Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 187640

June 15, 2011

PHILIPPINE NATIONAL BANK, Petitioner,

vs.
THE SPS. ANGELITO PEREZ and JOCELYN PEREZ, Respondents.
x-----------------------x
G.R. No. 187687
SPS. ANGELITO PEREZ and JOCELYN PEREZ, Petitioners,
vs.
PHILIPPINE NATIONAL BANK, Respondent.
DECISION
VELASCO, JR., J.:
Before Us are two Petitions for Review on Certiorari under Rule 45 docketed as G.R. No. 187640 and G.R. No. 187687, seeking the review of
the Decision and Resolution of the Court of Appeals (CA) dated October 23, 2008 and April 28, 2009, respectively, in CA-G.R. SP No. 96534.
We consolidated the two cases as they involve identical parties, arose from the same facts, and raise interrelated issues.
The Facts
In 1988, spouses Angelito Perez and Jocelyn Perez (Spouses Perez) obtained a revolving credit line from Philippine National Banks (PNBs)
branch in Cauayan City, Province of Isabela. The credit line was secured by several chattel mortgages over palay stocks inventory and real
estate mortgages over real properties.
Sometime in 2001, Spouses Perez defaulted on their financial obligations, prompting PNB to institute extra-judicial foreclosure proceedings over
the aforementioned securities on November 13 of that year. On November 19, 2001, the sheriff instituted a Notice of Extra-Judicial Sale for the
mortgaged properties by public auction on December 20, 2001.
Meanwhile, on November 26, 2001, Spouses Perez filed an Amended Complaint for Release or Discharge of Mortgaged Properties, Breach of
Contract, Declaration of Correct Amount of Obligation, Injunction, Damages, Annulment of Sheriffs Notice of Extra-Judicial Sale, with a Prayer
for the Issuance of a Preliminary Mandatory Injunctive Writ and a Temporary Restraining Order docketed as Civil Case No. 20-1155. 1
At the hearing of the application for the issuance of a writ of preliminary mandatory injunction on April 19, 2002, Spouses Perez and their
counsel failed to appear. As a result, the prayer for injunctive relief was denied.
Similarly, at the pre-trial conference scheduled on September 19, 2002, Spouses Perez and their counsel again failed to appear. Spouses Perez
alleged that they previously filed a Motion for Postponement dated August 28, 2002. On the same date, the trial court issued an Order denying
the Motion for Postponement and, accordingly, dismissed the case.
Spouses Perez then filed a Motion for Reconsideration which was subsequently denied. They also filed a Second Motion for Reconsideration
dated January 16, 2003 which was also denied by the trial court.
After this, Spouses Perez filed a Notice of Appeal. It was also denied by the trial court in an Order dated April 11, 2003 for being filed out of time.
Spouses Perez then filed a Motion for Reconsideration dated April 29, 2003 seeking the reconsideration of the Order dismissing the appeal.
The Motion for Reconsideration dated April 29, 2003 was originally set for hearing on July 30, 2003. However, Spouses Perez filed five (5)
motions to postpone the hearing. The trial court granted the first four (4) motions but denied the fifth one. Spouses Perez filed a Motion for
Reconsideration of the Order denying the fifth Motion for Postponement which was also subsequently denied.
Consequently, Spouses Perez appealed the denial of their Motion for Reconsideration to the CA. The petition was docketed as CA-G.R. SP No.
85491. On January 25, 2005, the CA rendered a Decision denying the petition filed by Spouses Perez. It reasoned:
Neither did respondent court gravely abuse its discretion in resolving to dismiss Civil Case No. 20-1155 for failure of the plaintiffs and their time,
allegedly because their counsel had to attend a pre-trial hearing in another case. True is it that procedural rules may be relaxed to relieve a
litigant of an injustice not commensurate with the degree of his noncompliance with the procedure required. But equally true is it that the law
mandates that the appearance of parties at the pre-trial conference is mandatory. Here, as borne out by the records of this case, counsel for
petitioners received the notice of pre-trial conference in another case a long while before they were notified of the pre-trial conference in the
case at bench. As shown in the notice dated August 15, 2002, counsel already knew that the pre-trial conference in the present case was set for
September 19, 2002. By the time he received the notice of pre-trial hearing in the case at bench on August 22, 2002, counsel thus must have
seen and realized the obvious conflict in schedules between the two cases. However, instead of taking timely measures to prevent an impending
snafu, it took counsel more than a week to file a motion for postponement of the pre-trial conference in Civil Case No. 20-1155. Worse, although
received by respondent court on September 3, 2002, that motion did not contain any request that said motion be scheduled for hearing. Equally
distressing, it is not clearly shown that the requirement on notice to the other party was likewise complied with. Counsel evidently failed to take
into account the fact that, just like him, the court must need also to calendar its own cases. Further, as stressed by respondent court in its
challenged order of September 19, 2002, petitioners counsel works for a law firm staffed by several lawyers, and any of these lawyers could
have represented petitioners at the pre-trial conference in this case. That counsel had to allegedly appear in another case (which purportedly
explained his inability to appear in the present case) is a stale, banal, and prosaic excuse. Some such flimsy ratiocination, added to counsels
filing of an erroneous pleading (the second motion for reconsideration), which because it is a prohibited pleading, unfortunately did not toll the

running of the prescriptive period for filing a notice of appeal, did prove fatal to petitioners cause. Settled is the rule that parties are bound by the
action or inaction of their counsel; this rule extends even to the mistakes and simple negligence committed by their counsel.
Simply put, petitioners trifled with the mandatory character of a pre-trial conference in the speedy disposition of cases. Petitioners should have
known that pre-trial in civil actions has been peremptorily required these many years. It is a procedural device intended to clarify and limit the
basic issues between the parties and paves the way for a less cluttered trial and resolution of the case. Its main objective is to simplify,
abbreviate and expedite the trial, or, propitious circumstance permitting (as when the parties can compound or compromise their differences),
even to totally dispense with it altogether. Thus, it should never be taken lightly or for granted! A party trifles with it at his peril.
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the petition at bench must be, as it hereby, is DENIED and consequently DISMISSED, for
lack of merit. Costs shall be assessed against the petitioners.
SO ORDERED.2
Spouses Perez filed a Motion for Reconsideration of the aforementioned decision. Surprisingly, on April 14, 2005, the CA issued an Amended
Decision3 granting the Motion for Reconsideration citing that the higher interest of substantial justice should prevail and not mere technicality.
The dispositive part of the Amended Decision reads:
WHEREFORE, finding merit in the motion for reconsideration, we hereby resolve, to wit:
(1) To SET ASIDE and VACATE our Decision of January 25, 2005;
(2) To GRANT this petition. Consequently we hereby direct the annulment or invalidation of the following orders issued by the
respondent court, to wit:
1. The April 11, 2003 order, denying petitioners notice of appeal; and the March 17, 2004 order, denying petitioners motion
for reconsideration thereon;
2. The September 19, 2002 order, denying petitioners motion for postponement in Civil Case No. 20-1155 entitled "Sps.
Angelito A. Perez v. Philippine National Bank, et al." thereby resulting in the dismissal of the said case;
3. The January 6, 2003 order, denying petitioners motion for reconsideration in the above mentioned case; and
4. The February 7, 2003 order, denying petitioners second motion for reconsideration in the above stated case.
(3) To REINSTATE Civil Case No. 20-1155 in the docket of respondent court, the Regional Trial Court of Cauayan City, Branch 20,
which is now hereby ordered to conduct the pre-trial therein, and thereafter to proceed to try the case on the merits.
Without costs.
SO ORDERED.4
Accordingly, the case was remanded to the trial court. On January 20, 2006, the trial court issued an Order setting the case for hearing on March
8, 2006. The said Order reads in full:
On October 20, 2005, [Spouses Perez] filed their motion to require [PNB] to submit [its] statement of account for the period beginning 1995 to
2000.
The motion was heard on November 7, 2005 but only the counsel for [Spouses Perez] appeared. On December 9, 2005, [PNB] also filed a
motion for the production or inspection of books of accounts regarding payments in the years 1997 to 2000 and thereafter, if any. The same
motion was heard on December 15, 2005 but again, despite due notice, only the counsel for [Spouses Perez] appeared and reiterated his
motions.
WHEREFORE, there being no opposition to the twin motion of [Spouses Perez], the same are hereby granted. Accordingly, let this case be set
for hearing on March 8, 2006 at 8:30 oclock in the morning. [PNB] is hereby directed to prepare and complete within thirty (30) days from receipt
of this order a statement of account for [Spouses Perez] covering payments made for the period beginning 1995 to 2000, allowing [Spouses
Perez] or their duly authorized representatives to inspect the same at the bank premises during regular banking hours.
SO ORDERED.5
PNB, however, failed to receive a copy of the aforementioned order and was, thus, unable to attend the hearing on March 8, 2006. Questionably,
on said date, the trial court issued an Order allowing Spouses Perez to adduce evidence and considered the hearing as a pre-trial conference,
to wit:
WHEREFORE, for failure to appear in todays pre-trial and for failure to comply with the order of this Court dated January 20, 2006, [Spouses
Perez] are hereby allowed to adduce evidence before the Branch Clerk of Court and the Branch Clerk of Court is ordered to submit her report
within ten (10) days.
SO ORDERED.6
On March 15, 2006, PNB filed a Motion for Reconsideration7 of the said Order.
Nevertheless, on July 5, 2006, the trial court decided in favor of Spouses Perez. In its Decision, the trial court denied PNBs Motion for
Reconsideration but failed to mention such denial in the dispositive portion of the Decision, viz:
WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring that due and full payments were made by [Spouses Perez] on their principal obligation to [PNB] including interest and
directing the release and discharge of all the properties covered by the real estate mortgages executed by [Spouses Perez];
2. Declaring the Sheriffs Notice of Extrajudicial Sale as null and void, and enjoining defendant from foreclosing any and all of the
properties mortgaged by [Spouses Perez] as collateral for the said loan obligations;
3. Ordering [PNB] to pay [Spouses Perez] the sum of:
a. ONE HUNDRED FORTY FIVE MILLION ONE HUNDRED SEVENTEEN THOUSAND THREE HUNDRED SIX PESOS
AND SIXTY SEVEN CENTAVOS (PHP145,117,306.67) representing the amount overpaid by [Spouses Perez] under the
revolving credit loan facility and promissory notes executed between the parties;
b. TWO MILLION PESOS (PHP2,000,000.00) as moral damages;
c. ONE MILLION FIVE HUNDRED THOUSAND PESOS as Exemplary damages;
[d.] ONE MILLION PESOS (PHP1,000,000.00) as Attorneys Fees and
[e.] Costs of suit.
SO ORDERED.8
PNB again filed a Motion for Reconsideration dated July 24, 2006 but due to certain reasons, the counsel for PNB failed to send a copy of the
said motion to the trial court. As a result, the trial court denied the Motion for Reconsideration for having been filed outside the reglementary
period and concluded that the Decision already became "final and executory by operation of law." 9 Accordingly, the trial court issued an Order of
Execution dated August 14, 2006.10 The very next day, a Writ of Execution was issued to implement the aforesaid order and to demand payment
from PNB.
On August 15, 2006, PNB filed a Petition for Relief from Judgment/Order of Execution 11 with a prayer for the issuance of a writ of preliminary
injunction, alleging that the failure to file the Motion for Reconsideration was due to mistake and/or excusable negligence. Afterwards, on August
16, 2006, the trial court issued an Order denying the prayer for preliminary injunction. Also, on August 17, 2006, the trial court issued an Order
annulling the certificates of title issued to PNB covering the properties subject of the case and directed the Register of Deeds of Isabela to issue
new certificates of title in the names of Spouses Perez.
On October 18, 2006, PNB filed a Petition for Certiorari (with Prayer for the Issuance of an Ex-Parte Temporary Restraining Order/Writ of
Preliminary Injunction)12 before the CA docketed as CA-G.R. SP No. 96543 seeking the annulment of the Order of Execution dated August 14,
2006, the Writ of Execution dated August 15, 2006, Order dated August 16, 2006 and the Order dated August 17, 2006. Similarly, on October 30,
2006 and November 6, 2006, PNB filed a Supplement to the Petition for Certiorari (with Urgent Prayer for the Issuance of an Ex-Parte
Temporary Restraining Order/Writ of Preliminary Injunction)13 and an Urgent Motion for the Issuance of an Ex-Parte Temporary Restraining
Order with Supplement to Petition,14 respectively.
Consequently, the CA issued a Resolution dated November 7, 2006, which was received by PNB on November 8, 2006, granting the prayer for
a temporary restraining order (TRO) and, likewise, issued a Temporary Restraining Order on the same date. The Resolution reads:
On account of the extreme urgency of the matter and in order not to frustrate the ends of justice, or to render the issues raised herein moot and
academic, this Court, pending the resolution of the instant petition, hereby resolves to GRANT [PNBs] prayer for issuance of a temporary
restraining order within a period of sixty (60) days from notice hereof or until earlier terminated by this Court, thereby directing public respondent,
or any person acting for and on his behalf, to CEASE and DESIST from IMPLEMENTING the assailed Orders dated August 16 and 17, 2006 in
Civil Case No. Br. 19-1155 or otherwise ENFORCING the Order of Execution dated August 14, 2006 or the Writ of Execution dated August 15,
2006 in said case.
[Spouses Perez] are, in the meantime, required to file their COMMENT (and not a motion to dismiss) on the petition within ten (10) days from
notice hereof and SHOW cause within the same period why a writ of preliminary injunction should not issue.
SO ORDERED.15
Despite the issuance of the TRO, Spouses Perez were able to garnish Two Million Six Hundred Seventy-Six Thousand One Hundred Forty
Pesos and Seventy Centavos (Php 2,676,140.70) from PNBs account with Equitable PCI Bank (EPCIB) on the same date the TRO was issued,
November 7, 2006. In a letter dated November 8, 2006, from Atty. Gerardo I. Banzon, EPCIBs Head of Legal Advisory and Research
Department, Legal Services Division, informed PNB regarding this, viz:
As much as we would like to heed to your request for the lifting and that a STOP PAYMENT ORDER of the check issued in favor of the Spouses
Perez, be issued immediately, we regret to inform you that Sheriff Asirit, together with the Spouses Perez, went to our Salcedo St. Legaspi
Village at about 10:30am yesterday to pick-up the check. Proceeds of the said check were credited to the account of the Spouses Perez, who
has an account with our Cauayan Isabela branch, before noon yesterday. Regrettably, we were only informed of the existence of the TRO at
about 4:49pm yesterday. Moreover, we only received the copy of the TRO itself at 2:07pm today. Sad to say but all matters are already moot and
academic.16 (Emphasis supplied.)
In view of this development, PNB filed a Supplemental Petition for Certiorari (with Urgent Prayer for the Issuance of an Ex-Parte Writ of
Preliminary Injunction)17 seeking additional reliefs for the return or reinstatement of the garnished amount and/or the appointment of a receiver
over the said funds to administer and preserve the same pending the final disposition of the case.
The Decision of the Court of Appeals
On October 23, 2008, the CA issued the assailed Decision in CA-G.R. SP No. 96534,18 granting the petition of PNB. It ruled that the sending of a
notice of pre-trial is mandatory and that the Order dated March 8, 2006 issued by the trial court cannot be considered as such. Therefore, the CA
held that all orders issued subsequent to the said order are, likewise, null and void. It disposed of the case as follows:

It is not only the Order of March 8, 2006 which allowed the presentation of [Spouses Perezs] evidence ex parte which is null and void. All the
Orders assailed in the instant petition, as follows:
a) Order of Execution dated August 14, 2006;
b) Writ of Execution dated August 15, 2006;
c) Order dated August 16, 2006 which denied PNBs application for TRO/preliminary injunction; and
d) the Order of August 17, 2006 which annulled PNBs fourteen (14) titles and directed issuance of new titles to herein private
respondents;
having been issued subsequent to the pre-trial improperly conducted on March 8, 2006 are declared voided and nullified for having been issued
with grave abuse of discretion amounting to lack or excess of jurisdiction.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The assailed Orders are declared void and nullified. The trial court is directed
to conduct the pre-trial therein after proper notice had been served on both parties and thereafter to proceed to try the case on the merits.
SO ORDERED.19
The Decision of the CA, however, failed to address PNBs prayer for the issuance of a writ of mandatory injunction and the return/reinstatement
of the Php 2,676,140.70. Thus, PNB filed a Motion for Clarificatory Order and/or Ad Cautelam Motion for Partial Reconsideration. 20 In support of
its motion, PNB argued that considering the garnishment of the amount of money was based on the orders already voided by the CA, it is
entitled to the return/reinstatement of the garnished amount. On the other hand, Spouses Perez also filed their Motion for Reconsideration. 21
In a Resolution dated April 28, 2009, the CA denied both motions. Hence, PNB and Spouses Perez filed their separate petitions with this Court
assailing both the decision and the resolution of the CA.
The Issues
In G.R. No. 187640, PNB raises the following arguments in support of its petition:
Whether the [CA] has decided a question of substance in a way not in accord with law or with the applicable decisions of this Honorable Court
on the following issues:
I. Whether a garnishment/execution erected on the same day and date that a TRO is issued to enjoin the garnishment/execution is
valid.
II. Whether an earlier garnishment effected pursuant to a writ of execution survives the subsequent annulment of the writ.
III. Whether the dissipation/loss of, or inability to return/recover the property, constitutes an irreparable injury to warrant the issuance
of a mandatory injunction.22
In G.R. No. 187687, Spouses Perez raise the following issues for our consideration:
I.
The Respondent Honorable [CA] committed a reversible error on [a] question of law in not dismissing the petition for certiorari outrightly on [the]
ground that a petition for certiorari under Rule 65 of [the] 1997 Rules on Civil Procedure is not a substitute for [a] lost appeal[;]
II.
The Respondent Honorable [CA] committed a reversible error on [a] question of law in not dismissing the petition for certiorari on the ground that
the decision of the lower court has already become final and executory; in fact, a writ of execution was already issued and the respondent [PNB]
has already partially satisfied the money judgment at its branch of P10,000.00 and then at the Equitable Bank Manila in the sum of
P2,676,140.70 and the certificates of title in the name of respondent bank was ordered cancelled and the certificates of titles of the petitioners to
the subject properties were reinstated in the name of petitioners who already sold the same to innocent purchasers for value and therefore, by
estoppel respondent bank is precluded to assail by petition for certiorari the final and executory decision, writ of execution and partial satisfaction
of the money judgment[;]
III.
The Respondent Honorable [CA] committed a reversible error on [a] question of law in not dismissing [the] petition for certiorari outrightly on
[the] ground that there are pending petition for relief from judgment and motion for [reconsideration] with the lower court[;]
IV.
The Respondent Honorable [CA] committed a reversible error on [a] question of law in not dismissing the petition for certiorari on [the] ground
that the order of the lower court[,] although [it] did not state [the] notice of pre-trial, the respondent bank and its counsel knew that the Honorable
[CA] in its Amended Decision in remanding the case to the lower court is to conduct a pre-trial and therefore, there was nothing to suppose that
the scheduled hearing was anything other than pre-trial as enunciated by this Honorable Court in the case of Bembo et. al. vs. Court of Appeals,
et. al. G.R. No. 116845, November 29, 1995.23
The issues presented can be summarized as follows: (1) Whether a petition for certiorari is a proper remedy; and (2) Whether a pre-trial notice is
mandatory and, as a consequence, whether the lack of notice of pre-trial voids a subsequently issued decision.

Petition for Certiorari is the Proper Remedy

In their petition, Spouses Perez argue that the filing of a petition for certiorari by PNB before the CA was improper for two reasons: (a) a petition
for certiorari is not a substitute for a lost appeal; and (b) there were other pending petitions for relief from judgment and a motion for
reconsideration with the lower court.
The argument is bereft of merit.
A special petition for certiorari under Rule 65 of the Rules of Court is availed of when a "tribunal, board or officer exercising judicial or quasijudicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law." 24
It is intended to correct errors of jurisdiction only or grave abuse of discretion amounting to lack or excess of jurisdiction. Its primary purpose is to
keep an inferior court within the parameters of its jurisdiction or to prevent it from committing such grave abuse of discretion amounting to lack or
excess of jurisdiction.25
The essential requisites for a petition for certiorari under Rule 65 are: (1) the writ is directed against a tribunal, a board, or an officer exercising
judicial or quasi-judicial functions; (2) such tribunal, board, or officer has acted without or in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary
course of law.261wphi1
In Chamber of Real Estate and Builders Associations, Inc. v. The Secretary of Agrarian Reform, the Court discussed the differences between
"excess of jurisdiction", "without jurisdiction" and "grave abuse of discretion", to wit:
Excess of jurisdiction as distinguished from absence of jurisdiction means that an act, though within the general power of a tribunal, board or
officer, is not authorized and invalid with respect to the particular proceeding, because the conditions which alone authorize the exercise of the
general power in respect of it are wanting. Without jurisdiction means lack or want of legal power, right or authority to hear and determine a
cause or causes, considered either in general or with reference to a particular matter. It means lack of power to exercise authority. Grave abuse
of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction or, in other words, where the
power is exercised in an arbitrary manner by reason of passion, prejudice, or personal hostility, and it must be so patent or gross as to amount to
an evasion of a positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.27
In Agulto v. Tecson, We likewise discussed that an order by the trial court allowing a party to present his evidence ex-parte without due notice of
pre-trial to the other party constitutes grave abuse of discretion.28
Here, the trial court failed to issue a proper notice of pre-trial to PNB. Thus, it committed grave abuse of discretion when it issued the Order
dated March 8, 2006 allowing Spouses Perez to present their evidence ex-parte.
Considering that the trial courts action in issuing such order constituted grave abuse of its discretion, PNB availed of the proper remedy when it
filed a petition for certiorari with the CA.
Nevertheless, even with the existence of the remedy of appeal, this Court has, in certain cases, allowed a writ of certiorari where the order
complained of is a patent nullity.29 In the instant case, the lack of notice of pre-trial rendered all subsequent proceedings null and void. Hence,
the CA was correct in not dismissing the petition for certiorari.
Moreover, it is a basic tenet that a petition for certiorari under Rule 65 is an original and independent action. It is not a part or a continuation of
the trial which resulted in the rendition of the judgment complained of.30 Neither does it "interrupt the course of the principal action nor the
running of the reglementary periods involved in the proceedings, unless an application for a restraining order or a writ of preliminary injunction to
the appellate court is granted."31
Evidently, the argument that the petition for certiorari is precluded by the motion for reconsideration and the petition for relief from judgment filed
before the trial court is untenable.
Pre-trial Notice is Mandatory
Spouses Perez further contend that the Order dated January 8, 2006 setting the case for hearing cannot be interpreted any other way except as
a notice for pre-trial. They assert that the Amended Decision of the CA dated April 14, 2005 remanded the case to the lower court to conduct a
pre-trial; therefore, the hearing in question was just following the order of the CA to set the case for a pre-trial.
We do not agree.
Section 3, Rule 18 of the 1997 Rules on Civil Procedure unequivocally requires that "[t]he notice of pre-trial shall be served on counsel, or on the
party who has no counsel."32 It is elementary in statutory construction that the word "shall" denotes the mandatory character of the rule. Thus, it
is without question that the language of the rule undoubtedly requires the trial court to send a notice of pre-trial to the parties.
More importantly, the notice of pre-trial seeks to notify the parties of the date, time and place of the pre-trial and to require them to file their
respective pre-trial briefs within the time prescribed by the rules. Its absence, therefore, renders the pre-trial and all subsequent proceedings null
and void.33
In Pineda v. Court of Appeals,34 the Court therein discussed the importance of the notice of pre-trial. It pointed out that the absence of the notice
of pre-trial constitutes a violation of a persons constitutional right to due process. Further, the Court ruled that all subsequent orders, including
the default judgment, are null and void and without effect, viz:
Reason and justice ordain that the court a quo should have notified the parties in the case at bar. Otherwise, said parties without such notice
would not know when to proceed or resume proceedings. With due notice of the proceedings, the fate of a party adversely affected would not be
adjudged ex parte and without due process, and he would have the opportunity of confronting the opposing party, and the paramount public
interest which calls for a proper examination of the issues in any justiciable case would be subserved. The absence, therefore, of the requisite
notice of pre-trial to private respondents through no fault or negligence on their part, nullifies the order of default issued by the petitioner Judge
for denying them their day in court a constitutional right. In such, the order suffers from an inherent procedural defect and is null and void.

Under such circumstance, the granting of relief to private respondents becomes a matter of right; and the court proceedings starting from the
order of default to the default judgment itself should be considered null and void and of no effect. (Emphasis supplied.)
More recently, in Agulto,35 this Court again had the chance to rule upon the same issue and reiterated the importance of the notice of pre-trial, to
wit:
The failure of a party to appear at the pre-trial has adverse consequences. If the absent party is the plaintiff, then he may be declared non-suited
and his case dismissed. If it is the defendant who fails to appear, then the plaintiff may be allowed to present his evidence ex parte and the court
to render judgment on the basis thereof.
Thus, sending a notice of pre-trial stating the date, time and place of pre-trial is mandatory. Its absence will render the pre-trial and subsequent
proceedings void. This must be so as part of a partys right to due process. (Emphasis supplied.)
In the case at bar, the order issued by the trial court merely spoke of a "hearing on March 8, 2006"36 and required PNB "to prepare and complete
x x x a statement of account."37 The said order does not mention anything about a pre-trial to be conducted by the trial court.
In contrast, the Notice of Pre-trial dated August 22, 2002 issued by the trial court categorically states that a pre-trial is to be conducted, requiring
the parties to submit their respective pre-trial briefs. It reads:
NOTICE OF PRE-TRIAL
You are hereby notified that the Pre-trial of this case will be held on September 19, 2002 at 8:30 oclock in the morning.
Pursuant to the Supreme Court Circular No. 1-89, you are requested to submit Pre-trial brief, at least three (3) days before said date, containing
the following:
A. Brief Statement of the parties respective claims and defenses;
B. The number of witnesses to be presented;
C. An abstract of the testimonies of witnesses to be presented by the parties and approximate number of hours that will be required for
the presentation of their respective evidence;
D. Copies of all document intended to be presented;
E. Admission;
F. Applica[ble] laws and jurisprudence;
G. The parties[] respective statement of the issues; and
H. The available trial dates of counsel for complete evidence presentation, which must be within a period of three (3) months from the
first day of trial.
You are further warned that the failure to submit said brief could be a ground for non-suit or declaration of default.
Cauayan City, Isabela, this 19th day of August 2002.38 (Emphasis supplied.)
What is more, PNB even claims that it failed to receive a copy of the said order. Clearly, no amount of reasoning will logically lead to the
conclusion that the trial court issued, or that PNB received, a notice of pre-trial.
As such, We find that the CA aptly held that the Order dated March 8, 2006, which declared the hearing to be a pre-trial and allowed Spouses
Perez to adduce evidence ex parte, is void. Similarly, its ruling that the Decision dated July 5, 2006 and all subsequent orders 39 issued pursuant
to the said judgment are also null and void, is proper.
In Padre v. Badillo, it was held that "[a] void judgment is no judgment at all. It cannot be the source of any right nor the creator of any obligation.
All acts performed pursuant to it and all claims emanating from it have no legal effect."40
Necessarily, it follows that the nullity of the Writ of Execution carries with it the nullity of all acts done which implemented the writ. This includes
the garnishment of Php 2,676,140.70 from PNBs account. Its return to PNBs account is but a necessary consequence of the void writ.
Similarly, the nullity of the Order dated August 17, 2006,41 which cancelled PNBs fourteen (14) titles and directed the issuance of new titles to
Spouses Perez, has the effect of annulling all the fourteen (14) titles issued in the name of Spouses Perez. The titles should revert back to PNB.
The argument that the subject properties were sold to certain innocent purchasers for value cannot stand. First of all, such allegation is a
question of fact, not a question of law. Time and again, this Court has pronounced that the issues that can be raised in a petition for review on
certiorari under Rule 45 are limited only to questions of law.42The test of whether the question is one of law or of fact is whether the appellate
court can determine the issue raised without reviewing or evaluating the evidence, in which case, it is a question of law; otherwise, it is a
question of fact.43
Furthermore, it is settled that matters not raised in the trial court or lower courts cannot be raised for the first time on appeal. "They must be
raised seasonably in the proceedings before the lower courts. Questions raised on appeal must be within the issues framed by the parties;
consequently, issues not raised before the trial court cannot be raised for the first time on appeal." 44 Spouses Perez never raised this issue
before the CA. Hence, they cannot raise it before this Court now.

WHEREFORE, the petition in G.R. No. 187640 is GRANTED. The Decision of the Court of Appeals (CA) in CA-G.R. SP No. 96534 dated
October 23, 2008 is AFFIRMED with the MODIFICATION that the July 5, 2006 Decision of the Regional Trial Court of Isabela in Civil Case No.
20-1155 is NULLIFIED and SET ASIDE, the titles issued to Spouses Angelito Perez and Jocelyn Perez by virtue of the aforesaid August 17,
2006 Order and all derivative titles emanating thereon are cancelled and declared null and void and directing the Register of Deeds of Isabela to
issue new certificates of title in the name of the Philippine National Bank (PNB) to replace the fourteen (14) titles previously issued to Spouses
Angelito and Jocelyn Perez pursuant to the August 17, 2006 Order and for Spouses Angelito and Jocelyn Perez to pay to PNB the amount of
PhP 2,676,140.70 representing the amount garnished from PNBs account with Equitable PCI Bank (EPCIB) by virtue of the August 15, 2006
Writ of Execution issued pursuant to the July 5, 2006 Decision.
As modified, the CA Decision shall read:
WHEREFORE, in view of the foregoing, the petition is GRANTED. The following orders and writ issued by the Regional Trial Court of Isabela in
Civil Case No. 20-1155 are declared null and void:
a. Order dated March 8, 2006 which allowed the presentation of [Spouses Perezs] evidence ex parte;
b. Order of Execution dated August 14, 2006;
c. Writ of Execution dated August 15, 2006;
d. Order dated August 16, 2006 which denied PNBs application for TRO/preliminary injunction; and
e. the Order of August 17, 2006 which annulled PNBs fourteen (14) titles and directed issuance of new titles to herein private
respondents;
The July 5, 2006 Decision of the Isabela RTC is nullified and set aside.
The fourteen (14) new titles issued to Spouses Angelito Perez and Jocelyn Perez by virtue of the August 17, 2006 Order and all derivative titles
issued therefrom are declared null and void and cancelled. The Register of Deeds of Isabela are directed to cancel said titles issued to Spouses
Perez and issue new certificates of titles in the name of Philippine National Bank (PNB) which shall contain a memorandum of the annulment of
the outstanding duplicate certificates issued to said spouses.1wphi1
Spouses Angelito Perez and Jocelyn Perez are ordered to pay PNB the amount of P2,767,140.70 representing the amount illegally garnished
from PNBs account with Equitable PCI Bank (EPCIB) by virtue of the August 15, 2006 writ of execution with interest thereon at six percent (6%)
per annum from August 15, 2006 up to the finality of judgment and at twelve percent (12%) per annum from the date of finality of judgment until
paid.
The trial court is directed to conduct further proceedings in Civil Case No. 20-1155 with dispatch.
The petition in G.R. No. 187687 is DENIED for lack of merit.
No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 173331

December 11, 2013

FLORPINA BENAVIDEZ, Petitioner,

vs.
NESTOR SALVADOR, Respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari assailing the November 22, 2005 Decision1 and the June 8, 2006 Amended Decision2 of the Court of
Appeals (CA). in CA-G.R. CV No. 73487, which affirmed and modified the June 1, 2001 Decision 3 of the Regional Trial Court. Branch 74, Anti
polo City (RTC-Antipolo) in Civil Case No. 00-5660.
The Facts:
Sometime in February 1998, pet1t1oner Florpina Benavidez (Benavidez) approached and asked respondent Nestor Salvador (Salvador) for a
loan that she would use to repurchase her property in Tanay, Rizal which was foreclosed by the Farmers Savings and Loan Bank, Inc. (Farmers
Savings). After inspecting the said property, Salvador agreed to lend the money subject to certain conditions. To secure the loan, Benavidez was
required to execute a real estate mortgage, a promissory note and a deed of sale. She was also required to submit a special power of
attorney (SPA) executed and signed by Benavidezs daughter, Florence B. Baning (Baning), whom she named as the vendee in the deed of
absolute sale of the repurchased property. In the SPA, Baning would authorize her mother to obtain a loan and to constitute the said property as
security of her indebtedness to Salvador.
Pursuant to the agreement, Salvador issued a managers check in favor of Benavidez in the amount of One Million Pesos (P1,000,000.00) and
released Five Hundred Thousand Pesos (P500,000.00) in cash. For the loan obtained, Benavidez executed a promissory note, dated March 11,
1998.
Benavidez, however, failed to deliver the required SPA. She also defaulted in her obligation under the promissory note. All the postdated checks
which she had issued to pay for the interests were dishonored. This development prompted Salvador to send a demand letter with a
corresponding statement of account, dated January 11, 2000. Unfortunately, the demand fell on deaf ears which constrained Salvador to file a
complaint for sum of money with damages with prayer for issuance of preliminary attachment.
On May 4, 2000, Benavidez filed a motion to dismiss on the ground of litis pendentia. She averred that prior to the filing of the case before the
RTC-Antipolo, she had filed a Complaint for Collection for Sum of Money, Annulment of Contract and Checks with Prayer for Preliminary
Injunction and Temporary Restraining Order against Salvador; his counsel, Atty. Nepthalie Segarra; Almar Danguilan; and Cris Marcelino, before
the Regional Trial Court, Branch 80, Morong, Rizal (RTC-Morong). The motion to dismiss, however, was denied by RTC-Antipolo on July 31,
2000. On September 15, 2000, Benavidez filed her answer with counterclaim. A pre-trial conference was scheduled on May 2, 2001 but she and
her counsel failed to appear despite due notice. Resultantly, upon motion, Salvador was allowed by the trial court to present evidence ex parte.
On June 1, 2001, RTC-Antipolo decided the subject case for Salvador. It found that indeed Benavidez obtained a loan from Salvador in the
amount of P1,500,000.00. It also noted that up to the time of the rendition of the judgment, she had failed to settle her obligation despite having
received oral and written demands from Salvador. Also, the trial court pointed out that the evidence had shown that as of January 11, 2000,
Benavidezs obligation had already reached the total amount of P4,810,703.21.4 Thus, the fallo of the said decision reads:
WHEREFORE, in view of the foregoing premises, defendant is hereby directed to pay plaintiff the following:
1. The amount of P4,810,703.21, covering the period from June 11, 1998 to January 11, 2000, exclusive of interest and penalty
charges until the said amount is fully paid;
2. The amount of P50,000.00 as exemplary damages;
3. The sum of 25% of the total obligation as and by way of attorneys fees; and,

4. Cost of suit.
SO ORDERED.5
Benavidez filed a motion for reconsideration but unfortunately for her, RTC-Antipolo, in its August 10, 2001 Order,6 denied her motion for lack of
merit.
Frustrated, Benavidez appealed the June 1, 2001 Decision and the August 10, 2001 Order of RTC-Antipolo to the CA. She argued, in chief, that
early on, the trial court should have dismissed the complaint for collection of sum of money filed by Salvador on grounds of litis pendentia and
erroneous certification against forum shopping. She claimed that prior to the filing of the said complaint against her, she had already filed a
complaint for the annulment of the promissory note evidencing her obligation against Salvador. According to her, there was substantial identity in
the causes of action and any result of her complaint for annulment would necessarily affect the complaint for collection of sum of money filed
against her. She added that Salvador never informed RTC-Antipolo about the pending case before RTC-Morong, rendering his certification on
forum shopping erroneous.7
Benavidez also argued that RTC-Antipolo erred in refusing to re-open the case for pre-trial conference and disallowing her to present evidence.
She added that the absence of her counsel on the scheduled pre-trial conference caused her substantial prejudice. Though she was not
unmindful of the general rule that a client was bound by the mistake or negligence of her counsel, she insisted that since the incompetence or
ignorance of her counsel was so great and the error committed was so serious as it prejudiced her and denied her day in court, the litigation
should have been reopened to give her the opportunity to present her case.8
The CA was not moved.
The CA reasoned out that RTC-Antipolo did not err in allowing Salvador to present his evidence ex-parte in accordance with Section 5, Rule 18
of the 1997 Rules of Court.9 Benavidez and her counsel failed to show a valid reason for their non-appearance at the pre-trial and so their
absence was not excusable. Her counsels negligence, as Benavidez cited, was not among the grounds for new trial or reconsideration as
required under Section 1, Rule 37 of the Rules of Civil Procedure. The CA emphasized that well-entrenched was the rule that negligence of
counsel bound his client. She was bound by the action of his counsel in the conduct of the trial. The appellate court also took note that she
herself was guilty of negligence because she was also absent during the pre-trial despite due notice. Thus, Benavidezs position that the trial
court should have reopened the case was untenable.10
With regards to the grounds of litis pendentia and forum shopping cited by Benavidez, the CA wrote that there was no identity of the rights
asserted in the cases filed before RTC-Morong and RTC-Antipolo. The reliefs prayed for in those cases were different. One case was for the
annulment of the promissory note while the other one was a complaint for sum of money. There could be identity of the parties, but all the other
requisites to warrant the dismissal of the case on the ground of litis pendentia were wanting.11 Thus, on November 22, 2005, the CA affirmed in
toto the decision of RTC-Antipolo.12
Feeling aggrieved by the affirmance, Benavidez filed a motion for reconsideration on the ground that the same was contrary to law and
jurisprudence; that litis pendentia existed which resultantly made his certification on non-forum shopping untruthful; and, that her absence during
the pre-trial was justified.
On June 08, 2006, the CA issued the Amended Decision, holding that the motion was partly meritorious. Accordingly, it modified its earlier
decision by deleting the award of exemplary damages and attorneys fees because the award thereof was not supported by any factual, legal
and equitable justification. Thus, the decretal portion of the Amended Decision reads:
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED. The Decision dated November 22, 2005
is MODIFIED by DELETING the award of exemplary damages and attorneys fees.
SO ORDERED. 13
Still unsatisfied, Benavidez comes before the Court via a petition for review under Rule 45 of the Rules of Court, raising the following issues: 14
1. Whether or not the present case is barred by Civil Case No. 00-05660 which is pending before the RTC-Morong, Rizal.
2. Whether or not the case is dismissible because the certification against forum shopping was defective.
3. Whether or not the executed promissory note is void for being unconscionable and shocking to the conscience.
4. Whether or not the CA erred in holding that the order allowing respondent to present evidence ex-parte and submitting the
case for decision is valid despite the fact that default judgment is looked upon with disfavor by this Court.
In fine, the core issue is whether or not the present case should have been dismissed on the ground of litis pendentia.
Benavidez argues that the outcome of the case, before RTC-Morong, where the annulment of the promissory note was sought, would have been
determinative of the subject case before RTC-Antipolo where the enforcement of the promissory note was sought. If RTC-Morong would rule
that the promissory note was null and void, then the case with RTC-Antipolo would have no more leg to stand on. He concludes that the
requisites of litis pendentia were indeed present: first, both Benavidez and Salvador were parties to both complaints; second, both complaints
were concerned with the promissory note; and third, the judgment in either of the said complaints would have been determinative of the other.15
Benavidez further claims that the case should have been dismissed because the certification on forum shopping which accompanied Salvadors
complaint was defective. He declared therein that he was not aware of any pending case before any court similar to the one he was filing, when
in truth and in fact, there was one. This fact could not be denied because summons in the case before RTC-Morong was served on him and he
even filed his answer to the said complaint.16
Benavidez also pushes the argument that RTC-Antipolo committed an error of law when it allowed Salvador to present evidence ex-parte and
eventually decided the case without waiting to hear her side. The trial court should have been more lenient. If there was any one to be blamed
for her predicament, it should have been his counsel, Atty. Rogelio Jakosalem (Jakosalem). His counsel was negligent in his duties when he did
not bother to file the necessary pre-trial brief and did not even appear at the pre-trial conference. He did not assist her either in filing a motion for
reconsideration. Benavidez explains that Atty. Jakosalem did not appear on the scheduled pre-trial conference because he got mad at her when

she refused to heed his advice to settle when the trial court granted Salvadors motion for issuance of preliminary attachment. Under the
circumstances, she should have been exempted from the rule that the negligence of counsel binds the client.17
For her part, she failed to appear because she was then suffering from illness. Contrary to the finding of the CA, her medical certificate was not
belatedly submitted. She submitted it within a reasonable period after she received the order allowing Salvador to present evidence ex-parte and
considering the case for resolution thereafter.18
The Courts Ruling
In litis pendentia, there is no
hard and fast rule in
determining which of the two
actions should be abated
Litis pendentia is a Latin term, which literally means "a pending suit" and is variously referred to in some decisions as lis pendens and auter
action pendant. As a ground for the dismissal of a civil action, it refers to the situation where two actions are pending between the same parties
for the same cause of action, so that one of them becomes unnecessary and vexatious. It is based on the policy against multiplicity of suits. 19
Litis pendentia exists when the following requisites are present: identity of the parties in the two actions; substantial identity in the causes of
action and in the reliefs sought by the parties; and the identity between the two actions should be such that any judgment that may be rendered
in one case, regardless of which party is successful, would amount to res judicata in the other.20
On the other hand, forum shopping exists when, as a result of an adverse decision in one forum, or in anticipation thereof, a party seeks a
favorable opinion in another forum through means other than appeal or certiorari.21
There is forum shopping when the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in
another.22
In the present controversy, the Court is of the view that litis pendentia exists. All the elements are present: first,both Benavidez and Salvador are
parties in both cases; second, both complaints are concerned with the same promissory note; and third, the judgment in either case would be
determinative of the other.
With the foregoing, which case then should be dismissed? At first glance, it would seem that Civil Case No. 00-5660 or the complaint filed with
RTC-Antipolo should have been dismissed applying the "priority-in-time rule." This rule, however, is not ironclad. The rule is not applied if the
first case was filed merely to pre-empt the later action or to anticipate its filing and lay the basis for its dismissal. A crucial consideration is the
good faith of the parties. In recent rulings, the more appropriate case is preferred and survives. In Spouses Abines v. BPI,23 it was written:
There is no hard and fast rule in determining which of the actions should be abated on the ground of litis pendentia, but through time, the
Supreme Court has endeavored to lay down certain criteria to guide lower courts faced with this legal dilemma. As a rule, preference is given to
the first action filed to be retained. This is in accordance with the maxim Qui prior est tempore, potior est jure. There are, however, limitations to
this rule. Hence, the first action may be abated if it was filed merely to pre-empt the later action or to anticipate its filing and lay the basis for its
dismissal. Thus, the bona fides or good faith of the parties is a crucial element. A later case shall not be abated if not brought to harass or vex;
and the first case can be abated if it is merely an anticipatory action or, more appropriately, an anticipatory defense against an expected suit a
clever move to steal the march from the aggrieved party.
Another exception to the priority in time rule is the criterion of the more appropriate action. Thus, an action, although filed later, shall not be
dismissed if it is the more appropriate vehicle for litigating the issues between the parties. [Underscoring supplied]
In the relatively recent case of Dotmatrix Trading v. Legaspi,24 the Court had the occasion to extensively discuss the various rules and
consideration in determining which case to dismiss in such situations. It included its analysis of Abines. Thus:
Early on, we applied the principle of Qui prior est tempore, potior est jure (literally, he who is before in time is better in right) in dismissing a case
on the ground of litis pendentia. This was exemplified in the relatively early case of Del Rosario v. Jacinto where two complaints for
reconveyance and/or recovery of the same parcel of land were filed by substantially the same parties, with the second case only impleading
more party-plaintiffs. The Court held that "parties who base their contention upon the same rights as the litigants in a previous suit are bound by
the judgment in the latter case." Without expressly saying so in litis pendentia terms, the Court gave priority to the suit filed earlier.
In Pampanga Bus Company, Inc. v. Ocfemia, complaints for damages arising from a collision of a cargo truck and a bus were separately filed by
the owners of the colliding vehicles. The complaint of the owners of the cargo truck prevailed and the complaint of the owners of the bus had to
yield, as the cargo truck owners first filed their complaint. Notably, the first and prevailing case was far advanced in development, with an answer
with counterclaim and an answer to the counterclaim having been already filed, thus fully joining the issues.
In Lamis Ents. v. Lagamon, the first case was a complaint for specific performance of obligations under a Memorandum of Agreement, while the
second case was a complaint for sums of money arising from obligations under a promissory note and a chattel mortgage, and damages. We
dismissed the second case because the claims for sums of money therein arose from the Memorandum of Agreement sued upon in the first
case.
Ago Timber Corporation v. Ruiz offered an insightful reason after both parties had each pleaded the pendency of another action between the
same parties for the same cause. The Court ruled that the second action should be dismissed, "not only as a matter of comity with a coordinate
and co-equal court (Laureta & Nolledo, Commentaries & Jurisprudence on Injunction, p. 79, citing Harrison v. Littlefield, 57 Tex. Div. A. 617, 619,
124 SW 212), but also to prevent confusion that might seriously hinder the administration of justice. (Cabigao, et al. v. Del Rosario, et al., 44
Phil. 182)."
In all these cases, we gave preference to the first action filed to be retained. The "priority-in-time rule,"however, is not absolute.
In the 1956 case of Teodoro v. Mirasol, we deviated from the "priority-in-time rule" and applied the "more appropriate action test" and
the "anticipatory test."
The "more appropriate action test" considers the real issue raised by the pleadings and the ultimate objective of the parties; the more
appropriate action is the one where the real issues raised can be fully and completely settled. In Teodoro, the lessee filed an action for

declaratory relief to fix the period of the lease, but the lessor moved for its dismissal because he had subsequently filed an action for ejectment
against the lessee. We noted that the unlawful detainer suit was the more appropriate action to resolve the real issue between the parties whether or not the lessee should be allowed to continue occupying the land under the terms of the lease contract; this was the subject matter of
the second suit for unlawful detainer, and was also the main or principal purpose of the first suit for declaratory relief.
In the "anticipatory test," the bona fides or good faith of the parties is the critical element.1wphi1 If the first suit is filed merely to preempt
the later action or to anticipate its filing and lay the basis for its dismissal, then the first suit should be dismissed. In Teodoro, we noted
that the first action, declaratory relief, was filed by the lessee to anticipate the filing of the second action, unlawful detainer, considering the
lessor's letter informing the lessee that the lease contract had expired.
We also applied the "more appropriate action test" in Ramos v. Peralta. In this case, the lessee filed an action for consignation of lease rentals
against the new owner of the property, but the new owner moved to dismiss the consignation case because of the quieting of title case he had
also filed against the lessee. Finding that the real issue between the parties involved the right to occupy/possess the subject property, we
ordered the dismissal of the consignation case, noting that the quieting of title case is the more appropriate vehicle for the ventilation of the
issues between them; the consignation case raised the issue of the right to possession of the lessee under the lease contract, an issue that was
effectively covered by the quieting of title case which raised the issue of the validity and effectivity of the same lease contract.
In University Physician Services, Inc. v. Court of Appeals, we applied both the "more appropriate action test" and "anticipatory test." In this case,
the new owner of an apartment sent a demand letter to the lessee to vacate the leased apartment unit. When the lessee filed an action for
damages and injunction against the new owner, the new owner moved for the dismissal of the action for damages on account of the action for
ejectment it had also filed. We noted that ejectment suit is the more appropriate action to resolve the issue of whether the lessee had the right to
occupy the apartment unit, where the question of possession is likewise the primary issue for resolution. We also noted that the lessee, after her
unjustified refusal to vacate the premises, was aware that an ejectment case against her was forthcoming; the lessee's filing of the complaint for
damages and injunction was but a canny and preemptive maneuver intended to block the new owner's action for ejectment.
We also applied the "more appropriate action test" in the 2003 case Panganiban v. Pilipinas Shell Petroleum Corp., where the lessee filed a
petition for declaratory relief on the issue of renewal of the lease of a gasoline service station, while the lessor filed an unlawful detainer case
against the lessee. On the question of which action should be dismissed, we noted that the interpretation of a provision in the lease contract as
to when the lease would expire is the key issue that would determine the lessee's right to possess the gasoline service station. The primary
issue the physical possession of the gasoline station - is best settled in the ejectment suit that directly confronted the physical possession
issue, and not in any other case such as an action for declaratory relief.
A more recent case - Abines v. Bank of the Philippine Islands in 2006 - saw the application of both the "priority-in-time rule" and the "more
appropriate action test." In this case, the respondent filed a complaint for collection of sum of money against the petitioners to enforce its rights
under the promissory notes and real estate mortgages, while the petitioners subsequently filed a complaint for reformation of the promissory
notes and real estate mortgages. We held that the first case, the collection case, should subsist because it is the first action filed and the more
appropriate vehicle for litigating all the issues in the controversy. We noted that in the second case, the reformation case, the petitioners
acknowledged their indebtedness to the respondent; they merely contested the amounts of the principal, interest and the remaining balance. We
observed, too, that the petitioners' claims in the reformation case were in the nature of defenses to the collection case and should be asserted in
this latter case.
Under this established jurisprudence on litis pendentia, the following considerations predominate in the ascending order of importance in
determining which action should prevail: (1) the date of filing, with preference generally given to the first action filed to be retained; (2) whether
the action sought to be dismissed was filed merely to preempt the later action or to anticipate its filing and lay the basis for its dismissal;
and (3) whether the action is the appropriate vehicle for litigating the issues between the parties.25 [Underscoring supplied]
In the complaint filed before RTC-Morong, Benavidez alleged, among others, that it was defendant Atty. Nepthalie Segarra (Atty. Segarra) who
arranged the loan in the amount of P1,500,000.00 for her at his own initiative; that he was the one who received the amount for her on or about
March 10, 1998 from defendant Salvador; that he paid Farmers Bank the amount of P1,049,266.12 leaving a balance of more than P450,000.00
in his possession; and that he made her sign a promissory note. Benavidez prayed, among others, that Atty. Segarra be ordered to give her the
balance of the amount loaned and that the promissory note that Salvador allegedly executed be declared null and void because she was just
duped into signing the said document through machinations and that the stipulated interest therein was shocking to the conscience. Salvador, on
the other hand, filed the subject case for the collection of a sum of money before RTC-Antipolo to enforce his rights under the promissory note.
Considering the nature of the transaction between the parties, the Court believes that the case for collection of sum of money filed before RTCAntipolo should be upheld as the more appropriate case because the judgment therein would eventually settle the issue in the controversy whether or not Benavidez should be made accountable for the subject loan. In the complaint that she filed with RTC- Morong, Benavidez never
denied that she contracted a loan with Salvador. Under her second cause of action, she alleged:
SECOND CAUSE OF ACTION
11. Defendant Atty. Nepthalie Segarra arranged a loan in the amount of ONE MILLION AND FIVE HUNDRED THOUSAND
(P1,500,000.00) PESOS for plaintiff at his own initiative;
12. Defendant Atty. Nepthalie Segarra received the P1,500,000.00 on or about March 10, 1998 from defendant Nestor Salvador in
behalf of and for delivery to plaintiff;
13. Defendant Atty. Nepthalie Segarra paid Farmers Bank the amount of P1,049,266.12 leaving a balance of more than P450,000.00
in his possession. A copy of the receipt evidencing payment is herewith attached as Annex "A" and made an integral part hereof;
14. Defendant Atty. Nepthalie Segarra made plaintiff sign a Promissory Note evidencing the loan ofP1,500,000.00. A copy of said
Promissory Note is herewith attached as Annex "B" and made an integral part hereof; 26 [Underscoring supplied]
From the foregoing, it is clear that there was an amount of money borrowed from Salvador which was used in the repurchase of her foreclosed
property. Whether or not it was Atty. Segarra who arranged the loan is immaterial. The fact stands that she borrowed from Salvador and she
benefited from it. Her insistence that the remaining balance of P450,000.00 of the money loaned was never handed to her by Atty. Segarra is a
matter between the two of them. As far as she and Salvador are concerned, there is admittedly an obligation. Whether the promissory note was
void or not could have been proven by her during the trial but she forfeited her right to do so when she and her lawyer failed to submit a pre-trial
brief and to appear at the pre-trial as will be discussed hereafter.

At this point, to dismiss Civil Case No. 00-5660 would only result in needless delay in the resolution of the parties' dispute and bring them back
to square one. This consequence will defeat the public policy reasons behind litis pendentia which, like the rule on forum shopping, aim to
prevent the unnecessary burdening of our courts and undue taxing of the manpower and financial resources of the Judiciary; to avoid the
situation where co-equal courts issue conflicting decisions over the same cause; and to preclude one party from harassing the other party
through the filing of an unnecessary or vexatious suit.27
The failure of a party to file a
pre-trial brief or to appear at a
pre-trial conference shall be
cause to allow the other party
to present evidence ex parte.
Benavidez basically contends that she should not be made to suffer the irresponsibility of her former counsel, Atty. Jakosalem, and that the trial
court should have relaxed the application of the Rules of Court, reopened the case and allowed her to present evidence in her favor.
The Court is not moved.
Section 4, Rule 18 of the Rules of Court provides that it is the duty of the parties and their counsel to appear at the pre-trial conference. The
effect of their failure to appear is provided by Section 5 of the same rule where it states:
Sec. 5. Effect of failure to appear.- The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause
for dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure on the part of the
defendant shall be cause to allow the plaintiff to present his evidence ex parte and the court to render judgment on the basis thereof.
[Emphasis supplied]
Furthermore, Section 6 thereof provides:
Sec. 6. Pre-trial brief.-The parties shall file with the court and serve on the adverse party, in such manner as shall ensure their receipt thereof at
least three (3) days before the date of the pre-trial, their respective pre-trial briefs which shall contain, among others:
xxx
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.
From the foregoing, it is clear that the failure of a party to appear at the pre-trial has adverse consequences. If the absent party is the plaintiff,
then his case shall be dismissed. If it is the defendant who fails to appear, then the plaintiff is allowed to present his evidence ex parte and the
court shall render judgment on the basis thereof. Thus, the plaintiff is given the privilege to present his evidence without objection from the
defendant, the likelihood being that the court will decide in favor of the plaintiff, the defendant having forfeited the opportunity to rebut or present
its own evidence.28
RTC-Antipolo then had the legal basis to allow Salvador to present evidence ex parte upon motion. Benavidez and her counsel were not present
at the scheduled pre-trial conference despite due notice. They did not file the required pre-trial brief despite receipt of the Order. The rule
explicitly provides that both parties and their counsel are mandated to appear thereat except for: (1) a valid excuse; and (2) appearance of a
representative on behalf of a party who is fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of
dispute resolution, and to enter into stipulations or admissions of facts and documents. 29 In this case, Benavidezs lawyer was already negligent,
but she compounded this by being negligent herself. She was aware of the scheduled pre-trial conference, but she did not make any move to
prevent the prejudicial consequences of her absence or that of her counsel. If she knew that her lawyer would not appear and could not because
she was ill, she should have sent a representative in court to inform the judge of her predicament.
Also, her failure to file the pre-trial brief warranted the same effect because the rules dictate that failure to file a pre-trial brief shall have the
same effect as failure to appear at the pre-trial. Settled is the rule that the negligence of a counsel binds his clients. 30 Neither Benavidez nor her
counsel can now evade the effects of their misfeasance.
Stipulated interest should be
reduced for being iniquitous
and unconscionable.
This Court is not unmindful of the fact that parties to a loan contract have wide latitude to stipulate on any interest rate in view of the Central
Bank Circular No. 905 s. 1982 which suspended the Usury Law ceiling on interest effective January I, 1983. It is, however, worth stressing that
interest rates whenever unconscionable may still be declared illegal. There is nothing in said circular which grants lenders carte
blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their
assets.31 In Menchavez v. Bermudez,32 the interest rate of 5% per month, which when summed up would reach 60% per annum, is null and void
for being excessive, iniquitous, unconscionable and exorbitant, contrary to morals, and the law.33
Accordingly, in this case, the Court considers the compounded interest rate of 5% per month as iniquitous and unconscionable and void and
inexistent from the beginning. The debt is to be considered without the stipulation of the iniquitous and unconscionable interest rate. 34 In line with
the ruling in the recent case of Nacar v. Gallery Frames,35 the legal interest of 6% per annum must be imposed in lieu of the excessive interest
stipulated in the agreement.
WHEREFORE, the petition is DENIED. The November 22, 2005 Decision and the June 8, 2006 Amended Decision of the Court of Appeals
are AFFIRMED with MODIFICATION. The interest rate of 5% per month which was the basis in computing Benavidez's obligation is reduced to
6% per annum.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 184589

June 13, 2013

DEOGENES O. RODRIGUEZ, Petitioner,

vs.
HON. COURT OF APPEALS and PHILIPPINE CHINESE CHARITABLE ASSOCIATION, INC., Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This Petition for Certiorari under Rule 65 of the Rules of Court assails the Decision 1 dated May 26, 2008 and Resolution2 dated September 17,
2008 of the Court of Appeals in CA-G.R. SP No. 101789 for having been rendered with grave abuse of discretion amounting to lack of
jurisdiction. Said Decision and Resolution reversed and set aside the Orders dated April 10, 2007 3 and November 22, 200t of the Regional Trial
Court (RTC), Branch 75, San Mateo, Rizal, in Land Registration (Reg.) Case No. N-5098 (LRC Rec. No. N-27619).
The Facts are as follows.
On January 29, 1965, Purita Landicho (Landicho) filed before the Court of First Instance (CFI) of Rizal an Application for Registration of a piece
of land, measuring 125 hectares, located in Barrio Patiis, San Mateo, Rizal (subject property), which was docketed as Land Reg. Case No. N5098.5 On November 16, 1965, the CFI rendered a Decision6 evaluating the evidence presented by the parties as follows:
It has been established by the evidence adduced by Landicho that the parcel of land under consideration was formerly several smaller parcels
owned and possessed by the spouses Felix San Pascual and Juanita Vertudes, Ignacio Santos and Socorro Santos, Caconto Cayetano and
Verneta Bartolome, Gavino Espiritu and Asuncion Cruz, and Lucio Manuel and Justina Ramos, all of whom in January 1960, executed
instruments of conditional sale of their respective parcels of land in favor of Landicho, x x x, and on July 20, 1965 all of them executed jointly a
final deed of absolute sale x x x which superseded the conditional sale. Gavino Espiritu, one of the vendors, fifty-five years old, farmer, resident
of Barrio Geronimo, Montalban, Rizal, testified that he and his co-vendors have been in possession of the parcel of land since 1930 and that the
possession of Landicho, together with her predecessors in interest, has been open, peaceful, continuous and adverse against the whole world in
the concept of an owner. It has also been established that the parcel of land is within the Alienable or Disposable Block-I of I.C. Project No. 26 of
San Mateo, Rizal, x x x; that the parcel of land is classified as "montaoso" with an assessed value of P12,560.00 under Tax Dec. No. 7081, x x
x, taxes due to which for the current year had been paid, x x x; and that the same is not mortgaged or affected by any encumbrance.
The oppositor did not present testimonial evidence but presented the report of investigation of Land Investigator Pedro R. Feliciano dated
August 23, 1965, x x x which stated substantially that during the investigation and ocular inspection it has been ascertained that no public land
application is involved and that no reservation is affected thereby, and therefore, he believed that the opposition already filed can be withdrawn;
x x x, 1st Indorsement dated August 24, 1965 of the District Land Officer, District No. 7, Bureau of Lands, to the Director of Lands,
recommending that, in view of said report of investigation, the opposition be withdrawn; and x x x, office memorandum of the Chief, Records
Division, Bureau of Land, addressed to the Chief, Legal Division, dated September 23, 1965, to the effect that according to the records, plan
Psu-201023 is not covered by any kind of public land application or patent.
It is therefore clear from the evidence on record that the applicant is entitled to the benefits provided by Section 48, of C.A. No. 141, as
amended.7

In the end, the CFI decreed:

WHEREFORE, the Court hereby confirms the title of the applicant, Purita Landicho, of legal age, married to Teodorico Landicho, Filipino,
resident of 74-A South 19th St., Quezon City, to the parcel of land under consideration and orders the registration thereof in her name and
personal circumstances aforementioned.
The opposition of the Director of Lands is hereby dismissed.
Once this decision becomes final and executory, let the order for the issuance of the decree issue.8
Upon finality of its Decision dated November 16, 1965, the CFI issued an Order9 on December 22, 1965 directing the Commissioner of the Land
Registration Commission (LRC) "to comply with Section 21 of Act No. 2347"10 on the issuance of a decree and original certificate of title (OCT).
Eventually, on July 11, 1966, Jose D. Santos (Santos), Register of Deeds (ROD) for the Province of Rizal, issued Transfer Certificate of Title
(TCT) No. 16768111 in Landichos name covering the subject property. Notably, ROD Santos issued to Landicho a TCT rather than an OCT for
the subject property; and although TCT No. 167681 stated that it was issued pursuant to Decree No. 1480, no other detail regarding the decree
and the original registration of the subject property was filled out.
The subject property was thereafter sold several times, and as the old TCTs of the vendors were cancelled, new TCTs were accordingly issued
to the buyers. The sale of the subject property could be traced from Landicho to Blue Chips Projects, Inc. (BCPI), which acquired TCT No.
344936 in its own name on November 10, 1971; then to Winmar Poultry Farm, Inc. (WPFI), TCT No. 425582, November 5, 1973; and finally, to
herein respondent Philippine Chinese Charitable Association, Inc. (PCCAI), TCT No. 482970, July 15, 1975. 12
Meanwhile, A. Doronila Resources Dev., Inc. (ADRDI)13 instituted Civil Case No. 12044, entitled A. Doronila Resources Dev., Inc. v. Court of
Appeals, which was still pending before the RTC, Branch 167, of Pasig City as of 2008. ADRDI asserted ownership over the subject property,
which was a portion of a bigger tract of land measuring around 513 hectares, covered by TCT No. 42999, dated February 20, 1956, in the name
of said corporation. This bigger tract of land was originally registered in the name of Meerkamp Co. under OCT No. 301, pursuant to Decree No.
1480, GLRO Record No. 2429, issued on November 22, 1906. ADRDI caused the annotation of a notice of lis pendens (as regards Civil Case
No. 12044) on TCT No. 344936 of BCPI. Subsequently, based on the ruling of this Court in A. Doronila Resources Dev., Inc. v. Court of
Appeals,14 ADRDI was also able to have its notice of adverse claim over the subject property annotated on TCT Nos. 344936 and 425582 of
BCPI and WPFI, respectively. ADRDI subsequently transferred the subject property to Amado Araneta (Araneta) to whom TCT No. 70589 was
issued on March 25, 1983.
On November 14, 1996, Landicho executed a Deed of Absolute Sales (sic) over the subject property in favor of herein petitioner Deogenes O.
Rodriguez (Rodriguez). Two years later, on June 1, 1998, Landicho died.
Seven years hence, or on May 18, 2005, Rodriguez filed an Omnibus Motion before the RTC, Branch 75, of San Mateo, Rizal, in Land Reg.
Case No. N-5098. Rodriguez alleged therein that the Decision dated November 16, 1965 and Order dated December 22, 1965 of the CFI in
Land Reg. Case No. N-5098 which confirmed Landichos title over the subject property has not been executed. Rodriguez specifically stated that
no decree of registration had been issued by the LRC Commissioner (now the Administrator of the Land Registration Authority [LRA]) and that
no OCT had been ever issued by the ROD in Landichos name. As Landichossuccessor-in-interest to the subject property, Rodriguez prayed
that:
a. Upon the filing of the instant motion, the Clerk of Court of the Regional Trial Court of Pasig City be commanded to transmit to the
Honorable Court the complete records and expediente of LRC No. x x x N-5098 (LRC Rec. No. N-27619);
b. After hearing, the Honorable Court give due course to the instant motions and issue an Order as follows:
i. Directing the Administrator of the Land Registration [Authority] to issue the Decree of Registration, in accordance with the
tenor of the Decision dated November 16, 1965 x x x and the Order dated December 22, 1965 x x x, in the name of the
petitioner [Rodriguez];
ii. Thereafter, ordering the Register of Deeds for Marikina City, through the Administrator of the Land Registration
Administration as having direct supervisory authority there-over, to issue the
Original Certificate of Title containing the Technical Description as duly confirmed in the said Decision and Order x x x in the name of the herein
petitioner [Rodriguez].
PETITIONER further prays for such other measures of relief as may be deemed just and equitable in the premises. 15
In the course of the proceedings concerning the aforementioned Omnibus Motion, Rodriguez himself submitted as his Exhibit "GG" TCT No.
482970 of PCCAI but alleged that said certificate of title was fictitious. Thus, the RTC issued on November 3, 2006 a subpoena commanding
PCCAI to appear at the hearing of Land Reg. Case No. N-5098 set on November 8, 2006 at 9:00 a.m.; to bring its TCT No. 482970 and Tax
Declaration No. SM-02-0229; and to testify in connection therewith.
On November 17, 2006, PCCAI filed before the RTC a Verified Motion for Leave to Intervene in Land Reg. Case No. N-5098. PCCAI justified its
intervention by arguing that it was an indispensable party in the case, having substantial legal interest therein as the registered owner of the
subject property under TCT No. 482970. PCCAI likewise pointed out that Rodriguez himself submitted a copy of TCT No. 482970, only alleging
that said certificate was fictitious. PCCAI averred that Rodriguez maliciously failed to allege in his Omnibus Motion that TCT No. 482970 remains
valid and subsisting, there being no direct action or final court decree for its cancellation. Rodriguezs Omnibus Motion constituted a collateral
attack on the title of PCCAI, which is not sanctioned by law and jurisprudence. Consequently, PCCAI asked the RTC to allow its intervention in
Land Reg. Case No. N-5098 so it could protect its vested rights and interests over the subject property; to note and admit its Answer-inIntervention; and to deny Rodriguezs Omnibus Motion for utter lack of merit.
The RTC favorably acted on Rodriguezs Omnibus Motion in an Order dated April 10, 2007, reasoning as follows:
Initially, the issue of jurisdiction arose particularly as to whether this Court may take cognizance of the instant case previously assigned to the
CFI Pasig and, subsequently, rule upon the Omnibus Motion of [Rodriguez] despite the lapse of more than forty (40) years after the finality of the
Decision of November 16, 1965.

Clearly, this Court has jurisdiction because, as earlier stated, the proceedings in this Court is merely a continuation of the land registration
proceedings commenced in the CFI Pasig. More importantly, with the creation of this Court under the provisions of the Judiciary Reorganization
Law, all cases involving properties within its territorial jurisdiction, specifically in San Mateo, Rizal, were transferred to this Court (Sec. 44, Batas
Pambansa Blg. 129).
Consequently, there is no legal impediment for this Court to reiterate the Decision dated November 16, 1965 and the Order dated December 22,
1966 because the Rules on execution of Judgment pertaining to civil cases are not applicable to this kind of proceedings. A final and executory
judgment in a land registration case, being merely declaratory in nature, does not prescribe. (Sta. Ana vs. Menla, 1 SCRA 1294; Heirs of
Cristobal Marcos vs. de Banuvar, 25 SCRA 316; vda. De Barroga vs. Albano, 157 SCRA 131; Cacho v. Court of Appeals, 269 SCRA 159)
Secondly, a more important issue was put to forewhether this Court may issue a writ of execution directing the Land Registration Authority
(LRA) to issue a decree of registration over the subject property and the Register of Deeds of the Province of Rizal to issue an original certificate
of title in the name of [Rodriguez].
Consistency dictates and being a mere continuation of the CFI Pasig proceedings, this Court can only reiterate the directives in the Order dated
December 22, 196[5]. It cannot, however, issue, as prayed for, a writ of execution directing the issuance of a decree of registration and an
original certificate of title in the name of [Rodriguez].
Finally, during the proceedings in this case, this Court was made aware of the existence of claimants to the subject property. However, this Court
cannot, at this time and in this proceedings, rule on the legality or illegality of these claims of ownership. It is best that these claims be ventilated
in appropriate proceedings specifically sought to for this purpose.16 (Underscoring deleted.)
The RTC decreed thus:
WHEREFORE, premises considered, the Order dated December 22, 1966 of the Court of First Instance of Pasig, Branch 6, is hereby
REITERATED. The Land Registration Authority is directed to issue a decree of registration while the Register of Deeds of the Province of Rizal
is likewise directed to issue an original certificate of title of the subject property, both in favor and in the name of applicant Purita Landicho, of
legal age, married to Teodorico Landicho, Filipino and a resident of 74-A South 19th St., Quezon City, after compliance with issuance
requirements and procedures.17
PCCAI filed a Motion for Reconsideration of the aforequoted Order of the RTC. The RTC resolved both the Motion for Leave to Intervene with
the attached Answer-in-Intervention and Motion for Reconsideration of PCCAI in another Order dated November 22, 2007. The trial court held:
This Court after receiving evidence that a Decision was rendered in favor of the applicants spouses Landicho as owner in fee simple of the
subject parcels of land, and that no title was issued pursuant to the said Decision which has become final and executory even after an Order to
that effect was issued, merely reiterated the said Order for the implementation of the Decision dated November 16, 1966, signed by the Hon.
Andres Reyes as Judge. In other words, Intervention would not be allowed after the Decision has become final and executory. The issue in the
instant Petition is the issuance of a decree of registration and nothing more is being tried.
WHEREFORE, premises considered, the Motion For Leave To Intervene and the Motion for Reconsideration filed by the PCCAI are both
DENIED.18
The LRA, upon receipt of a copy of the RTC Order dated April 10, 2007, filed a Manifestation dated February 4, 2008 informing the trial court
that it cannot comply with said Order since there were already two existing titles covering the subject property, i.e., TCT No. 70589 of Araneta
(traced back to OCT No. 301 of Meerkamp Co.) and TCT No. 482970 of PCCAI (traced back to Landichos TCT No. 167681); and to issue a
decree of registration and OCT in Landichos name would only further aggravate the problem of double titling. The LRA also explained that the
ROD issued a TCT, rather than an OCT, to Landicho for the subject property in 1966, following the Order dated July 7, 1966 of then LRC
Commissioner Antonio H. Noblejas (Noblejas), who took cognizance of the fact that the subject property, as part of a bigger parcel of land, was
already registered under OCT No. 301 in the name of Meerkamp Co., pursuant to Decree No. 1480 under GLRO Record No. 2429 issued in
1906. LRC Commissioner Noblejas additionally stated in his Order that:
The new transfer certificate of title to be issued by virtue hereof is deemed to have been derived from Transfer Certificate of Title No. N-1.
(Under Decree No. 1480 dated November 22, 1906) which should be deemed cancelled with respect to the said property and that the issuance
of the same has been effected without the presentation of the owners duplicate of subsisting certificate of title. 19 (Emphasis deleted.)
At around the same time, PCCAI filed a Petition for Certiorari and Prohibition before the Court of Appeals, docketed as CA-G.R. SP No. 101789,
assailing the Orders dated April 10, 2007 and November 22, 2007 of the RTC for having been issued without or in excess of jurisdiction and/or
with grave abuse of discretion amounting to lack or excess of jurisdiction. PCCAI acknowledged that it is the ministerial duty of the RTC to issue
a writ of execution for a final and executory decision/order; however, PCCAI argued that when subsequent facts and circumstances transpired
which renders the execution of the final and executory decision/order unjust or inequitable, then the trial court should refrain from issuing a writ
of execution. PCCAI likewise asserted that the RTC, as a land registration court, did not have the jurisdiction to resolve conflicting claims of
ownership over the subject property. PCCAI lastly maintained that it was an indispensable party in Land Reg. Case No. N-5098 and that it
should have been allowed by the RTC to intervene during the hearing of Rodriguezs Omnibus Motion for the execution of the Decision dated
November 16, 1965 and Order dated December 22, 1965 of the CFI.
The Court of Appeals, in a Decision dated May 26, 2008, found merit in the Petition of PCCAI. The appellate court gave great weight and
credence to the Manifestation dated February 8, 2008 of the LRA reporting the double titling and conflicting claims over the subject property. The
Court of Appeals held that:
The Land Registration Authority, being the repository of land registration documents and the administrative agency with the necessary expertise
concerning land registration matters, We cannot but agree with the above-quoted Manifestation. Moreover, from the above facts admitted by the
parties and the LRA, it cannot be denied that there are conflicting claims on the ownership of the property which cannot be passed upon by the
lower court as a land registration court for lack of jurisdiction.20
The Court of Appeals additionally opined that the intervention of PCCAI in Land Reg. Case No. N-5098 was proper given the circumstances:
Anent the issue of intervention, in the case of Information Technology of the Philippines vs. Comelec, G.R. 159139, August 22, 2006, the
following doctrine was enunciated, to wit:

"The basic doctrinal rule is that final judgments may no longer be modified, except only to correct clerical errors or mistakes, or when the
judgment is void, or if supervening events or circumstances that transpire after the finality of the decision render its execution unjust and
inequitable. In the interest of substantial justice, this Court has allowed exceptions to this rule. A person who has a legal interest in the matter in
litigation, or in the success of either of the parties, or an interest against both, or is so situated as to be adversely affected by a distribution or
other disposition of property in the custody of the court or of an officer thereof, may, with leave of court, be allowed to intervene in the action."
We are not unmindful that [PCCAI] filed its Intervention when the decision of the case was already final and executory and during the execution
stage of the case. However, the supervening event which is the issuance of a decree of registration which was already implemented and
enforced upon the order of the Administrator of the LRC way back in July 11, 1966 when the LRC issued TCT No. 167861 in the name of Purita
Landicho instead of an OCT makes the said intervention proper and well-taken.
From the foregoing, it appears absurd and senseless that an OCT be issued in favor of Mr. Rodriguez. Furthermore, it is in the paramount
interest of justice that the assailed orders be not implemented, [PCCAI] being an indispensable party in the execution and/or implementation of
the said orders. The non-execution of the said orders will prevent further disarray, confusion and complexity on the issue of who is or who should
be the real owner of the subject land which is a matter that can be threshed out in a proper case for quieting of title between adverse
claimants.21
Based on the foregoing, the appellate court adjudged:
All told, the assailed orders were issued with grave abuse of discretion amounting to lack or in excess of jurisdiction.
WHEREFORE, the assailed orders are REVERSED AND SET ASIDE. Accordingly, [Rodriguez, RTC Presiding Judge Josephine
ZarateFernandez, the LRA Administrator, and Marikina City ROD] are enjoined to cease and desist from implementing the said orders pending
the outcome of a proper case before an appropriate court where the issue of ownership of the subject land can be put to rest. 22
Rodriguez moved for reconsideration of the foregoing Decision but was denied by the Court of Appeals in a Resolution dated September 17,
2008.
Aggrieved, Rodriguez sought recourse from this Court through the present Petition, arguing that:
I
THE [COURT OF APPEALS] HAD ACTED WITHOUT JURISDICTION WHEN IT RENDERED AN OPEN-ENDED JUDGMENT.
A
THE [COURT OF APPEALS] HAD ABDICATED ITS JURISDICTION TO RESOLVE DISPUTES ON THE MERE MANIFESTATION OF
THE LRA THAT THERE WERE ISSUES OF OWNERSHIP WHICH HAVE FIRST TO BE RESOLVED.
B
THE [COURT OF APPEALS] HAS RESOLVED AN ISSUE WHICH WAS IRRELEVANT AND IMMATERIAL OR HAD OTHERWISE
BEEN RESOLVED.
II
THE [COURT OF APPEALS] HAD COMMITTED GRAVE ABUSE OF DISCRETION TANTAMOUNT TO LACK OF JURISDICTION IN RULING
THAT THE [PCCAI] HAD LEGAL STANDING TO PREVENT OR SUSPEND THE OPERATION OF THE LAND REGISTRATION LAWS BY WAY
OF THE ISSUANCE OF THE ORDER DIRECTING THE LAND REGISTRATION ADMINISTRATOR TO COMPLY WITH THE ORDER DATED
DECEMBER 16, 1965.
A
THE [PCCAI] HAD NO RIGHT TO INTERVENE IN LRC NO. N-5098.
B.
THE [PCCAI] CANNOT CLAIM BUYER IN GOOD FAITH STATUS AS ITS TITLE WAS DEFECTIVE ON ITS FACE.
III
[RODRIGUEZ] IS ENTITLED TO THE CORRECTIVE AND PREROGATIVE WRIT OF CERTIORARI TO INSURE THAT THE LAND
REGISTRATION LAWS ARE PROPERLY AND FULLY IMPLEMENTED. 23
The instant Petition has no merit.
At the outset, the Court finds unmeritorious Rodriguezs claim that the Court of Appeals rendered an open-ended judgment. In the dispositive
portion of its Decision dated May 26, 2008, the Court of Appeals clearly and categorically "REVERSED AND SET ASIDE" the Orders dated April
10, 2007 and November 22, 2007 of the RTC in Land Reg. Case No. N-5098. The cease and desist order of the appellate court in the second
line of the same dispositive portion is therefore a superfluity. Obviously, by reversing and setting aside the foregoing Orders, there is nothing
more to implement. The phrase "pending the outcome of a proper case before an appropriate court where the issue of ownership of the subject
land can be put to rest,"24 does not mean that the very same Orders which were reversed and set aside by the Court of Appeals could later on
be revived or reinstated; rather it means that the remedies sought by Rodriguez can be litigated and granted in an appropriate proceeding by a
court with proper jurisdiction.
To clarify matters, it must be stressed that the issue brought before the Court of Appeals did not involve the question of the ownership. The
appellate court only concerned itself with the proper execution of the November 16, 1965 Decision in Land Reg. Case No. N-5098 but, due to

the intricacy of the matter, was compelled to take notice of the controversy between Rodriguez and PCCAI, both of whom trace back their titles
to Landicho. In view of these conflicting claims, Rodriguez now avers that because ROD Santos issued TCT No. 167681 for the subject property
in Landichos name, the November 16, 1965 Decision in Land Reg. Case No. N-5098 was not validly implemented since no OCT was
issued.25 Corollary to this, Rodriguez posits that PCCAI is not a buyer in good faith of the subject property and that the latters TCT No. 482970
is spurious. PCCAI, on the other hand, insists that the issuance of TCT No. 167681 to Landicho, from which its own TCT No. 482970 may be
traced back, was a valid execution of the said CFI decision.
The LRA, in its Manifestation dated February 4, 2008 filed before the RTC, explained that a TCT was issued to Landicho because the subject
property, as part of a bigger parcel of land, was already covered by Decree No. 1480 and OCT No. 301 dated November 22, 1906 in the name
of Meerkamp Co. In other words, Landichos TCT No. 167681 is a derivative of Decree No. 1480 and OCT No. 301 of Meerkamp Co. which
were cancelled to the extent of the subject property.
Complicating the matter further is the pendency of Civil Case No. 12044 in the RTC, Branch 167, Pasig City. Not only is PCCAI questioning the
right of Rodriguez to the issuance of an OCT pursuant to the November 16, 1965 Decision and December 22, 1965 Order of the CFI in Land
Reg. Case No. N-5098, it is also defending the validity of TCT No. 482970 (which is a derivative of TCT No. 167681 issued to Landicho) against
Araneta who holds TCT No. 70589 (which is a derivative of Meerkamp Co.s OCT No. 301). In view of the foregoing, issuing an OCT covering
the subject property to Rodriguez would give rise to a third certificate of title over the same property. Such act would only cause more confusion
and complication, rather than the preservation, of the Torrens system of registration.
The real purpose of the Torrens system is to quiet title to land and to stop forever any question as to its legality. Once a title is registered, the
owner may rest secure, without the necessity of waiting in the portals of the court, or sitting on the "mirador su casa," to avoid the possibility of
losing his land. A Torrens title is generally a conclusive evidence of the ownership of the land referred to therein. A strong presumption exists that
Torrens titles are regularly issued and that they are valid.26 In this case, PCCAI is the registered owner of the subject property under TCT No.
482970, which could be traced back to TCT No. 16781 issued to Landicho. As between PCCAI and Rodriguez, the former is better entitled to the
protection of the Torrens system. PCCAI can rely on its TCT No. 482970 until the same has been annulled and/or cancelled.
Section 48 of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, explicitly provides that "a certificate of title
shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law."
In Decaleng v. Bishop of the Missionary District of the Philippine Islands of Protestant Episcopal Church in the United States of America, 27 the
Court declared that a Torrens title cannot be attacked collaterally, and the issue on its validity can be raised only in an action expressly instituted
for that purpose. A collateral attack is made when, in another action to obtain a different relief, the certificate of title is assailed as an incident in
said action.
Land Reg. Case No. N-5098 was an application for registration of the subject property instituted by Landicho before the CFI, which was granted
by the CFI in its Decision dated November 16, 1965. Rodriguez, asserting that he was Landichos lawful successor-in-interest, filed an Omnibus
Motion before the RTC in Land Reg. Case No. N-5098 seeking the issuance of a decree of registration and an OCT in his name for the subject
property pursuant to the said CFI judgment. Rodriguez acknowledged the existence of TCT No. 482970 of PCCAI for the same property, but he
simply brushed aside said certificate of title for allegedly being spurious. Still, Rodriguez did not pray that TCT No. 482970 be declared void
and/or cancelled; and even if he did, the RTC had no jurisdiction to grant such relief in a land registration case. Rodriguezs Omnibus Motion in
Land Reg. Case No. N-5098, under the circumstances, is a collateral attack on said certificate, which is proscribed under Section 48 of the
Property Registration Decree.
If Rodriguez wants to have a decree of registration and OCT issued in his (or even in Landichos name) for the subject property, he should have
directly challenged the validity of the extant TCT No. 482970 of PCCAI for the very same property in an action specifically instituted for such
purpose (i.e., petition for annulment and/or cancellation of title, petition for quieting of title) and pray the said certificate of title be annulled or
canceled. The proper court in an appropriate action can try the factual and legal issues involving the alleged fatal defects in Landichos TCT No.
167681 and/or its derivative TCTs, including TCT No. 482970 of PCCAI; the legal effects of Landichos sale of the subject property to BCPI (the
predecessor-in-interest of PCCAI) in 1971 and also to Rodriguez in 1996; and the good faith or bad faith of PCCAI, as well as Rodriguez, in
purchasing the subject property. The resolution of these issues will ultimately be determinative of who between Rodriguez and PCCAI is the
rightful owner of the subject property.
Clearly, the Court of Appeals cannot be faulted for according weight and credence to the Manifestation dated February 4, 2008 of the LRA.
The LRA exists for the sole purpose of implementing and protecting the Torrens system of land titling and registration. 28 In particular, it is tasked
with the following functions:
(1) Issue decrees of registration pursuant to final judgments of the courts in land registration proceedings and cause the issuance by
the Registrars of Land Titles and Deeds of the corresponding certificates of title;
(2) Be the central repository of records relative to original registration of lands titled under the Torrens system, including subdivision
and consolidation plans of titled lands; and
(3) Extend assistance to courts in ordinary and cadastral land registration proceedings and to the other agencies of the government in
the implementation of the land reform program.29
The duty of LRA officials to issue decrees of registration is ministerial in the sense that they act under the orders of the court and the decree
must be in conformity with the decision of the court and with the data found in the record. They have no discretion in the matter. However, if they
are in doubt upon any point in relation to the preparation and issuance of the decree, these officials ought to seek clarification from the court.
They act, in this respect, as officials of the court and not as administrative officials, and their act is the act of the court. They are specifically
called upon to "extend assistance to courts in ordinary and cadastral land registration proceedings." 30
In Ramos v. Rodriguez,31 the LRA filed a motion for reconsideration of the decision and order of the land registration court respectively granting
registration of a parcel of land and directing the issuance of a decree of registration for the same. According to the LRA, there was already an
existing certificate of title for the property. The land registration court granted the motion for reconsideration of the LRA and set aside its earlier
decision and order. On appeal, the Court declared that the land registration court did not commit grave abuse of discretion in reversing itself
because it was merely following the recommendation of the LRA, which was then acting as an agent of the court.

In another case, Spouses Laburada v. Land Registration Authority,32 the Court refused to issue a writ of mandamus compelling the LRA to issue
a decree of registration as ordered by a land registration court. The Court took into account the LRA report that the parcels of land were already
registered and held:
That the LRA hesitates in issuing a decree of registration is understandable. Rather than a sign of negligence or nonfeasance in the
performance of its duty, the LRAs reaction is reasonable, even imperative. Considering the probable duplication of titles over the same parcel of
land, such issuance may contravene the policy and the purpose, and thereby destroy the integrity, of the Torrens system of registration. 33
The LRA, in this case, filed the Manifestation dated February 4, 2008 to inform the RTC that the subject property is already covered by two
TCTs, both "uncancelled and extant[;]" and for this reason, the LRA cannot comply with the RTC Order dated April 10, 2007, directing the
issuance of a decree of registration and an OCT for the same property in Landichos name, as it would "further aggravate the already existing
problem of double titling." In filing said Manifestation, the LRA was only faithfully pursuing its mandate to protect the Torrens system and
performing its function of extending assistance to the RTC as regards Land Reg. Case No. N-5098. Contrary to Rodriguezs assertion, the Court
of Appeals did not abdicate its jurisdiction when it granted the Petition for Certiorari and Prohibition of PCCAI largely based on the Manifestation
of the LRA, since the LRA filed such a Manifestation as an officer of the court.
Finally, intervention is governed by Rule 19 of the Rules of Court, pertinent provisions of which read:
SECTION 1. Who may intervene. A person who has a legal interest in the matter in litigation, or in the success of either of the parties, or an
interest against both, or is so situated as to be adversely affected by a distribution or other disposition of property in the custody of the court or of
an officer thereof may, with leave of court, be allowed to intervene in the action. The court shall consider whether or not the intervention will
unduly delay or prejudice the adjudication of the rights of the original parties, and whether or not the intervenors rights may be fully protected in
a separate proceeding.
SECTION 2. Time to intervene. The motion to intervene may be filed at any time before rendition of judgment by the trial court. A copy of the
pleading-in-intervention shall be attached to the motion and served on the original parties.
The subject property is presently covered by TCT No. 482970 in the name of PCCAI.1wphi1 As the registered owner, PCCAI clearly has a
legal interest in the subject property. The issuance of another certificate of title to Rodriguez will adversely affect PCCAI, constituting a cloud on
its TCT No. 482970.
Although Rule 19 is explicit on the period when a motion to intervene may be filed, the Court allowed exceptions in several cases, viz:
This rule, however, is not inflexible. Interventions have been allowed even beyond the period prescribed in the Rule, when demanded by the
higher interest of justice. Interventions have also been granted to afford indispensable parties, who have not been impleaded, the right to be
heard even after a decision has been rendered by the trial court, when the petition for review of the judgment has already been submitted for
decision before the Supreme Court, and even where the assailed order has already become final and executory. In Lim v. Pacquing, the motion
for intervention filed by the Republic of the Philippines was allowed by this Court to avoid grave injustice and injury and to settle once and for all
the substantive issues raised by the parties.
In fine, the allowance or disallowance of a motion for intervention rests on the sound discretion of the court after consideration of the appropriate
circumstances. We stress again that Rule 19 of the Rules of Court is a rule of procedure whose object is to make the powers of the court fully
and completely available for justice. Its purpose is not to hinder or delay, but to facilitate and promote the administration of justice. 34 (Citations
omitted.)
The particular circumstances of this case similarly justify the relaxation of the rules of procedure on intervention. First, the interests of both
PCCAI and Rodriguez in the subject property arose only after the CFI Decision dated November 16, 1965 in Land Reg. Case No. N-5098
became final and executory. PCCAI bought the subject property from WPFI on November 13, 1973 and was issued TCT No. 482970 for the
same on July 15, 1975; while Rodriguez bought the subject property from Landicho on November 14, 1996. Second, as previously discussed
herein, both PCCAI and Rodriguez trace their titles back to Landicho. Hence, the intervention of PCCAI could not unduly delay or prejudice the
adjudication of the rights of Landicho, the original party in Land Reg. Case No. N-5098. Third, the latest proceedings in Land Reg. Case No. N5098 involved Rodriguezs Omnibus Motion, filed before the RTC on May 18, 2005, in which he prayed for the execution of the November 16,
1965 Decision of the CFI. PCCAI moved to intervene in the case only to oppose Rodriguezs Omnibus Motion on the ground that the subject
property is already registered in its name under TCT No. 482970, which originated from Landichos TCT No. 167681. And fourth, after learning
of Rodriguezs Omnibus Motion in Land Reg. Case No. N-5098 via the November 3, 2006 subpoena issued by the RTC, PCCAI was reasonably
expected to oppose the same. Such action was the most opportune and expedient remedy available to PCCAI to prevent the RTC from ordering
the issuance of a decree of registration and OCT in Rodriguezs name. For this reason, the RTC should have allowed the intervention of PCCAI.
ACCORDINGLY, the instant Petition is DISMISSED. The Decision dated May 26, 2008 of the Court of Appeals in CA-G.R. SP No. 101789,
reversing and setting aside the Orders dated April 10, 2007 and November 22, 2007 of the Regional Trial Court, Branch 75 of San Mateo, Rizal
in Land Reg. Case No. N-5098, is AFFIRMED with the MODIFICATION deleting the second sentence of the dispositive portion for being a
superfluity.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 154462

January 19, 2011

SPOUSES RUBEN and MYRNA LEYNES, Petitioners,

vs.
FORMER TENTH DIVISION OF THE COURT OF APPEALS, REGIONAL TRIAL COURT, BRANCH 21, BANSALAN, DAVAO DEL SUR,
MUNICIPAL CIRCUIT TRIAL COURT, BRANCH 1, BANSALAN, DAVAO DEL SUR, and SPOUSES GUALBERTO & RENE CABAHUGSUPERALES, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This Petition for Certiorari under Rule 65 of the Rules of Court assails the (1) Resolution 1 dated December 20, 2001 of the Court of Appeals in
CA-G.R. SP No. 4420-UDK, dismissing the Petition for Certiorari with prayer for a temporary restraining order (TRO) and preliminary injunction
of petitioners spouses Ruben and Myrna Leynes (spouses Leynes); and (2) Resolution dated May 7, 2002 of the appellate court in the same
case, denying the spouses Leynes Motion for Reconsideration.
This case originated from a Complaint2 for forcible entry, damages, and attorneys fees filed by respondents spouses Gualberto and Rene
Cabahug Superales (spouses Superales) against the spouses Leynes before the Municipal Circuit Trial Court (MCTC), Branch 1 of BansalanMagsaysay, Davao del Sur, and docketed as Civil Case No. 471 (2000)-B. The Complaint alleged the following material facts:
3. That the [spouses Superales] were the actual occupants and possessors, being lawful owners of that certain parcel of a residential
lot within the Nebrada Subd., Bansalan, Davao del Sur, known as Lot No. 2423-B-5-K-2, Psd-11-050478, being a portion of lot 2423B-5-K, Psd-11-008104, covered by Transfer Certificate of Title No. T-41240, containing an area of Three Hundred Thirty Six (336)
Square Meters, more or less, and registered in the name of Rene Cabahug Superales, in the Register of Deeds for the Province of
Davao del Sur;
xxxx

4. That sometime in February 2000, the [spouses Leynes] through force, stealth and strategy encroached upon and occupied a
portion of the [spouses Superales] titled property consisting of 76 square meters, more or less, dispossessed the [spouses Superales]
and constructed therein a comfort room as an extension of their house without first obtaining the required building permit from the
Municipal Engineers Office, of Bansalan, Davao del Sur;
5. That the [spouses Superales] promptly called the attention of the [spouses Leynes] and protested their intrusion into their property
but notwithstanding their protestations the [spouses Leynes] continued on their construction and occupation of a portion of the
[spouses Superales] property;
6. That the [spouses Superales] reported to the Barangay Captain of Brgy. Poblacion, Bansalan, Davao del Sur, the [spouses Leynes]
encroachment on their titled property and the illegal construction being made on a portion of their property and their complaint was
docketed as Brgy. Case No. 1649;
7. That Amicable Settlement of the dispute was however, repudiated by the [spouses Leynes] when they refused to recognized the
relocation survey conducted on the property of the [spouses Superales] and prevented the [spouses Superales] surveyor from
planting monuments on the boundary between the [spouses Superales] and the [spouses Leynes] lot;
xxxx
8. That as per relocation survey conducted, the [spouses Leynes] have encroached and occupied a total of Seventy Six (76) Square
Meters, of the [spouses Superales] titled property, thereby reducing the area of the [spouses Superales] lot from 336 Square Meters,
more or less to 260 Square Meters, more or less;
xxxx
9. That the [spouses Superales] also complained to the Municipal Engineers Office in order to stop the illegal construction undertaken
by the [spouses Leynes], but [spouses Superales] complaint fell on deaf ears as no action has been taken by the Municipal
Engineers Office on the said illegal construction;
xxxx
10. That the [spouses Leynes] have unlawfully occupied and are continuously occupying illegally a portion of the [spouses Superales]
property consisting of 76 Square Meters, thereby denying the [spouses Superales] the use and enjoyment of the said property being
unlawfully withheld by the [spouses Leynes];
11. That the [spouses Superales] must be promptly restored to the full and peaceful possession of the portion of 76 Square Meters, of
their property taken forcibly and illegally by the [spouses Leynes], by ordering the [spouses Leynes] to remove and/or demolish their
construction and improvements erected on the lot of the [spouses Superales], and should they fail or refuse to do so, [spouses
Superales] be given the authority to cause the removal of the [spouses Leynes] improvements at the expense of the [spouses
Superales];
12. That in the meantime that the [spouses Leynes] are occupying a portion of the [spouses Superales] property, [spouses Leynes] be
made to pay the [spouses Superales] the amount of P500.00 per month as reasonable rental for the property until they shall have
restored the property to the full and peaceful possession of the [spouses Superales].3
Summons together with a copy of the aforementioned Complaint was served on the spouses Leynes on May 10, 2000, giving them ten (10)
days from receipt within which to file their answer pursuant to Section 6 of the Rules on Summary Procedure. The 10-day period for the filing of
the spouses Leynes answer prescribed on May 20, 2000, a Saturday.
The spouses Leynes filed their Answer with Counterclaim on May 22, 2000, and their Motion to Admit Belatedly Filed Answer with attached
Answer with Counterclaim the day after, on May 23, 2000. The spouses Leynes explained that they were not able to file their Answer with
Counterclaim on May 20, 2000, even though there were court employees on duty that Saturday, because they had to serve first a copy of said
pleading on the spouses Superales counsel, whose office was located in Davao City. Davao City is approximately one-hour ride by bus from
Digos City. The spouses Leynes added that they were not even sure if the office of the spouses Superales counsel was open on Saturdays. 4
The spouses Superales opposed the spouses Leynes Motion to Admit Belatedly Filed Answer contending that the answer should have been
filed within 10 days from receipt of a copy of the complaint; and the spouses Leynes motion to admit is in the nature of a motion for extension of
time to file an answer, which is a prohibited pleading in summary proceedings. The spouses Superales further pointed out that the spouses
Leynes motion to admit was not set for hearing and was, thus, a pro forma motion which should be denied outright.
The spouses Superales subsequently filed an Ex Parte Motion for Judgment on May 23, 2000, in which they prayed that since the spouses
Leynes failed to file their answer to the Complaint within the prescribed period, then judgment could now be rendered based on the evidence
and allegations contained in the Complaint.
On May 29, 2000, the MCTC rendered its Judgment denying the spouses Leynes Motion to Admit Belatedly Filed Answer and resolving Civil
Case No. 471 (2000)-B entirely in the spouses Superales favor. Said MCTC judgment reads:
This treats the ex-parte motion for judgment filed by Atty. Rogelio E. Sarsaba, counsel for the [spouses Superales] alleging in substance that the
last day of filing of answer for the [spouses Leynes] was on May 20, 2000 and [the spouses Leynes] did not file any. Be it noted on such date
although it was Saturday the Court was opened and Court personnel, Benedicta Abagon and Anastacia Vale were present at that time to receive
cases and motions filed in Court. On May 22, 2000 [spouses Leynes] filed [their] answer which answer was filed out of the time prescribed by
law. Under Section 7 of Rule 70, 1997 Rules of Civil Procedure, the law provides: "Should the defendants fail to answer the complaint within the
period above provided, the court, motu proprio or on motion of the plaintiff, shall render judgment as may be warranted by the facts alleged in
the complaint and limited to what is prayed for therein. The Court, may in its discretion reduce the amount of damages and attorneys fees
claimed for being excessive or otherwise unconscionable, without prejudice to the applicability of Section 3 (c), Rule 9 if there are two or more
defendants."
From the foregoing facts, the [spouses Leynes] really failed to answer the complaint within the period prescribed by law, which period under the
rules cannot be extended.

WHEREFORE, the ex-parte motion for judgment filed by the [spouses Superales] is hereby APPROVED, AND judgment is hereby rendered
ordering the [spouses Leynes]:
1. To remove their construction and/or improvements on the 76 square meters lot belonging to the [spouses Superales] and
surrendered (sic) the same area promptly and peacefully to the [spouses Superales];
2. To pay the [spouses Superales] the amount of P500.00 per month as reasonable rentals of the 76 square meters lot occupied by
the [spouses Leynes] from February 2000 until the said area shall have been delivered to the full possession and control of [the
spouses Superales] in the concept of damages;
3. To pay the [spouses Superales] the sum of P4,000.00 as reimbursement for the cost of the survey and the relocation of [the
spouses Superales] property; and
4. To pay the [spouses Superales] the sum of P15,000.00 as reimbursement for attorney fees.5
Aggrieved, the spouses Leynes appealed the foregoing MCTC Judgment to the Regional Trial Court (RTC), Branch 21 of Bansalan, Davao del
Sur. Their appeal was docketed as Civil Case No. XXI-228 (00). In its Decision dated July 9, 2001, the RTC affirmed the appealed MCTC
Judgment, ruling thus:
The lower court was right when it did not allow or entertain the belatedly filed Answer with Counterclaim of the [spouses Leynes]. The "Motion to
Admit Belated Answer" partakes of a motion for extension of time to file pleading which is not allowed as explicitly provided in Section 19 of the
1991 Revised Rules on Summary Procedure. Since the law on this matter is unambiguous, unequivocal, its application is imperative.
Wherefore, the judgment rendered by the Municipal Circuit Trial Court is hereby affirmed, with the sole modification that the amount of monthly
rental for the Seventy-Six (76) square meter-lot be reduced from P500.00 to P200.00.6
The spouses Leynes filed with the RTC a Motion for Reconsideration in which they sought the recall of the Decision dated July 9, 2001 and the
remand of the case to the MCTC for trial on the merits. However, the RTC, in a Resolution also "strangely" dated July 9, 2001, refused to
reconsider its earlier decision. The RTC stressed that:
This case falls under the "Rules on Summary Procedure". As such, the answer should be filed within ten (10) days from the service of summons
and must be served on the plaintiff.
The [spouses Leynes], in filing a "Motion to Admit Belated Answer" in effect admitted that their Answer was filed out of time. Having made that
admission, they may no longer be heard to claim otherwise.
Wherefore, premises considered, the motion for reconsideration is hereby denied.7
On October 11, 2001, the spouses Superales filed with the RTC a Motion for Execution pursuant to Rule 70, Section 21 of the Revised Rules of
Court8 which provides for the immediate execution of the RTC judgment against the defendant notwithstanding further appeal of the same
before the Court of Appeals or the Supreme Court. Expectedly, the spouses Leynes opposed the spouses Superales Motion for Execution.
The spouses Leynes then filed a Petition for Certiorari with Prayer for the Issuance of Temporary Restraining Order and Preliminary Injunction
with the Court of Appeals on November 17, 2001. The petition was docketed as CA-G.R. SP No. 4420-UDK.
In its Resolution dated December 20, 2001, the Court of Appeals dismissed the spouses Leynes petition outright for being the wrong remedy
and for failure to state the material dates. The appellate court explicated that:
(1) It is a wrong remedy. Under the heading "Timeliness Of This Petition" [spouses Leynes] alleged that the petition is directed against
"the decision of the Regional Trial Court, Branch 21 in Bansalan, Davao del Sur in the exercise of its appellate jurisdiction. This case
originated from the Municipal Circuit Trial Court, Branch 1, Bansalan-Magsaysay, Davao del Sur (docketed as Civil Case No. 471
[2000]-B where, herein Respondents, Spouses Gualberto and Rene Superales filed a Complaint for Forcible Entry against Petitioners,
Spouses Ruben and Myrna Leynes." If that be so, then the correct and appropriate mode of review should be appeal by way of a
petition for review under Rule 42 of the 1997 Rules. Under paragraph 4 of Supreme Court Circular No. 2-90, an appeal taken to either
the Supreme Court or the Court of Appeals by the wrong or inappropriate mode shall be dismissed.
(2) Upon the other hand, if the present petition for certiorari were to be regarded as the correct or appropriate remedy (which it is
not) still it is procedurally flawed because [the spouses Leynes] violated the amendment introduced to Section 3, Rule 46 of the
1997 Rules, as amended, by Supreme Court Circular No. 39-98, effective September 11, 1998, which states as follows --Section 3. Contents and filing of petition; effect of non-compliance with requirements --xxxx
In actions filed under Rule 65, the petition shall further indicate the material dates showing when notice of judgment or final order or resolution
subject thereof was received, when a motion for new trial or reconsideration, if any, was filed, and when notice of the denial thereof was
received.
xxxx
The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition.
Here, [the spouses Leynes] did not indicate just when it was that they received the notice of the denial of the motion for reconsideration that they
allegedly filed with the RTC of Bansalan, Davao del Sur, Branch 21, on August 18, 2001, the resolution whereon, denying their motion for
reconsideration was allegedly "strangely" dated July 9, 2001.

WHEREFORE, the present petition must be denied due course and consequently DISMISSED. Needless to say, inasmuch as the prayer for a
temporary restraining order and preliminary injunction is merely an adjunct to the main petition, the same must be pro tanto DENIED.9
On January 28, 2002, the RTC issued an Order granting the spouses Superales Motion for Execution. The RTC observed that the Court of
Appeals did not issue a TRO as prayed for by the spouses Leynes in their petition in CA-G.R. SP No. 4420-UDK. Instead, the RTC referred to
the Resolution dated December 20, 2001 of the Court of Appeals dismissing outright the spouses Leynes petition in CA-G.R. SP No. 4420-UDK.
Subsequently, the RTC issued a Writ of Execution on February 2, 2002, for the satisfaction of its Decision dated July 9, 2001.
On February 11, 2002, the spouses Leynes filed with the RTC a Manifestation with motion to hold in abeyance the enforcement of the writ of
execution, considering their pending Motion for Reconsideration of the Resolution dated December 20, 2001 of the Court of Appeals in CA-G.R.
SP No. 4420-UDK. In its Order dated February 15, 2002, the RTC directed the Sheriff to hold in abeyance the implementation of the Writ of
Execution until said trial court has resolved the spouses Leynes latest motion.
In a Resolution dated May 7, 2002, the Court of Appeals found no reason to modify or overturn its earlier Resolution dated December 20, 2001,
which dismissed the spouses Leynes petition in CA-G.R. SP No. 4420-UDK. The dispositive portion of said Resolution states:
WHEREFORE, the motion for reconsideration, for lack of merit, must be as it hereby is DENIED.1wphi1 Accordingly, the appended Petition for
Certiorari is ordered expunged from the records, and the enclosed Postal Money Orders Nos. J 7318284 and B 2678220, both dated 19
November 2001, in the amount of P500.00 and P1,000.00, respectively, posted at the Ateneo University, Davao City, payable to the clerk of
court of this Court from a certain Ruben Leynes, are hereby ordered returned to the sender/payee.10
Not long thereafter, on May 13, 2002, the RTC issued an Order resolving the issue of execution of its Decision dated July 8, 2001. The RTC
reasoned that:
[I]n an ejectment case, the appellate court which affirms a decision brought before it on appeal cannot decree its execution in the guise of an
execution of the affirmed decision. The only exception to that is when said appellate court grants an execution pending appeal.
xxxx
Considering that this does not involve a motion for execution pending appeal, this Court (sitting as an appellate court) cannot decree its
execution.11
Thus, the RTC decreed:
Wherefore, this case is hereby remanded to the court of origin, that is, the Municipal Circuit Trial Court (Br. 001) Bansalan-Magsaysay with
which the motion for execution shall be filed.12
On May 17, 2002, the spouses Leynes received a copy of the Court of Appeals Resolution dated May 7, 2002 denying their Motion for
Reconsideration of the dismissal of their petition in CA-G.R. SP No. 4420-UDK. Thereafter, on July 17, 2002, the spouses Leynes filed the
instant Petition for Certiorari charging the Court of Appeals, as well as the RTC and the MCTC, with grave abuse of discretion, particularly
committed as follows:
I
IN DISMISSING [the spouses Leynes] EARLIER PETITION, THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION CONSIDERING THAT IT DENIED THE PETITION ON A MERE TECHNICALITY WITHOUT CONSIDERING THAT THE
ISSUES RAISED ARE NOVEL AND HIGHLY MERITORIOUS.
II
THE MCTC BRANCH 1 AND THE RTC BRANCH 21 BOTH COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK
OR EXCESS OF JURISDICTION WHEN IT DENIED TO ADMIT [the spouses Leynes] ANSWER AND RULING THAT SINCE THE
LAST DAY FOR FILING [the spouses Leynes] ANSWER FELL ON A SATURDAY, THE SAME SHOULD HAVE BEEN FILED ON THE
SAID DAY SINCE THERE WERE COURT PERSONNEL ON DUTY.
III
THE MCTC BRANCH 1 AND THE RTC BRANCH 21 COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT DECIDED TO ADMIT [the spouses Superales] COMPLAINT FOR FORCIBLE ENTRY
NOTWITHSTANDING THAT THE SAME WAS FILED MORE THAN ONE YEAR FROM ITS SUPPOSED HAPPENING. 13
Procedural Matters
The Court of Appeals dismissed the spouses Leynes Petition for Certiorari in CA-G.R. SP No. 4420-UDK for being the wrong mode of appeal
and for failure to state a material date.
Supreme Court Circular No. 2-90 clearly lays down the proper modes of appeal to the Court of Appeals from the RTCs:
3. Appeals to the Court of Appeals. On the other hand, appeals by certiorari will not lie with the Court of Appeals. Appeals to that Court from
Regional Trial Courts may be taken:
a) by writ of error (ordinary appeal) where the appealed judgment was rendered in a civil or criminal action by the regional trial court
in the exercise of its original jurisdiction; or
b) by petition for review where the judgment was rendered by the regional trial court in the exercise of its appellate jurisdiction.

The mode of appeal in either instance is entirely distinct from an appeal by certiorari to the Supreme Court.
4. Erroneous Appeals. An appeal taken to either the Supreme Court or the Court of Appeals by the wrong or inappropriate mode shall be
dismissed. (Emphases ours.)
The RTC decided Civil Case No. XXI-228 (00) in its appellate jurisdiction. Hence, the RTC Decision dated July 9, 2001, which affirmed the
MCTC Judgment of May 29, 2000 against the spouses Leynes, and Resolution inadvertently also dated July 9, 2001, which denied the spouses
Leynes Motion for Reconsideration, should have been appealed to the Court of Appeals by means of a petition for review under Rule 42 of the
Rules of Court.
The spouses Leynes, however, went before the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of Court. In Madrigal
Transport, Inc. v. Lapanday Holdings Corp.,14 we presented the following discourse distinguishing between an appeal (whether an ordinary
appeal or a petition for review) and a petition for certiorari, to wit:
A writ of certiorari may be issued only for the correction of errors of jurisdiction or grave abuse of discretion amounting to lack or excess of
jurisdiction. The writ cannot be used for any other purpose, as its function is limited to keeping the inferior court within the bounds of its
jurisdiction.
For certiorari to prosper, the following requisites must concur: (1) the writ is directed against a tribunal, a board or any officer exercising judicial
or quasi-judicial functions; (2) such tribunal, board or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law.
"Without jurisdiction" means that the court acted with absolute lack of authority. There is "excess of jurisdiction" when the court transcends its
power or acts without any statutory authority. "Grave abuse of discretion" implies such capricious and whimsical exercise of judgment as to be
equivalent to lack or excess of jurisdiction; in other words, power is exercised in an arbitrary or despotic manner by reason of passion, prejudice,
or personal hostility; and such exercise is so patent or so gross as to amount to an evasion of a positive duty or to a virtual refusal either to
perform the duty enjoined or to act at all in contemplation of law.
Appeal and Certiorari Distinguished
Between an appeal and a petition for certiorari, there are substantial distinctions which shall be explained below.
As to the Purpose. Certiorari is a remedy designed for the correction of errors of jurisdiction, not errors of judgment. In Pure Foods Corporation
v. NLRC, we explained the simple reason for the rule in this light:
"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 survive such a rule. Consequently, an error of judgment that the court
may commit in the exercise of its jurisdiction is not correct[a]ble through the original civil action of certiorari."
The supervisory jurisdiction of a court over the issuance of a writ of certiorari cannot be exercised for the purpose of reviewing the intrinsic
correctness of a judgment of the lower court on the basis either of the law or the facts of the case, or of the wisdom or legal soundness of the
decision. Even if the findings of the court are incorrect, as long as it has jurisdiction over the case, such correction is normally beyond the
province of certiorari. Where the error is not one of jurisdiction, but of an error of law or fact a mistake of judgment appeal is the remedy.
As to the Manner of Filing. Over an appeal, the CA exercises its appellate jurisdiction and power of review. Over a certiorari, the higher court
uses its original jurisdiction in accordance with its power of control and supervision over the proceedings of lower courts. An appeal is thus a
continuation of the original suit, while a petition for certiorari is an original and independent action that was not part of the trial that had resulted
in the rendition of the judgment or order complained of. The parties to an appeal are the original parties to the action. In contrast, the parties to a
petition for certiorari are the aggrieved party (who thereby becomes the petitioner) against the lower court or quasi-judicial agency, and the
prevailing parties (the public and the private respondents, respectively).
As to the Subject Matter. Only judgments or final orders and those that the Rules of Court so declare are appealable. Since the issue is
jurisdiction, an original action for certiorari may be directed against an interlocutory order of the lower court prior to an appeal from the judgment;
or where there is no appeal or any plain, speedy or adequate remedy.
As to the Period of Filing. Ordinary appeals should be filed within fifteen days from the notice of judgment or final order appealed from. Where a
record on appeal is required, the appellant must file a notice of appeal and a record on appeal within thirty days from the said notice of judgment
or final order. A petition for review should be filed and served within fifteen days from the notice of denial of the decision, or of the petitioners
timely filed motion for new trial or motion for reconsideration. In an appeal by certiorari, the petition should be filed also within fifteen days from
the notice of judgment or final order, or of the denial of the petitioners motion for new trial or motion for reconsideration.
On the other hand, a petition for certiorari should be filed not later than sixty days from the notice of judgment, order, or resolution. If a motion for
new trial or motion for reconsideration was timely filed, the period shall be counted from the denial of the motion.
As to the Need for a Motion for Reconsideration. A motion for reconsideration is generally required prior to the filing of a petition for certiorari, in
order to afford the tribunal an opportunity to correct the alleged errors. Note also that this motion is a plain and adequate remedy expressly
available under the law. Such motion is not required before appealing a judgment or final order.
Certiorari Not the Proper Remedy
if Appeal Is Available
Where appeal is available to the aggrieved party, the action for certiorari will not be entertained. Remedies of appeal (including petitions for
review) and certiorari are mutually exclusive, not alternative or successive. Hence, certiorari is not and cannot be a substitute for an appeal,
especially if ones own negligence or error in ones choice of remedy occasioned such loss or lapse. One of the requisites of certiorari is that
there be no available appeal or any plain, speedy and adequate remedy. Where an appeal is available, certiorari will not prosper, even if the
ground therefor is grave abuse of discretion.15

The remedy of appeal to the Court of Appeals was available to the spouses Leynes, only that they failed to avail of it in time. This much is clear
from the following explanation of the counsel for the spouses Leynes:
10. Until the proceedings before the Regional Trial Court Branch 21, [the spouses Leynes] were represented by their former counsel of record,
Atty. Christopher Abarilla. Aggrieved by the way their case was handled by their former counsel of record, [the spouses Leynes] engaged the
services of the undersigned Counsel in the second week of November 2001 for the purpose of elevating their case to the Court of Appeals.
Since no other remedy under the Rules of Court was no longer available to [the spouses Leynes] because the 15-day period within which to file
a Certiorari under Rule 42 had already lapsed, recourse under Rule 65 was instead resorted to as there was no appeal, or any plain, speedy
and adequate remedy in the ordinary course of law by which [the spouses Leynes] could question the assailed decisions of both the lower court
and the RTC Branch 21.16 (Emphasis ours.)
We reiterate the well-settled rule that certiorari is not available where the aggrieved partys remedy of appeal is plain, speedy and adequate in
the ordinary course, the reason being that certiorari cannot co-exist with an appeal or any other adequate remedy. The existence and availability
of the right to appeal are antithetical to the availment of the special civil action for certiorari. These two remedies are mutually exclusive. 17 The
special civil action of certiorari cannot be used as a substitute for an appeal which the petitioner already lost. 18
Furthermore, as the Court of Appeals held, the spouses Leynes Petition for Certiorari in CA-G.R. SP No. 4420-UDK failed to comply with the
requirement under Rule 46, Section 3 of the Rules of Court that a petition for certiorari should indicate material dates, such as when notice of the
judgment or final order or resolution subject thereof was received, when a motion for new trial or reconsideration, if any, was filed, and when
notice of the denial thereof was received. The spouses Leynes did not refute that their Petition for Certiorari before the Court of Appeals did not
state the date they received a copy of the RTC Resolution denying their Motion for Reconsideration. That the said Resolution was strangely
dated July 9, 2001, the same date as the RTC Decision sought to be reconsidered, is immaterial. The timeliness of the filing by the spouses
Leynes of their petition before the Court of Appeals is determined from the date they received the challenged RTC resolution and not the date
the RTC issued the same.
Seeking recourse from this Court, the spouses Leynes once more filed a Petition for Certiorari under Rule 65 of the Rules of Court. The spouses
Leynes yet again availed themselves of the wrong remedy.
The proper remedy of a party aggrieved by a decision of the Court of Appeals is a petition for review under Rule 45 which is not similar to a
petition for certiorari under Rule 65 of the Rules of Court. As provided in Rule 45 of the Rules of Court, decisions, final orders or resolutions of
the Court of Appeals in any case, i.e., regardless of the nature of the action or proceedings involved, may be appealed to us by filing a petition
for review, which would be but a continuation of the appellate process over the original case. A special civil action under Rule 65 is an
independent action based on the specific grounds therein provided and, as a general rule, cannot be availed of as a substitute for the lost
remedy of an ordinary appeal, including that under Rule 45. Accordingly, when a party adopts an improper remedy, his petition may be
dismissed outright.19
Nevertheless, we bear in mind that the acceptance of a petition for certiorari, as well as the grant of due course thereto is, in general, addressed
to the sound discretion of the court. The provisions of the Rules of Court, which are technical rules, may be relaxed in certain exceptional
situations. Where a rigid application of the rule that certiorari cannot be a substitute for appeal will result in a manifest failure or miscarriage of
justice, it is within our power to suspend the rules or exempt a particular case from its operation.20
We pronounced in Tanenglian v. Lorenzo21 that:
All things considered, however, we do not agree in the conclusion of the Court of Appeals dismissing petitioner's Petition based on a
procedural faux pax. While a petition for certiorari is dismissible for being the wrong remedy, there are exceptions to this rule, to wit: (a) when
public welfare and the advancement of public policy dictates; (b) when the broader interest of justice so requires; (c) when the writs issued are
null and void; or (d) when the questioned order amounts to an oppressive exercise of judicial authority.
In Sebastian v. Morales, we ruled that rules of procedure must be faithfully followed except only when, for persuasive reasons, they may be
relaxed to relieve a litigant of an injustice not commensurate with his failure to comply with the prescribed procedure, thus:
[C]onsidering that the petitioner has presented a good cause for the proper and just determination of his case, the appellate court should have
relaxed the stringent application of technical rules of procedure and yielded to consideration of substantial justice.
The Court has allowed some meritorious cases to proceed despite inherent procedural defects and lapses. This is in keeping with the principle
that rules of procedure are mere tools designed to facilitate the attainment of justice and that strict and rigid application of rules which would
result in technicalities that tend to frustrate rather than promote substantial justice must always be avoided. It is a far better and more prudent
cause of action for the court to excuse a technical lapse and afford the parties a review of the case to attain the ends of justice, rather than
dispose of the case on technicality and cause grave injustice to the parties, giving a false impression of speedy disposal of cases while actually
resulting in more delay, if not a miscarriage of justice.22 (Emphases ours.)
Given the peculiar circumstances extant in the case at bar, the dismissal of the spouses Leynes Petition for Certiorari would result in the
miscarriage of justice. The spouses Leynes were unjustly declared in default by the MCTC and deprived of the opportunity to present arguments
and evidence to counter the spouses Superales Complaint. Hence, we are accepting and giving due course to the spouses Leynes petition in
the interests of substantial justice and equity.
Reglementary Period
The MCTC rendered its Judgment dated May 29, 2000 ex parte, declaring the spouses Leynes in default for their failure to file their answer to
the spouses Superales Complaint within the reglementary period for doing so. According to the MCTC, the spouses Leynes only had until May
20, 2000 to file an answer; and although May 20, 2000 was a Saturday, the court was open and court personnel Benedicta Abagon and
Anastacia Vale were present at that time to receive cases and motions filed with the court.
We disagree.
Sections 6, Rule 70 of the 1991 Revised Rules on Summary Procedure gives a defendant 10 days from service of summons to file his/her
answer:
Section 6. Answer. - Within ten (10) days from service of summons, the defendant shall file his answer to the complaint and serve a copy thereof
on the plaintiff. Affirmative and negative defenses not pleaded therein shall be deemed waived, except lack of jurisdiction over the subject

matter. Cross-claims and compulsory counterclaims not asserted in the answer shall be considered barred. The answer to counterclaims or
cross-claims shall be served and filed within ten (10) days from service of the answer in which they are pleaded.
In computing said 10-day period, we resort to Rule 22, Section 1 of the Rules of Court, which reads:
Section 1. How to compute time. In computing any period of time prescribed or allowed by these Rules, or by order of the court, or by any
applicable statute, the day of the act or event from which the designated period of time begins to run is to be excluded and the date of
performance included. If the last day of the period, as thus computed, falls on a Saturday, a Sunday, or a legal holiday in the place where the
court sits, the time shall not run until the next working day. (Emphases ours.)
We emphasized in Bank of the Philippine Islands v. Court of Appeals,23 that non-working days (Saturdays, Sundays, and legal holidays) are
excluded from the counting of the period only when the last day of the period falls on such days. Rule 22 does not provide for any other
circumstance in which non-working days would affect the counting of a prescribed period.
The spouses Leynes were served with the summons on May 10, 2000. The last day of the 10-day period within which the spouses Leynes
should have filed their answer, May 20, 2000, fell on a Saturday. The next working day was May 22, 2000, a Monday, on which the spouses
Leynes did file their Answer with Counterclaim. Based on the aforequoted rules, the spouses Leynes answer was filed within the reglementary
period, and they were not in default. The MCTC should not have rendered an ex parte Judgment against them.
Court personnel were at the MCTC on May 20, 2000, a Saturday, in compliance with the Supreme Court Administrative Circular No. 2-99, on
Strict Observance of Working Hours and Disciplinary Action for Absenteeism and Tardiness, which took effect on February 1, 1999. Pertinent
provisions of said circular are reproduced below:
A. Executive Judges of the Regional Trial Courts shall assign by rotation, Judges of the Municipal Trial Courts and Municipal Circuit Trial Courts
in multiple sala stations within their respective territorial areas, to be on duty on Saturdays from 8:00 A.M. to 1:00 P.M., assisted by a skeletal
force, also on rotation, primarily to act on petitions for bail and other urgent matters.
xxxx
B. Court offices, (e.g., Office of the Clerk) and units which deal directly with the public, such as receiving, process-serving and cashiers units,
shall maintain a skeletal force on Saturdays from 8:00 A.M. to noon, and from 12:30 P.M. to 4:30 P.M. Those assigned to work on Saturdays
shall be notified of their assignment at least three days in advance. An employee so assigned shall have a full day-off the following week, on a
day to be specified by the Justice/Judge concerned. (Manual for Clerk of Courts, Chapter II, Section A, 1) (Emphases ours.)
Administrative Circular No. 2-99 should not affect the manner by which periods set by the rules or the courts are computed under Rule 22,
Section 1 of the Rules of Court. Administrative Circular No. 2-99 is an administrative issuance signed by then Chief Justice Hilario G. Davide to
govern the attendance of judiciary officials and employees. It cannot amend or take precedence over the Rules of Court, duly approved by the
Court en banc and published for the information of and compliance by the public. In fact, Administrative Circular No. 2-99 itself states that "it
supersedes and modifies accordingly any previous Orders or Circulars on the matter," but not the Rules of Court.
Moreover, Administrative Circular No. 2-99 requires certain trial court judges and employees to be present on Saturdays "primarily to act on
petitions for bail and other urgent matters." We fail to see an answer to a complaint for forcible entry as among such urgent matters that would
have required filing by the party and action by the court not a day later. In addition, Administrative Circular No. 2-99 directs the Office of the Clerk
of Court to maintain a skeletal force on Saturdays. Civil Case No. 471 (2000)-B, the spouses Superales complaint for forcible entry against the
spouses Leynes, was already raffled to and pending before the MCTC-Branch 1 of Bansalan-Magsaysay, Davao del Sur; thus, the answer and
other pleadings in said case should already be filed with the said Branch and not with the Office of the Clerk of Court. There is no showing that
the Office of the Branch Clerk of Court was also open on May 20, 2000.
MCTC Jurisdiction
We do not subscribe, however, to the spouses Leynes argument that the spouses Superales Complaint for forcible entry had already
prescribed.
Rule 70, Section 1 of the Rules of Court provides:
Sec. 1. Who may institute proceedings, and when. Subject to the provisions of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat, strategy, or stealth, or a lessor, vendor, vendee, or other person against whom
the possession of any land or building is unlawfully withheld after the expiration or termination of the right to hold possession, by virtue of any
contract, express or implied, or the legal representatives or assigns of any such lessor, vendor, vendee or other person, may, at any time within
one (1) year after such unlawful deprivation or withholding of possession, bring an action in the proper Municipal Trial Court against the person
or persons unlawfully withholding or depriving of possession, or any person or persons claiming under them, for the restitution of such
possession, together with damages and costs. (Emphasis ours.)
In forcible entry cases, the action must be brought within one year from the date of actual entry on the land. In paragraph 4 of their Complaint,
the spouses Superales alleged that the spouses Leynes, through force, stealth, and strategy, encroached upon and occupied a portion of the
spouses Superales titled property, consisting of 76 square meters, sometime in February 2000. The spouses Superales already filed their
Complaint for forcible entry, damages, and attorneys fees, three months thereafter, in May 2000.
Even so, the MCTC rendered judgment against the spouses Leynes ex parte. The spouses Leynes Answer with Counterclaim was not admitted
by the MCTC and they had no opportunity to present evidence in support of their defenses.
The spouses Leynes averred before us that:
48. It is clear from the language of the law that [the spouses Superales] cause of action accrued from the very moment they found in 1995 that
[the spouses Leynes] buildings allegedly intruded into their supposed property when they acquired title over the same. But for the next five
years or so, [the spouses Superales] never raised a howl of protest over the alleged encroachment. Not having acted on their rights within the
limits stipulated under the law, then the complaint for Forcible Entry should also be considered as belatedly filed before the MCTC Branch.

49. [The spouses Superales], however, have been very careful to allege that [the spouses Leynes] structures were built in the year 2000 to
enable them to get around the prescriptive period imposed by the Rules. But the truth is, and the same could have been very well established
had a trial on the merits proceeded, the comfort rooms were built in 1985 and the bunkhouse followed two years later. [The spouses Superales]
then were not yet claimants or possessors of the land they now say is theirs. In 1995 when they surreptitiously acquired title over Jose
Cabahugs property, they contested for the first time, the location of [the spouses Leynes] buildings. Yet, after having done so, [the spouses
Superales] never filed the complaint for Forcible Entry within the one (1) year period as mandated. At the onset therefore, [the spouses
Superales] cause of action was already tainted with a serious congenital infirmity which, had a trial been convened, would have necessarily
resulted in the unwarranted complaint against [the spouses Leynes]. 24
These averments obviously involve factual matters which the spouses Leynes must back up with evidence. We cannot rule on the same since
this Court is not a trier of facts. Consequently, it is only prudent that the case be remanded to the MCTC for further proceedings.
WHEREFORE, the Petition is GRANTED. The ex parte Judgment dated May 29, 2000 of the Municipal Circuit Trial Court, Branch 1 of
Bansalan-Magsaysay, Davao del Sur, in Civil Case No. 471 (2000)-B, is ANNULLED and SET ASIDE. The case is REMANDED to the same
court which is DIRECTED to admit the Answer with Counterclaim of the spouses Ruben and Myrna Leynes and accordingly conduct further
proceedings.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Baguio
EN BANC
G.R. Nos. 184379-80

April 24, 2012

RODOLFO NOEL LOZADA, JR., VIOLETA LOZADA and ARTURO LOZADA, Petitioners,
vs.
PRESIDENT GLORIA MACAPAGAL ARROYO, EDUARDO ERMITA, AVELINO RAZON, ANGEL ATUTUBO and SPO4 ROGER
VALEROSO,* Respondents.
DECISION
SERENO, J.:

What the Court decides today has nothing to do with the substance or merits surrounding the aborted deal of the Philippine government with the
National Broadband Network and ZTE Corporation, or any allegation of petitioner Rodolfo Noel "June" Lozada, Jr., (Lozada) regarding the same.
There is only one issue that we decide today whether circumstances are adequately alleged and proven by petitioner Lozada to entitle him to
the protection of the writ of amparo. Before us is a Petition for Review on Certiorari of the Decision dated 12 September 2008 of the Court of
Appeals (CA), dismissing the Petition for the Issuance of a Writ of Amparo.1
Petitioner Lozada was the former President and Chief Executive Officer of the Philippine Forest Corporation (PFC), a government-owned- and
-controlled corporation under the Department of Environment and Natural Resources (DENR). 2 Petitioner Violeta Lozada (Violeta) is his wife,
while petitioner Arturo Lozada (Arturo) is his brother.
At the time the Petition for the Writ of Amparo was filed, respondent former President Gloria Macapagal Arroyo (former President Arroyo) was
the incumbent President of the Philippines. Meanwhile, Eduardo Ermita (ES Ermita) was then the Executive Secretary; Avelino Razon (Razon),
the Director General of the Philippine National Police (PNP); Angel Atutubo (Atutubo), the Assistant General Manager for Security and
Emergency Services of the Manila International Airport Authority; and Rodolfo Valeroso (Valeroso), an agent of the Aviation Security Group
(ASG) of the PNP.
Antecedent Facts
The instant Petition stems from the alleged corruption scandal precipitated by a transaction between the Philippine government, represented by
the National Broadband Network (NBN), and ZTE Corporation (ZTE), a Chinese manufacturer of telecommunications equipment. 3 Former
National Economic Development Authority (NEDA) Secretary Romulo Neri (Sec. Neri) sought the services of Lozada as an unofficial consultant
in the ZTE-NBN deal.4 The latter avers that during the course of his engagement, he discovered several anomalies in the said transaction
involving certain public officials.5 These events impelled the Senate of the Philippines Blue Ribbon Committee (Blue Ribbon Committee) to
conduct an investigation thereon,6 for which it issued a subpoena directing Lozada to appear and testify on 30 January 2008.7
On that date, instead of appearing before the Blue Ribbon Committee, Lozada left the country for a purported official trip to London, as
announced by then DENR Secretary Lito Atienza (Sec. Atienza).8 In the Petition, Lozada alleged that his failure to appear at the scheduled
hearing was upon the instructions of then Executive Assistant Undersecretary Manuel Gaite (Usec. Gaite). 9 Consequently, the Senate issued an
Order dated 30 January 2008: (a) citing Lozada for contempt; (b) ordering his arrest and detention; and (c) directing the Senate Sergeant-atArms to implement the Order and make a return thereon.10
While overseas, Lozada asked Sec. Atienza whether the former could be allowed to go back to the Philippines. 11Upon the approval of Sec.
Atienza, Lozada informed his family that he was returning from Hong Kong on 5 February 2008 on board Cathay Pacific Flight No. 919, bound to
arrive in Manila at 4:40 p.m. on the same day.12
In the Petition, Lozada claims that, upon disembarking from the aircraft, several men held his arms and took his bag. Although he allegedly
insisted on meeting with his family, he later realized that it was wiser to just follow them, especially when he overheard from their handheld radio:
"[H]wag kayong dumaan diyan sir nandyan ang mga taga senado."13
Lozada asked if he could go to the comfort room, an opportunity he used to call up his brother, petitioner Arturo, and inform him of his
situation.14 The men thereafter led him through the departure area of the airport and into a car waiting for them. 15 They made him sit alone at the
back of the vehicle, while a man, whom he later discovered to be respondent Valeroso, took the passenger seat and was always in contact with
other individuals.16 Lozada observed that other cars tailed their vehicle.17
Sec. Atienza then phoned Lozada, assuring the latter that he was with people from the government, and that the former was going to confer with
"ES and Ma[a]m." Lozada surmised that these individuals referred to ES Ermita and former President Arroyo, respectively.18 Sec. Atienza also
purportedly instructed Lozada to pacify his wife, petitioner Violeta, who was making public statements asking for her husbands return. 19
The vehicle traversed the South Luzon Expressway and drove towards the direction of Laguna. 20 Along the way, the men asked Lozada to draft
an antedated letter requesting police protection.21
Lozada requested that he be brought home to Pasig, but the men were allegedly compelled to deny his request on account of unidentified
security risks.22 Eventually, however, the vehicle turned around and drove to Libis, Quezon City. The group stopped at The Outback restaurant to
meet with certain individuals, who turned out to be Atty. Antonio Bautista (Atty. Bautista) and Colonel Paul Mascarinas (Col. Mascarinas) of the
Police Special Protection Office (PSPO). At the restaurant, Lozada claimed that he was made to fill in the blanks of a prepared affidavit. 23
After the meeting, the men informed Lozada that they were going to billet him in a hotel for a night, but he suggested that they take him to La
Salle Green Hills instead. The men acquiesced.24
Upon arriving in La Salle Green Hills, Lozada was met by Violeta and his sister, Carmen Lozada (Carmen). 25 He observed that the perimeter
was guarded by policemen, purportedly restraining his liberty and threatening not only his security, but also that of his family and the De La Salle
brothers.26
On 6 February 2008, at around 10:00 a.m., Col. Mascarinas supposedly brought Lozada to the office of Atty. Bautista to finalize and sign an
affidavit.27
At about 1:00 p.m., Violeta filed before this Court a Petition for Habeas Corpus, docketed as G.R. No. 181342 (the Habeas Corpus
case).28 Arturo likewise filed before this Court a Petition for a Writ of Amparo, docketed as G.R. No. 181356 (the Amparo case), and prayed for
the issuance of (a) the writ of amparo; (b) a Temporary Protection Order (TPO); and (c) Inspection and Production Orders as regards documents
related to the authority ordering custody over Lozada, as well as any other document that would show responsibility for his alleged abduction. 29
At around the same time that Arturo filed the Petition for a Writ of Amparo, Col. Mascarinas drove Lozada back to La Salle Green Hills. 30 Lozada
was then made to sign a typewritten, antedated letter requesting police protection. 31 Thereafter, former Presidential Spokesperson Michael
Defensor (Sec. Defensor) supposedly came and requested Lozada to refute reports that the latter was kidnapped and to deny knowledge of
alleged anomalies in the NBN-ZTE deal. Sec. Defensor then purportedly gave Lozada P50,000 for the latters expenses.32
On 7 February 2008, Lozada decided to hold a press conference and contact the Senate Sergeant-at-Arms, who served the warrant of arrest on
him.33 Lozada claimed that after his press conference and testimony in the Senate, he and his family were since then harassed, stalked and
threatened.34

On the same day, this Court issued a Resolution (a) consolidating the Habeas Corpus case and the Amparo case; (b) requiring respondents in
the Habeas Corpus case to comment on the Petition; (c) issuing a Writ of Amparo; (d) ordering respondents in the Amparo case to file their
verified Return; (e) referring the consolidated Petitions to the CA; and (f) directing the CA to set the cases for hearing on 14 February
2008.35 Accordingly, the court a quo set both cases for hearing on 14 February 2008.36
On 12 February 2008, respondents filed before the CA a Manifestation and Motion, praying for the dismissal of the Habeas Corpus case. 37 They
asserted that Lozada was never illegally deprived of his liberty and was, at that time, no longer in their custody. They likewise averred that,
beginning 8 February 2008, Lozada had already been under the supervision of the Senate and, from then on, had been testifying before it. 38
In their verified Return, respondents claimed that Sec. Atienza had arranged for the provision of a security team to be assigned to Lozada, who
was then fearful for his safety.39 In effect, respondents asserted that Lozada had knowledge and control of the events that took place on 5
February 2008, voluntarily entrusted himself to their company, and was never deprived of his liberty. Hence, respondents prayed for the denial of
the interim reliefs and the dismissal of the Petition.40
During the initial hearing on 14 February 2008, Lozada and Violeta ratified the Petition in the Amparo case 41 to comply with Section 2 of the Rule
on the Writ of Amparo,42 which imposes an order to be followed by those who can sue for the writ. 43 The CA also dismissed the Habeas Corpus
case in open court for being moot and academic, as Lozada was physically present and was not confined or detained by any of the
respondents.44Considering that petitioners failed to question the dismissal of the Habeas Corpus case, the said dismissal had lapsed into finality,
leaving only the Amparo case open for disposition.
Thereafter, Lozada filed a Motion for Temporary Protection Order and Production of Documents, 45 while Arturo filed a Motion for Production of
Documents.46 Additionally, Arturo also filed a Motion for the Issuance of Subpoena Ad Testificandum and Presentation of Hostile Witnesses and
Adverse Parties Romulo Neri, Benjamin Abalos, [Sr.], Rodolfo Valeroso, "Jaime" the Driver and Other Respondents. Respondents opposed
these motions.47 The CA denied the Motion for the Issuance of Subpoena on the ground that the alleged acts and statements attributed to Sec.
Neri and Benjamin Abalos (Abalos) were irrelevant to the Amparo case, and that to require them to testify would only result in a fishing
expedition.48 The CA likewise denied Arturos subsequent Motion for Reconsideration.49
In its Resolution dated 5 March 2008, the CA dropped former President Arroyo as a respondent on the ground that at the time the Petition in the
Amparo case was filed, she was still the incumbent President enjoying immunity from suit.50 Arturo filed a Motion for Reconsideration,51 which
the CA denied in its Resolution dated 25 March 2008.52
On 12 September 2008, the CA rendered its Decision denying petitioners the privilege of the Writ of Amparo and dismissing the Petition. 53 The
CA found that petitioners were unable to prove through substantial evidence that respondents violated, or threatened with violation, the right to
life, liberty and security of Lozada.
Petitioners thus filed the instant Petition, praying for: (a) the reversal of the assailed CA Decision; (b) the issuance of the TPO; and (c) the
accreditation of the Association of Major Religious Superiors of the Philippines and the De La Salle Brothers as the sanctuaries of Lozada and
his family.54 In the alternative, petitioners pray that this Court remand the case to the CA for further hearings and reverse the latters Orders: (a)
denying the Motion to Issue a Subpoena Ad Testificandum and (b) dropping former President Arroyo as a respondent. Petitioners raise the
following issues:
(1) Whether the Court a [q]uo erred in ruling to dismiss the petition for a writ of amparo and deny Petitioners prayer for a Temporary
Protection Order, inter alia, because there is no substantial evidence to prove that the right to life, liberty or security of Jun Lozada was
violated or threatened with violation. This rule is not in accord with the rule on the writ of amparo and Supreme Court jurisprudence on
substantial evidence[.]
(2) Whether the Ponencia erred and gravely abused its discretion by prematurely ruling that the testimony of witnesses which
Petitioners sought to present and who are subject of the Motion for Issuance of Subpoena ad testificandum were irrelevant to the
Petition for a Writ of Amparo in a way not in accord with the Rules of Court and Supreme Court decisions.
(3) Whether the Court a quo erred in using and considering the affidavits of respondents in coming up with the questioned decision
when these were not offered as evidence and were not subjected to cross-examination. This ruling is not in accord with the Rules of
Court and jurisprudence.
(4) Whether the Court a [q]uo erred in dropping as respondent Pres. Gloria Arroyo despite her failure to submit a verified return and
personally claim presidential immunity in a way not in accord with the Rule on the Writ of Amparo. 55
The Office of the Solicitor General (OSG) asserts that petitioners failed to adduce substantial evidence, as the allegations they propounded in
support of their Petition were largely hearsay.56 The OSG also maintains that it was proper for the CA to have dropped former President Arroyo
as respondent on account of her presidential immunity from suit.57
Respondent Atutubo also alleges, among others, that: (a) Lozada voluntarily asked for security and protection; (b) Lozada willingly submitted
himself to the company of the police escorts; (c) Atutubo merely accompanied him to pass through the contingency route customarily provided to
VIP passengers, public figures, foreign dignitaries, and the like; and (d) Atutubo only performed his job to ensure security and maintain order at
the airport upon the arrival of Lozada.58
In the face of these assertions by respondents, petitioners nevertheless insist that while they have sufficiently established that Lozada was taken
against his will and was put under restraint, respondents have failed to discharge their own burden to prove that they exercised extraordinary
diligence as public officials.59 Petitioners also maintain that it was erroneous for the CA to have denied their motion for subpoena ad
testificandum for being irrelevant, given that the relevancy of evidence must be examined after it is offered, and not before. 60Finally, petitioners
contend that the presidential immunity from suit cannot be invoked in amparo actions.61
Issues
In ruling on whether the CA committed reversible error in issuing its assailed Decision, three issues must be discussed:
I. Whether the CA committed an error in dropping former President Arroyo as a respondent in the Amparo case.
II. Whether the CA committed an error in denying petitioners Motion for the Issuance of a Subpoena Ad Testificandum.

III. Whether petitioners should be granted the privilege of the writ of amparo.
Discussion
The writ of amparo is an independent and summary remedy that provides rapid judicial relief to protect the peoples right to life, liberty and
security.62 Having been originally intended as a response to the alarming cases of extrajudicial killings and enforced disappearances in the
country, it serves both preventive and curative roles to address the said human rights violations. It is preventive in that it breaks the expectation
of impunity in the commission of these offenses, and it is curative in that it facilitates the subsequent punishment of perpetrators by inevitably
leading to subsequent investigation and action.63
As it stands, the writ of amparo is confined only to cases of extrajudicial killings and enforced disappearances, or to threats
thereof.64 Considering that this remedy is aimed at addressing these serious violations of or threats to the right to life, liberty and security, it
cannot be issued on amorphous and uncertain grounds,65 or in cases where the alleged threat has ceased and is no longer imminent or
continuing.66 Instead, it must be granted judiciously so as not to dilute the extraordinary and remedial character of the writ, thus:
The privilege of the writ of amparo is envisioned basically to protect and guarantee the rights to life, liberty, and security of persons, free from
fears and threats that vitiate the quality of this life. It is an extraordinary writ conceptualized and adopted in light of and in response to the
prevalence of extra-legal killings and enforced disappearances. Accordingly, the remedy ought to be resorted to and granted judiciously, lest the
ideal sought by the Amparo Rule be diluted and undermined by the indiscriminate filing of amparo petitions for purposes less than the desire to
secure amparo reliefs and protection and/or on the basis of unsubstantiated allegations.67(Emphasis supplied.)
Using this perspective as the working framework for evaluating the assailed CA decision and the evidence adduced by the parties, this Court
denies the Petition.
First issue: Presidential immunity from suit
It is settled in jurisprudence that the President enjoys immunity from suit during his or her tenure of office or actual incumbency.68 Conversely,
this presidential privilege of immunity cannot be invoked by a non-sitting president even for acts committed during his or her tenure. 69
In the case at bar, the events that gave rise to the present action, as well as the filing of the original Petition and the issuance of the CA
Decision, occurred during the incumbency of former President Arroyo. In that respect, it was proper for the court a quo to have dropped her as a
respondent on account of her presidential immunity from suit.
It must be underscored, however, that since her tenure of office has already ended, former President Arroyo can no longer invoke the privilege of
presidential immunity as a defense to evade judicial determination of her responsibility or accountability for the alleged violation or threatened
violation of the right to life, liberty and security of Lozada.
Nonetheless, examining the merits of the case still results in the denial of the Petition on the issue of former President Arroyos alleged
responsibility or accountability. A thorough examination of the allegations postulated and the evidence adduced by petitioners reveals their
failure to sufficiently establish any unlawful act or omission on her part that violated, or threatened with violation, the right to life, liberty and
security of Lozada. Except for the bare claims that: (a) Sec. Atienza mentioned a certain "Ma[a]m,"70 whom Lozada speculated to have referred
to her, and (b) Sec. Defensor told Lozada that "the President was hurting from all the media frenzy," 71 there is nothing in the records that would
sufficiently establish the link of former President Arroyo to the events that transpired on 5-6 February 2010, as well as to the subsequent threats
that Lozada and his family purportedly received.
Second issue: Denial of the issuance of a subpoena ad testificandum
This Court, in Roco v. Contreras,72 ruled that for a subpoena to issue, it must first appear that the person or documents sought to be presented
are prima facie relevant to the issue subject of the controversy, to wit:
A subpoena is a process directed to a person requiring him to attend and to testify at the hearing or trial of an action or at any investigation
conducted under the laws of the Philippines, or for the taking of his deposition.
In this jurisdiction, there are two (2) kinds of subpoena, to wit: subpoena ad testificandum and subpoena duces tecum. The first is used to
compel a person to testify, while the second is used to compel the production of books, records, things or documents therein specified. As
characterized in H.C. Liebenow vs. The Philippine Vegetable Oil Company:
The subpoena duces tecum is, in all respects, like the ordinary subpoena ad testificandum with the exception that it concludes with an injunction
that the witness shall bring with him and produce at the examination the books, documents, or things described in the subpoena.
Well-settled is the rule that before a subpoena duces tecum may issue, the court must first be satisfied that the following requisites are present:
(1) the books, documents or other things requested must appear prima facierelevant to the issue subject of the controversy (test of relevancy);
and (2) such books must be reasonably described by the parties to be readily identified (test of definiteness). 73 (Emphasis supplied.)
In the present case, the CA correctly denied petitioners Motion for the Issuance of Subpoena Ad Testificandum on the ground that the
testimonies of the witnesses sought to be presented during trial were prima facie irrelevant to the issues of the case. The court a quo aptly ruled
in this manner:
The alleged acts and statements attributed by the petitioner to Neri and Abalos are not relevant to the instant Amparo Petition where the issue
involved is whether or not Lozadas right to life, liberty and security was threatened or continues to be threatened with violation by the unlawful
act/s of the respondents. Evidence, to be relevant, must have such a relation to the fact in issue as to induce belief in its existence or
nonexistence. Further, Neri, Abalos and a certain driver "Jaime" are not respondents in this Amparo Petition and the vague allegations averred in
the Motion with respect to them do not pass the test of relevancy. To Our mind, petitioner appears to be embarking on a "fishing expedition".
Petitioner should present the aggrieved party [Lozada], who has been regularly attending the hearings, to prove the allegations in the Amparo
Petition, instead of dragging the names of other people into the picture. We have repeatedly reminded the parties, in the course of the
proceedings, that the instant Amparo Petition does not involve the investigation of the ZTE-[NBN] contract. Petitioner should focus on the fact in
issue and not embroil this Court into said ZTE-NBN contract, which is now being investigated by the Senate Blue Ribbon Committee and the
Office of the Ombudsman.74 (Emphasis supplied.)

All the references of petitioners to either Sec. Neri or Abalos were solely with respect to the ZTE-NBN deal, and not to the events that transpired
on 5-6 February 2008, or to the ensuing threats that petitioners purportedly received. Although the present action is rooted from the involvement
of Lozada in the said government transaction, the testimonies of Sec. Neri or Abalos are nevertheless not prima facie relevant to the main issue
of whether there was an unlawful act or omission on the part of respondents that violated the right to life, liberty and security of Lozada. Thus,
the CA did not commit any reversible error in denying the Motion for the Issuance of Subpoena Ad Testificandum.
Third issue: Grant of the privilege of the writ of amparo
A. Alleged violation of or threat to the right to life, liberty and security of Lozada
Sections 17 and 18 of the Rule on the Writ of Amparo requires the parties to establish their claims by substantial evidence, 75 or such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion.76The use of this evidentiary threshold reveals the clear intent
of the framers of the Rule on the Writ of Amparo to have the equivalent of an administrative proceeding, albeit judicially conducted, in addressing
amparo situations.77
In cases where the violation of the right to life, liberty or security has already ceased, it is necessary for the petitioner in an amparo action to
prove the existence of a continuing threat.78 Thus, this Court held in its Resolution in Razon v. Tagitis:79
Manalo is different from Tagitis in terms of their factual settings, as enforced disappearance was no longer a problem in that case. The enforced
disappearance of the brothers Raymond and Reynaldo Manalo effectively ended when they escaped from captivity and surfaced, while Tagitis is
still nowhere to be found and remains missing more than two years after his reported disappearance. An Amparo situation subsisted in Manalo,
however, because of the continuing threat to the brothers right to security; the brothers claimed that since the persons responsible for their
enforced disappearance were still at large and had not been held accountable, the former were still under the threat of being once again
abducted, kept captive or even killed, which threat constituted a direct violation of their right to security of person. 80 (Emphasis supplied.)
In the present case, the totality of the evidence adduced by petitioners failed to meet the threshold of substantial evidence. Sifting through all the
evidence and allegations presented, the crux of the case boils down to assessing the veracity and credibility of the parties diverging claims as to
what actually transpired on 5-6 February 2008. In this regard, this Court is in agreement with the factual findings of the CA to the extent that
Lozada was not illegally deprived of his liberty from the point when he disembarked from the aircraft up to the time he was led to the departure
area of the airport,81 as he voluntarily submitted himself to the custody of respondents:
[Lozada] was one of the first few passengers to get off the plane because he was instructed by Secretary Atienza, th[r]ough a phone call on the
night of 04 February 2008, while he was still in Hong Kong, to proceed directly to the Bureau of Immigration so that few people would notice him
and he could be facilitated in going out of the airport without any hassle from the people of the Senate Sergeant-at-Arms. Again, [Lozada] stated
that he wanted to get away from the Senate people. [Lozada] even went to the mens room of the airport, after he was allegedly "grabbed",
where he made a call to his brother Arturo, using his Globe phone, and he was not prevented from making said call, and was simply advised by
the person who met him at the tube to (sic) "sir, bilisan mo na". When they proceeded out of the tube and while walking, [Lozada] heard from the
radio track down, "wag kayo dyan, sir, nandyan yong mga taga Senado", so they took a detour and went up to the departure area, did not go out
of the normal arrival area, and proceeded towards the elevator near the Duty Free Shop and then down towards the tarmac. Since [Lozada] was
avoiding the people from the Office of the Senate Sergeant-at-Arms, said detour appears to explain why they did not get out at the arrival area,
where [Lozada] could have passed through immigration so that his passport could be properly stamped.
This Court does not find any evidence on record that [Lozada] struggled or made an outcry for help when he was allegedly "grabbed" or
"abducted" at the airport. [Lozada] even testified that nobody held him, and they were not hostile to him nor shouted at him. With noon day
clarity, this Court finds that the reason why [Lozada] was fetched at the airport was to help him avoid the Senate contingent, who would arrest
and detain him at the Office of the Senate Sergeant-at-Arms, until such time that he would appear and give his testimony, pursuant to the Order
of the Senate on the NBN-ZTE Project. [Lozada] clearly knew this because at that time, it was still his decision not to testify before the Senate.
He agreed with that plan.82 (Emphases supplied.)
The foregoing statements show that Lozada personally sought the help of Sec. Atienza to avoid the Senate personnel, and thus knew that the
men who met him at the airport were there to aid him in such objective. Surely, the actions of Lozada evinced knowledge and voluntariness,
uncharacteristic of someone who claims to have been forcibly abducted.
However, these mens subsequent acts of directing Lozada to board the vehicle and driving him around, without disclosing the exact purpose
thereof, appear to be beyond what he had consented to and requested from Sec. Atienza. These men neither informed him of where he was
being transported nor provided him complete liberty to contact his family members to assure them of his safety. These acts demonstrated that
he lacked absolute control over the situation, as well as an effective capacity to challenge their instructions.
Nevertheless, it must be emphasized that if Lozada had in fact been illegally restrained, so much so that his right to liberty and security had
been violated, the acts that manifested this restraint had already ceased and has consequently rendered the grant of the privilege of the writ of
amparo moot. Whether or not Lozada was deprived of his liberty from the point when he was led inside the vehicle waiting for him at the airport
up to the time he was taken to La Salle Green Hills, petitioners assertions that Lozada and his family continue to suffer various threats from
respondents remain unproven. The CA correctly found as follows:
The supposed announcement of General Razon over the radio that [Lozada] was in the custody of the PNP can neither be construed as a threat
to [Lozadas] life, liberty and security. Certainly, no person in his right mind would make that kind of media announcement if his intent was indeed
to threaten somebodys life, liberty and security.
xxx

xxx

xxx

He claims that he is threatened by the alleged presence of armed men riding in motorcycle passing outside the De La Salle premises where he
and his family are staying and by alleged threats of armed men around him at places where he went to. Again, these alleged threats were not
proven by any evidence at all, as having originated from any of the respondents.
[Lozada] also considers the installation of the surveillance camera at the De La Salle and at St. Scholastica as indirect threat to his right to life,
liberty and security. He claims that these are spy cameras. However, save for [Lozadas] self-serving claim, he simply failed to prove that they
were installed or ordered installed by the respondents for the purpose of threatening his right to life, liberty and security.
[Lozada] further maintains that there is an alleged trend, i.e., wherever he goes, there is a bomb threat. There were bomb threats in the places
where he went to like in [the Polytechnic University of the Philippines], Dagupan, Cebu and Bohol. However, [Lozada] himself testified that he

did not try to ascertain where the bomb threats emanated. Plainly, there is no evidence on record that the bomb threats were made by the
respondents or done upon their instigation.
Moreover, [Lozada] views the pronouncement of the Secretary of Justice that he was put on the watch list of the Bureau of Immigration as a
threat to his life, liberty and security. This alleged threat is again unsupported by evidence, as in fact, [Lozada] testified that he did not ascertain
from the Bureau of Immigration whether his name was actually in the official watch list of the Bureau. At any rate, the Secretary of Justice is not
one of the respondents in the amparo petition, and there is no showing in the record that it was the respondents who ordered the same for the
purpose of threatening him.
[Lozada] harps on the filing of alleged frivolous cases against him and his family as threat to his life, liberty and security. xxx However, [Lozada]
himself testified that he does not know whether the respondents or any of the respondents ordered the filing of these cases against him. In any
event, said purported cases are to be determined based on their own merits and are clearly beyond the realm of the instant amparo petition filed
against the respondents.83 (Emphasis supplied.)
Finally, petitioners insist that while they were able to sufficiently establish their case by the required evidentiary standard, respondents failed to
discharge their burden to prove their defenses by substantial evidence and to show that respondents exercised extraordinary diligence as
required by the Rule on the Writ of Amparo.84 This Court has squarely passed upon this contention in Yano v. Sanchez, 85 to wit:
The failure to establish that the public official observed extraordinary diligence in the performance of duty does not result in the automatic grant
of the privilege of the amparo writ. It does not relieve the petitioner from establishing his or her claim by substantial evidence.
Thus, in amparo actions, petitioners must establish their claims by substantial evidence, and they cannot merely rely on the supposed failure of
respondents to prove either their defenses or their exercise of extraordinary diligence. In this case, the totality of the evidence presented by
petitioners fails to meet the requisite evidentiary threshold, and the privilege of the writ of amparo has already been rendered moot and
academic by the cessation of the restraint to Lozadas liberty.
B. Propriety of the privilege of the writ of amparo and its interim reliefs
As previously discussed, there is no basis to grant Lozada the privilege of the writ of amparo, considering that the illegal restraint alleged in this
case had already ceased and there is no imminent or continuing restriction on his liberty. In Castillo v. Cruz, 86 this Court held as follows:
Although respondents release from confinement does not necessarily hinder supplication for the writ of amparo, absent any evidence or even
an allegation in the petition that there is undue and continuing restraint on their liberty, and/or that there exists threat or intimidation that destroys
the efficacy of their right to be secure in their persons, the issuance of the writ cannot be justified. (Emphasis supplied.)1wphi1
Further, it appears that Lozada had already filed before the Department of Justice (DOJ) a Complaint charging respondents with kidnapping and
attempted murder, docketed as I.S. No. 2008-467.87 In this regard, this Courts ruling in Rubrico v. Arroyo88 is worth considering:
First, a criminal complaint for kidnapping and, alternatively, for arbitrary detention rooted in the same acts and incidents leading to the filing of
the subject amparo petition has been instituted with the OMB, docketed as OMB-P-C-O7-0602-E. The usual initial steps to determine the
existence of a prima facie case against the five (5) impleaded individuals suspected to be actually involved in the detention of Lourdes have
been set in motion. It must be pointed out, though, that the filing of the OMB complaint came before the effectivity of the Amparo Rule on
October 24, 2007.
Second, Sec. 22 of the Amparo Rule proscribes the filing of an amparo petition should a criminal action have, in the meanwhile, been
commenced. The succeeding Sec. 23, on the other hand, provides that when the criminal suit is filed subsequent to a petition for amparo, the
petition shall be consolidated with the criminal action where the Amparo Rule shall nonetheless govern the disposition of the relief under the
Rule. Under the terms of said Sec. 22, the present petition ought to have been dismissed at the outset. But as things stand, the outright
dismissal of the petition by force of that section is no longer technically feasible in light of the interplay of the following factual mix: (1) the Court
has, pursuant to Sec. 6 of the Rule, already issued ex parte the writ of amparo; (2) the CA, after a summary hearing, has dismissed the petition,
but not on the basis of Sec. 22; and (3) the complaint in OMB-P-C-O7-0602-E named as respondents only those believed to be the actual
abductors of Lourdes, while the instant petition impleaded, in addition, those tasked to investigate the kidnapping and detention incidents and
their superiors at the top. Yet, the acts and/or omissions subject of the criminal complaint and the amparo petition are so linked as to call for the
consolidation of both proceedings to obviate the mischief inherent in a multiplicity-of-suits situation.
Given the above perspective and to fully apply the beneficial nature of the writ of amparo as an inexpensive and effective tool to protect certain
rights violated or threatened to be violated, the Court hereby adjusts to a degree the literal application of Secs. 22 and 23 of the Amparo Rule to
fittingly address the situation obtaining under the premises. Towards this end, two things are at once indicated: (1) the consolidation of the probe
and fact-finding aspects of the instant petition with the investigation of the criminal complaint before the OMB; and (2) the incorporation in the
same criminal complaint of the allegations in this petition bearing on the threats to the right to security. Withal, the OMB should be furnished
copies of the investigation reports to aid that body in its own investigation and eventual resolution of OMB-P-C-O7-0602-E. Then, too, the OMB
shall be given easy access to all pertinent documents and evidence, if any, adduced before the CA. Necessarily, Lourdes, as complainant in
OMB-P-C-O7-0602-E, should be allowed, if so minded, to amend her basic criminal complaint if the consolidation of cases is to be fully effective.
(Emphasis supplied.)
Thus, if the Complaint filed before the DOJ had already progressed into a criminal case, then the latter action can more adequately dispose of
the allegations made by petitioners. After all, one of the ultimate objectives of the writ of amparo as a curative remedy is to facilitate the
subsequent punishment of perpetrators.89 On the other hand, if there is no actual criminal case lodged before the courts, then the denial of the
Petition is without prejudice to the filing of the appropriate administrative, civil or criminal case, if applicable, against those individuals whom
Lozada deems to have unduly restrained his liberty.
Finally, with respect to the interim reliefs sought by petitioners, this Court, in Yano v. Sanchez, 90 declined to grant the prayer for the issuance of a
TPO, as well as Inspection and Production Orders, upon a finding that the implicated public officials were not accountable for the disappearance
subject of that case. Analogously, it would be incongruous to grant herein petitioners prayer for a TPO and Inspection and Production Orders
and at the same time rule that there no longer exists any imminent or continuing threat to Lozadas right to life, liberty and security. Thus, there is
no basis on which a prayer for the issuance of these interim reliefs can be anchored.
WHEREFORE, the instant petition is DENIED for being moot and academic. The Court of Appeals denial of the privilege of the writ of amparo is
hereby AFFIRMED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 147143

March 10, 2006

HYATT INDUSTRIAL MANUFACTURING CORP., and YU HE CHING, Petitioners,

vs.
LEY CONSTRUCTION AND DEVELOPMENT CORP., and PRINCETON DEVELOPMENT CORP., Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a petition for review on certiorari seeking the nullification of the Decision dated May 4, 2000 of the Court of Appeals (CA)
then Seventh Division in CA-G.R. CV No. 57119, which remanded Civil Case No. 94-1429 to the trial court and directed the latter to allow the
deposition-taking without delay;1 and the CA Resolution dated February 13, 2001 which denied petitioners motion for reconsideration. 2
The facts are as follows:
On April 8, 1994, respondent Ley Construction and Development Corporation (LCDC) filed a complaint for specific performance and damages
with the Regional Trial Court of Makati, Branch 62 (RTC), docketed as Civil Case No. 94-1429, against petitioner Hyatt Industrial Manufacturing
Corporation (Hyatt) claiming that Hyatt reneged in its obligation to transfer 40% of the pro indiviso share of a real property in Makati in favor of
LCDC despite LCDCs full payment of the purchase price of P2,634,000.00; and that Hyatt failed to develop the said property in a joint venture,
despite LCDCs payment of 40% of the pre-construction cost.3 On April 12, 1994, LCDC filed an amended complaint impleading Princeton
Development Corporation (Princeton) as additional defendant claiming that Hyatt sold the subject property to Princeton on March 30, 1994 in
fraud of LCDC.4 On September 21, 1994, LCDC filed a second amended complaint adding as defendant, Yu He Ching (Yu), President of Hyatt,
alleging that LCDC paid the purchase price of P2,634,000.00 to Hyatt through Yu.5
Responsive pleadings were filed and LCDC filed notices to take the depositions of Yu; Pacita Tan Go, Account Officer of Rizal Commercial
Banking Corporation (RCBC); and Elena Sy, Finance Officer of Hyatt. Hyatt also filed notice to take deposition of Manuel Ley, President of
LCDC, while Princeton filed notice to take the depositions of Manuel and Janet Ley.6
On July 17, 1996, the RTC ordered the deposition-taking to proceed.7
At the scheduled deposition of Elena Sy on September 17, 1996, Hyatt and Yu prayed that all settings for depositions be disregarded and pretrial be set instead, contending that the taking of depositions only delay the resolution of the case. The RTC agreed and on the same day
ordered all depositions cancelled and pre-trial to take place on November 14, 1996.8
LCDC moved for reconsideration9 which the RTC denied in its October 14, 1996 Order, portion of which reads:
This Court has to deny the motion, because: 1) as already pointed out by this Court in the questioned Order said depositions will only delay the
early termination of this case; 2) had this Court set this case for pre-trial conference and trial thereafter, this case would have been terminated by
this time; 3) after all, what the parties would like to elicit from their deponents would probably be elicited at the pre-trial conference; 4) no
substantial rights of the parties would be prejudiced, if pre-trial conference is held, instead of deposition. 10
On November 14, 1996, the scheduled date of the pre-trial, LCDC filed an Urgent Motion to Suspend Proceedings Due to Pendency of Petition
for Certiorari in the Court of Appeals.11 The petition, which sought to annul the Orders of the RTC dated September 17, 1996 and October 14,
1996, was docketed as CA-G.R. SP No. 4251212and assigned to the then Twelfth Division of the CA.
Meanwhile, pre-trial proceeded at the RTC as scheduled13 and with the refusal of LCDC to enter into pre-trial, Hyatt, Yu and Princeton moved to
declare LCDC non-suited which the RTC granted in its Order dated December 3, 1996, thus:
On September 17, 1996, this Court noticing that this case was filed as early (as) April 4, 199414 and has not reached the pre-trial stage because
of several depositions applied for by the parties, not to mention that the records of this case has reached two (2) volumes, to avoid delay, upon
motion, ordered the cancellation of the depositions.
On September 24, 1996, plaintiff filed a motion for reconsideration, seeking to reconsider and set aside the order dated September 17, 1996,
which motion for reconsideration was denied in an order dated October 14, 1996, ruling among others that "after all, what the parties would like
to elicit from these deponents would probably be elicited at the pre-trial conference", and, reiterated the order setting this case for pre-trial
conference on November 14, 1996.
On the scheduled pre-trial conference on November 14, 1996, a petition for certiorari was filed with the Court of Appeals, seeking to annul the
Order of this Court dated September 17, 1996 and October 14, 1996, furnishing this Court with a copy on the same date.
At the scheduled pre-trial conference on November 14, 1996, plaintiff orally moved the Court to suspend pre-trial conference alleging pendency
of a petition with the Court of Appeals and made it plain that it cannot proceed with the pre-trial because the issue on whether or not plaintiff may
apply for depositions before the pre-trial conference is a prejudicial question. Defendants objected, alleging that even if the petition is granted,
pre-trial should proceed and that plaintiff could take deposition after the pre-trial conference, insisting that defendants are ready to enter into a
pre-trial conference.
This Court denied plaintiffs motion to suspend proceedings and ordered plaintiff to enter into pre-trial conference. Plaintiff refused. Before this
Court denied plaintiffs motion to suspend, this Court gave Plaintiff two (2) options: enter into a pre-trial conference, advising plaintiff that what it
would like to obtain at the deposition may be obtained at the pre-trial conference, thus expediting early termination of this case; and, terminate
the pre-trial conference and apply for deposition later on. Plaintiff insisted on suspension of the pre-trial conference alleging that it is not ready to
enter into pre-trial conference in view of the petition for certiorari with the Court of Appeals. Defendants insisted that pre-trial conference proceed
as scheduled, manifesting their readiness to enter into a pre-trial conference.

When plaintiff made it clear that it is not entering into the pre-trial conference, defendants prayed that plaintiff be declared non-suited. x x x
xxxx
In the light of the foregoing circumstances, this Court is compelled to dismiss plaintiffs complaint.
WHEREFORE, for failure of plaintiff to enter into pre-trial conference without any valid reason, plaintiffs complaint is dismissed. Defendants
counterclaims are likewise dismissed.
SO ORDERED.15
LCDC filed a motion for reconsideration16 which was denied however by the trial court in its Order dated April 21, 1997.17 LCDC went to the CA
on appeal which was docketed as CA-G.R. CV No. 57119 and assigned to the then Seventh Division of the CA. 18
On July 24, 1997, the CAs then Twelfth Division,19 in CA-G.R. SP No. 42512 denied LCDCs petition for certiorarideclaring that the granting of
the petition and setting aside of the September 17, 1996 and October 14, 1996 Orders are manifestly pointless considering that the complaint
itself had already been dismissed and subject of the appeal docketed as CA-G.R. CV No. 57119; that the reversal of the said Orders would have
practical effect only if the dismissal were also set aside and the complaint reinstated; and that the dismissal of the complaint rendered the
petition for certiorari devoid of any practical value.20 LCDCs motion for reconsideration of the CA-G.R. SP No. 42512 decision was denied on
March 4, 1998.21 LCDC then filed with this Court, a petition forcertiorari, docketed as G.R. No. 133145 which this Court dismissed on August 29,
2000.22
On May 4, 2000, the CAs then Seventh Division issued in CA-G.R. CV No. 57119 the herein assailed decision, the fallo of which reads:
WHEREFORE, premises considered, finding the appeal meritorious, this case is remanded to the court a quo for further hearing and directing
the latter to allow the deposition taking without delay.
SO ORDERED.23
The CA reasoned that: LCDC complied with Section 1, Rule 23 of the 1997 Rules of Civil Procedure which expressly sanctions depositions as a
mode of discovery without leave of court after the answer has been served; to unduly restrict the modes of discovery during trial would defeat
the very purpose for which it is intended which is a pre-trial device, and at the time of the trial, the issues would already be confined to matters
defined during pre-trial; the alleged intention of expediting the resolution of the case is not sufficient justification to recall the order to take
deposition as records show that the delay was brought about by postponement interposed by both parties and other legal antecedents that are
in no way imputable to LCDC alone; deposition-taking, together with the other modes of discovery are devised by the rules as a means to attain
the objective of having all the facts presented to the court; the trial court also erred in dismissing the complaint as LCDC appeared during the
pre-trial conference and notified it of the filing of a petition before the CA; such is a legitimate justification to stall the pre-trial conference, as the
filing of the petition was made in good faith in their belief that the court a quo erred in canceling the deposition scheduled for no apparent
purpose.24
Hyatt and Princeton filed their respective motions for reconsideration which the CA denied on February 13, 2001. 25
Hyatt and Yu now come before the Court via a petition for review on certiorari, on the following grounds:
I
THE COURT OF APPEALS, SEVENTH DIVISION, COMMITTED GRAVE ABUSE OF DISCRETION, ACTUALLY AMOUNTING TO LACK OF
JURISDICTION, IN HOLDING IN EFFECT INVALID THE ORDERS OF THE LOWER COURT DATED SEPTEMBER 17, 1996 AND OCTOBER
14, 1996 WHICH ARE NOT RAISED OR PENDING BEFORE IT, BUT IN ANOTHER CASE (CA-G.R. SP. No. 42512) PENDING BEFORE
ANOTHER DIVISION OF THE COURT OF APPEALS, TWELFTH DIVISION, AND WHICH CASE WAS DISMISSED BY THE SAID DIVISION
OF THE COURT OF APPEALS AND FINALLY BY THE HONORABLE SUPREME COURT IN G.R. NO. 133145.
II
THE COURT OF APPEALS, SEVENTH DIVISION, COMMITTED GRAVE ABUSE OF DISCRETION AND SERIOUS ERRORS OF LAW IN
REVERSING THE LOWER COURTS ORDER DATED DECEMBER 3, 1996 AND APRIL 21, 1997 HOLDING RESPONDENT NON-SUITED
FOR FAILURE TO ENTER INTO PRE-TRIAL.26
Anent the first issue, petitioners claim that: the validity of the RTC Order dated September 17, 1996 which set the case for pre-trial, as well as its
Order dated October 14, 1996 denying LCDCs motion for partial reconsideration are not involved in CA-G.R. CV No. 57119 but were the subject
of CA-G.R. SP No. 42512, assigned to the then Twelfth Division, which dismissed the same on July 24, 1997 and which dismissal was affirmed
by this Court in G.R. No. 133145; in passing upon the validity of the Orders dated September 17, 1996 and October 14, 1996, the CAs then
Seventh Division in CA-G.R. CV No. 57119 exceeded its authority and encroached on issues taken cognizance of by another Division. 27
On the second issue, petitioners claim that: the CAs then Seventh Division should have outrightly dismissed the appeal of LCDC as the same
did not involve any error of fact or law but pertains to a matter of discretion which is properly a subject of certiorari under Rule 65 of the Revised
Rules of Court; conducting discovery thru deposition is not a condition sine qua non to the holding of a pre-trial and the fact that LCDC wanted to
take the deposition of certain persons is not a valid ground to suspend the holding of pre-trial and subsequently the trial on the merits; the
persons whose depositions were to be taken were listed as witnesses during the trial; to take their depositions before the lower court and to
present them as witnesses during the trial on the merits would result in unnecessary duplicity; the fact that LCDC has a pending petition
for certiorari with the CAs then Twelfth Division docketed as CA-G.R. SP No. 42512 is not a ground to cancel or suspend the scheduled pre-trial
on November 14, 1996 as there was no restraining order issued; LCDCs availment of the discovery procedure is causing the undue delay of the
case; it is only after LCDC has filed its complaint that it started looking for evidence to support its allegations thru modes of discovery and more
than two years has already passed after the filing of the complaint yet LCDC still has no documentary evidence to present before the lower court
to prove its allegations in the complaint.28
Petitioners then pray that the Decision dated May 4, 2000 and the Resolution dated February 13, 2001 of the CAs then Seventh Division in CAG.R. CV No. 57119 be annulled and set aside and the validity of the Orders dated December 3, 1996 and April 21, 1997 of the RTC of Makati,
Branch 62 in Civil Case No. 94-1429 be sustained.29

In its Comment, LCDC argues that the petitioners erred in claiming that the CAs then Seventh Division overstepped its authority as this Court
has ruled in G.R. No. 133145 that the issue of whether LCDC has been denied its right to discovery is more appropriately addressed in the
appeal before the then Seventh Division in CA-G.R. CV No. 57119 below rather than by the then Twelfth Division in the certiorari proceeding in
CA-G.R. SP No. 42512; and while the appeal of the final Order of the RTC dated December 3, 1996 also questioned the Orders dated
September 17, 1996 and October 14, 1996, it does not render the appeal improper as this Court in G.R. No. 133145 held that the subsequent
appeal constitutes an appropriate remedy because it assails not only the Order dated December 3, 1996, but also the two earlier orders. 30
On the second issue, LCDC contends that: the mere fact that a deponent will be called to the witness stand during trial is not a ground to deny
LCDC the right to discovery and does not cause "unnecessary duplicity", otherwise no deposition can ever be taken; a deposition is for the
purpose of "discovering" evidence while trial is for the purpose of "presenting" evidence to the court; if petitioners concern was the delay in the
disposition of the case, the remedy is to expedite the taking of the depositions, not terminate them altogether; petitioners have nothing to fear
from discovery unless they have in their possession damaging evidence; the parties should be allowed to utilize the discovery process prior to
conducting pre-trial since every bit of relevant information unearthed through the discovery process will hasten settlement, simplify the issues
and determine the necessity of amending the pleadings; the trial court erred in not suspending the pre-trial conference pending the petition
for certiorari before the then Twelfth Division of the CA since considerations of orderly administration of justice demanded that the trial court
accord due deference to the CA; not only was LCDCs petition for certiorari filed in good faith, the CA found it meritorious, vindicating LCDCs
insistence that the pre-trial be suspended; the undue delay in the disposition of the case was not attributable to LCDCs deposition-taking but to
the flurry of pleadings filed by defendants below to block LCDCs depositions and prevent it from gaining access to critical evidence; the critical
evidence that LCDC needs to obtain through discovery is evidence that is totally within the knowledge and possession of petitioners and
defendant Princeton and is not available elsewhere.31
On September 17, 2001, the Court required the parties to file their respective memoranda.32 Hyatt and Yu on the one hand and LCDC on the
other filed their respective memoranda reiterating their positions.33
On January 2, 2002, Princeton filed a "Comment" which this Court considered as its Memorandum in the Resolution dated January 30, 2002. 34
In said memorandum, Princeton averred that: it is not true that Princeton failed to comply with any discovery orders as all information requested
of Princeton was duly furnished LCDC and there are no pending discovery orders insofar as Princeton is concerned; LCDC is seeking to dictate
its procedural strategies on the RTC and the opposing parties; LCDC was not deprived due process as it was given all the opportunity to
prepare for its case and to face its opponents before the court; LCDC admits to the probability of forum shopping as it filed a petition
for certiorari with the then Twelfth Division of the CA and later an appeal with the then Seventh Division of the CA; the RTC did not bar LCDC
from presenting witnesses or discovering any evidence, as all it did was to transfer the venue of the testimony and discovery to the courtroom
and get on with the case which LCDC did not want to do; that discovery proceedings need not take place before pre-trial conference; trial court
judges are given discretion over the right of parties in the taking of depositions and may deny the same for good reasons in order to prevent
abuse; the trial court did not err in not granting LCDCs motion to suspend proceedings due to the pendency of a petition for certiorari with the
CA since there was no order from said court and there was no merit in the petition for certiorari as shown by the dismissal thereof by the then
Twelfth Division; there was proper and legal ground for the trial court to declare LCDC non-suited; appearance at the pre-trial is not enough;
there is no evidence to support LCDCs claim that Hyatt surreptitiously transferred title to Princeton. 35
The Court is in a quandary why Hyatt and Yu included Princeton as respondent in the present petition when Princeton was their co-defendant
below and the arguments they raised herein pertain only to LCDC. With the failure of petitioners to raise any ground against Princeton in any of
its pleadings before this Court, we shall treat Princetons inclusion as respondent in the present petition as mere inadvertence on the part of
petitioners.
Now to the merits. The issues that need to be resolved in this case may be simplified as follows: (1) Whether the CAs then Seventh Division
exceeded its authority in ruling upon the validity of the Orders dated September 17, 1996 and November 14, 1996; and (2) Whether the CA
erred in remanding the case to the trial court and order the deposition-taking to proceed.
We answer both questions in the negative.
Petitioners assert that the CAs then Twelfth Division in CA-GR SP No. 42512 and this Court in G.R. No. 133145 already ruled upon the validity
of the Orders dated September 17, 1996 and November 14, 1996, thus the CAs then Seventh Division in CA G.R. CV No. 57119 erred in ruling
upon the same.
A cursory reading of the decisions in CA-GR SP No. 42512 and G.R. No. 133145, however, reveals otherwise. The CAs then Twelfth Division in
CA-G.R. SP No. 42512 was explicit in stating thus:
x x x Any decision of ours will not produce any practical legal effect. According to the petitioner, if we annul the questioned Orders, the dismissal
of its Complaint by the trial [court] will have to be set aside in its pending appeal. That assumes that the division handling the appeal will agree
with Our decision. On the other hand, it may not. Also other issues may be involved therein than the validity of the herein questioned orders.
We cannot pre-empt the decision that might be rendered in such appeal. The division to [which] it has been assigned should be left free to
resolve the same. On the other hand, it is better that this Court speak with one voice.36
This Court in G.R. No. 133145 also clearly stated that:
x x x First, it should be stressed that the said Petition (CA-G.R. SP No. 42512) sought to set aside only the two interlocutory RTC Orders, not the
December 3, 1996 Resolution dismissing the Complaint. Verily, the Petition could not have assailed the Resolution, which was issued after the
filing of the former.
Under the circumstances, granting the Petition for Certiorari and setting aside the two Orders are manifestly pointless, considering that the
Complaint itself had already been dismissed. Indeed, the reversal of the assailed Orders would have practical effect only if the dismissal were
also set aside and the Complaint reinstated. In other words, the dismissal of the Complaint rendered the Petition for Certiorari devoid of any
practical value.
Second, the Petition for Certiorari was superseded by the filing, before the Court of Appeals, of a subsequent appeal docketed as CA-G.R. CV
No. 57119, questioning the Resolution and the two Orders. In this light, there was no more reason for the CA to resolve the Petition
for Certiorari.
xxxx

In this case, the subsequent appeal constitutes an adequate remedy. In fact, it is the appropriate remedy, because it assails not only the
Resolution but also the two Orders.
xxxx
WHEREFORE, the Petition is DENIED and the assailed Resolutions AFFIRMED. x x x.37
With the pronouncements of the CA in CA-G.R. SP No. 42512 and by this Court in G.R. No. 133145 that the subsequent appeal via CA-G.R. CV
No. 57119 constitutes as the adequate remedy to resolve the validity of the RTC Orders dated September 17, 1996 and November 14, 1996, the
arguments of petitioners on this point clearly have no leg to stand on and must therefore fail.
On the second issue, the Court finds that the CA was correct in remanding the case to the RTC and ordering the deposition-taking to proceed.
A deposition should be allowed, absent any showing that taking it would prejudice any party.38 It is accorded a broad and liberal treatment and
the liberty of a party to make discovery is well-nigh unrestricted if the matters inquired into are otherwise relevant and not privileged, and the
inquiry is made in good faith and within the bounds of law.39 It is allowed as a departure from the accepted and usual judicial proceedings of
examining witnesses in open court where their demeanor could be observed by the trial judge, consistent with the principle of promoting just,
speedy and inexpensive disposition of every action and proceeding;40 and provided it is taken in accordance with the provisions of the Rules of
Court, i.e., with leave of court if summons have been served, and without such leave if an answer has been submitted; and provided further that
a circumstance for its admissibility exists (Section 4, Rule 23, Rules of Court).41 The rules on discovery should not be unduly restricted,
otherwise, the advantage of a liberal discovery procedure in ascertaining the truth and expediting the disposal of litigation would be defeated. 42
Indeed, the importance of discovery procedures is well recognized by the Court. It approved A.M. No. 03-1-09-SC on July 13, 2004 which
provided for the guidelines to be observed by trial court judges and clerks of court in the conduct of pre-trial and use of deposition-discovery
measures. Under A.M. No. 03-1-09-SC, trial courts are directed to issue orders requiring parties to avail of interrogatories to parties under Rule
45 and request for admission of adverse party under Rule 26 or at their discretion make use of depositions under Rule 23 or other measures
under Rule 27 and 28 within 5 days from the filing of the answer. The parties are likewise required to submit, at least 3 days before the pre-trial,
pre-trial briefs, containing among others a manifestation of the parties of their having availed or their intention to avail themselves of discovery
procedures or referral to commissioners.43
Since the pertinent incidents of the case took place prior to the effectivity of said issuance, however, the depositions sought by LCDC shall be
evaluated based on the jurisprudence and rules then prevailing, particularly Sec. 1, Rule 23 of the 1997 Rules of Court which provides as
follows:
SECTION 1. Depositions pending action, when may be taken.--- By leave of court after jurisdiction has been obtained over any defendant
or over property which is the subject of the action, or without such leave after an answer has been served, the testimony of any
person, whether a party or not, may be taken, at the instance of any party, by deposition upon oral examination or written
interrogatories. The attendance of witnesses may be compelled by the use of a subpoena as provided in Rule 21. Depositions shall be taken
only in accordance with these Rules. The deposition of a person confined in prison may be taken only by leave of court on such terms as the
court prescribes. (Emphasis supplied).
As correctly observed by the CA, LCDC complied with the above quoted provision as it made its notice to take depositions after the answers of
the defendants have been served. LCDC having complied with the rules then prevailing, the trial court erred in canceling the previously
scheduled depositions.
While it is true that depositions may be disallowed by trial courts if the examination is conducted in bad faith; or in such a manner as to annoy,
embarrass, or oppress the person who is the subject of the inquiry, or when the inquiry touches upon the irrelevant or encroaches upon the
recognized domains of privilege,44 such circumstances, however are absent in the case at bar.
The RTC cites the delay in the case as reason for canceling the scheduled depositions. While speedy disposition of cases is important, such
consideration however should not outweigh a thorough and comprehensive evaluation of cases, for the ends of justice are reached not only
through the speedy disposal of cases but more importantly, through a meticulous and comprehensive evaluation of the merits of the
case.45 Records also show that the delay of the case is not attributable to the depositions sought by LCDC but was caused by the many
pleadings filed by all the parties including petitioners herein.
The argument that the taking of depositions would cause unnecessary duplicity as the intended deponents shall also be called as witnesses
during trial, is also without merit.
The case of Fortune Corp. v. Court of Appeals46 which already settled the matter, explained that:
The availability of the proposed deponent to testify in court does not constitute "good cause" to justify the courts order that his deposition shall
not be taken. That the witness is unable to attend or testify is one of the grounds when the deposition of a witness may be used in court during
the trial. But the same reason cannot be successfully invoked to prohibit the taking of his deposition.
The right to take statements and the right to use them in court have been kept entirely distinct. The utmost freedom is allowed in taking
depositions; restrictions are imposed upon their use. As a result, there is accorded the widest possible opportunity for knowledge by both parties
of all the facts before the trial. Such of this testimony as may be appropriate for use as a substitute for viva voce examination may be introduced
at the trial; the remainder of the testimony, having served its purpose in revealing the facts to the parties before trial, drops out of the judicial
picture.
x x x [U]nder the concept adopted by the new Rules, the deposition serves the double function of a method of discovery - with use on trial not
necessarily contemplated - and a method of presenting testimony. Accordingly, no limitations other than relevancy and privilege have been
placed on the taking of depositions, while the use at the trial is subject to circumscriptions looking toward the use of oral testimony wherever
practicable.47
Petitioner also argues that LCDC has no evidence to support its claims and that it was only after the filing of its Complaint that it started looking
for evidence through the modes of discovery.
On this point, it is well to reiterate the Courts pronouncement in Republic v. Sandiganbayan48:

What is chiefly contemplated is the discovery of every bit of information which may be useful in the preparation for trial, such as the identity and
location of persons having knowledge of relevant facts; those relevant facts themselves; and the existence, description, nature, custody,
condition, and location of any books, documents, or other tangible things. Hence, "the deposition-discovery rules are to be accorded a broad
and liberal treatment. No longer can the time-honored cry of fishing expedition serve to preclude a party from inquiring into the facts underlying
his opponents case. Mutual knowledge of all the relevant facts gathered by both parties is essential to proper litigation. To that end, either party
may compel the other to disgorge whatever facts he has in his possession. The deposition-discovery procedure simply advances the stage at
which the disclosure can be compelled from the time of trial to the period preceding it, thus reducing the possibility, of surprise. 49
It also does not escape this Courts attention that the trial court, before dismissing LCDCs complaint, gave LCDC two options: (a) enter into a
pre-trial conference, advising LCDC that what it would like to obtain at the deposition may be obtained at the pre-trial conference, thus
expediting early termination of the case; and (b) terminate the pre-trial conference and apply for deposition later on. The trial court erred in
forcing LCDC to choose only from these options and in dismissing its complaint upon LCDCs refusal to choose either of the two.
The information LCDC seeks to obtain through the depositions of Elena Sy, the Finance Officer of Hyatt and Pacita Tan Go, an Account Officer
of RCBC, may not be obtained at the pre-trial conference, as the said deponents are not parties to the pre-trial conference.
As also pointed out by the CA:
x x x To unduly restrict the modes of discovery during trial, would defeat the very purpose for which it is intended, as a pre-trial device. By then,
the issues would have been confined only on matters defined during pre-trial. The importance of the modes of discovery cannot be gainsaid in
this case in view of the nature of the controversy involved and the conflicting interest claimed by the parties. 50
Deposition is chiefly a mode of discovery, the primary function of which is to supplement the pleadings for the purpose of disclosing the real
matters of dispute between the parties and affording an adequate factual basis during the preparation for trial. 51
Further, in Republic v. Sandiganbayan52 the Court explained that:
The truth is that "evidentiary matters" may be inquired into and learned by the parties before the trial. Indeed, it is the purpose and policy of
the law that the parties - before the trial if not indeed even before the pre-trial - should discover or inform themselves of all the facts
relevant to the action, not only those known to them individually, but also those known to their adversaries; in other words,
the desideratum is that civil trials should not be carried on in the dark; and the Rules of Court make this ideal possible through the
deposition- discovery mechanism set forth in Rules 24 to 29. The experience in other jurisdictions has been the ample discovery before trial,
under proper regulation, accomplished one of the most necessary ends of modern procedure; it not only eliminates unessential issues from trials
thereby shortening them considerably, but also requires parties to play the game with the cards on the table so that the possibility of fair
settlement before trial is measurably increased.
As just intimated, the deposition-discovery procedure was designed to remedy the conceded inadequacy and cumbersomeness of the pre-trial
functions of notice-giving, issue-formulation and fact revelation theretofore performed primarily by the pleadings.
The various modes or instruments of discovery are meant to serve (1) as a device, along with the pre-trial hearing under Rule 20, to narrow and
clarify the basic issues between the parties, and (2) as a device for ascertaining the facts relative to those issues. The evident purpose is, to
repeat, to enable the parties, consistent with recognized privileges, to obtain the fullest possible knowledge of the issues and facts before civil
trials and thus prevent that said trials are carried on in the dark. 53 (emphasis supplied)
In this case, the information sought to be obtained through the depositions of Elena and Pacita are necessary to fully equip LCDC in determining
what issues will be defined at the pre-trial. Without such information before pre-trial, LCDC will be forced to prosecute its case in the dark --- the
very situation which the rules of discovery seek to prevent. Indeed, the rules on discovery seek to make trial less a game of blind mans bluff and
more a fair contest with the basic issues and facts disclosed to the fullest practicable extent. 54
Considering the foregoing, the Court finds that the CA was correct in remanding the case to the trial court and ordering the depositions to
proceed.
WHEREFORE, the petition is denied for lack of merit.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SPECIAL THIRD DIVISION
G.R. No. 204700

November 24, 2014

EAGLERIDGE DEVELOPMENT CORPORATION, MARCELO N. NAVAL and CRISPIN I. OBEN, Petitioners,

vs.
CAMERON GRANVILLE 3 ASSET MANAGEMENT, INC., Respondent.
RESOLUTION
LEONEN, J.:
For resolution is respondent Cameron Granville 3 Asset Management, Inc. 's motion for reconsideration 1 of our April 10, 2013 decision,2 which
reversed and set aside the Court of Appeals' resolutions3 and ordered respondent to produce the Loan Sale and Purchase Agreement (LSPA)
dated April 7, 2006, including its annexes and/or attachments, if any, in order that petitioners may inspect or photocopy the same.
Petitioners Eagleridge Development Corporation, Marcelo N. Naval, and Crispin I. Oben filed on June 7, 2013 their motion to ad.mit attached
opposition.4 Subsequently, respondent filed its reply5 and petitioners their motion to admit attached rejoinder.6
The motion for reconsideration raises the following points:
(1) The motion for production was filed out of time;7
(2) The production of the LSPA would violate the parol evidence rule; and8
(3) The LSPA is a privileged and confidential document.9
Respondent asserts that there was no "insistent refusal" on its part to present the LSPA, but that petitioners filed their motion for production way
out of time, even beyond the protracted pre-trial period from September 2005 to 2011.10 Hence, petitioners had no oneto blame but themselves
when the trial court denied their motion as it was filed only during the trial proper.11
Respondent further submits that "Article 1634 [of the] Civil Code had been inappropriately cited by [p]etitioners" 12inasmuch as it is Republic Act
No. 9182 (Special Purpose Vehicle Act) that is applicable.13 Nonetheless, even assuming that Article 1634 is applicable, respondent argued that
petitioners are: 1) still liable to pay the whole of petitioner Eagleridge Development Corporations (EDC) loanobligation, i.e., P10,232,998.00
exclusive of interests and/or damages;14 and 2) seven (7) years late in extinguishing petitioner EDCs loan obligation because pursuant to Article
1634, they should have exercised their right of extinguishment within 30 days from the substitution of Export and Industry Bank or EIB (the
original creditor) by respondent in December 2006.15 According to respondent, the trial court order "granting the substitution constituted sufficient
judicial demand as contemplated under Article 1634."16 Also, maintaining that the LSPA is immaterial or irrelevant to the case, respondent
contends that the "[o]rder of substitution settled the issue of [respondents] standing before the [c]ourt and its right to fill in the shoes of [EIB]." 17 It
argues that the production of the LSPA will neither prevent respondent from pursuing its claim of 10,232,998.00, exclusive of interests and
penalties, from petitioner EDC, nor write off petitioner EDCs liability to respondent. 18 The primordial issue of whether petitioners owe respondent
a sum of money via the deed of assignment can allegedly "be readily resolved by application of Civil Code provisions and/or applicable
jurisprudence and not by the production/inspection of the LSPA[.]"19 Respondent also argues that "a consideration is not always a requisite [in
assignment of credits, and] an assignee may maintain an action based on his title and it is immaterial whether ornot he paid any consideration
[therefor][.]"20
Respondent also contends that: (1) the production of the LSPA will violate the parol evidence rule 21 under Rule 130, Section 9 of the Rules of
Court; (2) the LSPA is a privileged/confidential bank document;22 and (3) under the Special Purpose Vehicle Act, "the only obligation of both the
assignor (bank) and the assignee (the SPV; respondent Cameron) is to give notice to the debtor (Eagleridge, Naval,and Oben) that its account
has been assigned/transferred to a special purpose vehicle (Sec. 12, R.A. 9182) [and] [i]t does not require of the special purpose vehicle or the
bank to disclose all financial documents included in the assignment/sale/transfer[.]"23
Finally, respondent points out that the deed of assignment is a contested document. "Fair play would be violated if the LSPA is produced without
[p]etitioners acknowledging that respondent Cameron Granville 3 Asset Management, Inc. is the real party-in-interest because petitioners . . .
would [thereafter] use . . . the contents of a document (LSPA) to its benefit while at the same time" 24 refuting the integrity of the deed and the
legal personality of respondent to sue petitioners.25
For their part, petitioners counter that their motion for production was not filed out of time, and "[t]here is no proscription, under Rule 27 or any
provision of the Rules of Court, from filing motions for production, beyond the pre-trial." 26

Further, assuming that there was a valid transfer of the loan obligation of petitioner EDC, Article 1634 is applicable and, therefore, petitioners
must be informed of the actual transfer price, which information may only be supplied by the LSPA. 27 Petitioners argue that the substitution of
respondent in the case a quowas "not sufficient demandas contemplated under Article 1634 of the Civil Code inasmuch asrespondent Cameron
failed . . . to inform petitioner EDC of the price it paid for the [transfer of the] loan obligation," 28 which made it "impossible for petitioners to
reimburse what was paid for the acquisition of the . . . loan obligation [of EDC]."29 Additionally, petitioners contend that respondent was not a
party to the deed of assignment, but Cameron Granville Asset Management (SPV-AMC), Inc., hence, "as [to] the actual parties to the Deed of
Assignment are concerned, no such demand has yet been made."30
Petitioners add that the amount of their liability to respondent is one of the factual issues to be resolved as stated in the November 21, 2011
pretrial order of the Regional Trial Court, which makes the LSPA clearly relevant and material to the disposition of the case. 31
Petitioners next argue that the parol evidence rule is not applicable to them because they were not parties tothe deed of assignment, and "they
cannot be prevented from seeking evidence to determine the complete terms of the Deed of Assignment."32 Besides, the deedof assignment
made express reference to the LSPA, hence,the latter cannot be considered as extrinsic to it. 33
As to respondents invocation that the LSPA is privileged/confidential, petitioners counter that "it has not been shown that the parties fall under . .
. or, at the very least . . . analogous to [any of the relationships enumerated in Rule 130, Section 124] that would exempt [respondent] from
disclosing information as to their transaction."34
In reply, respondent argues that "[petitioners] cannot accept and reject the same instrument at the same time." 35According to respondent, by
allegedly "uphold[ing] the truth of the contents as well as the validity of [the] Deed of Assignment [in] seeking the production of the
[LSPA],"36 petitioners could no longer be allowed to impugn the validity of the same deed.37
In their rejoinder, petitioners clarified that their consistent position was always to assail the validity of the deed of assignment; that alternatively,
they invoked the application of Article 1634 should the court uphold the validity of the transfer of their alleged loan obligation; and that Rule 8,
Section 2 of the Rules of Court "permits parties to set forth alternative causes of action or defenses." 38
We deny the motion for reconsideration.
Discovery mode of
production/inspection of
document may be availed of
even beyond pre-trial upon a
showing of good cause
The availment of a motion for production, as one of the modes of discovery, is not limited to the pre-trial stage. Rule 27 does not provide for any
time frame within which the discovery mode of production or inspection of documents can be utilized. The rule only requires leave of court "upon
due application and a showing of due cause."39 Rule 27, Section 1 of the 1997 Rules of Court, states:
SECTION 1. Motion for production or inspection order Upon motion of any party showing good cause therefor the court in which an action is
pending may (a) order any party to produce and permit the inspection and copying or photographing, by or on behalf of the moving party, of any
designated documents, papers, books, accounts, letters, photographs, objects or tangible things, not privileged, which constitute or contain
evidence material to any matter involved in the action and which are in his possession, custody or control[.] (Emphasis supplied)
In Producers Bank of the Philippines v. Court of Appeals,40 this court held that since the rules are silent asto the period within which modes of
discovery (in that case, written interrogatories) may still be requested, it is necessary to determine: (1) the purposeof discovery; (2) whether,
based on the stage of the proceedings and evidence presented thus far, allowing it is proper and would facilitate the disposition of the case; and
(3) whether substantial rights of parties would be unduly prejudiced.41 This court further held that "[t]he use of discovery is encouraged, for it
operates with desirable flexibility under the discretionary control of the trial court." 42
In Dasmarias Garments, Inc. v. Reyes,43 this court declared that depositions, as a mode ofdiscovery, "may be taken at any time after the
institution of any action [as there is] no prohibition against the taking of depositions after pre-trial." 44 Thus:
Dasmarias also contends that the "taking of deposition is a mode of pretrial discovery to be availed of before the action comes to trial." Not so.
Depositions may be taken at any time after the institution of any action, whenever necessary or convenient. There is no rule that limits
deposition-taking only to the period of pre-trial or before it; no prohibition against the taking of depositions after pre-trial. Indeed, the law
authorizes the taking of depositions of witnesses before or after an appeal is taken from the judgment of a Regional Trial Court "to perpetuate
their testimony for use in the event of further proceedings in the said court" (Rule 134, Rules of Court), and even during the process of execution
of a final and executory judgment (East Asiatic Co. v. C.I.R., 40 SCRA 521, 544).45
"The modes of discovery are accorded a broad and liberal treatment."46 The evident purpose of discovery procedures is "to enable the parties,
consistent with recognized privileges, to obtain the fullest possible knowledge of the issues and facts before civil trials" 47 and, thus, facilitating an
amicable settlement or expediting the trial of the case.48
Technicalities in pleading should be avoided in order to obtain substantial justice. In Mutuc v. Judge Agloro, 49 this court directed the bank to give
Mutuc a complete statement asto how his debt was computed, and should he be dissatisfied with that statement, pursuant to Rule 27 of the
Rules of Court, to allow him to inspect and copy bank records supporting the items in that statement.50 This was held to be "in consonance with
the rules on discovery and the avowed policy of the Rules of Court . . . to require the parties to lay their cards on the table to facilitate a
settlement of the case before the trial."51
We have determined that the LSPA isrelevant and material to the issue on the validity of the deed of assignment raised by petitioners in the
court a quo, and allowing its production and inspection by petitioners would be more in keeping with the objectives of the discovery rules. We
find no great practical difficulty, and respondent continuously fails to allege any, in presenting the document for inspection and copying of
petitioners. On the other hand, to deny petitioners the opportunity to inquire into the LSPA would bar their access to relevant evidence and
impair their fundamental right to due process.52
Article 1634 of the New Civil Code is applicable
Contrary to respondents stance, Article 1634 of the Civil Code on assignment of credit in litigation is applicable.

Section 13 of the Special Purpose Vehicle Act clearly provides that in the transfer of the non-performing loans to a special purpose vehicle, "the
provisions on subrogation and assignment of credits under the New Civil Code shall apply." Thus:
Sec. 13. Nature of Transfer. All sales or transfers of NPAs to an SPV shall be in the nature of a true sale after proper notice in accordance with
the procedures asprovided for in Section 12: Provided, That GFIs and GOCCs shall be subject to existing law on the disposition of assets:
Provided, further, That in the transfer of the NPLs, the provisions on subrogation and assignment of credits under the New Civil Code shall apply.
Furthermore, Section 19 of the Special Purpose Vehicle Act expressly states that redemption periods allowed to borrowers under the banking
law, the Rules of Court, and/or other laws are applicable. Hence, the right of redemption allowed to a debtor under Article 1634 of the Civil Code
is applicable to the case a quo.
Accordingly, petitioners may extinguish their debt by paying the assignee-special purpose vehicle the transfer price plus the cost of money up to
the time of redemption and the judicial costs.
Petitioners right to
extinguish their debt has not
yet lapsed
Petitioners right to extinguish their debt under Article 1634 on assignment of credits has not yet lapsed. The pertinent provision is reproduced
here:
Art. 1634. When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it by reimbursing the assignee for
the price the latter paid therefor, the judicial costs incurred by him, and the interest on the price from the day on which the same was paid. A
credit or other incorporeal right shall be considered in litigation from the time the complaint concerning the same is answered.
The debtor may exercise his right within thirty days from the date the assignee demands payment from him. (Emphasis supplied)
Under the last paragraph of Article 1634, the debtor may extinguish his or her debt within 30 days from the date the assignee demands payment.
In this case, insofar as the actual parties to the deed of assignment are concerned, no demand has yet been made, and the 30-day period did
not begin to run. Indeed, petitioners assailed before the trial court the validity of the deed of assignment on the groundsthat it did not comply with
the mandatory requirements of the Special Purpose Vehicle Act,53 and it referred to Cameron Granville Asset Management (SPV-AMC), Inc., as
the assignee, and not respondent Cameron Granville 3 Asset Management, Inc.54 The law requires that payment should be made only "to the
person in whose favor the obligation has been constituted, or his [or her] successor in interest, or any person authorized to receive it." 55 It was
held that payment made to a person who is not the creditor, his or her successor-in-interest, or a person who is authorized to receive payment,
even through error or good faith, is not effective payment which will bind the creditor or release the debtor from the obligation to pay.56 Therefore,
it was important for petitioners to determine for sure the proper assignee of the EIB credit or who to pay, in order to effectively extinguish their
debt.
Moreover, even assuming that respondent is the proper assignee of the EIB credit, petitioners could not exercise their right of extinguishment
because they were not informed of the consideration paid for the assignment.57
Respondent must, pursuant to Article 1634 of the Civil Code, disclose how much it paid to acquire the EIB credit, so that petitioners could make
the corresponding offer to pay, by way of redemption, the same amount in final settlement of their obligation.
Respondent insists that the transfer price of the EIB credit is P10,232,998.00 (the actual amount and value of the credit), and that petitioners
should have paid the said amount within 30 days from the December 8, 2006 order of the Regional Trial Court approving its substitution of
EIB.58 Petitioners believe otherwise, and as the deed of assignment was silent on the matter, it becomes necessary to verify the amount of the
consideration from the LSPA.
Assuming indeed that respondent acquired the EIB credit for a lesser consideration, it cannot compel petitioners to pay or answer for the entire
original EIB credit, or more thanwhat it paid for the assignment.
Under the circumstances of this case, the 30-day period under Article 1634 within which petitioners could exercise their right to extinguish their
debt should begin to run only from the time they were informed of the actual price paid by the assignee for the transfer of their debt. Parol
evidence rule is not applicable
Claiming further the impropriety of allowing the production of the LSPA, respondent contends that the presentation of the document and its
annexes would violate the parol evidence rule in Rule 130, Section 9:
SEC. 9. Evidence of written agreements.When the terms of an agreement have been reduced to writing, it is considered as containing all the
terms agreed upon and there can be, between the parties and their successors in interest, no evidence of such terms other than the contents of
the written agreement.
However, a party may present evidence to modify, explain or add to the terms of the written agreement ifhe puts in issue in his pleading:
(a) An intrinsic ambiguity, mistake or imperfection in the written agreement;
(b) The failure of the written agreement to express the true intent and agreement of the parties thereto;
(c) The validity of the written agreement; or
(d) The existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement.
The term "agreement" includes wills.
We disagree.

The parol evidence rule does notapply to petitioners who are not parties to the deed of assignment and do not base a claim on it. 59 Hence, they
cannot be prevented from seeking evidence to determine the complete terms of the deed of assignment.
Even assuming that Rule 130, Section 9 is applicable, an exception to the rule under the second paragraph iswhen the party puts in issue the
validity of the written agreement, as in the case a quo.
Besides, what is forbidden under the parol evidence rule is the presentation of oral or extrinsic evidence, not those expressly referred to in the
written agreement. "[D]ocuments canbe read together when one refers to the other."60 By the express terms of the deed of assignment, it is clear
that the deed of assignment was meant to be read in conjunction with the LSPA.
As we have stated in our decision, Rule 132, Section 1761 of the Rules of Court allows a party to inquire into the whole of the writing or record
when a part of it is given in evidence by the other party. Since the deed of assignment was produced in court by respondent and marked as one
of its documentary exhibits, the LSPA which was made a part thereof by explicit reference and which is necessary for its understanding may also
be inquired into by petitioners.
The LSPA is not privileged
and confidential in nature
Respondents contention that the LSPAis privileged and confidential is likewise untenable.
Indeed, Rule 27 contains the proviso that the documents sought to be produced and inspected must not be privileged against disclosure. Rule
130, Section 24 describes the types of privileged communication. These are communication between or involving the following: (a) between
husband and wife; (b) between attorney and client; (c) between physician and patient; (d) between priest and penitent; and (e) public officers
and public interest.
Privileged communications under the rules of evidence is premised on an accepted need to protect a trust relationship. It has not been shown
that the parties to the deed of assignment fall under any of the foregoing categories.
This court has previously cited other privileged matters such as the following: "(a) editors may not be compelled to disclose the source of
published news; (b) voters may not be compelled to disclose for whom they voted; (c) trade secrets; (d) information contained in tax census
returns; . . . (d) bank deposits"62 (pursuant to the Secrecy of Bank Deposits Act); (e) national security matters and intelligence information; 63 and
(f) criminal matters.64 Nonetheless, the LSPA does not fall within any of these classes of information. Moreover, the privilegeis not absolute, and
the court may compel disclosure where it is indispensable for doing justice.
At any rate, respondent failed to discharge the burden of showing that the LSPA is a privileged document.1wphi1Respondent did not present
any law or regulation that considers bank documents such as the LSPA as classified information. Its contention that the Special Purpose Vehicle
Act65 only requires the creditor-bank to give notice to the debtor of the transfer of his or her account to a special purpose vehicle, and that the
assignee-special purpose vehicle has no obligation to disclose other financial documents related to the sale, is untenable. The Special Purpose
Vehicle Act does not explicitly declare these financial documents as privileged matters. Further, as discussed, petitioners are not precluded from
inquiring as to the true consideration of the assignment, precisely because the same law in relation to Article 1634 allows the debtor to
extinguish its debt by reimbursing the assignee-special purpose vehicle of the actual price the latter paid for the assignment.
An assignment of a credit "produce[s] no effect as against third persons, unless it appears ina public instrument[.]" 66 It strains reason why the
LSPA, which by law must be a publicinstrument to be binding against third persons such as petitioners-debtors, is privileged and confidential.
Alternative defenses are
allowed under the Rules
Finally, respondents contention that petitioners cannot claim the validity and invalidity of the deed ofassignment at the same time is untenable.
The invocation by petitioners of Article 1634, which presupposes the validity of the deed of assignment orthe transfer of the EIB credit to
respondent, even if it would run counter to their defense on the invalidity of the deed of assignment, is proper and sanctioned by Rule 8, Section
2 of the Rules of Court, which reads:
SEC. 2. Alternative causes of action or defenses. A party may set forth two or more statements of a claim or defense alternatively or
hypothetically, either in one causeof action or defense or in separate causes of action or defenses. When two or more statements are made in
the alternative and one of them if made independently would be sufficient, the pleading is not made insufficient by the insufficiency of one or
more of the alternative statements. (Emphasis supplied)
All told, respondent failed to allege sufficient reasons for us to reconsider our decision. Verily, the production and inspection of the LSPA and its
annexes fulfill the discovery-procedures objective of making the trial "less a game of blind mans buff and morea fair contest with the basic
issues and facts disclosed to the fullest practicable extent."67
WHEREFORE, the motion for reconsideration is DENIED WITH FINALITY.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 163515

October 31, 2008

ISIDRO T. PAJARILLAGA, Petitioner,

vs.
COURT OF APPEALS and THOMAS T. KALANGEG, Respondents.
DECISION
QUISUMBING, Acting C.J.:
This is a petition for review on certiorari of the Decision1 dated January 26, 2004 and the Resolution2 dated May 14, 2004 of the Court of
Appeals in CA-G.R. SP No. 47526. The appellate court affirmed the Orders3 dated January 29, 1998 and March 26, 1998 of the Regional Trial
Court (RTC) of Bontoc, Mt. Province, Branch 36, which had denied petitioners Motion for Leave of Court to Take the Deposition of the
Defendant Upon Written Interrogatories.
The antecedent facts are as follows:
On November 24, 1995, private respondent Thomas T. Kalangeg filed with the RTC of Bontoc, Mt. Province, Branch 36, a complaint 4 for a sum
of money with damages against petitioner Isidro T. Pajarillaga.
Since the parties failed to reach an amicable settlement, trial on the merits ensued. On March 10, 1997, private respondent presented his first
witness. At the next scheduled hearing on August 8, 1997, neither petitioner nor his counsel appeared despite notice. Upon private respondents
motion, the trial court allowed him to present his remaining two witnesses subject to petitioners cross-examination on the next scheduled
hearing on September 2, 1997. But when the case was called on that date, petitioner and his counsel were again absent. Upon private
respondents motion, the trial court declared petitioner to have waived his right of cross-examination and allowed private respondent to make a
formal offer of evidence.
In an Order dated October 8, 1997, the trial court admitted all the exhibits formally offered by private respondent. It also scheduled petitioners
presentation of evidence on October 28, 29 and 30, 1997.
Petitioner moved to reset the hearing to November 17, 1997. The trial court granted his motion and reset the hearing to December 15, 1997.
On December 10, 1997, however, petitioner filed a Motion for Leave of Court to Take the Deposition of the Defendant Upon Written
Interrogatories5 on the grounds that: (1) petitioner resides in Manila which is more than four hundred (400) kilometers from Bontoc, Mt. Province;
and (2) petitioner is suffering from an illness which prohibits him from doing strenuous activities.
Private respondent opposed the motion. On December 15, 1997, neither petitioner nor his counsel again appeared. Nonetheless, the trial court
reset the case to January 12, 1998 for the presentation of petitioners evidence. What transpired on said date, however, is not disclosed by the
records before this Court.
In an Order6 dated January 29, 1998, the trial court denied petitioners motion, in this wise:

Considering that the above-entitled case has been pending since November 24, 1995, and hearings thereof have been delayed almost always
at the instance of the defendant, the latters motion for leave of Court to take said defendants deposition upon written interrogatories at this late
stage of the proceedings is hereby denied.
Wherefore, in the interest of justice defendant is granted one more chance to adduce his evidence on February 18, 1998, at 8:30 oclock in the
morning. Otherwise, he shall be deemed to have waived his right thereto.
SO ORDERED.
Petitioner moved for reconsideration which the trial court denied. It also reset the hearing to April 20, 1998. 7
Petitioner elevated the case to the Court of Appeals via a petition for certiorari under Rule 65 of the 1997 Rules of Court. In affirming the trial
courts orders, the appellate court ruled that: First, the denial of petitioners motion was not tainted with grave abuse of discretion since the trial
court gave petitioner full opportunity to present his evidence. Second, petitioners motion came much too late in the proceedings since private
respondent has already rested his case. Third, the medical certificate which petitioner submitted to validate his allegation of illness merely
contained a remark that the "patient is advised to avoid strenuous activity." It did not state that the travel from Manila to Mt. Province for the
scheduled hearings was too strenuous to endanger petitioners health. Fourth, the threats to petitioners life by private respondents relatives
were belatedly alleged only in his motion for reconsideration.
Dissatisfied, petitioner appealed to this Court on the ground that the Court of Appeals erred in:
DENYING PETITIONERS PRAYER THAT HIS DEPOSITION BE TAKEN THROUGH WRITTEN INTERROGATORIES IN CONNECTION
WITH A CASE WHICH IS BEING HEARD BY THE REGIONAL TRIAL COURT OF BONTOC, MT. PROVINCE THAT CAN BE REACHED AFTER
A GRUELLING SEVEN (7) HOUR RIDE TRAVERSING VERY ROUGH AND RUGGED ROADS. 8
Simply stated, the issue is whether the taking of petitioners deposition by written interrogatories is proper under the circumstances obtaining in
this case.
Petitioner asserts that the trial court should have allowed the taking of his deposition through written interrogatories since: (1) this discovery
measure may be availed of by a party as a matter of right; (2) he has good reasons for invoking his right to this discovery measure, i.e., he
resides in Manila which is more than four hundred (400) kilometers from Bontoc, Mt. Province and he is suffering from an illness which prohibits
him from doing strenuous activities. Petitioner adds that there are serious threats to his life by private respondents relatives.
Private respondent counters that petitioner could no longer avail of this discovery measure since the trial court has already given him sufficient
time to present his evidence and yet he failed to do so. Private respondent adds that petitioners motion was made purposely to further delay the
resolution of the case as it was invoked during the late stage of the proceedings. Private respondent also avers that the medical certificate
submitted to show petitioners illness does not contain any statement that he could not travel from Manila to Mt. Province for the scheduled
hearings. In fact, the medical certificate was not even notarized.
After considering the contentions and submissions of the parties, we are in agreement that the petition lacks merit.
Deposition is chiefly a mode of discovery, the primary function of which is to supplement the pleadings for the purpose of disclosing the real
points of dispute between the parties and affording an adequate factual basis during the preparation for trial. 9 It should be allowed absent any
showing that taking it would prejudice any party. It is accorded a broad and liberal treatment and the liberty of a party to make discovery is wellnigh unrestricted if the matters inquired into are otherwise relevant and not privileged, and the inquiry is made in good faith and within the
bounds of law. It is allowed as a departure from the accepted and usual judicial proceedings of examining witnesses in open court where their
demeanor could be observed by the trial judge, consistent with the principle of promoting just, speedy and inexpensive disposition of every
action and proceeding; and provided it is taken in accordance with the provisions of the Rules of Court, i.e., with leave of court if summons have
been served, and without such leave if an answer has been submitted; and provided further that a circumstance for its admissibility exists. 10
There is nothing in the Rules of Court or in jurisprudence which restricts a deposition to the sole function of being a mode of discovery before
trial. Under certain conditions and for certain limited purposes, it may be taken even after trial has commenced and may be used without the
deponent being actually called to the witness stand.11There is no rule that limits deposition-taking only to the period of pre-trial or before it; no
prohibition exists against the taking of depositions after pre-trial. There can be no valid objection to allowing them during the process of
executing final and executory judgments, when the material issues of fact have become numerous or complicated.12
Such being the case, there is really nothing objectionable, per se, with petitioner availing of this discovery measure after private respondent has
rested his case and prior to petitioners presentation of evidence. To reiterate, depositions may be taken at any time after the institution of any
action, whenever necessary or convenient.
But when viewed vis the several postponements made by petitioner for the initial presentation of his evidence, we are of the view that his timing
is, in fact, suspect. The records before us show that petitioner stopped attending the hearings after private respondent presented his first
witness. Petitioner offered no excuse for his and his counsels absences. Moreover, the trial court has set four (4) hearing dates for the initial
presentation of his evidence. But he merely moved for its resetting without invoking the grounds which he now presents before us.
Besides, even as we scrutinize petitioners arguments, we think that he has not sufficiently shown an "exceptional" or "unusual" case for us to
grant leave and reverse the trial and appellate courts.
Under Section 4, Rule 23 of the Rules of Court, depositions may be used for the trial or for the hearing of a motion or an interlocutory
proceeding, under the following circumstances:
SEC. 4. Use of depositions.
xxxx
(c) The deposition of a witness, whether or not a party, may be used by any party for any purpose if the court finds: (1) that the witness is dead;
or (2) that the witness resides at a distance more than one hundred (100) kilometers from the place of trial or hearing, or is out of the Philippines,
unless it appears that his absence was procured by the party offering the deposition; or (3) that the witness is unable to attend or testify because
of age, sickness, infirmity, or imprisonment; or (4) that the party offering the deposition has been unable to procure the attendance of the witness

by subpoena; or (5) upon application and notice, that such exceptional circumstances exist as to make it desirable, in the interest of justice and
with due regard to the importance of presenting the testimony of witnesses orally in open court, to allow the deposition to be used; and
x x x x13
In this case, petitioner invokes distance and illness to avail of the discovery measure.1avvphi1 We agree with private respondent that the matter
of distance could have been settled had petitioner requested for a change of venue earlier in the proceedings. Petitioner has attended the pretrial and the hearing where private respondent presented his first witness. He need not await his turn to present evidence before realizing the
great inconvenience caused by the enormous distance between his place of residence and the place of hearing.
Nor are we inclined to accept petitioners claim of illness. As aptly observed by the Court of Appeals, the medical certificate submitted by
petitioner merely contained a remark that the "patient is advised to avoid strenuous activity." It was not alleged that the travel from Manila to Mt.
Province for the scheduled hearings was too strenuous to endanger petitioners health.
We also agree with the Court of Appeals that the threats to petitioners life by private respondents relatives appear to be a mere afterthought
since it was raised only in petitioners motion for reconsideration of the trial courts denial of his motion for leave. We also note that the incident
which gave rise to the alleged threats took place prior to the pre-trial. Surely, petitioner could have informed the trial court of this incident had
there been truth to, and serious implication of, his allegation.
Finally, we must emphasize that while the rules on discovery are liberally constructed so as to ascertain truth and to expedite the disposal of
cases, the trial court may disallow a deposition if there are valid reasons for so ruling.14 Here, we find the protracted delay in the litigation at
petitioners instance coupled with the belated and unsubstantiated allegations of illness and threats to petitioners life, more than sufficient
reasons for the trial court to deny petitioners motion.
WHEREFORE, the instant petition is DENIED for lack of merit. The Decision dated January 26, 2004 and the Resolution dated May 14, 2004 of
the Court of Appeals in CA-G.R. SP No. 47526, are AFFIRMED. Costs against petitioner.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
FIRST DIVISION
G.R. No. 161135. April 8, 2005
SWAGMAN HOTELS AND TRAVEL, INC., Petitioners,
vs.
HON. COURT OF APPEALS, and NEAL B. CHRISTIAN, Respondents.
DECISION
DAVIDE, JR., C.J.:
May a complaint that lacks a cause of action at the time it was filed be cured by the accrual of a cause of action during the pendency of the
case? This is the basic issue raised in this petition for the Courts consideration.
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc., through Atty. Leonor L. Infante and Rodney David Hegerty, its
president and vice-president, respectively, obtained from private respondent Neal B. Christian loans evidenced by three promissory notes dated
7 August 1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in the amount of US$50,000 payable after three years from
its date with an interest of 15% per annum payable every three months.1 In a letter dated 16 December 1998, Christian informed the petitioner
corporation that he was terminating the loans and demanded from the latter payment in the total amount of US$150,000 plus unpaid interests in
the total amount of US$13,500.2
On 2 February 1999, private respondent Christian filed with the Regional Trial Court of Baguio City, Branch 59, a complaint for a sum of money
and damages against the petitioner corporation, Hegerty, and Atty. Infante. The complaint alleged as follows: On 7 August 1996, 14 March 1997,
and 14 July 1997, the petitioner, as well as its president and vice-president obtained loans from him in the total amount of US$150,000 payable
after three years, with an interest of 15% per annum payable quarterly or every three months. For a while, they paid an interest of 15% per
annum every three months in accordance with the three promissory notes. However, starting January 1998 until December 1998, they paid him
only an interest of 6% per annum, instead of 15% per annum, in violation of the terms of the three promissory notes. Thus, Christian prayed that
the trial court order them to pay him jointly and solidarily the amount of US$150,000 representing the total amount of the loans; US$13,500
representing unpaid interests from January 1998 until December 1998; P100,000 for moral damages; P50,000 for attorneys fees; and the cost
of the suit.3
The petitioner corporation, together with its president and vice-president, filed an Answer raising as defenses lack of cause of action and
novation of the principal obligations. According to them, Christian had no cause of action because the three promissory notes were not yet due
and demandable. In December 1997, since the petitioner corporation was experiencing huge losses due to the Asian financial crisis, Christian
agreed (a) to waive the interest of 15% per annum, and (b) accept payments of the principal loans in installment basis, the amount and period of
which would depend on the state of business of the petitioner corporation. Thus, the petitioner paid Christian capital repayment in the amount of
US$750 per month from January 1998 until the time the complaint was filed in February 1999. The petitioner and its co-defendants then prayed
that the complaint be dismissed and that Christian be ordered to pay P1 million as moral damages; P500,000 as exemplary damages;
and P100,000 as attorneys fees.4

In due course and after hearing, the trial court rendered a decision5 on 5 May 2000 declaring the first two promissory notes dated 7 August 1996
and 14 March 1997 as already due and demandable and that the interest on the loans had been reduced by the parties from 15% to 6% per
annum. It then ordered the petitioner corporation to pay Christian the amount of $100,000 representing the principal obligation covered by the
promissory notes dated 7 August 1996 and 14 March 1997, "plus interest of 6% per month thereon until fully paid, with all interest payments
already paid by the defendant to the plaintiff to be deducted therefrom."
The trial court ratiocinated in this wise:
(1) There was no novation of defendants obligation to the plaintiff. Under Article 1292 of the Civil Code, there is an implied novation only if the
old and the new obligation be on every point incompatible with one another.
The test of incompatibility between the two obligations or contracts, according to an imminent author, is whether they can stand together, each
one having an independent existence. If they cannot, they are incompatible, and the subsequent obligation novates the first (Tolentino, Civil
Code of the Philippines, Vol. IV, 1991 ed., p. 384). Otherwise, the old obligation will continue to subsist subject to the modifications agreed upon
by the parties. Thus, it has been written that accidental modifications in an existing obligation do not extinguish it by novation. Mere
modifications of the debt agreed upon between the parties do not constitute novation. When the changes refer to secondary agreement and not
to the object or principal conditions of the contract, there is no novation; such changes will produce modifications of incidental facts, but will not
extinguish the original obligation. Thus, the acceptance of partial payments or a partial remission does not involve novation (id., p. 387). Neither
does the reduction of the amount of an obligation amount to a novation because it only means a partial remission or condonation of the same
debt.
In the instant case, the Court is of the view that the parties merely intended to change the rate of interest from 15% per annum to 6% per annum
when the defendant started paying $750 per month which payments were all accepted by the plaintiff from January 1998 onward. The payment
of the principal obligation, however, remains unaffected which means that the defendant should still pay the plaintiff $50,000 on August 9, 1999,
March 14, 2000 and July 14, 2000.
(2) When the instant case was filed on February 2, 1999, none of the promissory notes was due and demandable. As of this date however, the
first and the second promissory notes have already matured. Hence, payment is already due.
Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a complaint which states no cause of action may be cured by evidence
presented without objection. Thus, even if the plaintiff had no cause of action at the time he filed the instant complaint, as defendants obligation
are not yet due and demandable then, he may nevertheless recover on the first two promissory notes in view of the introduction of evidence
showing that the obligations covered by the two promissory notes are now due and demandable.
(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can not be held personally liable for the obligations contracted by the
defendant corporation it being clear that they merely acted in representation of the defendant corporation in their capacity as General Manager
and President, respectively, when they signed the promissory notes as evidenced by Board Resolution No. 1(94) passed by the Board of
Directors of the defendant corporation (Exhibit "4").6
In its decision7 of 5 September 2003, the Court of Appeals denied petitioners appeal and affirmed in toto the decision of the trial court, holding
as follows:
In the case at bench, there is no incompatibility because the changes referred to by appellant Swagman consist only in the manner of payment. .
..
Appellant Swagmans interpretation that the three (3) promissory notes have been novated by reason of appellee Christians acceptance of the
monthly payments of US$750.00 as capital repayments continuously even after the filing of the instant case is a little bit strained considering the
stiff requirements of the law on novation that the intention to novate must appear by express agreement of the parties, or by their acts that are
too clear and unequivocal to be mistaken. Under the circumstances, the more reasonable interpretation of the act of the appellee Christian in
receiving the monthly payments of US$750.00 is that appellee Christian merely allowed appellant Swagman to pay whatever amount the latter is
capable of. This interpretation is supported by the letter of demand dated December 16, 1998 wherein appellee Christian demanded from
appellant Swagman to return the principal loan in the amount of US$150,000 plus unpaid interest in the amount of US$13,500.00
...
Appellant Swagman, likewise, contends that, at the time of the filing of the complaint, appellee Christian ha[d] no cause of action because none
of the promissory notes was due and demandable.
Again, We are not persuaded.
In the case at bench, while it is true that appellant Swagman raised in its Answer the issue of prematurity in the filing of the complaint, appellant
Swagman nonetheless failed to object to appellee Christians presentation of evidence to the effect that the promissory notes have become due
and demandable.
The afore-quoted rule allows a complaint which states no cause of action to be cured either by evidence presented without objection or, in the
event of an objection sustained by the court, by an amendment of the complaint with leave of court (Herrera, Remedial Law, Vol. VII, 1997 ed.,
p. 108).8
Its motion for reconsideration having been denied by the Court of Appeals in its Resolution of 4 December 2003, 9the petitioner came to this
Court raising the following issues:
I. WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO DEFENDANTS HAS BECOME FINAL AND EXECUTORY, MAY THE
RESPONDENT COURT OF APPEALS STILL STUBBORNLY CONSIDER THEM AS APPELLANTS WHEN THEY DID NOT APPEAL?
ii. Where there is no cause of action, is the decision of the lower court valid?
III. MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A DECISION OF THE LOWER COURT WHICH IS INVALID DUE TO
LACK OF CAUSE OF ACTION?

IV. Where there is a valid novation, may the original terms of contract which has been novated still prevail? 10
The petitioner harps on the absence of a cause of action at the time the private respondents complaint was filed with the trial court. In
connection with this, the petitioner raises the issue of novation by arguing that its obligations under the three promissory notes were novated by
the renegotiation that happened in December 1997 wherein the private respondent agreed to waive the interest in each of the three promissory
notes and to accept US$750 per month as installment payment for the principal loans in the total amount of US$150,000. Lastly, the petitioner
questions the act of the Court of Appeals in considering Hegerty and Infante as appellants when they no longer appealed because the trial court
had already absolved them of the liability of the petitioner corporation.
On the other hand, the private respondent asserts that this petition is "a mere ploy to continue delaying the payment of a just obligation." Anent
the fact that Hegerty and Atty. Infante were considered by the Court of Appeals as appellants, the private respondent finds it immaterial because
they are not affected by the assailed decision anyway.
Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil Procedure, is the act or omission by which a party violates the right of
another. Its essential elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever law it arises or is created;
2. An obligation on the part of the named defendant to respect or not to violate such right; and
3. Act or omission on the part of such defendant in violation of the right of the plaintiff or constituting a breach of the obligation of the defendant
to the plaintiff for which the latter may maintain an action for recovery of damages or other appropriate relief. 11
It is, thus, only upon the occurrence of the last element that a cause of action arises, giving the plaintiff the right to maintain an action in court for
recovery of damages or other appropriate relief.
It is undisputed that the three promissory notes were for the amount of P50,000 each and uniformly provided for (1) a term of three years; (2) an
interest of 15 % per annum, payable quarterly; and (3) the repayment of the principal loans after three years from their respective dates.
However, both the Court of Appeals and the trial court found that a renegotiation of the three promissory notes indeed happened in December
1997 between the private respondent and the petitioner resulting in the reduction not waiver of the interest from 15% to 6% per annum,
which from then on was payable monthly, instead of quarterly. The term of the principal loans remained unchanged in that they were still due
three years from the respective dates of the promissory notes. Thus, at the time the complaint was filed with the trial court on 2 February 1999,
none of the three promissory notes was due yet; although, two of the promissory notes with the due dates of 7 August 1999 and 14 March 2000
matured during the pendency of the case with the trial court. Both courts also found that the petitioner had been religiously paying the private
respondent US$750 per month from January 1998 and even during the pendency of the case before the trial court and that the private
respondent had accepted all these monthly payments.
With these findings of facts, it has become glaringly obvious that when the complaint for a sum of money and damages was filed with the trial
court on 2 February 1999, no cause of action has as yet existed because the petitioner had not committed any act in violation of the terms of the
three promissory notes as modified by the renegotiation in December 1997. Without a cause of action, the private respondent had no right to
maintain an action in court, and the trial court should have therefore dismissed his complaint.
Despite its finding that the petitioner corporation did not violate the modified terms of the three promissory notes and that the payment of the
principal loans were not yet due when the complaint was filed, the trial court did not dismiss the complaint, citing Section 5, Rule 10 of the 1997
Rules of Civil Procedure, which reads:
Section 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried with the
express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party
at any time, even after judgment; but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial
on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so with
liberality if the presentation of the merits of the action and the ends of substantial justice will be subserved thereby. The court may grant a
continuance to enable the amendment to be made.
According to the trial court, and sustained by the Court of Appeals, this Section allows a complaint that does not state a cause of action to be
cured by evidence presented without objection during the trial. Thus, it ruled that even if the private respondent had no cause of action when he
filed the complaint for a sum of money and damages because none of the three promissory notes was due yet, he could nevertheless recover
on the first two promissory notes dated 7 August 1996 and 14 March 1997, which became due during the pendency of the case in view of the
introduction of evidence of their maturity during the trial.
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil Procedure is erroneous.
Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of Civil Procedure in order that the actual merits of a case may be
determined in the most expeditious and inexpensive manner without regard to technicalities, and that all other matters included in the case may
be determined in a single proceeding, thereby avoiding multiplicity of suits.12 Section 5 thereof applies to situations wherein evidence not within
the issues raised in the pleadings is presented by the parties during the trial, and to conform to such evidence the pleadings are subsequently
amended on motion of a party. Thus, a complaint which fails to state a cause of action may be cured by evidence presented during the trial.
However, the curing effect under Section 5 is applicable only if a cause of action in fact exists at the time the complaint is filed, but the complaint
is defective for failure to allege the essential facts. For example, if a complaint failed to allege the fulfillment of a condition precedent upon which
the cause of action depends, evidence showing that such condition had already been fulfilled when the complaint was filed may be presented
during the trial, and the complaint may accordingly be amended thereafter.13 Thus, in Roces v. Jalandoni,14 this Court upheld the trial court in
taking cognizance of an otherwise defective complaint which was later cured by the testimony of the plaintiff during the trial. In that case, there
was in fact a cause of action and the only problem was the insufficiency of the allegations in the complaint. This ruling was reiterated in Pascua
v. Court of Appeals.15
It thus follows that a complaint whose cause of action has not yet accrued cannot be cured or remedied by an amended or supplemental
pleading alleging the existence or accrual of a cause of action while the case is pending. 16 Such an action is prematurely brought and is,
therefore, a groundless suit, which should be dismissed by the court upon proper motion seasonably filed by the defendant. The underlying

reason for this rule is that a person should not be summoned before the public tribunals to answer for complaints which are immature. As this
Court eloquently said in Surigao Mine Exploration Co., Inc. v. Harris:17
It is a rule of law to which there is, perhaps, no exception, either at law or in equity, that to recover at all there must be some cause of action
at the commencement of the suit. As observed by counsel for appellees, there are reasons of public policy why there should be no needless
haste in bringing up litigation, and why people who are in no default and against whom there is yet no cause of action should not be summoned
before the public tribunals to answer complaints which are groundless. We say groundless because if the action is immature, it should not be
entertained, and an action prematurely brought is a groundless suit.
It is true that an amended complaint and the answer thereto take the place of the originals which are thereby regarded as abandoned (Reynes
vs. Compaa General de Tabacos [1912], 21 Phil. 416; Ruyman and Farris vs. Director of Lands [1916], 34 Phil., 428) and that "the complaint
and answer having been superseded by the amended complaint and answer thereto, and the answer to the original complaint not having been
presented in evidence as an exhibit, the trial court was not authorized to take it into account." (Bastida vs. Menzi & Co. [1933], 58 Phil., 188.) But
in none of these cases or in any other case have we held that if a right of action did not exist when the original complaint was filed, one could be
created by filing an amended complaint. In some jurisdictions in the United States what was termed an "imperfect cause of action" could be
perfected by suitable amendment (Brown vs. Galena Mining & Smelting Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221) and this
is virtually permitted in Banzon and Rosauro vs. Sellner ([1933], 58 Phil., 453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil., 683); and
recently in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which is no cause of action whatsoever cannot by amendment or
supplemental pleading be converted into a cause of action:Nihil de re accrescit ei qui nihil in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff has a valid and subsisting cause of action at the time his action is
commenced, the defect cannot be cured or remedied by the acquisition or accrual of one while the action is pending, and a
supplemental complaint or an amendment setting up such after-accrued cause of action is not permissible. (Emphasis ours).
Hence, contrary to the holding of the trial court and the Court of Appeals, the defect of lack of cause of action at the commencement of this suit
cannot be cured by the accrual of a cause of action during the pendency of this case arising from the alleged maturity of two of the promissory
notes on 7 August 1999 and 14 March 2000.
Anent the issue of novation, this Court observes that the petitioner corporation argues the existence of novation based on its own version of
what transpired during the renegotiation of the three promissory notes in December 1997. By using its own version of facts, the petitioner is, in a
way, questioning the findings of facts of the trial court and the Court of Appeals.
As a rule, the findings of fact of the trial court and the Court of Appeals are final and conclusive and cannot be reviewed on appeal to the
Supreme Court18 as long as they are borne out by the record or are based on substantial evidence.19 The Supreme Court is not a trier of facts,
its jurisdiction being limited to reviewing only errors of law that may have been committed by the lower courts. Among the exceptions is when the
finding of fact of the trial court or the Court of Appeals is not supported by the evidence on record or is based on a misapprehension of facts.
Such exception obtains in the present case.20
This Court finds to be contrary to the evidence on record the finding of both the trial court and the Court of Appeals that the renegotiation in
December 1997 resulted in the reduction of the interest from 15% to 6% per annum and that the monthly payments of US$750 made by the
petitioner were for the reduced interests.
It is worthy to note that the cash voucher dated January 199821 states that the payment of US$750 represents "INVESTMENT PAYMENT." All
the succeeding cash vouchers describe the payments from February 1998 to September 1999 as "CAPITAL REPAYMENT." 22 All these cash
vouchers served as receipts evidencing private respondents acknowledgment of the payments made by the petitioner: two of which were signed
by the private respondent himself and all the others were signed by his representatives. The private respondent even identified and confirmed
the existence of these receipts during the hearing. 23 Significantly, cognizant of these receipts, the private respondent applied these payments to
the three consolidated principal loans in the summary of payments he submitted to the court.24
Under Article 1253 of the Civil Code, if the debt produces interest, payment of the principal shall not be deemed to have been made until the
interest has been covered. In this case, the private respondent would not have signed the receipts describing the payments made by the
petitioner as "capital repayment" if the obligation to pay the interest was still subsisting. The receipts, as well as private respondents summary of
payments, lend credence to petitioners claim that the payments were for the principal loans and that the interests on the three consolidated
loans were waived by the private respondent during the undisputed renegotiation of the loans on account of the business reverses suffered by
the petitioner at the time.
There was therefore a novation of the terms of the three promissory notes in that the interest was waived and the principal was payable in
monthly installments of US$750. Alterations of the terms and conditions of the obligation would generally result only in modificatory novation
unless such terms and conditions are considered to be the essence of the obligation itself.25 The resulting novation in this case was, therefore, of
the modificatory type, not the extinctive type, since the obligation to pay a sum of money remains in force.
Thus, since the petitioner did not renege on its obligation to pay the monthly installments conformably with their new agreement and even
continued paying during the pendency of the case, the private respondent had no cause of action to file the complaint. It is only upon petitioners
default in the payment of the monthly amortizations that a cause of action would arise and give the private respondent a right to maintain an
action against the petitioner.
Lastly, the petitioner contends that the Court of Appeals obstinately included its President Infante and Vice-President Hegerty as appellants even
if they did not appeal the trial courts decision since they were found to be not personally liable for the obligation of the petitioner. Indeed, the
Court of Appeals erred in referring to them as defendants-appellants; nevertheless, that error is no cause for alarm because its ruling was clear
that the petitioner corporation was the one solely liable for its obligation. In fact, the Court of Appeals affirmed in toto the decision of the trial
court, which means that it also upheld the latters ruling that Hegerty and Infante were not personally liable for the pecuniary obligations of the
petitioner to the private respondent.
In sum, based on our disquisition on the lack of cause of action when the complaint for sum of money and damages was filed by the private
respondent, the petition in the case at bar is impressed with merit.
WHEREFORE, the petition is hereby GRANTED. The Decision of 5 September 2003 of the Court of Appeals in CA-G.R. CV No. 68109, which
affirmed the Decision of 5 May 2000 of the Regional Trial Court of Baguio, Branch 59, granting in part private respondents complaint for sum of
money and damages, and its Resolution of 4 December 2003, which denied petitioners motion for reconsideration are hereby REVERSED and
SET ASIDE. The complaint docketed as Civil Case No. 4282-R is hereby DISMISSED for lack of cause of action.

No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 185590

December 3, 2014

METROPOLITAN BANK AND TRUST COMPANY, Petitioner,

vs.
LEY CONSTRUCTION AND DEVELOPMENT CORPORATION and SPOUSES MANUEL LEY and JANET LEY,Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
This petition for review on certiorari under Rule 45 of the Rules of Court seeks the reversal of the Court of Appeals' Decision 1 dated September
4, 2008 in CA-G.R. CV No. 75590 dismissing the appeal of petitioner Metropolitan Bank and Trust Company assailing the dismissal of its
complaint by the Regional Trial Court (RTC) of Makati City, Branch 56, and the Resolution 2 dated December 5, 2008 denying the Bank's motion
for reconsideration.
The Court of Appeals adopted the following recital of facts in the Decision 3 dated July 3, 2001 of the RTC in Civil Case No. 91-1878:
This is an action for recovery of a sum of money and damages with a prayer for the issuance of writ of preliminary attachment filed by the
plaintiff Philippine Banking Corporation4 against the defendants, namely: Ley Construction and Development Corporation (hereafter "LCDC")
and Spouses Manuel and Janet C. Ley (hereafter "[defendant]-spouses").
The complaint alleges that: Defendant LCDC, a general contracting firm, through the oral representations of defendant-spouses, applied with
plaintiff, a commercial bank, for the opening of a Letter of Credit. Plaintiff issued, on April 26, 1990, Letter of Credit DC 90[-]303-C in favor of the

supplier-beneficiary Global Enterprises Limited, in the amount of Eight Hundred Two Thousand Five Hundred U.S. Dollars (USD 802,500.00).
The letter of credit covered the importation by defendant LCDC of Fifteen Thousand (15,000) metric tons of Iraqi cement from Iraq. Defendant
applied for and filed with plaintiff two (2) Applications for Amendment of Letter of Credit on May 3, 1990 and May 11, 1990, respectively.
Thereafter, the supplier-beneficiary Global Enterprises, Inc. negotiated its Letter of Credit with the negotiating bank Credit Suisse of Zurich,
Switzerland. Credit Suisse then sent a reimbursement claim by telex to American Express Bank Ltd., New York on July 25, 1990 for the amount
of Seven Hundred Sixty[-]Six Thousand Seven Hundred Eight U.S. Dollars (USD 766,708.00) with a certification that all terms and conditions of
the credit were complied with. Accordingly, on July 30, 1990, American Express Bank debited plaintiffs account Seven Hundred Seventy
Thousand Six Hundred Ninety[-]One U.S. Dollars and Thirty Cents (USD 770,691.30) and credited Credit Suisse Zurich Account with American
Express Bank, Ltd., New Yorkfor the negotiation of Letter of Credit. On August 6, 1990, plaintiff received from Credit Suisse the necessary
shipping documents pertaining to Letter of Credit DC 90-303-C that were in turn delivered to the defendant. Upon receipt of the aforesaid
documents, defendants executed a trust receipt. However, the cement that was to be imported through the opening of the subject Letter of
Credit never arrived in the Philippines.
The prompt payment of the obligation of the defendant LCDC was guaranteed by [defendant]-spouses under the Continuing Surety Agreement
executed by the latter in favor of the defendant. The obligation covered by the subject Letter of Credit in the amount of USD 802,500.00 has long
been overdue and unpaid, notwithstanding repeated demands for payment thereof. Plaintiff, therefore, instituted the instant complaint for
recovery of the following amounts: Twenty[-]Three [M]illion Two Hundred [F]ifty[-]Nine Thousand One Hundred Twenty[-]Four Pesos and
Fourteen Centavos (PHP23,259,124.14) as of June 15, 1991, inclusive of interestand penalty, plus additional interest thereon of Thirty percent
(30%) per annum; attorneys fees equivalent to Twenty[-]Five percent [25%] of the total obligation; and costs of suit.
In support of its cause of action against defendant, plaintiff presented the testimony of Mr. Fenelito Cabrera, Head of the Foreign Department of
plaintiffs Head Office. (T.S.N. dated June 16, 1995, p. 4) There being no other witness to be presented by the plaintiff (Order dated June 27,
1997), the plaintiff filed its formal offer of exhibits dated July 18, 1997 to which defendant filed its comments/objections to formal offer of
evidence dated February 23, 1998. In an order dated March 4, 1998, Exhibits "A" to "N" to "N-4" including [their] sub-markings were admitted for
the purposes they were respectively offered. However, on defendants motion for reconsideration dated [March 30,] 1998 that was duly opposed
by the plaintiff in itsopposition dated June 3, 1998, this Court partially granted defendants motion for reconsideration. Consequently, Exhibits
"D", "E", "H","I", "J", "K", "L", and "M" and their sub-markings were not admitted for not being properly identified and authenticated by a
competent witness. Only Exhibits "A", "B", "C", "C-1", and "N", "N-1" to "N-4" remain admitted in evidence. (Order dated September 9, 1998)
Defendant filed a motion to dismiss by way of demurrer to evidence on the ground that plaintiffs witness Mr. Fenelito Cabrera was incompetent
to testify with respect tothe transaction between the plaintiff and the defendant and that the plaintiffs documentary exhibits were not properly
identified and authenticated.5
The trial court found that the Banks only witness, Fenelito Cabrera, was incompetent to testify on the documents presented by the Bank during
the trial. Cabrera was with the Banks Dasmarias Branch and not with the Head Office from March 1990 to June 1991, the period the
transaction covered by the documents took place. Thus, he could not have properly identified and authenticated the Banks documentary
exhibits. His lack of competence was even admitted by the Banks counsel who did not even ask Cabrera to identify the documents. Asthe
documents were not identified and duly authenticated, the Banks evidence was not preponderant enough to establish its right to recover from
LCDC and the spouses Ley.6
The trial court further ruled that only the following documents remained admitted in evidence:
Exhibit

Document

"A"

Continuing Surety Agreement dated July 25, 1989

"B"

Application and Agreement for Commercial Letter of Credit

"C" and "C-1"

Letter of Credit No. DC 90-303-C

"N" and "N-1" to "N-4"

Statement of Outstanding Obligations

For the trial court, these were insufficient to show that LCDC and the spouses Ley were responsible for the improper negotiation of the letter of
credit. Thus, the trial court concluded in its Decision dated July 3, 2001 that the Bank failed to establish its cause ofaction and to make a
sufficient or preponderant case.7 The dispositive portion of the decision reads:
WHEREFORE, the demurrer to evidence is granted. The case is dismissed.8 The Bank appealed to the Court of Appeals. It claimed that the trial
court erred in granting the demurrer toevidence of LCDC and the spouses Ley on the ground that the Bank failed to establish its cause of action.
The Bank insisted that, even without considering the exhibits excluded in evidence by the trial court, the Bank was able to prove by
preponderant evidence that it had a right and that right was violated by LCDC and the spouses Ley. It explained that the trial court was wrong in
considering only Exhibits "A," "B," "C," "C-1," "N" and "N-1" to "N-4" as the following documents were also admitted in evidence and should have
been considered in the resolution of the demurrer to evidence.9
Exhibit

Document

"F"

Register Copy or Memorandum on the Letter of Credit

"G"

Trust Receipt No. TRI432/90 dated August 16, 1990

"G-1"

Bank Draft

"G-2"

Bill of Exchange

The Bank asserted that the consideration of Exhibits "F," "G" and "G-1" to "G-2" would have established the following:
(a) On August 16, 1990, LCDC and the spouses Ley received from the Bank the necessary shipping documents relative to the Letter
of Credit evidencing title to the goods subject matter of the importation which the Bank had previously received from Credit Suisse;
(b) Upon receipt of the shipping documents, LCDC and the spouses Ley executed a trust receipt, Trust Receipt No. TRI432/90, in
favor of the Bank covering the importation of cement under Letter of Credit No. DC 90-303-C;
(c) The issuance of the trust receipt was an acknowledgement by LCDC and the spouses Ley of their receipt of the shipping
documents and of their liability to the Bank;
(d) By signing the trust receipt, constituted an admission by LCDC and the spouses Ley that the Letter of Credit was in order, including
the Banks payment of the amountof US$766,708.00 under the Letter of Credit. 10

Thus, even with only the testimony ofCabrera and Exhibits "A," "B," "C," "C-1," "N" and "N-1" to "N-4" and "F," "G" and "G-1" to "G-2," the
demurrer should have been denied and LCDC and the spouses Ley held liable to the Bank.
Moreover, the Bank contended that its Exhibits "D," "E," "H," and "I" should have been also admitted in evidence because LCDC and the
spouses Ley effectively admitted the authenticity of the said documents when they stated in the pre-trial brief which they submitted during the
pretrial of the case atthe trial court:
III. DOCUMENTARY EXHIBITS
Defendants shall adopt the documents submitted by plaintiff and marked as Annexes "A", "B", "C", "D","E", "E-1", "F", "G", "G-1", "H" and "H-1"
in the plaintiffs complaint.
Defendants reserve the right tomark or adopt such other documentary evidence as may be discovered or warranted to support its claim in the
course of the trial. x x x.11
The Court of Appeals found no merit in the Banks appeal. It observed that Cabrera, the Banks onlywitness, prepared and properly identified
Exhibits "F," "G," "N" and "N-1" to "N-4" only. The Banks counsel even admitted in open court during Cabreras direct examination that Cabrera
was incompetent to testify onthe rest of the Exhibits. The trial court was therefore correct in not giving any evidentiary weight to those Exhibits
not properly identified by Cabrera.12
For the Court of Appeals, the statement in the pre-trial brief that LCDC and the spouses Ley "shall adopt" Annexes "A," "B," "C," "D," "E," "E-1,"
"F," "G," "G-1," "H" and "H-1" of the Banks complaint did not constitute an admission of the said documents by LCDC and the spouses Ley.
However, the appellate court noted that LCDC and the spouses Ley admitted the existence and authenticity of the Banks Exhibits "A," "B," "C,"
"C-1," and "G."13
Nevertheless, the Court of Appeals ruled that the following Exhibits of the Bank were admitted in evidence:
Exhibit

Document

"A"

Continuing Surety Agreement dated July 25, 1989

"B"

Application and Agreement for Commercial Letter of Credit

"C" and "C-1"

Letter of Credit No. DC 90-303-C

"F"

Register Copy or Memorandum on the Letter of Credit

"G"

Trust Receipt No. TRI432/90 dated August 16, 1990

"N" and "N-1" to "N-4"

Statement of Outstanding Obligations

Even upon inclusion and consideration of the above-mentioned exhibits, the Court of Appeals held that the Bank still failed to show that LCDC
and the spouses Ley were directly responsible for the improper negotiation of the letter of credit. Thus, the Court of Appeals, in its Decision
dated September 4, 2008, dismissed the appeal and affirmed the decision of the trial court. 14 The dispositive portion of the Decision of the Court
of Appeals reads:
WHEREFORE, premises considered, the instant appeal is hereby DISMISSED and the assailed decision of the RTC, National Capital Judicial
Region, Branch 56, Makati City in Civil Case No. 91-1878 is AFFIRMED.15
The Court of Appeals denied the Banks motion for reconsideration, prompting the Bank to file this petition.
The Bank insists that it has been ableto establish its cause of action not only through preponderance of evidence but even by the admissions of
LCDC and the spouses Ley. It maintains that its cause of action is not predicated on the improper negotiation of the letter of credit but on the
breach of the terms and conditions of the trust receipt.16
The petition fails.
First, the Banks petition suffers from a fatal infirmity. In particular, it contravenes the elementary rule of appellate procedure that an appeal to
this Court by petition for review on certiorari under Rule 45 of the Rules of Court "shall raise only questions of law." 17 The rule is based on the
nature of this Courts appellate function this Court is not a trier of facts 18 and on the evidentiary weight given to the findings of fact of the trial
court which have been affirmed on appeal by the Court of Appeals they are conclusive on this Court. 19 While there are recognized exceptions
to the rule,20 this Court sees no reason to apply the exception and not the rule in this case.
The conceptual distinction between a question of law and a question of fact is well-settled in case law:
There is a "question of law" when the doubt or difference arises as to what the law is on a certain state of facts, and which does not call for an
examination of the probative value of the evidence presented by the parties-litigants. On the other hand, there is a "question of fact" when the
doubt or controversy arises as to the truth or falsity of the alleged facts. x x x.21
The issue of whether or not the Bank was able to establish its cause of action by preponderant evidence is essentially a question of fact. Stated
in another way, the issue which the Bank raises in this petition is whether the evidence it presented during the trial was preponderant enough to
hold LCDC and the spouses Ley liable.
The required burden of proof, or that amount of evidence necessary and sufficient to establish ones claim or defense, in civil cases is
preponderance of evidence.22 Preponderance of evidence is defined as follows:
Preponderance of evidence is the weight, credit, and value of the aggregate evidence on either side and is usually considered to be
synonymous with the term "greater weight of evidence" or "greater weight of the credible evidence." Preponderance of evidence is a phrase
which, in the last analysis, means probability to truth. It is evidence which is more convincing to the court as worthier of belief than that which is
offered in opposition thereto.23 (Emphasis supplied, citation omitted.)
As preponderance of evidence refers to the probability to truth of the matters intended to be proven as facts, it concerns a determination of the
truth or falsity of the alleged facts based on the evidence presented. Thus, a review of the respective findings of the trial and the appellate courts
as to the preponderance of a partys evidence requires that the reviewing court address a question of fact.

Moreover, a demurrer to evidence is a motion to dismiss on the ground of insufficiency of evidence. Evidence is the means, sanctioned by the
Rules of Court, of ascertaining in a judicial proceeding the truth respecting a matter of fact. 24 As such, the question of sufficiency or insufficiency
of evidence, the basic issue presented by the Bank, pertains to the question of whether the factual matters alleged by the Bank are true. Plainly,
it is a question of fact and, as such, not proper subject of a petition for review on certiorari under Rule 45 of the Rules of Court. It was incumbent
upon the Bank to demonstrate that this case fell under any of the exceptions to this rule but it failed to do so.
Second, the Bank attempts to avoid the "only questions of law" rule for appeals filed under Rule 45 by invoking the misapprehension of facts
exception.25 According to the Bank, the trial and the appellate courts misapprehended the facts with respect tothe determination of the basis of
the Banks cause of action.26 In particular, the Bank contends that both the trial and the appellate courts erred in the consideration of the proper
actionable document upon which the Bank based its cause of action. The Bank asserts that its cause of action isnot grounded on the Letter of
Credit but on the Trust Receipt.
The Banks reference to the Trust Receipt as its "primary actionable document"27 is mistaken and misleading.
The nature of the cause of action isdetermined by the facts alleged in the complaint. 28 A partys cause of action is not what the party says it is,
nor is it what the designation of the complaint states, but what the allegations in the body define and describe. 29
In this case, the Banks allegations asto the basis of its cause of action against LCDC and the spouses Ley, however, belie the Banks claim. In
particular, the relevant portion of the Banks Complaint30 reads:
1.2 The defendants:
a. Ley Construction and Development Corporation (LCDC) is a general contracting firm engaged in the construction of
buildings, infrastructures, and other civil works with principal office at Mapulang Lupa St., Malinta, Valenzuela, Metro Manila
where it [may be] served with summons and other processes of this Court.
b. Sps. Manuel and Janet C. Ley, the major stockholders of defendant (LCDC)with business address at 23rd Floor Pacific
Star Bldg., Makati Avenue, Makati, Metro Manila where the processes of this Honorable Court [may be] served upon them
are impleaded herein in their capacity as Surety for the obligation incurred by defendant LCDC with the herein plaintiff by
virtue of a Continuing Surety Agreement they executed in favor of the plaintiff, a copy of which is hereto attached as Annex
"A";
2. STATEMENT OF CAUSE OF ACTION AGAINST DEFENDANT LCDC AND SPOUSES MANUEL AND JANET LEY
2.1 In conjunction with its business, defendant LCDC sought to import "Iraqi Cement" from Iraq thru its supplier "Global
Enterprises, Limited" with address at 15 A. Tuckeys Lane, Gibraltar.
2.2 To finance this importation, defendant LCDC applied with the plaintiff for the opening of Letter of Credit as evidenced by
the Application and Agreement for Commercial Letter of Credit, copy of which is marked as Annex "B" and made integral
part hereof.
2.3 Acting on defendant[]s oral representation and those stated in its application (Annex "B"), plaintiff issued on April 26,
1990 its Letter of Credit No. DC 90[-]303-C in favor of the supplier Global Enterprises Limited, as beneficiary in the amount
of U.S. Dollars: EIGHT HUNDRED TWO THOUSAND FIVE HUNDRED (US $802,500) for the account of defendant,
covering the importation of 15,000 metric tons of Iraqi Cement from Iraq, copy of the Letter of Credit is marked as Annex "C"
and made integral part hereof;
2.4 On May 3, 1990, defendant applied for and filed with plaintiff an Application for Amendment of Letter of Credit, copy of
which is attached as Annex "D" hereof, and another application for amendment was filed on May 11, 1990 copy of which is
marked as Annexes "E" and "E-1" hereof;
2.5 After these amendments were communicated to the negotiating bank, Credit Suisse of Zurich, Switzerland, the
beneficiary negotiated its Letter of Credit therewith. Thereafter, Credit Suisse sent a reimbursement claim by telex to
American Express Bank Ltd., New York on July 25, 1990 for the amount of US$766,708.00 with a Certification that all terms
and conditions of the credit were complied with;
2.6 Accordingly, on July 30, 1990, American Express Bank debited plaintiffs account US$770,691.30 and credited Credit
Suisse Zurich Account with American Express Bank Ltd., New York for the negotiation of Letter of Credit;
2.7 On August 6, 1990, plaintiff received from Credit Suisse the necessary shipping documents pertaining to Letter of Credit
DC 90-303-C all of which were in turn delivered and received by the defendant on August 16, 1990 as evidenced by their
acknowledgment appearing on the plaintiffs register copy, a copy of which is hereto attached as Annex "F";
2.8 Upon defendants receipt of the shipping documents and other documents of title to the imported goods, defendant
signed a trust receipt manifesting its acceptance/conformity that the negotiation of the LC is in order. A copy of the TR and
the draft issued by the defendant as a means of paying its LC obligation to the plaintiff are hereto attached and marked as
Annexes "G" and "G-1" hereof;
2.9 Sometime during the 3rd week of August, defendant LCDC informed the plaintiff that the expected shipment of cement
subject matter of the LC was allegedly held up in Iraq purportedly on account of the trade embargo imposed against it by the
United Nation[s] and sought assistance from the plaintiff to secure no-dollar import permit from the Central Bank as
defendant was negotiating with its supplier Global Enterprises Limited, Inc. for an alternate shipment of Syrian Cement.
2.10 Plaintiff acceded to the request of the defendant and conformably secured the requested approval from Central Bank
to allow the defendant to import cement on a no-dollar basis, a copy of the defendants request as well as the Central Bank
approval are hereto attached as Annexes "H" and "H-1".
2.11 About two months after the plaintiff has obtained the requested Central Bank approval (Annex "H-1")[,] plaintiff was
again advised by the defendant that the alternate shipment of Syrian Cement is no longer forthcoming and that defendant
LCDC after a series of negotiation with its supplier has agreed with the latter for a reimbursement of the value of the
negotiated Letter of Credit.

2.12 While defendant was negotiating with its supplier for that replacement of Syrian cement, defendant advised plaintiff not
to initiate any move as it might jeopardize defendants negotiation with its supplier.
2.13 In December 1990, four (4) months from defendants receipt of the shipping and export documents from plaintiff, as it
became perceptible that defendants negotiation with its supplier for reimbursement or replacement would fail[,] defendant
for the first time asked for copies of the beneficiarys draft, the Charter Party Agreement even as it contested the validity of
defendants obligation to plaintiff.
2.14 For the first time, defendant also began to assail the validity of the payment made by the plaintiff to the supplier (Global
Enterprises Ltd.) through Credit Suisse, with the intention of avoiding the payment of its lawful obligation to reimburse the
plaintiff the amount of US $802,500 which obligation is now long overdue and unpaid notwithstanding repeated demands.
2.15 The obligation covered by the aforesaid Letter of Credit bears interest and charges at the rateof 30% per annum which
rate [may be] increased or decreased within the limits allowed by the law.
2.16 The prompt payment of the obligations contracted by defendant LCDC from the plaintiff inclusive of the subject Letter
of Creditis guaranteed by defendant Sps.Manuel and Janet Ley by making themselves jointly and severally liable with the
defendant LCDC in accordance with the terms of a Continuing Surety Agreement which they executed in favor of the plaintiff
(Annex "A").31 (Emphases supplied.)
That the Banks cause of action was hinged on the Letter of Credit is unmistakable. Taken as a whole, the Banks allegations make a cause of
action based on the Letter of Credit. The Trust Receipt was mentioned incidentally and appears only in paragraph 2.8 of the Complaint. 32 In stark
contrast, the Letter of Credit figures prominently in the Complaint as it is mentioned in almost all of the paragraphs of Part 2 (Statement of Cause
of Action Against Defendant LCDC and Spouses Manuel and Janet Ley). More tellingly, in paragraph 2.15, the Bank speaks of "the obligation
covered by the aforesaid Letter of Credit."33
Moreover, under paragraphs1.2(b) and 2.16 of the Complaint, the spouses Ley have been impleaded as co-defendants of LCDC on account of
their execution of a Continuing Surety Agreement in the Banks favor to guarantee the "prompt payment of the obligations contracted by
defendant LCDC from the plaintiff inclusive of the subject Letter of Credit." 34 In short, the Bank seeks to hold liable (1) LCDC for its obligations
under the Letter of Credit, and (2) the spouses Ley for their obligations under the Continuing Surety Agreement which stands as security for the
Letter of Credit and not for the Trust Receipt.
Another significant factor that contradicts the Banks assertion that its "primary actionable document" is the Trust Receipt is the manner it
pleaded the Letter of Credit and the Trust Receipt, respectively.
The relevant rule on actionable documents is Section 7, Rule 8 of the Rules of Court which provides:
Section 7. Action or defense based on document. Whenever an action or defense is based upon a written instrument or document, the
substance of such instrument or document shall be set forth in the pleading, and the original or a copy thereof shall be attached to the pleading
as an exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set forth in the pleading.
An "actionable document" is a written instrument or document on which an action or defense is founded. It may be pleaded in either of two ways:
(1) by setting forth the substance ofsuch document in the pleading and attaching the document thereto as an annex, or
(2) by setting forth said document verbatim in the pleading.35
A look at the allegations in the Complaint quoted abovewill show that the Bank did not set forth the contents of the Trust Receipt verbatim in the
pleading. The Bank did not also set forth the substance of the Trust Receipt in the Complaint but simply attached a copy thereof as an annex.
Rather than setting forth the substance of the Trust Receipt, paragraph 2.8 of the Complaint shows that the Bank simply described the Trust
Receipt as LCDCs manifestation of "its acceptance/conformity that the negotiation of the [Letter of Credit] is in order." 36
In contrast, while the Bank did not set forth the contents of the Letter of Credit verbatim in the Complaint, the Bank set forth the substance of the
Letter of Credit in paragraph 2.3 of the Complaint and attached a copy thereof as Annex "C" of the Complaint.1awp++i1 The Bank stated that it
"issued on April 26, 1990 its Letter of Credit No. DC 90[-]303-C in favor of the supplier Global Enterprises Limited, as beneficiary[,] in the amount
of U.S. Dollars: EIGHT HUNDRED TWO THOUSAND FIVE HUNDRED (US$802,500.00) for the account of defendant [LCDC], covering the
importation of 15,000 metric tonsof Iraqi Cement from Iraq."37
Thus, the Banks attempt to cling to the Trust Receipt as its so-called "primary actionable document" is negated by the manner of its allegations
in the Complaint. Thus, too, the trial and the appellate courts did not misapprehend the facts when they considered the Letter of Credit as the
basis of the Banks cause of action.
Third, a look at the Letter of Credit, the actionable document on which the Bank relied in its case against LCDC and the spouses Ley, confirms
the identical findings of the Regional Trial Court and the Court of Appeals.
In Keng Hua Paper Products Co., Inc. v. Court of Appeals, we held38:
In a letter of credit, there are three distinct and independent contracts: (1) the contract of sale between the buyer and the seller, (2) the contract
of the buyer with the issuing bank, and (3) the letter of credit proper in which the bank promises to pay the seller pursuant to the terms and
conditions stated therein. x x x.
Here, what is involved is the second contract the contract of LCDC, as the buyer of Iraqi cement, with the Bank, as the issuer of the Letter of
Credit. The Bank refers to that contract in the Petition for Review on Certiorari and the Memorandum filed by the Bank in this case when the
Bank argues that, as LCDC and the spouses Ley have admitted the issuance of the Letter of Credit in their favor, they are "deemed to have
likewise admitted the terms and conditions thereof, as evidenced by the stipulation therein appearing above the signature of respondent Janet
Ley,"39 viz:
"In consideration of your arranging, at my/o[u]r request[,] for the establishment of this commercial letter of credit (thereinafter referred to as the
["]Credit["]) substantially in accordance with the foregoing, I/we hereby covenant and agree to eachand all of [the] provisions and conditions
stipulated on the reverse side hereof."40

The above stipulation actually appears on the Application and Agreement for Commercial Letter of Credit, the Banks Exhibit "B." It is the
contract which contains the provisions and conditions governing the legal relationship of the Bank and LCDC, particularly their respective rights
and obligations, in connection with the Banks issuance of Letter of Credit No. DC 90-303-C. The importance of the provisions and conditions
supposed to be stipulated on the reverse side of the Application and Agreement for Commercial Letter of Credit is underscored by the following
note appearing below the space for the signature of Janet Ley:
IMPORTANT: PLEASE READ PROVISIONS AND CONDITIONS ON REVERSE SIDE HEREOF BEFORE SIGNING ABOVE. 41
However, the Banks Exhibit "B" has nothing on its reverse side. In other words, the reverse side of the Application and Agreement for
Commercial Letter of Credit is a blank page.42 Even the copy of the Application and Agreement for Commercial Letter of Credit attached to the
Banks Complaint also has nothing on its back page.43
A cause of action the act or omission by which a party violates the right of another 44 has three essential elements:
(1) the existence of a legal right in favor of the plaintiff;
(2) a correlative legal duty of the defendant to respect such right; and
(3) an act or omission by such defendant in violation of the right of the plaintiff with a resulting injury or damage to the plaintiff for
which the latter may maintain an action for the recovery of relief from the defendant.45
Although the first two elements may exist, a cause of action arises only upon the occurrence of the last element, giving the plaintiff the right to
maintain an action in court for recovery of damages or other appropriate relief.46 In this case, however, even the legal rights of the Bank and the
correlative legal duty of LCDC have not been sufficiently established by the Bank in view of the failure of the Bank's evidence to show the
provisions and conditions that govern its legal relationship with LCDC, particularly the absence of the provisions and conditions supposedly
printed at the back of the Application and Agreement for Commercial Letter of Credit. Even assuming arguendo that there was no impropriety in
the negotiation of the Letter of Credit and the Bank's cause of action was simply for the collection of what it paid under said Letter of Credit, the
Bank did not discharge its burden to prove every element of its cause of action against LCDC.
This failure of the Bank to present preponderant evidence that will establish the liability of LCDC under the Letter of Credit necessarily benefits
the spouses Ley whose liability is supposed to be based on a Continuing Surety Agreement guaranteeing the liability of LCDC under the Letter
of Credit.
The Court therefore finds no reason to disturb the rulings of the courts a quo as the petition put forward insufficient basis to warrant their
reversal.
WHEREFORE, the petition is hereby DENIED.
SO ORDERED.