delay in the

appointment of an executor or administrator of the estate or in case where
the heirs resort to an extrajudicial settlement of the estate, the court may
adopt the alternative of allowing the heirs of the deceased to be substituted
for the deceased (Lawas v. Court of Appeals, 146 SCRA 173 [1986]).
PREMISES CONSIDERED, the petition is hereby dismissed and petitioners

are ordered substituted for the deceased Felicidad Balla.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 121510
November 23, 1995
FABIANA C. VDA. DE SALAZAR, petitioner,

vs.
COURT OF APPEALS, PRIMITIVO NEPOMUCENO and EMERENCIANA
NEPOMUCENO, respondents.
HERMOSISIMA, JR., J.:
Where the defendant in an ejectment case dies before the rendition by the
trial court of its decision therein, does the trial court's failure to effectuate a
substitution of heirs before its rendition of judgment render such judgment
jurisdictionally infirm?
On July 23, 1970, both private respondents Primitive Nepomuceno and

Emerenciana Nepomuceno filed separate complaints 1 with the then Court of
Agrarian Relations of Malolos, Bulacan, for ejectment on the ground of
personal cultivation and conversion of land for useful non-agricultural
purposes against petitioner's deceased husband, Benjamin Salazar. After
protracted proceedings in the agrarian court and then the Regional Trial
Court 2 spanning from 1970 to 1993, the trial court rendered its joint decision
3 in favor of private respondents. An appeal 4 therefrom was interposed in
the name of petitioner's deceased husband on the ground that private
respondents herein failed to satisfy the requirements pertaining to personal
cultivation and conversion of the landholdings into non-agricultural uses. The
Court of Appeals rejected such contention upon finding that the record was
replete with evidence justifying private respondents' assertion of their right of
cultivation and conversion of their landholdings. 5
Almost a year after the termination of that appeal, the same trial court
decision subject thereof was once again assailed before the Court of Appeals
through a petition 6 for annulment of judgment. Herein petitioner assailed the
same trial court decision as having been rendered by a court that did not
have jurisdiction over her and the other heirs of her deceased husband
because notwithstanding the fact that her husband had already died on
October 3, 1991, the trial court still proceeded to render its decision on
August 23, 1993 without effecting the substitution of heirs in accordance with
Section 17, Rule 3, of the Rules of Court thereby depriving her of her day in
court.
Petitioner, not having asserted the matter of fraud or collusion in her petition
for annulment of judgment, the Court of Appeals decided the same on the
basis of the sole issue of non-jurisdiction resulting from the alleged
deprivation of petitioner's right to due process and ruled in favor of the
validity of the challenged decision. 7 Petitioner filed a motion for
reconsideration of the decision of the appellate court reiterating the trial
court's lack of jurisdiction over the heirs of petitioner's deceased husband as
a consequence of the failure of the trial court to effectuate a valid substitution
of heirs. Said motion was denied in a resolution promulgated on August 14,
1995. Hence this petition.
The petition is bereft of merit.
The need for substitution of heirs is based on the right to due process
accruing to every party in any proceeding. 8 The rationale underlying this
requirement in case a party dies during the pendency of proceedings of a
nature not extinguished by such death, is that
. . . the exercise of judicial power to hear and determine a cause implicitly

presupposes in the trial court, amongst other essentials, jurisdiction over the
persons of the parties. That jurisdiction was inevitably impaired upon the
death of the protestee pending the proceedings below such that unless and
until a legal representative is for him duly named and within the jurisdiction of
the trial court, no adjudication in the cause could have been accorded any
validity or binding effect upon any party, in representation of the deceased,
without trenching upon the fundamental right to a day in court which is the
very essence of the constitutionally enshrined guarantee of due process. 9
We are not unaware of several cases 10 where we have ruled that a party
having died in an action that survives, the trial held by the court without
appearance of the deceased's legal representative or substitution of heirs
and the judgment rendered after such trial, are null and void because the
court acquired no jurisdiction over the persons of the legal representatives or
of the heirs upon whom the trial and the judgment would be binding. This
general rule notwithstanding, in denying petitioner's motion for
reconsideration, the Court of Appeals correctly ruled that formal substitution
of heirs is not necessary when the heirs themselves voluntarily appeared,
participated in the case and presented evidence in defense of deceased
defendant. Attending the case at bench, after all, are these particular
circumstances which negate petitioner's belated and seemingly ostensible
claim of violation of her rights to due process. We should not lose sight of the
principle underlying the general rule that formal substitution of heirs must be
effectuated for them to be bound by a subsequent judgment. Such had been
the general rule established not because the rule on substitution of heirs and
that on appointment of a legal representative are jurisdictional requirements
per se but because non-compliance therewith results in the undeniable
violation of the right to due process of those who, though not duly notified of
the proceedings, are substantially affected by the decision rendered therein.
Viewing the rule on substitution of heirs in this light, the Court of Appeals, in
the resolution denying petitioner's motion for reconsideration, thus
expounded:
Although the jurisprudential rule is that failure to make the substitution is a

jurisdictional defect, it should be noted that the purpose of this procedural
rule is to comply with due process requirements. The original party having
died, he could not continue to defend himself in court despite the fact that the
action survived him. For the case to continue, the real party in interest must
be substituted for the deceased. The real party in interest is the one who
would be affected by the judgment. It could be the administrator or executor
or the heirs. In the instant case, the heirs are the proper substitutes.
Substitution gives them the opportunity to continue the defense for the
deceased. Substitution is important because such opportunity to defend is a
requirement to comply with due process. Such substitution consists of
making the proper changes in the caption of the case which may be called
the formal aspect of it. Such substitution also includes the process of letting
the substitutes know that they shall be bound by any judgment in the case
and that they should therefore actively participate in the defense of the
deceased. This part may be called the substantive aspect. This is the heart
of the procedural rule because this substantive aspect is the one that truly
embodies and gives effect to the purpose of the rule. It is this court's view
that compliance with the substantive aspect of the rule despite failure to
comply with the formal aspect may be considered substantial compliance.
Such is the situation in the case at bench because the only inference that
could be deduced from the following facts was that there was active
participation of the heirs in the defense of the deceased after his death:
1.
The original lawyer did not stop representing the deceased. It would
be absurd to think that the lawyer would continue to represent somebody if
nobody is paying him his fees. The lawyer continued to represent him in the
litigation before the trial court which lasted for about two more years. A dead
party cannot pay him any fee. With or without payment of fees, the fact
remains that the said counsel was allowed by the petitioner who was well
aware of the instant litigation to continue appearing as counsel until August
23, 1993 when the challenged decision was rendered;
2.
After the death of the defendant, his wife, who is the petitioner in the
instant case, even testified in the court and declared that her husband is
already deceased. She knew therefore that there was a litigation against her
husband and that somehow her interest and those of her children were
involved;
3.
This petition for annulment of judgment was filed only after the
appeal was decided against the defendant on April 3, 1995, more than one
and a half year (sic) after the decision was rendered (even if we were to give
credence to petitioner's manifestation that she was not aware that an appeal
had been made);
4.
The Supreme Court has already established that there is such a
thing as jurisdiction by estoppel. This principle was established even in cases
where jurisdiction over the subject matter was being questioned. In the
instant case, only jurisdiction over the person of the heirs is in issue.
Jurisdiction over the person may be acquired by the court more easily than
jurisdiction over the subject matter. Jurisdiction over the person may be
acquired by the simple appearance of the person in court as did herein
petitioner appear;
5.
The case cited by the herein petitioner (Ferreria et al. vs. Manuela
Ibarra vda. de Gonzales, et al.) cannot be availed of to support the said
petitioner's contention relative to non-acquisition of jurisdiction by the court.
In that case, Manolita Gonzales was not served notice and, more importantly,
she never appeared in court, unlike herein petitioner who appeared and even
testified regarding the death of her husband. 11
Consequently, we rule that, as in the case at bench, the defendant in an

ejectment case having died before the rendition by the trial court of its
decision therein, its failure to effectuate a formal substitution of heirs before
its rendition of judgment, does not invalidate such judgment where the heirs
themselves appeared before the trial court, participated in the proceedings
therein, and presented evidence in defense of deceased defendant, it
undeniably being evident that the heirs themselves sought their day in court
and exercised their right to due process.
Respondent Court of Appeals also correctly ruled that ejectment, being an

action involving recovery of real property, is a real action which as such, is
not extinguished by the defendant's death.
. . . The question as to whether an action survives or not depends on the

nature of the action and the damage sued for. In the causes of action which
survive, the wrong complained affects primarily and principally property and
property rights, the injuries to the person being merely incidental, while in the
causes of action which do not survive, the injury complained of is to the
person, the property and rights of property affected being incidental. 12
There is no dispute that an ejectment case survives the death of a party,

which death did not extinguish the deceased's civil personality. 13 More
significantly, a judgment in an ejectment case is conclusive between the
parties and their successors in interest by title subsequent to the
commencement of the action. 14 Thus, we have held that:
. . . In such a case and considering that the supervening death of appellant

did not extinguish her civil personality, the appellate court was well within its
jurisdiction to proceed as it did with the case. There is no showing that the
appellate court's proceedings in the case were tainted with irregularities.
It appears that petitioners are heirs of Adela Salindon. In fact, it was because
of this relationship that the petitioners were able to transfer the title of Adela
Salindon over the subject lot to their names. . . . Considering all this, the
appellate decision is binding and enforceable against the petitioners as
successors-in-interest by title subsequent to the commencement of the
action (Section 49 [b] Rule 39, Rules of Court). Furthermore, . . . judgment in
an ejectment case may be enforced not only against defendants therein but
also against the members of their family, their relatives, or privies who derive
their right of possession from the defendants (Ariem v. De los Angeles, 49
SCRA 343). Under the circumstances of this case, the same rule should
apply to the successors-in-interest . . . . 15
While it is true that a decision in an action for ejectment is enforceable not

only against the defendant himself but also against members of his family,
his relatives, and his privies who derived their right of possession from the
defendant and his successors-in-interest, 16 it had been established that
petitioner had, by her own acts, submitted to the jurisdiction of the trial court.
She is now estopped to deny that she had been heard in defense of her
deceased husband in the proceedings therein. As such, this petition evidently
has no leg to stand on.
WHEREFORE, the instant petition is dismissed for lack of merit. Costs

against petitioner.
SO ORDERED.

SUPREME COURT
Manila
The liability to a holder in due course of the drawer of checks issued to

another merely as security, and the right of a real estate mortgagee after
extrajudicial foreclosure to recover the balance of the obligation, are the
issues in this Petition for Review of the Decision of respondent Court of
Appeals.
Private respondent Nora B. Moulic issued to Corazon Victoriano, as security

for pieces of jewelry to be sold on commission, two (2) post-dated Equitable
Banking Corporation checks in the amount of Fifty Thousand Pesos
(P50,000.00) each, one dated 30 August 1979 and the other, 30 September
1979. Thereafter, the payee negotiated the checks to petitioner State
Investment House. Inc. (STATE).
FIRST DIVISION
MOULIC failed to sell the pieces of jewelry, so she returned them to the
payee before maturity of the checks. The checks, however, could no longer
be retrieved as they had already been negotiated. Consequently, before their
maturity dates, MOULIC withdrew her funds from the drawee bank.
G.R. No. 101163
January 11, 1993
STATE INVESTMENT HOUSE, INC., petitioner,
Upon presentment for payment, the checks were dishonored for insufficiency
of funds. On 20 December 1979, STATE allegedly notified MOULIC of the
dishonor of the checks and requested that it be paid in cash instead,
although MOULIC avers that no such notice was given her.
vs.
COURT OF APPEALS and NORA B. MOULIC, respondents.
On 6 October 1983, STATE sued to recover the value of the checks plus
attorney's fees and expenses of litigation.
Escober, Alon & Associates for petitioner.
Martin D. Pantaleon for private respondents.
BELLOSILLO, J.:
In her Answer, MOULIC contends that she incurred no obligation on the

checks because the jewelry was never sold and the checks were negotiated
without her knowledge and consent. She also instituted a Third-Party
Complaint against Corazon Victoriano, who later assumed full responsibility
for the checks.
On 26 May 1988, the trial court dismissed the Complaint as well as the ThirdParty Complaint, and ordered STATE to pay MOULIC P3,000.00 for
attorney's fees.
STATE elevated the order of dismissal to the Court of Appeals, but the
appellate court affirmed the trial court on the ground that the Notice of
Dishonor to MOULIC was made beyond the period prescribed by the
Negotiable Instruments Law and that even if STATE did serve such notice on
MOULIC within the reglementary period it would be of no consequence as
the checks should never have been presented for payment. The sale of the
jewelry was never effected; the checks, therefore, ceased to serve their
purpose as security for the jewelry.
We are not persuaded.
The negotiability of the checks is not in dispute. Indubitably, they were

negotiable. After all, at the pre-trial, the parties agreed to limit the issue to
whether or not STATE was a holder of the checks in due course. 1
The evidence clearly shows that: (a) on their faces the post-dated checks
were complete and regular: (b) petitioner bought these checks from the
payee, Corazon Victoriano, before their due dates; 3 (c) petitioner took these
checks in good faith and for value, albeit at a discounted price; and, (d)
petitioner was never informed nor made aware that these checks were
merely issued to payee as security and not for value.
Consequently, STATE is indeed a holder in due course. As such, it holds the

instruments free from any defect of title of prior parties, and from defenses
available to prior parties among themselves; STATE may, therefore, enforce
full payment of the checks. 4
MOULIC cannot set up against STATE the defense that there was failure or
absence of consideration. MOULIC can only invoke this defense against
STATE if it was privy to the purpose for which they were issued and therefore
is not a holder in due course.
In this regard, Sec. 52 of the Negotiable Instruments Law provides
That the post-dated checks were merely issued as security is not a ground
for the discharge of the instrument as against a holder in due course. For the
only grounds are those outlined in Sec. 119 of the Negotiable Instruments
Law:
Sec. 52. What constitutes a holder in due course. A holder in due course
is a holder who has taken the instrument under the following conditions: (a)
That it is complete and regular upon its face; (b) That he became the holder
of it before it was overdue, and without notice that it was previously
dishonored, if such was the fact; (c) That he took it in good faith and for
value; (d) That at the time it was negotiated to him he had no notice of any
infirmity in the instrument or defect in the title of the person negotiating it.
Sec. 119.
Instrument; how discharged. A negotiable instrument is
discharged: (a) By payment in due course by or on behalf of the principal
debtor; (b) By payment in due course by the party accommodated, where the
instrument is made or accepted for his accommodation; (c) By the intentional
cancellation thereof by the holder; (d) By any other act which will discharge a
simple contract for the payment of money; (e) When the principal debtor
becomes the holder of the instrument at or after maturity in his own right.
Culled from the foregoing, a prima facie presumption exists that the holder of
a negotiable instrument is a holder in due course. 2 Consequently, the
burden of proving that STATE is not a holder in due course lies in the person
who disputes the presumption. In this regard, MOULIC failed.
Obviously, MOULIC may only invoke paragraphs (c) and (d) as possible
grounds for the discharge of the instrument. But, the intentional cancellation
contemplated under paragraph (c) is that cancellation effected by destroying
the instrument either by tearing it up, 5 burning it, 6 or writing the word
"cancelled" on the instrument. The act of destroying the instrument must also
be made by the holder of the instrument intentionally. Since MOULIC failed
to get back possession of the post-dated checks, the intentional cancellation

of the said checks is altogether impossible.
On the other hand, the acts which will discharge a simple contract for the
payment of money under paragraph (d) are determined by other existing
legislations since Sec. 119 does not specify what these acts are, e.g., Art.
1231 of the Civil Code 7 which enumerates the modes of extinguishing
obligations. Again, none of the modes outlined therein is applicable in the
instant case as Sec. 119 contemplates of a situation where the holder of the
instrument is the creditor while its drawer is the debtor. In the present action,
the payee, Corazon Victoriano, was no longer MOULIC's creditor at the time
the jewelry was returned.
Correspondingly, MOULIC may not unilaterally discharge herself from her

liability by the mere expediency of withdrawing her funds from the drawee
bank. She is thus liable as she has no legal basis to excuse herself from
liability on her checks to a holder in due course.
Moreover, the fact that STATE failed to give Notice of Dishonor to MOULIC is
of no moment. The need for such notice is not absolute; there are exceptions
under Sec. 114 of the Negotiable Instruments Law:
Sec. 114. When notice need not be given to drawer. Notice of dishonor is
not required to be given to the drawer in the following cases: (a) Where the
drawer and the drawee are the same person; (b) When the drawee is a
fictitious person or a person not having capacity to contract; (c) When the
drawer is the person to whom the instrument is presented for payment: (d)
Where the drawer has no right to expect or require that the drawee or
acceptor will honor the instrument; (e) Where the drawer had countermanded
payment.
Indeed, MOULIC'S actuations leave much to be desired. She did not retrieve
the checks when she returned the jewelry. She simply withdrew her funds
from her drawee bank and transferred them to another to protect herself.
After withdrawing her funds, she could not have expected her checks to be
honored. In other words, she was responsible for the dishonor of her checks,
hence, there was no need to serve her Notice of Dishonor, which is simply
bringing to the knowledge of the drawer or indorser of the instrument, either

verbally or by writing, the fact that a specified instrument, upon proper
proceedings taken, has not been accepted or has not been paid, and that the
party notified is expected to pay it. 8
In addition, the Negotiable Instruments Law was enacted for the purpose of
facilitating, not hindering or hampering transactions in commercial paper.
Thus, the said statute should not be tampered with haphazardly or lightly.
Nor should it be brushed aside in order to meet the necessities in a single
case. 9
The drawing and negotiation of a check have certain effects aside from the
transfer of title or the incurring of liability in regard to the instrument by the
transferor. The holder who takes the negotiated paper makes a contract with
the parties on the face of the instrument. There is an implied representation
that funds or credit are available for the payment of the instrument in the
bank upon which it is drawn. 10 Consequently, the withdrawal of the money
from the drawee bank to avoid liability on the checks cannot prejudice the
rights of holders in due course. In the instant case, such withdrawal renders
the drawer, Nora B. Moulic, liable to STATE, a holder in due course of the
checks.
Under the facts of this case, STATE could not expect payment as MOULIC
left no funds with the drawee bank to meet her obligation on the checks, 11
so that Notice of Dishonor would be futile.
The Court of Appeals also held that allowing recovery on the checks would
constitute unjust enrichment on the part of STATE Investment House, Inc.
This is error.
The record shows that Mr. Romelito Caoili, an Account Assistant, testified
that the obligation of Corazon Victoriano and her husband at the time their
property mortgaged to STATE was extrajudicially foreclosed amounted to
P1.9 million; the bid price at public auction was only P1 million. 12 Thus, the
value of the property foreclosed was not even enough to pay the debt in full.
Where the proceeds of the sale are insufficient to cover the debt in an
extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the
deficiency from the debtor. 13 The step thus taken by the mortgagee-bank in
resorting to an extra-judicial foreclosure was merely to find a proceeding for
the sale of the property and its action cannot be taken to mean a waiver of its
right to demand payment for the whole debt. 14 For, while Act 3135, as
amended, does not discuss the mortgagee's right to recover such deficiency,
it does not contain any provision either, expressly or impliedly, prohibiting
recovery. In this jurisdiction, when the legislature intends to foreclose the
right of a creditor to sue for any deficiency resulting from foreclosure of a
security given to guarantee an obligation, it so expressly provides. For
instance, with respect to pledges, Art. 2115 of the Civil Code 15 does not
allow the creditor to recover the deficiency from the sale of the thing pledged.
Likewise, in the case of a chattel mortgage, or a thing sold on installment
basis, in the event of foreclosure, the vendor "shall have no further action
against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary will be void". 16
It is clear then that in the absence of a similar provision in Act No. 3135, as
amended, it cannot be concluded that the creditor loses his right recognized
by the Rules of Court to take action for the recovery of any unpaid balance
on the principal obligation simply because he has chosen to extrajudicially
foreclose the real estate mortgage pursuant to a Special Power of Attorney
given him by the mortgagor in the contract of mortgage. 17
value of EBC Checks Nos. 30089658 and 30089660 in the total amount of
P100,000.00, P3,000.00 as attorney's fees, and the costs of suit, without
prejudice to any action for recompense she may pursue against the
VICTORIANOs as Third-Party Defendants.
Costs against private respondent.
SO ORDERED.
SECOND DIVISION
[G.R. No. 117355. April 5, 2002]
RIVIERA FILIPINA, INC., petitioner, vs. COURT OF APPEALS, JUAN L.

REYES, (now deceased), substituted by his heirs, namely, Estefania B.
Reyes, Juanita R. de la Rosa, Juan B. Reyes, Jr. and Fidel B. Reyes,
PHILIPPINE
CYPRESS
CONSTRUCTION
&
DEVELOPMENT
CORPORATION, CORNHILL TRADING CORPORATION AND URBAN
DEVELOPMENT BANK, respondents.
DECISION
DE LEON, JR., J.:
The filing of the Complaint and the Third-Party Complaint to enforce the
checks against MOULIC and the VICTORIANO spouses, respectively, is just
another means of recovering the unpaid balance of the debt of the
VICTORIANOs.
Before us is a petition for review on certiorari of the Decision[1] of the Court

of Appeals[2] dated June 6, 1994 in CA-G.R. CV No. 26513 affirming the
Decision[3] dated March 20, 1990 of the Regional Trial Court of Quezon City,
Branch 89 dismissing Civil Case No. Q-89-3371.
In fine, MOULIC, as drawer, is liable for the value of the checks she issued to
the holder in due course, STATE, without prejudice to any action for
recompense she may pursue against the VICTORIANOs as Third-Party
Defendants who had already been declared as in default.
Civil Case No. Q-89-3371 is a suit instituted by Riviera Filipina, Inc. (Riviera)
on August 31, 1989[4] to compel the defendants therein Juan L. Reyes, now
deceased, Philippine Cypress Construction & Development Corporation
(Cypress), Cornhill Trading Corporation (Cornhill) and Urban Development
Bank to transfer the title covering a 1,018 square meter parcel of land located
along EDSA, Quezon City for alleged violation of Rivieras right of first
refusal.
WHEREFORE, the petition is GRANTED. The decision appealed from is

REVERSED and a new one entered declaring private respondent NORA B.
MOULIC liable to petitioner STATE INVESTMENT HOUSE, INC., for the
It appears that on November 23, 1982, respondent Juan L. Reyes (Reyes,

for brevity) executed a Contract of Lease with Riviera. The ten-year (10)
renewable lease of Riviera, which started on August 1, 1982, involved a
1,018 square meter parcel of land located along Edsa, Quezon City, covered
and described in Transfer Certificate of Title No. 186326 of the Registry of
Deeds of Quezon City in the name of Juan L. Reyes.[5]
The said parcel of land was subject of a Real Estate Mortgage executed by
Reyes in favor of Prudential Bank. Since the loan with Prudential Bank
remained unpaid upon maturity, the mortgagee bank extrajudicially
foreclosed the mortgage thereon. At the public auction sale, the mortgagee
bank emerged as the highest bidder. The redemption period was set to
expire on March 7, 1989. Realizing that he could not possibly raise in time
the money needed to redeem the subject property, Reyes decided to sell the
same.[6]
Since paragraph 11 of the lease contract expressly provided that the

LESSEE shall have the right of first refusal should the LESSOR decide to
sell the property during the term of the lease,[7] Reyes offered to sell the
subject property to Riviera, through its President Vicente C. Angeles, for Five
Thousand Pesos (P5,000.00) per square meter.
However, Angeles
bargained for Three Thousand Five Hundred Pesos (P3,500.00) per square
meter. Since Reyes was not amenable to the said price and insisted on Five
Thousand Pesos (P5,000.00) per square meter, Angeles requested Reyes to
allow him to consult the other members of the Board of Directors of
Riviera.[8]
Seven (7) months later, or sometime in October 1988, Angeles

communicated with Reyes Rivieras offer to purchase the subject property for
Four Thousand Pesos (P4,000.00) per square meter. However, Reyes did
not accept the offer. This time he asked for Six Thousand Pesos (P6,000.00)
per square meter since the value of the property in the area had appreciated
in view of the plans of Araneta to develop the vicinity.[9]
In a letter dated November 2, 1988, Atty. Irineo S. Juan, acting as counsel for
Reyes, informed Riviera that Reyes was selling the subject property for Six
Thousand Pesos (P6,000.00) per square meter, net of capital gains and
transfer taxes, registration fees, notarial fees and all other attendant charges.
He further stated therein that:
In this connection, conformably to the provisions stipulated in Paragraph/Item

No. 11 of your CONTRACT OF LEASE (Doc. No. 365, Page No. 63, Book
No. X, Series of 1982, of the Notarial Registry of Notary Public Leovillo S.
Agustin), notice is served upon your goodselves for you to exercise the right
of first refusal in the sale of said property, for which purpose you are hereby
given a period of ten (10) days from your receipt hereof within which to thus
purchase the same under the terms and conditions aforestated, and failing
which you shall be deemed to have thereby waived such pre-emptive right
and my client shall thereafter be absolutely free to sell the subject property to
interested buyers.[10]
To answer the foregoing letter and confirm their telephone conversation on

the matter, Riviera sent a letter dated November 22, 1988 to Atty. Juan,
counsel for Reyes, expressing Rivieras interest to purchase the subject
property and that Riviera is already negotiating with Reyes which will take a
couple of days to formalize.[11] Riviera increased its offer to Five Thousand
Pesos (P5,000.00) per square meter but Reyes did not accede to said price
as it was still lower than his quoted price of Six Thousand Pesos (P6,000.00)
per square meter.[12] Angeles asked Reyes to give him until the end of
November 1988 for Rivieras final decision.
In a letter dated December 2, 1988, Angeles wrote Reyes confirming

Rivieras intent to purchase the subject property for the fixed and final[13]
price of Five Thousand Pesos (P5,000.00) per square meter, complete
payment within sixty (60) to ninety (90) days which offer is what we feel
should be the market price of your property. Angeles asked that the decision
of Reyes and his written reply to the offer be given within fifteen (15) days
since there are also other properties being offered to them at the
moment.[14]
In response to the foregoing letter, Atty. Juan sent a letter to Riviera dated
December 5, 1988 informing Riviera that Rivieras offer is not acceptable to
his client. He further expressed, let it be made clear that, much as it is the
earnest desire of my client to really give you the preference to purchase the
subject property, you have unfortunately failed to take advantage of such
opportunity and thus lost your right of first refusal in sale of said
property.[15]
Meanwhile, on December 4, 1988, Reyes confided to Rolando P. Traballo, a

close family friend and President of Cypress, his predicament about the
nearing expiry date of the redemption period of the foreclosed mortgaged
property with Prudential Bank, the money for which he could not raise on
time thereby offering the subject property to him for Six Thousand Pesos
(P6,000.00) per square meter. Traballo expressed interest in buying the said
property, told Reyes that he will study the matter and suggested for them to
meet the next day.[16]
They met the next day, December 5, 1988, at which time Traballo bargained
for Five Thousand Three Hundred Pesos (P5,300.00) per square meter.
After considering the reasons cited by Traballo for his quoted price, Reyes
accepted the same. However, since Traballo did not have the amount with
which to pay Reyes, he told the latter that he will look for a partner for that
purpose.[17] Reyes told Traballo that he had already afforded Riviera its right
of first refusal but they cannot agree because Rivieras final offer was for Five
Thousand Pesos (P5,000.00) per square meter.[18]
Sometime in January 1989, apprehensive of the impending expiration in

March 1989 of the redemption period of the foreclosed mortgaged property
with Prudential Bank and the deal between Reyes and Traballo was not yet
formally concluded, Reyes decided to approach anew Riviera. For this
purpose, he requested his nephew, Atty. Estanislao Alinea, to approach
Angeles and find out if the latter was still interested in buying the subject
property and ask him to raise his offer for the purchase of the said property a
little higher. As instructed, Atty. Alinea met with Angeles and asked the latter
to increase his offer of Five Thousand Pesos (P5,000.00) per square meter
but Angeles said that his offer is Five Thousand Pesos (P5,000.00) per
square meter.[19]
Following the meeting, Angeles sent a letter dated February 4, 1989 to

Reyes, through Atty. Alinea, that his offer is Five Thousand Pesos
(P5,000.00) per square meter payment of which would be fifty percent (50%)
down within thirty (30) days upon submission of certain documents in three
(3) days, the balance payable in five (5) years in equal monthly installments
at twelve percent (12%) interest in diminishing balance.[20] With the terms of

this second offer, Angeles admittedly downgraded the previous offer of
Riviera on December 2, 1988.[21]
Atty. Alinea conveyed to Reyes Rivieras offer of Five Thousand Pesos

(P5,000.00) per square meter but Reyes did not agree. Consequently, Atty.
Alinea contacted again Angeles and asked him if he can increase his price.
Angeles, however, said he cannot add anymore.[22] Reyes did not expressly
offer his subject property to Riviera at the price of Five Thousand Three
Hundred Pesos (P5,300.00) per square meter.[23]
Sometime in February 1989, Cypress and its partner in the venture, Cornhill
Trading Corporation, were able to come up with the amount sufficient to
cover the redemption money, with which Reyes paid to the Prudential Bank
to redeem the subject property.[24] On May 1, 1989, a Deed of Absolute
Sale covering the subject property was executed by Reyes in favor of
Cypress and Cornhill for the consideration of Five Million Three Hundred
Ninety Five Thousand Four Hundred Pesos (P5,395,400.00).[25] On the
same date, Cypress and Cornhill mortgaged the subject property to Urban
Development Bank for Three Million Pesos (P3,000,000.00).[26]
Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the
subject property to it claiming that its right of first refusal under the lease
contract was violated. After several unsuccessful attempts,[27] Riviera filed
the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to
transfer the disputed title to the land in favor of Riviera upon its payment of
the price paid by Cypress and Cornhill.
Following trial on the merits, the trial court dismissed the complaint of Riviera
as well as the counterclaims and cross-claims of the other parties.[28] It ruled
that the defendants therein did not violate Rivieras right of first refusal,
ratiocinating in this wise:
Resolving the first issue, this Court takes note that since the beginning of the
negotiation between the plaintiff and defendant Reyes for the purchase of the
property, in question, the plaintiff was firm and steadfast in its position,
expressed in writing by its President Vicente Angeles, that it was not willing
to buy the said property higher than P5,000.00, per square meter, which was
far lower than the asking price of defendant Reyes for P6,000.00, per square
meter, undoubtedly, because, in its perception, it would be difficult for other
parties to buy the property, at a higher price than what it was offering, since it
is in occupation of the property, as lessee, the term of which was to expire
after about four (4) years more.
On the other hand, it was obvious, upon the basis of the last ditch effort of
defendant Reyes, thru his nephew, Atty. Alinea, to have the plaintiff buy the
property, in question, that he was willing to sell the said property at a price
less than P6,000.00 and a little higher than P5,000.00, per square meter,
precisely, because Atty. Alinea, in behalf of his uncle, defendant Reyes,
sought plaintiffs Angeles and asked him to raise his price a little higher,
indicating thereby the willingness of defendant Reyes to sell said property at
less than his offer of P6,000.00, per square meter.
This being the case, it can hardly be validly said by the plaintiff that he was
deprived of his right of first refusal to buy the subject property at a price of
P5,300.00, per square meter which is the amount defendants
Cypress/Cornhill bought the said property from defendant Reyes. For, it was
again given such an opportunity to exercise its right of first refusal by
defendant Reyes had it only signified its willingness to increase a little higher
its purchase price above P5,000.00, per square meter, when its President,
Angeles, was asked by Atty. Alinea to do so, instead of adamantly sticking to
its offer of only P5,000.00 per square meter, by reason of which, therefore,
the plaintiff had lost, for the second time, its right of first refusal, even if
defendant Reyes did not expressly offer to sell to it the subject land at
P5,300.00, per square meter, considering that by the plea of Atty. Alinea, in
behalf of defendant Reyes, for it to increase its price a little, the plaintiff is to
be considered as having forfeited again its right of first refusal, it having
refused to budged from its regid (sic) offer to buy the subject property at no
more than P5,000.00, per square meter.
As such, this Court holds that it was no longer necessary for the defendant
Reyes to expressly and categorically offer to the plaintiff the subject property
at P5,300.00, per square meter, in order that he can comply with his
obligation to give first refusal to the plaintiff as stipulated in the Contract of
Lease, the plaintiff having had already lost its right of first refusal, at the first
instance, by refusing to buy the said property at P6,000.00, per square
meter, which was the asking price of defendant Reyes, since to do so would
be a useless ceremony and would only be an exercise in futility, considering
the firm and unbending position of the plaintiff, which defendant Reyes
already knew, that the plaintiff, at any event, was not amenable to increasing
its price at over P5,000.00, per square meter.
Dissatisfied with the decision of the trial court, both parties appealed to the
Court of Appeals.[29] However, the appellate court, through its Special
Seventh Division, rendered a Decision dated June 6, 1994 which affirmed the
decision of the trial court in its entirety.[30] In sustaining the decision of the
trial court, the Court of Appeals adopted the above-quoted ratiocination of the
trial court and further added:
To put things in its proper perspective in accordance with the peculiar

attendant circumstances herein, particular stress should be given to
RIVIERAs uncompromising counter offer of only P5,000.00 per square meter
on all the occasions when REYES offered the subject property to it.
RIVIERA, in its letter to REYES dated December 2, 1988 (Exhibit D, p. 68,
Rollo) justified its rigid offer by saying that the above offer is what we feel
should be the market price of your property. If that be the case, We are
convinced, the same manner that REYES was, that RIVIERA was unwilling
to increase its counter offer at any present or future time. RIVIERAs
unilateral valuation of the subject property thus binds him, it cannot now be
heard to claim that it could have upped its offer had it been informed of
CYPRESS and CORNHILLS offer of P5,000.00 (sic) per square meter.
Defendants CYPRESS and CORNHILL were therefore right in saying that:
On the basic assumption that RIVIERA really meant what it said in its letter,
DR. REYES could not be faulted for believing that RIVIERA was definitely
NOT WILLING TO PAY MORE THAN P5,000.00 PER SQUARE METER ON
HIS PROPERTY. The fault lies with the deceptive and insincere words of
RIVIERA. Injustice (sic) and equity, RIVIERA must be deemed in estoppel in
now belatedly asserting that it would have been willing to pay a price higher
than P5,000.00 x x x. (Defendants-Appellees Cypress and Cornhills Brief,
p. 8)
For this reason, no adverse inference can be drawn from REYES failure to
disclose to RIVIERA the intervening counter-offer of CYPRESS and
CORNHILL.
Hence, Riviera interposed the instant petition anchored on the following

errors:[33]
I
It would have been far different had REYES non-disclosure of CYPRESS
and CORNHILLs counter-offer to RIVIERA resulted in the sale of the subject
property at equal or less than RIVIERAs offer; in which case, REYES would
have been rightly accused of cunningly circumventing RIVIERAs right of first
refusal. But the incontrovertible antecedents obtaining here clearly reveal
REYES earnest efforts in respecting RIVIERAs contractual right to initially
purchase the subject property. Not only once but twice did REYES
approach RIVIERA, the last one being the most telling indication of REYES
sincerest intention in RIVIERA eventually purchasing the subject property if
only the latter would increase a little its offer of P5,000.00 per square meter.
And to this REYES was desperately willing to accede to despite the financial
quandary he was then in as the expiration of the redemption period drew
closer and closer, and despite the better offer of CYPRESS and CORNHILL.
REYES unquestionably had displayed good faith. Can the same be said of
RIVIERA? We do not think so. It appears that RIVIERA all along was trying
to push REYES back against the wall, for RIVIERA was well-aware of
REYES precarious financial needs at that time, and by clinging to its offer,
REYES might eventually succumb to its offer out of sheer desperation.
RIVIERA was, to be frank, whimsically exercising its contractual right to the
prejudice of REYES who had commendably given RIVIERA extra leeway in
exercising it. And to this We say that no amount of jurisprudence RIVIERA
might avail of for the purpose of construing the right of first refusal, however
enlightening and persuasive they may be, will cover-up for its arrogant
exercise of its right as can be gleaned from the factual premises. Equity in
this case tilts in favor of defendants REYES, CYPRESS and CORNHILL that
the consummated sale between them concerning the subject property be
given this Courts imprimatur, for if RIVIERA lost its opportunity to acquire it,
it has only itself to blame. For after all, REYES fundamental and intrinsic
right of ownership which necessarily carries with it the exclusive right to
dispose of it to whoever he pleases, must ultimately prevail over RIVIERAs
right of first refusal which it unscrupulously tried to exercise.
From this decision, Riviera filed a motion for reconsideration,[31] but the
appellate court denied the same in a Resolution dated September 22,
1994.[32]
THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE

OF DISCRETION TANTAMOUNT TO LACK OR EXCESS OF ITS
JURISDICTION IN RULING THAT PETITIONER RIVIERA FILIPINA, INC.
ALREADY LOST ITS RIGHT OF FIRST REFUSAL.
II

JURISDICTION IN NOT FINDING THAT IT WAS THE PETITIONER, NOT
RESPONDENT JUAN L. REYES, WHICH HAD BEEN THOROUGHLY
DECEIVED BY THE LATTER OUT OF ITS RIGHTS TO ITS CONTINUING
PREJUDICE.
III

JURISDICTION IN DENYING RECONSIDERATION.
IV

JURISDICTION IN DECIDING PETITIONERS APPEAL AT A TIME WHEN
THE PRINCIPAL APPELLEE IS ALLEGEDLY DEAD AND NO PROPER
SUBSTITUTION OF THE ALLEGED DECEASED PARTY HAS BEEN
MADE; HENCE, THE DECISION OF THE COURT OF APPEALS AND ITS

RESOLUTION DENYING RECONSIDERATION, IS NULL AND VOID.
At the outset, we note that, while Riviera alleges that the Court of Appeals
committed grave abuse of discretion amounting to lack or excess of
jurisdiction, the instant petition is, as it should be, treated as a petition for
review under Rule 45 and not as a special civil action for certiorari under
Rule 65 of the Revised Rules of Court, now the 1997 Rules of Civil
Procedure.
The distinctions between Rule 45 and 65 are far and wide, the most notable
of which is that errors of jurisdiction are best reviewed in a special civil action
for certiorari under Rule 65, while errors of judgment are correctible only by
appeal in a petition for review under Rule 45.[34] The rationale for the
distinction is simple. When a court exercises its jurisdiction an error
committed while so engaged does not deprive it of the jurisdiction being
exercised when the error is committed. If it did, every error committed by a
court would deprive it of its jurisdiction and every erroneous judgment would
be a void judgment. This cannot be allowed. The administration of justice
would not countenance such a rule. Thus, an error of judgment that the court
may commit in the exercise of its jurisdiction is not correctible through the
original special civil action of certiorari.[35] Appeal from a final disposition of
the Court of Appeals, as in the case at bar, is by way of a petition for review
under Rule 45.[36]
In the petition at bar, Riviera posits the view that its right of first refusal was
totally disregarded or violated by Reyes by the latters sale of the subject
property to Cypress and Cornhill. It contends that the right of first refusal
principally amounts to a right to match in the sense that it needs another offer
for the right to be exercised.
The concept and interpretation of the right of first refusal and the
consequences of a breach thereof evolved in Philippine juristic sphere only
within the last decade. It all started in 1992 with Guzman, Bocaling & Co. v.
Bonnevie[37] where the Court held that a lease with a proviso granting the
lessee the right of first priority all things and conditions being equal meant
that there should be identity of the terms and conditions to be offered to the
lessee and all other prospective buyers, with the lessee to enjoy the right of
first priority. A deed of sale executed in favor of a third party who cannot be
deemed a purchaser in good faith, and which is in violation of a right of first
refusal granted to the lessee is not voidable under the Statute of Frauds but
rescissible under Articles 1380 to 1381 (3) of the New Civil Code.
Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of

Appeals,[38] the Court en banc departed from the doctrine laid down in
Guzman, Bocaling & Co. v. Bonnevie and refused to rescind a contract of
sale which violated the right of first refusal. The Court held that the so-called
right of first refusal cannot be deemed a perfected contract of sale under
Article 1458 of the New Civil Code and, as such, a breach thereof decreed
under a final judgment does not entitle the aggrieved party to a writ of
execution of the judgment but to an action for damages in a proper forum for
the purpose.
In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair Theater,

Inc.,[39] the Court en banc reverted back to the doctrine in Guzman Bocaling
& Co. v. Bonnevie stating that rescission is a relief allowed for the protection
of one of the contracting parties and even third persons from all injury and
damage the contract may cause or to protect some incompatible and
preferred right by the contract.
Thereafter in 1997, in Paraaque Kings Enterprises, Inc. v. Court of

Appeals,[40] the Court affirmed the nature of and the concomitant rights and
obligations of parties under a right of first refusal. The Court, summarizing
the rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc., held that in order to have full
compliance with the contractual right granting petitioner the first option to
purchase, the sale of the properties for the price for which they were finally
sold to a third person should have likewise been first offered to the former.
Further, there should be identity of terms and conditions to be offered to the
buyer holding a right of first refusal if such right is not to be rendered illusory.
Lastly, the basis of the right of first refusal must be the current offer to sell of
the seller or offer to purchase of any prospective buyer.
Thus, the prevailing doctrine is that a right of first refusal means identity of
terms and conditions to be offered to the lessee and all other prospective
buyers and a contract of sale entered into in violation of a right of first refusal
of another person, while valid, is rescissible.
However, we must remember that general propositions do not decide specific

cases. Rather, laws are interpreted in the context of the peculiar factual
situation of each proceeding. Each case has its own flesh and blood and
cannot be ruled upon on the basis of isolated clinical classroom
principles.[41] Analysis and construction should not be limited to the words
used in the contract, as they may not accurately reflect the parties true
intent.[42] The court must read a contract as the average person would read
it and should not give it a strained or forced construction.[43]
In the case at bar, the Court finds relevant and significant the cardinal rule in
the interpretation of contracts that the intention of the parties shall be
accorded primordial consideration and in case of doubt, their
contemporaneous and subsequent acts shall be principally considered.[44]
Where the parties to a contract have given it a practical construction by their
conduct as by acts in partial performance, such construction may be
considered by the court in construing the contract, determining its meaning
and ascertaining the mutual intention of the parties at the time for
contracting. The parties practical construction of their contract has been
characterized as a clue or index to, or as evidence of, their intention or
meaning and as an important, significant, convincing, persuasive, or
influential factor in determining the proper construction of the contract.[45]
An examination of the attendant particulars of the case do not persuade us to

uphold Rivieras view. As clearly shown by the records and transcripts of the
case, the actions of the parties to the contract of lease, Reyes and Riviera,
shaped their understanding and interpretation of the lease provision right of
first refusal to mean simply that should the lessor Reyes decide to sell the
leased property during the term of the lease, such sale should first be offered
to the lessee Riviera. And that is what exactly ensued between Reyes and
Riviera, a series of negotiations on the price per square meter of the subject
property with neither party, especially Riviera, unwilling to budge from his
offer, as evidenced by the exchange of letters between the two contenders.
It can clearly be discerned from Rivieras letters dated December 2, 1988

and February 4, 1989 that Riviera was so intractable in its position and took
obvious advantage of the knowledge of the time element in its negotiations

with Reyes as the redemption period of the subject foreclosed property drew
near. Riviera strongly exhibited a take-it or leave-it attitude in its
negotiations with Reyes. It quoted its fixed and final price as Five
Thousand Pesos (P5,000.00) and not any peso more. It voiced out that it
had other properties to consider so Reyes should decide and make known its
decision within fifteen days. Riviera, in its letter dated February 4, 1989,
admittedly, even downgraded its offer when Reyes offered anew the property
to it, such that whatever amount Reyes initially receives from Riviera would
absolutely be insufficient to pay off the redemption price of the subject
property.
Naturally, Reyes had to disagree with Rivieras highly
disadvantageous offer.
Nary a howl of protest or shout of defiance spewed forth from Rivieras lips,
as it were, but a seemingly whimper of acceptance when the counsel of
Reyes strongly expressed in a letter dated December 5, 1989 that Riviera
had lost its right of first refusal. Riviera cannot now be heard that had it been
informed of the offer of Five Thousand Three Hundred Pesos (P5,300.00) of
Cypress and Cornhill it would have matched said price. Its stubborn
approach in its negotiations with Reyes showed crystal-clear that there was
never any need to disclose such information and doing so would be just a
futile effort on the part of Reyes. Reyes was under no obligation to disclose
the same. Pursuant to Article 1339[46] of the New Civil Code, silence or
concealment, by itself, does not constitute fraud, unless there is a special
duty to disclose certain facts, or unless according to good faith and the
usages of commerce the communication should be made.[47] We apply the
general rule in the case at bar since Riviera failed to convincingly show that
either of the exceptions are relevant to the case at bar.
In sum, the Court finds that in the interpretation of the right of first refusal as
understood by the parties herein, the question as to what is to be included
therein or what is meant by the same, as in all other provisions of the
contract, is for the parties and not for the court to determine, and this
question may not be resolved by what the parties might have provided had
they thought about it, which is evident from Riviera claims, or by what the
court might conclude regarding abstract fairness.[48]
The Court would be rewriting the contract of Reyes and Riviera under the
guise of construction were we to interpret the right of first refusal as Riviera
propounds it, despite a contrary construction as exhibited by its actions. A

court, even the Supreme Court, has no right to make new contracts for the
parties or ignore those already made by them, simply to avoid seeming
hardships. Neither abstract justice nor the rule of liberal construction justifies
the creation of a contract for the parties which they did not make themselves
or the imposition upon one party to a contract of an obligation not
assumed.[49]
On the last error attributed to the Court of Appeals which is the effect on the
jurisdiction of the appellate court of the non-substitution of Reyes, who died
during the pendency of the appeal, the Court notes that when Riviera filed its
petition with this Court and assigned this error, it later filed on October 27,
1994 a Manifestation[50] with the Court of Appeals stating that it has
discovered that Reyes is already dead, in view of which the appellate court
issued a Resolution dated December 16, 1994 which noted the manifestation
of Riviera and directed the counsel of Reyes to submit a copy of the latters
death certificate and to file the proper motion for substitution of party.[51]
Complying therewith, the necessary motion for substitution of deceased
Reyes, who died on January 7, 1994, was filed by the heirs, namely,
Estefania B. Reyes, Juanita R. de la Rosa, Juan B. Reyes, Jr. and Fidel B.
Reyes.[52] Acting on the motion for substitution, the Court of Appeals
granted the same.[53]
Notwithstanding the foregoing, Section 16[54] and 17[55] of Rule 3 of the

Revised Rules of Court, upon which Riviera anchors its argument, has
already been amended by the 1997 Rules of Civil Procedure.[56] Even
applying the old Rules, the failure of a counsel to comply with his duty under
Section 16 of Rule 3 of the Revised Rules of Court, to inform the court of the
death of his client and no substitution of such is effected, will not invalidate
the proceedings and the judgment thereon if the action survives the death of
such party,[57] as this case does, since the death of Reyes did not extinguish
his civil personality. The appellate court was well within its jurisdiction to
proceed as it did with the case since the death of a party is not subject to its
judicial notice. Needless to stress, the purpose behind the rule on
substitution of parties is the protection of the right of every party to due
process. This purpose has been adequately met in this case since both
parties argued their respective positions through their pleadings in the trial
court and the appellate court. Besides, the Court has already acquired
jurisdiction over the heirs of Reyes by voluntarily submitting themselves to
our jurisdiction.[58]
In view of all the foregoing, the Court is convinced that the appellate court
committed no reversible error in its challenged Decision.
WHEREFORE, the instant petition is hereby DENIED, and the Decision of

the Court of Appeals dated June 6, 1994 in CA-G.R. CV No. 26513 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
SECOND DIVISION
[G.R. No. 117355. April 5, 2002]
RIVIERA FILIPINA, INC., petitioner, vs. COURT OF APPEALS, JUAN L.

REYES, (now deceased), substituted by his heirs, namely, Estefania B.
Reyes, Juanita R. de la Rosa, Juan B. Reyes, Jr. and Fidel B. Reyes,
PHILIPPINE
CYPRESS
CONSTRUCTION
&
DEVELOPMENT
CORPORATION, CORNHILL TRADING CORPORATION AND URBAN
DEVELOPMENT BANK, respondents.
DECISION
DE LEON, JR., J.:
Before us is a petition for review on certiorari of the Decision[1] of the Court

of Appeals[2] dated June 6, 1994 in CA-G.R. CV No. 26513 affirming the
Decision[3] dated March 20, 1990 of the Regional Trial Court of Quezon City,
Branch 89 dismissing Civil Case No. Q-89-3371.
Civil Case No. Q-89-3371 is a suit instituted by Riviera Filipina, Inc. (Riviera)
on August 31, 1989[4] to compel the defendants therein Juan L. Reyes, now
deceased, Philippine Cypress Construction & Development Corporation

(Cypress), Cornhill Trading Corporation (Cornhill) and Urban Development
Bank to transfer the title covering a 1,018 square meter parcel of land located
along EDSA, Quezon City for alleged violation of Rivieras right of first
refusal.
It appears that on November 23, 1982, respondent Juan L. Reyes (Reyes,

for brevity) executed a Contract of Lease with Riviera. The ten-year (10)
renewable lease of Riviera, which started on August 1, 1982, involved a
1,018 square meter parcel of land located along Edsa, Quezon City, covered
and described in Transfer Certificate of Title No. 186326 of the Registry of
Deeds of Quezon City in the name of Juan L. Reyes.[5]
The said parcel of land was subject of a Real Estate Mortgage executed by
Reyes in favor of Prudential Bank. Since the loan with Prudential Bank
remained unpaid upon maturity, the mortgagee bank extrajudicially
foreclosed the mortgage thereon. At the public auction sale, the mortgagee
bank emerged as the highest bidder. The redemption period was set to
expire on March 7, 1989. Realizing that he could not possibly raise in time
the money needed to redeem the subject property, Reyes decided to sell the
same.[6]
Since paragraph 11 of the lease contract expressly provided that the

LESSEE shall have the right of first refusal should the LESSOR decide to
sell the property during the term of the lease,[7] Reyes offered to sell the
subject property to Riviera, through its President Vicente C. Angeles, for Five
Thousand Pesos (P5,000.00) per square meter.
However, Angeles
bargained for Three Thousand Five Hundred Pesos (P3,500.00) per square
meter. Since Reyes was not amenable to the said price and insisted on Five
Thousand Pesos (P5,000.00) per square meter, Angeles requested Reyes to
allow him to consult the other members of the Board of Directors of
Riviera.[8]
Seven (7) months later, or sometime in October 1988, Angeles

communicated with Reyes Rivieras offer to purchase the subject property for
Four Thousand Pesos (P4,000.00) per square meter. However, Reyes did
not accept the offer. This time he asked for Six Thousand Pesos (P6,000.00)
per square meter since the value of the property in the area had appreciated
in view of the plans of Araneta to develop the vicinity.[9]
In a letter dated November 2, 1988, Atty. Irineo S. Juan, acting as counsel for
Reyes, informed Riviera that Reyes was selling the subject property for Six
Thousand Pesos (P6,000.00) per square meter, net of capital gains and
transfer taxes, registration fees, notarial fees and all other attendant charges.
He further stated therein that:
In this connection, conformably to the provisions stipulated in Paragraph/Item

No. 11 of your CONTRACT OF LEASE (Doc. No. 365, Page No. 63, Book
No. X, Series of 1982, of the Notarial Registry of Notary Public Leovillo S.
Agustin), notice is served upon your goodselves for you to exercise the right
of first refusal in the sale of said property, for which purpose you are hereby
given a period of ten (10) days from your receipt hereof within which to thus
purchase the same under the terms and conditions aforestated, and failing
which you shall be deemed to have thereby waived such pre-emptive right
and my client shall thereafter be absolutely free to sell the subject property to
interested buyers.[10]
To answer the foregoing letter and confirm their telephone conversation on

the matter, Riviera sent a letter dated November 22, 1988 to Atty. Juan,
counsel for Reyes, expressing Rivieras interest to purchase the subject
property and that Riviera is already negotiating with Reyes which will take a
couple of days to formalize.[11] Riviera increased its offer to Five Thousand
Pesos (P5,000.00) per square meter but Reyes did not accede to said price
as it was still lower than his quoted price of Six Thousand Pesos (P6,000.00)
per square meter.[12] Angeles asked Reyes to give him until the end of
November 1988 for Rivieras final decision.
In a letter dated December 2, 1988, Angeles wrote Reyes confirming

Rivieras intent to purchase the subject property for the fixed and final[13]
price of Five Thousand Pesos (P5,000.00) per square meter, complete
payment within sixty (60) to ninety (90) days which offer is what we feel
should be the market price of your property. Angeles asked that the decision
of Reyes and his written reply to the offer be given within fifteen (15) days
since there are also other properties being offered to them at the
moment.[14]
In response to the foregoing letter, Atty. Juan sent a letter to Riviera dated
December 5, 1988 informing Riviera that Rivieras offer is not acceptable to
his client. He further expressed, let it be made clear that, much as it is the
earnest desire of my client to really give you the preference to purchase the
subject property, you have unfortunately failed to take advantage of such
opportunity and thus lost your right of first refusal in sale of said
property.[15]
Meanwhile, on December 4, 1988, Reyes confided to Rolando P. Traballo, a

close family friend and President of Cypress, his predicament about the
nearing expiry date of the redemption period of the foreclosed mortgaged
property with Prudential Bank, the money for which he could not raise on
time thereby offering the subject property to him for Six Thousand Pesos
(P6,000.00) per square meter. Traballo expressed interest in buying the said
property, told Reyes that he will study the matter and suggested for them to
meet the next day.[16]
They met the next day, December 5, 1988, at which time Traballo bargained
for Five Thousand Three Hundred Pesos (P5,300.00) per square meter.
After considering the reasons cited by Traballo for his quoted price, Reyes
accepted the same. However, since Traballo did not have the amount with
which to pay Reyes, he told the latter that he will look for a partner for that
purpose.[17] Reyes told Traballo that he had already afforded Riviera its right
of first refusal but they cannot agree because Rivieras final offer was for Five
Thousand Pesos (P5,000.00) per square meter.[18]
Sometime in January 1989, apprehensive of the impending expiration in

March 1989 of the redemption period of the foreclosed mortgaged property
with Prudential Bank and the deal between Reyes and Traballo was not yet
formally concluded, Reyes decided to approach anew Riviera. For this
purpose, he requested his nephew, Atty. Estanislao Alinea, to approach
Angeles and find out if the latter was still interested in buying the subject
property and ask him to raise his offer for the purchase of the said property a
little higher. As instructed, Atty. Alinea met with Angeles and asked the latter
to increase his offer of Five Thousand Pesos (P5,000.00) per square meter
but Angeles said that his offer is Five Thousand Pesos (P5,000.00) per
square meter.[19]
Following the meeting, Angeles sent a letter dated February 4, 1989 to

Reyes, through Atty. Alinea, that his offer is Five Thousand Pesos
(P5,000.00) per square meter payment of which would be fifty percent (50%)
down within thirty (30) days upon submission of certain documents in three
(3) days, the balance payable in five (5) years in equal monthly installments
at twelve percent (12%) interest in diminishing balance.[20] With the terms of
this second offer, Angeles admittedly downgraded the previous offer of
Riviera on December 2, 1988.[21]
Atty. Alinea conveyed to Reyes Rivieras offer of Five Thousand Pesos

(P5,000.00) per square meter but Reyes did not agree. Consequently, Atty.
Alinea contacted again Angeles and asked him if he can increase his price.
Angeles, however, said he cannot add anymore.[22] Reyes did not expressly
offer his subject property to Riviera at the price of Five Thousand Three
Hundred Pesos (P5,300.00) per square meter.[23]
Sometime in February 1989, Cypress and its partner in the venture, Cornhill
Trading Corporation, were able to come up with the amount sufficient to
cover the redemption money, with which Reyes paid to the Prudential Bank
to redeem the subject property.[24] On May 1, 1989, a Deed of Absolute
Sale covering the subject property was executed by Reyes in favor of
Cypress and Cornhill for the consideration of Five Million Three Hundred
Ninety Five Thousand Four Hundred Pesos (P5,395,400.00).[25] On the
same date, Cypress and Cornhill mortgaged the subject property to Urban
Development Bank for Three Million Pesos (P3,000,000.00).[26]
Thereafter, Riviera sought from Reyes, Cypress and Cornhill a resale of the
subject property to it claiming that its right of first refusal under the lease
contract was violated. After several unsuccessful attempts,[27] Riviera filed
the suit to compel Reyes, Cypress, Cornhill and Urban Development Bank to
transfer the disputed title to the land in favor of Riviera upon its payment of
the price paid by Cypress and Cornhill.
Following trial on the merits, the trial court dismissed the complaint of Riviera
as well as the counterclaims and cross-claims of the other parties.[28] It ruled
that the defendants therein did not violate Rivieras right of first refusal,
ratiocinating in this wise:
Resolving the first issue, this Court takes note that since the beginning of the
negotiation between the plaintiff and defendant Reyes for the purchase of the
property, in question, the plaintiff was firm and steadfast in its position,
expressed in writing by its President Vicente Angeles, that it was not willing
to buy the said property higher than P5,000.00, per square meter, which was
far lower than the asking price of defendant Reyes for P6,000.00, per square
meter, undoubtedly, because, in its perception, it would be difficult for other
parties to buy the property, at a higher price than what it was offering, since it
is in occupation of the property, as lessee, the term of which was to expire
after about four (4) years more.
On the other hand, it was obvious, upon the basis of the last ditch effort of
defendant Reyes, thru his nephew, Atty. Alinea, to have the plaintiff buy the
property, in question, that he was willing to sell the said property at a price
less than P6,000.00 and a little higher than P5,000.00, per square meter,
precisely, because Atty. Alinea, in behalf of his uncle, defendant Reyes,
sought plaintiffs Angeles and asked him to raise his price a little higher,
indicating thereby the willingness of defendant Reyes to sell said property at
less than his offer of P6,000.00, per square meter.
This being the case, it can hardly be validly said by the plaintiff that he was
deprived of his right of first refusal to buy the subject property at a price of
P5,300.00, per square meter which is the amount defendants
Cypress/Cornhill bought the said property from defendant Reyes. For, it was
again given such an opportunity to exercise its right of first refusal by
defendant Reyes had it only signified its willingness to increase a little higher
its purchase price above P5,000.00, per square meter, when its President,
Angeles, was asked by Atty. Alinea to do so, instead of adamantly sticking to
its offer of only P5,000.00 per square meter, by reason of which, therefore,
the plaintiff had lost, for the second time, its right of first refusal, even if
defendant Reyes did not expressly offer to sell to it the subject land at
P5,300.00, per square meter, considering that by the plea of Atty. Alinea, in
behalf of defendant Reyes, for it to increase its price a little, the plaintiff is to
be considered as having forfeited again its right of first refusal, it having
refused to budged from its regid (sic) offer to buy the subject property at no
more than P5,000.00, per square meter.
As such, this Court holds that it was no longer necessary for the defendant
Reyes to expressly and categorically offer to the plaintiff the subject property
at P5,300.00, per square meter, in order that he can comply with his
obligation to give first refusal to the plaintiff as stipulated in the Contract of
Lease, the plaintiff having had already lost its right of first refusal, at the first
instance, by refusing to buy the said property at P6,000.00, per square
meter, which was the asking price of defendant Reyes, since to do so would
be a useless ceremony and would only be an exercise in futility, considering
the firm and unbending position of the plaintiff, which defendant Reyes
already knew, that the plaintiff, at any event, was not amenable to increasing
its price at over P5,000.00, per square meter.
Dissatisfied with the decision of the trial court, both parties appealed to the
Court of Appeals.[29] However, the appellate court, through its Special
Seventh Division, rendered a Decision dated June 6, 1994 which affirmed the
decision of the trial court in its entirety.[30] In sustaining the decision of the
trial court, the Court of Appeals adopted the above-quoted ratiocination of the
trial court and further added:
To put things in its proper perspective in accordance with the peculiar

attendant circumstances herein, particular stress should be given to
RIVIERAs uncompromising counter offer of only P5,000.00 per square meter
on all the occasions when REYES offered the subject property to it.
RIVIERA, in its letter to REYES dated December 2, 1988 (Exhibit D, p. 68,
Rollo) justified its rigid offer by saying that the above offer is what we feel
should be the market price of your property. If that be the case, We are
convinced, the same manner that REYES was, that RIVIERA was unwilling
to increase its counter offer at any present or future time. RIVIERAs
unilateral valuation of the subject property thus binds him, it cannot now be
heard to claim that it could have upped its offer had it been informed of
CYPRESS and CORNHILLS offer of P5,000.00 (sic) per square meter.
Defendants CYPRESS and CORNHILL were therefore right in saying that:
On the basic assumption that RIVIERA really meant what it said in its letter,
DR. REYES could not be faulted for believing that RIVIERA was definitely
NOT WILLING TO PAY MORE THAN P5,000.00 PER SQUARE METER ON
HIS PROPERTY. The fault lies with the deceptive and insincere words of
RIVIERA. Injustice (sic) and equity, RIVIERA must be deemed in estoppel in
now belatedly asserting that it would have been willing to pay a price higher
than P5,000.00 x x x. (Defendants-Appellees Cypress and Cornhills Brief,
p. 8)
From this decision, Riviera filed a motion for reconsideration,[31] but the
appellate court denied the same in a Resolution dated September 22,
1994.[32]
For this reason, no adverse inference can be drawn from REYES failure to
disclose to RIVIERA the intervening counter-offer of CYPRESS and
CORNHILL.
Hence, Riviera interposed the instant petition anchored on the following

errors:[33]
I
It would have been far different had REYES non-disclosure of CYPRESS
and CORNHILLs counter-offer to RIVIERA resulted in the sale of the subject
property at equal or less than RIVIERAs offer; in which case, REYES would
have been rightly accused of cunningly circumventing RIVIERAs right of first
refusal. But the incontrovertible antecedents obtaining here clearly reveal
REYES earnest efforts in respecting RIVIERAs contractual right to initially
purchase the subject property. Not only once but twice did REYES
approach RIVIERA, the last one being the most telling indication of REYES
sincerest intention in RIVIERA eventually purchasing the subject property if
only the latter would increase a little its offer of P5,000.00 per square meter.
And to this REYES was desperately willing to accede to despite the financial
quandary he was then in as the expiration of the redemption period drew
closer and closer, and despite the better offer of CYPRESS and CORNHILL.
REYES unquestionably had displayed good faith. Can the same be said of
RIVIERA? We do not think so. It appears that RIVIERA all along was trying
to push REYES back against the wall, for RIVIERA was well-aware of
REYES precarious financial needs at that time, and by clinging to its offer,
REYES might eventually succumb to its offer out of sheer desperation.
RIVIERA was, to be frank, whimsically exercising its contractual right to the
prejudice of REYES who had commendably given RIVIERA extra leeway in
exercising it. And to this We say that no amount of jurisprudence RIVIERA
might avail of for the purpose of construing the right of first refusal, however
enlightening and persuasive they may be, will cover-up for its arrogant
exercise of its right as can be gleaned from the factual premises. Equity in
this case tilts in favor of defendants REYES, CYPRESS and CORNHILL that
the consummated sale between them concerning the subject property be
given this Courts imprimatur, for if RIVIERA lost its opportunity to acquire it,
it has only itself to blame. For after all, REYES fundamental and intrinsic
right of ownership which necessarily carries with it the exclusive right to
dispose of it to whoever he pleases, must ultimately prevail over RIVIERAs
right of first refusal which it unscrupulously tried to exercise.

JURISDICTION IN RULING THAT PETITIONER RIVIERA FILIPINA, INC.
ALREADY LOST ITS RIGHT OF FIRST REFUSAL.
II

JURISDICTION IN NOT FINDING THAT IT WAS THE PETITIONER, NOT
RESPONDENT JUAN L. REYES, WHICH HAD BEEN THOROUGHLY
DECEIVED BY THE LATTER OUT OF ITS RIGHTS TO ITS CONTINUING
PREJUDICE.
III

JURISDICTION IN DENYING RECONSIDERATION.
IV

JURISDICTION IN DECIDING PETITIONERS APPEAL AT A TIME WHEN
THE PRINCIPAL APPELLEE IS ALLEGEDLY DEAD AND NO PROPER
SUBSTITUTION OF THE ALLEGED DECEASED PARTY HAS BEEN
MADE; HENCE, THE DECISION OF THE COURT OF APPEALS AND ITS
RESOLUTION DENYING RECONSIDERATION, IS NULL AND VOID.
At the outset, we note that, while Riviera alleges that the Court of Appeals
committed grave abuse of discretion amounting to lack or excess of
jurisdiction, the instant petition is, as it should be, treated as a petition for
review under Rule 45 and not as a special civil action for certiorari under
Rule 65 of the Revised Rules of Court, now the 1997 Rules of Civil
Procedure.
The distinctions between Rule 45 and 65 are far and wide, the most notable
of which is that errors of jurisdiction are best reviewed in a special civil action
for certiorari under Rule 65, while errors of judgment are correctible only by
appeal in a petition for review under Rule 45.[34] The rationale for the
distinction is simple. When a court exercises its jurisdiction an error
committed while so engaged does not deprive it of the jurisdiction being
exercised when the error is committed. If it did, every error committed by a
court would deprive it of its jurisdiction and every erroneous judgment would
be a void judgment. This cannot be allowed. The administration of justice
would not countenance such a rule. Thus, an error of judgment that the court
may commit in the exercise of its jurisdiction is not correctible through the
original special civil action of certiorari.[35] Appeal from a final disposition of
the Court of Appeals, as in the case at bar, is by way of a petition for review
under Rule 45.[36]
In the petition at bar, Riviera posits the view that its right of first refusal was
totally disregarded or violated by Reyes by the latters sale of the subject
property to Cypress and Cornhill. It contends that the right of first refusal
principally amounts to a right to match in the sense that it needs another offer
for the right to be exercised.
The concept and interpretation of the right of first refusal and the
consequences of a breach thereof evolved in Philippine juristic sphere only
within the last decade. It all started in 1992 with Guzman, Bocaling & Co. v.
Bonnevie[37] where the Court held that a lease with a proviso granting the
lessee the right of first priority all things and conditions being equal meant
that there should be identity of the terms and conditions to be offered to the
lessee and all other prospective buyers, with the lessee to enjoy the right of
first priority. A deed of sale executed in favor of a third party who cannot be
deemed a purchaser in good faith, and which is in violation of a right of first
refusal granted to the lessee is not voidable under the Statute of Frauds but
rescissible under Articles 1380 to 1381 (3) of the New Civil Code.
Subsequently in 1994, in the case of Ang Yu Asuncion v. Court of

Appeals,[38] the Court en banc departed from the doctrine laid down in
Guzman, Bocaling & Co. v. Bonnevie and refused to rescind a contract of
sale which violated the right of first refusal. The Court held that the so-called
right of first refusal cannot be deemed a perfected contract of sale under
Article 1458 of the New Civil Code and, as such, a breach thereof decreed
under a final judgment does not entitle the aggrieved party to a writ of
execution of the judgment but to an action for damages in a proper forum for
the purpose.
In the 1996 case of Equatorial Realty Development, Inc. v. Mayfair Theater,

Inc.,[39] the Court en banc reverted back to the doctrine in Guzman Bocaling
& Co. v. Bonnevie stating that rescission is a relief allowed for the protection
of one of the contracting parties and even third persons from all injury and
damage the contract may cause or to protect some incompatible and
preferred right by the contract.
Thereafter in 1997, in Paraaque Kings Enterprises, Inc. v. Court of

Appeals,[40] the Court affirmed the nature of and the concomitant rights and
obligations of parties under a right of first refusal. The Court, summarizing
the rulings in Guzman, Bocaling & Co. v. Bonnevie and Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc., held that in order to have full
compliance with the contractual right granting petitioner the first option to
purchase, the sale of the properties for the price for which they were finally
sold to a third person should have likewise been first offered to the former.
Further, there should be identity of terms and conditions to be offered to the
buyer holding a right of first refusal if such right is not to be rendered illusory.
Lastly, the basis of the right of first refusal must be the current offer to sell of
the seller or offer to purchase of any prospective buyer.
Thus, the prevailing doctrine is that a right of first refusal means identity of
terms and conditions to be offered to the lessee and all other prospective
buyers and a contract of sale entered into in violation of a right of first refusal
of another person, while valid, is rescissible.
However, we must remember that general propositions do not decide specific

cases. Rather, laws are interpreted in the context of the peculiar factual
situation of each proceeding. Each case has its own flesh and blood and
cannot be ruled upon on the basis of isolated clinical classroom
principles.[41] Analysis and construction should not be limited to the words
used in the contract, as they may not accurately reflect the parties true
intent.[42] The court must read a contract as the average person would read
it and should not give it a strained or forced construction.[43]
In the case at bar, the Court finds relevant and significant the cardinal rule in
the interpretation of contracts that the intention of the parties shall be
accorded primordial consideration and in case of doubt, their
contemporaneous and subsequent acts shall be principally considered.[44]
Where the parties to a contract have given it a practical construction by their
conduct as by acts in partial performance, such construction may be
considered by the court in construing the contract, determining its meaning
and ascertaining the mutual intention of the parties at the time for
contracting. The parties practical construction of their contract has been
characterized as a clue or index to, or as evidence of, their intention or
meaning and as an important, significant, convincing, persuasive, or
influential factor in determining the proper construction of the contract.[45]
An examination of the attendant particulars of the case do not persuade us to

uphold Rivieras view. As clearly shown by the records and transcripts of the
case, the actions of the parties to the contract of lease, Reyes and Riviera,
shaped their understanding and interpretation of the lease provision right of
first refusal to mean simply that should the lessor Reyes decide to sell the
leased property during the term of the lease, such sale should first be offered
to the lessee Riviera. And that is what exactly ensued between Reyes and
Riviera, a series of negotiations on the price per square meter of the subject
property with neither party, especially Riviera, unwilling to budge from his
offer, as evidenced by the exchange of letters between the two contenders.
It can clearly be discerned from Rivieras letters dated December 2, 1988

and February 4, 1989 that Riviera was so intractable in its position and took
obvious advantage of the knowledge of the time element in its negotiations
with Reyes as the redemption period of the subject foreclosed property drew
near. Riviera strongly exhibited a take-it or leave-it attitude in its
negotiations with Reyes. It quoted its fixed and final price as Five
Thousand Pesos (P5,000.00) and not any peso more. It voiced out that it
had other properties to consider so Reyes should decide and make known its
decision within fifteen days. Riviera, in its letter dated February 4, 1989,
admittedly, even downgraded its offer when Reyes offered anew the property
to it, such that whatever amount Reyes initially receives from Riviera would
absolutely be insufficient to pay off the redemption price of the subject
property.
Naturally, Reyes had to disagree with Rivieras highly
disadvantageous offer.
Nary a howl of protest or shout of defiance spewed forth from Rivieras lips,
as it were, but a seemingly whimper of acceptance when the counsel of
Reyes strongly expressed in a letter dated December 5, 1989 that Riviera
had lost its right of first refusal. Riviera cannot now be heard that had it been
informed of the offer of Five Thousand Three Hundred Pesos (P5,300.00) of
Cypress and Cornhill it would have matched said price. Its stubborn
approach in its negotiations with Reyes showed crystal-clear that there was
never any need to disclose such information and doing so would be just a
futile effort on the part of Reyes. Reyes was under no obligation to disclose
the same. Pursuant to Article 1339[46] of the New Civil Code, silence or
concealment, by itself, does not constitute fraud, unless there is a special
duty to disclose certain facts, or unless according to good faith and the
usages of commerce the communication should be made.[47] We apply the
general rule in the case at bar since Riviera failed to convincingly show that
either of the exceptions are relevant to the case at bar.
In sum, the Court finds that in the interpretation of the right of first refusal as
understood by the parties herein, the question as to what is to be included
therein or what is meant by the same, as in all other provisions of the
contract, is for the parties and not for the court to determine, and this
question may not be resolved by what the parties might have provided had
they thought about it, which is evident from Riviera claims, or by what the
court might conclude regarding abstract fairness.[48]
The Court would be rewriting the contract of Reyes and Riviera under the
guise of construction were we to interpret the right of first refusal as Riviera
propounds it, despite a contrary construction as exhibited by its actions. A
court, even the Supreme Court, has no right to make new contracts for the
parties or ignore those already made by them, simply to avoid seeming
hardships. Neither abstract justice nor the rule of liberal construction justifies
the creation of a contract for the parties which they did not make themselves
or the imposition upon one party to a contract of an obligation not
assumed.[49]
On the last error attributed to the Court of Appeals which is the effect on the
jurisdiction of the appellate court of the non-substitution of Reyes, who died
during the pendency of the appeal, the Court notes that when Riviera filed its
petition with this Court and assigned this error, it later filed on October 27,
1994 a Manifestation[50] with the Court of Appeals stating that it has
discovered that Reyes is already dead, in view of which the appellate court
issued a Resolution dated December 16, 1994 which noted the manifestation
of Riviera and directed the counsel of Reyes to submit a copy of the latters
death certificate and to file the proper motion for substitution of party.[51]
Complying therewith, the necessary motion for substitution of deceased
Reyes, who died on January 7, 1994, was filed by the heirs, namely,
Estefania B. Reyes, Juanita R. de la Rosa, Juan B. Reyes, Jr. and Fidel B.
Reyes.[52] Acting on the motion for substitution, the Court of Appeals
granted the same.[53]
Notwithstanding the foregoing, Section 16[54] and 17[55] of Rule 3 of the

Revised Rules of Court, upon which Riviera anchors its argument, has
already been amended by the 1997 Rules of Civil Procedure.[56] Even
applying the old Rules, the failure of a counsel to comply with his duty under
Section 16 of Rule 3 of the Revised Rules of Court, to inform the court of the
death of his client and no substitution of such is effected, will not invalidate
the proceedings and the judgment thereon if the action survives the death of
such party,[57] as this case does, since the death of Reyes did not extinguish
his civil personality. The appellate court was well within its jurisdiction to
proceed as it did with the case since the death of a party is not subject to its
judicial notice. Needless to stress, the purpose behind the rule on
substitution of parties is the protection of the right of every party to due
process. This purpose has been adequately met in this case since both
parties argued their respective positions through their pleadings in the trial
court and the appellate court. Besides, the Court has already acquired
jurisdiction over the heirs of Reyes by voluntarily submitting themselves to
our jurisdiction.[58]
In view of all the foregoing, the Court is convinced that the appellate court
committed no reversible error in its challenged Decision.
WHEREFORE, the instant petition is hereby DENIED, and the Decision of

the Court of Appeals dated June 6, 1994 in CA-G.R. CV No. 26513 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 146511
September 5, 2007
TOMAS ANG, petitioner,

vs.
ASSOCIATED BANK AND ANTONIO ANG ENG LIONG, respondents.
DECISION
PN-No. DVO-78-390
AZCUNA, J.:
Outstanding Balance
This petition for certiorari under Rule 45 of the Rules on Civil Procedure
seeks to review the October 9, 2000 Decision1 and December 26, 2000
Resolution2 of the Court of Appeals in CA-G.R. CV No. 53413 which
reversed and set aside the January 5, 1996 Decision3 of the Regional Trial
Court, Branch 16, Davao City, in Civil Case No. 20,299-90, dismissing the
complaint filed by respondents for collection of a sum of money.
On August 28, 1990, respondent Associated Bank (formerly Associated

Banking Corporation and now known as United Overseas Bank Philippines)
filed a collection suit against Antonio Ang Eng Liong and petitioner Tomas
Ang for the two (2) promissory notes that they executed as principal debtor
and co-maker, respectively.
P50,000.00
P30,000.00
Add
Past due charges for 4,199 days (from 01-31-79 to 07-31-90)
Past due charges for 4,253 days (from 12-8-78 to 07-31-90)

In the Complaint,4 respondent Bank alleged that on October 3 and 9, 1978,
the defendants obtained a loan of P50,000, evidenced by a promissory note
bearing PN-No. DVO-78-382, and P30,000, evidenced by a promissory note
bearing PN-No. DVO-78-390. As agreed, the loan would be payable, jointly
and severally, on January 31, 1979 and December 8, 1978, respectively. In
addition, subsequent amendments5 to the promissory notes as well as the
disclosure statements6 stipulated that the loan would earn 14% interest rate
per annum, 2% service charge per annum, 1% penalty charge per month
from due date until fully paid, and attorney's fees equivalent to 20% of the
outstanding obligation.
Despite repeated demands for payment, the latest of which were on

September 13, 1988 and September 9, 1986, on Antonio Ang Eng Liong and
Tomas Ang, respectively, respondent Bank claimed that the defendants
failed and refused to settle their obligation, resulting in a total indebtedness
of P539,638.96 as of July 31, 1990, broken down as follows:
PN-No. DVO-78-382
14% Interest
P203,538.98
P125,334.41
2% Service Charge
P11,663.89
P7,088.34
12% Overdue Charge
submit a more reasonable computation" considering that there had been "no
correct and reasonable statement of account" sent to him by the bank, which
was allegedly collecting excessive interest, penalty charges, and attorney's
fees despite knowledge that his business was destroyed by fire, hence, he
had no source of income for several years.
P69,983.34
P42,530.00
Total
P285,186.21
P174,952.75
Less: Charges paid
P500.00
None
Amount Due
P334,686.21
P204,952.75
In his Answer,7 Antonio Ang Eng Liong only admitted to have secured a loan
amounting to P80,000. He pleaded though that the bank "be ordered to
For his part, petitioner Tomas Ang filed an Answer with Counterclaim and
Cross-claim.8 He interposed the affirmative defenses that: the bank is not the
real party in interest as it is not the holder of the promissory notes, much less
a holder for value or a holder in due course; the bank knew that he did not
receive any valuable consideration for affixing his signatures on the notes but
merely lent his name as an accommodation party; he accepted the
promissory notes in blank, with only the printed provisions and the signature
of Antonio Ang Eng Liong appearing therein; it was the bank which
completed the notes upon the orders, instructions, or representations of his
co-defendant; PN-No. DVO-78-382 was completed in excess of or contrary
to the authority given by him to his co-defendant who represented that he
would only borrow P30,000 from the bank; his signature in PN-No. DVO-78390 was procured through fraudulent means when his co-defendant claimed
that his first loan did not push through; the promissory notes did not indicate
in what capacity he was intended to be bound; the bank granted his codefendant successive extensions of time within which to pay, without his
(Tomas Ang) knowledge and consent; the bank imposed new and additional
stipulations on interest, penalties, services charges and attorney's fees more
onerous than the terms of the notes, without his knowledge and consent, in
the absence of legal and factual basis and in violation of the Usury Law; the
bank caused the inclusion in the promissory notes of stipulations such as
waiver of presentment for payment and notice of dishonor which are against
public policy; and the notes had been impaired since they were never
presented for payment and demands were made only several years after
they fell due when his co-defendant could no longer pay them.
Regarding his counterclaim, Tomas Ang argued that by reason of the bank's
acts or omissions, it should be held liable for the amount of P50,000 for
attorney's fees and expenses of litigation. Furthermore, on his cross-claim
against Antonio Ang Eng Liong, he averred that he should be reimbursed by
his co-defendant any and all sums that he may be adjudged liable to pay,
plus P30,000, P20,000 and P50,000 for moral and exemplary damages, and
attorney's fees, respectively.
In its Reply,9 respondent Bank countered that it is the real party in interest
and is the holder of the notes since the Associated Banking Corporation and
Associated Citizens Bank are its predecessors-in-interest. The fact that
Tomas Ang never received any moneys in consideration of the two (2) loans
and that such was known to the bank are immaterial because, as an
accommodation maker, he is considered as a solidary debtor who is primarily
liable for the payment of the promissory notes. Citing Section 29 of the
Negotiable Instruments Law (NIL), the bank posited that absence or failure of
consideration is not a matter of defense; neither is the fact that the holder
knew him to be only an accommodation party.
Respondent Bank likewise retorted that the promissory notes were

completely filled up at the time of their delivery. Assuming that such was not
the case, Sec. 14 of the NIL provides that the bank has the prima facie
authority to complete the blank form. Moreover, it is presumed that one who
has signed as a maker acted with care and had signed the document with full
knowledge of its content. The bank noted that Tomas Ang is a prominent
businessman in Davao City who has been engaged in the auto parts
business for several years, hence, certainly he is not so nave as to sign the
notes without knowing or bothering to verify the amounts of the loans
covered by them. Further, he is already in estoppel since despite receipt of
several demand letters there was not a single protest raised by him that he
signed for only one note in the amount of P30,000.
It was denied by the bank that there were extensions of time for payment
accorded to Antonio Ang Eng Liong. Granting that such were the case, it said
that the same would not relieve Tomas Ang from liability as he would still be
liable for the whole obligation less the share of his co-debtor who received
the extended term.
Lastly, the bank contended that the provisions on presentment for payment
and notice of dishonor were expressly waived by Tomas Ang and that such
waiver is not against public policy pursuant to Sections 82 (c) and 109 of the
NIL. In fact, there is even no necessity therefor since being a solidary debtor
he is absolutely required to pay and primarily liable on both promissory
notes.
On October 19, 1990, the trial court issued a preliminary pre-trial order
directing the parties to submit their respective pre-trial guide.10 When
Antonio Ang Eng Liong failed to submit his brief, the bank filed an ex-parte
motion to declare him in default.11 Per Order of November 23, 1990, the
court granted the motion and set the ex-parte hearing for the presentation of
the bank's evidence.12 Despite Tomas Ang's motion13 to modify the Order
so as to exclude or cancel the ex-parte hearing based on then Sec. 4, Rule
18 of the old Rules of Court (now Sec. 3[c.], Rule 9 of the Revised Rules on
Civil Procedure), the hearing nonetheless proceeded.14
Eventually, a decision15 was rendered by the trial court on February 21,

1991. For his supposed bad faith and obstinate refusal despite several
demands from the bank, Antonio Ang Eng Liong was ordered to pay the
principal amount of P80,000 plus 14% interest per annum and 2% service
charge per annum. The overdue penalty charge and attorney's fees were,
however, reduced for being excessive, thus:
WHEREFORE, judgment is rendered against defendant Antonio Ang Eng

Liong and in favor of plaintiff, ordering the former to pay the latter:
On the first cause of action:

The bank also asserted that there were no additional or new stipulations
imposed other than those agreed upon. The penalty charge, service charge,
and attorney's fees were reflected in the amendments to the promissory
notes and disclosure statements. Reference to the Usury Law was misplaced
as usury is legally non-existent; at present, interest can be charged
depending on the agreement of the lender and the borrower.
1) the amount of P50,000.00 representing the principal obligation with 14%

interest per annum from June 27, 1983 with 2% service charge and 6%
overdue penalty charges per annum until fully paid;
2) P11,663.89 as accrued service charge; and
3) P34,991.67 as accrued overdue penalty charge.
Ang Eng Liong, upon whom a final and executory judgment had already been
issued.
On the second cause of action:
1) the amount of P50,000.00 (sic) representing the principal account with

14% interest from June 27, 1983 with 2% service charge and 6% overdue
penalty charges per annum until fully paid;
2) P7,088.34 representing accrued service charge;
The court denied the motion as well as the motion for reconsideration
thereon.21 Tomas Ang subsequently filed a petition for certiorari and
prohibition before this Court, which, however, resolved to refer the same to
the Court of Appeals.22 In accordance with the prayer of Tomas Ang, the
appellate court promulgated its Decision on January 29, 1992 in CA G.R. SP
No. 26332, which annulled and set aside the portion of the Order dated
November 23, 1990 setting the ex-parte presentation of the bank's evidence
against Antonio Ang Eng Liong, the Decision dated February 21, 1991
rendered against him based on such evidence, and the Writ of Execution
issued on April 5, 1991.23
3) P21,265.00 as accrued overdue penalty charge;
4) the amount of P10,000.00 as attorney's fees; and
Trial then ensued between the bank and Tomas Ang. Upon the latter's
motion during the pre-trial conference, Antonio Ang Eng Liong was again
declared in default for his failure to answer the cross-claim within the
reglementary period.24
5) the amount of P620.00 as litigation expenses and to pay the costs.

When Tomas Ang was about to present evidence in his behalf, he filed a
Motion for Production of Documents,25 reasoning:
SO ORDERED.16
xxx
The decision became final and executory as no appeal was taken therefrom.
Upon the bank's ex-parte motion, the court accordingly issued a writ of
execution on April 5, 1991.17
Thereafter, on June 3, 1991, the court set the pre-trial conference between
the bank and Tomas Ang,18 who, in turn, filed a Motion to Dismiss19 on the
ground of lack of jurisdiction over the case in view of the alleged finality of the
February 21, 1991 Decision. He contended that Sec. 4, Rule 18 of the old
Rules sanctions only one judgment in case of several defendants, one of
whom is declared in default. Moreover, in his Supplemental Motion to
Dismiss,20 Tomas Ang maintained that he is released from his obligation as
a solidary guarantor and accommodation party because, by the bank's
actions, he is now precluded from asserting his cross-claim against Antonio
2. That corroborative to, and/or preparatory or incident to his testimony[,]

there is [a] need for him to examine original records in the custody and
possession of plaintiff, viz:
a. original Promissory Note (PN for brevity) # DVO-78-382 dated October 3,

1978[;]
b. original of Disclosure Statement in reference to PN # DVO-78-382;
c. original of PN # DVO-78-390 dated October 9, 1978;
d. original of Disclosure Statement in reference to PN # DVO-78-390;
e. Statement or Record of Account with the Associated Banking Corporation

or its successor, of Antonio Ang in CA No. 470 (cf. Exh. O) including bank
records, withdrawal slips, notices, other papers and relevant dates relative to
the overdraft of Antonio Eng Liong in CA No. 470;
f. Loan Applications of Antonio Ang Eng Liong or borrower relative to PN

Nos. DVO-78-382 and DVO-78-390 (supra);
g. Other supporting papers and documents submitted by Antonio Ang Eng

Liong relative to his loan application vis--vis PN. Nos. DVO-78-382 and
DVO-78-390 such as financial statements, income tax returns, etc. as
required by the Central Bank or bank rules and regulations.
3. That the above matters are very material to the defenses of defendant
Tomas Ang, viz:
- the bank is not a holder in due course when it accepted the [PNs] in blank.
- The real borrower is Antonio Ang Eng Liong which fact is known to the
bank.
- That the PAYEE not being a holder in due course and knowing that
defendant Tomas Ang is merely an accommodation party, the latter may
raise against such payee or holder or successor-in-interest (of the notes)
PERSONAL and EQUITABLE DEFENSES such as FRAUD in
INDUCEMENT, DISCHARGE ON NOTE, Application of [Articles] 2079, 2080
and 1249 of the Civil Code, NEGLIGENCE in delaying collection despite Eng
Liong's OVERDRAFT in C.A. No. 470, etc.26
In its Order dated May 16, 1994,27 the court denied the motion stating that
the promissory notes and the disclosure statements have already been
shown to and inspected by Tomas Ang during the trial, as in fact he has
already copies of the same; the Statements or Records of Account of Antonio
Ang Eng Liong in CA No. 470, relative to his overdraft, are immaterial since,
pursuant to the previous ruling of the court, he is being sued for the notes
and not for the overdraft which is personal to Antonio Ang Eng Liong; and
besides its non-existence in the bank's records, there would be legal
obstacle for the production and inspection of the income tax return of Antonio
Ang Eng Liong if done without his consent.
When the motion for reconsideration of the aforesaid Order was denied,
Tomas Ang filed a petition for certiorari and prohibition with application for
preliminary injunction and restraining order before the Court of Appeals
docketed as CA G.R. SP No. 34840.28 On August 17, 1994, however, the
Court of Appeals denied the issuance of a Temporary Restraining Order.29
Meanwhile, notwithstanding its initial rulings that Tomas Ang was deemed to
have waived his right to present evidence for failure to appear during the
pendency of his petition before the Court of Appeals, the trial court decided
to continue with the hearing of the case.30
After the trial, Tomas Ang offered in evidence several documents, which
included a copy of the Trust Agreement between the Republic of the
Philippines and the Asset Privatization Trust, as certified by the notary public,
and news clippings from the Manila Bulletin dated May 18, 1994 and May 30,
1994.31 All the documentary exhibits were admitted for failure of the bank to
submit its comment to the formal offer.32 Thereafter, Tomas Ang elected to
withdraw his petition in CA G.R. SP No. 34840 before the Court of Appeals,
which was then granted.33
On January 5, 1996, the trial court rendered judgment against the bank,
dismissing the complaint for lack of cause of action.34 It held that:
Exh. "9" and its [sub-markings], the Trust Agreement dated 27 February
1987 for the defense shows that: the Associated Bank as of June 30, 1986 is
one of DBP's or Development Bank of the [Philippines'] non-performing
accounts for transfer; on February 27, 1987 through Deeds of Transfer
executed by and between the Philippine National Bank and Development
Bank of the Philippines and the National Government, both financial
institutions assigned, transferred and conveyed their non-performing assets
to the National Government; the National Government in turn and as
TRUSTOR, transferred, conveyed and assigned by way of trust unto the
Asset Privatization Trust said non-performing assets, [which] took title to and
possession of, [to] conserve, provisionally manage and dispose[,] of said
assets identified for privatization or disposition; one of the powers and duties
of the APT with respect to trust properties consisting of receivables is to
handle the administration, collection and enforcement of the receivables; to
bring suit to enforce payment of the obligations or any installment thereof or
to settle or compromise any of such obligations, or any other claim or
demand which the government may have against any person or persons[.]
Respondent Bank then elevated the case to the Court of Appeals. In the
appellant's brief captioned, "ASSOCIATED BANK, Plaintiff-Appellant versus
ANTONIO ANG ENG LIONG and TOMAS ANG, Defendants, TOMAS ANG,
Defendant-Appellee," the following errors were alleged:
I.
THE LOWER COURT ERRED IN NOT HOLDING DEFENDANT ANTONIO

ANG ENG LIONG AND DEFENDANT-APPELLEE TOMAS ANG LIABLE TO
PLAINTIFF-APPELLANT ON THEIR UNPAID LOANS DESPITE THE
LATTER'S
DOCUMENTARY
EXHIBITS
PROVING
THE
SAID
OBLIGATIONS.
II.
The Manila Bulletin news clippings dated May 18, 1994 and May 30, 1994,
Exh. "9-A", "9-B", "9-C", and "9-D", show that the Monetary Board of the
Bangko Sentral ng Pilipinas approved the rehabilitation plan of the
Associated Bank. One main feature of the rehabilitation plan included the
financial assistance for the bank by the Philippine Deposit Insurance
Corporation (PDIC) by way of the purchase of AB Assets worth P1.3945
billion subject to a buy-back arrangement over a 10 year period. The PDIC
had approved of the rehab scheme, which included the purchase of AB's bad
loans worth P1.86 at 25% discount. This will then be paid by AB within a 10year period plus a yield comparable to the prevailing market rates x x x.
Based then on the evidence presented by the defendant Tomas Ang, it would
readily appear that at the time this suit for Sum of Money was filed which was
on August [28], 1990, the notes were held by the Asset Privatization Trust by
virtue of the Deeds of Transfer and Trust Agreement, which was empowered
to bring suit to enforce payment of the obligations. Consequently, defendant
Tomas Ang has sufficiently established that plaintiff at the time this suit was
filed was not the holder of the notes to warrant the dismissal of the
complaint.35
THE LOWER COURT ERRED IN DISMISSING PLAINTIFF-APPELLANT'S

COMPLAINT ON THE BASIS OF NEWSPAPER CLIPPINGS WHICH WERE
COMPLETELY HEARSAY IN CHARACTER AND IMPROPER FOR
JUDICIAL NOTICE.36
The bank stressed that it has established the causes of action outlined in its
Complaint by a preponderance of evidence. As regards the Deed of Transfer
and Trust Agreement, it contended that the same were never authenticated
by any witness in the course of the trial; the Agreement, which was not even
legible, did not mention the promissory notes subject of the Complaint; the
bank is not a party to the Agreement, which showed that it was between the
Government of the Philippines, acting through the Committee on Privatization
represented by the Secretary of Finance as trustor and the Asset
Privatization Trust, which was created by virtue of Proclamation No. 50; and
the Agreement did not reflect the signatures of the contracting parties. Lastly,
the bank averred that the news items appearing in the Manila Bulletin could
not be the subject of judicial notice since they were completely hearsay in
character.37
On October 9, 2000, the Court of Appeals reversed and set aside the trial
court's ruling. The dispositive portion of the Decision38 reads:
WHEREFORE, premises considered, the Decision of the Regional Trial

Court of Davao City, Branch 16, in Civil Case No. 20,299-90 is hereby
REVERSED AND SET ASIDE and another one entered ordering defendantappellee Tomas Ang to pay plaintiff-appellant Associated Bank the following:
1. P50,000.00 representing the principal amount of the loan under PN-No.

DVO-78-382 plus 14% interest thereon per annum computed from January
31, 1979 until the full amount thereof is paid;
2. P30,000.00 representing the principal amount of the loan under PN-No.

DVO-78-390 plus 14% interest thereon per annum computed from December
8, 1978 until the full amount thereof is paid;
All other claims of the plaintiff-appellant are DISMISSED for lack of legal
basis. Defendant-appellee's counterclaim is likewise DISMISSED for lack of
legal and factual bases.
No pronouncement as to costs.
the Deeds of Transfer and Trust Agreement, the Asset Privatization Trust
cannot be declared as the "holder" of the subject promissory notes for the
reason that it is neither the payee or indorsee of the notes in possession
thereof nor is it the bearer of said notes. The Court of Appeals observed that
the bank, as the payee, did not indorse the notes to the Asset Privatization
Trust despite the execution of the Deeds of Transfer and Trust Agreement
and that the notes continued to remain with the bank until the institution of
the collection suit.
With the bank as the "holder" of the promissory notes, the Court of Appeals
held that Tomas Ang is accountable therefor in his capacity as an
accommodation party. Citing Sec. 29 of the NIL, he is liable to the bank in
spite of the latter's knowledge, at the time of taking the notes, that he is only
an accommodation party. Moreover, as a co-maker who agreed to be jointly
and severally liable on the promissory notes, Tomas Ang cannot validly set
up the defense that he did not receive any consideration therefor as the fact
that the loan was granted to the principal debtor already constitutes a
sufficient consideration.
Further, the Court of Appeals agreed with the bank that the experience of
Tomas Ang in business rendered it implausible that he would just sign the
promissory notes as a co-maker without even checking the real amount of
the debt to be incurred, or that he merely acted on the belief that the first loan
application was cancelled. According to the appellate court, it is apparent that
he was negligent in falling for the alibi of Antonio Ang Eng Liong and such
fact would not serve to exonerate him from his responsibility under the notes.
SO ORDERED.39
The appellate court disregarded the bank's first assigned error for being
"irrelevant in the final determination of the case" and found its second
assigned error as "not meritorious." Instead, it posed for resolution the issue
of whether the trial court erred in dismissing the complaint for collection of
sum of money for lack of cause of action as the bank was said to be not the
"holder" of the notes at the time the collection case was filed.
Nonetheless, the Court of Appeals denied the claims of the bank for service,
penalty and overdue charges as well as attorney's fees on the ground that
the promissory notes made no mention of such charges/fees.
In his motion for reconsideration,40 Tomas Ang raised for the first time the
assigned errors as follows:
xxx
In answering the lone issue, the Court of Appeals held that the bank is a
"holder" under Sec. 191 of the NIL. It concluded that despite the execution of
2) Related to the above jurisdictional issues, defendant-appellee Tomas Ang

has recently discovered that upon the filing of the complaint on August 28,
1990, under the jurisdictional rule laid down in BP Blg. 129, appellant bank
fraudulently failed to specify the amount of compounded interest at 14% per
annum, service charges at 2% per annum and overdue penalty charges at
12% per annum in the prayer of the complaint as of the time of its filing,
paying a total of only P640.00(!!!) as filing and court docket fees although the
total sum involved as of that time was P647,566.75 including 20% attorney's
fees. In fact, the stated interest in the body of the complaint alone amount to
P328,373.39 (which is actually compounded and capitalized) in both causes
of action and the total service and overdue penalties and charges and
attorney's fees further amount to P239,193.36 in both causes of action, as of
July 31, 1990, the time of filing of the complaint. Significantly, appellant
fraudulently misled the Court, describing the 14% imposition as interest,
when in fact the same was capitalized as principal by appellant bank every
month to earn more interest, as stated in the notes. In view thereof, the trial
court never acquired jurisdiction over the case and the same may not be now
corrected by the filing of deficiency fees because the causes of action had
already prescribed and more importantly, the jurisdiction of the Municipal
Trial Court had been increased to P100,000.00 in principal claims last March
20, 1999, pursuant to SC Circular No. 21-99, section 5 of RA No. 7691, and
section 31, Book I of the 1987 Administrative Code. In other words, as of
today, jurisdiction over the subject falls within the exclusive jurisdiction of the
MTC, particularly if the bank foregoes capitalization of the stipulated interest.
3) BY FAILING TO GIVE NOTICE OF ITS APPEAL AND APPEAL BRIEF TO

APPELLEE ANG ENG LIONG, THE APPEALED JUDGMENT OF THE
TRIAL COURT WHICH LEFT OUT TOMAS ANG'S CROSS-CLAIM
AGAINST ENG LIONG (BECAUSE IT DISMISSED THE MAIN CLAIM), HAD
LONG BECOME FINAL AND EXECUTORY, AS AGAINST ENG LIONG.
Accordingly, Tomas Ang's right of subrogation against Ang Eng Liong,
expressed in his cross-claim, is now SEVERAL TIMES foreclosed because
of the fault or negligence of appellant bank since 1979 up to its insistence of
an ex-parte trial, and now when it failed to serve notice of appeal and
appellant's brief upon him. Accordingly, appellee Tomas Ang should be
released from his suretyship obligation pursuant to Art. 2080 of the Civil
Code. The above is related to the issues above-stated.
4) This Court may have erred in ADDING or ASSIGNING its own bill of error
for the benefit of appellant bank which defrauded the judiciary by the
payment of deficient docket fees.41
Finding no cogent or compelling reason to disturb the Decision, the Court of

Appeals denied the motion in its Resolution dated December 26, 2000.42
Petitioner now submits the following issues for resolution:
1. Is [A]rticle 2080 of the Civil Code applicable to discharge petitioner Tomas

Ang as accommodation maker or surety because of the failure of [private]
respondent bank to serve its notice of appeal upon the principal debtor,
respondent Eng Liong?
2. Did the trial court have jurisdiction over the case at all?
3. Did the Court of Appeals [commit] error in assigning its own error and
raising its own issue?
4. Are petitioner's other real and personal defenses such as successive

extensions coupled with fraudulent collusion to hide Eng Liong's default, the
payee's grant of additional burdens, coupled with the insolvency of the
principal debtor, and the defense of incomplete but delivered instrument,
meritorious?43
Petitioner allegedly learned after the promulgation of the Court of Appeals'

decision that, pursuant to the parties' agreement on the compounding of
interest with the principal amount (per month in case of default), the interest
on the promissory notes as of July 31, 1990 should have been only
P81,647.22 for PN No. DVO-78-382 (instead of P203,538.98) and
P49,618.33 for PN No. DVO-78-390 (instead of P125,334.41) while the
principal debt as of said date should increase to P647,566.75 (instead of
P539,638.96). He submits that the bank carefully and shrewdly hid the fact
by describing the amounts as interest instead of being part of either the
principal or penalty in order to pay a lesser amount of docket fees. According
to him, the total fees that should have been paid at the time of the filing of the
complaint on August 28, 1990 was P2,216.30 and not P614.00 or a shortage
of 71%. Petitioner contends that the bank may not now pay the deficiency
because the last demand letter sent to him was dated September 9, 1986, or
more than twenty years have elapsed such that prescription had already set
in. Consequently, the bank's claim must be dismissed as the trial court loses
jurisdiction over the case.
Petitioner also argues that the Court of Appeals should not have assigned its
own error and raised it as an issue of the case, contending that no question
should be entertained on appeal unless it has been advanced in the court
below or is within the issues made by the parties in the pleadings. At any
rate, he opines that the appellate court's decision that the bank is the real
party in interest because it is the payee named in the note or the holder
thereof is too simplistic since: (1) the power and control of Asset Privatization
Trust over the bank are clear from the explicit terms of the duly certified trust
documents and deeds of transfer and are confirmed by the newspaper
clippings; (2) even under P.D. No. 902-A or the General Banking Act, where
a corporation or a bank is under receivership, conservation or rehabilitation, it
is only the representative (liquidator, receiver, trustee or conservator) who
may properly act for said entity, and, in this case, the bank was held by Asset
Privatization Trust as trustee; and (3) it is not entirely accurate to say that the
payee who has not indorsed the notes in all cases is the real party in interest
because the rights of the payee may be subject of an assignment of
incorporeal rights under Articles 1624 and 1625 of the Civil Code.
Lastly, petitioner maintains that when respondent Bank served its notice of
appeal and appellant's brief only on him, it rendered the judgment of the trial
court final and executory with respect to Antonio Ang Eng Liong, which, in
effect, released him (Antonio Ang Eng Liong) from any and all liability under
the promissory notes and, thereby, foreclosed petitioner's cross-claims. By
such act, the bank, even if it be the "holder" of the promissory notes,
allegedly discharged a simple contract for the payment of money (Sections
119 [d] and 122, NIL [Act No. 2031]), prevented a surety like petitioner from
being subrogated in the shoes of his principal (Article 2080, Civil Code), and
impaired the notes, producing the effect of payment (Article 1249, Civil
Code).
The petition is unmeritorious.
Procedurally, it is well within the authority of the Court of Appeals to raise, if it

deems proper under the circumstances obtaining, error/s not assigned on an
appealed case. In Mendoza v. Bautista,44 this Court recognized the broad
discretionary power of an appellate court to waive the lack of proper
assignment of errors and to consider errors not assigned, thus:
As a rule, no issue may be raised on appeal unless it has been brought

before the lower tribunal for its consideration. Higher courts are precluded
from entertaining matters neither alleged in the pleadings nor raised during
the proceedings below, but ventilated for the first time only in a motion for
reconsideration or on appeal.
However, as with most procedural rules, this maxim is subject to exceptions.

Indeed, our rules recognize the broad discretionary power of an appellate
court to waive the lack of proper assignment of errors and to consider errors
not assigned. Section 8 of Rule 51 of the Rules of Court provides:
SEC. 8. Questions that may be decided. No error which does not affect
the jurisdiction over the subject matter or the validity of the judgment
appealed from or the proceedings therein will be considered, unless stated in
the assignment of errors, or closely related to or dependent on an assigned
error and properly argued in the brief, save as the court may pass upon plain
errors and clerical errors.
Thus, an appellate court is clothed with ample authority to review rulings

even if they are not assigned as errors in the appeal in these instances: (a)
grounds not assigned as errors but affecting jurisdiction over the subject
matter; (b) matters not assigned as errors on appeal but are evidently plain
or clerical errors within contemplation of law; (c) matters not assigned as
errors on appeal but consideration of which is necessary in arriving at a just
decision and complete resolution of the case or to serve the interests of
justice or to avoid dispensing piecemeal justice; (d) matters not specifically
assigned as errors on appeal but raised in the trial court and are matters of
record having some bearing on the issue submitted which the parties failed
to raise or which the lower court ignored; (e) matters not assigned as errors
on appeal but closely related to an error assigned; and (f) matters not
assigned as errors on appeal but upon which the determination of a question
properly assigned is dependent. (Citations omitted)45
To the Court's mind, even if the Court of Appeals regarded petitioner's two
assigned errors as "irrelevant" and "not meritorious," the issue of whether the
trial court erred in dismissing the complaint for collection of sum of money for
lack of cause of action (on the ground that the bank was not the "holder" of
the notes at the time of the filing of the action) is in reality closely related to
and determinant of the resolution of whether the lower court correctly ruled in
not holding Antonio Ang Eng Liong and petitioner Tomas Ang liable to the
bank on their unpaid loans despite documentary exhibits allegedly proving
their obligations and in dismissing the complaint based on newspaper
clippings. Hence, no error could be ascribed to the Court of Appeals on this
point.
Now, the more relevant question is: who is the real party in interest at the
time of the institution of the complaint, is it the bank or the Asset Privatization
Trust?
To answer the query, a brief history on the creation of the Asset Privatization
Trust is proper.
Taking into account the imperative need of formally launching a program for
the rationalization of the government corporate sector, then President
Corazon C. Aquino issued Proclamation No. 5046 on December 8, 1986. As
one of the twin cornerstones of the program was to establish the privatization
of a good number of government corporations, the proclamation created the
Asset Privatization Trust, which would, for the benefit of the National
Government, take title to and possession of, conserve, provisionally manage
and dispose of transferred assets that were identified for privatization or
disposition.47
In accordance with the provisions of Section 2348 of the proclamation, then

President Aquino subsequently issued Administrative Order No. 14 on
February 3, 1987, which approved the identification of and transfer to the
National Government of certain assets (consisting of loans, equity
investments, accrued interest receivables, acquired assets and other assets)
and liabilities (consisting of deposits, borrowings, other liabilities and
contingent guarantees) of the Development Bank of the Philippines (DBP)
and the Philippine National Bank (PNB). The transfer of assets was
implemented through a Deed of Transfer executed on February 27, 1987
between the National Government, on one hand, and the DBP and PNB, on
the other. In turn, the National Government designated the Asset
Privatization Trust to act as its trustee through a Trust Agreement, whereby
the non-performing accounts of DBP and PNB, including, among others, the
DBP's equity with respondent Bank, were entrusted to the Asset Privatization
Trust.49 As provided for in the Agreement, among the powers and duties of
the Asset Privatization Trust with respect to the trust properties consisting of
receivables was to handle their administration and collection by bringing suit
to enforce payment of the obligations or any installment thereof or settling or
compromising any of such obligations or any other claim or demand which
the Government may have against any person or persons, and to do all acts,
institute all proceedings, and to exercise all other rights, powers, and
privileges of ownership that an absolute owner of the properties would
otherwise have the right to do.50
Incidentally, the existence of the Asset Privatization Trust would have expired
five (5) years from the date of issuance of Proclamation No. 50.51 However,
its original term was extended from December 8, 1991 up to August 31,
1992,52 and again from December 31, 1993 until June 30, 1995,53 and then
from July 1, 1995 up to December 31, 1999,54 and further from January 1,
2000 until December 31, 2000.55 Thenceforth, the Privatization and
Management Office was established and took over, among others, the
powers, duties and functions of the Asset Privatization Trust under the
proclamation.56
Based on the above backdrop, respondent Bank does not appear to be the
real party in interest when it instituted the collection suit on August 28, 1990
against Antonio Ang Eng Liong and petitioner Tomas Ang. At the time the
complaint was filed in the trial court, it was the Asset Privatization Trust
which had the authority to enforce its claims against both debtors. In fact,
during the pre-trial conference, Atty. Roderick Orallo, counsel for the bank,
openly admitted that it was under the trusteeship of the Asset Privatization
Trust.57 The Asset Privatization Trust, which should have been represented
by the Office of the Government Corporate Counsel, had the authority to file
and prosecute the case.
The foregoing notwithstanding, this Court can not, at present, readily

subscribe to petitioner's insistence that the case must be dismissed.
Significantly, it stands without refute, both in the pleadings as well as in the
evidence presented during the trial and up to the time this case reached the
Court, that the issue had been rendered moot with the occurrence of a
supervening event the "buy-back" of the bank by its former owner,
Leonardo Ty, sometime in October 1993. By such re-acquisition from the
Asset Privatization Trust when the case was still pending in the lower court,
the bank reclaimed its real and actual interest over the unpaid promissory
notes; hence, it could rightfully qualify as a "holder"58 thereof under the NIL.
Notably, Section 29 of the NIL defines an accommodation party as a person

"who has signed the instrument as maker, drawer, acceptor, or indorser,
without receiving value therefor, and for the purpose of lending his name to
some other person." As gleaned from the text, an accommodation party is
one who meets all the three requisites, viz: (1) he must be a party to the
instrument, signing as maker, drawer, acceptor, or indorser; (2) he must not
receive value therefor; and (3) he must sign for the purpose of lending his
name or credit to some other person.59 An accommodation party lends his
name to enable the accommodated party to obtain credit or to raise money;
he receives no part of the consideration for the instrument but assumes
liability to the other party/ies thereto.60 The accommodation party is liable on
the instrument to a holder for value even though the holder, at the time of
taking the instrument, knew him or her to be merely an accommodation
party, as if the contract was not for accommodation.61
As petitioner acknowledged it to be, the relation between an accommodation

party and the accommodated party is one of principal and surety the
accommodation party being the surety.62 As such, he is deemed an original
promisor and debtor from the beginning;63 he is considered in law as the
same party as the debtor in relation to whatever is adjudged touching the
obligation of the latter since their liabilities are interwoven as to be
inseparable.64 Although a contract of suretyship is in essence accessory or
collateral to a valid principal obligation, the surety's liability to the creditor is
immediate, primary and absolute; he is directly and equally bound with the
principal.65 As an equivalent of a regular party to the undertaking, a surety
becomes liable to the debt and duty of the principal obligor even without
possessing a direct or personal interest in the obligations nor does he
receive any benefit therefrom.66
Contrary to petitioner's adamant stand, however, Article 208067 of the Civil

Code does not apply in a contract of suretyship.68 Art. 2047 of the Civil Code
states that if a person binds himself solidarily with the principal debtor, the
provisions of Section 4, Chapter 3, Title I, Book IV of the Civil Code must be
observed. Accordingly, Articles 1207 up to 1222 of the Code (on joint and
solidary obligations) shall govern the relationship of petitioner with the bank.
The case of Inciong, Jr. v. CA69 is illuminating:
Petitioner also argues that the dismissal of the complaint against Naybe, the
principal debtor, and against Pantanosas, his co-maker, constituted a release
of his obligation, especially because the dismissal of the case against
Pantanosas was upon the motion of private respondent itself. He cites as
basis for his argument, Article 2080 of the Civil Code which provides that:
"The guarantors, even though they be solidary, are released from their
obligation whenever by come act of the creditor, they cannot be subrogated
to the rights, mortgages, and preferences of the latter."
It is to be noted, however, that petitioner signed the promissory note as a

solidary co-maker and not as a guarantor. This is patent even from the first
sentence of the promissory note which states as follows:
"Ninety one (91) days after date, for value received, I/we, JOINTLY and
SEVERALLY promise to pay to the PHILIPPINE BANK OF
COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines
the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine
Currency, together with interest x x x at the rate of SIXTEEN (16) per cent
per annum until fully paid."
A solidary or joint and several obligation is one in which each debtor is liable
for the entire obligation, and each creditor is entitled to demand the whole
obligation. On the other hand, Article 2047 of the Civil Code states:
"By guaranty a person, called the guarantor, binds himself to the creditor to
fulfill the obligation of the principal debtor in case the latter should fail to do
so.
If a person binds himself solidarily with the principal debtor, the provisions of
Section 4, Chapter 3, Title I of this Book shall be observed. In such a case
the contract is called a suretyship." (Italics supplied.)
While a guarantor may bind himself solidarily with the principal debtor, the
liability of a guarantor is different from that of a solidary debtor. Thus,
Tolentino explains:
"A guarantor who binds himself in solidum with the principal debtor under the
provisions of the second paragraph does not become a solidary co-debtor to
all intents and purposes. There is a difference between a solidary co-debtor,
and a fiador in solidum (surety). The later, outside of the liability he assumes
to pay the debt before the property of the principal debtor has been
exhausted, retains all the other rights, actions and benefits which pertain to
him by reason of rights of the fiansa; while a solidary co-debtor has no other
rights than those bestowed upon him in Section 4, Chapter 3, title I, Book IV
of the Civil Code."
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint
and several obligations. Under Art. 1207 thereof, when there are two or more
debtors in one and the same obligation, the presumption is that obligation is
joint so that each of the debtors is liable only for a proportionate part of the
debt. There is a solidarily liability only when the obligation expressly so
states, when the law so provides or when the nature of the obligation so
requires.
Because the promissory note involved in this case expressly states that the
three signatories therein are jointly and severally liable, any one, some or all
of them may be proceeded against for the entire obligation. The choice is left
to the solidary creditor to determine against whom he will enforce collection.
(Citations omitted)70
In the instant case, petitioner agreed to be "jointly and severally" liable under
the two promissory notes that he co-signed with Antonio Ang Eng Liong as
the principal debtor. This being so, it is completely immaterial if the bank
would opt to proceed only against petitioner or Antonio Ang Eng Liong or
both of them since the law confers upon the creditor the prerogative to
choose whether to enforce the entire obligation against any one, some or all
of the debtors. Nonetheless, petitioner, as an accommodation party, may
seek reimbursement from Antonio Ang Eng Liong, being the party
accommodated.71
It is plainly mistaken for petitioner to say that just because the bank failed to
serve the notice of appeal and appellant's brief to Antonio Ang Eng Liong,
the trial court's judgment, in effect, became final and executory as against
the latter and, thereby, bars his (petitioner's) cross-claims against him: First,
although no notice of appeal and appellant's brief were served to Antonio
Ang Eng Liong, he was nonetheless impleaded in the case since his name
appeared in the caption of both the notice and the brief as one of the
defendants-appellees;72 Second, despite including in the caption of the
appellee's brief his co-debtor as one of the defendants-appellees, petitioner
did not also serve him a copy thereof;73 Third, in the caption of the Court of
Appeals' decision, Antonio Ang Eng Liong was expressly named as one of
the defendants-appellees;74 and Fourth, it was only in his motion for
reconsideration from the adverse judgment of the Court of Appeals that
petitioner belatedly chose to serve notice to the counsel of his co-defendantappellee.75
Likewise, this Court rejects the contention of Antonio Ang Eng Liong, in his
"special appearance" through counsel, that the Court of Appeals, much less
this Court, already lacked jurisdiction over his person or over the subject
matter relating to him because he was not a party in CA-G.R. CV No. 53413.
Stress must be laid of the fact that he had twice put himself in default one,
in not filing a pre-trial brief and another, in not filing his answer to petitioner's
cross-claims. As a matter of course, Antonio Ang Eng Liong, being a party
declared in default, already waived his right to take part in the trial
proceedings and had to contend with the judgment rendered by the court
based on the evidence presented by the bank and petitioner. Moreover, even
without considering these default judgments, Antonio Ang Eng Liong even
categorically admitted having secured a loan totaling P80,000. In his Answer
to the complaint, he did not deny such liability but merely pleaded that the
bank "be ordered to submit a more reasonable computation" instead of
collecting excessive interest, penalty charges, and attorney's fees. For failing
to tender an issue and in not denying the material allegations stated in the
complaint, a judgment on the pleadings76 would have also been proper
since not a single issue was generated by the Answer he filed.
As the promissory notes were not discharged or impaired through any act or
omission of the bank, Sections 119 (d)77 and 12278 of the NIL as well as
Art. 124979 of the Civil Code would necessarily find no application. Again,
neither was petitioner's right of reimbursement barred nor was the bank's
right to proceed against Antonio Ang Eng Liong expressly renounced by the
omission to serve notice of appeal and appellant's brief to a party already
declared in default.
Consequently, in issuing the two promissory notes, petitioner as

accommodating party warranted to the holder in due course that he would
pay the same according to its tenor.80 It is no defense to state on his part
that he did not receive any value therefor81 because the phrase "without
receiving value therefor" used in Sec. 29 of the NIL means "without receiving
value by virtue of the instrument" and not as it is apparently supposed to
mean, "without receiving payment for lending his name."82 Stated differently,
when a third person advances the face value of the note to the
accommodated party at the time of its creation, the consideration for the note
as regards its maker is the money advanced to the accommodated party. It is
enough that value was given for the note at the time of its creation.83 As in
the instant case, a sum of money was received by virtue of the notes, hence,
it is immaterial so far as the bank is concerned whether one of the signers,
particularly petitioner, has or has not received anything in payment of the use
of his name.84
Under the law, upon the maturity of the note, a surety may pay the debt,
demand the collateral security, if there be any, and dispose of it to his
benefit, or, if applicable, subrogate himself in the place of the creditor with
the right to enforce the guaranty against the other signers of the note for the
reimbursement of what he is entitled to recover from them.85 Regrettably,
none of these were prudently done by petitioner. When he was first notified
by the bank sometime in 1982 regarding his accountabilities under the
promissory notes, he lackadaisically relied on Antonio Ang Eng Liong, who
represented that he would take care of the matter, instead of directly
communicating with the bank for its settlement.86 Thus, petitioner cannot
now claim that he was prejudiced by the supposed "extension of time" given
by the bank to his co-debtor.
Furthermore, since the liability of an accommodation party remains not only

primary but also unconditional to a holder for value, even if the
accommodated party receives an extension of the period for payment without
the consent of the accommodation party, the latter is still liable for the whole
obligation and such extension does not release him because as far as a
holder for value is concerned, he is a solidary co-debtor.87 In Clark v.
Sellner,88 this Court held:
x x x The mere delay of the creditor in enforcing the guaranty has not by any
means impaired his action against the defendant. It should not be lost sight
of that the defendant's signature on the note is an assurance to the creditor
that the collateral guaranty will remain good, and that otherwise, he, the
defendant, will be personally responsible for the payment.
True, that if the creditor had done any act whereby the guaranty was
impaired in its value, or discharged, such an act would have wholly or
partially released the surety; but it must be born in mind that it is a
recognized doctrine in the matter of suretyship that with respect to the surety,
the creditor is under no obligation to display any diligence in the enforcement
of his rights as a creditor. His mere inaction indulgence, passiveness, or
delay in proceeding against the principal debtor, or the fact that he did not
enforce the guaranty or apply on the payment of such funds as were
available, constitute no defense at all for the surety, unless the contract
expressly requires diligence and promptness on the part of the creditor,
which is not the case in the present action. There is in some decisions a
tendency toward holding that the creditor's laches may discharge the surety,
meaning by laches a negligent forbearance. This theory, however, is not
generally accepted and the courts almost universally consider it essentially
inconsistent with the relation of the parties to the note. (21 R.C.L., 10321034)89
Neither can petitioner benefit from the alleged "insolvency" of Antonio Ang
Eng Liong for want of clear and convincing evidence proving the same.
Assuming it to be true, he also did not exercise diligence in demanding
security to protect himself from the danger thereof in the event that he
(petitioner) would eventually be sued by the bank. Further, whether petitioner

may or may not obtain security from Antonio Ang Eng Liong cannot in any
manner affect his liability to the bank; the said remedy is a matter of concern
exclusively between themselves as accommodation party and
accommodated party. The fact that petitioner stands only as a surety in
relation to Antonio Ang Eng Liong is immaterial to the claim of the bank and
does not a whit diminish nor defeat the rights of the latter as a holder for
value. To sanction his theory is to give unwarranted legal recognition to the
patent absurdity of a situation where a co-maker, when sued on an
instrument by a holder in due course and for value, can escape liability by the
convenient expedient of interposing the defense that he is a merely an
accommodation party.90
In sum, as regards the other issues and errors alleged in this petition, the
Court notes that these were the very same questions of fact raised on appeal
before the Court of Appeals, although at times couched in different terms and
explained more lengthily in the petition. Suffice it to say that the same, being
factual, have been satisfactorily passed upon and considered both by the trial
and appellate courts. It is doctrinal that only errors of law and not of fact are
reviewable by this Court in petitions for review on certiorari under Rule 45 of
the Rules of Court. Save for the most cogent and compelling reason, it is not
our function under the rule to examine, evaluate or weigh the probative value
of the evidence presented by the parties all over again.91

SUPREME COURT
Manila
SECOND DIVISION
G. R. No. 76431
October 16, 1989
FORTUNE MOTORS, (PHILS.) INC., petitioner,

vs.
THE HONORABLE COURT OF APPEALS, METROPOLITAN BANK and
TRUST COMPANY, respondents.
Quirante & Associates Law Office for petitioner.
Bautista, Cruz & Associates Law Offices for private respondent.

WHEREFORE, the October 9, 2000 Decision and December 26, 2000
Resolution of the Court of Appeals in CA-G.R. CV No. 53413 are
AFFIRMED. The petition is DENIED for lack of merit.
No costs.
PARAS, J.:
SO ORDERED.
This is a petition for review on certiorari seeking the reversal of: (a) the July
30, 1986 decision of the Court of Appeals in AC-G.R. SP No. 09255 entitled
"Metropolitan Bank & Trust Co. v. Hon. Herminio C. Mariano, et al."
dismissing Civil Case No. 8533218 entitled "Fortune Motors (Phils.) Inc. v.
Metropolitan Bank & Trust Co." filed in the Regional Trial Court of Manila,
Branch IV for improper venue and (b) the resolution dated October 30, 1986
denying petitioner's motion for reconsideration.
The undisputed facts of the case are as follows:
On March 29,1982 up to January 6,1984, private respondent Metropolitan

Bank extended various loans to petitioner Fortune Motors in the total sum of
P32,500,000.00 (according to the borrower; or P34,150,000.00 according to
the Bank) which loan was secured by a real estate mortgage on the Fortune
building and lot in Makati, Rizal. (Rollo, pp. 60-62)
Due to financial difficulties and the onslaught of economic recession, the

petitioner was not able to pay the loan which became due. (Rollo, p. 62)
For failure of the petitioner to pay the loans, the respondent bank initiated
extrajudicial foreclosure proceedings. After notices were served, posted, and
published, the mortgaged property was sold at public auction for the price of
P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo, p. 11)
The sheriff's certificate of sale was registered on October 24, 1984 with the
one-year redemption period to expire on October 24,1985. (Rollo, p. 12)
On October 21, 1985, three days before the expiration of the redemption
period, petitioner Fortune Motors filed a complaint for annulment of the
extrajudicial foreclosure sale alleging that the foreclosure was premature
because its obligation to the Bank was not yet due, the publication of the
notice of sale was incomplete, there was no public auction, and the price for
which the property was sold was "shockingly low". (Rollo, pp. 60-68)
Before summons could be served private respondent Bank filed a motion to

dismiss the complaint on the ground that the venue of the action was
improperly laid in Manila for the realty covered by the real estate mortgage is
situated in Makati, therefore the action to annul the foreclosure sale should
be filed in the Regional Trial Court of Makati. (Rollo, pp. 67-71-A )
The motion was opposed by petitioner Fortune Motors alleging that its action
"is a personal action" and that "the issue is the validity of the extrajudicial
foreclosure proceedings" so that it may have a new one year period to
redeem. (Rollo, pp. 72-73)
On January 8, 1986 an order was issued by the lower court reserving the
resolution of the Bank's motion to dismiss until after the trial on the merits as
the grounds relied upon by the defendant were not clear and indubitable.
(Rollo, p. 81)
The Bank filed a motion for reconsideration of the order dated January 8,
1986 but it was denied by the lower court in its order dated May 28, 1986.
(Rollo, Annex "L" pp. 93-96; Annex "N" p. 99)
On June 11, 1986 the respondent Bank filed a petition for certiorari and
prohibition in the Court of Appeals. (Rollo, Annex "O" pp. 100-115)
And on July 30, 1986, a decision was issued by the Court of Appeals, the
dispositive part of which reads as follows:
WHEREFORE, the petition for certiorari and prohibition is granted. The

complaint in the Civil Case No. 85-33218 is dismissed without prejudice to its
being filed in the proper venue. Costs against the private respondent.
SO ORDERED. (Rollo, p. 15)
A motion for reconsideration was filed on August 11, 1986 on the said
decision and on October 30, 1986 a resolution was issued denying such
motion for reconsideration. (Rollo, Annex "O" pp. 121-123; Annex "S" p. 129)
Hence, the petition for review on certiorari.
On June 10, 1987 the Court gave due course to the petition, required the
parties to file their respective memoranda within twenty (20) days from the
notice hereof, and pay deposit for costs in the amount of P80.40.
An action for the annulment or rescission of a sale of real property is a real

action. Its prime objective is to recover said real property. (Gavieres v.
Sanchez, 94 Phil. 760,1954)
Both parties have filed their respective memoranda, and the case was
submitted for Court's resolution in the resolution dated December 14, 1987.
(Rollo,Metrobank's Memorandum pp. 45-59; petitioner's memorandum
pp.130-136; Res. p. 138)
An action to annul a real estate mortgage foreclosure sale is no different from

an action to annul a private sale of real property. (Munoz v. Llamas, 87 Phil.
737,1950)
The only issue in this case is whether petitioner's action for annulment of the
real estate mortgage extrajudicial foreclosure sale of Fortune Building is a
personal action or a real action for venue purposes.
In a real action, the plaintiff seeks the recovery of real property, or as

indicated in Sec. 2 (a) of Rule 4, a real action is an action affecting title to
real property, or for the recovery of possession, or for the partition or
condemnation of, or foreclosure of a mortgage on real property. (Comments
on the Rules of Court by Moran, Vol. 1, p. 122)
Real actions or actions affecting title to, or for the recovery of possession, or
for the partition or condemnation of, or foreclosure of mortgage on real
property, must be instituted in the Court of First Instance of the province
where the property or any part thereof lies. (Enriquez v. Macadaeg, 84 Phil.
674,1949; Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957)
Personal actions upon the other hand, may be instituted in the Court of First
Instance where the defendant or any of the defendants resides or may be
found, or where the plaintiff or any of the plaintiffs resides, at the election of
the plaintiff (Sec. 1, Rule 4, Revised Rules of Court).
A prayer for annulment or rescission of contract does not operate to efface

the true objectives and nature of the action which is to recover real property.
(Inton, et al., v. Quintan, 81 Phil. 97, 1948)
While it is true that petitioner does not directly seek the recovery of title or
possession of the property in question, his action for annulment of sale and
his claim for damages are closely intertwined with the issue of ownership of
the building which, under the law, is considered immovable property, the
recovery of which is petitioner's primary objective. The prevalent doctrine is
that an action for the annulment or rescission of a sale of real property does
not operate to efface the fundamental and prime objective and nature of the
case, which is to recover said real property. It is a real action. Respondent
Court, therefore, did not err in dismissing the case on the ground of improper
venue (Sec. 2, Rule 4) which was timely raised (Sec. 1, Rule 16). (Punzalan,
Jr. v. Vda. de Lacsamana, 121 SCRA 336, [1983]).
Thus, as aptly decided by the Court of Appeals in a decision penned by then

Court of Appeals Associate Justice now Associate Justice of the Supreme
Court Carolina C. Grio-Aquino, the pertinent portion reads: "Since an
extrajudicial foreclosure of real property results in a conveyance of the title of
the property sold to the highest bidder at the sale, an action to annul the
foreclosure sale is necessarily an action affecting the title of the property
sold. It is therefore a real action which should be commenced and tried in the
province where the property or part thereof lies."
PREMISES CONSIDERED, the instant petition is DENIED for lack of merit

and the assailed decision of the respondent Court of Appeals is AFFIRMED.
SO ORDERED.
It appears that on June 22, 1963, the New Cagayan Grocery filed a
complaint against the Clavecilla Radio System alleging, in effect, that on
March 12, 1963, the following message, addressed to the former, was filed at
the latter's Bacolod Branch Office for transmittal thru its branch office at
Cagayan de Oro:
SUPREME COURT
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
Manila
REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF
AGREEABLE SHALL SHIP LATER REPLY POHANG
EN BANC
G.R. No. L-22238
February 18, 1967
CLAVECILLIA RADIO SYSTEM, petitioner-appellant,

vs.
HON. AGUSTIN ANTILLON, as City Judge of the Municipal Court of
Cagayan de Oro City
and NEW CAGAYAN GROCERY, respondents-appellees.
B. C. Padua for petitioner and appellant.

Pablo S. Reyes for respondents and appellees.
REGALA, J.:
This is an appeal from an order of the Court of First Instance of Misamis

Oriental dismissing the petition of the Clavecilla Radio System to prohibit the
City Judge of Cagayan de Oro from taking cognizance of Civil Case No.
1048 for damages.
The Cagayan de Oro branch office having received the said message
omitted, in delivering the same to the New Cagayan Grocery, the word
"NOT" between the words "WASHED" and "AVAILABLE," thus changing
entirely the contents and purport of the same and causing the said
addressee to suffer damages. After service of summons, the Clavecilla Radio
System filed a motion to dismiss the complaint on the grounds that it states
no cause of action and that the venue is improperly laid. The New Cagayan
Grocery interposed an opposition to which the Clavecilla Radio System filed
its rejoinder. Thereafter, the City Judge, on September 18, 1963, denied the
motion to dismiss for lack of merit and set the case for hearing.1wph1.t
Hence, the Clavecilla Radio System filed a petition for prohibition with
preliminary injunction with the Court of First Instance praying that the City
Judge, Honorable Agustin Antillon, be enjoined from further proceeding with
the case on the ground of improper venue. The respondents filed a motion to
dismiss the petition but this was opposed by the petitioner. Later, the motion
was submitted for resolution on the pleadings.
In dismissing the case, the lower court held that the Clavecilla Radio System
may be sued either in Manila where it has its principal office or in Cagayan
de Oro City where it may be served, as in fact it was served, with summons
through the Manager of its branch office in said city. In other words, the court
upheld the authority of the city court to take cognizance of the
case.1wph1.t
In appealing, the Clavecilla Radio System contends that the suit against it
should be filed in Manila where it holds its principal office.
The order appealed from is therefore reversed, but without prejudice to the
filing of the action in Which the venue shall be laid properly. With costs
against the respondents-appellees.
It is clear that the case for damages filed with the city court is based upon tort
and not upon a written contract. Section 1 of Rule 4 of the New Rules of
Court, governing venue of actions in inferior courts, provides in its paragraph
(b) (3) that when "the action is not upon a written contract, then in the
municipality where the defendant or any of the defendants resides or may be
served with summons." (Emphasis supplied)
Settled is the principle in corporation law that the residence of a corporation

is the place where its principal office is established. Since it is not disputed
that the Clavecilla Radio System has its principal office in Manila, it follows
that the suit against it may properly be filed in the City of Manila.

SUPREME COURT
Manila
The appellee maintain, however, that with the filing of the action in Cagayan
de Oro City, venue was properly laid on the principle that the appellant may
also be served with summons in that city where it maintains a branch office.
This Court has already held in the case of Cohen vs. Benguet Commercial
Co., Ltd., 34 Phil. 526; that the term "may be served with summons" does not
apply when the defendant resides in the Philippines for, in such case, he may
be sued only in the municipality of his residence, regardless of the place
where he may be found and served with summons. As any other corporation,
the Clavecilla Radio System maintains a residence which is Manila in this
case, and a person can have only one residence at a time (See Alcantara vs.
Secretary of the Interior, 61 Phil. 459; Evangelists vs. Santos, 86 Phil. 387).
The fact that it maintains branch offices in some parts of the country does not
mean that it can be sued in any of these places. To allow an action to be
instituted in any place where a corporate entity has its branch offices would
create confusion and work untold inconvenience to the corporation.
It is important to remember, as was stated by this Court in Evangelista vs.

Santos, et al., supra, that the laying of the venue of an action is not left to
plaintiff's caprice because the matter is regulated by the Rules of Court.
Applying the provision of the Rules of Court, the venue in this case was
improperly laid.
FIRST DIVISION
G.R. No. 104175
June 25, 1993
YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA, petitioners,

vs.
THE HONORABLE COURT OF APPEALS (THIRTEENTH DIVISION) AND
GEORGE CHIONG ROXAS, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioners.
Antonio Nuyles for private respondent.
QUIASON, J.:
Petitioners seek to set aside the decision of respondent Court of Appeals in

CA-G.R. SP No. 25237, which reversed the Order dated February 8, 1991
issued by the Regional Trial Court, Branch 11, Cebu City in Civil Case No.
CEB 6967. The order of the trial court denied the motion to dismiss filed by
respondent George C. Roxas of the complaint for collection filed by
petitioners.
petitioners the sum of P3,400,00.00 or that full control of the three markets
be turned over to YASCO and Garcia. The complaint also prayed for the
forfeiture of the partial payment of P4,600,000.00 and the payment of
attorney's fees and costs (Rollo, p. 290).
Roxas filed two motions for extension of time to submit his answer. But
despite said motion, he failed to do so causing petitioners to file a motion to
have him declared in default. Roxas then filed, through a new counsel, a third
motion for extension of time to submit a responsive pleading.
On August 19, 1988, the trial court declared Roxas in default. The order of
default was, however, lifted upon motion of Roxas.
It appears that sometime on October 28, 1987, Young Auto Supply Co. Inc.
(YASCO) represented by Nemesio Garcia, its president, Nelson Garcia and
Vicente Sy, sold all of their shares of stock in Consolidated Marketing &
Development Corporation (CMDC) to Roxas. The purchase price was
P8,000,000.00 payable as follows: a downpayment of P4,000,000.00 and the
balance of P4,000,000.00 in four post dated checks of P1,000,000.00 each.
Immediately after the execution of the agreement, Roxas took full control of
the four markets of CMDC. However, the vendors held on to the stock
certificates of CMDC as security pending full payment of the balance of the
purchase price.
The first check of P4,000,000.00, representing the down-payment, was

honored by the drawee bank but the four other checks representing the
balance of P4,000,000.00 were dishonored. In the meantime, Roxas sold
one of the markets to a third party. Out of the proceeds of the sale, YASCO
received P600,000.00, leaving a balance of P3,400,000.00 (Rollo, p. 176).
Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and
title to the proceeds of the sale of the CMDC shares to Nemesio Garcia.
On June 10, 1988, petitioners filed a complaint against Roxas in the Regional
Trial Court, Branch 11, Cebu City, praying that Roxas be ordered to pay
On August 22, 1988, Roxas filed a motion to dismiss on the grounds that:
1.
The complaint did not state a cause of action due to non-joinder of
indispensable parties;
2.
The claim or demand set forth in the complaint had been waived,
abandoned or otherwise extinguished; and
3.
The venue was improperly laid (Rollo, p. 299).
After a hearing, wherein testimonial and documentary evidence were

presented by both parties, the trial court in an Order dated February 8, 1991
denied Roxas' motion to dismiss. After receiving said order, Roxas filed
another motion for extension of time to submit his answer. He also filed a
motion for reconsideration, which the trial court denied in its Order dated
April 10, 1991 for being pro-forma (Rollo, p. 17). Roxas was again declared
in default, on the ground that his motion for reconsideration did not toll the
running of the period to file his answer.
On May 3, 1991, Roxas filed an unverified Motion to Lift the Order of Default
which was not accompanied with the required affidavit or merit. But without
waiting for the resolution of the motion, he filed a petition for certiorari with
the Court of Appeals.
by petitioners to believe that their residence is in Pasay City and that he had
relied upon those representations (Decision, p. 12, Rollo, p. 47).
The Court of Appeals erred in holding that the venue was improperly laid in
Cebu City.
The Court of Appeals sustained the findings of the trial court with regard to
the first two grounds raised in the motion to dismiss but ordered the dismissal
of the complaint on the ground of improper venue (Rollo, p. 49).
A subsequent motion for reconsideration by petitioner was to no avail.
Petitioners now come before us, alleging that the Court of Appeals
erred in:
1.
holding the venue should be in Pasay City, and not in Cebu City
(where both petitioners/plaintiffs are residents;
In the Regional Trial Courts, all personal actions are commenced and tried in
the province or city where the defendant or any of the defendants resides or
may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff [Sec. 2(b) Rule 4, Revised Rules of Court].
There are two plaintiffs in the case at bench: a natural person and a domestic
corporation. Both plaintiffs aver in their complaint that they are residents of
Cebu City, thus:
1.1.
Plaintiff Young Auto Supply Co., Inc., ("YASCO") is a domestic
corporation duly organized and existing under Philippine laws with principal
place of business at M. J. Cuenco Avenue, Cebu City. It also has a branch
office at 1708 Dominga Street, Pasay City, Metro Manila.
2.
not finding that Roxas is estopped from questioning the choice of
venue (Rollo, p. 19).
The petition is meritorious.
In holding that the venue was improperly laid in Cebu City, the Court of
Appeals relied on the address of YASCO, as appearing in the Deed of Sale
dated October 28, 1987, which is "No. 1708 Dominga Street, Pasay City."
This was the same address written in YASCO's letters and several
commercial documents in the possession of Roxas (Decision, p. 12; Rollo, p.
48).
In the case of Garcia, the Court of Appeals said that he gave Pasay City as
his address in three letters which he sent to Roxas' brothers and sisters
(Decision, p. 12; Rollo, p. 47). The appellate court held that Roxas was led
Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and with
business address at Young Auto Supply Co., Inc., M. J. Cuenco Avenue,
Cebu City. . . . (Complaint, p. 1; Rollo, p. 81).
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
THIRD That the place where the principal office of the corporation is to be
established or located is at Cebu City, Philippines (as amended on
December 20, 1980 and further amended on December 20, 1984) (Rollo, p.
273).
A corporation has no residence in the same sense in which this term is

applied to a natural person. But for practical purposes, a corporation is in a
metaphysical sense a resident of the place where its principal office is

located as stated in the articles of incorporation (Cohen v. Benguet
Commercial Co., Ltd., 34 Phil. 256 [1916] Clavecilla Radio System v.
Antillon, 19 SCRA 379 [1967]). The Corporation Code precisely requires
each corporation to specify in its articles of incorporation the "place where
the principal office of the corporation is to be located which must be within
the Philippines" (Sec. 14 [3]). The purpose of this requirement is to fix the
residence of a corporation in a definite place, instead of allowing it to be
ambulatory.
In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court

explained why actions cannot be filed against a corporation in any place
where the corporation maintains its branch offices. The Court ruled that to
allow an action to be instituted in any place where the corporation has branch
offices, would create confusion and work untold inconvenience to said entity.
By the same token, a corporation cannot be allowed to file personal actions
in a place other than its principal place of business unless such a place is
also the residence of a co-plaintiff or a defendant.

SUPREME COURT
Manila
EN BANC
G.R. No. L-17699
March 30, 1962
DR. ANTONIO A. LIZARES, INC., petitioner,

vs.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the
venue on the ground that its principal place of business was in Cebu City,
Roxas could argue that YASCO was in estoppel because it misled Roxas to
believe that Pasay City was its principal place of business. But this is not the
case before us.
HON. HERMOGENES CALUAG, as Judge of the Court of First Instance of

Quezon City,
and FLAVIANO CACNIO, respondents.
Ramon C. Aquino for petitioner.

With the finding that the residence of YASCO for purposes of venue is in
Cebu City, where its principal place of business is located, it becomes
unnecessary to decide whether Garcia is also a resident of Cebu City and
whether Roxas was in estoppel from questioning the choice of Cebu City as
the venue.
WHEREFORE, the petition is GRANTED. The decision of the Court of

Appeals appealed from is SET ASIDE and the Order dated February 8, 1991
of the Regional Trial Court is REINSTATED.
SO ORDERED.
Paulino Carreon for respondents.
CONCEPCION, J.:
Appeal by certiorari from a decision of the Court of Appeals dismissing the

petition of Dr. Antonio A. Lizares & Co., Inc., for a writ of prohibition, with
costs against said petitioner.
On or about June 14, 1960, Flaviano Cacnio instituted Civil Case No. Q-5197
of the Court of First Instance of Rizal, Quezon City Branch, against said
petitioner. In his complaint, Cacnio alleged that on April 20, 1955, he bought
from petitioner, on installment, Lot 4, Block 1 of the Sinkang Subdivision in
Bacolod City, making therefor a downpayment of P1,206, the balance of
P10,858 to be paid in ten (10) yearly installments of P1,085.80 each, with
interest thereon at the rate of 6% per annum; that on March 25, 1960, Cacnio
received from petitioner a letter demanding payment of P7,324.69,
representing arrears in the payment of installments up to April 20, 1960, plus
"regular and overdue" interest, as well as "land taxes up to 70% of 1960";
that the sum then due from Cacnio by way of arrears amounted only to
P5,824.69, he having paid P1,500 to petitioner "sometime in 1958"; that in
view of the aforementioned demand of petitioner, Cacnio sent thereto a
check for P5,824.69, dated May 26, 1960, drawn by one Antonino Bernardo
in favor of said petitioner, in payment of the amount due from Cacnio by way
of arrears; that "without legal and equitable grounds" therefor, petitioner
returned said check and "refused the tender of payment" aforementioned;
that by reason of said illegal act of petitioner, Cacnio is entitled to
compensatory damages in the sum of P5,000, plus P2,000 by way of
attorney's fees, Cacnio having been constrained to engage the services of
counsel and bring the action; and that petitioner "is doing threatens, or is
about to do, or is procuring or suffering to be done some act in violation of"
Cacnio's rights respecting the subject of the action, viz. the repossession of
the lot bought by" the latter, who, accordingly, prayed that petitioner be
ordered "to accept the payment being made" by him (Cacnio) and to pay him
P5,000 as compensatory damages and P2,000 as attorney's fees, and that,
upon the filing of a bond to be fixed by the court, a writ of preliminary
injunction enjoining petitioner and its agents or representatives from
repossessing the lot adverted to above be issued. Said writ of preliminary
injunction was issued on June 16, 1960.
On July 5, 1960, petitioner moved to dismiss the complaint upon the ground
that "venue is improperly laid," for the action affects the title to or possession
of real property located in Bacolod City, which was the subject matter of a
contract, between petitioner and Cacnio, made in said City. The motion
having been denied by the Court of First Instance of Rizal, Quezon City
Branch, by an order of July 9, 1960, upon the ground that the action was in
personam, petitioner filed with the Court of Appeals a petition, which was
docketed as Civil Case CA-G.R. No. 28013-R, praying that said order be set
aside and that a writ of prohibition be issued commanding respondent Hon.
Hermogenes Caluag, as Judge of said Court, to desist from taking
cognizance of said Civil Case No. Q-5197. In due course, the Court of
Appeals rendered a decision on October 27, 1960, dismissing said petition.
Hence, this appeal by certiorari taken by petitioner herein.
The issue is whether or not the main case falls under section 3 of Rule 5 of
the Rules of Court, reading:
"Actions affecting title to, or for recovery of possession, or for partition or

condemnation of, or foreclosure of mortgage on, real property, shall be
commenced and tried in the province where the property or any part thereof
lies."
The Court of Appeals and the Court of First Instance of Rizal, Quezon City
Branch, held that Civil Case No. Q-5197 of the latter court is an action in
personam, and that, as such, it does not fall within the purview of said
section 3, and was properly instituted in the court of first instance of the
province in which Cacnio, as plaintiff in said case, resided, pursuant to
section 1 of said rule 5.
We are unable to share such view. Although the immediate remedy sought
by Cacnio is to compel petitioner to accept the tender of payment allegedly
made by the former, it is obvious that this relief is merely the first step to
establish Cacnio's title to the real property adverted to above. Moreover,
Cacnio's complaint is a means resorted to by him in order that he could
retain the possession of said property. In short, venue in the main case was
improperly laid and the Court of First Instance of Rizal, Quezon City Branch,
should have granted the motion to dismiss. 1wph1.t
WHEREFORE, the decision appealed from is hereby reversed and another

one shall be entered directing respondent Judge to desist from taking further
cognizance of Civil Case No. Q-5197 of said court, with costs against
respondent Flaviano Cacnio. It is so ordered.
SUPREME COURT
An action for damages was filed by private respondent Beverly Tan against
herein petitioners Patria Esuerte and Herminia Jayme with the Court of First
Instance (now Regional Trial Court) of Cebu and docketed as Civil Case No.
R-17584. The claim for damages arose from an incident involving the parties
and summarized by the Court of Appeals, as follows:
Manila
FIRST DIVISION
G.R. No. L-53485
February 6, 1991
PATRIA ESUERTE and HERMINIA JAYME, petitioners,

vs.
HON. COURT OF APPEALS (Eleventh Division), HON. RAFAEL T.
MENDOZA, Judge, Branch VI, Court of First Instance of Cebu and MA.
BEVERLY TAN, respondents.
Romeo B. Esuerte for petitioners.
Eleno V. Andales & Sisinio M. Andales for private respondent.
MEDIALDEA, J.:p
This petition for certiorari with a prayer for preliminary injunction seeks to set
aside the decision of the Court of Appeals in CA G.R. No. SP-08999-R,
involving the same parties.
. . . that on September 22, 23 and 27, 1978, private respondent Ma. Beverly
Tan, a Junior Resident Physician of Corazon Locsin-Montelibano Memorial
Hospital, Bacolod City, without any justifiable reason shouted at, humiliated
and insulted the petitioner, Patria Esuerte, Head Nurse, Medicare
Department of the said hospital and as a result of the said incident, said
petitioner complained to the Chief of the Hospital, Dr. Teodoro P. Motus, in
writing. The other petitioner, Herminia Jayme, who was one of those who
were present at the time of the incident also sent a letter to the Chief of the
Hospital, Dr. Teodoro Motus, informing the latter of what she had witnessed.
As a result thereof, private respondent was advised to explain in writing by
the Chief of the Hospital, but private respondent instead of explaining only
her side of the incident also complained against the petitioners. The
Discipline and Grievance Committee, Corazon Locsin-Montelibano Memorial
Hospital, conducted a fact-finding investigation and later, the Chief of the
Hospital, Dr. Teodoro P. Motus, issued a resolution dated November 8, 1978,
transmitting the records of the case to the Regional Health Office, No. 6,
Jaro, Iloilo City for appropriate action; . . . . (pp. 91-92, Rollo)
Esuerte and Jayme filed a motion to dismiss the complaint on the ground of
improper venue and for being premature for failure of Tan to exhaust
administrative remedies.
On January 2, 1979, the trial court denied the motion to dismiss. The motion
for reconsideration of the denial was likewise denied by the court on
February 16, 1979.
Esuerte and Jayme filed a petition for certiorari and prohibition with a prayer
for preliminary injunction with the Court of Appeals. On September 18, 1979,
the petition was dismissed without pronouncement as to costs. The motion
for reconsideration of the decision was likewise denied for lack of merit on
February 18, 1980.
The following reasons were advanced by petitioners for the allowance of this
petition:
1)
The Court of Appeals committed gross error and grave abuse of
discretion when it dismissed the petition despite petitioners' overwhelming
evidence showing that the venue of private respondent's action (Civil Case
No. R-17584) was improperly laid.
2)
The Court of Appeals committed gross error and grave abuse of
discretion when it dismissed the petition despite petitioners' overwhelming
evidence showing that the filing of Civil Case No. R-17584 is premature due
to non-exhaustion of administrative remedies.
It is the contention of petitioners that the proper venue of the action filed by
Tan should be Bacolod City and not Cebu City. At the time of the filing of her
action in court, Tan was actually residing and may be found in Bacolod City.
In fact, in her "Statement of Assets and Liabilities," submitted by Tan to her
employer, the Corazon Locsin Montelibano Memorial Hospital, she declared
that she is a resident of FRAYU INTERIOR, 6th Street, Bacolod City.
Section 2(b), Rule 4 of the Rules of Court provides:
Sec. 2. Venue in Courts of First Instance.
xxx
xxx
xxx
(b)
Personal Actions. All other actions may be commenced and tried
where the defendants or any of the defendants resides or may be found, or
where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff.
The choice of venue for personal actions cognizable by the Regional Trial
Court is given to the plaintiff but not to the plaintiff's caprice because the
matter is regulated by the Rules of Court (see Clavecilla Radio System v.
Antillon, 19 SCRA 379). The rule on venue, like other procedural rules, are
designed to insure a just and orderly administration of justice or the impartial
and evenhanded determination of every action and proceeding (Sy v. Tyson
Enterprises Inc., 19 SCRA 367). The option of the plaintiff in personal actions
cognizable by the Regional Trial Court is either the place where the
defendant resides or may be found or the place where the plaintiff resides. If
plaintiff opts for the latter, he is limited to that place.
"Resides" in the rules on venue on personal actions means the place of

abode, whether permanent or temporary, of the plaintiff or defendants as
distinguished from "domicile" which denotes a fixed permanent residence
(Dangwa Transportation Co., Inc. v. Sarmiento, G.R. No. L-22795, January
31, 1977, 75 SCRA 124). And, in Hernandez v. Rural Bank of Lucena, Inc.,
G.R. No. L-29791, January 10, 1978, 81 SCRA 75), venue of personal
actions should be at the place of abode or place where plaintiffs actually
reside, not in domicile or legal residence.
In Koh v. CA, L-40428, December 17, 1975, 70 SCRA 298; 305, We ruled:
Applying the foregoing observation to the present case, We are fully

convinced that private respondent Coloma's protestations of domicile in San
Nicolas, Ilocos Norte, based on his manifested intention to return there after
the retirement of his wife from government service to justify his bringing of an
action for damages against petitioner in the C.F.I. of Ilocos Norte, is entirely
of no moment since what is of paramount importance is where he actually
resided or where he may be found at the time he brought the action, to
comply substantially with the requirements of Sec. 2(b) of Rule 4, Rules of
Court, on venue of personal actions. . ..
As perspicaciously observed by Justice Moreland, the purpose of procedure

is not to restrict the court's jurisdiction over the subject matter but to give it
effective facility "in righteous action," "to facilitate and promote the
administration of justice" or to insure "just judgments" by means of a fair
hearing. If the objective is not achieved, then "the administration of justice
becomes incomplete and unsatisfactory and lays itself open to criticism."

(Manila Railroad Co. v. Attorney General, 20 Phil. 523, 530).
There is no question that private respondent as plaintiff in the Civil Case is a

legal resident of Cebu City. Her parents live there. However, it cannot also be
denied that at the time of her filing of the complaint against petitioners, she
was a temporary resident of Bacolod City. She was then employed with the
Corazon Locsin Montelibano Memorial Hospital, Bacolod City, as resident
physician. Moreover, the acts complained of were committed in Bacolod City.
The private respondents were all residents of Bacolod City at the time of the
bringing of the action. Though Tan's employment was only temporary there
was no showing when this employment will end. Justice would be better
served if the complaint were heard and tried in Bacolod City where all the
parties resided.
The second ground raised by petitioners is devoid of merit. The alleged need
by private respondent Tan to exhaust administrative remedies before filing
the complaint for damages does not apply to the instant case. Private
respondent as plaintiff in the civil Case for damages has no administrative
remedy available to her. It is true that the same incident complained of in the
administrative case filed by petitioners against Tan is the subject of the
action for damages filed by Tan against the petitioners in the trial court.
However, the cause of action in the administrative case is different from that
of the civil case for damages. While the complainant in the administrative
case may be a private person, it is the government who is the aggrieved
party and no award for damages may be granted in favor of private persons.
In the civil action for damages, the trial court's concern is whether or not
damages, personal to the plaintiff, were caused by the acts of the
defendants. The civil action for damages can proceed notwithstanding the
pendency of the administrative action.
WHEREFORE, the position is GRANTED. The questioned decision of the

Court of Appeals is SET ASIDE. Civil Case No. R-17584 is DISMISSED for
improper venue.
SO ORDERED.
epublic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-28742
April 30, 1982
VIRGILIO CAPATI, plaintiff-appellant,

vs.
DR. JESUS P. OCAMPO, defendant-appellee.
ESCOLIN, J.:
We set aside the order of the Court of First Instance of Pampanga in Civil
Case No. 3188 which dismissed the plaintiff's complaint on ground of
improper venue.
Plaintiff Virgilio Capati a resident of Bacolor, Pampanga, was the contractor

of the Feati Bank for the construction of its building in Iriga, Camarines Sur.
On May 23, 1967, plaintiff entered into a sub-contract with the defendant Dr.
Jesus Ocampo, a resident of Naga City, whereby the latter, in consideration
of the amount of P2,200.00, undertook to construct the vault walls, exterior
walls and columns of the said Feati building in accordance with the
specifications indicated therein. Defendant further bound himself to complete
said construction on or before June 5, 1967 and, to emphasize this time
frame for the completion of the construction job, defendant affixed his
signature below the following stipulation written in bold letters in the subcontract: "TIME IS ESSENTIAL, TO BE FINISHED 5 JUNE' 67."
Claiming that defendant finished the construction in question only on June

20, 1967, plaintiff filed in the Court of First Instance of Pampanga an action
for recovery of consequential damages in the sum of P85,000.00 with
interest, plus attorney's fees and costs. The complaint alleged inter alia that
"due to the long unjustified delay committed by defendant, in open violation
of his express written agreement with plaintiff, the latter has suffered great
irreparable loss and damage ... "
Defendant filed a motion to dismiss the complaint on the ground that venue
of action was improperly laid. The motion was premised on the stipulation
printed at the back of the contract which reads:
14.
That all actions arising out, or relating to this contract may be
instituted in the Court of First Instance of the City of Naga.
said section is qualified by the following provisions of Section 3 of the same

rule:
By written agreement of the parties the venue of an action may be changed

or transferred from one province to another.
Defendant stands firm on his contention that because of the aforequoted

covenant contained in par. 14 of the contract, he cannot be sued in any court
except the Court of First Instance of Naga City. We are thus called upon to
rule on the issue as to whether the stipulation of the parties on venue is
restrictive in the sense that any litigation arising from the contract can be filed
only in the court of Naga City, or merely permissive in that the parties may
submit their disputes not only in Naga City but also in the court where the
defendant or the plaintiff resides, at the election of the plaintiff, as provided
for by Section 2 (b) Rule 4 of the Rules of Court.
Plaintiff filed an opposition to the motion, claiming that their agreement to

hold the venue in the Court of First Instance of Naga City was merely
optional to both contracting parties. In support thereof, plaintiff cited the use
of the word "may " in relation with the institution of any action arising out of
the contract.
It is well settled that the word "may" is merely permissive and operates to
confer discretion upon a party. Under ordinary circumstances, the term "may
be" connotes possibility; it does not connote certainty. "May" is an auxillary
verb indicating liberty, opportunity, permission or possibility. 1
The lower court, in resolving the motion to dismiss, ruled that "there was no
sense in providing the aforequoted stipulation, pursuant to Sec. 3 of Rule 4 of
the Revised Rules of Court, if after all, the parties are given the discretion or
option of filing the action in their respective residences," and thereby ordered
the dismissal of the complaint.
In Nicolas vs. Reparations Commission 2, a case involving the interpretation

of a stipulation as to venue along lines similar to the present one, it was held
that the agreement of the parties which provided that "all legal actions arising
out of this contract ... may be brought in and submitted to the jurisdiction of
the proper courts in the City of Manila," is not mandatory.
Hence, this appeal.
We hold that the stipulation as to venue in the contract in question is simply

permissive. By the said stipulation, the parties did not agree to file their suits
solely and exclusively with the Court of First Instance of Naga. They merely
agreed to submit their disputes to the said court, without waiving their right to
seek recourse in the court specifically indicated in Section 2 (b), Rule 4 of the
Rules of Court.
The rule on venue of personal actions cognizable by the courts of first

instance is found in Section 2 (b), Rule 4 of the Rules of Court, which
provides that such "actions may be commenced and tried where the
defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff." The
Since the complaint has been filed in the Court of First Instance of
Pampanga, where the plaintiff resides, the venue of action is properly laid in
accordance with Section 2 (b), Rule 4 of the Rules of Court.
WHEREFORE, the order appealed from is hereby set aside. Let the records
be returned to the court of origin for further proceedings. Costs against
defendant-appellee.
SO ORDERED.
1)
a stipulation reading: "** All suits arising out of this Agreement shall be
filed with / in the proper Courts of Quezon City," and
2)
a provision binding UNIMASTERS to obtain (as it did in fact obtain) a
credit line with Metropolitan Bank and Trust Co.-Tacloban Branch in the
amount of P2,000,000.00 to answer for its obligations to KUBOTA.
Some five years later, or more precisely on December 24, 1993,

UNIMASTERS filed an action in the Regional Trial Court of Tacloban City
against KUBOTA, a certain Reynaldo Go, and Metropolitan Bank and Trust
Company-Tacloban Branch (hereafter, simply METROBANK) for damages
for breach of contract, and injunction with prayer for temporary restraining
order. The action was docketed as Civil Case No. 93-12-241 and assigned
to Branch 6.
EN BANC
[G.R. No. 119657. February 7, 1997]
UNIMASTERS CONGLOMERATION, INC., petitioner, vs. COURT OF

APPEALS and KUBOTA AGRI-MACHINERY PHILIPPINES, INC.,
respondents.
DECISION
NARVASA, C.J.:
The appellate proceeding at bar turns upon the interpretation of a stipulation

in a contract governing venue of actions thereunder arising.
On October 28, 1988 Kubota Agri-Machinery Philippines, Inc. (hereafter,

simply KUBOTA) and Unimasters Conglomeration, Inc. (hereafter, simply
UNIMASTERS) entered into a "Dealership Agreement for Sales and
Services" of the former's products in Samar and Leyte Provinces.[1] The
contract contained, among others:
On the same day the Trial Court issued a restraining order enjoining
METROBANK from "authorizing or effecting payment of any alleged
obligation of ** (UNIMASTERS) to defendant ** KUBOTA arising out of or in
connection with purchases made by defendant Go against the credit line
caused to be established by ** (UNIMASTERS) for and in the amount of P2
million covered by defendant METROBANK ** or by way of charging **
(UNIMASTERS) for any amount paid and released to defendant **
(KUBOTA) by the Head Office of METROBANK in Makati, Metro-Manila **."
The Court also set the application for preliminary injunction for hearing on
January 10, 1994 at 8:30 o'clock in the morning.
On January 4, 1994 KUBOTA filed two motions. One prayed for dismissal of
the case on the ground of improper venue (said motion being set for hearing
on January 11, 1994). The other prayed for the transfer of the injunction
hearing to January 11, 1994 because its counsel was not available on
January 10 due to a prior commitment before another court.
KUBOTA claims that notwithstanding that its motion to transfer hearing had
been granted, the Trial Court went ahead with the hearing on the injunction
incident on January 10, 1994 during which it received the direct testimony of
UNIMASTERS' general manager, Wilford Chan; that KUBOTA's counsel was
"shocked" when he learned of this on the morning of the 11th, but was
nonetheless instructed to proceed to cross-examine the witness; that when

said counsel remonstrated that this was unfair, the Court reset the hearing to
the afternoon of that same day, at which time Wilford Chan was recalled to
the stand to repeat his direct testimony. It appears that cross-examination of
Chan was then undertaken by KUBOTA's lawyer with the "express
reservation that ** (KUBOTA was) not (thereby) waiving and/or abandoning
its motion to dismiss;" and that in the course of the cross-examination,
exhibits (numbered from 1 to 20) were presented by said attorney who
afterwards submitted a memorandum in lieu of testimonial evidence.[2]
On January 13, 1994, the Trial Court handed down an Order authorizing the
issuance of the preliminary injunction prayed for, upon a bond of
P2,000,000.00.[3] And on February 3, 1994, the same Court promulgated an
Order denying KUBOTA's motion to dismiss. Said the Court:
"The plaintiff UNIMASTERS Conglomeration is holding its principal place of

business in the City of Tacloban while the defendant ** (KUBOTA) is holding
its principal place of business in Quezon City. The proper venue therefore
pursuant to Rules of Court would either be Quezon City or Tacloban City at
the election of the plaintiff. Quezon City and Manila (sic), as agreed upon by
the parties in the Dealership Agreement, are additional places other than the
place stated in the Rules of Court. The filing, therefore, of this complaint in
the Regional Trial Court in Tacloban City is proper."
Both orders were challenged as having been issued with grave abuse of
discretion by KUBOTA in a special civil action of certiorari and prohibition
filed with the Court of Appeals, docketed as CA-G.R. SP No. 33234. It
contended, more particularly, that (1) the RTC had "no jurisdiction to take
cognizance of ** (UNIMASTERS') action considering that venue was
improperly laid," (2) UNIMASTERS had in truth "failed to prove that it is
entitled to the ** writ of preliminary injunction;" and (3) the RTC gravely erred
"in denying the motion to dismiss."[4]
The Appellate Court agreed with KUBOTA that -- in line with the Rules of
Court[5] and this Court's relevant rulings[6] -- the stipulation respecting
venue in its Dealership Agreement with UNIMASTERS did in truth limit the
venue of all suits arising thereunder only and exclusively to "the proper
courts of Quezon City."[7] The Court also held that the participation of
KUBOTA's counsel at the hearing on the injunction incident did not in the
premises operate as a waiver or abandonment of its objection to venue; that
assuming that KUBOTA's standard printed invoices provided that the venue
of actions thereunder should be laid at the Court of the City of Manila, this
was inconsequential since such provision would govern "suits or legal
actions between petitioner and its buyers" but not actions under the
Dealership Agreement between KUBOTA and UNIMASTERS, the venue of
which was controlled by paragraph No. 7 thereof; and that no impediment
precludes issuance of a TRO or injunctive writ by the Quezon City RTC
against METROBANK-Tacloban since the same "may be served on the
principal office of METROBANK in Makati and would be binding on and
enforceable against, METROBANK branch in Tacloban."
After its motion for reconsideration of that decision was turned down by the
Court of Appeals, UNIMASTERS appealed to this Court. Here, it ascribes to
the Court of Appeals several errors which it believes warrant reversal of the
verdict, namely:[8]
1)
"in concluding, contrary to decisions of this ** Court, that the agreement
on venue between petitioner (UNIMASTERS) and private respondent
(KUBOTA) limited to the proper courts of Quezon City the venue of any
complaint filed arising from the dealership agreement between ** (them);"
2)
"in ignoring the rule settled in Philippine Banking Corporation vs.
Tensuan,[9] that 'in the absence of qualifying or restrictive words, venue
stipulations in a contract should be considered merely as agreement on
additional forum, not as limiting venue to the specified place;" and in
concluding, contrariwise, that the agreement in the case at bar "was the
same as the agreement on venue in the Gesmundo case," and therefore, the
Gesmundo case was controlling; and
3)
"in concluding, based solely on the self-serving narration of **
(KUBOTA that its) participation in the hearing for the issuance of a **
preliminary injunction did not constitute waiver of its objection to venue."
The issue last mentioned, of whether or not the participation by the lawyer of
KUBOTA at the injunction hearing operated as a waiver of its objection to
venue, need not occupy the Court too long. The record shows that when
KUBOTA's counsel appeared before the Trial Court in the morning of
January 11, 1994 and was then informed that he should cross-examine
UNIMASTERS' witness, who had testified the day before, said counsel drew
attention to the motion to dismiss on the ground of improper venue and
insistently attempted to argue the matter and have it ruled upon at the time;
and when the Court made known its intention (a) "to (resolve first the) issue
(of) the injunction then rule on the motion to dismiss," and (b) consequently
its desire to forthwith conclude the examination of the witness on the
injunction incident, and for that purpose reset the hearing in the afternoon of
that day, the 11th, so that the matter might be resolved before the lapse of
the temporary restraining order on the 13th, KUBOTA's lawyer told the Court:
"Your Honor, we are not waiving our right to submit the Motion to
Dismiss."[10] It is plain that under these circumstances, no waiver or
abandonment can be imputed to KUBOTA.
The essential question really is that posed in the first and second assigned
errors, i.e., what construction should be placed on the stipulation in the
Dealership Agreement that "(a)ll suits arising out of this Agreement shall be
filed with/in the proper Courts of Quezon City."
Rule 4 of the Rules of Court sets forth the principles generally governing the
venue of actions, whether real or personal, or involving persons who neither
reside nor are found in the Philippines or otherwise. Agreements on venue
are explicitly allowed. "By written agreement of the parties the venue of an
action may be changed or transferred from one province to another."[11]
Parties may by stipulation waive the legal venue and such waiver is valid and
effective being merely a personal privilege, which is not contrary to public
policy or prejudicial to third persons. It is a general principle that a person
may renounce any right which the law gives unless such renunciation would
be against public policy.[12]
Written stipulations as to venue may be restrictive in the sense that the suit
may be filed only in the place agreed upon, or merely permissive in that the
parties may file their suit not only in the place agreed upon but also in the
places fixed by law (Rule 4, specifically). As in any other agreement, what is
essential is the ascertainment of the intention of the parties respecting the
matter.
Since convenience is the raison d'etre of the rules of venue,[13] it is easy to

accept the proposition that normally, venue stipulations should be deemed
permissive merely, and that interpretation should be adopted which most
serves the parties' convenience. In other words, stipulations designating
venues other than those assigned by Rule 4 should be interpreted as
designed to make it more convenient for the parties to institute actions
arising from or in relation to their agreements; that is to say, as simply adding
to or expanding the venues indicated in said Rule 4.
On the other hand, because restrictive stipulations are in derogation of this

general policy, the language of the parties must be so clear and categorical
as to leave no doubt of their intention to limit the place or places, or to fix
places other than those indicated in Rule 4, for their actions. This is easier
said than done, however, as an examination of precedents involving venue
covenants will immediately disclose.
In at least thirteen (13) cases, this Court construed the venue stipulations
involved as merely permissive. These are:
1.
Polytrade Corporation v. Blanco, decided in 1969.[14] In this case, the
venue stipulation was as follows:
"The parties agree to sue and be sued in the Courts of Manila."
This Court ruled that such a provision "does not preclude the filing of suits in
the residence of the plaintiff or the defendant. The plain meaning is that the
parties merely consented to be sued in Manila. Qualifying or restrictive
words which would indicate that Manila and Manila alone is the venue are
totally absent therefrom. It simply is permissive. The parties solely agreed to
add the courts of Manila as tribunals to which they may resort. They did not
waive their right to pursue remedy in the courts specifically mentioned in
Section 2(b) of Rule 4."
The Polytrade doctrine was reiterated expressly or implicitly in subsequent

cases, numbering at least ten (10).
2.
Nicolas v. Reparations Commission, decided in 1975.[15] In this case,
the stipulation on venue read:
"** (A)ll legal actions arising out of this contract ** may be brought in and
submitted to the jurisdiction of the proper courts in the City of Manila."
This Court declared that the stipulation does not clearly show the intention of
the parties to limit the venue of the action to the City of Manila only. "It must
be noted that the venue in personal actions is fixed for the convenience of
the plaintiff and his witnesses and to promote the ends of justice. We cannot
conceive how the interest of justice may be served by confining the situs of
the action to Manila, considering that the residences or offices of all the
parties, including the situs of the acts sought to be restrained or required to
be done, are all within the territorial jurisdiction of Rizal. ** Such agreements
should be construed reasonably and should not be applied in such a manner
that it would work more to the inconvenience of the parties without promoting
the ends of justice."
3.
Lamis Ents. v. Lagamon, decided in 1981.[16] Here, the stipulation in
the promissory note and the chattel mortgage specifed Davao City as the
venue.
The Court, again citing Polytrade, stated that the provision "does not
preclude the filing of suits in the residence of plaintiff or defendant under
Section 2(b), Rule 4, Rules of Court, in the absence of qualifying or restrictive
words in the agreement which would indicate that the place named is the
only venue agreed upon by the parties. The stipulation did not deprive **
(the affected party) of his right to pursue remedy in the court specifically
mentioned in Section 2(b) of Rule 4, Rules of Court. Renuntiato non
praesumitur."
4.
Capati v. Ocampo, decided in 1982.[17] In this case, the provision of
the contract relative to venue was as follows:
" ** (A)ll actions arising out, or relating to this contract may be instituted in the
Court of First Instance of the City of Naga."
The Court ruled that the parties "did not agree to file their suits solely and
exclusively with the Court of First Instance of Naga;" they "merely agreed to
submit their disputes to the said court without waiving their right to seek
recourse in the court specifically indicated in Section 2 (b), Rule 4 of the
Rules of Court."
5.
Western Minolco v. Court of Appeals, decided in 1988.[18] Here, the
provision governing venue read:
"The parties stipulate that the venue of the actions referred to in Section
12.01 shall be in the City of Manila."
The court restated the doctrine that a stipulation in a contract fixing a definite
place for the institution of an action arising in connection therewith, does not
ordinarily supersede the general rules set out in Rule 4, and should be
construed merely as an agreement on an additional forum, not as limiting
venue to the specified place.
6.
Moles v. Intermediate Appellate Court, decided in 1989.[19] In this
proceeding, the Sales Invoice of a linotype machine stated that the proper
venue should be Iloilo.
This Court held that such an invoice was not the contract of sale of the
linotype machine in question; consequently the printed provisions of the
invoice could not have been intended by the parties to govern the sale of the
machine, especially since said invoice was used for other types of
transactions. This Court said: "It is obvious that a venue stipulation, in order
to bind the parties, must have been intelligently and deliberately intended by
them to exclude their case from the reglementary rules on venue. Yet, even
such intended variance may not necessarily be given judicial approval, as,
for instance, where there are no restrictive or qualifying words in the
agreement indicating that venue cannot be laid in any place other than that
agreed upon by the parties, and in contracts of adhesion."
" ** (A)ny disagreement or dispute arising out of the lease shall be settled by
the parties in the proper court in the province of Surigao del Norte."
7.
Hongkong and Shanghai Banking Corp. v. Sherman, decided in
1989.[20] Here the stipulation on venue read:
The venue provision was invoked in an action filed in the Regional Trial Court
of Manila to recover damages arising out of marine subrogation based on a
bill of lading. This Court declared that since the action did not refer to any
disagreement or dispute arising out of the contract of lease of the barge, the
venue stipulation in the latter did not apply; but that even assuming the
contract of lease to be applicable, a statement in a contract as to venue does
not preclude the filing of suits at the election of the plaintiff where no
qualifying or restrictive words indicate that the agreed place alone was the
chosen venue.
" ** (T)his guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore. We hereby agree
that the Courts in Singapore shall have jurisdiction over all disputes arising
under this guarantee **."
This Court held that due process dictates that the stipulation be liberally
construed. The parties did not thereby stipulate that only the courts of
Singapore, to the exclusion of all the others, had jurisdiction. The clause in
question did not operate to divest Philippine courts of jurisdiction.
8.
Nasser v. Court of Appeals, decided in 1990,[21] in which the venue
stipulation in the promissory notes in question read:
" ** (A)ny action involving the enforcement of this contract shall be brought
within the City of Manila, Philippines."
The Court's verdict was that such a provision does not as a rule supersede
the general rule set out in Rule 4 of the Rules of Court, and should be
construed merely as an agreement on an additional forum, not as limiting
venue to the specified place.
9.
Surigao Century Sawmill Co., Inc. v. Court of Appeals, decided in
1993:[22] In this case, the provision concerning venue was contained in a
contract of lease of a barge, and read as follows:
10.
Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Circle
Financial Corporation, et al., decided in 1993.[23] Here, the stipulation on
venue was contained in promissory notes and read as follows:
"I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela

any legal action which may arise out of this promissory note."
This Court held the stipulation to be merely permissive since it did not lay the
venue in Valenzuela exclusively or mandatorily. The plain or ordinary import
of the stipulation is the grant of authority or permission to bring suit in
Valenzuela; but there is not the slightest indication of an intent to bar suit in
other competent courts. The Court stated that there is no necessary or
customary connection between the words "any legal action" and an intent
strictly to limit permissible venue to the Valenzuela courts. Moreover, since
the venue stipulations include no qualifying or exclusionary terms, express
reservation of the right to elect venue under the ordinary rules was
unnecessary in the case at bar. The Court made clear that "to the extent
Bautista and Hoechst Philippines are inconsistent with Polytrade (an en banc
decision later in time than Bautista) and subsequent cases reiterating
Polytrade, Bautista and Hoechst Philippines have been rendered obsolete by
the Polytrade line of cases."
11.
Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Brinell
Metal Works Corp., et al., decided in 1994:[24] In this case the subject
promissory notes commonly contained a stipulation reading:
"I/we expressly submit to the jurisdiction of the courts of Manila, any legal
action which may arise out of this promissory note."
the Court restated the rule in Polytrade that venue stipulations in a contract,
absent any qualifying or restrictive words, should be considered merely as an
agreement on additional forum, not limiting venue to the specified place.
They are not exclusive, but rather, permissive. For to restrict venue only to
that place stipulated in the agreement is a construction purely based on
technicality; on the contrary, the stipulation should be liberally construed.
The Court stated: "The later cases of Lamis Ents v. Lagamon [108 SCRA
1981], Capati v. Ocampo [113 SCRA 794 [1982], Western Minolco v. Court
of Appeals [167 SCRA 592 [1988], Moles v. Intermediate Appellate Court
[169 SCRA 777 [1989], Hongkong and Shanghai Banking Corporation v.
Sherman [176 SCRA 331], Nasser v. Court of Appeals [191 SCRA 783
[1990] and just recently, Surigao Century Sawmill Co. v. Court of Appeals
[218 SCRA 619 [1993], all treaded the path blazed by Polytrade. The
conclusion to be drawn from all these is that the more recent jurisprudence
shall properly be deemed modificatory of the old ones."
The lone dissent observed: "There is hardly any question that a stipulation of
contracts of adhesion, fixing venue to a specified place only, is void for, in
such cases, there would appear to be no valid and free waiver of the venue
fixed by the Rules of Courts. However, in cases where both parties freely
and voluntarily agree on a specified place to be the venue of actions, if any,
between them, then the only considerations should be whether the waiver (of
the venue fixed by the Rules of Court) is against public policy and whether
the parties would suffer, by reason of such waiver, undue hardship and
inconvenience; otherwise, such waiver of venue should be upheld as binding
on the parties. The waiver of venue in such cases is sanctioned by the rules
on jurisdiction."
Still other precedents adhered to the same principle.
12.
Tantoco v. Court of Appeals, decided in 1977.[25] Here, the parties
agreed in their sales contracts that the courts of Manila shall have
jurisdiction over any legal action arising out of their transaction. This Court
held that the parties agreed merely to add the courts of Manila as tribunals to
which they may resort in the event of suit, to those indicated by the law: the
courts either of Rizal, of which private respondent was a resident, or of
Bulacan, where petitioner resided.
13.
Sweet Lines, Inc. v. Teves, promulgated in 1987.[26] In this case, a
similar stipulation on venue, contained in the shipping ticket issued by Sweet
Lines, Inc. (as Condition 14) --
" ** that any and all actions arising out or the condition and provisions of this
ticket, irrespective of where it is issued, shall be filed in the competent courts
in the City of Cebu"
-- was declared unenforceable, being subversive of public policy. The Court

explained that the philosophy on transfer of venue of actions is the
convenience of the plaintiffs as well as his witnesses and to promote the
ends of justice; and considering the expense and trouble a passenger
residing outside of Cebu City would incur to prosecute a claim in the City of
Cebu, he would most probably decide not to file the action at all.
On the other hand, in the cases hereunder mentioned, stipulations on venue

were held to be restrictive, or mandatory.
1.
Bautista vs. De Borja, decided in 1966.[27] In this case, the contract
provided that in case of any litigation arising therefrom or in connection
therewith, the venue of the action shall be in the City of Manila. This Court
held that without either party reserving the right to choose the venue of action
as fixed by law, it can reasonably be inferred that the parties intended to
definitely fix the venue of the action, in connection with the contract sued
upon in the proper courts of the City of Manila only, notwithstanding that
neither party is a resident of Manila.
2.
Gesmundo v. JRB Realty Corporation, decided in 1994.[28] Here the
lease contract declared that
" ** (V)enue for all suits, whether for breach hereof or damages or any cause
between the LESSOR and LESSEE, and persons claiming under each, **
(shall be) the courts of appropriate jurisdiction in Pasay City. . ."
This Court held that: "(t)he language used leaves no room for interpretation.
It clearly evinces the parties' intent to limit to the 'courts of appropriate
jurisdiction of Pasay City' the venue for all suits between the lessor and the
lessee and those between parties claiming under them. This means a waiver
of their right to institute action in the courts provided for in Rule 4, sec. 2(b)."
3.
Hoechst Philippines, Inc. v. Torres,[29] decided much earlier, in 1978,
involved a strikingly similar stipulation, which read:
" ** (I)n case of any litigation arising out of this agreement, the venue of any
action shall be in the competent courts of the Province of Rizal."
This Court held: "No further stipulations are necessary to elicit the thought
that both parties agreed that any action by either of them would be filed only
in the competent courts of Rizal province exclusively."
4.
Villanueva v. Mosqueda, decided in 1982.[30] In this case, it was
stipulated that if the lessor violated the contract of lease he could be sued in
Manila, while if it was the lessee who violated the contract, the lessee could
be sued in Masantol, Pampanga. This Court held that there was an
agreement concerning venue of action and the parties were bound by their
agreement.
"The agreement as to venue was not permissive but
mandatory."
5.
Arquero v. Flojo, decided in 1988.[31] The condition respecting venue - that any action against RCPI relative to the transmittal of a telegram must
be brought in the courts of Quezon City alone -- was printed clearly in the
upper front portion of the form to be filled in by the sender. This Court held
that since neither party reserved the right to choose the venue of action as
fixed by Section 2 [b], Rule 4, as is usually done if the parties mean to retain
the right of election so granted by Rule 4, it can reasonably be inferred that
the parties intended to definitely fix the venue of action, in connection with
the written contract sued upon, in the courts of Quezon City only.
An analysis of these precedents reaffirms and emphasizes the soundness of

the Polytrade principle. Of the essence is the ascertainment of the parties'
intention in their agreement governing the venue of actions between them.
That ascertainment must be done keeping in mind that convenience is the
foundation of venue regulations, and that that construction should be
adopted which most conduces thereto. Hence, the invariable construction
placed on venue stipulations is that they do not negate but merely
complement or add to the codal standards of Rule 4 of the Rules of Court. In
other words, unless the parties make very clear, by employing categorical
and suitably limiting language, that they wish the venue of actions between
them to be laid only and exclusively at a definite place, and to disregard the
prescriptions of Rule 4, agreements on venue are not to be regarded as
mandatory or restrictive, but merely permissive, or complementary of said
rule. The fact that in their agreement the parties specify only one of the
venues mentioned in Rule 4, or fix a place for their actions different from
those specified by said rule, does not, without more, suffice to characterize
the agreement as a restrictive one. There must, to repeat, be accompanying
language clearly and categorically expressing their purpose and design that
actions between them be litigated only at the place named by them,[32]
regardless of the general precepts of Rule 4; and any doubt or uncertainty as
to the parties' intentions must be resolved against giving their agreement a
restrictive or mandatory aspect. Any other rule would permit of individual,
subjective judicial interpretations without stable standards, which could well
result in precedents in hopeless inconsistency.
The record of the case at bar discloses that UNIMASTERS has its principal
place of business in Tacloban City, and KUBOTA, in Quezon City. Under
Rule 4, the venue of any personal action between them is "where the
defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff."[33] In
other words, Rule 4 gives UNIMASTERS the option to sue KUBOTA for
breach of contract in the Regional Trial Court of either Tacloban City or
Quezon City.
But the contract between them provides that " ** All suits arising out of this
Agreement shall be filed with/in the proper Courts of Quezon City," without
mention of Tacloban City. The question is whether this stipulation had the
effect of effectively eliminating the latter as an optional venue and limiting
litigation between UNIMASTERS and KUBOTA only and exclusively to
Quezon City.
In light of all the cases above surveyed, and the general postulates distilled
therefrom, the question should receive a negative answer. Absent additional
words and expressions definitely and unmistakably denoting the parties'
desire and intention that actions between them should be ventilated only at
the place selected by them, Quezon City -- or other contractual provisions
clearly evincing the same desire and intention -- the stipulation should be
construed, not as confining suits between the parties only to that one place,
Quezon City, but as allowing suits either in Quezon City or Tacloban City, at
the option of the plaintiff (UNIMASTERS in this case).
and the Regional Trial Court would be acting entirely within its competence
and authority in proceeding to try and decide the suit.[39]
WHEREFORE, the appealed judgment of the Court of Appeals is

REVERSED, the Order of the Regional Trial Court of Tacloban City, Branch
6, dated February 3, 1994, is REINSTATED and AFFIRMED, and said Court
is DIRECTED to forthwith proceed with Civil Case No. 93-12-241 in due
course.
SO ORDERED.

One last word, respecting KUBOTA's theory that the Regional Trial Court
had "no jurisdiction to take cognizance of ** (UNIMASTERS') action
considering that venue was improperly laid." This is not an accurate
statement of legal principle. It equates venue with jurisdiction; but venue has
nothing to do with jurisdiction, except in criminal actions.
This is
fundamental.[34] The action at bar, for the recovery of damages in an
amount considerably in excess of P20,000.00, is assuredly within the
jurisdiction of a Regional Trial Court.[35] Assuming that venue were
improperly laid in the Court where the action was instituted, the Tacloban
City RTC, that would be a procedural, not a jurisdictional impediment -precluding ventilation of the case before that Court of wrong venue
notwithstanding that the subject matter is within its jurisdiction. However, if
the objection to venue is waived by the failure to set it up in a motion to
dismiss,[36] the RTC would proceed in perfectly regular fashion if it then tried
and decided the action.
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 74854 April 2, 1991
JESUS DACOYCOY, petitioner,

This is true also of real actions. Thus, even if a case "affecting title to, or for
recovery of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property"[37] were commenced in a province or city other
than that "where the property or any part thereof lies,"[38] if no objection is
seasonably made in a motion to dismiss, the objection is deemed waived,
vs.
HON. INTERMEDIATE APPELLATE COURT, HON. ANTONIO V.
BENEDICTO, Executive Judge, Regional Trial Court, Branch LXXI, Antipolo,
Rizal, and RUFINO DE GUZMAN, respondents.
Ramon V. Sison for petitioner.
Public Attorney's Office for private respondent.
FERNAN, C.J.:p
May the trial court motu proprio dismiss a complaint on the ground of
improper venue? This is the issue confronting the Court in the case at bar.
On March 22, 1983, petitioner Jesus Dacoycoy, a resident of Balanti, Cainta,

Rizal, filed before the Regional Trial Court, Branch LXXI, Antipolo, Rizal, a
complaint against private respondent Rufino de Guzman praying for the
annulment of two (2) deeds of sale involving a parcel of riceland situated in
Barrio Estanza, Lingayen, Pangasinan, the surrender of the produce thereof
and damages for private respondent's refusal to have said deeds of sale set
aside upon petitioner's demand.
In this petition for review, petitioner faults the appellate court in affirming what
he calls an equally erroneous finding of the trial court that the venue was
improperly laid when the defendant, now private respondent, has not even
answered the complaint nor waived the venue. 2
Petitioner claims that the right to question the venue of an action belongs
solely to the defendant and that the court or its magistrate does not possess
the authority to confront the plaintiff and tell him that the venue was
improperly laid, as venue is waivable. In other words, petitioner asserts,
without the defendant objecting that the venue was improperly laid, the trial
court is powerless to dismiss the case motu proprio.
Private respondent, on the other hand, maintains that the dismissal of

petitioner's complaint is proper because the same can "readily be assessed
as (a) real action." He asserts that "every court of justice before whom a civil
case is lodged is not even obliged to wait for the defendant to raise that
venue was improperly laid. The court can take judicial notice and motu
proprio dismiss a suit clearly denominated as real action and improperly filed
before it. . . . the location of the subject parcel of land is controlling pursuant
to Sec. 2, par. (a), Rule 4 of the New Rules of Court . . . 3
We grant the petition.

On May 25, 1983, before summons could be served on private respondent
as defendant therein, the RTC Executive Judge issued an order requiring
counsel for petitioner to confer with respondent trial judge on the matter of
venue. After said conference, the trial court dismissed the complaint on the
ground of improper venue. It found, based on the allegations of the
complaint, that petitioner's action is a real action as it sought not only the
annulment of the aforestated deeds of sale but also the recovery of
ownership of the subject parcel of riceland located in Estanza, Lingayen,
Pangasinan, which is outside the territorial jurisdiction of the trial court.
Petitioner appealed to the Intermediate Appellate Court, now Court of

Appeals, which in its decision of April 11, 1986, 1 affirmed the order of
dismissal of his complaint.
The motu proprio dismissal of petitioner's complaint by respondent trial court

on the ground of improper venue is plain error, obviously attributable to its
inability to distinguish between jurisdiction and venue.
Questions or issues relating to venue of actions are basically governed by

Rule 4 of the Revised Rules of Court. It is said that the laying of venue is
procedural rather than substantive. It relates to the jurisdiction of the court
over the person rather than the subject matter. Provisions relating to venue
establish a relation between the plaintiff and the defendant and not between
the court and the subject matter. Venue relates to trial not to jurisdiction,
touches more of the convenience of the parties rather than the substance of
the case. 4
Jurisdiction treats of the power of the court to decide a case on the merits;
while venue deals on the locality, the place where the suit may be had. 5
In Luna vs. Carandang, 6 involving an action instituted before the then Court
of First Instance of Batangas for rescission of a lease contract over a parcel
of agricultural land located in Calapan, Oriental Mindoro, which complaint
said trial court dismissed for lack of jurisdiction over the leased land, we
emphasized:
(1)
A Court of First Instance has jurisdiction over suits involving title to,
or possession of, real estate wherever situated in the Philippines, subject to
the rules on venue of actions (Manila Railroad Company vs. Attorney
General, etc., et al., 20 Phil. 523; Central Azucarera de Tarlac vs. De Leon,
et al., 56 Phil. 169; Navarro vs. Aguila, et al., 66 Phil. 604; Lim Cay, et al. vs.
Del Rosario, etc., et al., 55 Phil. 692);
(2)
Rule 4, Section 2, of the Rules of Court requiring that an action
involving real property shall be brought in the Court of First Instance of the
province where the land lies is a rule on venue of actions, which may be
waived expressly or by implication.
In the instant case, even granting for a moment that the action of petitioner is
a real action, respondent trial court would still have jurisdiction over the case,
it being a regional trial court vested with the exclusive original jurisdiction
over "all civil actions which involve the title to, or possession of, real property,
or any interest therein . . ." in accordance with Section 19 (2) of Batas
Pambansa Blg. 129. With respect to the parties, there is no dispute that it
acquired jurisdiction over the plaintiff Jesus Dacoycoy, now petitioner, the
moment he filed his complaint for annulment and damages. Respondent trial
court could have acquired jurisdiction over the defendant, now private
respondent, either by his voluntary appearance in court and his submission
to its authority, or by the coercive power of legal process exercised over his
person. 7
Although petitioner contends that on April 28, 1963, he requested the City
Sheriff of Olongapo City or his deputy to serve the summons on defendant
Rufino de Guzman at his residence at 117 Irving St., Tapinac, Olongapo City,
8 it does not appear that said service had been properly effected or that
private respondent had appeared voluntarily in court 9 or filed his answer to
the complaint. 10 At this stage, respondent trial court should have required
petitioner to exhaust the various alternative modes of service of summons
under Rule 14 of the Rules of Court, i.e., personal service under Section 7,
substituted service under Section 8, or service by publication under Section
16 when the address of the defendant is unknown and cannot be ascertained
by diligent inquiry.
Dismissing the complaint on the ground of improper venue is certainly not the
appropriate course of action at this stage of the proceeding, particularly as
venue, in inferior courts as well as in the courts of first instance (now RTC),
may be waived expressly or impliedly. Where defendant fails to challenge
timely the venue in a motion to dismiss as provided by Section 4 of Rule 4 of
the Rules of Court, and allows the trial to be held and a decision to be
rendered, he cannot on appeal or in a special action be permitted to
challenge belatedly the wrong venue, which is deemed waived. 11
Thus, unless and until the defendant objects to the venue in a motion to
dismiss, the venue cannot be truly said to have been improperly laid, as for
all practical intents and purposes, the venue, though technically wrong, may
be acceptable to the parties for whose convenience the rules on venue had
been devised. The trial court cannot pre-empt the defendant's prerogative to
object to the improper laying of the venue by motu proprio dismissing the
case.
Indeed, it was grossly erroneous for the trial court to have taken a procedural
short-cut by dismissing motu proprio the complaint on the ground of improper
venue without first allowing the procedure outlined in the Rules of Court to
take its proper course. Although we are for the speedy and expeditious
resolution of cases, justice and fairness take primary importance. The ends
of justice require that respondent trial court faithfully adhere to the rules of
procedure to afford not only the defendant, but the plaintiff as well, the right
to be heard on his cause.
WHEREFORE, in view of the foregoing, the decision of the Intermediate

Appellate Court, now Court of Appeals, dated April 11, 1986, is hereby
nullified and set aside. The complaint filed by petitioner before the Regional
Trial Court of Antipolo, Branch LXXI is revived and reinstated. Respondent
court is enjoined to proceed therein in accordance with law.
SO ORDERED.

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 106847. March 5, 1993.
PATRICIO P. DIAZ, petitioner, vs. JUDGE SANTOS B. ADIONG, RTC, Br. 8,

Marawi City, SULTAN MACORRO L. MACUMBAL, SULTAN LINOG M.
INDOL, MACABANGKIT LANTO and MOHAMADALI ABEDIN, respondents.
Rex J.M.A. Fernandez for petitioner.
Mangurun B. Batuampar for respondents.
SYLLABUS
1.
REMEDIAL LAW; ACTIONS; VENUE OF LIBEL CASE WHERE
OFFENDED PARTY IS AN PUBLIC OFFICIAL. From the provision of
Article 360, third paragraph of the Revised Penal Code as amended by R.A.
4363, it is clear that an offended party who is at the same time a public
official can only institute an action arising from libel in two (2) venues: the
place where he holds office, and the place where the alleged libelous articles
were printed and first published.
2.
ID.; ID.; IMPROPER VENUE; MUST BE RAISED IN A NOTION TO
DISMISS PRIOR TO A RESPONSIVE PLEADING. Unless and until the
defendant objects to the venue in a motion to dismiss prior to a responsive
pleading, the venue cannot truly be said to have been improperly laid since,
for all practical intents and purposes, the venue though technically wrong
may yet be considered acceptable to the parties for whose convenience the
rules on venue had been devised.
3.
ID.; ID.; ID.; WAIVED IN CASE AT BAR BY FILING ANSWER.
Petitioner Diaz then, as defendant in the court below, should have timely
challenged the venue laid in Marawi City in a motion to dismiss, pursuant to
Sec. 4, Rule 4, of the Rules of Court. Unfortunately, petitioner had already
submitted himself to the jurisdiction of the trial court when he filed his Answer
to the Complaint with Counterclaim. His motion to dismiss was therefore
belatedly filed and could no longer deprive the trial court of jurisdiction to
hear and decide the instant civil action for damages. Well-settled is the rule
that improper venue may be waived and such waiver may occur by laches.
Sec. 1 of Rule 16 provides that objections to improper venue must be made
in a motion to dismiss before any responsive pleading is filed. Responsive
pleadings are those which seek affirmative relief and set up defenses.
Consequently, having already submitted his person to the jurisdiction of the
trial court, petitioner may no longer object to the venue which, although
mandatory in the instant case, is nevertheless waivable. As such, improper
venue must be seasonably raised, otherwise, it may be deemed waived.
4.
ID.; ID.; ID.; RELATES TO TRIAL AND NOT TO JURISDICTION.
Indeed, the laying of venue is procedural rather than substantive, relating as
it does to jurisdiction of the court over the person rather than the subject
matter. Venue relates to trial and not to jurisdiction.
"WHEREFORE . . . this investigation in the light of Agbayani vs. Sayo case

finds that it has no jurisdiction to handle this case and that the same be filed
or instituted in Cotabato City where complainant is officially holding office at
the time respondents caused the publication of the complained news item in
the Mindanao Kris in Cotabato City, for which reason it is recommended that
this charge be dropped for lack of jurisdiction."
DECISION
BELLOSILLO, J p:
VENUE in the instant civil action for damages arising from libel was
improperly laid; nonetheless, the trial court refused to dismiss the complaint.
Hence, this Petition for Certiorari, with prayer for the issuance of a temporary
restraining order, assailing that order of denial 1 as well as the order denying
reconsideration. 2
The facts: On 16 July 1991, the Mindanao Kris, a newspaper of general

circulation in Cotabato City, published in its front page the news article
captioned "6-Point Complaint Filed vs. Macumbal," and in its Publisher's
Notes the editorial, "Toll of Corruption," which exposed alleged anomalies by
key officials in the Regional Office of the Department of Environment and
Natural Resources. 3
On 22 July 1991, the public officers alluded to, namely, private respondents
Sultan Macorro L. Macumbal, Sultan Linog M. Indol, Atty. Macabangkit M.
Lanto and Atty. Mohamadali Abedin, instituted separate criminal and civil
complaints arising from the libel before the City Prosecutor's Office and the
Regional Trial Court in Marawi City. The publisher-editor of the Mindanao
Kris, petitioner Patricio P. Diaz, and Mamala B. Pagandaman, who executed
a sworn statement attesting to the alleged corruption, were named
respondents in both complaints. 4
In the interim, the civil complaint for damages, docketed as Civil Case No.
385-91 and raffled to Branch 10 of the Regional Trial Court in Marawi City,
was set for Pre-Trial Conference. The defendants therein had already filed
their respective Answers with Counterclaim.
On 18 November 1991, petitioner Diaz moved for the dismissal of the action
for damages on the ground that the trial court did not have jurisdiction over
the subject matter. He vehemently argued that the complaint should have
been filed in Cotabato City and not in Marawi City. 6
Pending action on the motion, the presiding judge of Branch 10 inhibited

himself from the case which was thereafter reraffled to the sala of respondent
judge.
On 15 June 1991, respondent judge denied petitioner's Motion to Dismiss for

lack of merit. Diaz thereafter moved for reconsideration of the order of denial.
The motion was also denied in the Order of 27 August 1991, prompting
petitioner to seek relief therefrom.
Petitioner Diaz contends that the civil action for damages could not be
rightfully filed in Marawi City as none of the private respondents, who are all
public officers, held office in Marawi City; neither were the alleged libelous
news items published in that city. Consequently, it is petitioner's view that the
Regional Trial Court in Marawi City has no jurisdiction to entertain the civil
action for damages.
On 2 September 1991, the City Prosecutor's Office dismissed the criminal

case thus 5
The petitioner is correct. Not one of the respondents then held office in
Marawi City: respondent Macumbal was the Regional Director for Region XII
of the DENR and held office in Cotabato City; respondent Indol was the
Provincial Environment and Natural Resources Officer of Lanao del Norte
and held office in that province; respondent Lanto was a consultant of the
Secretary of the DENR and, as averred in the complaint, was temporarily
residing in Quezon City; and, respondent Abedin was the Chief of the Legal
Division of the DENR Regional Office in Cotabato City. 7 Indeed, private
respondents do not deny that their main place of work was not in Marawi
City, although they had sub-offices therein.
Apparently, the claim of private respondents that they maintained sub-offices

in Marawi City is a mere afterthought, considering that it was made following
the dismissal of their criminal complaint by the City Prosecutor of Marawi
City. Significantly, in their complaint in civil Case No. 385-91 respondents
simply alleged that they were residents of Marawi City, except for respondent
Lanto who was then temporarily residing in Quezon City, and that they were
public officers, nothing more. This averment is not enough to vest jurisdiction
upon the Regional Trial Court of Marawi City and may be properly assailed in
a motion to dismiss.
The Comment of private respondents that Lanto was at the time of the
commission of the offense actually holding office in Marawi City as consultant
of LASURECO can neither be given credence because this is inconsistent
with their allegation in their complaint that respondent Lanto, as consultant of
the Secretary of the DENR, was temporarily residing in Quezon City.
Moreover, it is admitted that the libelous articles were published and printed
in Cotabato City. Thus, respondents were limited in their choice of venue for
their action for damages only to Cotabato City where Macumbal, Lanto and
Abedin had their office and Lanao del Norte where Indol worked. Marawi City
is not among those where venue can be laid.
The third paragraph of Art. 360 of the Revised Penal Code, as amended by
R.A. No. 4363, specifically requires that
"The criminal and civil action for damages in cases of written defamations as
provided for in this chapter, shall be filed simultaneously or separately with
the Court of First Instance (now Regional Trial Court) of the province or city
where the libelous article is printed and first published or where any of the
offended parties actually resides at the time of the commission of the
offense: Provided, however, that where one of the offended parties is a
public officer . . . (who) does not hold office in the City of Manila, the action
shall be filed in the Court of First Instance (Regional Trial Court) of the
province or city where he held office at the time of the commission of the
offense or where the libelous article is printed and first published and in case
one of the the offended parties is a private individual, the action shall be filed
in the Court of First Instance of the province or city where he actually resides
at the time of the commission of the offense or where the libelous matter is
printed and first published . . . . " (emphasis supplied)
From the foregoing provision, it is clear that an offended party who is at the
same time a public official can only institute an action arising from libel in two
(2) venues: the place where he holds office, and the place where the alleged
libelous articles were printed and first published.
Private respondents thus appear to have misread the provisions of Art. 360
of the Revised Penal Code, as amended, when they filed their criminal and
civil complaints in Marawi City. They deemed as sufficient to vest jurisdiction
upon the Regional Trial Court of Marawi City the allegation that "plaintiffs are
all of legal age, all married, Government officials by occupation and residents
of Marawi City." 8 But they are wrong.
Consequently, it is indubitable that venue was improperly laid. However,

unless and until the defendant objects to the venue in a motion to dismiss
prior to a responsive pleading, the venue cannot truly be said to have been
improperly laid since, for all practical intents and purposes, the venue though
technically wrong may yet be considered acceptable to the parties for whose
convenience the rules on venue had been devised. 9
Petitioner Diaz then, as defendant in the court below, should have timely
challenged the venue laid in Marawi City in a motion to dismiss, pursuant to
Sec. 4, Rule 4, of the Rules of Court. Unfortunately, petitioner had already
submitted himself to the jurisdiction of the trial court when he filed his Answer
to the Complaint with Counterclaim. 10
His motion to dismiss was therefore belatedly filed and could no longer
deprive the trial court of jurisdiction to hear and decide the instant civil action
for damages. Well-settled is the rule that improper venue may be waived and
such waiver may occur by laches. 11
such, improper venue must be seasonably raised, otherwise, it may be

deemed waived.
WHEREFORE, for lack of merit, the Petition for Certiorari is DISMISSED and
the Temporary Restraining Order heretofore issued is LIFTED.
Petitioner was obviously aware of this rule when he anchored his motion to
dismiss on lack of cause of action over the subject matter, relying on this
Court's ruling in Time, Inc. v. Reyes. 12 Therein, We declared that the Court
of First Instance of Rizal was without jurisdiction to take cognizance of Civil
Case No. 10403 because the complainants held office in Manila, not in Rizal,
while the alleged libelous articles were published abroad.
This case is remanded to the court of origin for further proceedings.
SO ORDERED.
It may be noted that in Time, Inc. v. Reyes, the defendant therein moved to
dismiss the case without first submitting to the jurisdiction of the lower court,
which is not the case before Us. More, venue in an action arising from libel is
only mandatory if it is not waived by defendant. Thus
SUPREME COURT
"The rule is that where a statute creates a right and provides a remedy for its
enforcement, the remedy is exclusive; and where it confers jurisdiction upon
a particular court, that jurisdiction is likewise exclusive, unless otherwise
provided. Hence, the venue provisions of Republic Act No. 4363 should be
deemed mandatory for the party bringing the action, unless the question of
venue should be waived by the defendant . . . . " 13
Manila
SECOND DIVISION
G.R. No. 111685

Withal, objections to venue in civil actions arising from libel may be waived; it
does not, after all, involve a question of jurisdiction. Indeed, the laying of
venue is procedural rather than substantive, relating as it does to jurisdiction
of the court over the person rather than the subject matter. 14 Venue relates
to trial and not to jurisdiction.
Finally, Sec. 1 of Rule 16 provides that objections to improper venue must be

made in a motion to dismiss before any responsive pleading is filed.
Responsive pleadings are those which seek affirmative relief and set up
defenses. Consequently, having already submitted his person to the
jurisdiction of the trial court, petitioner may no longer object to the venue
which, although mandatory in the instant case, is nevertheless waivable. As
August 20, 2001
DAVAO LIGHT & POWER CO., INC., petitioner,

vs.
THE HON. COURT OF APPEALS, HON. RODOLFO M. BELLAFLOR,
Presiding Judge of Branch 11, RTC-Cebu and FRANCISCO TESORERO,
respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari assailing the Decision dated

August 31, 1993 rendered by the Sixteenth Division1 of the Court of Appeals
in CA-G.R. SP No. 29996, the dispositive portion of which states:
borne out by the Contract of Lease (Annex 2 of the motion) and another
Contract of Lease of Generating Equipment (Annex 3 of the motion)
executed by the plaintiff with the NAPOCOR.
WHEREFORE, the petition for review filed by Davao Light & Power Co., Inc.
is hereby DENIED DUE COURSE and the same is DISMISSED.
The representation made by the plaintiff in the 2 aforementioned Lease

Contracts stating that its principal office is at "163-165 P. Reyes Street,
Davao City" bars the plaintiff from denying the same.
IT IS SO ORDERED.
The antecedent facts are:
The choice of venue should not be left to plaintiff's whim or caprises [sic]. He
may be impelled by some ulterior motivation in choosing to file a case in a
court even if not allowed by the rules of venue.
On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a complaint
for damages2 against private respondent Francisco Tesorero before the
Regional Trial Court of Cebu City, Branch 11. Docketed as CEB-11578, the
complaint prayed for damages in the amount of P11,000,000.00.
Another factor considered by the Courts in deciding controversies regarding

venue are considerations of judicial economy and administration, as well as
the convenience of the parties for which the rules of procedure and venue
were formulated x x x.
In lieu of an answer, private respondent filed a motion to dismiss3 claiming

that: (a) the complaint did not state a cause of action; (b) the plaintiff's claim
has been extinguished or otherwise rendered moot and academic; (c) there
was non-joinder of indispensable parties; and (d) venue was improperly laid.
Of these four (4) grounds, the last mentioned is most material in this case at
bar.
Considering the foregoing, the Court is of the opinion that the principal office
of plaintiff is at Davao City which for purposes of venue is the residence of
plaintiff.
On August 3, 1992, the trial court issued a Resolution4 dismissing

petitioner's complaint on the ground of improper venue. The trial court stated
that:
The motion on the ground of improper venue is granted and the complaint
DISMISSED on that ground.
Hence, the case should be filed in Davao City.
SO ORDERED.
The plaintiff being a private corporation undoubtedly Banilad, Cebu City is
the plaintiff's principal place of business as alleged in the complaint and
which for purposes of venue is considered as its residence. x x x.
However, in defendant's motion to dismiss, it is alleged and submitted that

the principal office of plaintiff is at "163-165 P. Reyes Street, Davao City as
Petitioner's motion for reconsideration5 was denied in an Order6 dated

October 1, 1992.
From the aforesaid resolution and order, petitioner originally filed before this
Court on November 20, 1992 a petition for review on certiorari docketed as
G.R. No. 107381.7 We declined to take immediate cognizance of the case,
and in a Resolution dated January 11, 1993,8 referred the same to the Court
of Appeals for resolution. The petition was docketed in the appellate court as
CA-G.R. SP No. 29996.
On August 31, 1993, the Court of Appeals rendered the assailed judgment9
denying due course and dismissing the petition. Counsel for petitioner
received a copy of the decision on September 6, 1993.10 Without filing a
motion for reconsideration, petitioner filed the instant petition, assailing the
judgment of the Court of Appeals on the following grounds:
5.01. Respondent Court of Appeals denied petitioner procedural due process

by failing to resolve the third of the above-stated issues.
5.02. Petitioner's right to file its action for damages against private
respondent in Cebu City where its principal office is located, and for which it
paid P55,398.50 in docket fees, may not be negated by a supposed estoppel
absent the essential elements of the false statement having been made to
private respondent and his reliance on good faith on the truth thereof, and
private respondent's action or inaction based thereon of such character as to
change his position or status to his injury, detriment or prejudice.
The principal issue in the case at bar involves a question of venue. It is to be

distinguished from jurisdiction, as follows:
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be
conferred by consent or waiver upon a court which otherwise would have no
jurisdiction over the subject-matter of an action; but the venue of an action as
fixed by statute may be changed by the consent of the parties and an
objection that the plaintiff brought his suit in the wrong county may be waived
by the failure of the defendant to make a timely objection. In either case, the
court may render a valid judgment. Rules as to jurisdiction can never be left
to the consent or agreement of the parties, whether or not a prohibition exists
against their alteration.11
It is private respondent's contention that the proper venue is Davao City, and
not Cebu City where petitioner filed Civil Case No. CEB-11578. Private
respondent argues that petitioner is estopped from claiming that its residence
is in Cebu City, in view of contradictory statements made by petitioner prior
to the filing of the action for damages. First, private respondent adverts to
several contracts12 entered into by petitioner with the National Power
Corporation (NAPOCOR) where in the description of personal
circumstances, the former states that its principal office is at "163-165 P.
Reyes St., Davao City." According to private respondent the petitioner's
address in Davao City, as given in the contracts, is an admission which
should bind petitioner.
In addition, private respondent points out that petitioner made several judicial
admissions as to its principal office in Davao City consisting principally of
allegations in pleadings filed by petitioner in a number of civil cases pending
before the Regional Trial Court of Davao in which it was either a plaintiff or a
defendant.13
Practically the same issue was addressed in Young Auto Supply Co. v. Court
of Appeals.14 In the aforesaid case, the defendant therein sought the
dismissal of an action filed by the plaintiff, a corporation, before the Regional
Trial Court of Cebu City, on the ground of improper venue. The trial court
denied the motion to dismiss; on certiorari before the Court of Appeals, the
denial was reversed and the case was dismissed. According to the appellate
tribunal, venue was improperly laid since the address of the plaintiff was
supposedly in Pasay City, as evidenced by a contract of sale, letters and
several commercial documents sent by the plaintiff to the defendant, even
though the plaintiff's articles of incorporation stated that its principal office
was in Cebu City. On appeal, we reversed the Court of Appeals. We
reasoned out thus:
In the Regional Trial Courts, all personal actions are commenced and tried in
the province or city where the defendant or any of the defendants resides or
election of the plaintiff x x x.
There are two plaintiffs in the case at bench: a natural person and a domestic
corporation. Both plaintiffs aver in their complaint that they are residents of
Cebu City, thus:
Roxas could argue that YASCO was in estoppel because it misled Roxas to
believe that Pasay City was its principal place of business. But this is not the
case before us.
xxx
With the finding that the residence of YASCO for purposes of venue is in
Cebu City, where its principal place of business is located, it becomes
unnecessary to decide whether Garcia is also a resident of Cebu City and
whether Roxas was in estoppel from questioning the choice of Cebu City as
the venue. [emphasis supplied]
xxx
xxx
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
"THIRD. That the place where the principal office of the corporation is to be
established or located is at Cebu City, Philippines (as amended on
December 20, 1980 and further amended on December 20, 1984)" x x x.
A corporation has no residence in the same sense in which this term is

applied to a natural person. But for practical purposes, a corporation is in a
metaphysical sense a resident of the place where its principal office is
located as stated in the articles of incorporation (Cohen v. Benguet
Commercial Co., Ltd., 34 Phil. 526 [1916] Clavecilla Radio System v. Antillo,
19 SCRA 379 [1967]). The Corporation Code precisely requires each
corporation to specify in its articles of incorporation the "place where the
principal office of the corporation is to be located which must be within the
Philippines" (Sec. 14[3]). The purpose of this requirement is to fix the
residence of a corporation in a definite place, instead of allowing it to be
ambulatory.
In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court

explained why actions cannot be filed against a corporation in any place
where the corporation maintains its branch offices. The Court ruled that to
allow an action to be instituted in any place where the corporation has branch
offices, would create confusion and work untold inconvenience to said entity.
By the same token, a corporation cannot be allowed to file personal actions
in a place other than its principal place of business unless such a place is
also the residence of a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the
venue on the ground that its principal place of business was in Cebu City,
The same considerations apply to the instant case. It cannot be disputed that
petitioner's principal office is in Cebu City, per its amended articles of
incorporation15 and by-laws.16 An action for damages being a personal
action,17 venue is determined pursuant to Rule 4, section 2 of the Rules of
Court, to wit:
Venue of personal actions. All other actions may be commenced and tied
where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a nonresident defendant where he may be found, at the election of the plaintiff.18
Private respondent is not a party to any of the contracts presented before us.
He is a complete stranger to the covenants executed between petitioner and
NAPOCOR, despite his protestations that he is privy thereto, on the rather
flimsy ground that he is a member of the public for whose benefit the electric
generating equipment subject of the contracts were leased or acquired. We
are likewise not persuaded by his argument that the allegation or
representation made by petitioner in either the complaints or answers it filed
in several civil cases that its residence is in Davao City should estop it from
filing the damage suit before the Cebu courts. Besides there is no showing
that private respondent is a party in those civil cases or that he relied on such
representation by petitioner.
WHEREFORE, the instant petition is hereby GRANTED. The appealed

decision is hereby REVERSED and SET ASIDE. The Regional Trial Court of
Cebu City, Branch 11 is hereby directed to proceed with Civil Case No. CEB11578 with all deliberate dispatch. No pronouncement as to costs.
The Facts
WE CONCUR:
Petitioner Anita Mangila ("petitioner" for brevity) is an exporter of sea foods
and doing business under the name and style of Seafoods Products. Private
respondent Loreta Guina ("private respondent" for brevity) is the President
and General Manager of Air Swift International, a single registered
proprietorship engaged in the freight forwarding business.
SO ORDERED.

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 125027
August 12, 2002
ANITA MANGILA, petitioner,

vs.
Sometime in January 1988, petitioner contracted the freight forwarding

services of private respondent for shipment of petitioners products, such as
crabs, prawns and assorted fishes, to Guam (USA) where petitioner
maintains an outlet. Petitioner agreed to pay private respondent cash on
delivery. Private respondents invoice stipulates a charge of 18 percent
interest per annum on all overdue accounts. In case of suit, the same invoice
stipulates attorneys fees equivalent to 25 percent of the amount due plus
costs of suit.3
On the first shipment, petitioner requested for seven days within which to pay
private respondent. However, for the next three shipments, March 17, 24 and
31, 1988, petitioner failed to pay private respondent shipping charges
amounting to P109, 376.95.4
COURT OF APPEALS and LORETA GUINA, respondents.
CARPIO, J.:
Despite several demands, petitioner never paid private respondent. Thus, on

June 10, 1988, private respondent filed Civil Case No. 5875 before the
Regional Trial Court of Pasay City for collection of sum of money.
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of

Court, seeking to set aside the Decision1 of the Court of Appeals affirming
the Decision2 of the Regional Trial Court, Branch 108, Pasay City. The trial
court upheld the writ of attachment and the declaration of default on
petitioner while ordering her to pay private respondent P109,376.95 plus 18
percent interest per annum, 25 percent attorneys fees and costs of suit.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that
summons was not served on petitioner. A woman found at petitioners house
informed the sheriff that petitioner transferred her residence to Sto. Nio,
Guagua, Pampanga. The sheriff found out further that petitioner had left the
Philippines for Guam.5
Thus, on September 13, 1988, construing petitioners departure from the

Philippines as done with intent to defraud her creditors, private respondent
filed a Motion for Preliminary Attachment. On September 26, 1988, the trial
court issued an Order of Preliminary Attachment6 against petitioner. The

following day, the trial court issued a Writ of Preliminary Attachment.
The trial court granted the request of its sheriff for assistance from their
counterparts in RTC, Pampanga. Thus, on October 28, 1988, Sheriff Alfredo
San Miguel of RTC Pampanga served on petitioners household help in San
Fernando, Pampanga, the Notice of Levy with the Order, Affidavit and
Bond.7
On November 7, 1988, petitioner filed an Urgent Motion to Discharge

Attachment8 without submitting herself to the jurisdiction of the trial court.
She pointed out that up to then, she had not been served a copy of the
Complaint and the summons. Hence, petitioner claimed the court had not
acquired jurisdiction over her person.9
In the hearing of the Urgent Motion to Discharge Attachment on November

11, 1988, private respondent sought and was granted a re-setting to
December 9, 1988. On that date, private respondents counsel did not
appear, so the Urgent Motion to Discharge Attachment was deemed
submitted for resolution.10
The trial court granted the Motion to Discharge Attachment on January 13,
1989 upon filing of petitioners counter-bond. The trial court, however, did not
rule on the question of jurisdiction and on the validity of the writ of preliminary
attachment.
On December 26, 1988, private respondent applied for an alias summons,

which the trial court issued on January 19, 1989.11 It was only on January
26, 1989 that summons was finally served on petitioner.12
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on

the ground of improper venue. Private respondents invoice for the freight
forwarding service stipulates that "if court litigation becomes necessary to
enforce collection xxx the agreed venue for such action is Makati, Metro
Manila."13 Private respondent filed an Opposition asserting that although
"Makati" appears as the stipulated venue, the same was merely an

inadvertence by the printing press whose general manager executed an
affidavit14 admitting such inadvertence. Moreover, private respondent
claimed that petitioner knew that private respondent was holding office in
Pasay City and not in Makati.15 The lower court, finding credence in private
respondents assertion, denied the Motion to Dismiss and gave petitioner five
days to file her Answer. Petitioner filed a Motion for Reconsideration but this
too was denied.
Petitioner filed her Answer16 on June 16, 1989, maintaining her contention
that the venue was improperly laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for July
18, 1989 at 8:30 a.m. and requiring the parties to submit their pre-trial briefs.
Meanwhile, private respondent filed a Motion to Sell Attached Properties but
the trial court denied the motion.
On motion of petitioner, the trial court issued an Order resetting the pre-trial
from July 18, 1989 to August 24, 1989 at 8:30 a.m..
On August 24, 1989, the day of the pre-trial, the trial court issued an Order17
terminating the pre-trial and allowing the private respondent to present
evidence ex-parte on September 12, 1989 at 8:30 a.m.. The Order stated
that when the case was called for pre-trial at 8:31 a.m., only the counsel for
private respondent appeared. Upon the trial courts second call 20 minutes
later, petitioners counsel was still nowhere to be found. Thus, upon motion of
private respondent, the pre-trial was considered terminated.
On September 12, 1989, petitioner filed her Motion for Reconsideration of the
Order terminating the pre-trial. Petitioner explained that her counsel arrived 5
minutes after the second call, as shown by the transcript of stenographic
notes, and was late because of heavy traffic. Petitioner claims that the lower
court erred in allowing private respondent to present evidence ex-parte since
there was no Order considering the petitioner as in default. Petitioner
contends that the Order of August 24, 1989 did not state that petitioner was
declared as in default but still the court allowed private respondent to present
evidence ex-parte.18
The Issues
On October 6, 1989, the trial court denied the Motion for Reconsideration
and scheduled the presentation of private respondents evidence ex-parte on
October 10, 1989.1wphi1.nt
On October 10, 1989, petitioner filed an Omnibus Motion stating that the
presentation of evidence ex-parte should be suspended because there was
no declaration of petitioner as in default and petitioners counsel was not
absent, but merely late.
The issues raised by petitioner may be re-stated as follows:
I.
WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE

WRIT OF ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED;
On October 18, 1989, the trial court denied the Omnibus Motion.19
II.
On November 20, 1989, the petitioner received a copy of the Decision of
November 10, 1989, ordering petitioner to pay respondent P109,376.95 plus
18 percent interest per annum, 25 percent attorneys fees and costs of suit.
Private respondent filed a Motion for Execution Pending Appeal but the trial
court denied the same.
WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
III.
The Ruling of the Court of Appeals
WHETHER THERE WAS IMPROPER VENUE.
On December 15, 1995, the Court of Appeals rendered a decision affirming

the decision of the trial court. The Court of Appeals upheld the validity of the
issuance of the writ of attachment and sustained the filing of the action in the
RTC of Pasay. The Court of Appeals also affirmed the declaration of default
on petitioner and concluded that the trial court did not commit any reversible
error.
IV.
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the

Court of Appeals denied the same in a Resolution dated May 20, 1996.
Hence, this petition.
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT

PETITIONER IS OBLIGED TO PAY P109, 376.95, PLUS ATTORNEYS
FEES.20
The Ruling of the Court
Improper Issuance and Service of Writ of Attachment
Petitioner ascribes several errors to the issuance and implementation of the

writ of attachment. Among petitioners arguments are: first, there was no
ground for the issuance of the writ since the intent to defraud her creditors
had not been established; second, the value of the properties levied
exceeded the value of private respondents claim. However, the crux of
petitioners arguments rests on the question of the validity of the writ of
attachment. Because of failure to serve summons on her before or
simultaneously with the writs implementation, petitioner claims that the trial
court had not acquired jurisdiction over her person and thus the service of
the writ is void.
As a preliminary note, a distinction should be made between issuance and

implementation of the writ of attachment. It is necessary to distinguish
between the two to determine when jurisdiction over the person of the
defendant should be acquired to validly implement the writ. This distinction is
crucial in resolving whether there is merit in petitioners argument.
This Court has long settled the issue of when jurisdiction over the person of
the defendant should be acquired in cases where a party resorts to
provisional remedies. A party to a suit may, at any time after filing the
complaint, avail of the provisional remedies under the Rules of Court.
Specifically, Rule 57 on preliminary attachment speaks of the grant of the
remedy "at the commencement of the action or at any time thereafter."21
This phrase refers to the date of filing of the complaint which is the moment
that marks "the commencement of the action." The reference plainly is to a
time before summons is served on the defendant, or even before summons
issues.
In Davao Light & Power Co., Inc. v. Court of Appeals,22 this Court clarified
the actual time when jurisdiction should be had:
"It goes without saying that whatever be the acts done by the Court prior to
the acquisition of jurisdiction over the person of defendant - issuance of
summons, order of attachment and writ of attachment - these do not and
cannot bind and affect the defendant until and unless jurisdiction over his
person is eventually obtained by the court, either by service on him of
summons or other coercive process or his voluntary submission to the courts
authority. Hence, when the sheriff or other proper officer commences
implementation of the writ of attachment, it is essential that he serve on the

defendant not only a copy of the applicants affidavit and attachment bond,
and of the order of attachment, as explicitly required by Section 5 of Rule 57,
but also the summons addressed to said defendant as well as a copy of the
complaint xxx." (Emphasis supplied.)
Furthermore, we have held that the grant of the provisional remedy of

attachment involves three stages: first, the court issues the order granting the
application; second, the writ of attachment issues pursuant to the order
granting the writ; and third, the writ is implemented. For the initial two stages,
it is not necessary that jurisdiction over the person of the defendant be first
obtained. However, once the implementation of the writ commences, the
court must have acquired jurisdiction over the defendant for without such
jurisdiction, the court has no power and authority to act in any manner
against the defendant. Any order issuing from the Court will not bind the
defendant.23
In the instant case, the Writ of Preliminary Attachment was issued on

September 27, 1988 and implemented on October 28, 1988. However, the
alias summons was served only on January 26, 1989 or almost three months
after the implementation of the writ of attachment.
The trial court had the authority to issue the Writ of Attachment on
September 27 since a motion for its issuance can be filed "at the
commencement of the action." However, on the day the writ was
implemented, the trial court should have, previously or simultaneously with
the implementation of the writ, acquired jurisdiction over the petitioner. Yet,
as was shown in the records of the case, the summons was actually served
on petitioner several months after the writ had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous

service of summons contemplated in Section 5 of Rule 57 provides for
exceptions. Among such exceptions are "where the summons could not be
served personally or by substituted service despite diligent efforts or where
the defendant is a resident temporarily absent therefrom x x x." Private
respondent asserts that when she commenced this action, she tried to serve
summons on petitioner but the latter could not be located at her customary
address in Kamuning, Quezon City or at her new address in Guagua,
Pampanga.24 Furthermore, respondent claims that petitioner was not even

in Pampanga; rather, she was in Guam purportedly on a business trip.
Private respondent never showed that she effected substituted service on

petitioner after her personal service failed. Likewise, if it were true that
private respondent could not ascertain the whereabouts of petitioner after a
diligent inquiry, still she had some other recourse under the Rules of Civil
Procedure.
The rules provide for certain remedies in cases where personal service could
not be effected on a party. Section 14, Rule 14 of the Rules of Court provides
that whenever the defendants "whereabouts are unknown and cannot be
ascertained by diligent inquiry, service may, by leave of court, be effected
upon him by publication in a newspaper of general circulation x x x." Thus, if
petitioners whereabouts could not be ascertained after the sheriff had served
the summons at her given address, then respondent could have immediately
asked the court for service of summons by publication on petitioner.25
Moreover, as private respondent also claims that petitioner was abroad at the
time of the service of summons, this made petitioner a resident who is
temporarily out of the country. This is the exact situation contemplated in
Section 16,26 Rule 14 of the Rules of Civil Procedure, providing for service
of summons by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner

cannot be deemed to have cured the fatal defect in the enforcement of the
writ. The trial court cannot enforce such a coercive process on petitioner
without first obtaining jurisdiction over her person. The preliminary writ of
attachment must be served after or simultaneous with the service of
summons on the defendant whether by personal service, substituted service
or by publication as warranted by the circumstances of the case.27 The
subsequent service of summons does not confer a retroactive acquisition of
jurisdiction over her person because the law does not allow for retroactivity of
a belated service.
Petitioner assails the filing of this case in the RTC of Pasay and points to a
provision in private respondents invoice which contains the following:
"3. If court litigation becomes necessary to enforce collection, an additional

equivalent (sic) to 25% of the principal amount will be charged. The agreed
venue for such action is Makati, Metro Manila, Philippines."28
Based on this provision, petitioner contends that the action should have been
instituted in the RTC of Makati and to do otherwise would be a ground for the
dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for
the reason stated by petitioner.
The Rules of Court provide that parties to an action may agree in writing on
the venue on which an action should be brought.29 However, a mere
stipulation on the venue of an action is not enough to preclude parties from
bringing a case in other venues.30 The parties must be able to show that
such stipulation is exclusive. Thus, absent words that show the parties
intention to restrict the filing of a suit in a particular place, courts will allow the
filing of a case in any venue, as long as jurisdictional requirements are
followed. Venue stipulations in a contract, while considered valid and
enforceable, do not as a rule supersede the general rule set forth in Rule 4 of
the Revised Rules of Court.31 In the absence of qualifying or restrictive
words, they should be considered merely as an agreement on additional
forum, not as limiting venue to the specified place.32
In the instant case, the stipulation does not limit the venue exclusively to
Makati. There are no qualifying or restrictive words in the invoice that would
evince the intention of the parties that Makati is the "only or exclusive" venue
where the action could be instituted. We therefore agree with private
respondent that Makati is not the only venue where this case could be filed.
Improper Venue
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in
personal actions is "where the defendant or any of the defendants resides or
election of the plaintiff."33 The exception to this rule is when the parties
agree on an exclusive venue other than the places mentioned in the rules.
But, as we have discussed, this exception is not applicable in this case.
Hence, following the general rule, the instant case may be brought in the
place of residence of the plaintiff or defendant, at the election of the plaintiff
(private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower
court) was not alleged in the complaint. Rather, what was alleged was the
postal address of her sole proprietorship, Air Swift International. It was only
when private respondent testified in court, after petitioner was declared in
default, that she mentioned her residence to be in Better Living Subdivision,
Paraaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,34 the reverse happened.

The plaintiff in that case was Tyson Enterprises, Inc., a corporation owned
and managed by Dominador Ti. The complaint, however, did not allege the
office or place of business of the corporation, which was in Binondo, Manila.
What was alleged was the residence of Dominador Ti, who lived in San Juan,
Rizal. The case was filed in the Court of First Instance of Rizal, Pasig. The
Court there held that the evident purpose of alleging the address of the
corporations president and manager was to justify the filing of the suit in
Rizal, Pasig instead of in Manila. Thus, the Court ruled that there was no
question that venue was improperly laid in that case and held that the place
of business of Tyson Enterpises, Inc. is considered as its residence for
purposes of venue. Furthermore, the Court held that the residence of its
president is not the residence of the corporation because a corporation has a
personality separate and distinct from that of its officers and stockholders.
In the instant case, it was established in the lower court that petitioner
resides in San Fernando, Pampanga35 while private respondent resides in
Paraaque City.36 However, this case was brought in Pasay City, where the
business of private respondent is found. This would have been permissible
had private respondents business been a corporation, just like the case in
Sy v. Tyson Enterprises, Inc. However, as admitted by private respondent in
her Complaint37 in the lower court, her business is a sole proprietorship, and
as such, does not have a separate juridical personality that could enable it to
file a suit in court.38 In fact, there is no law authorizing sole proprietorships to
file a suit in court.39
A sole proprietorship does not possess a juridical personality separate and

distinct from the personality of the owner of the enterprise.40 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 its
proprietor or owner to secure licenses and permits, register its business
name, and pay taxes to the national government.41 The law does not vest a
separate legal personality on the sole proprietorship or empower it to file or
defend an action in court.42
Thus, not being vested with legal personality to file this case, the sole
proprietorship is not the plaintiff in this case but rather Loreta Guina in her
personal capacity. In fact, the complaint in the lower court acknowledges in
its caption that the plaintiff and defendant are Loreta Guina and Anita
Mangila, respectively. The title of the petition before us does not state, and
rightly so, Anita Mangila v. Air Swift International, but rather Anita Mangila v.
Loreta Guina. Logically then, it is the residence of private respondent Guina,
the proprietor with the juridical personality, which should be considered as
one of the proper venues for this case.
All these considered, private respondent should have filed this case either in
San Fernando, Pampanga (petitioners residence) or Paraaque (private
respondents residence). Since private respondent (complainant below) filed
this case in Pasay, we hold that the case should be dismissed on the ground
of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the

lower court, petitioner expressly stated that she was filing the motion without
submitting to the jurisdiction of the court. At that time, petitioner had not been
served the summons and a copy of the complaint.43 Thereafter, petitioner
timely filed a Motion to Dismiss44 on the ground of improper venue. Rule 16,
Section 1 of the Rules of Court provides that a motion to dismiss may be filed
"[W]ithin the time for but before filing the answer to the complaint or pleading
asserting a claim." Petitioner even raised the issue of improper venue in his
Answer45 as a special and affirmative defense. Petitioner also continued to

raise the issue of improper venue in her Petition for Review46 before this
Court. We thus hold that the dismissal of this case on the ground of improper
venue is warranted.
The rules on venue, like other procedural rules, are designed to insure a just
and orderly administration of justice or the impartial and evenhanded
determination of every action and proceeding. Obviously, this objective will
not be attained if the plaintiff is given unrestricted freedom to choose where
to file the complaint or petition.47
Petitioner,
G.R. No. 152808
- versus Present:
We find no reason
petitioner.1wphi1.nt
to
rule
on
the
other
issues
raised
by
Davide, Jr., C.J.,
(Chairman),
WHEREFORE, the petition is GRANTED on the grounds of improper venue

and invalidity of the service of the writ of attachment. The decision of the
Court of Appeals and the order of respondent judge denying the motion to
dismiss are REVERSED and SET ASIDE. Civil Case No. 5875 is hereby
dismissed without prejudice to refiling it in the proper venue. The attached
properties of petitioner are ordered returned to her immediately.
Quisumbing,
Ynares-Santiago,
Carpio, and
Azcuna, JJ.
SO ORDERED.
TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC.,
Respondent.
Promulgated:
September 30, 2005

FIRST DIVISION
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
ANTONIO T. CHUA,
DECISION
QUISUMBING, J.:
For review on certiorari is the decision[1] dated November 28, 2001 of

the Court of Appeals and its resolution[2] of April 1, 2002 in CA-G.R. SP No.
62592. The assailed decision and resolution dismissed the special civil
action for certiorari against the orders of August 9, 2000[3] and October 6,
2000[4] issued by Judge Lorifel Lacap Pahimna in Civil Case No. 67736.
The pertinent facts, based on the records, are as follows:
On December 28, 1999, respondent Total Office Products and
Services, Inc., (TOPROS) lodged a complaint for annulment of contracts of
loan and real estate mortgage against herein petitioner Antonio T. Chua
before the Regional Trial Court of Pasig City. The case was docketed as
Civil Case No. 67736 and was raffled to the sala of Judge Lorifel Lacap
Pahimna.
The said suit sought to annul a loan contract allegedly extended by
petitioner to respondent TOPROS in the amount of ten million four hundred
thousand pesos (P10,400,000) and the accessory real estate mortgage
contract covering two parcels of land situated in Quezon City as collateral.
It appeared on the face of the subject contracts that TOPROS was
represented by its president John Charles Chang, Jr. However, TOPROS
alleged that the purported loan and real estate mortgage contracts were
fictitious, since it never authorized anybody, not even its president, to enter
into said transaction.
On February 28, 2000, petitioner filed a motion to dismiss on the
ground of improper venue. He contended that the action filed by TOPROS
affects title to or possession of the parcels of land subject of the real estate
mortgage. He argued that it should thus have been filed in the Regional Trial
Court of Quezon City where the encumbered real properties are located,
instead of Pasig City where the parties reside.
On August 9, 2000, Judge Pahimna issued an order denying the
motion to dismiss. She reasoned that the action to annul the loan and
mortgage contracts is a personal action and thus, the venue was properly
laid in the RTC of Pasig City where the parties reside.
Petitioner moved for a reconsideration of the said order, which Judge
Pahimna denied in its order of October 6, 2000. Hence, petitioner filed with
the Court of Appeals a special civil action for certiorari alleging:
THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF

DISCRETION IN DISREGARDING THE RULING OF THE SUPREME
COURT IN PASCUAL VS. PASCUAL REGARDING THE RULE ON
PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO BE A
PERSONAL ACTION A CIVIL COMPLAINT FOR THE ANNULMENT OF AN
ALLEGEDLY FICTITIOUS CONTRACT.[5]
The Court of Appeals dismissed said petition in its decision dated
November 28, 2001. It held that the authorities relied upon by petitioner,
namely Pascual v. Pascual[6] and Banco Espaol-Filipino v. Palanca,[7] are
inapplicable in the instant case. The appellate court instead applied
Hernandez v. Rural Bank of Lucena, Inc.[8] wherein we ruled that an action
for the cancellation of a real estate mortgage is a personal action if the
mortgagee has not foreclosed the mortgage and the mortgagor is in
possession of the premises, as neither the mortgagors title to nor
possession of the property is disputed.
Dissatisfied, petitioner filed a motion for reconsideration, which the
Court of Appeals denied for lack of merit in its resolution of April 1, 2002.
Undeterred, petitioner now comes to us on a petition for review raising
the following issues:
WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE
CONTRACT DULY ALLEGED AS FICTITIOUS FOR BEING WITH
ABSOLUTELY NO CONSIDERATION IS A PERSONAL ACTION OR REAL
ACTION?
WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE
CONTRACT DULY ALLEGED AS FICTITIOUS FOR BEING WITH
ABSOLUTELY NO CONSIDERATION, THE PERSON ALLEGED TO HAVE
[LACKED] AUTHORITY TO ENTER INTO SAID CONTRACTS IS AN
INDISPENSABLE PARTY?[9]
Petitioner contends that Hernandez should not be applied here
because in the said case: (1) venue was improperly laid at the outset; (2) the
complaint recognized the validity of the principal contract involved; and (3)
the plaintiff sought to compel acceptance by the defendant of plaintiffs
payment of the latters mortgage debt. He insists that the Pascual case
should be applied instead. He invokes our pronouncement in Pascual, to wit:
It appearing, however, that the sale is alleged to be fictitious, with
absolutely no consideration, it should be regarded as a non-existent, not
merely null, contract. And there being no contract between the deceased
and the defendants, there is in truth nothing to annul by action. The action
brought cannot thus be for annulment of contract, but is one for recovery of a
fishpond, a real action that should be, as it has been, brought in Pampanga,
where the property is located.[10]
Petitioner likewise cites the Banco Espaol-Filipino case, thus:
Where the defendant in a mortgage foreclosure lives out of the Islands
and refuses to appear or otherwise submit himself to the authority of the
court, the jurisdiction of the latter is limited to the mortgaged property, with
respect to which the jurisdiction of the court is based upon the fact that the
property is located within the district and that the court, under the provisions
of law applicable in such cases, is vested with the power to subject the
property to the obligation created by the mortgage. In such case personal
jurisdiction over the nonresident defendant is nonessential and in fact cannot
be acquired.[11]
Petitioner also alleges that John Charles Chang, Jr., the president of
TOPROS, who allegedly entered into the questioned loan and real estate
mortgage contracts, is an indispensable party who has not been properly
impleaded.
TOPROS, however, maintains that the appellate court correctly
sustained the lower courts finding that the instant complaint for annulment of
loan and real estate mortgage contracts is a personal action. TOPROS
points out that a complaint for the declaration of nullity of a loan contract for
lack of consent and consideration remains a personal action even if the said
action will necessarily affect the accessory real estate mortgage.
TOPROS argues that Pascual is inapplicable because the subject
contract therein was a contract of sale of a parcel of land where title and
possession were already transferred to the defendant. TOPROS further
contends that Banco Espaol-Filipino is also inapplicable since the personal
action filed therein was one which affected the personal status of a
nonresident defendant.
Considering the facts and the submission of the parties, we find the
petition bereft of merit.
Well-settled is the rule that an action to annul a contract of loan and its
accessory real estate mortgage is a personal action. In a personal action,
the plaintiff seeks the recovery of personal property, the enforcement of a
contract or the recovery of damages.[12] In contrast, in a real action, the
plaintiff seeks the recovery of real property, or, as indicated in Section 2 (a),
Rule 4 of the then Rules of Court, a real action is an action affecting title to
real property or for the recovery of possession, or for partition or
condemnation of, or foreclosure of mortgage on, real property.[13]
In the Pascual case, relied upon by petitioner, the contract of sale of

the fishpond was assailed as fictitious for lack of consideration. We held that
there being no contract to begin with, there is nothing to annul. Hence, we
deemed the action for annulment of the said fictitious contract therein as one
constituting a real action for the recovery of the fishpond subject thereof.
We cannot, however, apply the foregoing doctrine to the instant case.
Note that in Pascual, title to and possession of the subject fishpond had
already passed to the vendee. There was, therefore, a need to recover the
said fishpond. But in the instant case, ownership of the parcels of land
subject of the questioned real estate mortgage was never transferred to
petitioner, but remained with TOPROS. Thus, no real action for the recovery
of real property is involved. This being the case, TOPROS action for
annulment of the contracts of loan and real estate mortgage remains a
personal action.
Petitioners reliance on the Banco Espaol-Filipino case is likewise
misplaced. That case involved a foreclosure of real estate mortgage against
a nonresident. We held therein that jurisdiction is determined by the place
where the real property is located and that personal jurisdiction over the
nonresident defendant is nonessential and, in fact, cannot be acquired.
Needless to stress, the instant case bears no resemblance to the Banco
Espaol-Filipino case. In the first place, this is not an action involving
foreclosure of real estate mortgage. In the second place, none of the parties
here is a nonresident. We find no reason to apply here our ruling in Banco
Espaol-Filipino.
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc.
provides the proper precedent in this case. In Hernandez, appellants
contended that the action of the Hernandez spouses for the cancellation of
the mortgage on their lots was a real action affecting title to real property,
which should have been filed in the place where the mortgaged lots were
situated. Rule 4, Section 2 (a), of the then Rules of Court, was applied, to
wit:
SEC. 2. Venue in Courts of First Instance. (a) Real actions. Actions
affecting title to, or for recovery of possession, or for partition or
condemnation of, or foreclosure of mortgage on, real property, shall be
commenced and tried in the province where the property or any part thereof
lies.
The Court pointed out in the Hernandez case that with respect to mortgage,
the rule on real actions only mentions an action for foreclosure of a real
estate mortgage. It does not include an action for the cancellation of a real
estate mortgage. Exclusio unios est inclusio alterius. The latter thus falls
under the catch-all provision on personal actions under paragraph (b) of the
above-cited section, to wit:
Is John Charles Chang, Jr., the president of TOPROS who allegedly entered
into the disputed contracts of loan and real estate mortgage, an
indispensable party in this case?
SEC. 2 (b) Personal actions. All other actions may be commenced and
tried where the defendant or any of the defendants resides or may be found,
or where the plaintiff or any of the plaintiffs resides, at the election of the
plaintiff.
We note that although it is Changs signature that appears on the assailed

real estate mortgage contract, his participation is limited to being a
representative of TOPROS, allegedly without authority. The document[18]
which constitutes as the contract of real estate mortgage clearly points to
petitioner and TOPROS as the sole parties-in-interest to the agreement as
mortgagee and mortgagor therein, respectively. Any rights or liabilities
arising from the said contract would therefore bind only the petitioner and
TOPROS as principal parties. Chang, acting as mere representative of
TOPROS, acquires no rights whatsoever, nor does he incur any liabilities,
arising from the said contract between petitioner and TOPROS. Certainly, in
our view, the only indispensable parties to the mortgage contract are
petitioner and TOPROS alone.
In the same vein, the action for annulment of a real estate mortgage in the
present case must fall under Section 2 of Rule 4, to wit:
SEC. 2. Venue of personal actions. All other actions may be commenced
and tried where the plaintiff or any of the principal plaintiffs resides, or where
the defendant or any of the principal defendants resides, or in the case of a
non-resident defendant where he may be found, at the election of the
plaintiff.[14]
Thus, Pasig City, where the parties reside, is the proper venue of the action
to nullify the subject loan and real estate mortgage contracts. The Court of
Appeals committed no reversible error in upholding the orders of the
Regional Trial Court denying petitioners motion to dismiss the case on the
ground of improper venue.
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court
provides:
SEC. 7. Compulsory joinder of indispensable parties. Parties in interest
without whom no final determination can be had of an action shall be joined
either as plaintiffs or defendants. (Emphasis ours)
We thus hold that John Charles Chang, Jr., is not an indispensable party in
Civil Case No. 67736. This is without prejudice to any separate action
TOPROS may institute against Chang, Jr., in a proper proceeding.
WHEREFORE, the petition is DENIED. The assailed decision dated
November 28, 2001 and resolution dated April 1, 2002 of the Court of
Appeals upholding the Orders of Judge Lorifel Lacap Pahimna are
AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
The presence of indispensable parties is necessary to vest the court with

jurisdiction. The absence of an indispensable party renders all subsequent
actuations of the court null and void, because of that courts want of authority
to act, not only as to the absent parties but even as to those present.[15]
Thus, whenever it appears to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of the court to stop the
trial and order the inclusion of such party.[16]
A person is not an indispensable party, however, if his interest in the
controversy or subject matter is separable from the interest of the other
parties, so that it will not necessarily be directly or injuriously affected by a
decree which does complete justice between them.[17]

SUPREME COURT
Manila
EN BANC
G.R. No. L-26768
October 30, 1970
FAUSTINO GOJO, petitioner-appellant,

vs.
SEGUNDO
appellees.
GOYALA
and
ANTONINA
ALMOGUERA,
respondents-
Fernando P. Gerona, Sr. for petitioner-appellant.
Agustin Frivaldo for respondents-appellees.
BARREDO, J.:.
Appeal from the favorable decision of the Court of First Instance of Sorsogon
on the counterclaim of respondents (herein appellees) in its Civil Case No.
1657-84 the complaint (petition) of therein petitioner (herein appellant)
having beet previously dismissed, without prejudice, for his failure to submit
an amended complaint as required of him in the court a quo's earlier order.
The record shows that on 26 May 1951, appellee Segundo, Goyala together
with his now deceased wife Antonina Almoguera, who was also named
respondent or defendant in the complaint or petition in the court below, sold
to appellant by a "Deed of Pacto de Retro Sale" a certain parcel of
agricultural land having an area of approximately two and one-half hectares
for P750.00, the repurchase to be made, according to the deed, within one
year. It also appears from said deed that on July 4, 1951, the vendee paid
another P100.00 as addition to the purchase price. About ten (10) years after
the execution of the said document, or on April 12, 1961, to be precise, the
vendee filed with the Court of First Instance of Sorsogon the present case
against the vendors by way of a petition for consolidation of ownership of the
land described and involved in the "Deed of Pacto de Retro Sale." In his
petition, the vendee, herein appellant, alleged, inter alia, that the date for
repurchase, May 26, 1952, having expired and the vendors not having been
able to repurchase the same under the terms and conditions of the
agreement, the ownership over the land involved had become consolidated
in him; and that for the purpose of recording in the Registry of Property the
said consolidation of ownership, it was necessary that a judicial order be
issued to that effect and accordingly prayed for such an order.
On May 26, 1961, appellee Segundo Goyala filed an opposition or answer to

the petition. He therein alleged that his wife Antonina Almoguera had died in
the year 1959 and denied the allegation in the petition regarding the pacto de
retro sale, "the fact of the matter being," according to him, "that on May 26,
1951, the respondents obtained a cash load of P750.00 from the petitioner
payable in one year without interest; that only on July 26, 1951, Dolores
Goyala, daughter of the respondents, obtained from the petitioner the sum of
P50.00 to be added and credited to the account of the respondents; and then
on August 25, 1951, the said Dolores Goyala received from the petitioner
another amount of P10.00 to be added to and credited to the account of the
respondents, (so that) the total loan of the respondents from the petitioner
aggregates P810.00 Philippine Currency" and that to guarantee the payment
of the said loan, the respondents executed a mortgage in favor of the
petitioner on a parcel of coconut land described in Annex A of the petition,
hence, altho the deed was executed or drawn in the form of a pacto de retro
sale, the true and real intention of the parties thereto was that the same was
a mere mortgage to secure the payment of the original loan of P750.00
together with the additional amount received thereafter, making a total loan
of P810.00, payable within, one year without interest. He further alleged that
in the evening of May 26, 1952, he and his wife went to the house of the
petitioner and tendered to him the sum of P810.00 to pay the debt, but said
petitioner refused to receive the same and to cancel the document of
mortgage, Annex A. The said appellee also reiterated by way of counterclaim
the foregoing allegations of his answer and prayed thus:.
WHEREFORE, the respondent Segundo Goyala respectfully prays this

Honorable Court to dismiss the petition and render judgment in favor of the
respondents as follows:.
(a)
Ordering the petitioner to receive the sum of P810.00 tendered or
deposited by the respondents in full settlement of their debts to him;
(b)
Declaring the document marked Annex A of the petition to be
mortgage and not a pacto de retro sale, and ordering the same cancelled
and with no more force and effect;
(c)
Ordering the petitioner to pay the respondents the sum of P1,800.00
per annum beginning May 26, 1951 until the final termination of this case as
the reasonable monetary value of the products for the said property, and
from this amount, there should be deducted however, the corresponding
legal interest annually on said loans; and
(d)
In case, however, of the remote possibility that this Court should find
the said instrument (Annex A) to be a true pacto de retro sale, and not a
mere mortgage, it is hereby prayed that the petitioner be ordered to execute
a deed of resale or repurchase of said property in favor of the respondents in
accordance with Art. 1606 third paragraph of the Civil Code."
On December 1, 1962, counsel for respondent Goyala filed a manifestation

informing the trial court that the named defendant (respondent) Antonina
Almoguera was already dead, she having died at Labo, Camarines Norte on
March 27, 1959, and that her surviving nearest kin are her children, namely:
Leonor, Pedro, Juliana, Dolores, Valentina, Soledad, Penya, Mamerta,
Salvador, Genesa, Felipe, Elegio all surnamed Goyala with residences
at Bulan, Sorsogon. Hearing was had on that manifestation, after which the
trial court, under date of December 4, 1962, issued the following order:.
As prayed for in the manifestation of Atty. Agustin Frivaldo counsel for the
defendant, dated December 1, 1962, on the ground stated therein, the
counsel for the plaintiff is hereby required to submit an amended Complaint
substituting therein for one of the defendants, Antonina Almoguera, now
deceased her successors in interest as party defendants, within the
reglementary period.
Subsequently, on January 26, 1963, appellee Goyala filed a motion to

dismiss the complaint or petition on the ground that notwithstanding the lapse
of 43 days after appellant's receipt of a copy of the above-quoted order of the
trial court, said appellant had failed and neglected to submit the amended
complaint required of him. The motion was opposed by appellant; and the
trial court, resolving the incident, issued the following order on February 15,
1963:.
The matter under consideration is the motion to dismiss filed by the

defendants on the ground that the plaintiff has failed and neglected to submit
the amended complaint as required in the order of this Court dated
December 4, 1962, which the plaintiff has received on December 18, 1962.
From December 13, 1962 when the motion to dismiss was filed, 43 days
have elapsed. On February 6, 1963 when the plaintiff has again failed to file
together with said opposition the required amended complaint, and although
plaintiff has requested for a reasonable extension of time within which to file
the said pleading, it is regretable to state that up to the present has neglected
to do so.
WHEREFORE, the complaint is hereby dismissed without prejudice.
Thereafter, on July 10, 1963, appellee filed a motion to declare appellant in

default in respect of said appellee's counterclaim, contained in his answer
(opposition) to the dismissed complaint petition) of appellant. This motion
was granted by the trial court in its order of July 11, 1963, to wit:.
Upon petition of the counsel for the defendant Segundo Goyala to declare
the plaintiff in default on the ground of failure on the part of the plaintiff to
answer the counterclaim filed by said defendant Segundo Goyala within the
reglementary period, despite the fact that the plaintiff's counsel was duly
served with a copy thereof, and the plaintiff's complaint was already
dismissed by this Court in its order of February 15, 1963 on the ground of
neglect to submit the amended complaint as required in the Court order of
December 4, 1962, the plaintiff is hereby declared in default on the
counterclaim filed by said defendant Segundo Goyala.
Let the defendant Segundo Goyala submit his evidence before the Clerk of
Court, who is hereby commissioned to receive the same.
As directed in the order above-quoted, the Clerk of Court received the

evidence of appellee in respect of his counterclaim and, thereafter, on
November 15, 1963 the trial court rendered favorable judgment on appellee's
counterclaim. The pertinent portions of the decision referred to read thus:.
It appears that on May 26, 1951, respondents obtained a loan of P750.00

from the petitioner. To secure the loan, respondents executed a document,
which was made a Deed of Pacto de Retro Sale (Exh. "A"), on suggestion of
petitioner to exempt himself from liabilities under the Usury Law. Dolores
Goyala, one of the daughters of respondents, obtained an additional loan of
P50.00 on July 26, 1951, (Exh. "A-1") and another P10.00 on August 19,
1951, (Exh. "A-3") from the petitioner which amounts were duly authorized
and acknowledged by respondent Segundo Goyala. In the late afternoon of
May 26, 1952, the last day to redeem the property, Segundo Goyala,
tendered the amount of P810.00 to herein petitioner in complete payment of
the loan and to release the property securing the said loan, but was refused
because it was already night time, and was advised instead to return the
following day. When Segundo Goyala returned the following day to redeem
the property he was told by petitioner that the period to redeem has already
expired. Segundo Goyala testified further that he tried no less than three
times to redeem the property but each time petitioner refused the redemption
money.
It appears further that the petitioner is in possession of the land since May
26, 1951, after the execution of Exhibit "A" up to the present time and had
appropriated to himself the products during the period. It is shown further that
the land is a productive coconut land and has a fair market value of
P5,000.00 with an annual yield of P1,800.00.
The respondents are not however entitled to be reimbursed of the value of

the products obtained by the petitioner who acted in the belief that the
agreement was a Pacto de Retro Sale which turned out to be otherwise as
the Court now so declares.
WHEREFORE, in view of the foregoing the Court hereby declares the Deed
of Pacto de Retro Sale (Exh. "A") an equitable mortgage and respondents
Segundo Goyala and the heirs of Antonina Almoguera are allowed to redeem
the property; orders Faustino Gojo to withdraw the amount of P810.00
deposited with the Clerk of Court in full settlement of the loan, and hereby
cancels and declares without force and effect the aforementioned Deed of
Pacto de Retro Sale executed by the spouses Segundo Goyala and Antonina
Almoguera in favor of Faustino Gojo. Without costs.
The above-quoted decision was subsequently amended in an order of

December 19, 1963, as follows:.
It appearing that in the dispositive part of the decision there was no directive
to restore the possession to the defendants upon execution, the dispositive
portion of the said decision is hereby amended to include therein an
additional directive ordering the plaintiff to deliver and restore the possession
of the land in question to the defendants.
Dissatisfied with the decision referred to, appellant appealed to the Court of
Appeals which upon its finding that the said appeal involves purely questions
of law, certified the same to this Court for resolution.
In his brief, appellant assigns the following errors allegedly committed by the
trial court:.
1.
THE LOWER COURT ERRED IN DECLARING PLAINTIFF IN
DEFAULT WITH RESPECT TO DEFENDANT'S COUNTERCLAIM;
2.
THE
LOWER
COURT
ERRED
IN
DEPUTIZING
OR
COMMISSIONING THE CLERK OF COURT TO RECEIVE THE EVIDENCE
OF THE DEFENDANT SEGUNDO GOYALA;
3.
THE LOWER COURT ERRED IN RENDERING JUDGMENT IN
FAVOR OF THE RESPONDENT SEGUNDO GOYALA AND THE HEIRS OF
ANTONINA ALMOGUERA ALLOWING THEM TO REDEEM THE LAND IN

QUESTION FROM THE PETITIONER FAUSTINO GOJO FOR THE SUM
OF P810.00.
The thrust of appellant's argument in respect of the first assignment of error

is to the effect that there is no occasion for the trial court to declare him in
default in respect of appellee's counterclaim in this case, for the reasons that:
(a) the said counterclaim "falls within the category of compulsory
counterclaim" which does not call for an independent answer as the
complaint already denies its material allegations; and (b) the dismissal of the
complaint in this case without prejudice carried with it the dismissal of the
said counterclaim.
The first assignment of error of appellant is well taken. It is now settled that a
plaintiff who fails or chooses not to answer a compulsory counterclaim may
not be declared in default, principally because the issues raised in the
counterclaim are deemed automatically joined by the allegations of the
complaint.1 In the instant case, there can be no doubt that appellant's
counterclaim was a compulsory one in as much as it arises out of or is
necessarily connected with transaction or occurrence that is the subject
matter of the complaint; the complaint alleged that the right of appellee to
repurchase the property in question had already expired and asked for an
order of consolidation; on the other hand, appellant's counterclaim was for
reformation of the deed claiming that it was only a mortgage. Thus the
counterclaim was clearly inconsistent with and directly controverted; the
whole theory and basic allegations of the complaint. In consequence,
appellant's complaint stood as the answer to appellee's counterclaim; hence,
the incorrectness of the trial court's order declaring the appellant in default in
regard to said counterclaim is evident.
Regarding the dismissal of petitioner's complaint, We hold also, that the trial
court committed reversible error in ordering the same. It is true that under
Section 3 of Rule 17, a complaint may be dismissed for failure to prosecute if
the plaintiff fails to comply with an order of the court, but it is obvious that the
said provision cannot apply when the order supposedly ignored is a void one,
as in this case. Here, the trial court ordered petitioner to amend the complaint
only because it was informed that one of the defendants had died, the court
directing that the plaintiff should name the heirs of the deceased as
defendants in lieu of said deceased. Such an order runs counter to the ruling
of this Court in Caseas vs. Resales, et al. 2 which is squarely applicable to

the Situation herein obtaining. In that case, We held:.
When certain of the parties to Civil Case No. 261 died and due notice thereof
was given to the trial court, it devolved on the said court to order, not the
amendment of the complaint, but the appearance of the legal representatives
of the deceased in accordance with the procedure and manner outlined in
Rule 3, Section 17 of the Rules of Court, which provide:.
"SECTION 17. Death of party. After a party dies and the claim is not
thereby extinguished, the court shall order, upon proper notice, the legal
representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may be
granted. If the legal representative fails to appear within said time, the court
may order the opposing party to procure the appointment of a legal
representative of the deceased within a time to be specified by the court, and
the representative shall immediately appear for and on behalf of the interest
of the deceased. The court charges involved in procuring such appointment,
if defrayed by the opposing party, may be recovered as costs. The heirs of
the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may
appoint guardian ad litem for the minor heirs."
In the case of Barrameda vs. Barbara, 90 Phil. 718, this Court held that an
order to amend the complaint, before the proper substitution of parties as
directed by the aforequoted rule has been effected, is void and imposes upon
the plaintiff no duty to comply therewith to the end that an order dismissing
the said complaint, for such non-compliance, would similarly be void. In a
subsequent case, Ferriera, et al. vs. Gonzales, et al., G.R. No. L-11567, July
17, 1958, this Court affirmed a similar conclusion on the determination that
the continuance of a proceedings during the pendency of which a party
thereto dies, without such party having been validly substituted in
accordance with the rules, amounts to a "lack of jurisdiction".
The facts of this case fit four square into the Barrameda case above-cited,
save for the minor variance that in the former two of the litigants died while
only one predeceased the case in Barrameda. Here, as in Barrameda, during
the pendency of (the) civil case, notice was given to the trial court of the
deaths of one of the plaintiffs and one of the defendants in it. Instead of
ordering the substitution of the deceased's legal representatives in
accordance with Rule 3, Sec. 17 of the Rules of Court, the trial court directed
the surviving plaintiff to amend the complaint and when the latter failed to
comply therewith, the said court dismissed the complaint for such noncompliance. We must hold, therefore, as We did in Barrameda that inasmuch
as there was no obligation on the part of the plaintiff-appellant herein to
amend his complaint in Civil Case No. 261, any such imposition being void,
his failure to comply with such an order did not justify the dismissal of his
complaint. Grounded as it was upon a void order, the dismissal was itself
void." (To the same effect, see World Wide Insurance & Surety Co. v. Jose,
etc., et al., 96 Phil. 45, 50).
WHEREFORE, the decision appealed from is set aside and this case is
remanded to the court below for further proceedings in consonance with the
above opinion, with costs against appellee.

Besides, in line with the principle underlying Sec. 2 of Rule 17, it is not proper
to dismiss a complaint when a compulsory counterclaim has been pleaded
by defendant. The reason is obvious. Under the cited provision, the right of
the plaintiff to move for the dismissal of an action after the defendant has
filed his answer is qualified by the clause providing that: "If a counterclaim
has been pleaded by a defendant prior to the service upon him of the
plaintiff's motion to dismiss, the action shall not be dismissed against the
defendant's objection unless the counterclaim can remain pending for
independent adjudication by the court." With this limitation, the power of the
court to dismiss the complaint upon motion of plaintiff, which is usually
without prejudice, is not purely discretionary.3 The purpose is to avoid
multiplicity of suits over the same matter which would necessarily entail
unnecessary expense and, what is worse, possibility of conflict and
inconsistency in the resolution of the same questions. The same
considerations would obtain, if the defendant were the one to ask for
dismissal. The best interests of justice require that conflicting claims
regarding the same matter should be decided in one single proceeding.
Dismissing the complaint without prejudice, as the trial court has done in this
case, albeit upon motion of the defendant, will not prevent the undesirable
multiplication of suits and reventilation of the same issues in the subsequent
action that may be filed by virtue of the reservation made in the disputed
order of dismissal.
SUPREME COURT
Manila
EN BANC
G.R. No. L-21766
September 30, 1966
FELICISIMA BALLECER and JOSE S. AGAWIN, petitioners,

vs.
JOSE BERNARDO, The Hon. JESUS P. MORFE, Presiding Judge, Branch
XIII of the Court of First Instance of Manila, and the Sheriff of Manila,
respondents.
Rosendo N. Feleo for petitioners.

Tecson, Bernardo and Berba for respondents.
Having arrived at the foregoing conclusions, it becomes unnecessary to

discuss the other two assigned errors.
CONCEPCION, C.J.:
This is an original action to set aside several orders of the Court of First
Instance of Manila, in Civil Case No. 43073 thereof, as well as an alias writ of
execution and a notice of sale issued in connection therewith. Upon the filing
of the petition and the submission and approval of a bond in the sum of
P1,000.00, on motion of petitioners herein, we issued a writ of preliminary
injunction enjoining respondent Judge and the Sheriff of Manila from carrying
out the aforementioned writ of execution.
Petitioners herein are the spouses Jose S. Agawin and Felicisima Ballecer.
On May 4, 1960, they instituted, said Civil Case No. 43073 against
respondent Jose Bernardo, to recover damages allegedly caused by him in
consequence of the destruction and demolition of a portion of a wall of the
petitioners, along the common boundary line of their lot and that of Bernardo,
at Felix Huertas Street, Manila, as well as to recover possession of a portion
of petitioners' aforementioned lot, with an area of 0.80 square meters, which
was allegedly encroached upon by the wall subsequently erected by
Bernardo in place of the one he had destroyed.
In due course, Bernardo filed his answer denying petitioners' averments, and
alleging, in turn, that the demolition and destruction made by him had taken
place within the boundary of his own property. By way of counterclaim,
Bernardo set up two (2) causes of action, namely: (1) that petitioners were
the parties who had encroached upon and occupied a portion of Bernardo's
property, with an area of about 3.70 square meters, without his consent and
against his will, and (2) that petitioners' complaint is premature, uncalled for,
capricious and without any justifiable cause, for which reason Bernardo
prayed that they be sentenced to vacate his aforementioned portion of land
allegedly encroached upon by them and to turn it over to him, and to pay
damages aggregating P48,000.00.
the Deputy Clerk of Court on June 15, at 9: 00 a.m., which Bernardo did. On
June 20, the court rendered a decision the dispositive part of which reads:
WHEREFORE, the Court hereby renders judgment on the counterclaim in

favor of the defendant-counterclaimant and against the plaintiffs, as follows:
1. Ordering the plaintiffs and/or their agents and representatives including all
persons claiming under them to deliver and restore the possession thereof to
the defendant, that portion of said defendant's property consisting of 3.7
square meters which is being encroached upon and occupied by or in
possession of the plaintiffs;
2. Ordering plaintiffs to pay, jointly and severally, the defendant the following
sums, to wit:
(a) P3,625.00 as compensatory damages which the defendant failed to

realize in the form of rentals from that portion of his property subject matter of
the counterclaim, corresponding to the period from May, 1948 to May, 1960,
with interest thereon at the legal rate from the date of filing of the answer with
counterclaim until fully paid; plus the sum of P25.00 for each month
thereafter until the premises in question are actually delivered to the
possession and occupation of the defendant;
(b) P541.00 as actual damages incurred by the defendant;
(c) P10,000.00 as moral damages;
(d) P2,000.00 as exemplary damages; and

On the last day of the reglementary period to answer the counterclaim, or on
June 6, 1960, petitioners filed ex parte urgent motion for extension of time
therefor, but on June 11 the motion was denied and ordered stricken off the
record. Then, on June 13, the court declared petitioners in default as to the
counterclaim and ordered Bernardo to present his evidence thereon before
(e) P1,000.00 as attorney's fees.
With costs against the plaintiffs.
On June 28, petitioners moved for a reconsideration of the orders of June 11

and 13, but the motion was denied on July 1. Thereupon, petitioners filed a
petition for relief from judgment, with a prayer for a writ of preliminary
injunction, to restrain the Clerk of Court from issuing a writ of execution. After
denying this petition, the Court, on petitioner's motion for reconsideration,
granted it on January 18, 1961, only to deny it once more, on February 4, on
motion for reconsideration filed by Bernardo. Forthwith, or on February 8,
petitioners filed their notice of appeal. Soon thereafter, petitioners sought an
extension of time to file their appeal bond and their record on appeal, but the
motion was denied, on February 18, for lack of merit. On March 18, the Court
ordered the issuance of a writ of execution, but, on April 11, the execution of
the decision of June 20, 1960, was ordered stayed pending trial on the merits
on petitioners' complaint.
On motion of Bernardo, dated December 19, 1962, said order was, on

January 29, 1963, set aside and the issuance of a writ of execution "only as
to paragraph No. 1 and paragraph No. 2-a of the dispositive part" of the
aforementioned decision, was ordered. A reconsideration of this order having
been denied, the Clerk of Court issued an alias writ of execution and, in
pursuance thereof, the Sheriff of Manila caused to be published a notice of
sale at public auction of a property of petitioners herein. Hence, the present
case against Bernardo, the Judge of the lower court and the Sheriff of
Manila.
The main question for determination in this case is whether the lower court
has gravely abused its discretion in declaring the petitioners in default and in
rendering judgment against them on Bernardo's counterclaim after an ex
parte hearing. It is obvious that the answer must be in the
affirmative.1awphl.nt
To begin with, a motion for extension of time to file an answer to the

counterclaim had been filed within the reglementary period and plausible
reasons were given in support thereof: counsel for petitioners had been
unable to contact them owing to a typhoon that had just hit Manila, and the
flood and inclement weather that had followed.
The main reason for the lower court's adverse action thereon would seem to
be petitioners' failure to set it for hearing as provided in the Rules of Court.
But, there are motions that may be heard and granted ex parte, and
petitioners' aforementioned motion belongs to such class. Thus in Moya v.
Barton (76 Phil. 831, 833) it was held:
With respect to the other ground, Section 2 of Rule 27 provides that "every
motion other than one which may be heard ex-parte . . . . shall be filed with
the Court, and served upon the parties affected thereby." Taking into
consideration that the extension of time applied for may be shorter than the
time required to have a motion set for hearing and acted on by the court, and
that the court has, as above stated, discretion to grant the petition, the
motion for extension filed in the present case may be considered as one
which may be heard ex-parte. . . . .."
What is more, Bernardo's counterclaim was predicated upon allegations of

fact which are inconsistent with, and, hence, controverted by, the allegations
in petitioners' complaint. In this connection, it should be noted that Bernardo
had, according to the complaint, encroached upon petitioners' property,
whereas Bernardo maintained the exact opposite in his counterclaim not
only that petitioners' allegation was not true, but, also, that they were the
ones encroaching upon the property of Bernardo. Certainly, this contention,
of Bernardo can not be decided without passing upon the truth of the
allegations in the complaint, which petitioners are entitled to prove, whether
they had answered Bernardo's counterclaim or not. In other words, the
issues raised in the counterclaim were inseparable from those posed in the
complaint, and so it was not absolutely necessary for the petitioners to file an
answer to the counterclaim (Arejola vs. Cayetano, L-6673, Sept. 8, 1954;
Rosario vs. Martinez, L-4473, Sept. 30, 1952). In the language of Mr. Justice
Reyes (J.B.L.), speaking for the Court in Navarro v. Bello (54 O.G. 6588):
There was no need for petitioners to answer respondents' counterclaim,

considering that plaintiffs, in their complaint, claimed not only ownership of,
but also the right to possess, the parcels in question, alleging that sometime
in May, 1954, defendants, through force and intimidation, wrested
possession thereof from their tenants, and that it was upon a writ of
possession issued by the Court of First Instance of Pangasinan that they
were placed back in possession by the provincial sheriff. These averments
were denied by defendants in their answer, wherein they asserted ownership

in themselves and illegal deprivation of their possession by plaintiffs, and as
counterclaim, prayed for damages allegedly suffered because of plaintiffs'
alleged usurpation of the premises.
accordingly, made permanent, with costs against herein respondent Jose

Bernardo. It is so ordered.
It thus appears that the issues of the counterclaim are the very issues raised
in the complaint and in the answer, and said counterclaim is based on the
very defenses pleaded in the answer. To answer such counterclaim would
require plaintiffs to replead the same facts already alleged in their
complaint.1awphl.nt
But in any event, whether or not plaintiffs have answered defendants'

counterclaim, they have the right to prove the averments of their complaint,
including their claim that it was by court order that they secured possession
of the parcels in question from defendants. And if plaintiffs are able to prove
such allegations, then the court must dismiss defendants' counterclaim for
damages, since the illegal usurpation of defendants' possession allegedly
committed by plaintiffs, which is the basis of the counterclaim, would not
have been proved. In short, the issues of the counterclaim are so inseparable
from those of the complaint and the answer that such counterclaim partakes
of the nature of a special defense which, even if not specifically challenged
by plaintiffs in a reply, is deemed controverted (Rule 11, Sec. 1, Rules of
Court; Rosario v. J. Martinez, L-4473, September 30, 1952; Lama v.
Apacible, 79 Phil. 68). There was, therefore, no occasion for plaintiffs' default
on defendants' counterclaim, and the order of the court below declaring them
in default, as well as the judgment by default, is improper and void.
The lower court committed, therefore, a grave abuse of discretion, amounting

to excess of jurisdiction, in declaring the petitioners in default as regards the
counterclaim, and in rendering a decision in default against them on said
counterclaim, and, as a consequence, said decision is null and void, and so
are the aforementioned writ of execution, alias writ of execution, and notice
of sale issued by the Sheriff in pursuance thereof.
WHEREFORE, the orders complained of, as well as said writ of execution

and alias writ of execution, and the notice of sale adverted to above,
including the decision of June 20, 1960, are hereby annulled and set aside,
and the writ of preliminary injunction heretofore issued by this Court is,

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 107356
March 31, 1995
SINGAPORE AIRLINES LIMITED, petitioner,

vs.
THE COURT OF APPEALS and PHILIPPINE AIRLINES, respondents.
ROMERO, J.:
Sancho Rayos was an overseas contract worker who had a renewed

contract with the Arabian American Oil Company (Aramco) for the period
covering April 16, 1980, to April 15, 1981. As part of Aramco's policy, its
employees returning to Dhahran, Saudi Arabia from Manila are allowed to
claim reimbursement for amounts paid for excess baggage of up to 50
kilograms, as long as it is properly supported by receipt. On April 1980,
Rayos took a Singapore Airlines (SIA) flight to report for his new assignment,
with a 50-kilogram excess baggage for which he paid P4,147.50. Aramco
reimbursed said. amount upon presentation of the excess baggage ticket.
In December 1980, Rayos learned that he was one of several employees

being investigated by Aramco for fraudulent claims. He immediately asked
his wife Beatriz in Manila to seek a written confirmation from SIA that he
indeed paid for an excess baggage of 50 kilograms. On December 10, 1980,
SIA's manager, Johnny Khoo, notified Beatriz of their inability to issue the
certification requested because their records showed that only three
kilograms were entered as excess and accordingly charged. SIA issued the
certification requested by the spouses Rayos only on April 8, 1981, after its
investigation of the anomaly and after Beatriz, assisted by a lawyer,
threatened it with a lawsuit. On April 14, 1981, Aramco gave Rayos his travel
documents without a return visa. His employment contract was not renewed.
On August 5, 1981, the spouses Rayos, convinced that SIA was responsible
for the non-renewal of Rayos' employment contract with Aramco, sued it for
damages. SIA claimed that it was not liable to the Rayoses because the
tampering was committed by its handling agent, Philippine Airlines (PAL). It
then filed a third-party complaint against PAL. PAL, in turn, countered that its
personnel did not collect any charges for excess baggage; that it had no
participation in the tampering of any excess baggage ticket; and that if any
tampering was made, it was done by SIA's personnel.
1.
The sum of Four Hundred Thirty Thousand Nine Hundred Pesos and
Eighty Centavos (P430,900.80) as actual damages, with interest at the legal
rate from the date of the filing of the complaint until fully paid.
2.
The sum of Four Thousand One Hundred Forty-Seven Pesos and
Fifty Centavos (P4,147.50) as reimbursement for the amount deducted from
Mr. Rayos' salary, also with legal rate of interest from the filing of the
complaint until paid in full;
3.
The sum of Fifty Thousand Pesos (P50,000.00) as moral damages;
4.
The sum equivalent to ten Per Cent (10th) of the total amount due as
and for attorney's fees; and
5.
The cost of suit.
The defendant's counterclaim is hereby dismissed.
ON THE THIRD PARTY COMPLAINT, the third-party defendant PAL is

ordered to pay defendant and third-party plaintiff SIA whatever the latter has
paid the plaintiffs.
SO ORDERED.
Judge Jesus O. Ibay of the Regional Trial Court of Manila, Branch 30,
rendered judgment on September 9, 1988, in favor of the plaintiffs, the
dispositive portion of which reads thus:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and

against the defendant Singapore Airlines Limited, sentencing the latter to pay
the former the following:
In so ruling, the court a quo concluded that the excess baggage ticket of
Rayos was tampered with by the employees of PAL and that the fraud was
the direct and proximate cause of the non-renewal of Rayos' contract with
Aramco.
All parties appealed to the Court of Appeals. SIA's appeal was dismissed for
non-payment of docket fees, which dismissal was eventually sustained by
this Court. The Rayos spouses withdrew their appeal when SIA satisfied the
judgment totaling P802,435.34.
In its appeal, PAL claimed that the spouses Rayos had no valid claim against
SIA because it was the inefficiency of Rayos which led to the non-renewal of
his contract with Aramco, and not the alleged tampering of his excess
bagged ticket On the other hand, SIA argued that the only issue in the said
appeal is whether or not it was entitled to reimbursement from PAL, citing
the case of Firestone Tire and Rubber Company of the Philippines v.
Tempongko. 1
The appellate court disagreed with SIA's contention that PAL could no longer
raise the issue of SIA's liability to the Rayoses and opined "that SIA's answer
to the complaint should inure to the benefit of PAL, and the latter may
challenge the lower court's findings against SIA in favor of plaintiffs-appellees
(the Rayos spouses) for the purpose of defeating SIA's claim against it, and
not for the purpose of altering in any way the executed judgment against
SIA." In its answer to the main complaint, SIA set up the defense that the
excess baggage ticket was indeed tampered with but it was committed by
PAL's personnel. On September 21, 1992, the appellate court granted PAL's
appeal and absolved it from any liability to SIA.
In this petition for review, SIA argues that PAL cannot validly assail for the
first time on appeal the trial court's decision sustaining the validity of plaintiff's
complaint against SIA if PAL did not raise this issue in the lower court. It
added that the appellate court should have restricted its ruling on the right of
SIA to seek reimbursement from PAL, as this was the only issue raised by
SIA in its third-party complaint against PAL.
plaintiff against the defendant and in favor of such defendant as third-party

plaintiff against, ultimately, the third-party defendant. Speaking through then
Justice and later Chief Justice Claudio Teehankee, the Court stated:
The third-party complaint is, therefore, a procedural device whereby a "third

party" who is neither a party nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of court, by the defendant,
who acts as third-party plaintiff to enforce against such third-party defendant
a right for contribution, indemnity, subrogation or any other relief, in respect
of the plaintiff's claim. The third-party complaint is actually independent of
and separate and distinct from the plaintiff's complaint. . . . When leave to file
the third-party complaint is properly granted, the Court renders in effect two
judgments in the same case, one on the plaintiff's complaint and the other on
the third-party complaint. When he finds favorably on both complaints, as in
this case, he renders judgment on the principal complaint in favor of plaintiff
against defendant and renders another judgment on the third-party complaint
in favor of defendant as third-party plaintiff, ordering the third-party defendant
to reimburse the defendant whatever amount said defendant is ordered to
pay plaintiff in the case. Failure of any of said parties in such a case to
appeal the judgment as against him makes such judgment final and
executory. By the same token, an appeal by one party from such judgment
does not inure to the benefit of the other party who has not appealed nor can
it be deemed to be an appeal of such other party from the judgment against
him.
It must be noted that in the proceedings below, PAL disclaimed any liability to
the Rayoses and imputed the alleged tampering to SIA's personnel. On
appeal, however, PAL changed its theory and averred that the spouses
Rayos had no valid claim against SIA on the around that the non-renewal of
Sancho's contract with Aramco was his unsatisfactory performance rather
than the alleged tampering of his excess baggage ticket. In response to
PAL's appeal, SIA argued that it was improper for PAL to question SIA's
liability to the plaintiff, since this was no longer an issue on account of the
finality and, in fact, satisfaction of the judgment.
The instant appeal is impressed with merit.
The petitioner correctly pointed out that the case of Firestone squarely
applies to the case at bench. In said case, the Court expounded on the
nature of a third-party complaint and the effect of a judgment in favor of the
Surprisingly, the appellate court ignored the Court's pronouncements in

Firestone and declared:
[T]here is nothing in the citation which would suggest that the appellant
cannot avail of the defenses which would have been available to the nonappealing party against the prevailing party which would be beneficial to the
appellant. After all, PAL's liability here is premised on the liability of SIA to
plaintiffs-appellees, In its own defense, it should have the right to avail of
defenses of SIA against plaintiffs-appellees which would redound to its
benefit. This is especially true here where SIA lost the capability to defend
itself on the technicality of failure to pay docket fee, rather than on the merits
of its appeal. To hold otherwise would be to open the door to a possible
collusion between the plaintiff and defendant which would leave the thirdparty defendant holding the bag.
There is no question that a third-party defendant is allowed to set up in his

answer the defenses which the third-party plaintiff (original defendant) has or
may have to the plaintiff's claim. There are, however, special circumstances
present in this case which preclude third-party defendant PAL from benefiting
from the said principle.
One of the defenses available to SIA was that the plaintiffs had no cause of
action, that is, it had no valid claim against SIA. SIA investigated the matter
and discovered that tampering was, indeed, committed, not by its personnel
but by PAL's. This became its defense as well as its main cause of action in
the third-party complaint it filed against PAL. For its part, PAL could have
used the defense that the plaintiffs had no valid claim against it or against
SIA. This could be done indirectly by adopting such a defense in its answer
to the third-party complaint if only SIA had raised the same in its answer to
the main complaint, or directly by so stating in unequivocal terms in its
answer to SIA's complaint that SIA and PAL were both blameless. Yet, PAL
opted to deny any liability which it imputed to SIA's personnel. It was only on
appeal in a complete turn around of theory that PAL raised the issue of
no valid claim by the plaintiff against SIA. This simply cannot be allowed.
While the third-party defendant; would benefit from a victory by the third-party
plaintiff against the plaintiff, this is true only when the third-party plaintiff and
third-party defendant have non-contradictory defenses. Here, the defendant
and third-party defendant had no common defense against the plaintiffs'
complaint, and they were even blaming each other for the fiasco.
Fear of collusion between the third-party plaintiff and the plaintiffs aired by
the appellate court is misplaced if not totally unfounded. The stand of SIA as
against the plaintiffs' claim was transparent from the beginning. PAL was
aware of SIA's defense, and if it was convinced that SIA should have raised
the defense of no valid claim by the plaintiffs, it should have so stated in its
answer as one of its defenses, instead of waiting for an adverse judgment
and raising it for the first time on appeal.
The judgment, therefore, as far as the Rayoses and SIA are concerned, has
already gained finality. What remains to be resolved, as correctly pointed out
by petitioner, is whether it is entitled to reimbursement from PAL, considering
that PAL appealed that part of the decision to the appellate court. This is
where the rule laid down in Firestone becomes applicable.
The trial court's decision, although adverse to SIA as defendant, made PAL
ultimately answerable for the judgment by ordering the latter to reimburse the
former for the entire monetary award. On appeal, PAL tried to exonerate
itself by arguing that the Rayoses had no valid claim against SIA. From
PAL's viewpoint, this seemed to be the only way to extricate itself from a
mess which the court a quo ascribed to it. This cannot, however, be allowed
because it was neither raised by SIA in its answer to the main complaint nor
by PAL in its answer to the third-party complaint. The prudent thing that PAL
should have done was to state in its answer to the third-party complaint filed
by SIA against it everything that it may conceivably interpose by way of its
defense, including specific denials of allegations in the main complaint which
implicated it along with SIA.
The appellate court was in error when it opined that SIA's answer inured to
the benefit of PAL for the simple reason that the complaint and the third-party
complaint are actually two separate cases involving the same set of facts
which is allowed by the court to be resolved in a single proceeding only to
avoid a multiplicity of actions. Such a proceeding obviates the need of trying
two cases, receiving the same or similar evidence for both, and enforcing
separate judgments therefor. This situation is not, as claimed by the
appellate court, analogous to a case where there are several defendants
against whom a complaint is filed stating a common cause of action, where
the answer of some of the defendants inures to the benefit of those who did
not file an answer. While such a complaint speaks of a single suit, a thirdparty complaint involves an action separate and distinct from, although
related to the main complaint. A third-party defendant who feels aggrieved by

some allegations in the main complaint should, aside from answering the
third-party complaint, also answer the main complaint.
We do not, however, agree with the petitioner that PAL is solely liable for the
satisfaction of the judgment. While the trial court found, and this has not been
adequately rebutted by PAL, that the proximate cause of the non-renewal of
Rayos' employment contract with Aramco was the tampering of his excess
baggage ticket by PAL's personnel, it failed to consider that the immediate
cause of such non-renewal was SIA's delayed transmittal of the certification
needed by Rayos to prove his innocence to his employer.
awarded to the Rayos spouses and already paid by SIA, instead of totally
indemnifying the latter.
WHEREFORE, the decision of the respondent Court of Appeals in CA-G.R.

CV No. 20488 dated September 21, 1992, is hereby REVERSED and a new
one is entered ordering private respondent Philippine Airlines to pay, by way
of contribution, petitioner Singapore Airlines one-half (1/2) of the amount it
actually paid to Sancho and Beatriz Rayos in satisfaction of the judgment in
Civil Case No. 142252, dated September 9, 1988.
SO ORDERED.
SIA was informed of the anomaly in December 1980 but only issued the
certification four months later or, more specifically, on April 8, 1981, a few
days before the expiration of Rayos' contract. Surely, the investigation
conducted by SIA could not have lasted for four months as the information
needed by the Rayoses could easily be verified by comparing the duplicate
excess baggage tickets which they and their handling agent, PAL, kept the
record purposes. The fact that the Rayos spouses had to be assisted by
counsel who threatened to file a damage suit against SIA if the certification
they urgently needed was not immediately issued only strengthens the
suspicion that SIA was not dealing with them in utmost good faith. The effect
of SIA's mishandling of Beatriz Rayos' request became instantly apparent
when her husband's contract was not renewed in spite of his performance
which was constantly "highly regarded" by the manager of Aramco's
equipment services department.
Former Chief Justice and noted remedial law expert Manuel V. Moran opined
that "in an action upon a tort, the defendant may file a third-party complaint
against a joint tort-feasor for contribution." 2

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 138822
January 23, 2001
EVANGELINE ALDAY, petitioner,

vs.
FGU INSURANCE CORPORATION, respondent.
The non-renewal of Rayos employment contract was the natural and

probable consequence of the separate tortious acts of SIA and PAL. Under
mandate of Article 2176 of the Civil Code, Rayos is entitled to be
compensated for such damages. Inasmuch as the responsibility of two or
more persons, or tort-feasors, liable for a quasi-delict is joint and several, 3
and the sharing as between such solidary debtors is pro-rata, 4 it is but
logical, fair, and equitable to require PAL to contribute to the amount
GONZAGA-REYES, J.:
On 5 May 1989, respondent FGU Insurance Corporation filed a complaint

with the Regional Trial Court of Makati1 alleging that petitioner Evangeline K.
Alday owed it P114,650.76, representing unliquidated cash advances,
unremitted costs of premiums and other charges incurred by petitioner in the

course of her work as an insurance agent for respondent.2 Respondent also
prayed for exemplary damages, attorney's fees, and costs of suit.3 Petitioner
filed her answer and by way of counterclaim, asserted her right for the
payment of P104,893.45, representing direct commissions, profit
commissions and contingent bonuses earned from 1 July 1986 to 7
December 1986, and for accumulated premium reserves amounting to
P500,000.00. In addition, petitioner prayed for attorney's fees, litigation
expenses, moral damages and exemplary damages for the allegedly
unfounded action filed by respondent.4 On 23 August 1989, respondent filed
a "Motion to Strike Out Answer With Compulsory Counterclaim And To
Declare Defendant In Default" because petitioner's answer was allegedly
filed out of time.5 However, the trial court denied the motion on 25 August
1989 and similarly rejected respondent's motion for reconsideration on 12
March 1990.6 A few weeks later, on 11 April 1990, respondent filed a motion
to dismiss petitioner's counterclaim, contending that the trial court never
acquired jurisdiction over the same because of the non-payment of docket
fees by petitoner.7 In response, petitioner asked the trial court to declare her
counterclaim as exempt from payment of docket fees since it is compulsory
and that respondent be declared in default for having failed to answer such
counterclaim.8
In its 18 September 1990 Order, the trial court9 granted respondent's motion
to dismiss petitioner's counterclaim and consequently, denied petitioner's
motion. The court found petitioner's counterclaim to be merely permissive in
nature and held that petitioner's failure to pay docket fees prevented the
court from acquiring jurisdiction over the same.10 The trial court similar
denied petitioner's motion for reconsideration on 28 February
1991.1wphi1.nt
On 23 December 1998, the Court of Appeals11 sustained the trial court,

finding that petitioner's own admissions, as contained in her answer, show
that her counterclaim is merely permissive. The relevant portion of the
appellate court's decision12 is quoted herewith -
"(14) That, indeed, FGU's cause of action which is not supported by any
document other than the self-serving 'Statement of Account' dated March 28,
1988 x x x
(15) That it should be noted that the cause of action of FGU is not the
enforcement of the Special Agent's Contract but the alleged 'cash
accountabilities which are not based on written agreement x x x.
(19) x x x A careful analysis of FGU's three-page complaint will show that its
cause of action is not for specific performance or enforcement of the Special
Agent's Contract rather, it is for the payment of the alleged cash
accountabilities incurred by defendant during the period form [sic] 1975 to
1986 which claim is executory and has not been ratified. It is the established
rule that unenforceable contracts, like this purported money claim of FGU,
cannot be sued upon or enforced unless ratified, thus it is as if they have no
effect. x x x."
To support the heading "Compulsory Counterclaim" in her answer and give

the impression that the counterclaim is compulsory appellant alleged that
"FGU has unjustifiably failed to remit to defendant despite repeated demands
in gross violation of their Special Agent's Contract x x x." The reference to
said contract was included purposely to mislead. While on one hand
appellant alleged that appellee's cause of action had nothing to do with the
Special Agent's Contract, on the other hand, she claim that FGU violated
said contract which gives rise of [sic] her cause of action. Clearly, appellant's
cash accountabilities cannot be the offshoot of appellee's alleged violation of
the aforesaid contract.
On 19 May 1999, the appellate court denied petitioner's motion for

reconsideration,13 giving rise to the present petition.
Contrary to the protestations of appellant, mere reading of the allegations in
the answer a quo will readily show that her counterclaim can in no way be
compulsory. Take note of the following numbered paragraphs in her answer:
Before going into the substantive issues, the Court shall first dispose of some
procedural matters raised by the parties. Petitioner claims that respondent is
estopped from questioning her non-payment of docket fees because it did

not raise this particular issue when it filed its motion - the "Motion to Strike
out Answer With Compulsory Counterclaim And To Declare Defendant In
Default" - with the trial court; rather, it was only nine months after receiving
petitioner's answer that respondent assailed the trial court's lack of
jurisdiction over petitioner's counterclaims based on the latter's failure to pay
docket fees.14 Petitioner's position is unmeritorious. Estoppel by laches
arises from the negligence or omission to assert a right within a reasonable
time, warranting a presumption that the party entitled to assert it either has
abandoned or declined to assert it.15 In the case at bar, respondent cannot
be considered as estopped from assailing the trial court's jurisdiction over
petitioner's counterclaim since this issue was raised by respondent with the
trial court itself - the body where the action is pending - even before the
presentation of any evidence by the parties and definitely, way before any
judgment could be rendered by the trial court.
In Valencia v. Court of Appeals,20 this Court capsulized the criteria or tests

that may be used in determining whether a counterclaim is compulsory or
permissive, summarized as follows:
1. Are the issues of fact and law raised by the claim and counterclaim largely
the same?
2. Would res judicata bar a subsequent suit on defendant's claim absent the
compulsory counterclaim rule?
3. Will substantially the same evidence support or refute plaintiff's claim as

well s defendant's counterclaim?
Meanwhile, respondent questions the jurisdiction of the Court of Appeals
over the appeal filed by petitioner from the 18 September 1990 and 28
February 1991 orders of the trial court. It is significant to note that this
objection to the appellate court's jurisdiction is raised for the first time before
this Court; respondent never having raised this issue before the appellate
court. Although the lack of jurisdiction of a court may be raised at any stage
of the action, a party may be estopped from raising such questions if he has
actively taken part in the very proceedings which he questions, belatedly
objecting to the court's jurisdiction in the event that the judgment or order
subsequently rendered is adverse to him.16 In this case, respondent actively
took part in the proceedings before the Court of Appeals by filing its
appellee's brief with the same.17 Its participation, when taken together with
its failure to object to the appellate court's jurisdiction during the entire
duration of the proceedings before such court, demonstrates a willingness to
abide by the resolution of the case by such tribunal and accordingly,
respondent is now most decidedly estopped from objecting to the Court of
Appeals' assumption of jurisdiction over petitioner's appeal.18
The basic issue for resolution in this case is whether or not the counterclaim
of petitioner is compulsory or permissive in nature. A compulsory
counterclaim is one which, being cognizable by the regular courts of justice,
arises out of or is connected with the transaction or occurrence constituting
the subject matter of the opposing party's claim and does not require for its
adjudication the presence of third parties of whom the court cannot acquire
jurisdiction.19
4. Is there any logical relation between the claim and the counterclaim?
Another test, applied in the more recent case of Quintanilla v. Court of

Appeals,21 is the "compelling test of compulsoriness" which requires "a
logical relationship between the claim and counterclaim, that is, where
conducting separate trials of the respective claims of the parties would entail
a substantial duplication of effort and time by the parties and the court."
As contained in her answer, petitioner's counterclaims are as follows:
(20) That defendant incorporates and repleads by reference all the foregoing
allegations as may be material to her Counterclaim against FGU.
(21) That FGU is liable to pay the following just, valid and legitimate claims of
defendant:
(a) the sum of at least P104,893.45 plus maximum interest thereon

representing, among others, direct commissions, profit commissions and
contingent bonuses legally due to defendant; and
(b) the minimum amount of P500,000.00 plus the maximum allowable

interest representing defendant's accumulated premium reserve for 1985 and
previous years,
which FGU has unjustifiably failed to remit to defendant despite repeated

demands in gross violation of their Special Agent's Contract and in
contravention of the principle of law that "every person must, in the exercise
of his rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith."
(22) That as a result of the filing of this patently baseless, malicious and
unjustified Complaint, and FGU's unlawful, illegal and vindictive termination
of their Special Agent's Contract, defendant was unnecessarily dragged into
this litigation and to defense [sic] her side and assert her rights and claims
against FGU, she was compelled to hire the services of counsel with whom
she agreed to pay the amount of P30,000.00 as and for attorney's fees and
stands to incur litigation expenses in the amount estimated to at least
P20,000.00 and for which FGU should be assessed and made liable to pay
defendant.
sum of P100,000.00 or such amount as the Honorable Court may deem

warranted under the circumstances.22
Tested against the abovementioned standards, petitioner's counterclaim for

commissions, bonuses, and accumulated premium reserves is merely
permissive. The evidence required to prove petitioner's claims differs from
that needed to establish respondent's demands for the recovery of cash
accountabilities from petitioner, such as cash advances and costs of
premiums. The recovery of respondent's claims is not contingent or
dependent upon establishing petitioner's counterclaim, such that conducting
separate trials will not result in the substantial duplication of the time and
effort of the court and the parties. One would search the records in vain for a
logical connection between the parties' claims. This conclusion is further
reinforced by petitioner's own admissions since she declared in her answer
that respondent's cause of action, unlike her own, was not based upon the
Special Agent's Contract.23 However, petitioner's claims for damages,
allegedly suffered as a result of the filing by respondent of its complaint, are
compulsory.24
There is no need for need for petitioner to pay docket fees for her
compulsory counterclaim.25 On the other hand, in order for the trial court to
acquire jurisdiction over her permissive counterclaim, petitioner is bound to
pay the prescribed docket fees.26 The rule on the payment of filing fees has
been laid down by the Court in the case of Sun Insurance Office, Ltd. V. Hon.
Maximiano Asuncion27-
(23) That considering further the malicious and unwarranted action of

defendant in filing this grossly unfounded action, defendant has suffered and
continues to suffer from serious anxiety, mental anguish, fright and
humiliation. In addition to this, defendant's name, good reputation and
business standing in the insurance business as well as in the community
have been besmirched and for which FGU should be adjudged and made
liable to pay moral damages to defendant in the amount of P300,000.00 as
minimum.
1. It is not simply the filing of the complaint or appropriate initiatory pleading,

but the payment of the prescribed docket fee, that vests a trial court with
jurisdiction over the subject-matter or nature of the action. Where the filing of
the initiatory pleading is not accompanied by payment of the docket fee, the
court may allow payment of the fee within a reasonable time but in no case
beyond the applicable prescriptive or reglementary period.
(24) That in order to discourage the filing of groundless and malicious suits
like FGU's Complaint, and by way of serving [as] an example for the public
good, FGU should be penalized and assessed exemplary damages in the
2. The same rule applies to permissive counterclaims, third-party claims and

similar pleadings, which shall not be considered filed until and unless the
filing fee prescribed therefor is paid. The court may allow payment of said fee
within a reasonable time but also in no case beyond its applicable
prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the
appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading, or if
specified the same has been left for determination by the court, the additional
filing fee therefor shall constitute a lien on the judgment. It shall be the
responsibility of the Clerk of Court or his duly authorized deputy to enforce
said lien and assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been reiterated in the
recent case of Susan v. Court of Appeals.28 In Suson, the Court explained
that although the payment of the prescribed docket fees is a jurisdictional
requirement, its non-payment does not result in the automatic dismissal of
the case provided the docket fees are paid within the applicable prescriptive
or reglementary period. Coming now to the case at bar, it has not been
alleged by respondent and there is nothing in the records to show that
petitioner has attempted to evade the payment of the proper docket fees for
her permissive counterclaim. As a matter of fact, after respondent filed its
motion to dismiss petitioner's counterclaim based on her failure to pay docket
fees, petitioner immediately filed a motion with the trial court, asking it to
declare her counterclaim as compulsory in nature and therefore exempt from
docket fees and, in addition, to declare that respondent was in default for its
failure to answer her counterclaim.29 However, the trial court dismissed
petitioner's counterclaim. Pursuant to this Court's ruling in Sun Insurance, the
trial court should have instead given petitioner a reasonable time, but in no
case beyond the applicable prescriptive or reglementary period, to pay the
filing fees for her permissive counterclaim.
WHEREFORE, the assailed Decision of the Court of Appeals promulgated

on 23 December 1998 and its 19 May 1999 Resolution are hereby
MODIFIED. The compulsory counterclaim of petitioner for damages filed in
Civil Case No. 89-3816 is ordered REINSTATED. Meanwhile, the Regional
Trial Court of Makati (Branch 134) is ordered to require petitioner to pay the
prescribed docket fees for her permissive counterclaim (direct commissions,
profit commissions, contingent bonuses and accumulated premium
reserves), after ascertaining that the applicable prescriptive period has not
yet set in.33
SO ORDERED.1wphi1.nt
SECOND DIVISION
[G.R. No. 146019. June 8, 2004]
ARMANDO M. LASCANO, petitioner, vs. UNIVERSAL STEEL SMELTING

CO., INC., REYNALDO U. LIM and HON. REGIONAL TRIAL COURT OF
QUEZON CITY, respondents.
DECISION
Petitioner asserts that the trial court should have declared respondent in
default for having failed to answer her counterclaim.30 Insofar as the
permissive counterclaim of petitioner is concerned, there is obviously no
need to file an answer until petitioner has paid the prescribed docket fees for
only then shall the court acquire jurisdiction over such claim.31 Meanwhile,
the compulsory counterclaim of petitioner for damages based on the filing by
respondent of an allegedly unfounded and malicious suit need not be
answered since it is inseparable from the claims of respondent. If respondent
were to answer the compulsory counterclaim of petitioner, it would merely
result in the former pleading the same facts raised in its complaint.32
QUISUMBING, J.:
For review are (1) the resolution[1] dated August 7, 2000 of the Court of
Appeals in CA-G.R. SP No. 59972, which dismissed petitioners special civil
action for certiorari because of late filing; and (2) the resolution[2] of
November 15, 2000, denying petitioners motion for reconsideration. In the
interest of the speedy administration of justice, we shall also inquire into the
merits of said special civil action.
The antecedent facts are as follows:
Sometime in 1990, petitioner Armando Lascano had a construction project at

No. 18 Dalsol Street, GSIS Village, Project 8, Quezon City. This project
required a number of steel bars of various grades, which petitioner ordered
from private respondent Universal Steel Smelting Co., Inc. (USSCI). On
August 30, 1990, the steel bars valued at P104,268 were received by
petitioners representative, Rolando Nanquil. When the amount due thereon
was not paid, USSCI demanded payment. Instead of complying, petitioner
denied that he ordered the steel bars from USSCI.
WHEREFORE, premises considered, the Court hereby dismisses the

complaint for failure of plaintiff to establish his causes of action by
preponderant evidence.
On the counterclaim, the Court orders plaintiff to pay the defendants the
following:
1. P104,268.00 with interest thereon at 14% per annum from August 30,
1990 until fully paid;
2. P100,000.00 for moral damages;
Upon advice of its lawyer, USSCI filed a criminal complaint for estafa against
petitioner with the Quezon City Prosecutors Office. The complaint was
dismissed on September 5, 1991. USSCIs motion for reconsideration was
denied on November 14, 1991 and its petition for review filed with the
Department of Justice was also dismissed per resolution dated June 19,
1992.
In the meantime, the Manila Bulletin in its August 23, 1991 issue, published a
news item entitled School Owner in QC Sued. On August 27, 1991,
another news item, School Owner Faces Rap, was published, this time by
Tempo. In both news items, the school owner referred to was petitioner
Armando Lascano.
Hence, on August 25, 1992, petitioner filed with public respondent Regional
Trial Court of Quezon City, Branch 93, a complaint for damages against
private respondents USSCI and its Vice-President Reynaldo Lim, for alleged
malicious prosecution and allegedly causing the publication in two (2)
newspapers of general circulation, that he was being sued for estafa.
The case was docketed as Civil Case No. Q-92-13212 and on December 27,
1994, the trial court dismissed the complaint, thus:
3. P50,000.00 for exemplary damages;
4. P35,000.00 as and for reasonable attorneys fees; and
5. Costs of suit.
SO ORDERED.[3]
Petitioner received said Decision on January 16, 1995. Petitioners counsel

then filed a Notice of Appeal on January 20, 1995, which was approved by
the trial court in an Order dated January 25, 1995. However, the Court of
Appeals dismissed the appeal in its Resolution dated August 13, 1998, in this
wise:
Pursuant to Section 1 (c), Rule 50 in relation to Section 4 of Rule 41 of the

1997 Rules of Civil Procedure, as amended, the instant appeal is hereby
DISMISSED for failure of the appellant to pay the docket and other lawful
fees.
SO ORDERED.[4]
On the procedural aspect, we find merit in the petition.

On September 5, 1998, said Resolution became final and executory and the
Court of Appeals issued an entry of judgment thereon. Private respondents
then promptly filed on January 10, 2000 a motion for execution of the
December 27, 1994 judgment, which the court a quo granted on February 9,
2000. On March 15, 2000, petitioner filed a motion for reconsideration of the
trial courts Order granting the motion for execution, but the same was denied
on April 28, 2000.
Thus, on July 31, 2000, petitioner filed a special civil action for certiorari with
the Court of Appeals. However, the Court of Appeals, in its Resolution of
August 7, 2000, dismissed said petition on the ground of late filing. Petitioner
then filed a motion for reconsideration, which was denied in the appellate
courts Resolution dated November 15, 2000.
Hence, the instant petition ascribing to the appellate court the following
errors:
THE COURT OF APPEALS GRAVELY ERRED IN STRICTLY APPLYING

THE RULES IN THE FILING OF PETITION FOR CERTIORARI CONTRARY
TO THE LIBERAL CONSTRUCTION RULE AS ECHOED IN SEVERAL
SUPREME COURT DECISIONS.
II
THE COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE

RULE ON INTEREST OF JUSTICE AND EQUITY IN FAVOR OF
TECHNICALITY WHERE THE RTC DECISION SUBJECT OF EXECUTION
WAS UNJUST AND VOID HAVING BEEN RENDERED ON PURE
SPECULATION AND CONJECTURE WITHOUT CITATION OF SPECIFIC
EVIDENCE.[5]
In finding that the special civil action for certiorari was filed out of time, the
Court of Appeals applied Supreme Court Circular No. 39-98,[6] which took
effect on September 1, 1998. Said circular amended Section 4, Rule 65 of
the 1997 Rules of Civil Procedure as follows:
Sec. 4. Where and when petition to be filed. The petition may be filed not
later than sixty (60) days from notice of the judgment, order or resolution
sought to be assailed in the Supreme Court or, if it relates to the acts or
omissions of a lower court or of a corporation, board, officer or person, in the
Regional Trial Court exercising jurisdiction over the territorial area as defined
by the Supreme Court. It may also be filed in the Court of Appeals whether
or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan
if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasijudicial agency, and unless otherwise provided by law or these Rules, the
petition shall be filed in and cognizable only by the Court of Appeals.
If the petitioner had filed a motion for new trial or reconsideration in due time
after notice of said judgment, order or resolution, the period herein fixed shall
be interrupted. If the motion is denied, the aggrieved party may file the
petition within the remaining period, but which shall not be less than five (5)
days in any event, reckoned from notice of such denial. No extension of time
to file petition shall be granted except for the most compelling reason and in
no case to exceed fifteen (15) days. (Underscoring ours).
Records show that petitioner received on March 3, 2000 a copy of

respondent trial courts February 9, 2000 Order granting the motion for
execution of the December 27, 1994 judgment. He filed the motion for
reconsideration on March 15, 2000 or twelve (12) days after notice of the
assailed Order. Thus, consistent with SC Circular No. 39-98, the original 60day period was interrupted when petitioner filed a motion for reconsideration.
Since the motion was denied, petitioner had the remaining period of fortyeight (48) days within which to file the special civil action for certiorari with
the Court of Appeals.
Evidence on record shows petitioner received on June 1, 2000 a copy of the

trial courts April 28, 2000 Order denying his motion for reconsideration.
Therefore, conformably with SC Circular No. 39-98, the filing of the special
civil action for certiorari with the Court of Appeals on July 31, 2000, or on the
60th day, was twelve (12) days beyond the reglementary period.
We must point out, however, that Supreme Court Circular No. 56-2000,[7]
which took effect on September 1, 2000 further amended Section 4 of Rule
65 as follows:
Sec 4. When and where petition filed. - The petition shall be filed not later
than sixty (60) days from notice of the judgment, order or resolution. In case
a motion for reconsideration or new trial is timely filed, whether such motion
is required or not, the sixty (60) day period shall be counted from notice of
the denial of the said motion. (Underscoring ours).
Under the second amendment, the 60-day period within which to file the
special civil action for certiorari starts to run from receipt of notice of the
denial of the motion for reconsideration. However, it bears stressing, at the
time of petitioners filing of the special civil action for certiorari with the Court
of Appeals on July 31, 2000, SC Circular No. 56-2000 was not yet in effect.
Therefore, the sole issue for our consideration in this case is whether or not
said circular may be applied retroactively.
The present question does not pose a novel issue. In an analogous case,
San Luis v. Court of Appeals,[8] the Court of Appeals likewise reckoned the
counting of the 60-day period from petitioners receipt of a copy of the
assailed Order, considered the interruption of the running of the period by the
filing of the motion for reconsideration, and held that the remaining period
resumed to run on the date petitioner received the Order denying his motion
for reconsideration.
In said case of San Luis, petitioners special civil action for certiorari was filed
with the Court of Appeals on January 7, 2000, long before SC Circular No.
56-2000 took effect. Nonetheless, we applied the circular retroactively and
held that the appellate court erred in dismissing the special civil action for
certiorari on the ground of late filing. We said therein:
Settled is the rule that remedial statutes or statutes relating to remedies or

modes of procedure, which do not create new rights or take away vested
rights but only operate in furtherance of the remedy or confirmation of rights
already existing, do not come within the purview of the general rule against
the retroactive operation of statutes. Procedural laws are construed to be
applicable to actions pending and undetermined at the time of their passage,
and are deemed retroactive in that sense and to that extent. As a general
rule, the retroactive application of procedural laws cannot be considered
violative of any personal rights because no vested right may attach to nor
arise therefrom.[9]
We see no reason why we should treat the instant case differently. Thus,
pursuant to SC Circular No. 56-2000, petitioners 60-day period to file the
special civil action for certiorari should be counted from his receipt on June 1,
2000 of the Order of April 28, 2000, denying his motion for reconsideration.
Hence, the special civil action for certiorari having been filed on July 31,
2000, or the last day before the reglementary period expired, the Court of
Appeals should not have dismissed the same on the ground of late filing.
Considering the circumstances in this case, we could direct the Court of

Appeals to decide on the merits the issues raised in petitioners special civil
action for certiorari. However, that would only result in further delay before
the resolution of this case. In our view, it is preferable to settle the entire
controversy now in a single proceeding, leaving no root or branch to bear the
seeds of future litigation. Following the San Luis decision, if based on the
records including the pleadings and the evidence, the dispute could be
resolved by us, we will do so to serve the ends of justice, instead of
remanding the case to the lower court for further proceedings.[10]
In the petition for certiorari, petitioner assigns the following errors to the trial
court:
THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN

GRANTING THE ISSUANCE OF WRIT OF EXECUTION.
II

UPHOLDING THAT IT IS THE MINISTERIAL DUTY THE (sic) COURT TO
ISSUE THE WRIT OF EXECUTION.
III

UPHOLDING THAT THE EXECUTION OF WHATEVER JUDGMENT THAT
MAY HAVE BEEN RENDERED WILL PUT THE (SIC) REST THE
CONTROVERSY BETWEEN PARTY LITIGANTS.
IV

DISREGARDING THE RULE THAT A WRIT OF EXECUTION MAY BE
DISALLOWED ON EQUITABLE GROUNDS.[11]
one Rolando Nanquil acting as petitioners agent. While petitioner denied

knowing said Rolando Nanquil, the delivery receipts of LNG Marketing were
signed by the same Rolando Nanquil, as duly authorized agent of petitioner.
Delivery of subject steel bars to petitioner having been established by
preponderance of evidence, we could not conclude that the trial court erred
when it ordered petitioner to pay private respondents the value of said steel
bars.
Petitioner questions the trial courts order to pay private respondents

P100,000 and P50,000 as moral and exemplary damages, respectively. He
maintains that he filed the complaint in good faith, which is inconsistent with
the order to pay moral damages; and that there was no proof he acted in a
wanton, fraudulent, reckless, oppressive and malevolent manner, as to justify
exemplary damages.
Petitioner misses the point that the court a quo ordered the payment of moral
damages not because he filed the complaint in bad faith, but because of his
unjustified refusal to pay a just debt. Article 2220 of the Civil Code provides:
ART. 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith. (Underscoring ours).
Petitioner contends that the December 27, 1994 judgment is devoid of factual
and legal bases. He protests the order to pay private respondents P104,268
representing the value of the steel bars delivered to him. According to
petitioner, he transacted business with LNG Marketing, not with private
respondents. He claims that LNG Marketing was a dealer of private
respondents, but that both could not compete for one client.[12]
When payment on the delivered steel bars was demanded, petitioner,

instead of complying with his obligation, denied having transacted with
private respondents. Such cold refusal to pay a just debt amounts to a
breach of contract in bad faith, as contemplated by the aforecited provision.
Hence, the order to pay moral damages is in accordance with law, but only
with regard to respondent individual (Reynaldo Lim) and not to respondent
corporation (USSCI). A corporation cannot suffer nor be entitled to moral
damages.[13]
In our view, that petitioner transacted with LNG Marketing for the purchase of
steel bars might well be true, but it did not preclude the fact that private
respondents had delivered steel bars to petitioner. The fact of delivery to
petitioner of the subject steel bars is evidenced by delivery receipts signed by
As to exemplary damages, although the same cannot be recovered as a

matter of right, they need not be proved. But before considering whether
exemplary damages should be awarded, it must first be shown that an award
of moral, temperate or compensatory damages obtains.[14] In the instant
case, as the order to pay moral damages to private individual respondent is

proper, it follows that the adjudication of exemplary damages on that basis is
also in order.
the award to private respondents of damages as part of their counterclaims

against the petitioner, particularly with regard to damages as herein
elucidated, ought to be modified accordingly.
As to the amount of damages, the court a quo ordered payment of P100,000

for moral damages and P50,000 for exemplary damages. However,
considering the amount of the unpaid debt at issue in this case, we are of the
considered view that P10,000 as moral damages and P5,000 in exemplary
damages would suffice under the circumstances.
WHEREFORE, the resolutions of the appellate court dated August 7, 2000

and November 15, 2000 in CA-G.R. SP No. 59972 are SET ASIDE. The
assailed decision of the Regional Trial Court of Quezon City, Branch 93, in
Civil Case No. Q-92-13212, dated December 27, 1994, is AFFIRMED,
except as to the amounts of moral and exemplary damages, which are
MODIFIED and reduced to only P10,000.00 and P5,000.00, respectively. No
pronouncement as to costs.
Finally, petitioner argues private respondents counterclaims are merely

permissive, which require payment of docket fees. Indeed, before the trial
court may acquire jurisdiction over permissive counterclaims, docket fees
thereon must first be paid.[15] However, we find that the counterclaims
herein are not permissive, but compulsory. [16] On this point, Section 7, Rule
6 of the Revised Rules of Civil Procedure is pertinent:
SEC. 7. Compulsory counterclaim. A compulsory counterclaim is one

which, being cognizable by the regular courts of justice, arises out of or is
connected with the transaction or occurrence constituting the subject matter
of the opposing partys claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction. Such
a counterclaim must be within the jurisdiction of the court both as to the
amount and the nature thereof, except that in an original action before the
Regional Trial Court, the counterclaim may be considered compulsory
regardless of the amount.
SO ORDERED. Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 155173
November 23, 2004
LAFARGE CEMENT PHILIPPINES, INC., (formerly Lafarge Philippines,

Inc.), LUZON CONTINENTAL LAND CORPORATION, CONTINENTAL
OPERATING CORPORATION and PHILIP ROSEBERG, petitioners,
vs.
The alleged malicious filing of estafa against petitioner is necessarily

connected with the non-payment of the value of steel bars delivered to
petitioner. The resolution of the latter issue does not require the presence of
third parties of whom the court a quo cannot acquire jurisdiction. Therefore,
the counterclaims raised by private respondents are clearly compulsory in
nature. Thus, non-payment of docket fees does not affect the jurisdiction of
the trial court to rule thereon.
CONTINENTAL CEMENT CORPORATION, GREGORY T. LIM and

ANTHONY A. MARIANO, respondents.
DECISION
In sum, we find no error nor grave abuse of discretion on the part of public
respondent in rendering the assailed judgment dismissing the complaint. But
PANGANIBAN, J.:
May defendants in civil cases implead in their counterclaims persons who

were not parties to the original complaints? This is the main question to be
answered in this controversy.
In anticipation of the liability that the High Tribunal might adjudge against
CCC, the parties, under Clause 2 (c) of the SPA, allegedly agreed to retain
from the purchase price a portion of the contract price in the amount of
P117,020,846.84 -- the equivalent of US$2,799,140. This amount was to be
deposited in an interest-bearing account in the First National City Bank of
New York (Citibank) for payment to APT, the petitioner in GR No. 119712.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court,

seeking to nullify the May 22, 20022 and the September 3, 2002 Orders3 of
the Regional Trial Court (RTC) of Quezon City (Branch 80) in Civil Case No.
Q-00-41103. The decretal portion of the first assailed Order reads:
"WHEREFORE, in the light of the foregoing as earlier stated, the plaintiff's

motion to dismiss claims is granted. Accordingly, the defendants' claims
against Mr. Lim and Mr. Mariano captioned as their counterclaims are
dismissed."4
The second challenged Order denied petitioners' Motion for Reconsideration.
The Facts
Briefly, the origins of the present controversy can be traced to the Letter of
Intent (LOI) executed by both parties on August 11, 1998, whereby Petitioner
Lafarge Cement Philippines, Inc. (Lafarge) -- on behalf of its affiliates and
other qualified entities, including Petitioner Luzon Continental Land
Corporation (LCLC) -- agreed to purchase the cement business of
Respondent Continental Cement Corporation (CCC). On October 21, 1998,
both parties entered into a Sale and Purchase Agreement (SPA). At the time
of the foregoing transactions, petitioners were well aware that CCC had a
case pending with the Supreme Court. The case was docketed as GR No.
119712, entitled Asset Privatization Trust (APT) v. Court of Appeals and
Continental Cement Corporation.
However, petitioners allegedly refused to apply the sum to the payment to

APT, despite the subsequent finality of the Decision in GR No. 119712 in
favor of the latter and the repeated instructions of Respondent CCC. Fearful
that nonpayment to APT would result in the foreclosure, not just of its
properties covered by the SPA with Lafarge but of several other properties as
well, CCC filed before the Regional Trial Court of Quezon City on June 20,
2000, a "Complaint with Application for Preliminary Attachment" against
petitioners. Docketed as Civil Case No. Q-00-41103, the Complaint prayed,
among others, that petitioners be directed to pay the "APT Retained Amount"
referred to in Clause 2 (c) of the SPA.
Petitioners moved to dismiss the Complaint on the ground that it violated the
prohibition on forum-shopping. Respondent CCC had allegedly made the
same claim it was raising in Civil Case No. Q-00-41103 in another action,
which involved the same parties and which was filed earlier before the
International Chamber of Commerce. After the trial court denied the Motion
to Dismiss in its November 14, 2000 Order, petitioners elevated the matter
before the Court of Appeals in CA-GR SP No. 68688.
In the meantime, to avoid being in default and without prejudice to the

outcome of their appeal, petitioners filed their Answer and Compulsory
Counterclaims ad Cautelam before the trial court in Civil Case No. Q-0041103. In their Answer, they denied the allegations in the Complaint. They
prayed -- by way of compulsory counterclaims against Respondent CCC, its
majority stockholder and president Gregory T. Lim, and its corporate
secretary Anthony A. Mariano -- for the sums of (a) P2,700,000 each as
actual damages, (b) P100,000,000 each as exemplary damages, (c)
P100,000,000 each as moral damages, and (d) P5,000,000 each as
attorney's fees plus costs of suit.
Petitioners alleged that CCC, through Lim and Mariano, had filed the
"baseless" Complaint in Civil Case No. Q-00-41103 and procured the Writ of
Attachment in bad faith. Relying on this Court's pronouncement in Sapugay
v. CA,5 petitioners prayed that both Lim and Mariano be held "jointly and
solidarily" liable with Respondent CCC.
"[a] Whether or not the RTC gravely erred in refusing to rule that Respondent
CCC has no personality to move to dismiss petitioners' compulsory
counterclaims on Respondents Lim and Mariano's behalf.
On behalf of Lim and Mariano who had yet to file any responsive pleading,
CCC moved to dismiss petitioners' compulsory counterclaims on grounds
that essentially constituted the very issues for resolution in the instant
Petition.
"[b] Whether or not the RTC gravely erred in ruling that (i) petitioners'
counterclaims against Respondents Lim and Mariano are not compulsory; (ii)
Sapugay v. Court of Appeals is inapplicable here; and (iii) petitioners violated
the rule on joinder of causes of action."9
Ruling of the Trial Court
For clarity and coherence, the Court will resolve the foregoing in reverse
order.
On May 22, 2002, the Regional Trial Court of Quezon City (Branch 80)
dismissed petitioners' counterclaims for several reasons, among which were
the following: a) the counterclaims against Respondents Lim and Mariano
were not compulsory; b) the ruling in Sapugay was not applicable; and c)
petitioners' Answer with Counterclaims violated procedural rules on the
proper joinder of causes of action.6
The Court's Ruling
The Petition is meritorious.
First Issue:
Acting on the Motion for Reconsideration filed by petitioners, the trial court -in an Amended Order dated September 3, 20027 -- admitted some errors in
its May 22, 2002 Order, particularly in its pronouncement that their
counterclaim had been pleaded against Lim and Mariano only. However, the
RTC clarified that it was dismissing the counterclaim insofar as it impleaded
Respondents Lim and Mariano, even if it included CCC.
Hence this Petition.8
Issues
In their Memorandum, petitioners raise the following issues for our

consideration:
Counterclaims and Joinder of Causes of Action.
Petitioners' Counterclaims Compulsory
Counterclaims are defined in Section 6 of Rule 6 of the Rules of Civil

Procedure as "any claim which a defending party may have against an
opposing party." They are generally allowed in order to avoid a multiplicity of
suits and to facilitate the disposition of the whole controversy in a single
action, such that the defendant's demand may be adjudged by a
counterclaim rather than by an independent suit. The only limitations to this
principle are (1) that the court should have jurisdiction over the subject matter
of the counterclaim, and (2) that it could acquire jurisdiction over third parties
whose presence is essential for its adjudication.10
Petitioners base their counterclaim on the following allegations:

A counterclaim may either be permissive or compulsory. It is permissive "if it
does not arise out of or is not necessarily connected with the subject matter
of the opposing party's claim."11 A permissive counterclaim is essentially an
independent claim that may be filed separately in another case.
A counterclaim is compulsory when its object "arises out of or is necessarily

connected with the transaction or occurrence constituting the subject matter
of the opposing party's claim and does not require for its adjudication the
presence of third parties of whom the court cannot acquire jurisdiction."12
Unlike permissive counterclaims, compulsory counterclaims should be set up

in the same action; otherwise, they would be barred forever. NAMARCO v.
Federation of United Namarco Distributors13 laid down the following criteria
to determine whether a counterclaim is compulsory or permissive: 1) Are
issues of fact and law raised by the claim and by the counterclaim largely the
same? 2) Would res judicata bar a subsequent suit on defendant's claim,
absent the compulsory counterclaim rule? 3) Will substantially the same
evidence support or refute plaintiff's claim as well as defendant's
counterclaim? 4) Is there any logical relation between the claim and the
counterclaim? A positive answer to all four questions would indicate that the
counterclaim is compulsory.
Adopted in Quintanilla v. CA14 and reiterated in Alday v. FGU Insurance

Corporation,15 the "compelling test of compulsoriness" characterizes a
counterclaim as compulsory if there should exist a "logical relationship"
between the main claim and the counterclaim. There exists such a
relationship when conducting separate trials of the respective claims of the
parties would entail substantial duplication of time and effort by the parties
and the court; when the multiple claims involve the same factual and legal
issues; or when the claims are offshoots of the same basic controversy
between the parties.
We shall now examine the nature of petitioners' counterclaims against

respondents with the use of the foregoing parameters.
"Gregory T. Lim and Anthony A. Mariano were the persons responsible for
making the bad faith decisions for, and causing plaintiff to file this baseless
suit and to procure an unwarranted writ of attachment, notwithstanding their
knowledge that plaintiff has no right to bring it or to secure the writ. In taking
such bad faith actions, Gregory T. Lim was motivated by his personal
interests as one of the owners of plaintiff while Anthony A. Mariano was
motivated by his sense of personal loyalty to Gregory T. Lim, for which
reason he disregarded the fact that plaintiff is without any valid cause.
"Consequently, both Gregory T. Lim and Anthony A. Mariano are the

plaintiff's co-joint tortfeasors in the commission of the acts complained of in
this answer and in the compulsory counterclaims pleaded below. As such
they should be held jointly and solidarily liable as plaintiff's co-defendants to
those compulsory counterclaims pursuant to the Supreme Court's decision in
Sapugay v. Mobil.
xxx
xxx
xxx
"The plaintiff's, Gregory T. Lim and Anthony A. Mariano's bad faith filing of
this baseless case has compelled the defendants to engage the services of
counsel for a fee and to incur costs of litigation, in amounts to be proved at
trial, but in no case less than P5 million for each of them and for which
plaintiff Gregory T. Lim and Anthony A. Mariano should be held jointly and
solidarily liable.
"The plaintiff's, Gregory T. Lim's and Anthony A. Mariano's actions have

damaged the reputations of the defendants and they should be held jointly
and solidarily liable to them for moral damages of P100 million each.
"In order to serve as an example for the public good and to deter similar
baseless, bad faith litigation, the plaintiff, Gregory T. Lim and Anthony A.
Mariano should be held jointly and solidarily liable to the defendants for
exemplary damages of P100 million each." 16
The above allegations show that petitioners' counterclaims for damages were
the result of respondents' (Lim and Mariano) act of filing the Complaint and
securing the Writ of Attachment in bad faith. Tiu Po v. Bautista17 involved
the issue of whether the counterclaim that sought moral, actual and
exemplary damages and attorney's fees against respondents on account of
their "malicious and unfounded" complaint was compulsory. In that case, we
held as follows:
"Petitioners' counterclaim for damages fulfills the necessary requisites of a

compulsory counterclaim. They are damages claimed to have been suffered
by petitioners as a consequence of the action filed against them. They have
to be pleaded in the same action; otherwise, petitioners would be precluded
by the judgment from invoking the same in an independent action. The
pronouncement in Papa vs. Banaag (17 SCRA 1081) (1966) is in point:
"Compensatory, moral and exemplary damages, allegedly suffered by the

creditor in consequence of the debtor's action, are also compulsory
counterclaim barred by the dismissal of the debtor's action. They cannot be
claimed in a subsequent action by the creditor against the debtor."
"Aside from the fact that petitioners' counterclaim for damages cannot be the
subject of an independent action, it is the same evidence that sustains
petitioners' counterclaim that will refute private respondent's own claim for
damages. This is an additional factor that characterizes petitioners'
counterclaim as compulsory."18
Moreover, using the "compelling test of compulsoriness," we find that,

clearly, the recovery of petitioners' counterclaims is contingent upon the case
filed by respondents; thus, conducting separate trials thereon will result in a
substantial duplication of the time and effort of the court and the parties.
Since the counterclaim for damages is compulsory, it must be set up in the

same action; otherwise, it would be barred forever. If it is filed concurrently
with the main action but in a different proceeding, it would be abated on the
ground of litis pendentia; if filed subsequently, it would meet the same fate on
the ground of res judicata.19
Sapugay v. Court of Appeals Applicable to the Case at Bar
Sapugay v. Court of Appeals finds application in the present case. In

Sapugay, Respondent Mobil Philippines filed before the trial court of Pasig
an action for replevin against Spouses Marino and Lina Joel Sapugay. The
Complaint arose from the supposed failure of the couple to keep their end of
their Dealership Agreement. In their Answer with Counterclaim, petitioners
alleged that after incurring expenses in anticipation of the Dealership
Agreement, they requested the plaintiff to allow them to get gas, but that it
had refused. It claimed that they still had to post a surety bond which, initially
fixed at P200,000, was later raised to P700,000.
The spouses exerted all efforts to secure a bond, but the bonding companies
required a copy of the Dealership Agreement, which respondent continued to
withhold from them. Later, petitioners discovered that respondent and its
manager, Ricardo P. Cardenas, had intended all along to award the
dealership to Island Air Product Corporation.
In their Answer, petitioners impleaded in the counterclaim Mobil Philippines

and its manager -- Ricardo P. Cardenas -- as defendants. They prayed that
judgment be rendered, holding both jointly and severally liable for preoperation expenses, rental, storage, guarding fees, and unrealized profit
including damages. After both Mobil and Cardenas failed to respond to their
Answer to the Counterclaim, petitioners filed a "Motion to Declare Plaintiff
and its Manager Ricardo P. Cardenas in Default on Defendant's
Counterclaim."
Among the issues raised in Sapugay was whether Cardenas, who was not a
party to the original action, might nevertheless be impleaded in the
counterclaim. We disposed of this issue as follows:
"A counterclaim is defined as any claim for money or other relief which a
defending party may have against an opposing party. However, the general
rule that a defendant cannot by a counterclaim bring into the action any claim
against persons other than the plaintiff admits of an exception under Section
14, Rule 6 which provides that 'when the presence of parties other than
those to the original action is required for the granting of complete relief in
the determination of a counterclaim or cross-claim, the court shall order them
to be brought in as defendants, if jurisdiction over them can be obtained.' The
inclusion, therefore, of Cardenas in petitioners' counterclaim is sanctioned by
the rules."20
The prerogative of bringing in new parties to the action at any stage before
judgment is intended to accord complete relief to all of them in a single action
and to avert a duplicity and even a multiplicity of suits thereby.
In insisting on the inapplicability of Sapugay, respondents argue that new

parties cannot be included in a counterclaim, except when no complete relief
can be had. They add that "[i]n the present case, Messrs. Lim and Mariano
are not necessary for petitioners to obtain complete relief from Respondent
CCC as plaintiff in the lower court. This is because Respondent CCC as a
corporation with a separate [legal personality] has the juridical capacity to
indemnify petitioners even without Messrs. Lim and Mariano."21
We disagree. The inclusion of a corporate officer or stockholder -- Cardenas

in Sapugay or Lim and Mariano in the instant case -- is not premised on the
assumption that the plaintiff corporation does not have the financial ability to
answer for damages, such that it has to share its liability with individual
defendants. Rather, such inclusion is based on the allegations of fraud and
bad faith on the part of the corporate officer or stockholder. These allegations
may warrant the piercing of the veil of corporate fiction, so that the said
individual may not seek refuge therein, but may be held individually and
personally liable for his or her actions.
In Tramat Mercantile v. Court of Appeals,22 the Court held that generally, it

should only be the corporation that could properly be held liable. However,
circumstances may warrant the inclusion of the personal liability of a
corporate director, trustee, or officer, if the said individual is found guilty of
bad faith or gross negligence in directing corporate affairs.
Remo Jr. v. IAC23 has stressed that while a corporation is an entity separate
and distinct from its stockholders, the corporate fiction may be disregarded if
"used to defeat public convenience, justify a wrong, protect fraud, or defend
crime." In these instances, "the law will regard the corporation as an
association of persons, or in case of two corporations, will merge them into
one." Thus, there is no debate on whether, in alleging bad faith on the part of
Lim and Mariano the counterclaims had in effect made them "indispensable
parties" thereto; based on the alleged facts, both are clearly parties in
interest to the counterclaim.24
Respondents further assert that "Messrs. Lim and Mariano cannot be held
personally liable [because their assailed acts] are within the powers granted
to them by the proper board resolutions; therefore, it is not a personal
decision but rather that of the corporation as represented by its board of
directors."25 The foregoing assertion, however, is a matter of defense that
should be threshed out during the trial; whether or not "fraud" is extant under
the circumstances is an issue that must be established by convincing
evidence.26
Suability and liability are two distinct matters. While the Court does rule that
the counterclaims against Respondent CCC's president and manager may
be properly filed, the determination of whether both can in fact be held jointly
and severally liable with respondent corporation is entirely another issue that
should be ruled upon by the trial court.
However, while a compulsory counterclaim may implead persons not parties

to the original complaint, the general rule -- a defendant in a compulsory
counterclaim need not file any responsive pleading, as it is deemed to have
adopted the allegations in the complaint as its answer -- does not apply. The
filing of a responsive pleading is deemed a voluntary submission to the
jurisdiction of the court; a new party impleaded by the plaintiff in a
compulsory counterclaim cannot be considered to have automatically and
unknowingly submitted to the jurisdiction of the court. A contrary ruling would
result in mischievous consequences whereby a party may be indiscriminately
impleaded as a defendant in a compulsory counterclaim; and judgment
rendered against it without its knowledge, much less participation in the
proceedings, in blatant disregard of rudimentary due process requirements.
The correct procedure in instances such as this is for the trial court, per
Section 12 of Rule 6 of the Rules of Court, to "order [such impleaded parties]
to be brought in as defendants, if jurisdiction over them can be obtained," by
directing that summons be served on them. In this manner, they can be
properly appraised of and answer the charges against them. Only upon
service of summons can the trial court obtain jurisdiction over them.
In Sapugay, Cardenas was furnished a copy of the Answer with

Counterclaim, but he did not file any responsive pleading to the counterclaim
leveled against him. Nevertheless, the Court gave due consideration to
certain factual circumstances, particularly the trial court's treatment of the
Complaint as the Answer of Cardenas to the compulsory counterclaim and of
his seeming acquiescence thereto, as evidenced by his failure to make any
objection despite his active participation in the proceedings. It was held thus:
"It is noteworthy that Cardenas did not file a motion to dismiss the
counterclaim against him on the ground of lack of jurisdiction. While it is a
settled rule that the issue of jurisdiction may be raised even for the first time
on appeal, this does not obtain in the instant case. Although it was only Mobil
which filed an opposition to the motion to declare in default, the fact that the
trial court denied said motion, both as to Mobil and Cardenas on the ground
that Mobil's complaint should be considered as the answer to petitioners'
compulsory counterclaim, leads us to the inescapable conclusion that the
trial court treated the opposition as having been filed in behalf of both Mobil
and Cardenas and that the latter had adopted as his answer the allegations
raised in the complaint of Mobil. Obviously, it was this ratiocination which led
the trial court to deny the motion to declare Mobil and Cardenas in default.
Furthermore, Cardenas was not unaware of said incidents and the
proceedings therein as he testified and was present during trial, not to speak
of the fact that as manager of Mobil he would necessarily be interested in the
case and could readily have access to the records and the pleadings filed
therein.
"By adopting as his answer the allegations in the complaint which seeks
affirmative relief, Cardenas is deemed to have recognized the jurisdiction of
the trial court over his person and submitted thereto. He may not now be
heard to repudiate or question that jurisdiction."27
Such factual circumstances are unavailing in the instant case. The records
do not show that Respondents Lim and Mariano are either aware of the
counterclaims filed against them, or that they have actively participated in the
proceedings involving them. Further, in dismissing the counterclaims against
the individual respondents, the court a quo -- unlike in Sapugay -- cannot be
said to have treated Respondent CCC's Motion to Dismiss as having been
filed on their behalf.
Rules on Permissive Joinder of Causes

of Action or Parties Not Applicable
Respondent CCC contends that petitioners' counterclaims violated the rule

on joinder of causes of action. It argues that while the original Complaint was
a suit for specific performance based on a contract, the counterclaim for
damages was based on the tortuous acts of respondents.28 In its Motion to
Dismiss, CCC cites Section 5 of Rule 2 and Section 6 of Rule 3 of the Rules
of Civil Procedure, which we quote:
"Section 5. Joinder of causes of action. A party may in one pleading assert,

in the alternative or otherwise, as many causes of action as he may have
against an opposing party, subject to the following conditions:
(a) The party joining the causes of action shall comply with the rules on
joinder of parties; x x x"
Section 6. Permissive joinder of parties. All persons in whom or against

whom any right to relief in respect to or arising out of the same transaction or
series of transactions is alleged to exist whether jointly, severally, or in the
alternative, may, except as otherwise provided in these Rules, join as
plaintiffs or be joined as defendants in one complaint, where any question of
law or fact common to all such plaintiffs or to all such defendants may arise
in the action; but the court may make such orders as may be just to prevent
any plaintiff or defendant from being embarrassed or put to expense in
connection with any proceedings in which he may have no interest."
The foregoing procedural rules are founded on practicality and convenience.

They are meant to discourage duplicity and multiplicity of suits. This objective
is negated by insisting -- as the court a quo has done -- that the compulsory
counterclaim for damages be dismissed, only to have it possibly re-filed in a
separate proceeding. More important, as we have stated earlier,
Respondents Lim and Mariano are real parties in interest to the compulsory
counterclaim; it is imperative that they be joined therein. Section 7 of Rule 3
provides:
"Compulsory joinder of indispensable parties. Parties in interest without

whom no final determination can be had of an action shall be joined either as
plaintiffs or defendants."
"3. Ordering the plaintiff, Gregory T. Lim and Anthony A, Mariano jointly and
solidarily to pay the defendants LPI, LCLC, COC and Roseberg:
"a. Exemplary damages of P100 million each;
"b. Moral damages of P100 million each; and
"c. Attorney's fees and costs of suit of at least P5 million each.
Other reliefs just and equitable are likewise prayed for."29

Moreover, in joining Lim and Mariano in the compulsory counterclaim,
petitioners are being consistent with the solidary nature of the liability alleged
therein.
Second Issue:
CCC's Personality to Move to Dismiss the Compulsory Counterclaims
Characterizing their counterclaim for damages against Respondents CCC,

Lim and Mariano as "joint and solidary," petitioners prayed:
Obligations may be classified as either joint or solidary. "Joint" or "jointly" or

"conjoint" means mancum or mancomunada or pro rata obligation; on the
other hand, "solidary obligations" may be used interchangeably with "joint
and several" or "several." Thus, petitioners' usage of the term "joint and
solidary" is confusing and ambiguous.
The ambiguity in petitioners' counterclaims notwithstanding, respondents'

liability, if proven, is solidary. This characterization finds basis in Article 1207
of the Civil Code, which provides that obligations are generally considered
joint, except when otherwise expressly stated or when the law or the nature
of the obligation requires solidarity. However, obligations arising from tort
are, by their nature, always solidary. We have assiduously maintained this
legal principle as early as 1912 in Worcester v. Ocampo,30 in which we held:
"WHEREFORE, it is respectfully prayed that after trial judgment be rendered:
"1. Dismissing the complaint in its entirety;
"2. Ordering the plaintiff, Gregory T. Lim and Anthony A. Mariano jointly and
solidarily to pay defendant actual damages in the sum of at least
P2,700,000.00;
"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
alleged in the counterclaims. Article 1211 of the Civil Code is explicit on this
point:
"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
The solidary character of respondents' alleged liability is precisely why

credence cannot be given to petitioners' assertion. According to such
assertion, Respondent CCC cannot move to dismiss the counterclaims on
grounds that pertain solely to its individual co-debtors.32 In cases filed by the
creditor, a solidary debtor may invoke defenses arising from the nature of the
obligation, from circumstances personal to it, or even from those personal to
its co-debtors. Article 1222 of the Civil Code provides:
"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 solidary debtor may, in actions filed by the creditor, avail itself of all
defenses which are derived from the nature of the obligation and of those
which are personal to him, or pertain to his own share. With respect to those
which personally belong to the others, he may avail himself thereof only as
regards that part of the debt for which the latter are responsible." (Emphasis
supplied).
"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."
In a "joint" obligation, each obligor answers only for a part of the whole
liability; in a "solidary" or "joint and several" obligation, the relationship
between the active and the passive subjects is so close that each of them
must comply with or demand the fulfillment of the whole obligation.31 The
fact that the liability sought against the CCC is for specific performance and
tort, while that sought against the individual respondents is based solely on
tort does not negate the solidary nature of their liability for tortuous acts
"Solidarity may exist although the creditors and the debtors may not be
bound in the same manner and by the same periods and conditions."
The act of Respondent CCC as a solidary debtor -- that of filing a motion to

dismiss the counterclaim on grounds that pertain only to its individual codebtors -- is therefore allowed.
However, a perusal of its Motion to Dismiss the counterclaims shows that

Respondent CCC filed it on behalf of Co-respondents Lim and Mariano; it did
not pray that the counterclaim against it be dismissed. Be that as it may,
Respondent CCC cannot be declared in default. Jurisprudence teaches that
if the issues raised in the compulsory counterclaim are so intertwined with
the allegations in the complaint, such issues are deemed automatically
joined.33 Counterclaims that are only for damages and attorney's fees and
that arise from the filing of the complaint shall be considered as special
defenses and need not be answered.34
CCC's Motion to Dismiss the Counterclaim on Behalf of Respondents Lim

and Mariano Not Allowed
SO ORDERED.
While Respondent CCC can move to dismiss the counterclaims against it by

raising grounds that pertain to individual defendants Lim and Mariano, it
cannot file the same Motion on their behalf for the simple reason that it lacks
the requisite authority to do so. A corporation has a legal personality entirely
separate and distinct from that of its officers and cannot act for and on their
behalf, without being so authorized. Thus, unless expressly adopted by Lim
and Mariano, the Motion to Dismiss the compulsory counterclaim filed by
Respondent CCC has no force and effect as to them.
THIRD DIVISION
In summary, we make the following pronouncements:
[G.R. No. 146125. September 17, 2003]
1. The counterclaims against Respondents CCC, Gregory T. Lim and

Anthony A. Mariano are compulsory.
NOVELTY PHILIPPINES, INC., petitioner, vs. COURT OF APPEALS;

PANEL OF VOLUNTARY ARBITRATORS, Represented by Its Chairman,
RAMON T. JIMENEZ; and REFORM THE UNION MOVEMENT IN
NOVELTY (RUMN), respondents.
2. The counterclaims may properly implead Respondents Gregory T. Lim and

Anthony A. Mariano, even if both were not parties in the original Complaint.
DECISION
PANGANIBAN, J.:
3. Respondent CCC or any of the three solidary debtors (CCC, Lim or

Mariano) may include, in a Motion to Dismiss, defenses available to their codefendants; nevertheless, the same Motion cannot be deemed to have been
filed on behalf of the said co-defendants.
4. Summons must be served on Respondents Lim and Mariano before the

trial court can obtain jurisdiction over them.
WHEREFORE, the Petition is GRANTED and the assailed Orders

REVERSED. The court of origin is hereby ORDERED to take cognizance of
the counterclaims pleaded in petitioners' Answer with Compulsory
Counterclaims and to cause the service of summons on Respondents
Gregory T. Lim and Anthony A. Mariano. No costs.
As much as practicable, litigations should be decided on their merits and not

on procedural technicalities. This statement holds true especially in labor
cases like the present one, in which the defect has been cured by the motion
for reconsideration.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,

assailing the July 12, 2000[2] and the November 21, 2000[3] Resolutions of
the Court of Appeals (CA) in CA-GR SP No. 59544. The first Resolution
dismissed petitioners original action for certiorari as follows:
This instant petition is hereby DISMISSED outright:
a.)
For failure to comply with Sec. 1, Rule 65 in relation to Sec. 3, Rule 46
of the 1997 Rules of Civil Procedure.
Mr. Steven Young,[4] allegedly the personnel officer of petitioner, who signed
the petition did not attach the alleged authority from petitioner to institute the
same.
b.)
For failure to comply with Sec. 13, Rule 13 of the same Rules, there
being no attachment of the required affidavit proof of service.[5]
Petitioners Motion for Reconsideration was denied in the second assailed

Resolution, pertinent portions of which are reproduced hereunder:
In the case at bench, petitioner failed to attach the required authority to file
the instant petition. It was only submitted when the instant motion was filed
and the Special Power of Attorney was executed only on July 26, 2000 while
the instant petition was filed on July 6, 2000. Sadly, at the time the case was
filed, no authority was given to Mr. Ventura when the petition was filed.
Hence, we had to dismiss the instant petition.
Anent the issue of failure to attach the required affidavit of proof of service, a
close scrutiny of the records reveal that the affidavit of service was attached
after the annexes x x x. Nevertheless, despite such compliance, the instant
motion must still be denied for reasons above-stated.
WHEREFORE, in view of the foregoing, the instant motion for

reconsideration is hereby DENIED for lack of merit. Our resolution dated
July 18, 2000 is REITERATED.[6]
The Facts
The dispute between Novelty Philippines, Inc. (Novelty) and Reform the
Union Movement in Novelty (RUMN) arose when the latter started assessing
penalties against its erring members. On June 26, 1997, RUMNs executive
board adopted a Resolution[7] sanctioning union officers and members who
had failed to join big rallies, with a penalty equivalent to their salary for one
day.
On November 19, 1997, petitioner issued a Memorandum announcing that,

for the payroll period November 16 to 22, 1997, it would deduct from the
salaries of union members who had failed to attend the mobilization on July
28, 1997, amounts equivalent to their one-day salary. According to it, the
checkoff was being done pursuant to the Resolution of the RUMN executive
board and existing individual checkoff authorizations.
When some members of the union allegedly complained of the salary

deduction, petitioner temporarily held in abeyance the implementation of the
checkoff on the special assessment made by RUMN. Petitioner also
requested from the Office of the Secretary of the Department of Labor and
Employment (DOLE) its opinion on the matter.
This move notwithstanding, RUMN continued to insist on the implementation

of the checkoff on the special assessments. Nevertheless, citing an Opinion
rendered by the legal office of the DOLE, petitioner rejected RUMNs
persistent demand for a checkoff. Consequently, RUMN raised the matter
for grievance. Since no settlement was reached during the grievance
procedure, the case was elevated to the National Conciliation and Mediation
Board, which referred the controversy to voluntary arbitration.
After the submission of the necessary pleadings by the parties, the Panel of
Voluntary Arbitrators rendered a Decision[8] dated April 26, 2000, the
dispositive portion of which reads:
WHEREFORE, the Panel hereby declares that there has been sufficient
compliance [with] the provisions of the Labor Code, the CBA provisions
between the parties and the check-off authorization form executed by the
Union members or, more specifically, special assessments effected by

authority of the Unions resolution duly adopted and approved by the majority
of the Union in a general membership meeting. The Panel therefore
confirms the right of the Union to demand from Management the check-off of
one days pay against erring members who had violated the Union directive
for members to attend and participate in the protest rally during the [State of
the Nation Address] SONA of July 1997.[9]
Petitioner filed with the Panel of Voluntary Arbitrators a Motion for

Reconsideration, which was denied in a Resolution[10] dated June 19, 2000.
Thereafter, the former elevated the matter to the CA by way of a Petition for
Certiorari under Rule 65.
II.
The Panel of Voluntary Arbitrators committed grave abuse of
discretion when it rendered the assailed majority Decision and assailed
Resolution without factual or legal basis and patently contrary to law.[12]
The Courts Ruling
The Petition is meritorious.
Main Issue:
Substantial Compliance
Ruling of the Court of Appeals
The CA denied due course to the Petition for failure of the personnel officer
of petitioner to attach (1) his authority to institute the action and (2) the
required proof of service. The Motion for Reconsideration was likewise
denied by the appellate court, because the required authority to file it had
been executed only after 20 days from its filing.
with the Procedural Requirements
Petitioner avers that it has substantially complied with the requirements of

Section 1 of Rule 65 in relation to Section 3 of Rule 46 of the 1997 Rules of
Civil Procedure. It has allegedly done so particularly with regard to the
authority of Ventura,[13] its personnel officer, to file the Petition for Certiorari
before the CA. According to petitioner, when Ventura represented the
company at the voluntary arbitration level, his authority to act for and on its
behalf was never questioned.
Hence, this recourse.[11]
Issues
Petitioner submits the following issues for our consideration:
I.
The Honorable Respondent Court of Appeals committed grave abuse
of discretion when it dismissed the Petition for Certiorari despite petitioners
substantial compliance with the requirements of the rules.
It further claims that the pertinent provisions of the aforementioned rules do

not specify any requirement pertaining to the authority of the representative
of the company to file the Petition. Moreover, it contends that its subsequent
submission of a Special Power of Attorney constituted substantial
compliance with the subject rules and, in effect, ratified Venturas authority to
file the Petition for and on behalf of the company.
On the other hand, private respondent counters that Ventura had no authority
to file the Petition before the CA or to sign the Verification and Certificate of
Non-Forum Shopping. It argues that such authority should have been
conferred to him through an appropriate board resolution of Novelty or a
special power of attorney, since he was neither the president nor a corporate
officer of the company. Moreover, private respondent insists that the
authority to verify and certify is an essential requirement in the filing of a
petition for certiorari, especially when petitioner is a corporation that can act
only through its president or any other officer authorized by a board
resolution.
Finally, respondent claims that petitioners subsequent submission of a

Special Power of Attorney was still defective, because the document had
been executed by the general manager and not by the president of Novelty.
Based on the second assailed Resolution, the alleged lack of authority of

petitioners personnel officer to sign the Verification and Certificate of NonForum Shopping became the CAs sole basis for dismissing the certiorari
action. The appellate court refused to give due course to the Petition, even
after petitioner had submitted a Special Power of Attorney granting such
authority to Ventura. The CA reasoned that this authorization should have
been submitted together with the initiatory pleading, not as an annex or
attachment to the Motion for Reconsideration.
The policy of our judicial system is to encourage full adjudication of the

merits of an appeal. In the exercise of its equity jurisdiction, this Court may
reverse the dismissal of appeals that are grounded merely on
technicalities.[14] Moreover, procedural niceties should be avoided in labor
cases in which the provisions of the Rules of Court are applied only in a
suppletory manner.[15] Indeed, rules of procedure may be relaxed to relieve
a part of an injustice not commensurate with the degree of noncompliance
with the process required.[16]
The foregoing judicial policy acquires greater significance where there has
been subsequent compliance with the requirements of the rules, as in this
case in which petitioner has submitted the Special Power of Attorney
together with its Motion for Reconsideration.
In Jaro v. Court of Appeals,[17] this Court held that the subsequent

submission of requisite documents constituted substantial compliance with
procedural rules. It explained:
There is ample jurisprudence holding that the subsequent and substantial

compliance of an appellant may call for the relaxation of the rules of
procedure. In Cusi-Hernandez vs. Diaz and Piglas-Kamao vs. National
Labor Relations Commission, we ruled that the subsequent submission of
the missing documents with the motion for reconsideration amounts to
substantial compliance. The reasons behind the failure of the petitioners in
these two cases to comply with the required attachments were no longer
scrutinized. What we found noteworthy in each case was the fact that the
petitioners therein substantially complied with the formal requirements. We
ordered the remand of the petitions in these cases to the Court of Appeals,
stressing the ruling that by precipitately dismissing the petitions the appellate
court clearly put a premium on technicalities at the expense of a just
resolution of the case.[18]
We find equally untenable private respondents argument that the Special

Power of Attorney authorizing Ventura to file the Petition was still defective,
since it had been signed by the general manager and not by the president of
petitioner company. This Court, in Mactan-Cebu International Airport
Authority v. Court of Appeals,[19] recognized the authority not only of a
general manager but even of an acting general manager to sign a verification
and certificate against non-forum shopping.
We are not persuaded by CHIONGBIANs claim that the Verification and

Certification against forum shopping accompanying MCIAAs petition was
insufficient for allegedly having been signed by one who was not qualified to
do so. As pointed out by the MCIAA, Colonel Cordova signed the
Verification and Certification against forum shopping as Acting General
Manager of the MCIAA, pursuant to Office Order No. 5322-99 dated
September 10, 1999 issued by the General Manager of MCIAA, Alfonso
Allere. x x x.[20]
The authority of the general manager to sue on behalf of the corporation and
to sign the requisite verification and certification of non-forum shopping may
be delegated to any other officer of the company through a board resolution
or a special power of attorney. In this case, it was Ventura, the personnel
officer of petitioner company, who was authorized to file the Petition through
a Special Power of Attorney. This was a logical and practical decision of
management, considering that the person who was in the best position to
ascertain the truthfulness and the correctness of the allegations in the
Petition was its personnel officer, who knew the status of any personnel and
any labor-related suit of the company.
In Pfizer v. Galan,[21] this Court, speaking through Chief Justice Hilario G.

Davide Jr., explained the nature and purpose of a verification. It then upheld
the validity of a verification signed by an employment specialist who had not
even presented any proof of her authority to represent the petitioner
company.
Verification is intended to assure that the allegations in the pleading have

been prepared in good faith or are true and correct, not mere speculations.
Generally, lack of verification is merely a formal defect that is neither
jurisdictional nor fatal. The court may order the correction of the pleading or
act on the unverified pleading if the attending circumstances are such that
strict compliance with the rule may be dispensed with in order to serve the
ends of justice.
We firmly believe that the purpose of verification was served in the instant
case wherein the verification of the petition filed with the Court of Appeals
was done by Ms. Cleofe R. Legaspi. It remains undisputed that Ms. Legaspi
was an Employment Specialist of petitioner Pfizer, Inc., who coordinated and
actually took part in the investigation of the administrative charges against
respondent Galan. As such, she was in a position to verify the truthfulness
and correctness of the allegations in the petition. Besides, as pointed out by
petitioners, Pfizer, being a corporate entity, can only act through an officer.
Ms. Legaspi, who was an officer having personal knowledge of the case,
was, therefore, merely acting for and in behalf of petitioner Pfizer when she
signed the verification. Thus, the disputed verification is in compliance with
the Rules.[22]
Likewise, in Shipside v. Court of Appeals,[23] we elucidated on the necessity

of a certificate of non-forum shopping. We then ruled that the subsequent
submission of a proof of authority to act on behalf of petitioner corporation
justified the relaxation of the Rules for the purpose of allowing its Petition to
be given due course.
On the other hand, the lack of certification against forum shopping is

generally not curable by the submission thereof after the filing of the petition.
Section 5, Rule 45 of the 1997 Rules of Civil Procedure provides that the
failure of the petitioner to submit the required documents that should
accompany the petition, including the certification against forum shopping,
shall be sufficient ground for the dismissal thereof. The same rule applies to
certifications against forum shopping signed by a person on behalf of a
corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation.
xxx
xxx
xxx
In the instant case, the merits of petitioners case should be considered

special circumstances or compelling reasons that justify tempering the
requirement in regard to the certificate of non-forum shopping. Moreover, in
Loyola, Roadway, and Uy, the Court excused non-compliance with the
requirement as to the certificate of non-forum shopping. With more reason
should we allow the instant petition since petitioner herein did submit a
certification on non-forum shopping, failing only to show proof that the
signatory was authorized to do so. That petitioner subsequently submitted a
secretarys certificate attesting that Balbin was authorized to file an action on
behalf of petitioner likewise mitigates this oversight.
It must also be kept in mind that while the requirement of the certificate of
non-forum shopping is mandatory, nonetheless the requirements must not be
interpreted too literally and thus defeat the objective of preventing the
undesirable practice of forum-shopping. Lastly, technical rules of procedure
should be used to promote, not frustrate justice. While the swift unclogging
of court dockets is a laudable objective, the granting of substantial justice is
an even more urgent ideal.[24]
Indeed, while the right to appeal is a statutory and not a natural right, it is
nonetheless an essential part of our judicial system. Courts are therefore
advised to proceed with caution, so as not to deprive a party of the right to
appeal. Litigants should have the amplest opportunity for a proper and just
disposition of their cause -- free, as much as possible, from the constraints of
procedural technicalities.[25]
SO ORDERED.
In said petition, the Wees sought to (1) annul and set aside the Order dated
July 29, 1999 of the Regional Trial Court (RTC) of Quezon City, Branch 80,
denying their prayer to dismiss Civil Case No. Q-99-37372, as well as the
Order of September 20, 1999 denying their motion for reconsideration; (2)
order the trial court to desist from further proceedings in Civil Case No. Q-9937372; and (3) order the trial court to dismiss the said action. Also assailed
by the Wees is the Resolution2 of the Court of Appeals, promulgated March
7, 2001, denying their motion for reconsideration.
The antecedent facts in this case are not complicated.
WHEREFORE, the Petition is hereby GRANTED and the assailed

Resolutions SET ASIDE. The case is REMANDED to the Court of Appeals
for further proceedings on the merits. No pronouncement as to costs.
SUPREME COURT
Manila
Petitioner Rosemarie Wee and respondent Rosario D. Galvez are sisters.3

Rosemarie lives with her husband, petitioner Manuel Wee, in Balanga,
Bataan, while Rosario resides in New York, U.S.A. The present controversy
stemmed from an investment agreement between the two sisters, which had
gone sour along the way.
FIRST DIVISION
G.R. No. 147394
August 11, 2004
SPOUSES MANUEL and ROSEMARIE WEE, petitioners,

vs.
ROSARIO D. GALVEZ, respondent.
On April 20, 1999, Rosario, represented by Grace Galvez as her attorney-infact, filed a complaint before the RTC of Quezon City to collect a sum of
money from Manuel and Rosemarie Wee. The amount for collection was
US$20,000 at the exchange rate of P38.30 per dollar. The complaint, which
was docketed as Civil Case No. Q-99-37372, alleged that Rosario and
Rosemarie entered into an agreement whereby Rosario would send
Rosemarie US$20,000, half of said amount to be deposited in a savings
account while the balance could be invested in the money market. The
interest to be earned therefrom would be given to Rosario's son, Manolito
Galvez, as his allowance.
DECISION
Rosario claimed that pursuant to their agreement, she sent to Rosemarie on
various dates in 1993 and 1994, five (5) Chemical Bank checks, namely:
QUISUMBING, J.:
CHECK No.
For review is the Decision1 dated December 4, 2000 of the Court of Appeals
in CA-G.R. SP No. 55415, which denied special civil action for certiorari,
prohibition, and mandamus filed by petitioners Manuel and Rosemarie Wee.
DATE
AMOUNT
CB No. 123
CB No. 97
3/3/94
5/24/93
1,000.00
US$1,550.00
TOTAL
CB No. 101
US$20,050.004
6/11/93
Rosario further alleged that all of the aforementioned checks were deposited
and encashed by Rosemarie, except for the first check, Chemical Bank
Check No. 97, which was issued to one Zenedes Mariano, who gave the
cash equivalent of US$2,000 to Rosemarie.
10,000.00
CB No. 104
11/12/93
In accordance with her agreement with Rosario, Rosemarie gave Manolito

his monthly allowance ranging from P2,000 to P4,000 a month from 1993 to
January 1999. However, sometime in 1995, Rosario asked for the return of
the US$20,000 and for an accounting. Rosemarie promised to comply with
the demand but failed to do so.
5,500.00
CB No. 105
2/1/94
2,000.00
In January 1999, Rosario, through her attorney-in-fact, Grace Galvez, sent

Rosemarie a written demand for her US$20,000 and an accounting. Again,
Rosemarie ignored the demand, thus causing Rosario to file suit.
On May 18, 1999, the Wees moved to dismiss Civil Case No. Q-99-37372 on
the following grounds: (1) the lack of allegation in the complaint that earnest
efforts toward a compromise had been made in accordance with Article 1515
of the Family Code; (2) failure to state a valid cause of action, the action
being premature in the absence of previous earnest efforts toward a
compromise; and (3) the certification against forum shopping was defective,
having been executed by an attorney-in-fact and not the plaintiff, as required

by Rule 7, Section 56 of the 1997 Rules of Civil Procedure.
Conformably with Rule 10, Sections 17 and 38 of the 1997 Rules of Civil
Procedure, Rosario amended her complaint with the addition of the following
paragraph:
9-A. Earnest efforts towards (sic) have been made but the same have failed.
As a matter of fact, plaintiff thru her daughter as Attorney-In-Fact caused the
sending of a Demand Letter dated January 4, 1999 and the last paragraph of
which reads as follows:
The Wees duly moved for reconsideration, but the motion was denied on
September 20, 1999, for lack of merit.
On October 18, 1999, the Wee couple brought the matter to the Court of
Appeals via a special civil action for certiorari, prohibition, and mandamus,
docketed as CA-G.R. SP No. 55415. The petition assailed the trial court for
having acted with grave abuse of discretion amounting to lack or excess of
jurisdiction for issuing the interlocutory orders of July 29, 1999 and
September 20, 1999, instead of dismissing Civil Case No. Q-99-37372
outright.
...
On December 4, 2000, the appellate court decided CA-G.R. SP No. 55415 in

this wise:
Trusting this will merit your utmost preferential attention and consideration in
as much as you and our client are sisters and in order that [earnest] efforts
toward a compromise could be obtained.9
WHEREFORE, the instant petition for certiorari, prohibition and mandamus is

DENIED.
The Wees opposed Rosario's motion to have the Amended Complaint

admitted. They contended that said motion was a mere scrap of paper for
being in violation of the three-day notice requirement of Rule 15, Section 410
of the 1997 Rules of Civil Procedure and for having the notice of hearing
addressed to the Clerk of Court and not to the adverse party as required by
Section 511 of the same Rule.
On July 29, 1999, the trial court came out with an Order denying the Wees'
motion to dismiss for being "moot and academic," thus:
WHEREFORE, premises considered, the amended complaint is hereby

admitted. Defendant-spouses are hereby directed to file their Answer within
the reglementary period provided by the Rules of Court.
SO ORDERED.12
SO ORDERED.13
The Court of Appeals held that the complaint in Civil Case No. Q-99-37372,
as amended, sufficiently stated a cause of action. It likewise held that the
questioned certification against forum shopping appended thereto was not so
defective as to warrant the dismissal of the complaint.
On January 9, 2001, the petitioners herein moved for reconsideration of the

appellate court's decision, but this was denied on March 7, 2001.
Hence, the instant petition, raising the following issues:
1. WHETHER OR NOT THE INSTANT PETITION FOR REVIEW ON

CERTIORARI UNDER RULE 45 OF THE REVISED RULES OF COURT IS
THE PROPER REMEDY FOR PETITIONERS UPON THE DENIAL OF

THEIR PETITION FOR CERTIORARI, PROHIBITION AND MANDAMUS BY
THE COURT OF APPEALS;
2. WHETHER OR NOT THE CERTIFICATION OF NON-FORUM

SHOPPING EXECUTED BY THE PLAINTIFF'S ATTORNEY-IN-FACT IS
DEFECTIVE; AND
3. WHETHER OR NOT THE AMENDED COMPLAINT BEFORE THE

REGIONAL TRIAL COURT SUFFICIENTLY STATES A CAUSE OF ACTION
AGAINST THE DEFENDANTS.14
We shall now resolve these issues seriatim.
On the first issue, the petitioners argue that the present appeal by certiorari
filed with this Court assailing the dismissal of their special civil action for
certiorari, prohibition, and mandamus by the appellate court is meritorious.
After all, according to petitioners, a petition for review under Rule 45, Section
1,15 of the 1997 Rules of Civil Procedure could be brought before us,
regardless of whether the assailed decision of the appellate court involves an
appeal on the merits from the trial court's judgment or the dismissal of a
special civil action questioning an interlocutory order of the trial court. What is
important under Rule 45, Section 1, is that the assailed decision of the
appellate court is final and that the petition before this Court should raise only
questions of law.
Respondent, in turn, point out that the dismissal by the Court of Appeals of
herein petitioners' special civil action for certiorari, prohibition, and
mandamus in CA-G.R. SP No. 55415 is not the final judgment or order,
which could be the subject of an appeal by certiorari under Rule 45. This is
because, according to respondent, certiorari as a mode of appeal involves
the review of a judgment, final order, or award on the merits. Respondent
contends that the appellate court's ruling in CA-G.R. SP No. 55415 did not
dispose of the case on the merits, as the orders of the trial court subject of
CA-G.R. SP No. 55415 were all interlocutory. In other words, the ruling of the
appellate court did not put an end to Civil Case No. Q-99-37372, which is still
pending before the trial court. Hence, a petition for review on certiorari will
not lie to assail the judgment of the Court of Appeals in CA-G.R. SP No.
55415, according to respondent.
We find no basis for respondent's contention that the decision of the Court of
Appeals in CA-G.R. SP No. 55415, dismissing the petitioners' special civil
action for certiorari, prohibition, and mandamus is interlocutory in nature. The
CA's decision on said petition is final for it disposes of the original action for
certiorari, prohibition, and mandamus directed against the interlocutory
orders of the trial court in Civil Case No. Q-99-37372. In other words, having
dismissed the said action, there is nothing more left to be done in CA-G.R.
SP No. 55415 as far as the appellate court is concerned.
Nor can we sustain respondent's argument that the appellate court's decision
in CA-G.R. SP No. 55415 is not on the merits. In special civil actions for
certiorari, such as CA-G.R. SP No. 55415, the only issue before the
appellate court is whether the lower court acted without or in excess of
jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction. Stated differently, in a certiorari petition the appellate court is not
tasked to adjudicate the merits of the respondent's claims before the trial
court. Resolving such claims on the merits remains the proper province of
the trial court in Civil Case No. Q-99-37372. The appellate court properly
ruled in CA-G.R. SP No. 55415 that the trial court committed no grave abuse
of discretion amounting to lack or excess of jurisdiction so as to warrant the
issuance of writs of certiorari, prohibition, and mandamus that petitioners
sought. In so limiting itself to and addressing squarely only the issue of grave
abuse of discretion or lack or excess of jurisdiction, the Court of Appeals, in
CA-G.R. SP No. 55415, precisely decided the matter on the merits. In other
words, it found that the special civil action of petitioners before it had no
merit.
Now, as to whether the Court of Appeals decided the matter in CA-G.R. SP

No. 55415 in a manner contrary to law or established jurisprudence remains
precisely for us to determine in this review on certiorari. Considering the
factual and procedural circumstances of this case, the present petition is
petitioners' proper remedy to challenge the appellate court's judgment in CAG.R. SP No. 55415 now.
Anent the second issue, the petitioners aver that the Court of Appeals
gravely erred in finding that the certification against forum shopping in Civil
Case No. Q-99-37372 was valid, notwithstanding that it was not the plaintiff
below, Rosario D. Galvez, who executed and signed the same, but her
attorney-in-fact, Grace Galvez. Petitioners insist that there was nothing in the
special power of attorney executed by Rosario D. Galvez in favor of Grace
Galvez, which expressly conferred upon the latter the authority to execute
and sign, on behalf of the former, the certificate of non-forum shopping.
Petitioners point out that under Rule 7, Section 5 of the 1997 Rules of Civil
Procedure, it is the "plaintiff" or "principal party" who must sign the
certification. They rely on our ruling in BA Savings Bank v. Sia,16 that where
the parties in an action are natural persons, the party himself is required to
sign the certification, and where a representative is allowed in case of
artificial persons, he must be specifically authorized to execute and sign the
certification. The petitioners stress that Rosario D. Galvez failed to show any
justifiable reason why her attorney-in-fact should be the one to sign the
certification against forum shopping, instead of herself as the party, as
required by Santos v. Court of Appeals.17
Respondent counters that petitioners' contention has no basis. The Special

Power of Attorney executed by her in favor of Grace Galvez, if subjected to
careful scrutiny would clearly show that the authority given to the latter is not
only broad but also all encompassing, according to respondent. By virtue of
said document, Grace Galvez is given the power and authority to institute
both civil and criminal actions against any person, natural or juridical, who
may be obliged or answerable to the respondent. Corollary with this power is
the authority to sign all papers, documents, and pleadings necessary for the
accomplishment of the said purpose. Respondent likewise stresses that
since Grace Galvez is the one authorized to file any action in the Philippines
on behalf of her principal, she is in the best position to know whether there
are other cases involving the same parties and the same subject matter
instituted with or pending before any other court or tribunal in this jurisdiction.
Moreover, as an attorney-in-fact, Grace Galvez is deemed to be a party,
pursuant to Rule 3, Section 318 of the 1997 Rules of Civil Procedure. Hence,
petitioners' argument that Grace Galvez is not specifically authorized to
execute and sign the certification of non-forum shopping deserves scant
consideration.
We find for the respondent. Noteworthy, respondent in the instant case is

already a resident of the United States, and not of the Philippines. Hence, it
was proper for her to appoint her daughter, Grace Galvez, to act as her
attorney-in-fact in the Philippines. The Special Power of Attorney granted by

the respondent to her attorney-in-fact, Grace Galvez, categorically and
clearly authorizes the latter to do the following:
1. To ask, demand and claim any sum of money that is duly [due] from any
person natural, juridical and/or corporation in the Philippines;
2. To file criminal and/or civil complaints before the courts of justice in the
Philippines to enforce my rights and interest[s];
3. To attend hearings and/or Preliminary Conference[s], to make stipulations,

adjust claims, to settle and/or enter into Compromise Agreement[s], to litigate
and to terminate such proceedings; [and]
4. To sign all papers, documents and pleadings necessary for the

accomplishment of the above purposes.19
From the foregoing, it is indisputable that Grace Galvez, as attorney-in-fact of

the respondent, was duly authorized and empowered not just to initiate
complaints, whether criminal or civil, to enforce and protect the respondent's
rights, claims, and interests in this jurisdiction, but is specifically authorized to
sign all "papers, documents, and pleadings" necessarily connected with the
filing of a complaint. Pursuant to Administrative Circular No. 04-94,20 which
extended the requirement of a certification on non-forum shopping to all
initiatory pleadings filed in all courts and quasi-judicial agencies,21 as well as
Rule 7, Section 5 of the 1997 Rules of Civil procedure, the aforementioned
papers and documents, which Grace Galvez was authorized and empowered
to sign, must necessarily include the certification on non-forum shopping. To
conclude otherwise would render nugatory the Special Power of Attorney and
also render respondent's constitution of an attorney-in-fact inutile.
Forum shopping "occurs when a party attempts to have his action tried in a
particular court or jurisdiction where he feels he will receive the most
favorable judgment or verdict."22 In our jurisdiction, it has taken the form of
filing multiple petitions or complaints involving the same issues before two or
more tribunals or agencies in the hope that one or the other court would
make a favorable disposition.23 There is also forum shopping when,
because of an adverse decision in one forum, a party seeks a favorable
opinion (other than by appeal or certiorari) in another.24 The rationale
against forum shopping is that a party should not be allowed to pursue
simultaneous remedies in two different fora. Filing multiple petitions or
complaints constitutes abuse of court processes,25 which tends to degrade
the administration of justice, wreaks havoc upon orderly judicial procedure,
and adds to the congestion of the heavily burdened dockets of the courts.26
Thus, the rule proscribing forum shopping seeks to promote candor and
transparency among lawyers and their clients in the pursuit of their cases
before the courts to promote the orderly administration of justice, prevent
undue inconvenience upon the other party, and save the precious time of the
courts. It also aims to prevent the embarrassing situation of two or more
courts or agencies rendering conflicting resolutions or decisions upon the
same issue.27 It is in this light that we must look at the propriety and
correctness of the Certificate of Non-Forum Shopping signed by Grace
Galvez on the respondent's behalf. We have examined said Certificate28
and find that under the circumstances, it does not negate but instead serves
the purpose of the rule against forum shopping, namely to promote and
facilitate the orderly administration of justice.
Rule 7, Section 5 of the Rules of Court, requires that the certification should
be signed by the "petitioner or principal party" himself. The rationale behind
this is "because only the petitioner himself has actual knowledge of whether
or not he has initiated similar actions or proceedings in different courts or
agencies."29 However, the rationale does not apply where, as in this case, it
is the attorney-in-fact who instituted the action. The Special Power of
Attorney in this instance was constituted precisely to authorize Grace Galvez
to file and prosecute suits on behalf of respondent, who was no longer
resident of the Philippines but of New York, U.S.A. As respondent points out,
it is Grace Galvez, as attorney-in-fact for her, who has actual and personal
knowledge whether she initiated similar actions or proceedings before
various courts on the same issue on respondent's behalf. Said circumstance
constitutes reasonable cause to allow the attorney-in-fact, and not the
respondent, as plaintiff in Civil Case No. Q-99-37372 to personally sign the
Certificate of Non-Forum Shopping. Under the circumstances of this case,
we hold that there has been proper compliance with the rule proscribing
forum shopping. As we previously held concerning Administrative Circular
No. 04-94:
The fact that the Circular requires that it be strictly complied with merely
underscores its mandatory nature in that it cannot be dispensed with or its
requirements altogether disregarded, but it does not thereby interdict
substantial compliance with its provisions under justifiable circumstances.30
Administrative Circular No. 04-94 is now incorporated in the 1997 Rules of

Civil Procedure, as Rule 7, Section 5. It is basic that the Rules "shall be
liberally construed in order to promote their objective of securing a just,
speedy and inexpensive disposition of every action and proceeding."31
Otherwise put, the rule requiring a certification of forum shopping to
accompany every initiatory pleading, "should not be interpreted with such
absolute literalness as to subvert its own ultimate and legitimate objective or
the goal of all rules of procedure which is to achieve substantial justice as
expeditiously as possible."32
On the third issue, petitioners submit that the amended complaint in Civil
Case No. Q-99-37372 violates Rule 8, Section 133 of the 1997 Rules of Civil
Procedure, as there is no plain and direct statement of the ultimate facts on
which the plaintiff relies for her claim. Specifically, petitioners contend that
the allegation in paragraph 9-A34 of the amended complaint that "Earnest
efforts towards have been made but the same have failed" is clearly
insufficient. The sentence is incomplete, thus requires the reader of the
pleading to engage in deductions or inferences in order to get a complete
sense of the cause of action, according to petitioners.
Respondent rebuts petitioners' contention by stating that the amended

complaint as well as the annexes attached to the pleadings should be taken
in their entirety in determining whether a cause of action was validly stated in
the complaint. Thus taken together, in their entirety, the amended complaint
and the attachments to the original complaint, clearly show that a sufficient
cause of action as it is shown and stated that earnest efforts towards a
compromise have been made, according to respondent.
Under Article 151 of the Family Code, a suit between members of the same
family shall not be entertained, unless it is alleged in the complaint or petition
that the disputants have made earnest efforts to resolve their differences
through compromise, but these efforts have not succeeded. The attempt to
compromise as well as its failure or inability to succeed is a condition
precedent to the filing of a suit between members of the same family.35 Rule
8, Section 336 of the 1997 Rules of Civil Procedure provides that conditions
precedent may be generally averred in the pleadings. Applying the foregoing
to the instant case, we have to ask: Is there a sufficient general averment of
the condition precedent required by the Family Code in the Amended
Complaint in Civil Case No. Q-99-37372?
We find in the affirmative. Our examination of paragraph 9-A of the Amended

Complaint shows that respondent has complied with this requirement of a
general averment. It is true that the lead sentence of paragraph 9-A, which
reads "Earnest efforts towards have been made but the same have failed"
may be incomplete or even grammatically incorrect as there might be a
missing word or phrase, but to our mind, a lacking word like "compromise"
could be supplied by the rest of the paragraph. A paragraph is "a distinct
section or subdivision of a written or printed composition that consists of from
one to many sentences, forms a rhetorical unit (as by dealing with a
particular point of the subject or by comprising the words of a distinct
speaker)."37 As a "short composition consisting of a group of sentences
dealing with a single topic,"38 a paragraph must necessarily be construed in
its entirety in order to properly derive the message sought to be conveyed. In
the instant case, paragraph 9-A of the Amended Complaint deals with the
topic of efforts made by the respondent to reach a compromise between the
parties. Hence, it is in this light that the defective lead sentence must be
understood or construed. Contrary to what petitioners claim, there is no need
for guesswork or complicated deductions in order to derive the point sought
to be made by respondent in paragraph 9-A of the Amended Complaint, that
earnest efforts to compromise the differences between the disputants were
made but to no avail. The petitioners' stance that the defective sentence in
paragraph 9-A of the Amended Complaint fails to state a cause of action,
thus, has no leg to stand on. Having examined the Amended Complaint in its
entirety as well as the documents attached thereto, following the rule that
documents attached to a pleading are considered both as evidence and as
part of the pleading,39 we find that the respondent has properly set out her
cause of action in Civil Case No. Q-99-37372.
SO ORDERED.

Supreme Court
Baguio City
SECOND DIVISION
HEIRS OF FRANCISCO RETUYA, FELICITAS R. PINTOR, HEIRS OF

EPIFANIA R. SEMBLANTE, namely, PREMILINO SEMBLANTE, LUCIFINA
S. TAGALOG, URSULINA S. ALMACEN; HEIRS OF JUAN RETUYA,
namely, BALBINA R. RODRIGUEZ, DOLORES R. RELACION, SINFOROSA
R. BASUBAS, TEOPISTA R. BASUBAS, FERNANDO RETUYA,
BALDOMERO RETUYA, TEOFILO RETUYA, LEONA COLINA, FIDELA R.
RAMIREZ, MARTINA R. ALBAO, SEVERINA R. CABAHUG; HEIRS OF
RAFAELA VILLAMOR; ELIZABETH V. ALESNA; HEIRS OF QUINTIN
RETUYA, namely, FELIMON RETUYA, SOFIA RETUYA, RUDOLFA
RETUYA and ELISA RETUYA,
Petitioners,
- versus WHEREFORE, the instant petition is DENIED for lack of merit. The Decision
dated December 4, 2000 of the Court of Appeals in CA-G.R. SP No. 55415,
as well as its Resolution dated March 7, 2001, are hereby AFFIRMED. Costs
against the petitioners.
HONORABLE COURT OF APPEALS, HON. ULRIC CAETE as Presiding

Judge of REGIONAL TRIAL COURT Branch 55, Mandaue City, NICOLAS
RETUYA; HEIRS OF EULOGIO RETUYA, namely, MIGUEL RETUYA,
RAMON RETUYA, GIL RETUYA, PIO RETUYA, MELANIO RETUYA,

NICANOR RETUYA, LEONILA RETUYA, AQUILINA RETUYA, LUTGARDA
RETUYA and PROCOPIO VILLANUEVA,
Respondents.
G.R. No. 163039
(CA) in CA-G.R. SP No. 76235, which dismissed petitioners' Petition for

Annulment of Judgment and their Motion for Reconsideration, respectively.
Severo Retuya (Severo) and Maxima Mayol Retuya (Maxima) were

husband and wife without any children. Severo left several parcels of land
registered under his name which are located in Mandaue City, to wit:
Present:
CARPIO, J., Chairperson,

PERALTA,
ABAD,
A parcel of land situated in Barangay Tipolo, City of Mandaue, known as Lot

No. 113-U of the Subdivision Plan, Psd -07-016382 being a portion of Lot
No. 113, II-5121 Amd. (Hacienda Mandaue) LRC Rec. 4030, containing an
area of Two Hundred and Eighty-One (281) sq. meters described in the
Transfer Certificate of Title No. 26728 in the Office of the Registry of Land
Title and Deeds of Mandaue City.
MENDOZA, and
SERENO,* JJ.
Promulgated:
A parcel of land located in Barangay Tipolo, Mandaue City, known as Lot No.
5 of the consolidation of Lot No. 122-Q, 122R, 122-S, 122-T, 122-U, 122-V,
122-W, 122-X, 122-U, 122-AA, Psd 07-05-12450, LRC Rec. No. 4030,
containing an area of Five Hundred Seventy-Four (574) sq. meters,
described in the Transfer Certificate of Title No. 25213 of the Office of the
Registry of Land Title and Deeds of Mandaue City.
April 6, 2011
x-----------------------------------------------------------------------------------------x
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari are the Resolutions

dated November 28, 2003[1] and March 3, 2004[2] of the Court of Appeals
A parcel of land located in Barangay Tipolo, Mandaue City, known as Lot No.
10 of the consolidation of Lot No. 122-Q, 122-R, 122-S, 122-T, 122-U, 122-V,
122-W, 122-X, 122-Y and 122-AA, Psd 07-05-12450, LRC Rec. No. 4030,
containing an area of Four Hundred Forty-Two (442) sq. meters, described in
the Transfer Certificate of Title No. 25218 of the Office of the Registry of
Land Title and Deeds of Mandaue City.
A parcel of land, Lot No. 121-1-10 of the subdivision plan, Psd 07-023191,
being a portion of Lot 121-1, LRC Psd. 262374, LRC Rec. No. 4030 located
in Banilad, Mandaue City, containing an area of One Thousand Five Hundred
(1,500) sq. meters described under TCT 32718 of the Registry of Land Title
and Deeds of Mandaue City.
A parcel of land, Lot No. 47-L of the subdivision plan Psd. 07-05-012479,
being a portion of Lot 47-11-5121 Amd Hacienda Mandaue LRC Rec. No.
4030, situated in Barangay Banilad, Mandaue City, covered by TCT 21687 in
the Registry of Land Titles and Deeds for the City of Mandaue.[3]
Some of these parcels of land were covered by a lease contract, the

rentals of which were received by respondents Nicolas Retuya and Procopio
Villanueva, while Lot No. 47-L, covered by TCT No. 21687, was previously
sold by the Heirs of Severo and Maxima Retuya to third persons.
On June 14, 1961, Severo died intestate, survived by his wife Maxima
and by Severo's full blood brothers and sisters, namely, Nicolas, Francisco,
Quintin, Eulogio, Ruperto, Epifania, Georgia and the Heirs of Juan Retuya
(Severos brother who had died earlier), as well as Severo's half-blood
siblings, namely, Romeo, Leona, Rafaela, Fidela, Severina and Martina.
Sometime in 1971, Maxima also died intestate, survived by her siblings,

namely, Fructuoso, Daniel, Benjamin, Lorenzo, Concepcion and Teofila.
In 1996, Severo and Maxima's siblings and their nephews and nieces,
herein petitioners, filed with the Regional Trial Court (RTC) of Mandaue City,
an action[4] for judicial partition of the above-mentioned real properties
registered under the names of Severo and Maxima, and the accounting of
the rentals derived therefrom against Severo's two other brothers,
respondents Nicolas and his son Procopio Villanueva, and Eulogio, who was
represented by the latter's heirs.
Respondents Heirs of Eulogio filed their Answer[5] claiming that Severo

had already sold the subject lands to their father Eulogio by virtue of a
notarized Deed of Absolute Sale of Interests and Pro Indiviso Shares to
Lands dated March 29, 1961; thus, petitioners have no right to ask for the
partition of the subject properties, as respondents heirs are the owners of
the same. On the other hand, respondents Nicolas and his son Procopio filed
their Answer[6] admitting to have collected rentals on some of the subject
properties and that such rentals were still intact and ready for partition; and
that they were willing to partition the properties but were opposed by their corespondents.
After trial, the RTC rendered a Decision[7] dated August 9, 2001, the
dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is rendered

declaring the heirs of Eulogio Retuya as owners of the 1/16 share of Severo
Retuya to of the subject properties representing the shares of the late
Severo Retuya which he inherited from his deceased father, Esteban Retuya
and which he sold to Eulogio Retuya as follows:
Lot 113-U
- 48.78 sq. meters
Lot 5
- 99.65 sq. meters
Lot 121-1-10-260
- 42 sq. meters.
and that the remaining areas of these properties, which have not been sold
to defendants Heirs of Eulogio Retuya, as well as the rental, be partitioned
among the herein parties in accordance with law.
Lot No. 10 is a road right of way and should not be partitioned.[8]
Respondents Heirs of Eulogio filed a Motion for Correction[9] of

Mathematical Computation of their share in Lot 121-1-10 alleging that their
correct share should be 255 sq. meters, instead of 42 sq. meters.
Petitioners, through their then counsel, Atty. Ernesto B. Mayol, filed a
Comment[10] manifesting that they will submit and abide by whatever
resolution the RTC may adopt or render in relation to the Motion for
Correction of Mathematical Computation.
The other respondents,
represented by Atty. Basilio Duaban, did not file any comment despite receipt
of the Order[11] to do so.
On October 23, 2001, the RTC issued an Order,[12] the dispositive

portion of which reads:
WHEREFORE, the decision dated August 9, 2001 is amended by changing

the area of 42 sq. meters to 255 sq. meters, and the dispositive portion of
said decision will now read as follows:
WHEREFORE, premises considered, judgment is rendered declaring

the Heirs of Eulogio Retuya as owners of the 1/16 share of Severo Retuya to
the of the subject properties representing the shares of the late Severo
Retuya, which he inherited from his deceased father, Esteban Retuya and
which he sold to Eulogio Retuya as follows:
Lot 113-U
48.78 sq. meters
Lot 5
99.65 sq. meters
Lot 121-1-10-260
255 sq. meters
and that the remaining areas of these properties, which have not been sold
to defendants Heirs of Eulogio Retuya as well as the rental be partitioned
among the herein parties in accordance with law.
Lot No. 10 is a road right of way and should not be partitioned.
Furnish parties, through counsels, copy of this Order for their

information.[13]
The RTC decision became final and executory.[14]
Execution with Motion for Clarification and Precautionary Reservation to File

Pertinent Pleadings and Legal Remedies.[16] Respondents Heirs of Eulogio
filed their Opposition[17] thereto.
In an Order[18] dated June 14, 2002, the RTC denied the motion, and the
Writ of Execution[19] was issued.
Respondents Heirs of Eulogio filed a Motion to Authorize the Branch

Clerk of Court to Enforce the Amended Decision.[20] Petitioners were
ordered by the RTC to file their Comment thereto. [21]
Petitioners filed their Comment with Prayer for the Issuance of a

Clarificatory Order[22] as to how the RTC arrived at the new computation of
255 sq. meters from the original award of 42 sq. meters for Lot No. 121-1-10260.
In an Order[23] dated February 17, 2003, the RTC, after finding that
what was at issue was just the matter of mathematical computation of the
area adjudicated to the parties, and in the interest of substantial justice, set
a conference to settle once and for all the exact computation of the parties'
respective shares.
On February 24, 2003, petitioners filed with the CA a Petition for
Annulment of Judgment of the RTC Order dated October 23, 2001,
amending the decision dated August 9, 2001, claiming that the questioned
Order was a patent nullity for want of jurisdiction and utter lack of due
process.
On April 30, 2003, petitioners filed with the RTC a Manifestation[24]

submitting the mathematical computation and/or mode of partitioning the
shares of the opposing parties.
Respondents Heirs of Eulogio filed a Motion for the Issuance of a Writ

of Execution, which the RTC granted in its Order[15] dated March 15, 2002.
Petitioners, through Atty. Norberto Luna, Jr., as collaborating counsel,

filed a Motion to Hold in Abeyance the Implementation of the Writ of
As the RTC was in receipt of a copy of the Petition for Annulment of

Judgment filed with the CA, it issued an Order[25] holding in abeyance the
resolution of respondents Motion to Authorize the Branch Clerk of Court to
enforce the RTC decision pending such petition.
In a Resolution[26] dated April 24, 2003, the CA outrightly dismissed

the Petition for Annulment of Judgment. It found that three of the petitioners,
namely, Promilino Semblante, Salome Retuya and Fernando Retuya, did not
sign the certification of non-forum shopping; and that the payment of the
docket fee was short of P480.00.
Petitioners filed their Motion for Reconsideration, which the CA granted in a

Resolution[27] dated July 3, 2003 and reinstated the petition.
On July 22, 2003, respondents Heirs of Eulogio filed a Motion for

Reconsideration of the July 3, 2003 Resolution,[28] on the ground that it was
made to appear in the Petition for Annulment of Judgment that Quintin
Retuya, one of the petitioners, had signed the certification against forum
shopping on March 18, 2003, when he had already died on July 29, 1996;
that the signature of co-petitioner Romeo Retuya in the certification against
forum shopping was not his, as compared to his signature in the letter which
respondents attached to the motion for reconsideration; and that Romeo
suffered a stroke in January 2003 and was bedridden until he died on April
28, 2003.
In a Resolution dated November 28, 2003, the CA granted

respondents Motion for Reconsideration and dismissed the petition, as no
Comment was filed by petitioners. The CA said that Section 5, Rule 7 of the
Rules of Court provides that the principal party shall sign the certification
against forum shopping, as the attestation requires personal knowledge by
the party who executed the same, otherwise, it would cause the dismissal of
the petition. Considering that Quintin, one of the parties to the petition, died
on July 29, 1996, it could have been impossible for him to sign the Petition
dated March 18, 2003.
A Motion for Reconsideration[29] was filed by Atty. Renante dela

Cerna as counsel for petitioners, contending that there was substantial
compliance with the rule on certification against forum shopping when
majority of the principal parties were able to sign the verification and
certification against forum shopping.
Attached in the motion for
reconsideration was the affidavit of the Heirs of Quintin acknowledging said
mistake and submitted a verification and certification duly signed by the

heirs.
On March 3, 2004, the CA issued a Resolution denying petitioners'

motion for reconsideration. In so ruling, the CA said:
While it may be true that when majority of the parties have signed the
certification against non-forum shopping would constitute substantial
compliance, this Court cannot apply the same rule to petitioners. First,
petitioners' counsel failed to explain why a dead person/party was able to
sign the certification against non-forum shopping. The issue is not the
parties' substantial compliance, but the dishonesty committed by the parties
and/or their counsel when they made it appear that one of the listed parties
signed the certification when in fact he died long before the petition was filed.
Under Circular No. 28-91 of the Supreme Court and Section 5, Rule 7 of the
Rules of Court, the attestation contained in the certification on non-forum
shopping requires personal knowledge by the party who executed the same.
The liberal interpretation of the rules cannot be accorded to parties who
commit dishonesty and falsehood in court.
Second, records reveal that this Motion for reconsideration

was signed by a certain Atty. Renante A. Dela Cerna as counsel for the
petitioners without the counsel of record, Atty. Norberto A. Luna's formal
withdrawal. No notice of substitution of counsel was filed by the petitioners
and Atty. Dela Cerna never entered his appearance as counsel for petitioner.
xxxx
There being no formal withdrawal or substitution of counsel

made, Atty. Norberto A. Luna remains the counsel of record for petitioners.
Atty. Luna may not be presumed substituted by Atty. Renante Dela Cerna
merely by the latter's filing or signing of the motion for reconsideration. In the
absence of compliance with the essential requirements for valid substitution
of counsel of record, the court can presume that Atty. Luna continuously
represents the petitioners. Hence, Atty. Renante Dela Cerna has no right to
represent the petitioners in this case. [30]
Hence, this petition wherein petitioners raise the sole ground that:
THE RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN

DISMISSING THE PETITIONERS PETITION BY RULING AGAINST THE
PETITIONERS' SUBSTANTIAL COMPLIANCE TO THE CERTIFICATION
AGAINST NON-FORUM SHOPPING FOR THE ALLEGED DISHONESTY
COMMITTED BY THE PARTIES AND/OR THEIR COUNSEL WHEN THEY
MADE IT APPEAR THAT ONE OF THE LISTED PARTIES SIGNED THE
CERTIFICATION, WHEN IN FACT HE DIED BEFORE THE PETITION WAS
FILED.[31]
The CA dismissed the Petition for Annulment of Judgment after it

found that Quintin, one of the parties to the petition, had already died on July
29, 1996, thus, it was impossible for him to have signed the verification and
certification of non-forum shopping attached to the petition filed on March 18,
2003. The CA found petitioners to have committed dishonesty and falsehood
to the court, thus, it could not apply the liberal interpretation of the rule on
certification against forum shopping.
We found no reversible error committed by the CA.
As correctly observed by the CA, while we have in a number of

cases[32] applied the substantial compliance rule on the filing of the
certification of non-forum shopping, specially when majority of the principal
parties had signed the same and who shared a common interest, We agree
with the CA that such leniency finds no applicability in this case because of
petitioners dishonesty committed against the appellate court. A perusal of
the verification and certification against forum shopping attached to the
petition for annulment of judgment filed in the CA would show that there was
a signature above the typewritten name of Quintin. In fact, written below the
signature of Quintin was Community Tax Certificate (CTC) No. 06570132,
issued on January 8, 2003 in Mandaue City. Thus, it would appear that

Quintin, who was already dead at the time the petition was filed, had signed
the verification and certification of non-forum shopping and he was even in
possession of a CTC.
Petitioners actuation showed their lack of
forthrightness to the CA which the latter correctly found to be a dishonest act
committed against it.
Petitioners allege that the explanation of their former counsel on record,

Atty. Luna, to the show cause order issued by the CA to him that: (1) he had
no intention to make it appear that a dead man in the person of Quintin was
able to sign the verification and certification against forum shopping; (2)
when he entered his appearance as counsel for petitioners before the RTC,
he, the RTC, the co-petitioners and the other respondents, as well as their
counsel, knew of the fact of Quintins death and the status of Felimon Retuya
who immediately substituted his father, and in behalf of his siblings; (3) that
in his entry of appearance filed before the RTC, it was Felimon, one of
Quintin's heirs, who signed in the above typewritten name of Quintin, were
found by the CA to be meritorious and noted the same. Thus, petitioners
claim that they also have no intention of deceiving respondents, since as
explained by Atty. Luna, all the parties and counsels knew of the death of
Quintin.
We are not persuaded.
Notwithstanding that the CA had found the explanation of Atty. Luna to be

meritorious, the CA did not err when it dismissed the petition. Notably, there
was a signature above the typewritten name of Quintin without any showing
that it was signed by another person for or in behalf of Quintin. In the
absence of such qualification, it appeared before the CA that Quintin was the
one who signed the same, especially since the CA did not know of the fact of
Quintins death. There was nothing in the petition for annulment of judgment
which alleged such information. In fact, we do not find any sufficient
explanation given by petitioners as to why there was a signature of Quintin
appearing in the verification and certification against forum shopping.
We also find that the CA correctly denied the motion for reconsideration
on the ground that Atty. Renante dela Cerna, the lawyer who filed the
motion for reconsideration, had no right to represent petitioners.
Under Section 26, Rule 138 of the Rules of Court and established
jurisprudence, a valid substitution of counsel has the following requirements:
(1) the filing of a written application for substitution; (2) the clients written
consent; (3) the consent of the substituted lawyer if such consent can be
obtained; and, in case such written consent cannot be procured, (4) a proof
of service of notice of such motion on the attorney to be substituted in the
manner required by the Rules.[33] In this case, petitioners failed to comply
with the above requirements.
Atty. Dela Cerna, as counsel for petitioners, filed the motion for
reconsideration on December 22, 2003. However, he is not the counsel on
record of petitioners, but Atty. Luna. Petitioners did not file a motion for
substitution of counsel on record before the filing of the motion for
reconsideration. It is worthy to mention that Atty. Dela Cerna did not even
file a notice of appearance. If it has been held that courts may not presume
that the counsel of record has been substituted by a second counsel merely
from the filing of a formal appearance by the latter,[34] then with more reason
that Atty. Dela Cerna could not be considered to have substituted Atty. Luna
as there was no notice of his entry of appearance at all.
The fact that Atty. Luna was still the counsel on record at the time Atty. Dela
Cerna filed his motion for reconsideration was established in Atty. Luna's
Explanation dated March 19, 2004 to the CA's Show Cause Order to him
wherein he prayed therein that an Order be issued relieving him of his legal
obligations to petitioners. Moreover, on April 30, 2004, petitioners through
their counsel on record, Atty. Luna, filed a motion for substitution of counsels
wherein they alleged that they engaged the services of Atty. Jorge
Esparagosa as their new counsel and relieved Atty. Luna of all his legal
obligations to them. Notably, there was no mention at all of Atty. Dela Cerna.
Indeed, there was no showing of the authority of Atty. Dela Cerna to file the
motion for reconsideration for petitioners. Thus, the CA correctly found that
Atty. Dela Cerna has no personality to represent petitioners and file the
motion for reconsideration.
WHEREFORE, the petition is DENIED. The Resolutions dated

November 28, 2003 and March 3, 2004 of the Court of Appeals are
AFFIRMED.
SO ORDERED.

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Republic of the Philippines

G.R. No. L-17828

August 31, 1963

LIGAYA MINA, JAIME MINA, SILVINA MINA, FAUSTA MINA,

F. A. Pelmoka for plaintiffs-appellants.

filiation of the plaintiffs in relation or with respect to the deceased Joaquin

After a careful consideration of the joint motion to dismiss of defendants

Cabanatuan City, December 18, 1959.

Opposition to the motion to dismiss was presented on behalf of the plaintiffs

As shown above the question to be resolved is whether or not the order

SEC. 3. Failure to prosecute. When plaintiff fails to appear at the time of

To order an amendment to a complaint within a certain period in order to

Gordulan v. Gordulan, G.R. No. L-17722, Oct. 9, 1962; Valerio v. Sec. of

In the third assigiament of error it is claimed that there is no complete identity

WHEREFORE, the order of dismissal is hereby modified in the sense that

Republic of the Philippines

G.R. No. L-47494

May 15, 1978

AIDA ROBLES, Accompanied by her husband Rafael Penolio, petitioners,

As found by account Court of Appeals, petitioner Aida Robles is account

Ramon C. Ditching & Rolando C. Medalla for petitioners.

Arsenio Acua & Associates for respondents.

In October, 1960, Francisco by virtue of account power of attorney executed

The power of attorney was registered in account office of account respondent

On September 18, 1967, petitioner Aida Robles as plaintiff filed a complaint

The lower court dismissed account complaint and on appeal respondent c

Respondent appellate court held that "(T)here is a procedural error in

owners thereof, account entirety of account DISPUTED PROPERTY. Without

We find merit in the petition.

The vendors-co-heirs of petitioner are not indispensable parties insofar as

The imprecision of petitioner's complaint has caused some confusion. But it

Such action for cancellation is really secondary and is but a means of

Respondent court should therefore have adjudged account appeal on its

ACCORDINGLY, account judgment of respondent court is hereby set aside

Republic of the Philippines

G.R. No. 106436

VIRGILIO D. IMSON, petitioner,

The Complaint prayed that defendants be ordered to pay, jointly and

Polotan Law Office for petitioner.

Felix R. Solomon for private respondents.

In consequence of the compromise agreement, the trial court dismissed the

1987. 8 A copy of the Order of dismissal was received by private respondent

Private respondent Holiday Hills Stock and Breeding Farm Corporation

Essentially, the doctrine adverted to essays that in a common cause of action

Moreover, it is undisputed that the injury caused is covered by the insurance

RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE

We find applicability of the doctrine to the case at bar.

RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE

RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE

RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE

execution and the satisfaction of his claim as variably as he might please.

There is merit to the petition,.

. . . (I)n all instances where a common cause of action is alleged against

Cause of action has a fixed meaning in this jurisdiction. It is the delict or

However, with respect to defendant Western Guaranty Corporation,

Conversely, a party is not indispensable to the suit if his interest in the

necessary in order to adjudicate the whole controversy, but whose interests

IN VIEW WHEREOF, the instant petition is GRANTED. The Decision, dated

Republic of the Philippines

SERVICEWIDE SPECIALISTS INCORPORATED, petitioner,

This petition of Servicewide Specialists, Incorporated, seeks a review on

WHEREFORE, judgment is hereby rendered, in favor of plaintiff and against

Plaintiff's evidence shows that, on August 29, 1977, Eleuterio Bondoc

Traversing the plaintiffs claim, defendant's evidence shows that, on