RULE 17
copy of Dante Go's answer with counterclaim dated November 6, 1981, which had been filed
1.) G.R. No. L-58986 April 17, 1989
DANTE Y. GO vs. HON. FERNANDO CRUZ, Judge, etc., CITY SHERIFF OF CALOOCAN
CITY, and CALIFORNIA MANUFACTURING CO., INC.,
NARVASA, J.:
The dismissal of civil actions is always addressed to the sound judgment and discretion of the
court; this, whether the dismissal is sought after a trial has been completed or otherwise, 1 or
whether it is prayed for by a defending party 2 or by a plaintiff or claimant. 3 There is one
instance however where the dismissal of an action rests exclusively on the will of a plaintiff or
claimant, to prevent which the defending party and even the court itself is powerless,
requiring in fact no action whatever on the part of the court except the acceptance and
recording of the causative document. This is dealt with in Section 1, Rule 17 of the Rules of
Court, which reads as follows:
SECTION 1. Dismissal by the plaintiff. An action may be dismissed by the plaintiff without
order of court by filing a notice of dismissal at any time before service of the answer or of a
motion for summary judgment. Unless otherwise stated in the notice, the dismissal is without
prejudice, except that a notice operates as an adjudication upon the merits when filed by a
plaintiff who has once dismissed in a competent court an action based on or including the
same claim. A class suit shall not be dismissed or compromised without approval of the court.
It is this provision with which the proceedings at bar are chiefly concerned.
On October 26, 1981, California Manufacturing Co., Inc. (hereinafter, simply, California)
brought an action in the Court of First Instance of Manila against Dante Go, accusing him of
unfair competition. 4 The gravamen of California's complaint was that Dante Go, doing
business under the name and style of "Sugarland International Products," and engaged like
California in the manufacture of spaghetti, macaroni, and other pasta was selling his products
in the open market under the brand name, "Great Italian," in packages which were in
colorable and deceitful limitation of California's containers bearing its own brand, "Royal." Its
complaint contained an application for preliminary injunction commanding Dante Go to
immediately cease and desist from the further manufacture, sale and distribution of said
products, and to retrieve those already being offered for sale. 5
About two weeks later, however, or on November 12, 1981, California filed a notice of
dismissal with the Court reading as follows: 6
COMES NOW the plaintiff in the above-entitled case, through undersigned counsel, and unto
this Honorable Court most respectfully gives notice of dismissal without prejudice pursuant to
Sec. 1, Rule 17 of the Rules of Court.
WHEREFORE, it is respectfully prayed that the above-entitled case be considered dismissed
without prejudice conformably with Sec. 1, Rule 17 of the Rules of Court.
Four days afterwards, or on November 16, 1981, California received by registered mail a
with the Court on November 9, 1981. 7
On November 19, 1981 a fire broke out at the Manila City Hall destroying among others
the sala of Judge Tengco and the records of cases therein kept, including that filed by
California against Dante Go. 8
On December 1, 1981, California filed another complaint asserting the same cause of action
against Dante Go, this time with the Court of First Instance at Caloocan City. 9 This second
suit was docketed as Civil Case No. C-9702 and was assigned to the branch presided over
by Judge Fernando A. Cruz.
On December 3, 1981, Judge Cruz issued an ex parte restraining order directing "the
defendant ... to immediately cease and desist from the further manufacture, sale, promotion
and distribution of spaghetti, macaroni and other pasta products contained in packaging
boxes and labels under the name 'GREAT ITALIAN,' which are similar to or copies of those of
the plaintiff, and ... recall ... all his spaghetti, macaroni and other pasta products using the
brand, 'GREAT ITALIAN.'" 10
On the day following the rendition of the restraining order, Dante Go filed the present petition
for certiorari, etc. with this Court praying for its nullification and perpetual inhibition. On
December 11, 1981, this Court, in turn issued a writ of preliminary injunction restraining
California, Judge Cruz and the City Sheriff from enforcing or implementing the restraining
order of December 3, 1981, and from continuing with the hearing on the application for
preliminary injunction in said Civil Case No. C-9702. The scope of the injunction was
subsequently enlarged by this Court's Resolution of April 14,1982 to include the City Fiscal of
Manila, who was thereby restrained from proceeding with the case of unfair competition filed
in his office by California against Dante Go. 11
Dante Go's thesis is that the case filed against him by California in the Manila Court remained
pending despite California's notice of dismissal. According to him, since he had already filed
his answer to the complaint before California sought dismissal of the action three (3) days
afterwards, such dismissal was no longer a matter of right and could no longer be effected by
mere notice in accordance with Section 1, Rule 17 of the Rules of Court, but only on plaintiff s
motion, and by order of the Court; hence, the Caloocan Court acted without jurisdiction over
the second action based on the same cause. He also accused California of forum shopping,
of selecting a sympathetic court for a relief which it had failed to obtain from another. 12
The petitioner is in error. What marks the loss by a plaintiff of the right to cause dismissal of
the action by mere notice is not the filing of the defendant's answer with the Court (either
personally or by mail) but the service on the plaintiff of said answer or of a motion for
summary judgment. This is the plain and explicit message of the Rules. 13 "The filing of
pleadings, appearances, motions, notices, orders and other papers with the court," according
to Section 1, Rule 13 of the Rules of Court, means the delivery thereof to the clerk of the
court either personally or by registered mail. Service, on the other hand, signifies delivery of
the pleading or other paper to the parties affected thereby through their counsel of record,
unless delivery to the party himself is ordered by the court, 14 by any of the modes set forth
in the Rules, i.e., by personal service, 15 service by mail, 16 or substituted service. 17
Here, California filed its notice of dismissal of its action in the Manila Court after the filing of
Dante Go's answer but before service thereof. Thus having acted well within the letter and
contemplation of the afore-quoted Section 1 of Rule 17 of the Rules of Court, its notice ipso
facto brought about the dismissal of the action then pending in the Manila Court, without need
of any order or other action by the Presiding Judge. The dismissal was effected without
regard to whatever reasons or motives California might have had for bringing it about, and
was, as the same Section 1, Rule 17 points out, "without prejudice," the contrary not being
otherwise "stated in the notice" and it being the first time the action was being so dismissed.
There was therefore no legal obstacle to the institution of the second action in the Caloocan
Court of First Instance based on the same claim. The filing of the complaint invested it with
jurisdiction of the subject matter or nature of the action. In truth, and contrary to what
petitioner Dante Go obviously believes, even if the first action were still pending in the Manila
Court, this circumstance would not affect the jurisdiction of the Caloocan Court over the
second suit. The pendency of the first action would merely give the defendant the right to
move to dismiss the second action on the ground of auter action pendant or litis
pendentia. 18
WHEREFORE, the petition is DISMISSED, with costs against petitioner. The temporary
restraining order of December 11, 1981, and the amendatory Resolution of April 14, 1982 are
SET ASIDE.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.
2.) G.R. No. L-35989 October 28, 1977
FERMIN JALOVER vs. PORFERIO YTORIAGA, CONSOLACION LOPEZ and HON.
VENICIO ESCOLIN, in his capacity as Presiding Judge, Branch V, Court of First
Instance of Iloilo
CASTRO, C.J.:
This is an original action for certiorari, with prayer for a writ of preliminary injunction, asking
this Court to declare null and void the Orders dated August 24, 1972 and November 10, 1972,
issued by the respondent Judge in civil case No. 5429 of the Court of First Instance of Iloilo,
Branch V. On December 27, 1972, a temporary restraining order was issued by this Court.
Sometime in April, 1960, private respondents Porferio Ytoriaga and Consolacion Lopez filed
against Ana Hedriana and petitioner Fermin Jalover a complaint dated April 6, 1960, in the
Court of First Instance of Iloilo (Civil Case No. 5429), alleging, inter alia, that they are owners
pro indiviso of Lot No. 2255 of the Cadastral Survey of Jaro, covered by TCT No. 6738 and
containing an area 8,153 square meters; that the said parcel of land is bounded oil the
southwest by the Salog River; that as of January, 1958, by virtue of the effects of the currant
of the river, there was a increase on its southwestern portion of around 900 square meters;
that since before the war, the plaintiffs have been in continuos possession of the increased
portion of the land, which, under the principle of alluvion, automatically belongs to them; that
sometime in January, 1958, the defendants had the land increase surveyed, placed concrete
monuments thereon and took possession , without the knowledge and consent of the plaintiff
and that the defendants, who destroyed plants standing on the land in question which belong
to the plaintiffs, have remained in ion of the in spite of repeated demands made by the latter
for them to return the said possession. The plaintiffs prayed that they be declared the owners
of the increased portion of the land, and that the defendants be ordered to vacate the
premises and restore their possession to the plaintiffs, to pay the plaintiffs the sum of
P147.00 as actual damages, the sum of P300.00 as attorney's fees, and the sum of P200.00
annually from the time the plaintiffs were deprived of ion up to the time the said ion shall have
been costs restored, and to pay the of suit.
In his answer dated April 21, 1960, petitioner Fermin Jalover, as a defendant, alleged, inter
alia, that his mother and co-defendant, Ana Hedriana, died on July 21, 1959; that the land in
question was formerly a river bed, which, less than 10 years before, was abandoned the
natural change in the course of the waters; that the said land rightfully belongs to the
defendant as sole heir of his mother, who owned the land pursuant to Article 461 of the Civil
Code of the Philippines; that it is not true that the plaintiffs were ever in possession of the
land, or that they had made demands upon the defendant to vacate the land; that the
plaintiffs had filed an ejectment suit against the defendant with the Municipal Court of Iloilo
City on March 12, 1958, and the same was decided against the plaintiffs: and that by virtue of
the malicious firing of the complaint, the defendant suffered damages and had to hire the
services of counsel. The defendant prayed the court to dismiss the complaint with costs
against the plaintiffs and to order the plaintiffs to pay the defendant the sum of P1,000.00 as
damages and the sum of P1,000,00 by way of attorney's fees.
Issues having been joined, the case was set for trial. On September 4, 1963, private
respondents, as plaintiffs, formally offered documentary evidence, and upon the admission
thereof, they rested their case; whereupon, continuation of trial was ordered transferred until
further assignment. Trial was postponed many times stretching to a period of more than 6
years, until January 26, 1970, when the case was called for trial, and then Presiding Judge
Ramon Blanco dismissed the case, for failure of private respondents to appear in court, in an
order which reads: +.wph!1 the right to cross-examine the witnesses whom petitioner might present and to object to the
The complaint was filed on April 6, 1960 up to the present the trial of' the case has not been
finished. The counsel of record for the plaintiff is Atty. Amado Atol who since several years
ago has been appointed Chief of the Secret Service of the Iloilo City Police Department.
Plaintiff did not take the necessary steps to engage the service of another lawyer in lieu of
Atty. Atol.
WHEREFORE, for failure to prosecute this case is dismissed it without pronouncement as to
costs .
Two years later, or on January 17, 1972, private respondents' lawyer, Atty. Amado B. Atol,
filed a motion for reconsideration of the order dated January 26, 1970 dismissing the case,
alleging that the said respondents did not fail to prosecute because, during the times that the
case was set for hearing, at least one of said respondents was always present, and the
record would show that the transfers of hearing were all made at the instance of petitioner or
his counsel; and, moreover, private respondents had already finished presenting their
evidence. Petitioner opposed the motion on the ground that the order of dismissal issued two
years before was an adjudication on the merits and had long become final. On June 23,
1972, respondent Judge Venicio Escolin, who succeeded Judge Blanco in Branch V, issued
an order denying the motion for reconsideration on the ground that the order of dismissal had
become final long ago and was beyond the court's power to amend or change.
Private respondents then filed a Petition for Relief from Judgment dated July 10, 1972,
claiming that the order of dismissal dated January 26, 1970 was void because of lack of due
process and for having been obtained thru fraud, for the petitioner had misrepresented to the
court the status of the case by making Judge Blanco - who was not the Presiding Judge when
private respondents presented their evidence and rested their case in 1963 - believe that trial
had not even begun. Petitioner opposed the petition for relief contending that private
respondents were served a copy of the order of dismissal on February 5, 1970, and,
therefore, pursuant to Section 3, Rule 38 of the Revised Rules of Court, the petition for relief
should have been filed within 60 days from February 5, 1970, and within 6 months from
January 26, 1970, when the order was issued; hence, the filing of the petition was beyond the
reglementary period.
The petition for relief was given due course, and on August 24, 1972, respondent Judge
issued an order setting aside the orders dated January 26, 1970 and June 23, 1972, and
setting the continuation of the trial for September 15, 1972. The reasons stated by
respondent Judge in support are: (1) the shows that while respondent Porferio Ytoriaga was
furnished with a copy of the dismissal order dated January 26, 1970, his counsel, Atty. Atol,
was never served with a copy thereof, hence, pursuant to the settled rule that where a party
appears by attorney, a notice to the client and not to his attorney is not a notice of law, the
said order of dismissal never became final; and (2) the order dated January 26, 1970 was
without legal basis, considering that private respondents had already presented their
evidence and rested their caw on September 4, 1963, and the hearing scheduled for January
26, 1970 was for reception of petitioner's evidence; consequently, the non-appearance of
private respondents and their counsel at the said hearing could not mean failure to prosecute
on their part, but may at worst only be construed as a waiver on private respondents' part of
admissibility of petitioner's evidence. Petitioner, in a motion dated October 16, 1972, moved
for a reconsideration of the order dated August 24, 1972, on the grounds that the court had
full authority to issue the order of dismissal, and that the said order, which had long become
final, was beyond the court's power to reconsider. On November 10, 1972, respondent Judge
issued an order denying the motion for reconsideration and setting the continuation of trial for
December 12, 1972.
Hence, the present recourse by petitioner.
The main thrust of the petition is that respondent Judge acted without or in excess of
jurisdiction or with grave abuse of discretion in setting aside the orders dated January 26,
1970 and June 23, 1972, because the said orders have long become final and executory,
hence, may no longer be disturbed.
It is uncontroverted that the order of January 26, 1970, dismissing the case for private
respondents' "failure to Prosecute," was served upon private respondents themselves, and
not upon their as attorney of record, Atty. Amado B. Atol, and that there was no court order
directing that the court's processes, particularly the order of January 26, 1970, should be
served directly upon private respondents. It is settled that when a party is represented by
counsel, notice should be made upon the counsel, and notice upon the party himself is not
considered notice in law unless service upon the party is ordered by the court. 1 The term
"every written notice" used in Section 2 of Rule 13 includes notice of decisions or
orders. 2 Private respondents' counsel of record not having been served with notice of the
order dismissing the case, the said order did not become final.
Petitioner argues that since private respondents' counsel of record, Atty. Atol, had been
appointed Chief of the Secret Service of the Iloilo City Police Department, he was not
anymore allowed to practice law, hence, private respondents being no longer represented by
counsel, notice to them should be deemed legally effective. The argument is not valid, for it
fails to consider the need of observing a legal formality before a counsel of record may be
considered relieved of his responsibility as such counsel on account of withdrawal. A lawyer's
withdrawal as counsel must be made in a formal petition filed in the case, and where no such
petition has been accomplished, notice of judgment rendered in the case served on the
counsel of record is, for all legal purposes, notice to the client, the date of receipt of which is
considered the starting point from which the period of appeal prescribed by law shall begin to
run 3 Not having withdrawn formally as counsel in the case, nor having been substituted by
his clients with another lawyer, or dismissed as such counsel, Atty. Atol was, for all legal
purposes, private respondents' attorney upon whom the Courts processes should have been
served.
It will also be noted that, as found by respondent Judge, private respondents, as plaintiffs,
adduced their evidence and rested their case on September 4, 1963, or more than six years
before the dismissal of the case on January 26, 1970. It was, therefore, the turn of petitioner,
as defendant, to present his evidence. In the premises, private respondents court not possibly
have failed to prosecute they were already past the stage where they could still be charged
with such failure. As correctly held by respondent Judge, private respondents' absence at the
hearing scheduled on January 6, 1970 "can only be construed as a waiver on their part to
cross-examine the witnesses that defendants might present at the continuation of trial and to
object to the admissibility of the latter's evidence." The right to cross-examine petitioner's
witnesses and/or object to his evidence is a right that belongs to private respondents which
they can certainly waive. Such waiver could be nothing more than the "intentional
relinquishment of a known right," 4 and. as such, should not have beer taken against private
respondents.
To dismiss the case after private respondents had submitted their evidence and rested their
case, would not only be to hold said respondents accountable for waiving a right, but also to
deny them one of the cardinal primary rights of a litigant, which is, corollary to the right to
adduce evidence, the right to have the said evidence considered by the court. 5 The dismissal
of the case for failure to prosecute, when in truth private respondents had already presented
their evidence and rested their case, and, therefore, had duly ,prosecuted their case, would in
effect mean a total disregard by the court of evidence presented by a party in the regular
course of trial and now forming part of the record. The ends of justice would be better served
if, in its deliberative function. the court would consider the said evidence together with the
evidence to be adduced by petitioner.
However, we are of the view that relief from judgment under Rule 38 of the Revised Rules of
Court is not the appropriate remedy. A petition for relief is available only if the judgment or
order complained of has already become final and executory; 6 but here, as earlier noted, the
order of January 26, 1970 never attained finality for the reason that notice thereof was not
served upon private respondents' counsel of record. The petition for relief may nevertheless
be considered as a second motion for reconsideration or a motion for new trial based on
fraud and lack of procedural due process.
Under the circumstances of the case, the issuance of the orders now complained of cannot
be said to have been characterized with abuse of discretion.
ACCORDINGLY the instant petition is denied. The temporary restraining order issued by this
Court on December 27, 1972 is hereby dissolved. No costs.
Separate Opinions
BARREDO, J., concurring:
I concur and I am writing this separate concurring opinion only to make more patent and to
stress why I believe the order of dismissal had not yet become final when the trial court
ordered the reopening of the case.
I fully agree with the holding in the main opinion that the dismissal of respondents' case
ordered by Judge Blanco on January 26, 1970 was legally erroneous. Indeed, to my mind, it
constituted grave abuse of discretion, and the contention of respondents that the situation on
hand had been misrepresented by counsel for petitioner only makes it even more patent that
due care was not exercised in the preparation of said order. Such being the case, there is
ample warrant to disregard procedural technicalities that might stand in the way of the
complete setting aside thereof to give way to substantial justice.
It is not disputed that Atty. Amado B. Atol, counsel for plaintiffs - the herein respondents - was
not served with notice of such order of dismissal. Accordingly, when he filed his motion for
reconsideration on January 17, 1972, the running of the period for the finality of that order
had not yet started. This motion was denied on June 23, 1972. As there is no showing when
Atty. Atol received copy of the order of denial, the least that can be said in his favor is that
when he filed his so-called petition for relief on July 10, 1972, he still had not less than
thirteen (13) days within which to perfect an appeal. Now, assuming that his petition for relief,
not being the proper remedy - as held in the main opinion, which view I am also fully in
accord with should be deemed a second motion for reconsideration, the question that would
arise would be whether or not such a second motion for reconsideration could be filed.
In this connection, it is to be noted that Atty. Atol's first motion for reconsideration was based
on the sole ground then apparent, namely, that the order of dismissal was improper, since
plaintiffs could not be considered as having failed to prosecute their case, it appearing that
they had already closed their evidence and, therefore, their absence of the resumption of the
trial for the reception of the evidence of the defendants could signify no more than they had
waived their right to contest the admissibility of the evidence presented by said defendants,
But the court. in its order of June 23, 1972, denied said first motion on a ground which had
nothing to do with the issue raised in the motion. Such being the case, it was but fair and
proper for the plaintiffs to be allowed to move to reconsider the order of denial before taking
any remedy against it in a higher court with a view to giving the trial court. an opportunity to
correct itself on the new matter treated in its order. In a sense, therefore, respondents'
petition for relief which the Court is treating as a second motion for reconsideration is
allowable under the rules and had the effect of suspending the respondents' period to appeal.
at the time the trial court gave due course to the petition for relief and granted the same on
August 24. 1972 it acted within its jurisdiction.
And inasmuch as, I have stated at the outset, there can be no doubt as to the right of
respondents to the nullification of the dismissal order of January 26, 1970 as well as the
subsequent order of June 23, 1972, it little matters that the trial court's order of August 24,
1972 is premised on the assumption that what was being acted upon is a petition for relief
instead of on a second motion for reconsideration. What is important and decisive is that the
reopening was done within the period 'or finality of the order of dismissal and before the trial
court had lost jurisdiction over the same. The mistake of respondents in filing the wrong
remedy is a matter of form which under the circumstances of this particular could not affect
the efficacy of the actual relief sought.
Separate Opinions
BARREDO, J., concurring:
I concur and I am writing this separate concurring opinion only to make more patent and to
stress why I believe the order of dismissal had not yet become final when the trial court
ordered the reopening of the case.
I fully agree with the holding in the main opinion that the dismissal of respondents' case
ordered by Judge Blanco on January 26, 1970 was legally erroneous. Indeed, to my mind, it
constituted grave abuse of discretion, and the contention of respondents that the situation on
hand had been misrepresented by counsel for petitioner only makes it even more patent that
due care was not exercised in the preparation of said order. Such being the case, there is
ample warrant to disregard procedural technicalities that might stand in the way of the
complete setting aside thereof to give way to substantial justice.
It is not disputed that Atty. Amado B. Atol, counsel for plaintiffs - the herein respondents - was
not served with notice of such order of dismissal. Accordingly, when he filed his motion for
reconsideration on January 17, 1972, the running of the period for the finality of that order
had not yet started. This motion was denied on June 23, 1972. As there is no showing when
Atty. Atol received copy of the order of denial, the least that can be said in his favor is that
when he filed his so-called petition for relief on July 10, 1972, he still had not less than
thirteen (13) days within which to perfect an appeal. Now, assuming that his petition for relief,
not being the proper remedy - as held in the main opinion, which view I am also fully in
accord with should be deemed a second motion for reconsideration, the question that would
arise would be whether or not such a second motion for reconsideration could be filed.
In this connection, it is to be noted that Atty. Atol's first motion for reconsideration was based
on the sole ground then apparent, namely, that the order of dismissal was improper, since
plaintiffs could not be considered as having failed to prosecute their case, it appearing that
they had already closed their evidence and, therefore, their absence of the resumption of the
trial for the reception of the evidence of the defendants could signify no more than they had
waived their right to contest the admissibility of the evidence presented by said defendants,
But the court. in its order of June 23, 1972, denied said first motion on a ground which had
nothing to do with the issue raised in the motion. Such being the case, it was but fair and
proper for the plaintiffs to be allowed to move to reconsider the order of denial before taking
any remedy against it in a higher court with a view to giving the trial court. an opportunity to
correct itself on the new matter treated in its order. In a sense, therefore, respondents'
petition for relief which the Court is treating as a second motion for reconsideration is
allowable under the rules and had the effect of suspending the respondents' period to appeal.
at the time the trial court gave due course to the petition for relief and granted the same on
August 24. 1972 it acted within its jurisdiction.
And inasmuch as, I have stated at the outset, there can be no doubt as to the right of
respondents to the nullification of the dismissal order of January 26, 1970 as well as the
subsequent order of June 23, 1972, it little matters that the trial court's order of August 24,
1972 is premised on the assumption that what was being acted upon is a petition for relief
instead of on a second motion for reconsideration. What is important and decisive is that the
reopening was done within the period 'or finality of the order of dismissal and before the trial
court had lost jurisdiction over the same. The mistake of respondents in filing the wrong
remedy is a matter of form which under the circumstances of this particular could not affect
the efficacy of the actual relief sought.
3.) G.R. No. L-17828 August 31, 1963
LIGAYA MINA, JAIME MINA, SILVINA MINA, FAUSTA MINA,
PABLO MINA and MIGUEL MINA, the minors represented by PILAR LAZO as guardian-
ad-litem, plaintiffs-appellants,
vs.
ANTONIA PACSON, CRISPINO MEDINA and CRESENCIA MINA, defendants-appellees.
F. A. Pelmoka for plaintiffs-appellants.
Castelo Law Office for defendants-appellees.
LABRADOR, J.:
This is an appeal from an order of the Court of First Instance of Nueva Ecija, Hon. Felix
Makasiar, presiding, in its Civil Case No. 3296, entitled "Ligaya Mina, et al., plaintiffs vs.
Crispino Medina, et al., defendants," dismissing the complaint filed in this case. The appellant
also appeals against the order denying the motion for reconsideration of the order of
dismissal.
The facts necessary to understand the nature of the issues presented in this appeal, as
gleaned from the pleadings, may be briefly stated as follows: Plaintiffs Ligaya, Jaime, Silvina,
Fausta, Pablo and Miguel, all surnamed Mina, are alleged to be the illegitimate children of the
deceased Joaquin Mina with plaintiff Pilar Lazo from 1933-1958, while married to Antonia
Pacson. Joaquin Mina died in August, 1958, leaving no descendants norascendants except
his widow, the defendant herein Antonia Pacson. On April 9, 1958, Joaquin Mina, then still
living, executed a deed of absolute sale (Annex "B" to Complaint) of three parcels of land
situated in the municipality of Muoz, Nueva Ecija, in favor of the defendants Crispino Medina
and Cresencia Mina for the sum of P12,000. On April 15, 1958 again he executed another
deed of sale (Annex "C" to Complaint) of 13 parcels of land covered by 12 transfer certificates
of title to the same spouses Crispino Medina and Cresencia Mina. Both deeds of sale bear
the conformity of his wife Antonia Pacson.
In the complaint filed in the Court of First Instance of Nueva Ecija in the case which originated
this appeal, it is alleged that plaintiffs are illegitimate children of the deceased Joaquin Mina
begotten by him with Pilar Lazo during the period from 1933 to 1958 while Joaquin Mina was
lawfully married to Antonia Pacson; that the plaintiff Pablo Mina is a recognized illegitimate
child of the deceased Joaquin Mina; that Joaquin Mina died intestate leaving no ascendants
or descendants, except his widow Antonia Pacson; that he left various parcels of land
enumerated in the complaint but that on April 9, 1950 the defendants connived and secured
from Joaquin Mina, who was ill and did not know what he was doing, the execution of the two
deeds of sale without consideration, fictitiously and fraudulently, transferring his propertiesto
the spouses Crispino Medina and Cresencia Mina; and that by reason of said acts,
defendants have caused moral anguish, anxiety and embarrassment to plaintiffs, causing
them damages amounting to P10,000; that plaintiffs pray that they be declared recognized
illegitimate children of the deceased Joaquin Mina, entitled to share in the properties left by
him as such illegitimate children; that the deeds of sale, Annexes "B" and "C" be declared
fictitious, fraudulent and therefore, null and void; and that defendants be required to deliver to
plaintiffs' possession one-fourth of said properties together with P10,000 for moral damages.
Upon the filing of the complaint the defendants presented a motion to dismiss the complaint
on the ground of res judicata, alleging that a similar action had previously been presented as
Civil Case No. 3015 in the same court, and by the same parties against Crispino Medina and
Cresencia Mina, in which the same allegations of plaintiffs' status and fraudulent conveyance
of the properties to defendants are alleged, together with a prayer for moral damages in the
sum of P20,000. It appears, however, that in the complaint filed in said Civil Case No. 3015,
no prayer is made for the declaration of the filiation of the plaintiffs in relation or with respect
to the deceased Joaquin Mina.
The motion to dismiss also copied an order of the court issued in said Civil Case No. 3015
which reads as follows:
Acting on the Motion filed by the defendants on December 22, 1958 for the reconsideration of
the order dated December 8, 1958, and considering that the present action is not only for
annulment of deeds of sale but also for partition (paragraphs 8 and 11 of the complaint and
paragraph 4 of the prayer thereof); that to avoid multiplicity of suits, the complex action to
establish filiation andfor partition or for recovery of inheritance may be brought in the same
case (Lopez v. Lopez, 68 Phil. 227; Escoval vs. Escoval, 48 O.G. 615; Edades vs. Edades, L-
8964, July 31, 1956); and that Antonia Pacson, the surviving widow and the other intestate
heirs of the deceased Joaquin Mina, or necessary parties are not made a party in this case
(Briz v. Briz, 43 Phil. 763), the plaintiffs are hereby directed to amend their complaint within
fifteen (15) days from receipt hereof by including as party defendant the surviving widow of
the deceased Joaquin Mina and other necessary parties.
Should the plaintiffs fail to comply with this order, this case will be dismissed.
Lastly, another order of the same court dated February 9, 1959 was quoted, the dispositive
part of which reads:
The fifteen-day period granted to the plaintiffs having elapsed without said order having been
complied with, the Court hereby dismisses this case, without pronouncement aa to costs.
Opposition to the motion to dismiss was presented on behalf of the plaintiffs by their attorney
to which a reply was filed on behalf of the defendants. A rejoinder was also filed after which
Judge Genaro Tan Torres, then presiding over the court, sustained the motion to dismiss in
an order which reads as follows:
After a careful consideration of the joint motion to dismiss of defendants Antonia Pacson and
the spouses Crispino Medina and Cresencia Mina, dated November 11, 1959, the opposition
thereto dated November 24, 1959, and the reply of the defendants to the opposition, dated
December 7, 1959, the Court is of the opinion that said motion to dismiss is well taken; hence
this case is hereby dismissed without costs.
Plaintiffs' motion for time to submit rejoinder, dated December 10, 1959, is hereby denied
because it will only unnecessarily delay the termination of this case.
So ordered.
Cabanatuan City, December 18, 1959.
A motion for the reconsideration of the order of the court dismissing the action having been
denied, the plaintiffs in the present case prosecuted this appeal directly to this
Court.1wph1.t
As shown above the question to be resolved is whether or not the order dismissing the
previous Civil Case No. 3015 bars the present civil action No. 3296 of the Court of First
Instance of Nueva Ecija.
In the first error assigned by the appellants in their brief it is argued that the dismissal of the
complaint in the previous action was in fact "at the indirect instance of the plaintiffs through
inaction or omission." We do not find this claim justified by the facts of the case. The order of
the court dismissing the complaint in the first case contains the following warning: "Should the
plaintiffs fail to comply with this order, this case will be dismissed." In the face of this express
warning given in the court's order the dismissal can not be said to have been "at the indirect
instance of the plaintiffs; it was in fact caused by plaintiffs' refusal to comply with the express
mandate contained in the order of dismissal. The dismissal, therefore, was justified under
Rule 30, Section 3 of the Rules of Court, which reads:
SEC. 3. Failure to prosecute. When plaintiff fails to appear at the time of the trial, or to
prosecute his action for an unreasonable length of time, or to comply with these rules of any
order of the court, the action may be dismissed upon motion of the defendant or upon the
court's own motion. This dismissal shall have the effect of an adjudication upon the merits,
unless otherwise provided by court.
The above provision of the Rules was invoked in the case, of Garchitorena, et al. vs. De los
Santos, et al., G.R. No. L-17045, June 30, 1962, wherein this Court held:
To order an amendment to a complaint within a certain period in order to implead as party
plaintiff or defendant one who is not a party to the case lies within the discretion of the Court.
And where it appears that the person to be impleaded is an indispensable party, the party to
whom such order is directed has no other choice but to comply with it. His refusal or failure to
comply with the order is a ground for the dismissal of his complaint pursuant to Section 3,
Rule, 30, of the Rules of Court. . . .
Under the second assignment of error it is argued that the dismissal of the previous case was
brought about by the negligence, gross or criminal, of plaintiffs' lawyer for which the plaintiffs-
appellants should not be made to suffer. The argument is not true to fact. The failure to
amend was a result not of the neglect of the lawyer alone but also of the plaintiffs-appellants
themselves. Had the plaintiffs taken even an ordinary interest in the result of the action that
they had filed, they would have been able to secure information from their lawyer that the
case had been dismissed for failure to amend. Upon receipt of such information, plaintiffs
could have applied to the court for relief under Rule 38 of the Rules of Court and could have
had the complaint amended as directed in the order of dismissal. It is not alone negligence of
their counsel, therefore, but of themselves also that the required amendment was not made.
But assuming for the sake of argument that the failure was due to the lawyer alone, such
failure would not relieve them of the responsibility resulting from the neglect of their lawyer,
for the client is bound by the action of his counsel. (Isaac v. Mendoza, G. R. No. L-2830, June
21, 1951; Vivero v. Santos, et al., G. R. No. L-8105, Feb. 28, 1956; Fernandez v. Tan Tiong
Tick, G.R. No. L-15877, April 28, 1961; Gordulan v. Gordulan, G.R. No. L-17722, Oct. 9,
1962; Valerio v. Sec. of Agriculture, G.R. No. L-18587, April 23, 1963.)
In the third assigiament of error it is claimed that there is no complete identity between the
parties in the first case and those in the case at bar. The statement is true because in the
previous case Antonia Pacson was not included as party-defendlant. As a matter of fact the
order decided that Pacson was to be included as party-defendant. As to the latter, therefore,
the previous order of dismissal does not bar the present complaint, not only because she was
not made a party but also because the issue of filiation of the parties-plaintiffs was not raised
in the previous case, although such issue was necessary for the plaintiffs to be able to
maintain their right of action. In view of this fact, the present action should be considered
barred in respect to the action for the annulment of the deeds of sale and as regards the
defendants spouses Crispino Medina and Cresencia Mina; but as to the case for the
declaration of the plaintiffs as illegitimate children and heirs of the deceased Joaquin Mina
this latter case is not barred by the previous action as above explained and may still be
prosecuted.
WHEREFORE, the order of dismissal is hereby modified in the sense that the action for the
recognition of the filiation of the plaintiffs should be allowed to continue against the defendant
Antonia Pacson; but the dismissal of the action for the annulment of the deeds of sale is
affirmed. Without costs.
4. G.R. No. L-18707 February 28, 1967
AGUSTIN O. CASEAS vs. CONCEPCION SANCHEZ VDA. DE ROSALES (Substituted
by her heirs), ROMEO S. ROSALES, ET AL.
REGALA, J.:
This is an appeal from the order of dismissal entered by the Court of First Instance of Agusan
in Civil Case No. 780, entitled Agustin Caseas vs. Concepcion Sanchez Vda. de Rosales, et
al.
On August 21, 1952, Rodolfo Araas and Agustin O. Caseas filed with the Court of First
Instance of Agusan, under Civil Case No. 261, a complaint for specific performance and
enforcement of their alleged right under a certain deed of sale, and damages against the
spouses Jose A. Rosales and Concepcion Sanchez. They alleged that sometime in 1939,
Agustin O. Caseas acquired from Rodolfo Araas under a deed of assignment, the latter's
rights and interest over a parcel of land covering an area of more or less than 2,273 square
meters and designated as Lot No. 445-A of the Butuan Cadastre No. 84 (Psd. 4943); that
Rodolfo Araas in turn, acquired the said property from the spouses Jose A. Rosales and
Concepcion Sanchez under a deed of sale executed on March 18, 1939 under the terms of
which, however, the actual transfer of the aforesaid land unto the vendee would be made only
on or before February 18, 1941; and that despite the above documented transactions, and
despite the arrival of the stipulated period for the execution of the final deed of transfer, the
vendors spouses refused to fulfill their obligation to effect such transfer of the said lot to the
vendee, Rodolfo Araas or his assignee, the herein appellant, Agustin O. Caseas. Thus, the
principal relief prayed for in the above complaint was for an order directing the defendants-
spouses to "execute a deed of absolute sale of the property described in the complaint in
favor of the assignee, plaintiff Agustin O. Caseas.
After the defendants-spouses had filed their answer to the above complaint, but before trial,
the counsel for the plaintiffs gave notice to the trial court that plaintiff Rodolfo Araas and
defendant Jose A. Rosales had both died. In view of the said manifestation, the lower court,
in an order dated April 27, 1956, directed, the surviving plaintiff, Agustin O. Caseas, to
amend the complaint to effect the necessary substitution of parties thereon. The said
surviving plaintiff, however, failed altogether to comply with the aforementioned order of April
27, 1956 to the end that on July 18, 1957, the lower court issued the following order:
Until this date no amended complaint was filed by the attorney for the plaintiffs. This shows
abandonment and lack of interest on the part of the plaintiffs. This being an old case, for
failure on the part of the counsel for the plaintiffs to comply with the order of this Court the
same is hereby dismissed without pronouncement as to costs.
As no appeal was taken from the above order of dismissal, the same, in due time, became
final.
On April 18, 1960, Agustin O. Caseas, the same plaintiff Caseas in civil Case No. 261, filed
with the same Court of First Instance of Agusan, under Civil Case No. 780, another complaint
against the widow and heirs of the late Jose A. Rosales "to quiet, and for reconveyance of,
title to real property, with damages." This suit referred itself to the very same property litigated
under Civil Case No. 261 and asserted exactly the same allegations as those made in the
former complaint, to wit: "that the plaintiff (Agustin O. Caseas) has acquired the above-
described property by purchase from its previous owner, Rodolfo Araas now deceased, ...;
and said Rodolfo Aranas had in turn acquired the same property by virtue of another deed of
sale executed by Jose A. Rosales, now also deceased;" (Par. 3, Complaint) "that under the
terms and stipulations of paragraph 2 of the deed of sale (between Rosales and Araas) ...
Jose A. Rosales was to hold title to the land in question in favor of Rodolfo Araas or the
latter's signs and successors in interest for a period of (5) years from February 19, 1936, at
the expiration of which said Jose A. Rosales was to execute a document conveying
absolutely the title to the land in question in favor of the aforementioned Rodolfo Araas or
his assigns and successors in interest" (Par. 9, Complaint) ; "despite which obligation the
defendants refused, even after the expiration of the stipulated period to "convey title to the
land in question and to execute the corresponding document covering the same." (Par. 12,
Complaint) In the premises, the plaintiff prayed for judgment "quieting the title of the plaintiff
to the land in question and ordering the defendants to execute a deed of conveyance of the
same in favor of the said plaintiff" plus costs and damages.
To the above complaint, the defendants filed a motion to dismiss on several grounds,
namely: res judicata, prescription, lack of cause of action, failure to include indispensable
parties, and that the contract subject of the complaint was void ab initio. After the plaintiff had
filed his opposition to the above motion, the lower court issued the order under appeal
dismissing the complaint. Of the above grounds, though, the lower court relied alone on the
defendants' plea of res judicata, lack of cause of action and prescription. The material portion
of this order of dismissal reads:
The Court, however, believes that this action is barred by prior judgment. The order of
dismissal in Civil Case No. 261 was already final and has the effect of an adjudication upon
the merits. The parties in Civil Case No. 261 and in this case are substantially the same; the
subject matter is the same and there is identity of cause of action. All the elements of res
judicata are therefore present.1wph1.t complaint in Civil Case No. 261, any such imposition being void, his failure to comply with
Moreover, the complaint states no cause of action if its purpose is to quiet title, because the
plaintiff has as yet no title to the land in question. Precisely, this action is brought in order to
acquire or secure title by compelling the defendants to execute a deed of sale in favor of the
plaintiff. However, this action for specific performance cannot also prosper because being
based upon an agreement in writing it is already barred by prescription as the period of ten
years has long expired when the present complaint was filed.
The appeal at bar assails the above determination that Civil Case No. 780 is barred by a prior
judgment and by prescription and that the same states no cause of action. It is on these
issues, therefore, that this Court shall dispose of this appeal.
We find for the appellant. When certain of the parties to Civil Case No. 261 died and due
notice thereof was given to the trial court, it devolved on the said court to order, not the
amendment of the complaint, but the appearance of the legal representatives of the
deceased in accordance with the procedure and manner outlined in Rule 3, Section 17 of the
Rules of Court, which provides:
SEC. 17. Death of Party. After a party dies and the claim is not thereby extinguished, the
court shall order, upon proper notice, the legal representative of the deceased to appear and
to be substituted for the deceased, within a period of thirty (30) days, or within such time as
may be granted. If the legal representative fails to appear within said time, the court may
order the opposing party to procure the appointment of a legal representative of the deceased
within a time to be specified by the court, and the representative shall immediately appear for
and on behalf of the interest of the deceased. The court charges involved in procuring such
appointment, if defrayed by the opposing party, may be recovered as costs. The heirs of the
deceased may be allowed to be substituted for the deceased, without requiring the
appointment of an executor or administrator and the court may appoint guardian ad litem for
the minor heirs.
In the case of Barrameda vs. Barbara, 90 Phil. 718, this court held that an order to amend the
complaint, before the proper substitution of parties as directed by the aforequoted rule has
been effected, is void and imposes upon the plaintiff no duty to comply therewith to the end
that an order dismissing the said complaint, for such non-compliance, would similarly be void.
In a subsequent case, Ferriera et al. vs. Gonzalez, et al., G.R. No. L-11567, July 17, 1958,
this court affirmed a similar conclusion on the determination that the continuance of a
proceedings during the pendency of which a party thereto dies, without such party having
been validly substituted in accordance with the rules, amounts to a "lack of jurisdiction."
The facts of this case fit four squares into the Barrameda case abovecited, save for the minor
variance that in the former two of the litigants died while only one predeceased the case in
Barrameda. Here, as in Barrameda, during the pendency of civil case, notice was given to the
trial court of the deaths of one of the plaintiffs and one of the defendants in it. Instead of
ordering the substitution of the deceased's legal representatives in accordance with Rule 3,
section 17 of the Rules of Court, the trial court directed the surviving plaintiff to amend the
complaint and when the latter failed to comply therewith, the said court dismissed the
complaint for such non-compliance. We must hold, therefore, as We did in Barrameda that
inasmuch as there was no obligation on the part of the plaintiff-appellant herein to amend his
such an order did not justify the dismissal of his complaint. Grounded as it was upon a void
order, the dismissal was itself void. Consequently, as the dismissal of Civil Case No. 261 was
void, it clearly may not be asserted to bar the subsequent prosecution of the same or identical
claim.
Finally, We find ourselves unable to share the appellees' view that the appellant's complaint
under Civil Case No. 780 failed to state a sufficient cause of action. A cause of action is an
act or omission of one party in violation of the legal right or rights of the other (Ma-ao Sugar
Central vs. Barrios, 79 Phil. 666) and both these elements were clearly alleged in the
aforesaid complaint.
Insofar as the issue of prescription is concerned, this Court is of the view that it should defer
resolution on it until after Civil Case No. 780 shall have been tried on the merits, considering
that one of the defenses set up by the appellant against the said issue is the existence of a
trust relationship over the property in dispute.
In view of all the foregoing, the order dated January 20, 1961 dismissing Civil Case No. 780
is hereby set aside and the said case is ordered remanded to the court of origin for trial on
the merits. Costs against the appellees.
5.) G.R. No. L-54287 September 28, 1988
REPUBLIC PLANTERS BANK petitioner,
vs.
HON. CONRADO M. MOLINA, as Presiding Judge, Court of First Instance of Manila,
Branch XX, SARMIENTO EXPORT CORPORATION, SARMIENTO SECURITIES
CORPORATION and FELICIANO SARMIENTO, JR., respondents.
Paco, Gutierrez, Dorado, Asia & Associates for petitioner.
Benjamin M. Reyes for respondents.
GANCAYCO, J.:
The principal issue raised in this case is whether the trial court committed a grave abuse of
discretion when it ordered Civil Case No. 129829 dismissed on the ground of resjudicata it
appearing that Civil Case No. 116028 was dismissed on May 21, 1979, for failure of petitioner
to prosecute within a reasonable length of time, although in the said case, the trial court never
acquired jurisdiction over the persons of private respondents.
It is not disputed that both complaints in Civil Case No. 116028 (Branch XXXVI, Manila,
Judge Alfredo C. Florendo) and in Civil Case No. 129829 (Branch XX, Manila, Judge
Conrado M. Molina) were filed by petitioner Republic Planters Bank against private
respondent, for the collection of a sum of money based on a promissory note dated January
26, 1970, in the amount of P100,000.00.
On May 21, 1979, Judge Alfredo C. Florendo dismissed Civil Case No. 116028 for failure of
the petitioner "to prosecute its case within a reasonable length of time. 1 A motion for
reconsideration of that order was denied on January 15, 1979. 2
When Civil Case No. 129829 was filed by petitioner, a motion to dismiss was submitted by
private respondents on the ground that the cause of action is barred by a prior judgment ( res
judicata) in Civil Case No. 116028. Private respondents opined that said order was an
adjudication upon the merits. Petitioner opposed the motion to dismiss, claiming that res
judicata does not apply because the summons and complaint in Civil Case No. 116028 were
never served upon private respondents and, as such, the trial court never acquired
jurisdiction over private respondents and, consequently, over the case. Petitioner maintains
that the order of dismissal in Civil Case No. 11 6028 never became final as against private
respondents.
The trial court (Branch XX), in its order dated May 8, 1980, dismissed the complaint in Civil
Case No. 129829 on the ground that the orders dated May 21, 1979 and June 15, 1979
issued by Judge Alfredo C. Florendo, dismissing Civil Case No. 116028, had become final.
The trial court ruled that the dismissal of Civil Case No. 116028 had the effect of an
adjudication upon the merits, that the dismissal was with prejudice since the order was
unconditional, and that the lack of jurisdiction over defendants (private respondents) in Civil
Case No. 116028 was of no moment. 3
In a motion for reconsideration of the order of May 8, 1980, petitioner reiterated its allegation
that in Civil Case No. 116028, the court did not acquire jurisdiction over private respondents
and that at the time the court ordered its dismissal, a motion for an alias writ of summons was
pending resolution inasmuch as the sheriff had not acted on the same. 4 The motion for
reconsideration was denied by the trial court on June 26, 1980 in Civil Case No. 129829. 5
Petitioner appealed to the Court of Appeals both questioned orders of respondent court in
Civil Case No. 129829. 6 But then, petitioner sought a more speedy remedy in questioning
said orders by filing this petition for certiorari before this Court.
Under the foregoing undisputed facts, the Court finds this petition to be impressed with merit.
The questioned orders of the trial court in Civil Case No. 129829 supporting private
respondent's motion to dismiss on the ground of res judicata are without cogent basis. We
sustain petitioner's claim that respondent trial judge acted without or in excess of jurisdiction
when he issued said orders because he thereby traversed the constitutional precept that "no
person shall be deprived of property without due process of law" and that jurisdiction is vitally
essential for any order or adjudication to be binding. Justice cannot be sacrificed for
technicality. Originally, the action for collection of the loan, evidenced by a promissory note,
was only for P100,000.00 but petitioner claims that as of March 5, 1981, the obligation was
already P429,219.74. It is a cardinal rule that no one must be allowed to enrich himself at the
expense of another without just cause.
In the very order of dismissal of Civil Case No. 116028, the trial court admitted that it did not
acquire jurisdiction over the persons of private respondents and yet, it held that it was of no
moment as to the dismissal of the case. We disagree. For the court to have authority to
dispose of the case on the merits, it must acquire jurisdiction over the subject matter and the
parties. If it did not acquire jurisdiction over the private respondents as parties to Civil Case
No. 116028, it cannot render any binding decision, favorable or adverse to them, or dismiss
the case with prejudice which, in effect, is an adjudication on the merits. 7 The controverted
orders in Civil Case No. 116028 disregarded the fundamental principles of remedial law and
the meaning and the effect of jurisdiction. A judgment, to be considered res judicata, must be
binding, and must be rendered by a court of competent jurisdiction. Otherwise, the judgment
is a nullity.
The order of dismissal in Civil Case No. 116028 does not have the effect of an adjudication
on the merits of the case because the court that rendered the same did not have the requisite
jurisdiction over the persons of the defendants therein.
This being so, it cannot be the basis of res judicata and it cannot be a bar to a lawful claim. If
at all, such a dismissal may be considered as one without prejudice. 8
Trial courts have the duty to dispose of controversies after trial on the merits whenever
possible. In this case, there are no indications that petitioner intentionally failed to prosecute
the case. The delay could not be attributed to its fault. Petitioner pursued the case with
diligence, but jurisdiction could not be acquired over defendants-private respondents. The
sheriff had not yet submitted his return of the alias summons when the action was
precipitately dismissed by the trial court. These are proven circumstances that negate the
action of respondent judge that the dismissal of Civil Case No. 116028 has the effect of an
adjudication upon the merits and constitutes a bar to the prosecution of Civil Case No.
129829. The court finds that the two questioned orders of the trial court are irregular,
improper, and, were issued with grave abuse of discretion amounting to excess of jurisdiction.
Petitioner correctly states that its appeal to the Court of Appeals in CA-G.R. No. 67288
pertaining to the questioned orders of the trial court is not an adequate remedy, because
petitioner was not able to present evidence in the trial court. The sole issue involved in this
case is one of jurisdiction, which is appropriate for resolution by the instant petition.
WHEREFORE, and by reason of the foregoing, the questioned orders dated May 8, 1980 and
June 26, 1980 issued in Civil Case No. 129829 are hereby REVERSED and SET ASIDE. The
records of the case are ordered returned to the trial court for trial and disposition on the
merits. No costs. This decision is immediately executory.
SO ORDERED.
RULE 18
1.) G.R. No. L-43372 May 5, 1979
ALFONSO A. CHAN vs. THE HON. JUDGE OTILLO G. ABAYA, as Presiding Judge of
Branch 11, Court of First Instance of Surigao del Sur, and SOFRONIA
AGAO respondents.
CONCEPCION, JR., J.:
Petition for certiorari to annul and set aside the orders of the respondent judge, dated August
13 and November 3, 1975, in Civil Case No L-154 of the Court of First Instance of Surigao del
Sur, entitled, "Alfonso A. Chan, plaintiff, versus Sofronia Agao, defendant", requiring the
petitioner and/or his counsel to pay damages suffered by the private respondent and her
counsel in the amount of P100.00, "the same to be paid not later than the next hearing of this
case," for the failure of the petitioner and his counsel to appear at the pre-trial conference of
the case.
The record shows that on January 27, 1975, the petitioner, Alfonso A. Chan, filed a complaint
against the herein private respondent, Sofronia Agao, with the Court of First Instance of
Surigao del Sur, for indemnification, under Articles 20 and 21 of the Civil Code of the
Philippines, in relation to Articles 2199, 2208 (par. 3), 2219 (par. 8) and 2229 thereof, for the
damages suffered by him and his wilful as a result of the family and malicious prosecution of
the petitioner by the private respondent. 1
The private respondent filed her answer thereto on February 19, 1975, denying the material
allegations in the complaint, and interposed a counterclaim for damages, attorney's fees, and
costs, as well as the payment of back rentals on a building which the petitioner failed to pay
despite demands. 2
Instead of filing a responsive pleading, the petitioner filed a motion for a bill of particulars,
asking for a more definite statement on the alleged lease contract, setting his motion for
resolution by the court on March 14, 1975, or on any other date as may be convenient for the
court, without further argument by counsel. 3
The respondent judge, however, did not take action on the motion for a bill of particulars and
set the pre-trial conference of the case on August 13 and 14, 1975. On August 11, 1975,
counsel for the petitioner sent a telegraphic motion to the court, followed later by a formal
written motion, asking that the pre-trial conference be reset to another date until his motion
for a bill of particulars shall have been resolved. 4 But, the case was called for a pre-trial
conference on August 13, 1975, as scheduled. Noting the absence of the petitioner and his
counsel, the attorney for the private respondent asked the court that the petitioner be ordered
to pay the private respondent her expenses in coming to court. The respondent judge granted
the motion and issued an order directing the petitioner and/or his counsel to pay damages
suffered by the private respondent and her counsel in the amount of P200.00, the same to be
paid not later than the next hearing of the case. The pretrial conference was re-set to
September 23 and 24, 1975. 5
The petitioner filed a motion for the reconsideration of said order, 6 and, as a result, the
amount was reduced to P 100.00. 7 Whereupon, the petitioner initiated the present recourse,
to annul and set aside the orders of the respondent judge dated August 13 and November 3,
1975.
The petitioner claims that the payment of damages to the private respondent is unjustified
because the petitioner was not properly notified of the holding of the pre-trial conference on
August 13, 1975, and that the calling of a pre-trial conference on August 13, 1975 was
premature since the respondent judge had not yet resolved the petitioner's motion for a bill of
particulars.
The private respondent, upon the other hand, maintains that there was substantial
compliance with the rules as to notice because the petitioner's counsel was notified of the
pretrial hearing by telegram on August 6, 1975, and the said attorney, in turn, notified the
petitioner of such pre-trial hearing by telegram.
The petition is meritorious. To begin with, the calling of a pre-trial conference on August 13,
1975 was untimely. Section 1, Rule 20 of the Revised Rules of Court provides:
Section 1. Pre-trial mandatory. In any action, after the last pleading has been filed, the
court shall direct the parties and their attorneys to appear before it for a conference to
consider:
(a) the possibility of an amicable settlement or of a submission to arbitration;
(b) the simplification of the issues;
(c) the necessity or desirability of amendments to the pleadings:
(d) the possibility of obtaining stipulations or admissions of fact and of documents to avoid
unnecessary proof ;
(e) the limitation of the number of witnesses;
(f) the advisability of a preliminary reference of issues to a commissioner;
(g) such other matters as may aid in the prompt disposition of the action.
As will be seen, the court is directed to hold the pre-trial of the case after the last pleading
has been filed. Construing the term "last pleading," the Court held that "under the rules of
pleading and practice, the answer ordinarily is the last pleading, but when the defendant's
answer contains a counterclaim, plaintiff's answer to it is the last pleading." 8 Following the
rule, the "last pleading" in the case would be the answer of the plaintiff to the counterclaim of
the defendant. But, no answer to the counterclaim had been filed because of the unresolved
motion for a bill of particulars. Obviously, the calling of a pre-trial conference on August 13,
1975 was premature since there has yet to be filed the "last pleading".
In the disputed order of August 13, 1975, the respondent judge stated that he did not act on
the motion for a bill of particulars and considered it as "merely a scrap of paper which the
court is not duty bound to resolve" for the reasons that ... the Clerk of Court informed the
court that said motion was received by his office in the afternoon of March 14, 1975 so that
although said motion was set for hearing on the said date, the same could not be heard on
the specified time it was set for hearing, which was in the morning of March 14, 1975.
Moreover, plaintiff's counsel failed to appear on said date to prosecute his motion. Said
counsel did not even bother to verify whether or not his motion reached the court on time, so
that he would have known the status of the same." The failure of a movant to appear on the
day of the hearing of his motion, however, is not sufficient reason to discard a motion and
treat it as a mere scrap of paper. The better rule is to deny such motion for abandonment or
for failure to prosecute.
Under the rules, pre-trial is mandatory and the Court has uniformly held that the parties, as
well as their counsel, who are required to appear thereat, must be notified of the same, and
the notice of pre-trial must be served upon them separately. 9 While a copy of the notice of
the pre-trial conference set for August 13 and 14, 1975 10 may have been sent to the
petitioner Alfonso A. Chan separately, 11 by registered mail at his given address of record on
August 8, 1975, 12the petitioner received the notice only on August 18, 1975, 13 His inability to
attend and be present at the pre-trial conference on August 13, 1975 is, therefore,justified.
The fact that his attorney had sent a telegram of "Escribano" notifying them of the setting of
the pre-trial conference on August l3 and 14, 1975 should not militate against the petitioner
because the telegram, to him, was vague and ambiguous, prompting the petitioner to send a
telegram to his counsel that he "did not received any court order regarding our motion or
defendants amended answer", and inquiring who " Escribano " is. 14
Moreover, We find that the award of damages in the amount of P100.00 to the private
respondent for her expenses in coming to court to attend the pre-trial hearing set for August
13, 1975, the same to be paid not later than the next hearing of the case, is unfounded and
without basis. Such an award cannot be justified under Article 2208 of the Civil Code.
WHEREFORE, the petition is granted and the orders of the respondent judge dated August
13 and November 3, 1975, in Civil Case No. L-154 of the Court of First Instance of Surigao
del Sur, entitled, "Alfonso A. Chan, plaintiff, versus Sofronia Argao, defendant, " should be, as
they are hearby annulled and set aside. Costs against the private respondent, Sofronia Agao.
SO ORDERED.

3.) G.R. No. L-56605 January 28, 1983
ANDRES C. SARMIENTO, petitioner,
vs.
THE HON. CELESTINO C. JUAN, PRESIDING JUDGE, BRANCH X, COURT OF FIRST
INSTANCE OF MANILA and BELFAST SURETY & INSURANCE CO., INC., respondents.
Andres C. Sarmiento in his own behalf.
Federico T. Castillo, Jr., for respondents.
VASQUEZ, J.:
In this petition for review on certiorari, petitioner Andres C. Sarmiento seeks to set aside a
decision rendered by the respondent Court of Appeals in CA G.R. No. SP-10649 which
denied due course to a petition for certiorari filed therein by the herein petitioner to annul two
orders issued by the Court of First Instance of Manila in Civil Case No. 126113. The instant
petition was given due course in the Resolution of September 14, 1981 and the parties
ordered to submit their respective memoranda. The petitioner flied a memorandum in his
behalf but the private respondent merely adopted its comment on the petition as its
memorandum.
Civil Case No. 126113 was an action filed by private respondent Belfast Surety & Insurance
Co., Inc. against herein petitioner and his father Benjamin R. Sarmiento, Sr. for
indemnification under an Indemnity Agreement executed by them in connection with a bail
bond. The case was assigned to Branch X of the Court of First Instance of Manila presided
over by respondent Judge Celestino C. Juan who had since retired.
After the petitioner filed an answer with compulsory counterclaim, private respondent filed a
motion to dismiss the case against defendant Benjamin R. Sarmiento, Sr., and to schedule
the case for pre-trial. This motion was granted by Judge Juan and the pre-trial was set on
February 5, 1980, at 8:30 a.m.
At the said pre-trial, nobody appeared except Atty. Federico T. Castillo, Jr., counsel for the
private respondent. However, the petitioner sent to the Court on the same date an urgent
motion for postponement stating therein that when he was preparing to go to the Court, he
felt severe stomach pain followed by loose bowel movements, and he accordingly prayed that
the pre-trial be postponed to another date.
The urgent motion for postponement filed by the petitioner was denied in the order of Judge
Juan dated February 5, 1980. On motion of Atty. Castillo, the petitioner was "declared non-
suited" (should have been "as in default") and the private respondent allowed to present its
evidence ex-parte on February 26, 1980, at 8:30 a.m.
On February 25, 1980, the petitioner filed a motion for reconsideration of the order of
February 5, 1980. In his order of February 26, 1980, Judge Juan denied the said motion for
reconsideration "for lack of merit," and reiterated the permission for the private respondent to
present its evidence ex-parte.
It does not appear whether the ex-parte presentation of evidence by the private respondent
had already been accomplished, nor that a derision thereon had been rendered. That such
proceedings had not taken place could, however, be gathered from the fact that on March 19,
1980, the petitioner filed a petition for certiorari with the Supreme Court docketed as G.R. No.
53399 to annul the aforementioned orders of Judge Juan dated February 5, 1980 and
February 26, 1980. The said petition was remanded to the Court of Appeals pursuant to the
Resolution of the First Division of this Court dated March 28, 1980. It was docketed in the
Court of Appeals as CA-G.R. No. SP-14649. In a decision promulgated on August 29, 1980
by the Special First Division of the Court of Appeals, the petition was denied due course and
ordered dismissed for lack of meet. Said decision is the subject of the present appeal by
certiorari.
The petitioner assails the refusal of the respondent Court of Appeals to disturb the questioned
orders of Judge Juan which petitioner claims to have been issued in excess of jurisdiction
and with grave abuse of discretion. He contends that (a) the pre-trial was premature
inasmuch as, there having been no answer filed by the private respondent to the petitioner's
counterclaim alleged in his answer, the "last pleading" has not yet been filed so as to
authorize a pre-trial to be conducted in accordance with Section 1, Rule 20, of the Rules of
Court; (b) there being no valid pre-trial, the trial court had no authority to declare him as "non-
suited", or more correctly, as in default, for his failure to appear at the said pre-trial; (b)
assuming that there was a valid pre-trial, the trial court could not legally declare the petitioner
as in default due to his failure to be present threat inasmuch as the private respondent itself
made no valid appearance at said pre-trial because only its counsel appeared without any
special authority to represent his client at the said pre-trial; and (c) it was a grave abuse of
discretion on the part of the trial court to deny the petitioner's urgent motion for postponement
despite the merit of the ground alleged therein, and the same thing is true with the denial of
his motion to set aside or lift the order declaring him in default.
We see no merit in the petitioner's contention that the pre-trial was prematurely scheduled on
the supposed ground that the last pleading had not been filed. In the petition for certiorari
docketed as G.R. No. 53399, the petitioner has alleged that he filed his answer to the
complaint containing a compulsory counterclaim on December 21, 1979 which was served on
the counsel for the private respondent on the same date. (Rollo, p. 19.) The pre-trial was
scheduled to be held on February 5, 1980 or a month and a half after the petitioner had flied
his answer to the complaint in Civil Case No. 126113 and private respondent served with a
copy of the same. While it may be true that the private respondent had not filed any answer to
the counterclaim contained in the petitioner's answer, such circumstance does not prevent
the trial court from conducting the pre-trial. As was observed by the respondent Court of
Appeals in its questioned decision: "If no answer (to the counterclaim) is timely filed the pre-
trial order may issue. Otherwise, an unscrupulous party litigant can hold court processes by
the simple expedient of failing to answer."
The requirement that the pre-trial shall be scheduled "after the last pleading has been filed"
( Section 1, Rule 20, Rules of Court) is intended to fully apprise the court and the parties of all
the issues in the case before the pre-trial is conducted. It must be remembered that the
issues may only be ascertained from the allegations contained in the pleadings filed by the
parties. The last permissible pleading that a party may file would be the reply to the answer to
the last pleading of claim that had been filed in the case, which may either be the complaint, a
cross-claim, a counterclaim or a third party complaint, etc. (Secs. 2 and 11, Rule 6, Rules of
Court.) Any pleading asserting a claim must be answered, and the failure to do so by the
party against whom the claim is asserted renders him liable to be declared in default in
respect of such claim. (See. 10, Ibid) There are, however, recognized exceptions to the rule,
making the failure to answer a pleading of claim as a ground for a default declaration, such as
the failure to answer a complaint in intervention (Sec. 2(c) Rule 12, Rules of Court), or a
compulsory counterclaim so intimately related to the complaint such that to answer to same
would merely require a repetition of the allegations contained in the complaint (Zamboanga
Colleges, Inc. vs. Court of Appeals, 1 SCRA 870; Ballecer vs. Bernardo, 18 SCRA
291; Agaton vs. Perez, 18 SCRA 1165.)
In the case presently considered, the nature of the counterclaim in the petitioner's answer has
not been made clear, except to categorize it as a compulsory counterclaim. Such being the
case, it is likely to be one where the answering thereof is not necessary, and the failure to do
so would not be a ground to be declared in default. In any event, the private respondent's
failure to answer the petitioner's counterclaim after the period to file the answer had lapsed is
no obstacle to holding a pre-trial.1wph1.t The requirement that the last pleading must appearance at the trial without motion on the part of the defendant (Sec. 3, Rule 17), the
have been filed before a pre-trial may be scheduled should more appropriately be construed
to mean not only if the last pleading had been actually filed, but also if the period for filing the
same had expired.
We, however, find merit in the petitioner's two other contentions. The denial by Judge Juan of
the petitioner's motion to postpone the pre-trial scheduled on February 5, 1980 may have
appeared valid at the outset, considering that it was filed at the last minute and was not
accompanied by a medical certificate although the ground alleged was illness on the part of
the petitioner. Nonetheless, a different appraisal of the petitioner's plea should have been
made after the petitioner filed a motion for reconsideration which was made under oath. Due
regard should have been given to the repeated pronouncements by this Court against default
judgments and proceedings that lay more emphasis on procedural niceties to the sacrifice of
substantial justice. After all, the ex-parte presentation of evidence had not yet been
conducted nor had a decision been rendered in the case. It appeared to be a simple matter of
giving the petitioner a chance to have his day in court in order to defend himself against the
claim filed by the private respondent. As it turned out, the procedure adopted by the trial court
proved unprofitable and disadvantageous to all parties concerned, including the courts. The
case would have been disposed of in a much easier and more expeditious manner if the trial
court had heeded the petitioner's simple plea for a chance to be heard. Thereby, all the
proceedings taken subsequent to the disputed orders of the trial court could have been
avoided, and the Court of Appeals and the Supreme Court spared from the trouble of
resolving the petitions filed before them.
The petitioner also has valid reason to complain about the apparent overanxiousness of the
trial court to finish the case in summary fashion. The petitioner had manifested to the Court
that his inability to appear before the pre-trial was due to a sudden ailment that befell him
while he was preparing to go to Court. While it is true that the motion for postponement was
not accompanied by a medical certificate, it must be considered that not every ailment is
attended to by a physician, or if so, a medical certificate under oath as required by the Rules
could be secured within the limited time available. There has been no refutation of the cause
of the non-appearance of the petitioner as claimed by the latter. Said cause had been
reiterated under oath in the petitioner's motion for reconsideration to which the trial court
turned a deaf ear. Any suspicion that the petitioner was merely suing for delay is readily
dispelled by the fact that the pre-trial was being set for the first time, and that the petitioner
took immediate steps against the refusal of the trial court to set aside the default declaration
and to pursue remedies steadfastly against the same in the higher tribunals.
The declaration default on the part of the petitioner may not be considered as entirely proper
under the circumstances surrounding the same. It is undenied that nobody appeared at the
pre-trial except the counsel for the private respondent. Under settled doctrines, not even the
private respondent may be considered as having appeared at the said pre-trial, it not having
made appearance thereat through a duly authorized representative. In such a situation, the
trial court would have acted more properly if it dismissed the case, or declared the private
respondent as plaintiff therein as non-suited instead of declaring the petitioner as in default
(erroneously stated by it as "non-suited.") This is because while the court may declare the
plaintiff non- suited for non-appearance at the pre-trial or dismiss the case for his non-
latter may not be declared in default without such motion on the part of the plaintiff. (Sec. 1.
Rule 18; Trajano vs. Cruz, 80 SCRA 712.) A plaintiff who makes no valid appearance at pre-
trial may not ask that the defendant be punished for the same shortcoming it was equally
guilty of.
WHEREFORE, the judgment of the Court of Appeals rendered in CA-G.R. No. 10649
promulgated on August 29, 1980, and the Resolution issued in said case dated March 29,
1981 which denied a motion for the reconsideration of the said judgment are hereby
REVERSED and SET ASIDE. The orders of the Court of First Instance of Manila in Civil Case
No. 126113 dated February 5, 1980 and February 26, 1980 are ordered ANNULLED and SET
ASIDE. Let the said case be rescheduled for pre-trial and for subsequent proceedings
thereafter. Costs against the private respondent.
SO ORDERED.

4.) G.R. No. 102300. March 17, 1993.
CITIBANK, N.A., vs. HON. SEGUNDINO G. CHUA, SANTIAGO M. KAPUNAN and LUIS L.
VICTOR, ASSOCIATE JUSTICES OF THE HON. COURT OF APPEALS, THIRD DIVISION,
MANILA, HON. LEONARDO B. CANARES, Judge of Regional, Trial Court of Cebu, Branch
10, and SPOUSES CRESENCIO AND ZENAIDA VELEZ
SYLLABUS
1. COMMERCIAL LAW; PRIVATE CORPORATIONS; LEVELS OF CONTROL IN
CORPORATE HIERARCHY; BOARD OF DIRECTORS MAY VALIDLY DELEGATE SOME
FUNCTIONS TO INDIVIDUAL OFFICERS OR AGENTS. In the corporate hierarchy, there
are three levels of control: (1) the board of directors, which is responsible for corporate
policies and the general management of the business affairs of the corporation; (2) the
officers, who in theory execute the policies laid down by the board, but in practice often have
wide latitude in determining the course of business operations; and (3) the stockholders who
have the residual power over fundamental corporate changes, like amendments of the
articles of incorporation. However, just as a natural person may authorize another to do
certain acts in his behalf, so may the board of directors of a corporation validly delegate some
of its functions to individual officers or agents appointed by it.
2. ID.; ID.; HOW CORPORATE POWERS CONFERRED UPON CORPORATE OFFICERS
OR AGENTS; EXERCISE OF POWERS INCIDENTAL TO EXPRESS POWERS
CONFERRED. Corporate powers may be directly conferred upon corporate officers or
agents by statute, the articles of incorporation, the by-laws or by resolution or other act of the
board of directors. In addition, an officer who is not a director may also appoint other agents
when so authorized by the by-laws or by the board of directors. Such are referred to as
express powers. There are also powers incidental to express powers conferred. It is a
fundamental principle in the law of agency that every delegation of authority, whether general
or special, carries with it, unless the contrary be expressed, implied authority to do all of those
acts, naturally and ordinarily done in such cases, which are reasonably necessary and proper
to be done in order to carry into effect the main authority conferred. Since the by-laws are a
source of authority for corporate officers and agents of the corporation, a resolution of the
Board of Directors of Citibank appointing an attorney in fact to represent and bind it during the
pre-trial conference of the case at bar is not necessary because its by-laws allow its officers,
the Executing Officer and the Secretary Pro-Tem, to execute a power of attorney to a
designated bank officer, William W. Ferguson in this case, clothing him with authority to direct
and manage corporate affairs.
3. ID.; ID.; ADOPTION OF BY-LAWS; PROVISION OF SECTION 46 OF CORPORATION
CODE REFERRING TO EFFECTIVITY OF CORPORATE BY-LAWS APPLICABLE ONLY TO
DOMESTIC CORPORATIONS. A corporation can submit its by-laws, prior to incorporation,
or within one month after receipt of official notice of the issuance of its certificate of
incorporation by the SEC. When the third paragraph of the above provision mentions "in all
cases", it can only refer to these two options; i.e., whether adopted prior to incorporation or
within one month after incorporation, the by-laws shall be effective only upon the approval of
the SEC. But even more important, said provision starts with the phrase "Every corporation
formed under this Code", which can only refer to corporations incorporated in the Philippines.
Hence, Section 46, in so far as it refers to the effectivity of corporate by-laws, applies only to
domestic corporations and not to foreign corporations.
4. ID.; FOREIGN CORPORATIONS; ISSUANCE OF LICENSE TO TRANSACT BUSINESS
IN THE PHILIPPINES; REQUISITES; GRANT OF LICENSE IN EFFECT APPROVAL BY
SEC OF FOREIGN CORPORATION'S BY-LAWS. Section 125 of the same Code requires
that a foreign corporation applying for a license to transact business in the Philippines must
submit, among other documents, to the SEC, a copy of its articles of incorporation and by-
laws, certified in accordance with law. Unless these documents are submitted, the application
cannot be acted upon by the SEC. In the following section, the Code specifies when the SEC
can grant the license applied for. Section 126 provides in part: "SEC. 126. Issuance of a
license. If the Securities and Exchange Commission is satisfied that the applicant has
complied with all the requirements of this Code and other special laws, rules and regulations,
the Commission shall issue a license to the applicant to transact business in the Philippines
for the purpose or purposes specified in such license . . ." Since the SEC will grant a license
only when the foreign corporation has complied with all the requirements of law, it follows that
when it decides to issue such license, it is satisfied that the applicant's by-laws, among the
other documents, meet the legal requirements. This, in effect, is an approval of the foreign
corporations by-laws. It may not have been made in express terms, still it is clearly an
approval. Therefore, petitioner bank's by-laws, though originating from a foreign jurisdiction,
are valid and effective in the Philippines.
5. CIVIL LAW; AGENCY; SPECIAL POWER OF ATTORNEY; WHEN POWER OF
ATTORNEY COMPREHENSIVE ENOUGH TO INCLUDE AUTHORITY TO APPEAR AT PRE-
TRIAL CONFERENCE. It is also error on the part of the Court of Appeals to state that the
power of attorney given to the four (4) Citibank employees is not a special power of attorney
as required in paragraph 3, Article 1878 of the Civil Code and Section 1 (a), Rule 20 of the
Rules of Court. In the case of Tropical Homes, Inc. vs. Villaluz, the special power of attorney
executed by petitioner bank therein contained the following pertinent terms "to appear for
and in its behalf in the above-entitled case in all circumstances where its appearance is
required and to bind it in all said instances". The court ruled that: "Although the power of
attorney in question does not specifically mention the authority of petitioner's counsel to
appear and bind the petitioner at the pre-trial conference, the terms of said power of attorney
are comprehensive enough as to include the authority to appear for the petitioner at the pre-
trial conference."
6. ID.; ID.; ID.; LEGAL COUNSEL APPOINTED TO REPRESENT BANK IN COURT
PURSUANT TO BY-LAW PROVISION CONSIDERED AN EMPLOYEE FOR A SPECIAL
PURPOSE. Attorney was sufficient under the by-law provision authorizing Ferguson to
delegate any of his functions to any one or more employees of the petitioner bank. A
reasonable interpretation of this provision would include an appointment of a legal counsel to
represent the bank in court, for, under the circumstances, such legal counsel can be
considered, and in fact was considered by the petitioner bank, an employee for a special
purpose. Furthermore, Ferguson, who heads the Philippine office thousands of miles away
from its main office in the United States, must be understood to have sufficient powers to act
promptly in order to protect the interests of his principal.
7. REMEDIAL LAW; CIVIL PROCEDURE; PRECIPITATE ORDERS OF DEFAULT
FROWNED UPON BY SUPREME COURT; REASON THEREFOR; WHEN PARTY MAY BE
PROPERLY DEFAULTED. We reiterate the previous admonitions of this Court against
"precipitate orders of default as these have the effect of denying the litigant the chance to be
heard. While there are instances, to be sure, when a party may be properly defaulted, these
should be the exceptions rather than the rule and should be allowed only in clear cases of an
obstinate refusal or inordinate neglect to comply with the orders of the court. Absent such a
showing, the party must be given every reasonable opportunity to present his side and to
refute the evidence of the adverse party in deference to due process of law".
8. LEGAL ETHICS; AUTHORITY OF ATTORNEYS TO BIND CLIENTS. Under Rule 138,
Section 23 of the Rules of Court, an attorney has authority to bind his client in any case by an
agreement in relation thereto made in writing, and this authority would include taking appeals
and all matters of ordinary judicial procedure. But he cannot, without special authority,
compromise his client's litigation or receive anything in discharge of a client's claim but the full
amount in cash. The special powers of attorney separately executed by Florencia Tarriela and
William W. Ferguson granted to J.P. Garcia & Associates are very explicit in their terms as to
the counsel's authority in the case at bar.
DECISION
CAMPOS, JR., J p:
Petitioner is a foreign commercial banking corporation duly licensed to do business in the
Philippines. Private respondents, spouses Cresencio and Zenaida Velez, were good clients of
petitioner bank's branch in Cebu until March 14, 1986 when they filed a complaint for specific
performance and damages against it in Civil Case No. CEB-4751 before the Regional Trial
Court of Cebu, Branch 10.
Private respondents alleged in their complaint that the petitioner bank extended to them credit
lines sufficiently secured with real estate and chattel mortgages on equipment. They claim
that petitioner offered them special additional accommodation of Five Million Pesos
(P5,000,000.00) to be availed of in the following manner:
"a. Defendant would and did purchase check or checks from the plaintiffs by exchanging it
with defendant's manager's check on a regular daily basis as reflected in the defendant's own
ledger furnished to plaintiffs;
b. It was further agreed that on the following day, defendant CITIBANK would again purchase
from the plaintiffs, check or checks, by exchanging the same with defendant's manager's
check, which check, however, will be deposited by the plaintiffs with their other banks to cover
the check or checks previously issued by the plaintiffs mentioned above;
c. The same regular and agreed activity would be undertaken by the plaintiffs and defendant
CITIBANK herein every banking day thereafter;" 1
This arrangement started on September 4, 1985 until March 11, 1986, when private
respondents tried to exchange with petitioner bank six checks amounting to P3,095,000.00
but petitioner bank allegedly refused to continue with the arrangement even after repeated
demands. Instead, petitioner bank suggested to private respondents that the total amount
covered by the "arrangement be restructured to thirty (30) months with prevailing interest rate
on the diminishing balance". 2 Private respondents agreed to such a proposal. Then as a
sign of good faith, they issued and delivered a check for P75,000.00 in favor of petitioner
bank which was refused by the latter demanding instead full payment of the entire amount.
For the failure of petitioner bank to comply with this restructuring agreement private
respondents sued for specific performance and damages.
Petitioner bank has a different version of the business relationship that existed between it and
private respondents. Thus:
". . . starting sometime on September 4 of 1985, he (private respondent Crescencio Velez)
deposited his unfunded personal checks with his current account with the petitioner. But prior
to depositing said checks, he would present his personal checks to a bank officer asking the
latter to have his personal checks immediately credited as if it were a cash deposit and at the
same time assuring the bank officer that his personal checks were fully funded. Having
already gained the trust and confidence of the officers of the bank because of his past
transactions, the bank's officer would always accommodate his request. After his requests are
granted which is done by way of the bank officer affixing his signature on the personal
checks, private respondent Cresencio Velez would then deposit his priorly approved personal
checks to his current account and at the same time withdraw sums of money from said
current account by way of petitioner bank's manager's check. Private respondent would then
deposit petitioner bank's manager's check to his various current accounts in other commercial
banks to cover his previously deposited unfunded personal checks with petitioner bank.
Naturally, petitioner bank and its officers never discovered that his personal check deposits
were unfunded. On the contrary, it gave the petitioner bank the false impression that private
respondent's construction business was doing very well and that he was one big client who
could be trusted. This deceptive and criminal scheme he did every banking day without fail
from September 4, 1985 up to March 11, 1986. The amounts that he was depositing and
withdrawing during this period (September 4, 1985 to March 11, 1986) progressively became
bigger. It started at P46,000.00 on September 4, 1985 and on March 11, 1986 the amount of
deposit and withdrawal already reached over P3,000,000.00. At this point in time (March 11,
1986), the private respondent Cresencio Velez presumably already feeling that sooner or
later he would be caught and that he already wanted to cash in on his evil scheme, decided
to run away with petitioner's money. On March 11, 1986, he deposited various unfunded
personal checks totalling P3,095,000.00 and requested a bank officer that the same be
credited as cash and after securing the approval of said bank officer, deposited his various
personal checks in the amount of P3,095,000.00 with his current account and at the same
time withdrew the sum of P3,244,000.00 in the form of petitioner's manager's check. Instead
of using the proceeds of his withdrawals to cover his unfunded personal checks, he ran away
with petitioner bank's money. Thus, private respondent Cresencio Velez's personal checks
deposited with petitioner bank on March 11, 1986 in the total aggregate amount of
P3,095,000.00 bounced. The checks bounced after said personal checks were made the
substantial basis of his withdrawing the sum of P3,244,000.00 from his current account with
petitioner bank." 3
Subsequently, on August 19, 1986, petitioner bank filed a criminal complaint against private
respondents for violation of Batas Pambansa Blg. 22 (Bouncing Checks Law) and estafa (six
counts) under Article 315 par. 2(d) of the Revised Penal Code. On April 28, 1988, the
investigating fiscal recommended the filing of an information against private respondents for
violations of the mentioned laws.
On June 13, 1989, petitioner bank submitted its answer to the complaint filed by private
respondents. In the Order dated February 20, 1990, the case was set for pre-trial on March
30, 1990 and petitioner bank was directed to submit its pre-trial brief at least 3 days before
the pre-trial conference. Petitioner bank only filed its pre-trial brief on March 30, 1990.
On March 30, 1990, the date of the pre-trial conference, counsel for petitioner bank
appeared, presenting a special power of attorney executed by Citibank officer Florencia
Tarriela in favor of petitioner bank's counsel, the J.P. Garcia & Associates, to represent and
bind petitioner bank at the pre-trial conference of the case at bar.
Inspite of this special power of attorney, counsel for private respondents orally moved to
declare petitioner bank as in default on the ground that the special power of attorney was not
executed by the Board of Directors of Citibank. Petitioner bank was then required to file a
written opposition to this oral motion to declare it as in default. In said opposition petitioner
bank attached another special power of attorney made by William W. Ferguson, Vice
President and highest ranking officer of Citibank, Philippines, constituting and appointing the
J.P. Garcia & Associates to represent and bind the BANK at the pre-trial conference and/or
trial of the case of "Cresencio Velez, et al. vs. Citibank, N.A.". 4 In an Order dated April 23,
1990, respondent judge denied private respondents' oral motion to declare petitioner bank as
in default and set the continuation of the pre-trial conference for May 2, 1990.
On the scheduled pre-trial conference, private respondents reiterated, by way of asking for
reconsideration, their oral motion to declare petitioner bank as in default for its failure to
appear through an authorized agent and that the documents presented are not in accordance
with the requirements of the law. Petitioner bank again filed on May 14, 1990 its opposition
thereto, stating as follows:
". . . While it has been the practice of Citibank to appoint its counsels as its attorney-in-fact in
civil cases because it considers said counsels equivalent to a Citibank employee, yet, in order
to avoid further arguments on the matter, the defendant Citibank will secure another power of
attorney from Mr. William W. Ferguson in favor of its employee/s who will represent the
defendant Citibank in the pre-trial conferences of this case. As soon as the said special power
of attorney is secured, the defendant will present it before this Honorable Court and in
pursuance therewith, the defendant hereby makes a reservation to present such document as
soon as available." 5
In compliance with the above promise, petitioner bank filed a manifestation, dated May 23,
1990, attaching therewith a special power of attorney executed by William W. Ferguson in
favor of Citibank employees to represent and bind Citibank on the pre-trial conference of the
case at bar. 6
On August 15, 1990, respondent judge issued an order declaring petitioner bank as in default.
This order, received by petitioner bank on September 27, 1990, cited the following as reason
for the declaration of default:
"Defendant-bank, although a foreign corporation, is bound by Philippine laws when doing and
conducting business in the Philippines (Sec. 129, B.P. Blg. 68), and its corporate powers
could only be exercised by its Board of Directors (Sec. 23, B.P. Blg. 68). The exercise by the
Board of Directors of such power could only be valid if it bears the approval of the majority of
the Board (Sec. 25, par. 2, Corporation Code). The records does not show the requisite
document. The alleged authority (Special Power of Attorney, Annex "A") executed by Mr.
William W. Ferguson in favor of the alleged Citibank employees, assuming the same to be a
delegable authority, to represent the defendant in the pre-trial conference, made no mention
of J.P. Garcia & Associates as one of the employees of the defendant.
It stands to reason therefore, that the defendant-bank has no proper representation during
the pre-trial conference on May 2, 1990 for purposes of Sec. 2, Rule 20 of the Rules of
Court." 7
On October 1, 1990, petitioner bank filed a motion for reconsideration of the above order but
it was denied on December 10, 1990.
Petitioner bank then filed a petition for certiorari, prohibition and mandamus with preliminary
injunction and/or temporary restraining order with the Court of Appeals. On June 26, 1991,
the Court of Appeals dismissed the petition on the following grounds:
". . . In the first place, petitioner admitted that it did not and could not present a Board
resolution from the bank's Board of Directors appointing its counsel, Atty. Julius Z. Neri, as its
attorney-in-fact to represent and bind it during the pre-trial conference of this case. This
admission is contained on pages 12 and 13 of the instant petition.
In the second place, the "By-Laws" of petitioner which on its face authorizes (sic) the
appointment of an attorney-in-fact to represent it in any litigation, has not been approved by
the Securities and Exchange Commission, as required by Section 46 of the Corporation Code
of the Philippines. Apparently, the "By-Laws" in question was (sic) approved under the laws of
the United States, but there is no showing that the same was given the required imprimatur
by the Securities and Exchange Commission. Since petitioner is a foreign corporation doing
business in the Philippines, it is bound by all laws, rules and regulations applicable to
domestic corporations (Sec. 129, Corporation Code).
In the third place, no special power of attorney was presented authorizing petitioner's counsel
of record, Atty. Julius Neri and/or J.P. Garcia Associates, to appear for and in behalf of
petitioner during the pre-trial.
What petitioner exhibited to the court a quo was a general power of attorney given to one
William W. Ferguson who in turn executed a power of attorney in favor of five (5) (sic)
Citibank employees to act as attorney-in-fact in Civil Case No. CEB-4751. Yet, during the pre-
trial not one of said employees appeared, except counsel who is not even a bank employee.
Furthermore, even assuming the validity of the power of attorney issued by petitioner in favor
of Ferguson as well as the power of attorney he issued to five (5) (sic) Citibank employees,
said power of attorney has not been shown to be a Special Power of Attorney precisely
intended not only to represent the bank at the pre-trial of the case on a certain date but also
to enter into any compromise as required in paragraph 3, Article 1878 of the Civil Code and
Section 1 (a), Rule 20, Rules of Court." 8
Hence, this instant petition.
Petitioner bank contends that no board resolution was necessary for its legal counsel, Atty.
Julius Z. Neri, or Citibank employees to act as its attorney-in-fact in the case at bar because
petitioner bank's by-laws grant to its Executing Officer and Secretary Pro-Tem the power to
delegate to a Citibank officer, in this case William W. Ferguson, the authority to represent and
defend the bank and its interests.
Furthermore, it contends that the Court of Appeals erred in holding that the by-laws of
petitioner bank cannot be given effect because it did not have the imprimatur of the Securities
and Exchange Commission (SEC) as required by Section 46 of the Corporation Code of the
Philippines.
Private respondents refute both contentions. They assail the authority of petitioner bank's
legal counsel to appear at the pre-trial conference on two grounds, namely: first, that the
authority did not come from the Board of Directors which has the exclusive right to exercise
corporate powers; and second, that the authority granted to the Executing Officer in the by-
laws was ineffective because the same were not submitted to, nor approved by, the SEC.
There are thus two issues in this case. First, whether a resolution of the board of directors of
a corporation is always necessary for granting authority to an agent to represent the
corporation in court cases. And second, whether the by-laws of the petitioner foreign
corporation which has previously been granted a license to do business in the Philippines,
are effective in this jurisdiction. If the by-laws are valid and a board resolution is not
necessary as petitioner bank claims, then the declaration of default would have no basis.
In the corporate hierarchy, there are three levels of control: (1) the board of directors, which is
responsible for corporate policies and the general management of the business affairs of the
corporation; (2) the officers, who in theory execute the policies laid down by the board, but in
practice often have wide latitude in determining the course of business operations; and (3)
the stockholders who have the residual power over fundamental corporate changes, like
amendments of the articles of incorporation. However, just as a natural person may authorize
another to do certain acts in his behalf, so may the board of directors of a corporation validly
delegate some of its functions to individual officers or agents appointed by it.
Section 23 of the Corporation Code of the Philippines in part provides:
"SEC. 23. The board of directors or trustees. Unless otherwise provided in this Code, the
corporate powers of all corporations formed under this Code shall be exercised, all business
conducted and all property of such corporations controlled and held by the board of directors
or trustees to be elected from among the holders of stocks, or where there is no stock, from
among the members of the corporation, who shall hold office for one (1) year and until their
successors are elected and qualified.
xxx xxx xxx" (Emphasis supplied).
Thus, although as a general rule, all corporate powers are to be exercised by the board of
directors, exceptions are made where the Code provides otherwise.
Section 25 of said Code provides that the directors of the corporation shall elect its corporate
officers, and further provides as follows:
"SEC. 25. Corporate officers; quorum. . . . The directors or trustees and officers to be
elected shall perform the duties enjoined on them by law and by the by-laws of the
corporation . . ."
Furthermore, Section 47 of the same Code enumerates what may be contained in the by-
laws, among which is a provision for the "qualifications, duties and compensation of directors
or trustees, officers and employees". (Emphasis supplied.)
Taking all the above provisions of law together, it is clear that corporate powers may be
directly conferred upon corporate officers or agents by statute, the articles of incorporation,
the by-laws or by resolution or other act of the board of directors. In addition, an officer who is
not a director may also appoint other agents when so authorized by the by-laws or by the
board of directors. Such are referred to as express powers. 9 There are also powers
incidental to express powers conferred. It is a fundamental principle in the law of agency that
every delegation of authority, whether general or special, carries with it, unless the contrary
be expressed, implied authority to do all of those acts, naturally and ordinarily done in such
cases, which are reasonably necessary and proper to be done in order to carry into effect the
main authority conferred. 10
Since the by-laws are a source of authority for corporate officers and agents of the
corporation, a resolution of the Board of Directors of Citibank appointing an attorney in fact to
represent and bind it during the pre-trial conference of the case at bar is not necessary
because its by-laws allow its officers, the Executing Officer and the Secretary Pro-Tem, ** to
execute a power of attorney to a designated bank officer, William W. Ferguson in this case,
clothing him with authority to direct and manage corporate affairs. The relevant provision in
the general power of attorney granted to him are as follows:
"A. That the Executing Officer and the Secretary Pro-Tem are of full age, competent to act in
the premises, to me personally known, and that they are authorized to execute this
instrument by virtue of the powers granted to them pursuant to the By-Laws of the Bank and
the laws of the United States of America, and that the Executing Officer said that he, on the
one hand, hereby revokes and cancels any instrument of power of attorney previously
executed on behalf of the Bank for use in the PHILIPPINES, in favor of WILLIAM W.
FERGUSON (hereinafter referred to as the "Attorney-in-fact"), of legal age, a Banker, and
now residing in the PHILIPPINES, and that he (the Executing Officer), on the other hand,
does hereby authorize and empower the Attorney-in-fact, acting in the name or on behalf of
the Bank, or any of its Branches, or any interest it or they may have or represent, said
revocation and authorization to be effective as of this date as follows:
xxx xxx xxx
XVII. To represent and defend the Bank and its interest before any and all judges and courts,
of all classes and jurisdictions, in any action, suit or proceeding in which the Bank may be a
party or may be interested in administrative, civil, criminal, contentious or contentious-
administrative matters, and in all kinds of lawsuits, recourses or proceedings of any kind or
nature, with complete and absolute representation of the Bank, whether as plaintiff or
defendant, or as an interested party for any reason whatsoever . . .
xxx xxx xxx
XXI. To substitute or delegate this Power of Attorney in whole or in part in favor of such one or
more employees of the Bank, as he may deem advisable, but without divesting himself of any
of the powers granted to him by this Power of Attorney; and to grant and execute in favor of
any one or more such employees, powers of attorney containing all or such authorizations, as
he may deem advisable. . . " 11
Since paragraph XXI above specifically allows Ferguson to delegate his powers in whole or in
part, there can be no doubt that the special power of attorney in favor, first, of J.P. Garcia &
Associates and later, of the bank's employees, constitutes a valid delegation of Ferguson's
express power (under paragraph XVII above) to represent petitioner bank in the pre-trial
conference in the lower court.
This brings us to the second query: whether petitioner bank's by-laws, which constitute the
basis for Ferguson's special power of attorney in favor of petitioner bank's legal counsel are
effective, considering that petitioner bank has been previously granted a license to do
business in the Philippines.
The Court of Appeals relied on Section 46 of the Corporation Code to support its conclusion
that the by-laws in question are without effect because they were not approved by the SEC.
Said section reads as follows:
"SEC. 46. Adoption of by-laws. Every corporation formed under this Code must, within one
(1) month after receipt of official notice of the issuance of its certificate of incorporation by the
Securities and Exchange Commission, adopt a code of by-laws for its government not
inconsistent with this Code. For the adoption of by-laws by the corporation, the affirmative
vote of the stockholders representing at least a majority of the outstanding capital stock, or of
at least a majority of the members in the case of non-stock corporations, shall be necessary.
The by-laws shall be signed by the stockholders or members voting for them and shall be
kept in the principal office of the corporation, subject to the inspection of the stockholders or
members during office hours; and a copy thereof, duly certified to by a majority of the
directors or trustees and countersigned by the secretary of the corporation, shall be filed with
the Securities and Exchange Commission which shall be attached to the original articles of
incorporation.
Notwithstanding the provisions of the preceding paragraph, by-laws may be adopted and filed
prior to incorporation; in such case, such by-laws shall be approved and signed by all the
incorporators and submitted to the Securities and Exchange Commission, together with the
articles of incorporation. In all cases, by-laws shall be effective only upon the issuance by the
Securities and Exchange Commission of a certification that the by-laws are not inconsistent
with this Code."
A careful reading of the above provision would show that a corporation can submit its by-
laws, prior to incorporation, or within one month after receipt of official notice of the issuance
of its certificate of incorporation by the SEC. When the third paragraph of the above provision
mentions "in all cases", it can only refer to these two options; i.e., whether adopted prior to
incorporation or within one month after incorporation, the by-laws shall be effective only upon
the approval of the SEC. But even more important, said provision starts with the phrase
"Every corporation formed under this Code", which can only refer to corporations
incorporated in the Philippines. Hence, Section 46, in so far as it refers to the effectivity of
corporate by-laws, applies only to domestic corporations and not to foreign corporations.
On the other hand, Section 125 of the same Code requires that a foreign corporation applying
for a license to transact business in the Philippines must submit, among other documents, to
the SEC, a copy of its articles of incorporation and by-laws, certified in accordance with law.
Unless these documents are submitted, the application cannot be acted upon by the SEC. In
the following section, the Code specifies when the SEC can grant the license applied for.
Section 126 provides in part:
"SEC. 126. Issuance of a license. If the Securities and Exchange Commission is satisfied
that the applicant has complied with all the requirements of this Code and other special laws,
rules and regulations, the Commission shall issue a license to the applicant to transact
business in the Philippines for the purpose or purposes specified in such license . . ."
Since the SEC will grant a license only when the foreign corporation has complied with all the
requirements of law, it follows that when it decides to issue such license, it is satisfied that the
applicant's by-laws, among the other documents, meet the legal requirements. This, in effect,
is an approval of the foreign corporations by-laws. It may not have been made in express
terms, still it is clearly an approval. Therefore, petitioner bank's by-laws, though originating
from a foreign jurisdiction, are valid and effective in the Philippines.
In pursuance of the authority granted to him by petitioner bank's by-laws, its Executing Officer
appointed William W. Ferguson, a resident of the Philippines, as its Attorney-in-Fact
empowering the latter, among other things, to represent petitioner bank in court cases. In
turn, William W. Ferguson executed a power of attorney in favor of J.P. Garcia & Associates
(petitioner bank's counsel) to represent petitioner bank in the pre-trial conference before the
lower court. This act of delegation is explicity authorized by paragraph XXI of his own
appointment, which we have previously cited.
It is also error for the Court of Appeals to insist that the special power of attorney, presented
by petitioner bank authorizing its counsel, Atty. Julius Neri and/or J.P. Garcia & Associates, to
appear for and in behalf of petitioner bank during the pre-trial, is not valid. The records do not
sustain this finding. We quote with approval the contention of petitioner bank as it is borne by
the records, to wit:
". . . The records of this case would show that at the start, the petitioner, thru counsel,
presented a special power of attorney executed by then Citibank Officer Florencio (sic) J.
Tarriela which was marked as Exhibit "1" in the pre-trial of this case . . . This is precisely the
reason why the court denied, in an Order dated April 23, 1990 . . . the private respondent's
oral motion to declare the defendant in fault. The said special power of attorney executed by
Florencio (sic) J. Tarriela was granted by Mr. Rafael B. Buenaventura, who was then the
Senior Vice-President of Citibank and the highest ranking office of Citibank in the Philippines.
Considering that at the time of the presentation of the said special power of attorney Rafael
B. Buenaventura was no longer connected with Citibank, the petitioner again presented
another special power of attorney executed by William W. Ferguson in favor of J.P. Garcia &
Associates, . . .
Finding that the authority of William W. Ferguson to delegate his authority to act for and in
behalf of the bank in any civil suit is limited to individuals who are employees of the bank the
petitioner again on May 23, 1990 presented another special power of attorney dated May 16,
1990 wherein William W. Ferguson appointed as attorney-in-fact the following employees of
petitioner, namely: Roberto Reyes, Nemesio Solomon, Aimee Yu and Tomas Yap. The said
special power of attorney was filed and presented by the petitioner through its Manifestation
filed in the Trial Court on May 23, 1990, . . ." 12
Under Rule 138, Section 23 of the Rules of Court, an attorney has authority to bind his client
in any case by an agreement in relation thereto made in writing, and this authority would
include taking appeals and all matters of ordinary judicial procedure. But he cannot, without
special authority, compromise his client's litigation or receive anything in discharge of a
client's claim but the full amount in cash. The special powers of attorney separately executed
by Florencia Tarriela and William W. Ferguson granted to J.P. Garcia & Associates are very
explicit in their terms as to the counsel's authority in the case at bar. We quote the relevant
provisions of the special powers of attorney showing sufficient compliance with the
requirements of Section 23, Rule 138, to wit:
"That the BANK further authorized the said J.P. GARCIA & ASSOCIATES to enter into an
amicable settlement, stipulation of facts and/or compromise agreement with the party or
parties involved under such terms and conditions which the said J.P. GARCIA &
ASSOCIATES may deem reasonable (under parameters previously defined by the principal)
and execute and sign said documents as may be appropriate.
HEREBY GIVING AND GRANTING unto J.P. GARCIA & ASSOCIATES full power and
authority whatsoever requisite necessary or proper to be done in or about the premises, as
fully to all intents and purposes as the BANK might or could lawfully do or cause to be done
under and by virtue of these presents." 13
It is also error on the part of the Court of Appeals to state that the power of attorney given to
the four (4) Citibank employees is not a special power of attorney as required in paragraph 3,
Article 1878 of the Civil Code and Section 1 (a), Rule 20 of the Rules of Court. In the case of
Tropical Homes, Inc. vs. Villaluz, 14 the special power of attorney executed by petitioner bank
therein contained the following pertinent terms "to appear for and in its behalf in the above-
entitled case in all circumstances where its appearance is required and to bind it in all said
instances". The court ruled that:
"Although the power of attorney in question does not specifically mention the authority of
petitioner's counsel to appear and bind the petitioner at the pre-trial conference, the terms of
said power of attorney are comprehensive enough as to include the authority to appear for
the petitioner at the pre-trial conference." In the same manner, the power of attorney granted
to petitioner bank's employees should be considered a special power of attorney. The
relevant portion reads:
"WHEREAS, the Bank is the Defendant in Civil Case No. CEB-4751, entitled "Cresencio
Velez, et al. vs. Citibank, N.A.," pending before the Regional Trial Court of Cebu City, Branch
X;
NOW, THEREFORE, under and by virtue of Article XXI of the Power of Attorney executed by
the Bank in favor of the Attorney-in-Fact (Annex "A"), which provision is quoted above, the
Attorney-in-Fact has nominated, designated and appointed, as by these presents he
nominates, designates and appoints, as his substitutes and delegates, with respect to the
said Power of Attorney, ROBERTO REYES, Vice President and/or NEMESIO SOLOMON,
JR., Manager, AIMEE YU, Assistant Vice President and/or TOMAS YAP, Assistant Manager
(hereinafter referred to as the "DELEGATES"), all of legal age, citizens of the Republic of the
Philippines and with business address at Citibank Center, Paseo de Roxas, Makati, Metro
Manila, Philippines, the Attorney-in-Fact hereby granting, conferring and delegating such
authorities and binding the Bank in the Pre-Trial Conference and/or Trial of the
abovementioned case, pursuant to Rule 20 of the Revised Rules of Court, to the
DELEGATES. The attorney-in-Fact furthermore hereby ratifying and confirming all that the
DELEGATES shall lawfully do or cause to be done under and by virtue of these presents." 15
From the outset, petitioner bank showed a willingness, if not zeal, in pursuing and defending
this case. It even acceded to private respondent's insistence on the question of proper
representation during the pre-trial by presenting not just one, but three, special powers of
attorney. Initially, the special power of attorney was executed by Florencia Tarriela in favor of
J.P. Garcia & Associates, petitioner bank's counsel. Private respondents insisted that this was
not proper authority required by law. To avoid further argument, a second special power of
attorney was presented by petitioner bank, executed by William W. Fersugon, the highest
ranking officer of Citibank in the Philippines, in favor of its counsel J.P. Garcia & Associates.
But since the authority to delegate of William A. Fersugon in favor of an agent is limited to
bank employees, another special power of attorney from Wiliam W. Fersugon in favor of the
Citibank employees was presented. But the respondent trial court judge disregarded all these
and issued the assailed default order. There is nothing to show that petitioner bank "miserably
failed to oblige"; on the contrary, three special powers of attorney manifest prudence and
diligence on petitioner bank's part.
In fact, there was no need for the third power of attorney because we believe that the second
power of attorney was sufficient under the by-law provision authorizing Fersugon to delegate
any of his functions to any one or more employees of the petitioner bank. A reasonable
interpretation of this provision would include an appointment of a legal counsel to represent
the bank in court, for, under the circumstances, such legal counsel can be considered, and in
fact was considered by the petitioner bank, an employee for a special purpose. Furthermore,
Fersugon, who heads the Philippine office thousands of miles away from its main office in the
United States, must be understood to have sufficient powers to act promptly in order to
protect the interests of his principal. We reiterate the previous admonitions of this Court
against "precipitate orders of default as these have the effect of denying the litigant the
chance to be heard. While there are instances, to be sure, when a party may be properly
defaulted, these should be the exceptions rather than the rule and should be allowed only in
clear cases of an obstinate refusal or inordinate neglect to comply with the orders of the
court. Absent such a showing, the party must be given every reasonable opportunity to
present his side and to refute the evidence of the adverse party in deference to due process
of law". 16 Considering further that petitioner bank has a meritorious defense and that the
amount in contest is substantial, the litigants should be allowed to settle their claims on the
arena of the court based on a trial on the merits rather than on mere technicalities.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The decision of the
Court of Appeals dated June 26, 1991 and its resolution denying the motion for
reconsideration of petitioner bank dated September 26, 1991 are both REVERSED and SET
ASIDE. The order of default issued on August 15, 1990 in Civil Case CEB-4751 of the
Regional Trial Court of Cebu is ANNULLED and SET ASIDE and the case is hereby
REMANDED to the court of origin for further proceedings. SO ORDERED.
RULE 19.
1.) P.T. CERNA CORPORATION, Petitioner, v. COURT OF APPEALS, PETER SCHEIDER
and JUAN BUNYI, Respondents.
SYLLABUS
1. CIVIL LAW; OWNERSHIP; SALES INVOICE; NOT CONSIDERED PROOF OF
TRANSFER OF OWNERSHIP. It has been held time and again that the issuance of a
sales invoice does not prove transfer of ownership of the thing sold to the buyer. An invoice is
nothing more than a detailed statement of the nature, quantity and cost of the thing sold and
has been considered not a bill of sale. Thus, petitioners contention that the issuance of the
invoices in its name occurred much earlier than the execution of the Deeds of Sale between
private respondent Scheider and the vendor corporations, becomes inconsequential.
Inasmuch as petitioners invoices are mere statements regarding the thing sold, as opposed
to private respondent Scheiders Deeds of Sale which are public documents, petitioners
claim of ownership cannot prosper.
2. REMEDIAL LAW; NOTARIAL DOCUMENT; ENJOYS PRESUMPTION OF REGULARITY
IN ITS FAVOR. The Deeds of Sale, being notarial documents, are evidence of the facts in
clear, unequivocal manner therein expressed. As such, they have in their favor, the
presumption of regularity. To contradict facts in a notarial document and the presumption of
regularity in its favor, the evidence must be clear, convincing and more than merely
preponderant.
3. ID; EVIDENCE; BURDEN OF PROOF IN CIVIL CASES RESTS UPON THE PARTY WHO
ASSERTS THE AFFIRMATIVE OF AN ISSUE. To prove fraud, it has been held that full
and convincing evidence is required. This again, petitioner was not able to accomplish. It
bears reiterating at this point that in civil cases, the burden of proof rests upon the party who,
as determined by the pleadings or the nature of the case, asserts the affirmative of an issue.
In this case, the burden lies on the petitioner, who is duty bound to prove the allegations in its
complaint. As this Court has held, he who alleges a fact has the burden of proving it and a
mere allegation is not evidence.
DECISION
CAMPOS, JR., J.:
The instant Petition seeks the review of the Decision ** of the Court of Appeals, dated August
9, 1989 and of its Resolution 1 dated December 21, 1989, both regarding CA-G.R. CV No.
05089.
The dispositive portion of the questioned decision reads:
"HENCE, there being no reversible error on the appealed judgment, the same is hereby
AFFIRMED with costs against Appellant.
SO ORDERED."
Respondent courts Resolution of which a review is also sought, denied petitioner-appellants
motion for reconsideration of the above cited decision for lack of merit.chanrobles virtual
lawlibrary
This case originated from a complaint for Replevin filed by P.T. Cerna Corporation against
Peter Scheider and Juan Bunyi. Consonant with the factual findings of the trial court,
respondent court found that the subjects of this case are three (3) personal properties, all of
which are "jaw crushers." The first one is a rock crusher, jaw size 34" x 33", purchased from
Bormaheco, Inc. for P165,000.00. The other two are US Mfg. jaw crushers, both purchased
from the International Tractor Sales, each for P111,000.00.
Both parties, petitioner and private respondent Scheider, claim ownership over the three jaw
crushers. Petitioner anchored its claim of ownership of the first rock crusher on the
"Customers Copy" of Invoice No. 43984, dated January 24, 1984 issued in the name of the
corporation by Bormaheco., Inc. for P165,000.00. As to the other two crushers, it presented
Invoice No. 601-A, dated March 30, 1984, by International Tractor and Equipment Sales, for
the total purchase price of P222,000.00. All of these purchases were purportedly paid through
the corporation checks duly signed by Noe de la Cerna and Edwin Tiu, its President and Vice-
President, respectively.

Petitioners president alleged further that sometime in late 1983, an agreement was entered
into by private respondent Scheider to quarry stones and crush them for sale to the public;
that he was able to find a suitable land for the quarry and had negotiated for its lease. Private
respondent Scheider, as per agreement, was supposed to be the technical man, and was
thus in possession of said machineries for a complete check-up. However, allegedly, private
respondents Scheider and Bunyi took advantage of their possession and proceeded to
organize their own company, together with Scheiders in-laws and other private persons, to
engage in the quarrying of stones and rocks and without the knowledge of the corporation,
using the litigated rock crushers for said purpose.
Private respondent Scheider, on the other hand, claimed that the three rock crushers were
actually purchased by him and in reality are owned by him. he presented the "Sales
Department Copy" of the same Invoice No. 43984, which was in his name properly
countersigned by Mr. Cervantes, the President of Bormaheco. He also presented a notarized
deed of sale of said rock crushers executed by Bormaheco in his favor and a further
certification by Mr. Cervantes, dated August 3, 1984, stating that the purchaser and owner of
said equipment was Mr. Peter Scheider. For the two rock crushers, he also managed to
present a notarized deed of sale executed by Mr. Virgil Lundberg in his favor. In connection
with this, he presented a delivery receipt and a certification by Mr. Virgil Lundberg attesting
that Mr. Peter Scheider is the purchaser and owner of the two rock crushers.
Private respondent Scheider, however, admitted that the purchase price of the crushers were
paid for by petitioner, but only to set off outstanding obligations of the same to him due to
various spare parts sold to petitioner, prior to the dispute, amounting to over P500,000. 00
On August 1, 1984, the trial court issued a Replevin Order, requiring delivery to petitioner of
possession of the three (3) rock crushers. Pursuant to said Replevin, the Deputy Sheriff of
Rizal was able to take possession of one of the three rock crushers, and was able to
eventually transfer possession thereof to petitioner. Private respondents Scheider and Bunyi
filed a "Motion for Reconsideration," dated August 7, 1984, of the Replevin Order. After
several hearings were held on the motion, the trial court on December 21, 1984, 4 gave due
course to the motion and set aside and revoked the Replevin Order dated August 1, 1984.
The sheriff, in the same order, was directed to immediately restore physical possession to
private respondent Scheider of the rock crusher seized by him. The same order dismissed
the complaint as the cause of action which was the question of ownership had been
accordingly resolved in favor of then defendants, herein private respondents.
On January 3, 1985, petitioner filed with the trial court a notice of appeal of said order.
Petitioner also filed, on the same day, a petition against the Hon. Antonio Y. Benedicto, the
presiding judge; the Deputy Provincial Sheriff of Rizal (RTC, Antipolo, Rizal); Peter Scheider
and Juan Bunyi, for" Certiorari and Prohibition with Preliminary Injunction and Restraining
Order," praying for the annulment of the trial courts order of December 21, 1984 insofar as it
ordered the immediate restoration of the replevined property to the private Respondent.
Said Certiorari Case was docketed as AC-G.R. SP No. 05066.
On January 4, 1985, the Court of Appeals, in AC-G.R. SP No. 05066 issued a Resolution
enjoining the respondents therein "from enforcing that part of the order dated December 21,
1984 directing the return to respondents of the replevined property, until further orders or
notice from this Court".
On January 9, 1985, the trial court issued an Order stating that no further action shall be
taken on the case until the certiorari case shall have been resolved by the appellate court.
On May 3, 1985, the Court of Appeals promulgated in AC-G.R. SP No. 05066, a Decision
setting aside the order of December 21, 1984, insofar as it directed the immediate restoration
of the replevined property to private respondents.
The appeal of petitioner from the Order of December 21, 1984 was docketed as CA-G.R. CV
No. 05089. The judgment regarding this appeal and the subsequent denial by respondent
court of petitioners motion for reconsideration are being challenged in this petition.
This Court is called upon to finally settle the question of ownership of the three jaw crushers.
Who, as between the claimants, is the rightful owner?
We rule in favor of private respondent Scheider.
Petitioner relies heavily on the invoices as evidence of purchase and delivery. Petitioners
theory is correct, but only up to this point. however, as to its claim that said invoices vested in
the corporation ownership over the disputed equipment, We simply cannot agree.
It has been held time and again that the issuance of a sales invoice does not prove transfer of
ownership of the thing sold to the buyer. An invoice is nothing more than a detailed statement
of the nature, quantity and cost of the thing sold and has been considered not a bill of sale. 5
Thus, petitioners contention that the issuance of the invoices in its name occurred much
earlier than the execution of the Deeds of Sale between private respondent Scheider and the
vendor corporations, becomes inconsequential. Inasmuch as petitioners invoices are mere
statements regarding the thing sold, as opposed to private respondent Scheiders Deeds of
Sale which are public documents, petitioners claim of ownership cannot prosper.chanrobles
law library : red
The Deeds of Sale, being notarial documents, are evidence of the facts in clear, unequivocal
manner therein expressed. As such, they have in their favor, the presumption of regularity. 6
To contradict facts in a notarial document and the presumption of regularity in its favor, the
evidence must be clear, convincing and more than merely preponderant. 7 As borne out by
the records of the case, petitioner challenged the authenticity of the invoices presented by
private respondent Scheider, alleging falsification of the same. The ruling however of this
court with respect to this matter still would not affect the evidentiary value of the Deeds of
Sale. Petitioner should have attacked private respondent Scheiders deeds of sale on which
the latter anchors his claim. Instead, petitioner did not even present the signatories to the
contracts of sale to successfully rebut the presumption of regularity accorded the deeds of
sale. Consequently, petitioner failed miserably to overcome the binding force and effect of the
deeds of sale.
Petitioner also attempted to discredit the sale of the equipment to private respondent
Scheider by alleging fraud employed by private respondents Scheider and Bunyi, who
purportedly reneged on their obligations with respect to an alleged joint venture. The latter
undertaking, as professed by petitioner, was entered into by herein claimant parties, with
private respondents as the technical partners. However, petitioner failed to substantiate this
claim. No sufficient evidence, as held by the trial court, was adduced to even prove the
existence of said agreement. To prove fraud, it has been held that full and convincing
evidence is required. 8 This again, petitioner was not able to accomplish.
It bears reiterating at this point that in civil cases, the burden of proof rests upon the party
who, as determined by the pleadings or the nature of the case, asserts the affirmative of an
issue. 9 In this case, the burden lies on the petitioner, who is duty bound to prove the
allegations in its complaint. As this Court has held, he who alleges a fact has the burden of
proving it and a mere allegation is not evidence. 10 A careful evaluation of the evidence
presented by petitioner reveals its insufficiency to detract from the evidentiary force of the
public instrument which appears on its face, as having been drawn up with all the formalities
prescribed by the law. This leads Us to the inescapable conclusion that private respondent
Scheider is the owner of the litigated properties. To hold otherwise would mean establishing a
very dangerous precedent that would open the door to fraud.
WHEREFORE, in light of the foregoing and finding no reversible error committed by
respondent Court, the petition is hereby DENIED. The decision of respondent Court dated
August 9, 1989 and its resolution of December 21, 1989 are both AFFIRMED.
SO ORDERED.
2.) [G.R. No. 81835 : December 20, 1990.]
192 SCRA 469
ROMEO J. ORDOEZ, Petitioner, vs. THE HON. ALFREDO J. GUSTILO, in his capacity
as presiding judge of Regional Trial Court of Cavite, Branch XVI, Cavite City,
Municipality of Rosario, Cavite, former Mayor Calixto D. Enriquez of Rosario, Cavite,
and Valeriano Espiritu of Mabolo, Bacoor, Cavite, Respondents.
DECISION
PARAS, J.:
This is a petition for Certiorari which seeks to annul, on the ground of grave abuse of
discretion, the (1) Decision dated May 24, 1985; (2) Order dated May 27, 1987 and (3) Order
dated December 24, 1987, all issued in Civil Case No. N-4367 of the Regional Trial Court of
Cavite, Branch XVI, Cavite City entitled "Valeriano Espiritu v. Municipality of Rosario,
Province of Cavite and Hon. Calixto D. Enriquez in his capacity as Municipal Mayor of
Rosario, Cavite.
The pertinent background facts are:
Valeriano Espiritu, herein private respondent filed on April 22, 1983, a complaint for Specific
Performance and Damages, against respondents Municipality of Rosario, Cavite and Calixto
Enriquez, the latter in his capacity as Mayor of said municipality, to enforce their agreement
contained in a Reclamation Contract. In his complaint, Espiritu prayed that the Municipality of
Rosario, together with Enriquez, be ordered to convey to him 323,996 square meters of the
reclaimed portion of the foreshore land of the town. Espiritu filed the action in his capacity as
the assignee of the Salinas Development Corporation (SADECO), the entity which reclaimed
the area in question by virtue of a Reclamation Contract entered into between it and the
Municipality of Rosario, represented by Enriquez as Municipal Mayor. The case was docketed
as Civil Case No. 4367 of the Regional Trial Court of Cavite, Fourth Judicial Region, Branch
XVI, Cavite City.
In its answer, defendant municipality resisted plaintiff's claim stating that it was barred by the
statute of limitation; the contract has been substantially amended, modified and
supplemented; and plaintiff has not performed his reciprocal obligation.- nad
The barangay captain of Tejeros Convention, Rosario, Cavite, herein petitioner Romeo J.
Ordoez, together with seven (7) other municipal and barangay officials intervened, and in
their Answer-in-Intervention, they alleged that no actual reclamation was done by the plaintiff
and the area being claimed by the plaintiff came about by natural accretion; the reclamation
contract between the contractor and the municipality is either void, voidable or
disadvantageous to the defendant municipality.
The issues having been joined the trial court set the case for the mandatory pre-trial
conference on November 15, 1984.
At this scheduled pre-trial conference, all the litigants including the intervenors, with their
respective counsel, were present. In said conference, plaintiff Espiritu and defendant
municipality, manifested to the court that having arrived at a satisfactory settlement, they
would submit a compromise agreement at a latter date.
On the other hand, the intervenors asked the court that they be allowed to present their
evidence to prove their defense asserted in their answer-in-intervention. For the said
purpose, hearing was held on December 13, 1984 wherein Ernesto Andico, vice-mayor
testified. Another hearing was also held on January 24, 1985 where Vice-Governor Jose M.
Ricafrente, Jr. of the Province of Cavite, and petitioner's counsel in the instant case, also
testified.
On May 20, 1985, the principal litigants filed with respondent trial court their promised
compromise agreement. The parties agreed that 208,664 square meters of the reclaimed
area were to be alloted to the plaintiff and 211,311 square meters thereof were to be given to
defendant municipality.
On May 24, 1985, the trial court approved the compromise agreement and rendered a
decision in accordance therewith. The intervenors received their copy of the decision on
September 19, 1985 thru Vice-Mayor Ernesto Andico. The decision being already final, it was
duly executed to the satisfaction of the principal litigants.
On October 17, 1985 and July 2, 1987 additional hearings were held where the intervenors
presented three (3) additional witnesses.
On June 24, 1987, the intervenors filed a motion to set aside the compromise agreement
dated May 15, 1985. This was denied by the trial court, thru respondent Judge Alfredo Gustilo
(the former presiding judge, Judge Alejandro Silapan having already retired) in its Order
dated November 27, 1987, the pertinent portion of which reads as follows:
"It appears that on May 24, 1985, the former Presiding Judge of this Court approved the said
Compromise Agreement and rendered a judgment on the basis thereof. It is settled that a
judgment approving a compromise agreement is final and immediately executory. (Samonte
v. Samonte, 64 SCRA 524). The motion in question therefore cannot be granted as it has the
effect of annulling the judgment of this Court which has already become final and, according
to the plaintiff, already executed.
"The Motion to Set Aside Compromise Agreement cannot even be considered as a motion for
reconsideration because the Court can no longer set aside, amend or modify its judgment
which has become final. Neither can the said motion be deemed as a petition for relief under
Rule 38 of the Rules of Court, since to set aside a judgment based upon a compromise
agreement under the said Rule, the petition for relief must be filed not later than six (6)
months from the date it was rendered. (Bodiongan v. Ceniza, 102 Phil. 750). The decision of
the Court based on the Compromise Agreement was rendered on May 24, 1985. On the other
hand, the present Motion to Set Aside Compromise Agreement was filed only on June 24,
1987. Moreover, under Section 3 of Rule 38, the petition for relief from judgment should be
filed within 60 days after the petitioner learns of the judgment sought to be set aside. The
intervenor in this case received a copy of the decision based on the Compromise Agreement
on September 19, 1985. If the instant motion be construed as an independent action to annul
a judgment, this Court would not have jurisdiction over it inasmuch as under Section 9 of
Batas Pambansa Blg. 129, the Judiciary Reorganization Act of 1980, an action for the
annulment of a judgment of the Regional Trial Court falls under the exclusive original
jurisdiction of the Court of Appeals.chanrobles virtual law library
Additionally, the intervenors have not convincingly shown that defendant Mayor Enriquez was
not authorized to sign the Compromise Agreement in behalf of the Municipality of Rosario. On
the contrary, the Mayor has in his favor the presumption that official duty has been regularly
performed. (Sec. 5 [m], Rule 131, Rules of Court.) Likewise, they failed to sufficiently explain
why and how the terms and conditions of the Compromise Agreement have contravened the
law, morals, good customs and public policy." (pp. 41-42, Rollo).
Meanwhile, on August 10, 1987, plaintiff Espiritu filed a manifestation and Motion praying that
the proceedings be terminated and that the case be considered closed, which motion
respondent judge granted in his Order dated December 24, 1987. The pertinent portion of the
said Order reads
"In support of his motion to terminate the proceedings, the plaintiff argued that further trial in
this case will be an exercise in futility, considering that the issues raised by the intervenors
have become moot and academic in view of the decision of the Court based on the
Compromise Agreement submitted by the plaintiff and the defendants.
"This contention appears to be well taken. The decision of the Court based on the
Compromise Agreement has in effect resolved the issues raised by the intervenors, i.e.,
whether the reclamation contract entered into between the town of Rosario and the Salinas
Development Corporation, the predecessors-in-interest of the plaintiff, is null and void; and
whether or not there was actual reclamation done by the said entity. This is so, for the
decision of the Court based on the Compromise Agreement has impliedly recognized the
validity of the said reclamation contract and the fact that the tract of land divided between the
plaintiff and the defendant municipality of Rosario pursuant to the Compromise Agreement
was the product of the reclamation efforts undertaken by the Salinas Development
Corporation, which subsequently assigned its rights to the plaintiff.
"The continuation of the trial in this case will be useless. Should the intervenors fail to adduce
evidence showing that the reclamation contract was null and void and that no actual
reclamation was undertaken by the Salinas Development Corporation, the correctness and
propriety of the decision of the Court based on the Compromise Agreement would be
strengthened. Even if they would succeed in proving that the reclamation contract was null
and void and that the area in question came into being through the natural action of the sea
and not through the reclamation done by the Salinas Development Corporation, still the said
decision could no longer be set aside, inasmuch as it has already become final and,
according to the plaintiff, already executed. The continuation of the reception of the evidence
for the intervenors clearly appears to serve no purpose at all.
xxx
"WHEREFORE, the Manifestation and Motion dated August 6, 1987, filed by the plaintiff, is
granted, and the trial of this case is declared terminated and this case is considered closed.
"This order modifies the pre-trial order dated November 15, 1984 of this Court, insofar as the
said order has allowed the intervenors to adduce evidence in support of their contention that
the land in question was not reclaimed by the plaintiff or his predecessor-in-interest but the
product of accretion, and that the reclamation contract between the defendants and the
Salinas Development Corporation was null and void.: rd
"SO ORDERED." (pp. 45-47, Rollo)
In assailing the aforementioned Decision and Orders of the trial court, petitioner Romeo
Ordoez (one of the intervenors, the other seven intervenors did not join him in this petition)
raises the following issues, to wit:
1. Whether or not the lower court erred in stopping/preventing the intervenors from further
presenting their evidence in support of their Answer-in-Intervention.
2. Whether or not the lower court erred in approving the compromise agreement of May 20,
1985 and rendering a decision based thereon dated May 24, 1985, inspite of the clear lack of
authority on the part of respondent Calixto D. Enriquez to bind the Municipality of Rosario
because of the absence of an enabling ordinance from the Sangguniang Bayan of Rosario,
Cavite empowering him to enter into said compromise agreement.
We answer both issues in the negative.
Intervention is defined as a "proceeding in a suit or action by which a third person is permitted
by the court to make himself a party, either joining plaintiff in claiming what is sought by the
complaint, or uniting with defendant in resisting the claims of plaintiff, or demanding
something adversely to both of them; the act or proceeding by which a third person becomes
a party in a suit pending between others; the admission, by leave of court, of a person not an
original party to pending legal proceedings, by which such person becomes a party thereto
for the protection of some right or interest alleged by him to be affected by such proceedings."
(Metropolitan Bank & Trust Co. v. the Presiding Judge, RTC Manila, Branch 39, et al., G.R.
No. 89909, September 21, 1990)
An intervention has been regarded as "merely collateral or accessory or ancillary to the
principal action and not an independent proceeding; an interlocutory proceeding dependent
on or subsidiary to, the case between the original parties." (Francisco, Rules of Court, Vol. 1)
The main action having ceased to exist, there is no pending proceeding whereon the
intervention may be based. (Barangay Matictic v. Elbinias, 148 SCRA 83, 89).
As we recently ruled in Camacho v. Hon. Court of Appeals, et al., G.R. No. 79564, December
24, 1989
"There is no question that intervention is only collateral or ancillary to the main action. Hence,
it was previously ruled that the final dismissal of the principal action results in the dismissal of
said ancillary action." (Emphasis supplied)
A judgment approving a compromise agreement is final and immediately executory. (Samonte
v. Samonte, 64 SCRA 524) All pending issues will become moot and academic once a
compromise submitted by the parties is approved by the trial court. (Berenguer v. Arcangel,
149 SCRA 164)
In the case at bar, the compromise agreement submitted by the plaintiff and the defendants
and the decision approving the same recognized the validity of the Reclamation Contract and
the fact that the tract of land involved was the result of the reclamation done by SADECO. In
their answer-in-intervention, petitioner alleges that there was no reclamation undertaken by
SADECO, that the land in question was the result of accretion from the sea and that the
Reclamation Contract is null and void. Clearly then, the compromise agreement and the
decision had in effect resolved the aforementioned issues raised by the intervenors. As aptly
observed by the trial court, the continuation of the reception of the intervenors' evidence
would serve no purpose at all. Should intervenors fail to prove that the Reclamation Contract
is null and void and that no actual reclamation was made, the correctness and propriety of the
decision based on the compromise agreement would be strengthened. Upon the other hand,
should they succeed in proving that the contract is null and void, and that the area in question
came into being through the natural action of the sea, still the decision of the lower court
could no longer be set aside, inasmuch as it has already become final and executed.:-cralaw
There is, therefore, no merit to the claim of petitioner that the lower court "unceremoniously
terminated the proceedings" even "without the intervenors completing their evidence."
(Memorandum for Petitioner, p. 140, 143, Rollo) Precisely, the court a quo gave credence and
weight to the compromise agreement and denied the claims of the intervenors which were
controverting the theories of the plaintiff and the defendants. In other words, due process had
been accorded the intervenors. It would have been different had the court not taken into
consideration the claims of the intervenors.
The petitioner cannot claim ignorance of the filing of the compromise agreement. As can be
gleaned from the pre-trial order, the intervenors were represented during the pre-trial
conferences, where the plaintiff and the defendants intimated that they would submit a
compromise agreement. The intervenors did not interpose any opposition to the manifestation
of the plaintiff and defendants that they would be amicably settling their dispute. The
compromise agreement was filed in court on May 20, 1985. It was approved by the lower
court on May 24, 1986. Before its approval no opposition had been filed questioning its
legality. The intervenors received their copy of the decision on September 19, 1985. They did
not file any motion for reconsideration to suspend its finality. It was only on June 24, 1987, or
after the lapse of almost two (2) years when they filed a motion to set aside the compromise
agreement. It should be emphasized at this juncture that the decision based on the
compromise agreement had long been executed.
Anent the other issue raised whether or not respondent mayor needed another authority
from the Sangguniang Bayan to sign the compromise agreement, suffice it to state that the
mayor need not secure another authority from the Sandiganbayan under Section 141 (c) and
(i) of the Local Government Code, which state that
"Section 141. (1) The Mayor shall be the Chief Executive of the municipal government and
shall exercise such powers, duties and functions as provided in this code and other laws. (2)
He shall:
xxx
'(c) Represent the municipality in its business transactions and sign on its behalf all contracts,
obligations and official documents made in accordance with law or ordinance.: rd
'(i) Direct the formulation of municipal development plans and programs, and once approved
by the Sangunian Bayan, supervise and direct the execution and implementation thereof.'" (p.
115, Rollo)
because the execution of the Compromise Agreement is but an act implementing the
reclamation contract duly approved by the Sangguniang Bayan.
Further, the terms and conditions of the compromise agreement are beneficial to the
municipality because the share of Espiritu has been reduced considerably from the 80%
agreed upon in the reclamation contract.
WHEREFORE, for lack of merit, the petition is DISMISSED. Costs against petitioner.
SO ORDERED.
 allowing the intervention suit therein to proceed, and its order of January 11, 1989, admitting
the amended complaint in intervention.
The proceedings in the court below from which this appeal arose, as found by respondent
Court of Appeals, are as follows:
Petitioner Metropolitan Bank and Trust Co. (Metropolitan) in whose favor a deed of chattel
mortgage was executed by Good Earth Emporium, Inc. (GEE) over certain air conditioning
units installed in the GEE building, filed a complaint for replevin against Uniwide Sales, Inc.
(Uniwide, for brevity) and the BPI Investment Corporation and several other banks collectively
called BPI-Consortium, for the recovery of the possession of the air-conditioning units or in
the event they may not be recovered, for the defendants which acquired the GEE building in
an auction sale, (to) be required, jointly and severally, to pay the plaintiff the unpaid
obligations on the units.
Per paragraph 3.11.3 of its complaint, plaintiff Metrobank alleged that the air-conditioning
units were installed on a loan of P4,900,000.00 it extended to Good Earth Emporium &
Supermarket, Inc. in its building located at Rizal Avenue, Sta. Cruz, Manila, after the land and
building had been foreclosed and purchased on June 3, 1983 at public auction by the
defendants, except Uniwide, and in order to secure repayment of the loan, a deed of chattel
mortgage was constituted over the personal properties listed in the deed which included the
airconditioning units.
It also alleged in par. 3.11.2 of the complaint, that '(T)he loan proceeds were used by GEE to
finance the acquisition of airconditioning equipment from Reycor (sic) Air Control System, Inc.
(amounting to P4,250,000.00 and installation costs of P650,000.00) under an Agreement of
Sale dated 29 June 1984' (Annex A, Petition, Id., pp. 23-24).
The defendants filed their Answer, Uniwide on July 25, 1986 (Annex B, Petition, Id., pp. 32-
48) and the defendants (presumably the rest of the defendants), on July 14, 1986 (Annex C,
Petition, Id., pp. 3949).

G.R. No. 89909 September 21, 1990 On July 17, 1986, Raycor Air Control Systems, Inc. filed a motion for leave to intervene
alleging' it has a direct and immediate interest on the subject matter of the litigation such that
METROPOLITAN BANK AND TRUST COMPANY, petitioner, it will either gain or lose by the direct legal operation and effect of the judgment' and attached
vs. the 'Intervention Complaint'(Annex D, Petition, Id., pp. 49-52). There was no opposition to the
THE PRESIDING JUDGE, REGIONAL TRIAL COURT, Manila Branch 39, RAYCOR motion and the intervention complaint was admitted by the lower court per its order dated
AIRCONTROL SYSTEM, INC. and COURT OF APPEALS,* respondent. August 8, 1986. Metrobank on November 19, 1986, filed its Answer To The Intervention
Complaint (Annex E, Petition, Id., pp. 53-59).
Balane, Barican, Cruz, Alampay Law Office for petitioner.
On August 3, 1987, the lower court set the case for trial on the merits on September 15, 1987
Bito, Lozada, Ortega & Castillo for private respondent. but before the date of the trial, on September 7, 1987, plaintiff Metrobank and the defendants
Uniwide and BPI Consortium, filed a motion for postponement of the scheduled hearing on
September 15, 1987 and asked for thirty (30) days from September 15 within which to submit
REGALADO, J.: a compromise agreement. On March 15, 1988, plaintiff Metrobank and defendants BPI
Consortium filed a joint motion to dismiss the complaint and on March 18, 1988, the lower
Before the Court for review on certiorari is the decision of respondent Court of Appeals in CA- court issued the order dismissing the complaint with prejudice (Annex D to Comment of
G.R. SP No. 17341, dated July 19, 1989, 1 dismissing petitioner's original action for certiorari Raycor Air Control System, Inc., Rollo, p. 108).
and mandamus which seeks to set aside the order of the trial court dated June 2, 1988,
On April 19, 1988, private respondent filed a motion for reconsideration of the order
dismissing the complaint with prejudice, claiming it was not furnished with copy of the joint
motion for dismissal and that it received the order of dismissal only on April 4, 1988. On June
2, 1988, the respondent court issued the order granting the motion for reconsideration filed by
the intervenor (Annex I, Petition, Id., p. 67) which order is now subject of present petition for
certiorari.
On August 2, 1988, private respondent filed a motion to admit amended complaint (Annex F,
Intervenor's Comment, Id., p. 110) and attached the Amended Intervention Complaint (Annex
J, Petition, Id., pp. 68-73) to the motion. To this motion, plaintiff Metrobank filed an opposition
(Annex K, Petition, Id., pp. 71-76) and after the intervenor had filed their Reply (Annex L,
Petition, Id., pp. 77-81) and the plaintiff a Rejoinder (Annex M, Petition, Id., pp. 82-87), on
January 11, 1989, the respondent court issued the order admitting the amended complaint in
intervention (Annex N, Petition, Id., p. 88). This is the other order which is subject of the
petition for certiorari.
On February 9, 1989, plaintiff Metrobank filed a motion for extension for 15 days or until
February 24, 1988 within which to file its answer to the amended complaint in intervention
and the intervenor on February 17, 1989 filed an opposition to Metrobank's motion and at the
same time moved that Metrobank be declared in default on the amended complaint in
intervention. The respondent court granted Metrobank's motion and on February 18, 1989,
Metrobank filed its Answer to the Amended Complaint in Intervention with Counterclaim. 2
On April 14, 1989, petitioner filed a petition for certiorari and mandamus with respondent
Court of Appeals contending that the lower court committed a grave abuse of discretion
amounting to lack of jurisdiction in allowing, per its order of June 2, 1988, the intervention suit
to survive despite the dismissal of the main action and also in admitting, per its order of
January 11, 1989, the amended complaint in intervention. 3
As earlier stated, the Court of Appeals found no merit in the petition and dismissed the same
on July 19, 1989. Petitioner is now before us raising the same issues and arguments. We
agree with the Court of Appeals that the lower court was innocent of any grave abuse of
discretion in issuing the orders complained of.
The contention of petitioner that the order of the lower court, dated June 2, 1988, has the
effect of allowing the intervention suit to prosper despite the dismissal of the main action
obviously cannot be upheld.
There is here no final dismissal of the main case. The aforementioned order of the lower
court has the effect not only of allowing the intervention suit to proceed but also of vacating its
previous order of dismissal. The reinstatement of the case in order to try and determine the
claims and rights of the intervenor is proper. The joint motion of therein plaintiff and the
original defendants to dismiss the case, without notice to and consent of the intervenor, has
the effect of putting to rest only the respective claims of the said original parties inter se but
the same cannot in any way affect the claim of private respondent which was allowed by the
court to intervene without opposition from the original parties. A resume of pertinent rulings on
the matter would be in order.
Intervention is defined as "a proceeding in a suit or action by which a third person is permitted
by the court to make himself a party, either joining plaintiff in claiming what is sought by the
complaint, or uniting with defendant in resisting the claims of plaintiff, or demanding
something adversely to both of them; the act or proceeding by which a third person becomes
a party in a suit pending between others; the admission, by leave of court, of a person not an
original party to pending legal proceedings, by which such person becomes a party thereto
for the protection of some right of interest alleged by him to be affected by such
proceedings." 4
Any person who has or claims an interest in the matter in litigation, in the success of either of
the parties to an action, or against both, may intervene in such action, and when he has
become a party thereto it is error for the court to dismiss the action, including the intervention
suit on the basis of an agreement between the original parties to the action. Any settlement
made by the plaintiff and the defendant is necessarily ineffective unless the intervenor is a
party to it. 5
By the very definition of "intervention," the intervenor is a party to the action as the original
parties and to make his right effectual he must necessarily have the same power as the
original parties, subject to the authority of the court reasonably to control the proceedings in
the case. 6
Having been permitted to become a party in order to better protect his interests, an intervenor
is entitled to have the issues raised between him and the original parties tried and
determined. 7 He had submitted himself and his cause of action to the jurisdiction of the court
and was entitled to relief as though he were himself a party in the action. 8
After the intervenor has appeared in the action, the plaintiff has no absolute right to put the
intervenor out of court by the dismissal of the action. The parties to the original suit have no
power to waive or otherwise annul the substantial rights of the intervenor. When an
intervening petition has been filed, a plaintiff may not dismiss the action in any respect to the
prejudice of the intervenor. 9
It has even been held that the simple fact that the trial court properly dismissed plaintiff s
action does not require dismissal of the action of the intervenor. 10 An intervenor has the right
to claim the benefit of the original suit and to prosecute it to judgment. The right cannot be
defeated by dismissal of the suit by the plaintiff after the filing of the petition and notice
thereof to the other parties. A person who has an interest in the subject matter of the action
has the right, on his own motion, to intervene and become a party to the suit, and even after
the complaint has been dismissed, may proceed to have any actual controversy established
by the pleadings determined in such action. The trial court's dismissal of plaintiffs action does
not require dismissal of the action of the intervenor. 11
The intervenor in a pending case is entitled to be heard like any other party. 12 A claim in
intervention that seeks affirmative relief prevents a plaintiff from taking a voluntary dismissal
of the main action. 13 Where a complaint in intervention was filed before plaintiff's action had
been expressly dismissed, the intervenor's complaint was not subject to dismissal on the
ground that no action was pending, since dismissal of plaintiffs action did not affect the rights
of the intervenor or affect the dismissal of intervenor's complaint. 14 An intervenor's petition
showing it to be entitled to affirmative relief will be preserved and heard regardless of the
disposition of the principal action. 15
As we ruled in Camacho vs. Hon. Court of Appeals, et al., 16 the rationale whereof is clearly
applicable to the present controversy-
There is no question that intervention is only collateral or ancillary to the main action. Hence,
it was previously ruled that the final dismissal of the principal action results in the dismissal of
said ancillary action. The main action having ceased to exist, there is no pending proceeding
whereon the intervention may be based. In the case at bar, however, there was no such final
or complete dismissal but rather an approval of a compromise agreement which was
embodied in what was specifically designated as a 'Partial Decision' affecting only the
interests of herein petitioner and the defendant in said case but not those of her co-plaintiff
municipality and the intervenor. The clear intent of the court below in making the partial
decision is to make a reservation to determine the rights of the intervenor and, presumably,
the plaintiff municipality. There may be nothing much left to be done with respect to the main
case but as far as the proceedings in the trial court are concerned, the controversy therein
has not been fully settled and the disposition of the case is definitely incomplete.
Moreover, to require private respondent to refile another case for the settlement of its claim
will result in unnecessary delay and expenses and will entail multiplicity of suits and,
therefore, defeat the very purpose of intervention which is to hear and determine at the same
time all conflicting claims which may be made on the subject matter in litigation, and to
expedite litigation and settle in one action and by a single judgment the whole controversy
among the persons involved. 17
On the propriety of the order dated January 11, 1988, admitting private respondent's
amended complaint in intervention, we sustain respondent Court of Appeals in upholding the
same. Incidentally, it will be recalled that petitioner was granted the opportunity to file, as it
did file, its answer to the amended complaint in intervention and it even interposed a
counterclaim in the process.
Now, the granting of leave to file an amended pleading is a matter particularly addressed to
the sound discretion of the trial court and that discretion is broad, subject only to the
limitations that the amendments should not substantially change the cause of action or alter
the theory of the case or that it was made to delay the action. 18Once exercised, that
discretion will not be disturbed on appeal, except in case of abuse thereof. 19
In the case at bar, a reading of the amended complaint in intervention shows that it merely
supplements an incomplete allegation of the cause of action stated in the original complaint
so as to submit the real matter in dispute. Contrary to petitioner's contention, it does not
substantially change intervenor's cause of action or alter the theory of the case, hence its
allowance is in order.
As aptly stated by the Court of Appeals:
In both the Intervention Complaint and the Amended Complaint in Intervention, the private
respondent seeks the payment to it of the amount of P150,000.00 which should have been
paid to it from out of the P650,000.00 which the petitioner as plaintiff in CC 86-3618 had
referred to in pars. 3.11.2 and 3.11.3 of its complaint as cost of installation of the
airconditioning units under the agreement of sale (between plaintiff Metrobank and GEE Inc).
dated June 29, 1984 and so basically, the Amended Complaint In Intervention did not really
detract or depart from that basic claim. 20
In determining whether a different cause of action is introduced by amendments to the
complaint, what is to be ascertained is whether the defendant shall be required to answer for
a liability or legal obligation wholly different from that which was stated in the original
complaint. An amendment will not be considered as stating a new cause of action if the facts
alleged in the amended complaint show substantially the same wrong with respect to the
same transaction, or if what are alleged refer to the same matter but are more fully and
differently stated, or where averments which were implied are made in expressed terms, and
the subject of the controversy or the liability sought to be enforced remains the same. 21
The courts should be liberal in allowing amendments to pleadings to avoid multiplicity of suits
and in order that the real controversies between the parties are presented, their rights
determined and the case decided on the merits without unnecessary delay. 22 This liberality is
greatest in the early stages of a lawsuit, 23 especially in this case where the amendment to
the complaint in intervention was made before trial of the case thereby giving petitioner all the
time allowed by law to answer and to prepare for trial.
On the issue regarding the propriety of the intervention, suffice it to state that petitioner's
failure to interpose a timely objection when the motion for leave to intervene was filed by
private respondent bars the former from belatedly questioning the validity of the same on
appeal. In any event, the trial court duly considered the circumstances and granted the
motion, which order was not seasonably questioned by petitioner thus evincing its approval of
the court's action.
WHEREFORE, finding no reversible error, the petition is DENIED and the judgment of
respondent Court of Appeals is hereby AFFIRMED.
SO ORDERED.