G.R. No. 172825 October 11, 2012
SPOUSES MINIANO B. DELA CRUZ and LETA L. DELA CRUZ, Petitioners, vs.
ANA MARIE CONCEPCION, Respondent.
DECISION
PERALTA, J.:
Assailed in this petition for review on certiorari under Rule 45 of the
Rules of Court filed by petitioners spouses Miniano B. Dela Cruz and Leta
L. Dela Cruz against respondent Ana Marie Concepcion are the Court of
Appeals (CA) Decision1 dated March 31, 2005 and Resolution2 dated May
24, 2006 in CA-G.R. CV No. 83030.
The facts of the case are as follows:
On March 25, 1996, petitioners (as vendors) entered into a Contract to
Sell3 with respondent (as vendee) involving a house and lot in Cypress
St., Phase I, Town and Country Executive Village, Antipolo City for a
consideration of P2,000,000.00 subject to the following terms and
conditions:
a) That an earnest money of P100,000.00 shall be paid immediately;
b) That a full down payment of Four Hundred Thousand Pesos
(P400,000.00) shall be paid on February 29, 1996;
c) That Five Hundred Thousand Pesos (P500,000.00) shall be paid on or
before May 5, 1996; and
d) That the balance of One Million Pesos (P1,000,000.00) shall be paid on
installment with interest of Eighteen Percent (18%) per annum or One
and a half percent (1-1/2 %) interest per month, based on the
diminishing balance, compounded monthly, effective May 6, 1996. The
interest shall continue to run until the whole obligation shall have been
fully paid. The whole One Million Pesos shall be paid within three years
from May 6, 1996;
e) That the agreed monthly amortization of Fifty Thousand Pesos
(P50,000.00), principal and interest included, must be paid to the
Vendors, without need of prior demand, on or before May 6, 1996, and
every month thereafter. Failure to pay the monthly amortization on time,
a penalty equal to Five Percent (5%) of the amount due shall be
imposed, until the account is updated. In addition, a penalty of One
Hundred Pesos per day shall be imposed until the account is updated;
f) That after receipt of the full payment, the Vendors shall execute the
necessary Absolute Deed of Sale covering the house and lot mentioned
above x x x4
Respondent made the following payments, to wit: (1) P500,000.00 by
way of downpayment; (2) P500,000.00 on May 30, 1996; (3)
P500,000.00 paid on January 22, 1997; and (4) P500,000.00 bounced
check dated June 30, 1997 which was subsequently replaced by another
check of the same amount, dated July 7, 1997. Respondent was,
therefore, able to pay a total of P2,000,000.00.5
Before respondent issued the P500,000.00 replacement check, she told
petitioners that based on the computation of her accountant as of July
6, 1997, her unpaid obligation which includes interests and penalties was
only P200,000.00.6 Petitioners agreed with respondent and said "if
P200,000.00 is the correct balance, it is okay with us."7
Meanwhile, the title to the property was transferred to respondent.
Petitioners later reminded respondent to pay P209,000.00 within three
months.8 They claimed that the said amount remained unpaid, despite
the transfer of the title to the property to respondent. Several months
later, petitioners made further demands stating the supposed correct
computation of respondent’s liabilities.9 Despite repeated demands,
petitioners failed to collect the amounts they claimed from respondent.
Hence, the Complaint for Sum of Money With Damages 10 filed with the
Regional Trial Court (RTC)11 of Antipolo, Rizal. The case was docketed as
Civil Case No. 98-4716.
In her Answer with Compulsory Counterclaim,12 respondent claimed that
her unpaid obligation to petitioners is only P200,000.00 as earlier
confirmed by petitioners and not P487,384.15 as later alleged in the
complaint. Respondent thus prayed for the dismissal of the complaint.
By way of counterclaim, respondent prayed for the payment of moral
damages and attorney’s fees. During the presentation of the parties’
evidence, in addition to documents showing the statement of her paid
obligations, respondent presented a receipt purportedly indicating
payment of the remaining balance of P200,000.00 to Adoracion Losloso
(Losloso) who allegedly received the same on behalf of petitioners. 13
On March 8, 2004, the RTC rendered a Decision14 in favor of respondent,
the dispositive portion of which reads:
WHEREFORE, premises considered, this case is hereby DISMISSED. The
plaintiff is hereby ordered to pay the defendant’s counterclaim,
amounting to wit:
a) P300,000 as moral damages; and
b) P100,000 plus P2,000 per court appearance as attorney’s fees.
SO ORDERED.15
The RTC noted that the evidence formally offered by petitioners have not
actually been marked as none of the markings were recorded. Thus, it
found no basis to grant their claims, especially since the amount
claimed in the complaint is different from that testified to. The court, on
the other hand, granted respondent’s counterclaim. 16
On appeal, the CA affirmed the decision with modification by deleting the
award of moral damages and attorney’s fees in favor of respondent. 17 It
agreed with the RTC that the evidence presented by petitioners cannot
be given credence in determining the correct liability of
respondent.18 Considering that the purchase price had been fully paid by
respondent ahead of the scheduled date agreed upon by the parties,
petitioners were not awarded the excessive penalties and
interests.19 The CA thus maintained that respondent’s liability is limited
to P200,000.00 as claimed by respondent and originally admitted by
petitioners.20 This amount, however, had already been paid by
respondent and received by petitioners’ representative.21 Finally, the CA
pointed out that the RTC did not explain in its decision why moral
damages and attorney’s fees were awarded. Considering also that bad
faith cannot be attributed to petitioners when they instituted the
collection suit, the CA deleted the grant of their counterclaims.22
Aggrieved, petitioners come before the Court in this petition for review
on certiorari under Rule 45 of the Rules of Court raising the following
errors:
I.
"THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE GROUND
THAT PLAINTIFF FAILED TO FORMALLY OFFER THEIR EVIDENCE AS
DEFENDANT JUDICIALLY ADMITTED IN HER ANSWER WITH COMPULS[O]RY
COUNTERCLAIM HER OUTSTANDING OBLIGATION STILL DUE TO PLAINTIFFS
AND NEED NO PROOF.
II.
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT FOR ALLEGED
FAILURE OF PLAINTIFFS TO PRESENT COMPUTATION OF THE AMOUNT BEING
CLAIMED AS DEFENDANT JUDICIALLY ADMITTED HAVING RECEIVED THE
DEMAND LETTER DATED OCTOBER 22, 1997 WITH COMPUTATION OF THE
BALANCE DUE.
III.
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT ON THE GROUND
THAT THE DEFENDANT FULLY PAID THE CLAIMS OF PLAINTIFFS BASED ON
THE ALLEGED RECEIPT OF PAYMENT BY ADORACION LOSLOSO FROM ANA
MARIE CONCEPCION MAGLASANG WHICH HAS NOTHING TO DO WITH THE
JUDICIALLY ADMITTED OBLIGATION OF APPELLEE."23
Invoking the rule on judicial admission, petitioners insist that respondent
admitted in her Answer with Compulsory Counterclaim that she had paid
only a total amount of P2 million and that her unpaid obligation amounts
to P200,000.00.24 They thus maintain that the RTC and the CA erred in
concluding that said amount had already been paid by respondent.
Petitioners add that respondent’s total liability as shown in the latter’s
statement of account was erroneously computed for failure to
compound the monthly interest agreed upon.25 Petitioners also claim
that the RTC and the CA erred in giving credence to the receipt
presented by respondent to show that her unpaid obligation had already
been paid having been allegedly given to a person who was not armed
with authority to receive payment.26
The petition is without merit.
It is undisputed that the parties entered into a contract to sell a house
and lot for a total consideration of P2 million. Considering that the
property was payable in installment, they likewise agreed on the
payment of interest as well as penalty in case of default. It is likewise
settled that respondent was able to pay the total purchase price of P2
million ahead of the agreed term. Afterwhich, they agreed on the
remaining balance by way of interest and penalties which is
P200,000.00. Considering that the term of payment was not strictly
followed and the purchase price had already been fully paid by
respondent, the latter presented to petitioners her computation of her
liabilities for interests and penalties which was agreed to by petitioners.
Petitioners also manifested their conformity to the statement of
account prepared by respondent.
In paragraph (9) of petitioners’ Complaint, they stated that:
9) That the Plaintiffs answered the Defendant as follows: "if P200,000 is
the correct balance, it is okay with us." x x x.27
But in paragraph (17) thereof, petitioners claimed that defendant’s
outstanding liability as of November 6, 1997 was P487,384.15.28 Different
amounts, however, were claimed in their demand letter and in their
testimony in court.
With the foregoing factual antecedents, petitioners cannot be permitted
to assert a different computation of the correct amount of respondent’s
liability.
It is noteworthy that in answer to petitioners’ claim of her purported
unpaid obligation, respondent admitted in her Answer with Compulsory
Counterclaim that she paid a total amount of P2 million representing the
purchase price of the subject house and lot. She then manifested to
petitioners and conformed to by respondent that her only balance was
P200,000.00. Nowhere in her Answer did she allege the defense of
payment. However, during the presentation of her evidence, respondent
submitted a receipt to prove that she had already paid the remaining
balance. Both the RTC and the CA concluded that respondent had already
paid the remaining balance of P200,000.00. Petitioners now assail this,
insisting that the court should have maintained the judicial admissions of
respondent in her Answer with Compulsory Counterclaim, especially as
to their agreed stipulations on interests and penalties as well as the
existence of outstanding obligations.
It is, thus, necessary to discuss the effect of failure of respondent to
plead payment of its obligations.
Section 1, Rule 9 of the Rules of Court states that "defenses and
objections not pleaded either in a motion to dismiss or in the answer are
deemed waived." Hence, respondent should have been barred from
raising the defense of payment of the unpaid P200,000.00. However,
Section 5, Rule 10 of the Rules of Court allows the amendment to
conform to or authorize presentation of evidence, to wit:
Section 5. Amendment to conform to or authorize presentation of
evidence. – When issues not raised by the pleadings are tried with the
express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure to amend does not
affect the result of the trial of these issues. If evidence is objected to at
the trial on the ground that it is not within the issues made by the
pleadings, the court may allow the pleadings to be amended and shall do
so with liberality if the presentation of the merits of the action and the
ends of substantial justice will be subserved thereby. The court may
grant a continuance to enable the amendment to be made.
The foregoing provision envisions two scenarios, namely, when evidence
is introduced in an issue not alleged in the pleadings and no objection
was interjected; and when evidence is offered on an issue not alleged in
the pleadings but this time an objection was raised.29 When the issue is
tried without the objection of the parties, it should be treated in all
respects as if it had been raised in the pleadings. 30 On the other hand,
when there is an objection, the evidence may be admitted where its
admission will not prejudice him.31
Thus, while respondent judicially admitted in her Answer that she only
paid P2 million and that she still owed petitioners P200,000.00,
respondent claimed later and, in fact, submitted an evidence to show
that she already paid the whole amount of her unpaid obligation. It is
noteworthy that when respondent presented the evidence of payment,
petitioners did not object thereto. When the receipt was formally offered
as evidence, petitioners did not manifest their objection to the
admissibility of said document on the ground that payment was not an
issue. Apparently, petitioners only denied receipt of said payment and
assailed the authority of Losloso to receive payment. Since there was an
implied consent on the part of petitioners to try the issue of payment,
even if no motion was filed and no amendment of the pleading has been
ordered,32 the RTC cannot be faulted for admitting respondent’s
testimonial and documentary evidence to prove payment. 33
As stressed by the Court in Royal Cargo Corporation v. DFS Sports
Unlimited, Inc.,34
The failure of a party to amend a pleading to conform to the evidence
adduced during trial does not preclude adjudication by the court on the
basis of such evidence which may embody new issues not raised in the
pleadings. x x x Although, the pleading may not have been amended to
conform to the evidence submitted during trial, judgment may
nonetheless be rendered, not simply on the basis of the issues alleged
but also on the issues discussed and the assertions of fact proved in the
course of the trial. The court may treat the pleading as if it had been
amended to conform to the evidence, although it had not been actually
amended. x x x Clearly, a court may rule and render judgment on the
basis of the evidence before it even though the relevant pleading had not
been previously amended, so long as no surprise or prejudice is thereby
caused to the adverse party. Put a little differently, so long as the basic
requirements of fair play had been met, as where the litigants were
given full opportunity to support their respective contentions and to
object to or refute each other's evidence, the court may validly treat the
pleadings as if they had been amended to conform to the evidence and
proceed to adjudicate on the basis of all the evidence before it.
(Emphasis supplied)35
To be sure, petitioners were given ample opportunity to refute the fact
of and present evidence to prove payment.
With the evidence presented by the contending parties, the more
important question to resolve is whether or not respondent’s obligation
had already been extinguished by payment.
We rule in the affirmative as aptly held by the RTC and the CA.
Respondent’s obligation consists of payment of a sum of money. In order
to extinguish said obligation, payment should be made to the proper
person as set forth in Article 1240 of the Civil Code, to wit:
Article 1240. Payment shall be made to the person in whose favor the
obligation has been constituted, or his successor in interest, or any
person authorized to receive it. (Emphasis supplied)
The Court explained in Cambroon v. City of Butuan,36 cited in Republic v.
De Guzman,37 to whom payment should be made in order to extinguish an
obligation:
Payment made by the debtor to the person of the creditor or to one
authorized by him or by the law to receive it extinguishes the obligation.
When payment is made to the wrong party, however, the obligation is not
extinguished as to the creditor who is without fault or negligence even if
the debtor acted in utmost good faith and by mistake as to the person of
the creditor or through error induced by fraud of a third person.
In general, a payment in order to be effective to discharge an obligation,
must be made to the proper person. Thus, payment must be made to the
obligee himself or to an agent having authority, express or implied, to
receive the particular payment. Payment made to one having apparent
authority to receive the money will, as a rule, be treated as though
actual authority had been given for its receipt. Likewise, if payment is
made to one who by law is authorized to act for the creditor, it will work
a discharge. The receipt of money due on a judgment by an officer
authorized by law to accept it will, therefore, satisfy the debt. 38
Admittedly, payment of the remaining balance of P200,000.00 was not
made to the creditors themselves. Rather, it was allegedly made to a
certain Losloso. Respondent claims that Losloso was the authorized
agent of petitioners, but the latter dispute it.
Losloso’s authority to receive payment was embodied in petitioners’
Letter39 addressed to respondent, dated August 7, 1997, where they
informed respondent of the amounts they advanced for the payment of
the 1997 real estate taxes. In said letter, petitioners reminded
respondent of her remaining balance, together with the amount of taxes
paid. Taking into consideration the busy schedule of respondent,
petitioners advised the latter to leave the payment to a certain "Dori"
who admittedly is Losloso, or to her trusted helper. This is an express
authority given to Losloso to receive payment.
Moreover, as correctly held by the CA:
Furthermore, that Adoracion Losloso was indeed an agent of the
appellant spouses is borne out by the following admissions of plaintiff-
appellant Atty. Miniano dela Cruz, to wit:
Q: You would agree with me that you have authorized this Doiry Losloso
to receive payment of whatever balance is due you coming from Ana
Marie Concepcion, that is correct?
A: In one or two times but not total authority, sir.
Q: Yes, but you have authorized her to receive payment?
A: One or two times, yes x x x. (TSN, June 28, 1999, pp. 16-17)40
Thus, as shown in the receipt signed by petitioners’ agent and pursuant
to the authority granted by petitioners to Losloso, payment made to the
latter is deemed payment to petitioners. We find no reason to depart
from the RTC and the CA conclusion that payment had already been
made and that it extinguished respondent's obligations.
WHEREFORE, premises considered, the petition is DENIED for lack of
merit. The Court of Appeals Decision dated March 31, 2005 and
Resolution dated May 24, 2006 in CA-G.R. CV No. 83030, are AFFIRMED.
SO ORDERED.
G.R. No. 173987 February 25, 2012
PADILLA MERCADO, ZULUETA MERCADO, BONIFACIA MERCADO, DAMIAN
MERCADO and EMMANUEL MERCADO BASCUG, Petitioners,
vs.
SPOUSES AGUEDO ESPINA and LOURDES ESPINA, Respondents.
DECISION
PERALTA, J.:
Assailed before the Court via a petiti_on for review on certiorari under
Rule 45 of the Rules of Court are the Decision1 and Resolution,2 dated
April 27, 2005 and July 12, 2006, respectively, of the Court of Appeals
(CA) in CA-G.R. SP No. 84537.
Subject of the instant controversy is a 338 square meter parcel of land
located at the Poblacion of the then Municipality of Maasin (now a city),
in the Province of Southern Leyte.
On May 8, 2000, herein petitioners filed with the Regional Trial Court
(RTC) of Maasin, Southern Leyte, a Complaint for Recovery of Property
and Declaration of Nullity of Deed of Sale, Certificate of Title and
Damages. The case was docketed as Civil Case No. R-3147.
Petitioners alleged in their Complaint that they are the heirs of the late
spouses Santiago and Sofronia Mercado, who were the owners of the
subject parcel of land; after the death of Santiago and Sofronia,
petitioners inherited the disputed lot, possessing the same as owners;
sometime in 1996, herein respondents claimed ownership over the
subject parcel of land, alleging that they bought the same from one
Josefa Mercado Espina (Josefa) who, in turn, previously bought the
same in 1939 from a certain Genivera Mercado Kavanaugh; that
Genivera supposedly purchased the same property from one Escolastico
Mercado in 1937 who, in turn, allegedly bought it from Santiago Mercado.
Petitioners further alleged that in 1962, Josefa, through fraudulent
machinations, was able to obtain a title (Original Certificate of Title No.
35) over the subject property in her name. Asserting that the above-
mentioned contracts of sale never happened, petitioners prayed for the
declaration of nullity of the deeds of sale between Santiago and
Escolastico, Escolastico and Genivera, and between Genivera and Josefa.
They prayed that the Transfer Certificate of Title (TCT) in the name of
herein respondents be nullified and that petitioners be declared as the
owners of the disputed lot. They asked that the court award them actual,
moral and exemplary damages, and attorney's fees.
On June 29, 2000, respondents filed a Motion to Dismiss on grounds
that the RTC has no jurisdiction over the case due to the failure of the
complainant to state the assessed value of the property, that
petitioners' cause of action is barred by prescription, laches and
indefeasibility of title, and that the complaint does not state sufficient
cause of action against respondents who are buyers in good faith. 3
The RTC denied respondents' Motion to Dismiss. Respondents then filed a
motion for reconsideration, but the same was denied by the RTC.
Respondents then filed a special civil action for certiorari with the CA
assailing the above orders of the RTC.
In its Resolution4 dated March 13, 2001, the CA denied due course and
dismissed respondents' petition for certiorari. Respondents filed a
motion for reconsideration, but the same was denied by the CA in its
Resolution dated October 21, 2003.
Meanwhile, on August 17, 2000, petitioners, by leave of court, filed an
Amended Complaint to include the assessed value of the subject
property.5
On November 21, 2003, respondents filed a Motion to Dismiss Amended
Complaint on grounds of prescription, laches, indefeasibility of title and
lack of cause of action.6
On February 18, 2004, the RTC issued an Order7 denying respondents'
Motion to Dismiss Amended Complaint. Respondents filed a motion for
reconsideration, but the RTC denied it in its Order dated April 19, 2004. 8
Respondents filed a special civil action for certiorari with the CA praying
that the February 18, 2004 and April 19, 2004 Orders of the RTC be set
aside and petitioners' complaint dismissed.
On April 27, 2005, the CA promulgated its assailed Decision, the
dispositive portion of which reads as follows:
WHEREFORE, the petition is granted. The assailed orders of the Regional
Trial Court dated February 18, 2004 and April 19, 2004 must be as they
are hereby, SET ASIDE. The COMPLAINT in Civil Case No. R-3147 is
DISMISSED. The Regional Trial Court of Maasin City, Branch 25 is
hereby enjoined from proceeding with the case. No pronouncement as to
costs.
SO ORDERED.9
The CA ruled that respondents' title has become indefeasible and
incontrovertible by lapse of time and that petitioners' action is already
barred by prescription. The CA also held that since petitioners did not
allege that respondents were not buyers in good faith, the latter are
presumed to be purchasers in good faith and for value.
Petitioners filed a motion for reconsideration, but the CA denied it in its
Resolution10 dated July 12, 2006.
Hence, the instant petition for review on certiorari raising the following
issues:
1) Procedurally, whether or not the Court of Appeals erred in giving due
course to respondents’ second motion to dismiss filed on November 21,
2003 on the amended complaint filed on August 16, 2000;
2) Substantively, whether or not the Court of Appeals erred in ordering
the Regional Trial Court to dismiss the case and enjoining it from
proceeding with the case on the ground of indefeasibility of title,
prescription and/or laches.11
On the first issue, petitioners contend that respondents' Motion to
Dismiss Amended Complaint was filed beyond the period allowed by the
Rules of Court. Petitioners also aver that the above Motion to Dismiss
Amended Complaint is a circumvention of the Rules of Court, because
the matters raised therein are mere reiterations of their first motion to
dismiss, which was dismissed by the RTC and, on petition for certiorari,
was denied due course by the CA.
Anent the second issue, petitioners argue that respondents' ground of
indefeasibility of title in their Motion to Dismiss Amended Complaint is
not an authorized ground under Rule 16 of the Rules of Court. Petitioners
also assert that the other grounds, i.e., good faith, lack of cause of
action and prescription, raised by respondents in their motion are not
supported by evidence.
The petition lacks merit.
As to the first issue, there is no dispute that the issue of timeliness of
respondents' Motion to Dismiss petitioners' Amended Complaint was not
raised by petitioners before the RTC. Neither was this issue raised in
their Comment to respondents' petition for certiorari filed with the CA. It
was only in their Motion for Reconsideration of the CA Decision that this
matter was raised. It is well established that issues raised for the first
time on appeal and not raised in the proceedings in the lower court are
barred by estoppel.12 Points of law, theories, issues, and arguments not
brought to the attention of the trial court ought not to be considered by
a reviewing court, as these cannot be raised for the first time on
appeal.13 Basic considerations of due process impel the adoption of this
rule.14
Moreover, respondent's filing of their Motion to Dismiss Amended
Complaint may not be considered as a circumvention of the rules of
procedure. Under Section 8, Rule 10 of the Rules of Court, an amended
complaint supersedes an original one. As a consequence, the original
complaint is deemed withdrawn and no longer considered part of the
record.15 In the present case, the Amended Complaint is, thus, treated as
an entirely new complaint. As such, respondents had every right to move
for the dismissal of the said Amended Complaint. Were it not for the
filing of the said Motion, respondents would not have been able to file a
petition for certiorari before the CA which, in turn, rendered the
presently assailed judgment in their favor.
With respect to the second issue, the CA correctly ruled that petitioners'
Amended Complaint failed to state a cause of action. The Court quotes
with approval the following disquisition of the appellate court, to wit:
xxxx
With particular reference to the petitioners [herein respondents], We
observed that there is no allegation at all in respondents' [herein
petitioners'] complaint that they [respondents] are buyers or
transferees in bad faith or with notice of the alleged defect in the title of
their vendor/s with the result that the allegations of said pleading are
not sufficient to constitute a cause of action.
While private respondents [petitioners] accused Escolastico Mercado of
fraudulent conduct, due to the alleged dubious character of the
document of sale which passed the ownership of Santiago's property to
him and that the signature of Santiago was not authentic, there is no
allegation whatsoever as to the fraudulent nature of the succeeding
transfers or of the succeeding transferee's knowledge about the
irregularity and defect of the first sale. Most importantly, the complaint
contains no averment that herein petitioners [respondents] had any
knowledge, much less any participation, voluntarily or otherwise, in the
alleged irregularity or anomaly of the original sale transaction between
Santiago and Escolastico Mercado or in the acquisition/issuance of the
OCT No. 35. Neither was there any allegation in the complaint attributing
petitioners [respondents] with negligence. Petitioners [Respondents]
cannot also be presumed to be negligent. On the contrary, the revised
rules of court provides a disputable presumption in Petitioners’
[respondents'] favor to the effect "that a person takes ordinary care of
his concerns["] and that ["]private transactions have been fair and
regular.["] The allegations of the complaint would even lend a conclusion
that there is nothing questionable as to the way
petitioners[respondents] obtained their title over the property. This is
where We denounce the court a quo's act of entertaining
evidence aliunde and supplying the missing facts which should have been
alleged to constitute a cause of action.
We have carefully perused the complaint and We find that it is devoid of
the following allegations: 1) that Josefa is the mother of petitioners
[respondents]; 2) that Genivera Mercado Kavanaugh is an American
citizen, and 3) that, petitioners [respondents] are not buyers in good
faith. Hence, the court a quo clearly committed grave abuse of
discretion, when, in denying the motion to dismiss, he made some
findings "that petitioners [respondents] are not buyers in good faith
because all along they know or they ought to know that the land does not
belong to their mother Josefa Espina, and that their mother could not
have legally acquired the same from her sister Genivera Kavanaugh, an
American citizen who cannot acquire land except by way of hereditary
succession." It has been held time and again that "to determine the
sufficiency of the cause of action, the respondent court can only
consider facts alleged in the complaint – which are deemed
hypothetically admitted by defendants – and no other allegations should
be considered."
Where the complaint for recovery of ownership and possession of a
parcel of land (such as the one at bar) alleges that some of the
defendants bought said land from their co-defendants who had a
defective title thereto – but does not allege that the purchasers were
purchasers in bad faith or with notice of the defect in the title of their
vendors, it is held that the lower court correctly dismissed the
complaint against the purchasers for failure to state a cause of action
against them.
x x x x16 (Emphasis supplied)
Failure to state a cause of action refers to the insufficiency of the
pleading, and is a ground for dismissal under Rule 16 of the Rules of
Court.17
A complaint states a cause of action if it avers the existence of the
three essential elements of a cause of action, namely:
(a) The legal right of the plaintiff;
(b) The correlative obligation of the defendant; and
(c) The act or omission of the defendant in violation of said legal right. 18
If the allegations in the complaint do not aver the concurrence of these
elements, the complaint becomes vulnerable to a motion to dismiss on
the ground of failure to state a cause of action.19 A perusal of the
Amended Complaint in the present case would show that there is,
indeed, no allegation of any act or omission on the part of respondents
which supposedly violated the legal rights of petitioners. Thus, the CA is
correct in dismissing the complaint on the ground of failure to state a
cause of action.
Apropos to the foregoing, it bears to note at this stage that the Court
likewise agrees with the ruling of the CA that respondents are presumed
purchasers in good faith.1âwphi1 In holding thus, the CA relied on the
settled principle that one who deals with property registered under the
Torrens System need not go beyond the same, but only has to rely on
the title.20 In the instant case, there is no dispute that the subject
property was already covered by a Torrens title when respondents
bought the same. There was no allegation in the Amended Complaint that
respondents were not buyers in good faith. More particularly, there was
nothing in the said complaint to indicate that respondents were aware of
or were participants in the alleged fraud supposedly committed against
petitioners' predecessor-in-interest, or that they have notice of any
defect in the title of the seller. As the CA correctly noted, from the time
that petitioners' predecessor-in-interest was supposedly deprived of
ownership of the subject Jot through an alleged fraudulent sale, the
same had already been sold thrice. Moreover, since the subject property
was already covered by a Torrens title at the time that respondents
bought the same, the law does not require them to go beyond what
appears on the face of the title. The lot has, thus, passed to
respondents, who are presumed innocent purchasers for value, in the
absence of any allegation to the contrary.
Paragraph 3, Section 53 ofPresidential Decree No. 1529 provides:
In all cases of registration procured by fraud, the owner may pursue all
his legal and equitable remedies against the parties to such fraud
without prejudice, however, to the rights of any i1moccnt holder for
value of a certificate of title. x x x
Petitioners' cause of action should, therefore, be directed not against
respondents, who are innocent holders for value, but against those
whom petitioners alleged to have defrauded them.
Based on the above discussions, the Court no longer finds any need to
resolve the other issues raised in the instant petition.
WHEREFORE, the petition for review on certiorari is DENIED. The April 27,
2005 Decision and July 12, 2006 Resolution of the Court of Appeals in
CA-G.R. SP No. 84537 are AFFIRMED.
SO ORDERED.
MA. MERCEDES L. BARBA, Petitioner, - versus - LICEO DE CAGA Y AN
UNIVERSITY, Respondent. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - -
DECISION VILLARAMA, JR., J.: G .R. No. 193857 Present: SERENO, C.J.,
Chairperson, LEONARDO-DE CASTRO, BERSAMIN, VILLARAMA, JR., and
PEREZ,* JJ Promulgated: Before the Court is a petition for review on
certiorari assailing the March 29, 2010 Amended Decision1 and
September 14, 2010 Resolution2 of the Court of Appeals (CA) in CA-G.R.
SP No. 02508-MIN. The CA had reconsidered its earlier Decision3 dated
October 22, 2009 and set aside the September 25, 2007 and June 30,
2008 Resolutions4 of the National Labor Relations Commission (NLRC)
as well as the September 29, 2006 Decision5 of the Labor Arbiter. The
CA held that the Labor Arbiter and NLRC had no jurisdiction over the
illegal dismissal case filed by petitioner against 2 Designated additional
member per Special Order No. 1356 dated November 13, 2012. Rollo, pp.
77-94. Penned by Associate Justice Leoncia R. Dimagiba with Associate
Justices Rodrigo F. Lim, Jr. and Danton Q. Bueser concurring. Id. at 166-
172. Penned by Associate Justice Leoncia R. Dimagiba with Associate
Justices Rodrigo F. Lim, Jr. and Ramon Paul L. Hernando concurring. Id.
at 54-76. Penned by Associate Justice Ruben C. Ayson with Associate
Justices Rodrigo F. Lim, Jr. and Leoncia Rea1-Dimagiba concurring. I d.
at 42-48, 50-52. ld. at 34-41. Decision 2 G.R. No. 193857 respondent
because petitioner’s position as Dean of the College of Physical Therapy
of respondent is a corporate office. The facts follow. Petitioner Dr. Ma.
Mercedes L. Barba was the Dean of the College of Physical Therapy of
respondent Liceo de Cagayan University, Inc., a private educational
institution with school campus located at Carmen, Cagayan de Oro City.
Petitioner started working for respondent on July 8, 1993 as medical
officer/school physician for a period of one school year or until March
31, 1994. In July 1994, she was chosen by respondent to be the recipient
of a scholarship grant to pursue a three-year residency training in
Rehabilitation Medicine at the Veterans Memorial Medical Center
(VMMC). The Scholarship Contract6 provides: 5. That the SCHOLAR after
the duration of her study and training shall serve the SCHOOL in
whatever position the SCHOOL desires related to the SCHOLAR’s studies
for a period of not less than ten (10) years; After completing her
residency training with VMMC in June 1997, petitioner returned to
continue working for respondent. She was appointed as Acting Dean of
the College of Physical Therapy and at the same time designated as
Doctor-In-Charge of the Rehabilitation Clinic of the Rodolfo N. Pelaez
Hall, City Memorial Hospital. On June 19, 2002, petitioner’s appointment
as Doctor-In-Charge of the Rehabilitation Clinic was renewed and she
was appointed as Dean of the College of Physical Therapy by
respondent’s President, Dr. Jose Ma. R. Golez. The appointment letter7
reads: x x x x Dear Dr. Barba: 6 Annex “A,” records, Vol. I, pp. 20-21. 7
Annex “E”, CA rollo, p. 31. Decision 3 G.R. No. 193857 You are hereby re-
appointed Dean of the College of Physical Therapy and Doctor-In-Charge
of the Rehabilitation Clinic at Rodolfo N. Pelaez Hall, City Memorial
Hospital and other rehabilitation clinics under the management of Liceo
de Cagayan University for a period of three years effective July 1, 2002
unless sooner revoked for valid cause or causes. Your position is one of
trust and confidence and the appointment is subject to the pertinent
provisions of the University Administrative Personnel and Faculty
Manuals, and Labor Code. x x x x Petitioner accepted her appointment
and assumed the position of Dean of the College of Physical Therapy. In
the school year 2003 to 2004, the College of Physical Therapy suffered
a dramatic decline in the number of enrollees from a total of 1,121
students in the school year 1995 to 1996 to only 29 students in the first
semester of school year 2003 to 2004. This worsened in the next year
or in school year 2004 to 2005 where a total of only 20 students
enrolled.8 Due to the low number of enrollees, respondent decided to
freeze the operation of the College of Physical Therapy indefinitely.
Respondent’s President Dr. Rafaelita Pelaez-Golez wrote petitioner a
letter9 dated March 16, 2005 informing her that her services as dean of
the said college will end at the close of the school year. Thereafter, the
College of Physical Therapy ceased operations on March 31, 2005, and
petitioner went on leave without pay starting on April 9, 2005.
Subsequently, respondent’s Executive Vice President, Dr. Mariano M.
Lerin, through Dr. Glory S. Magdale, respondent’s Vice President for
Academic Affairs, sent petitioner a letter10 dated April 27, 2005
instructing petitioner to return to work on June 1, 2005 and report to
Ma. Chona Palomares, the Acting Dean of the College of Nursing, to
receive her teaching load and assignment as a full-time faculty member
in that department for the school year 2005-2006. In reply, petitioner
informed Dr. Lerin that she had not committed to teach in the College of
Nursing and that as far as she can recall, her 8 Records, Vol. I, p. 39. 9
Annex “B,” id. at 23. 10 Annex “E,” id. at 61. Decision 4 G.R. No. 193857
employment is not dependent on any teaching load. She then requested
for the processing of her separation benefits in view of the closure of
the College of Physical Therapy.11 She did not report to Palomares on
June 1, 2005. On June 8, 2005, petitioner followed up her request for
separation pay and other benefits but Dr. Lerin insisted that she report
to Palomares; otherwise, sanctions will be imposed on her. Thus,
petitioner through counsel wrote Dr. Golez directly, asking for her
separation pay and other benefits. On June 21, 2005, Dr. Magdale wrote
petitioner a letter12 directing her to report for work and to teach her
assigned subjects on or before June 23, 2005. Otherwise, she will be
dismissed from employment on the ground of abandonment. Petitioner,
through counsel, replied that teaching in the College of Nursing is in no
way related to her scholarship and training in the field of rehabilitation
medicine. Petitioner added that coercing her to become a faculty
member from her position as College Dean is a great demotion which
amounts to constructive dismissal.13 Dr. Magdale sent another letter14
to petitioner on June 24, 2005 ordering her to report for work as she
was still bound by the Scholarship Contract to serve respondent for two
more years. But petitioner did not do so. Hence, on June 28, 2005, Dr.
Magdale sent petitioner a notice terminating her services on the ground
of abandonment. Meanwhile, on June 22, 2005, prior to the termination
of her services, petitioner filed a complaint before the Labor Arbiter for
illegal dismissal, payment of separation pay and retirement benefits
against respondent, Dr. Magdale and Dr. Golez. She alleged that her
transfer to the College of 11 Id. at 25. 12 Annex “I,” id. at 65. 13 Id. at 66.
14 Annex “L,” id. at 68. Decision 5 G.R. No. 193857 Nursing as a faculty
member is a demotion amounting to constructive dismissal. Respondent
claimed that petitioner was not terminated and that it was only
petitioner’s appointment as College Dean in the College of Physical
Therapy that expired as a necessary consequence of the eventual
closure of the said college. Respondent further averred that petitioner’s
transfer as fulltime professor in the College of Nursing does not amount
to constructive dismissal since the transfer was without loss of
seniority rights and without diminution of pay. Also, respondent added
that pursuant to the Scholarship Contract, petitioner was still duty
bound to serve respondent until 2007 in whatever position related to
her studies the school desires. Labor Arbiter’s Ruling In a Decision15
dated September 29, 2006, the Labor Arbiter found that respondent did
not constructively dismiss petitioner; therefore, she was not entitled to
separation pay. The Labor Arbiter held that petitioner’s assignment as
full-time professor in the College of Nursing was not a demotion
tantamount to constructive dismissal. The dispositive portion of the
Labor Arbiter’s decision reads: WHEREFORE, in view of the foregoing,
judgment is hereby rendered dismissing the complaint for illegal
dismissal for utter lack of merit, but ordering the respondent Liceo de
Cagayan University to reinstate complainant to an equivalent position
without loss of seniority rights, but without back wages. However, if
reinstatement is no longer feasible or if there is no equivalent position
to which complainant may be reinstated, respondent may opt to pay
complainant her separation pay equivalent to one-half (1/2) month pay
for every year of service or in the sum of P195,000.00, subject to
deduction for advances or accountabilities which complainant may have
had. Other claims are ordered dismissed for lack of merit. SO
ORDERED.16 15 Supra note 5. 16 Id. at 41. Decision 6 G.R. No. 193857
NLRC’s Ruling Petitioner appealed the above decision to the NLRC. On
September 25, 2007, the NLRC issued a Resolution17 reversing the Labor
Arbiter’s decision and holding that petitioner was constructively
dismissed. The NLRC held that petitioner was demoted when she was
assigned as a professor in the College of Nursing because there are
functions and obligations and certain allowances and benefits given to a
College Dean but not to an ordinary professor. The NLRC ruled:
WHEREFORE, in view of the foregoing, the assailed decision is hereby
MODIFIED in that complainant is hereby considered as constructively
dismissed and thus entitled to backwages and separation pay of one (1)
month salary for every year of service, plus attorney’s fees, which shall
be computed at the execution stage before the Arbitration Branch of
origin. SO ORDERED.18 The NLRC denied respondent’s motion for
reconsideration in a Resolution19 dated June 30, 2008. Ruling of the
Court of Appeals Respondent went to the CA on a petition for certiorari
alleging that the NLRC committed grave abuse of discretion when it
declared that petitioner’s transfer to the College of Nursing as full-time
professor but without diminution of salaries and without loss of
seniority rights amounted to constructive dismissal because there was
a demotion involved in the transfer and because petitioner was
compelled to accept her new assignment. Respondent also filed a
Supplemental Petition20 raising for the first time the issue of lack of
jurisdiction of the Labor Arbiter and the NLRC over the case. Respondent
claimed that a College Dean is a corporate officer under its by-laws and
petitioner was a corporate officer of respondent since 17 Supra note 4
at 42-48. 18 Id. at 47. 19 Id. at 50-52. 20 Id. at 179-209. Decision 7 G.R.
No. 193857 her appointment was approved by the board of directors.
Respondent posited that petitioner was a corporate officer since her
office was created by the by-laws and her appointment, compensation,
duties and functions were approved by the board of directors. Thus,
respondent maintained that the jurisdiction over the case is with the
regular courts and not with the labor tribunals. In its original Decision21
dated October 22, 2009, the CA reversed and set aside the NLRC
resolutions and reinstated the decision of the Labor Arbiter. The CA did
not find merit in respondent’s assertion in its Supplemental Petition that
the position of petitioner as College Dean was a corporate office.
Instead, the appellate court held that petitioner was respondent’s
employee, explaining thus: Corporate officers in the context of PD 902-A
are those officers of a corporation who are given that character either
by the Corporation Code or by the corporation’s By-Laws. Under Section
25 of the Corporation Code, the “corporate officers” are the president,
secretary, treasurer and such other officers as may be provided for in
the By-Laws. True, the By-Laws of LDCU provides that there shall be a
College Director. This means a College Director is a corporate officer.
However, contrary to the allegation of petitioner, the position of Dean
does not appear to be the same as that of a College Director. Aside from
the obvious disparity in name, the By-Laws of LDCU provides for only
one College Director. But as shown by LDCU itself, numerous persons
have been appointed as Deans. They could not be the College Director
contemplated by the By-Laws inasmuch as the By-Laws authorize only
the appointment of one not many. If it is indeed the intention of LDCU to
give its many Deans the rank of College Director, then it exceeded the
authority given to it by its By-Laws because only one College Director is
authorized to be appointed. It must amend its By-Laws. Prior to such an
amendment, the office of College Dean is not a corporate office. Another
telling sign that a College Director is not the same as a Dean is the
manner of appointment. A College Director is directly appointed by the
Board of Directors. However, a College Dean is appointed by the
President upon the recommendation of the Vice President for Academic
Affairs and the Executive Vice President and approval of the Board of
Directors. There is a clear distinction on the manner of appointment
indicating that the offices are not one and the same. x x x x 21 Supra
note 3. Decision 8 G.R. No. 193857 This shows that it was not the
intention of LDCU to make Dr. Barba a corporate officer as it was stated
in her letter of appointment that the same shall be subject to the
provisions of the Labor Code. Otherwise, the appointment letter should
have stated that her appointment is governed by the Corporation Code.
Thus, We find the arguments in the Supplemental Petition on the matter
of lack of jurisdiction of the Labor Arbiter and the NLRC to be without
merit. Dr. Barba, being a College Dean, was not a corporate officer.22
(Emphasis not ours) The CA further found that no constructive dismissal
occurred nor has petitioner abandoned her work. According to the CA, a
transfer amounts to constructive dismissal when the transfer is
unreasonable, unlikely, inconvenient, impossible, or prejudicial to the
employee or it involves a demotion in rank or a diminution of salary and
other benefits. In the case of petitioner, the CA held that she was never
demoted and her transfer, being a consequence of the closure of the
College of Physical Therapy, was valid. The CA also noted that
petitioner’s appointment as Dean of the College of Physical Therapy was
for a term of three years. Hence, when her appointment as College Dean
was no longer renewed on June 1, 2005 or after her three-year term
had expired, it cannot be said that there was a demotion or that she was
dismissed. Her term as Dean had expired and she can no longer claim to
be entitled to the benefits emanating from such office. On the issue of
alleged lack of jurisdiction, the CA observed that respondent never
raised the issue of jurisdiction before the Labor Arbiter and the NLRC
and respondent even actively participated in the proceedings below.
Hence, respondent is estopped from questioning the jurisdiction of the
labor tribunals. Unsatisfied, both petitioner and respondent sought
reconsideration of the CA decision. Petitioner prayed for the reversal of
the ruling that there was no constructive dismissal. Respondent
meanwhile maintained that the labor tribunals have no jurisdiction over
the case, petitioner being a corporate officer. 22 Id. at 64-66. Decision
9 G.R. No. 193857 On March 29, 2010, the CA issued the assailed
Amended Decision23 setting aside its earlier ruling. This time the CA
held that the position of a College Dean is a corporate office and
therefore the labor tribunals had no jurisdiction over the complaint for
constructive dismissal. The CA noted that petitioner’s appointment as
Dean of the College of Physical Therapy was approved by the
respondent’s board of directors thereby concluding that the position of
a College Dean is a corporate office. Also, the CA held that the College
Director mentioned in respondent’s by-laws is the same as a College
Dean and no one has ever been appointed as College Director. The CA
added that in the Administrative Manual the words “college” and
“department” were used in the same context in the section on the Duties
and Responsibilities of the College Dean, and that there could not have
been any other “head of department” being alluded to in the by-laws but
the college dean. The dispositive portion of the Amended Decision reads:
WHEREFORE, in view of the foregoing, We reconsider Our Decision on
October [22], 2009, and declare that the position of College Dean is a
corporate office of Petitioner [Liceo de Cagayan University], thereby
divesting the Labor Arbiter and the National Labor Relations Commission
of jurisdiction over the instant case. Hence, the Resolutions of the Public
Respondent dated September 25, 2007 and June 30, 2008 as well as
that of the Regional Labor Arbiter dated 29 September 2006 are
VACATED and SET ASIDE as they were rendered by tribunals that had no
jurisdiction over the case. SO ORDERED. 24 Petitioner filed a motion for
reconsideration from the above decision, but her motion was denied by
the CA in its Resolution25 dated September 14, 2010. Hence, petitioner
filed the present petition. Petitioner argues that the CA erred in ruling
that she was a corporate officer and asserts that the CA’s previous
finding that she was respondent’s employee is more in accord with law
and jurisprudence. Petitioner adds that the appellate court erred when
it ruled that the labor tribunals had no jurisdiction over her complaint
for illegal dismissal against respondent. She 23 Supra note 1. 24 Id. at
93. 25 Supra note 2. Decision 10 G.R. No. 193857 faults the CA for
allowing respondent to raise the issue of jurisdiction in a Supplemental
Petition after respondent has actively participated in the proceedings
before the labor tribunals. Petitioner also asserts that the CA erred in
denying her motion for reconsideration from its Amended Decision on
the ground that it is a second motion for reconsideration which is a
prohibited pleading. Lastly, petitioner claims that respondent violated
the rule against forum shopping when it failed to inform the CA of the
pendency of the complaint for breach of contract which it filed against
petitioner before the Regional Trial Court of Misamis Oriental, Branch
23. Respondent, for its part, counters that the petition was filed out of
time and petitioner’s motion for reconsideration from the Amended
Decision was a prohibited pleading since petitioner has already filed a
motion for reconsideration from the original decision of the CA. It is
respondent’s posture that an Amended Decision is not really a new
decision but the appellate court’s own modification of its prior decision.
More importantly, respondent points out that the arguments raised by
petitioner do not justify a reversal of the Amended Decision of the
appellate court. Respondent insists on the correctness of the Amended
Decision and quotes the assailed decision in its entirety. Issue The
decisive issue in the present petition is whether petitioner was an
employee or a corporate officer of respondent university. Resolution of
this issue resolves the question of whether the appellate court was
correct in ruling that the Labor Arbiter and the NLRC had no jurisdiction
over petitioner’s complaint for constructive dismissal against
respondent. Our Ruling We grant the petition. Prefatorily, we first
discuss the procedural matter raised by respondent that the present
petition is filed out of time. Respondent claims that Decision 11 G.R. No.
193857 petitioner’s motion for reconsideration from the Amended
Decision is a second motion for reconsideration which is a prohibited
pleading. Respondent’s assertion, however, is misplaced for it should be
noted that the CA’s Amended Decision totally reversed and set aside its
previous ruling. Section 2, Rule 52 of the 1997 Rules of Civil Procedure,
as amended, provides that no second motion for reconsideration of a
judgment or final resolution by the same party shall be entertained. This
contemplates a situation where a second motion for reconsideration is
filed by the same party assailing the same judgment or final resolution.
Here, the motion for reconsideration of petitioner was filed after the
appellate court rendered an Amended Decision totally reversing and
setting aside its previous ruling. Hence, petitioner is not precluded from
filing another motion for reconsideration from the Amended Decision
which held that the labor tribunals lacked jurisdiction over petitioner’s
complaint for constructive dismissal. The period to file an appeal should
be reckoned not from the denial of her motion for reconsideration of the
original decision, but from the date of petitioner’s receipt of the notice
of denial of her motion for reconsideration from the Amended Decision.
And as petitioner received notice of the denial of her motion for
reconsideration from the Amended Decision on September 23, 2010 and
filed her petition on November 8, 2010, or within the extension period
granted by the Court to file the petition, her petition was filed on time.
Now on the main issue. As a general rule, only questions of law may be
allowed in a petition for review on certiorari. 26 Considering, however,
that the CA reversed its earlier decision and made a complete
turnaround from its previous ruling, and consequently set aside both the
findings of the Labor Arbiter and the NLRC for allegedly having been
issued without jurisdiction, it is necessary for the Court to reexamine
the records and resolve the conflicting rulings. 26 Uy v. Centro
Ceramica Corporation, G.R. No. 174631, October 19, 2011, 659 SCRA 604,
614. Decision 12 G.R. No. 193857 After a careful review and examination
of the records, we find that the CA’s previous ruling that petitioner was
respondent’s employee and not a corporate officer is supported by the
totality of the evidence and more in accord with law and prevailing
jurisprudence. Corporate officers are elected or appointed by the
directors or stockholders, and are those who are given that character
either by the Corporation Code or by the corporation’s by-laws.27
Section 2528 of the Corporation Code enumerates corporate officers as
the president, the secretary, the treasurer and such other officers as
may be provided for in the by-laws. In Matling Industrial and Commercial
Corporation v. Coros, 29 the phrase “such other officers as may be
provided for in the by-laws” has been clarified, thus: Conformably with
Section 25, a position must be expressly mentioned in the By-Laws in
order to be considered as a corporate office. Thus, the creation of an
office pursuant to or under a By-Law enabling provision is not enough to
make a position a corporate office. Guerrea v. Lezama, the first ruling
on the matter, held that the only officers of a corporation were those
given that character either by the Corporation Code or by the By-Laws;
the rest of the corporate officers could be considered only as
employees of subordinate officials. Thus, it was held in Easycall
Communications Phils., Inc. v. King: An “office” is created by the charter
of the corporation and the officer is elected by the directors or
stockholders. On the other hand, an employee occupies no office and
generally is employed not by the action of the directors or stockholders
but by the managing officer of the corporation who also determines the
compensation to be paid to such employee. (Emphasis supplied) 27
Gomez v. PNOC Development and Management Corporation (PDMC), G.R.
No. 174044, November 27, 2009, 606 SCRA 187, 194. 28 SEC. 25.
Corporate officers, quorum. – Immediately after their election, the
directors of a corporation must formally organize by the election of a
president, who shall be a director, a treasurer who may or may not be a
director, a secretary who shall be a resident and citizen of the
Philippines, and such other officers as may be provided for in the by[-
]laws. Any two (2) or more positions may be held concurrently by the
same person, except that no one shall act as president and secretary or
as president and treasurer at the same time. The directors or trustees
and officers to be elected shall perform the duties enjoined on them by
law and the by[-]laws of the corporation. Unless the articles of
incorporation or the by[-]laws provide for a greater majority, a majority
of the number of directors or trustees as fixed in the articles of
incorporation shall constitute a quorum for the transaction of corporate
business, and every decision of at least a majority of the directors or
trustees present at a meeting at which there is a quorum shall be valid
as a corporate act, except for the election of officers which shall
require the vote of a majority of all the members of the board. Directors
or trustees cannot attend or vote by proxy at board meetings. 29 G.R.
No. 157802, October 13, 2010, 633 SCRA 12, 26. Decision 13 G.R. No.
193857 In declaring petitioner a corporate officer, the CA considered
respondent’s by-laws and gave weight to the certifications of
respondent’s secretary attesting to the resolutions of the board of
directors appointing the various academic deans for the School Years
1991-2002 and 2002-2005, including petitioner. However, an assiduous
perusal of these documents does not convince us that petitioner
occupies a corporate office position in respondent university. The
relevant portions of respondent’s by-laws30 are hereby quoted as
follows: Article III The Board of Directors Sec. 3. The Board of Directors
shall appoint a College Director, define his powers and duties, and
determine his compensation; approve or disapprove recommendations
for appointment or dismissal of teachers and employees submitted to it
by the College Director; and exercise other powers and perform such
duties as may be required of it hereafter for the proper functioning of
the school. x x x x Article IV Officers Sec. 1. The officers of the
corporation shall consist of a President, a Vice President, and a
Secretary-Treasurer, who shall be chosen from the directors and by the
directors themselves. They shall be elected annually at the first meeting
of the directors immediately after their election, and shall hold office for
one (1) year and until their successors are elected and qualified. x x x x
Article V Other Appointive Officials Sec. 1. The Liceo de Cagayan shall
have a College Director and such heads of departments as may exist in
the said college whose appointments, compensations, powers and duties
shall be determined by the Board of Directors.31 (Emphasis supplied) On
the other hand, the pertinent portions of the two board resolutions
appointing the various academic deans in the university including
petitioner, read as follows: 30 Rollo, pp. 211-218. 31 Id. at 212-215.
Decision 14 G.R. No. 193857 x x x x RESOLVE, as it is hereby resolved, that
pursuant to Section 3[,] Article III and Section 1[,] Article V of the
Corporation’s By-laws, the various academic deans for the school years
1999-2002 of the University, as recommended by the President of the
Corporation, are hereby appointed, whose names are enumerated
hereunder and their respective colleges and their honoraria are
indicated opposite their names, all of them having a three (3) year term,
to wit: Name and College Honorarium Ma. Mercedes Vivares 2,660.00
Physical Therapy x x x x RESOLVE, as it is hereby resolved, that pursuant
to Section 3[,] Article III and Section 1[,] Article V of the Corporation’s
By-laws, the various academic deans for the school years 2002-2005 of
the University, as recommended by the President of the Corporation,
are hereby appointed, whose names are enumerated hereunder and
their respective colleges and their honoraria are indicated opposite
their names, all of them having a three (3) year term, to wit: Name and
College Honorarium Ma. Mercedes Vivares 2,450.00 Physical Therapy x x
x x 32 In respondent’s by-laws, there are four officers specifically
mentioned, namely, a president, a vice president, a secretary and a
treasurer. In addition, it is provided that there shall be other appointive
officials, a College Director and heads of departments whose
appointments, compensations, powers and duties shall be determined by
the board of directors. It is worthy to note that a College Dean is not
among the corporate officers mentioned in respondent’s by-laws.
Petitioner, being an academic dean, also held an administrative post in
the university but not a corporate office as contemplated by law.
Petitioner was not directly elected nor appointed by the board of
directors to any corporate office but her appointment was merely
approved by the board together with the other academic deans of
respondent university in accordance with the procedure prescribed in
respondent’s Administrative Manual.33 The act of the board of 32 CA
rollo, pp. 191-193. 33 4.2. Academic Deans x x x x Decision 15 G.R. No.
193857 directors in approving the appointment of petitioner as Dean of
the College of Therapy did not make her a corporate officer of the
corporation. Moreover, the CA, in its amended decision erroneously
equated the position of a College Director to that of a College Dean
thereby concluding that petitioner is an officer of respondent. It bears
stressing that the appointive officials mentioned in Article V of
respondent’s by-laws are not corporate officers under the
contemplation of the law. Though the board of directors may create
appointive positions other than the positions of corporate officers, the
persons occupying such positions cannot be deemed as corporate
officers as contemplated by Section 25 of the Corporation Code. On this
point, the SEC Opinion dated November 25, 1993 quoted in the case of
Matling Industrial and Commercial Corporation v. Coros,34 is
instructive: Thus, pursuant to the above provision (Section 25 of the
Corporation Code), whoever are the corporate officers enumerated in
the by-laws are the exclusive Officers of the corporation and the Board
has no power to create other Offices without amending first the
corporate Bylaws. However, the Board may create appointive positions
other than the positions of corporate Officers, but the persons
occupying such positions are not considered as corporate officers
within the meaning of Section 25 of the Corporation Code and are not
empowered to exercise the functions of the corporate Officers, except
those functions lawfully delegated to them. Their functions and duties
are to be determined by the Board of Directors/Trustees. But even
assuming that a College Director may be considered a corporate officer
of respondent, a review of the records as well as the other documents
submitted by the parties fails to persuade that petitioner was the
“College Director” mentioned in the by-laws of respondent. Nowhere in
petitioner’s appointment letter was it stated that petitioner was
designated as the College Director or that petitioner was to assume the
functions and duties of a College Director. Neither can it be inferred in
respondent’s bylaws that a dean of a college is the same as a College
Director of respondent. 4.2.2.1. Appointed by: The President upon the
recommendation of the VPAA and EVP and upon approval of the Board of
Directors for a definite term not to exceed three (3) years and subject
to reappointment. (Rollo, p. 83). 34 Supra note 29 at 27. Decision 16 G.R.
No. 193857 Respondent’s lone surviving incorporating director Yolanda
Rollo even admitted that no College Director has ever been appointed by
respondent. In her affidavit, Yolanda also explained the reason for the
creation of the position of a College Director, to wit: 4. At the time we
signed the By-Laws of the Corporation, we, as directors, did envision to
form only a college of law as that was the main thrust of our president,
the late Atty. Rodolfo N. Pelaez. The original plan then was to have a
“College Director” as the head of the college of law and below him within
the college were heads of departments. The appointments,
remuneration, duties and functions of the “College Director” and the
heads of departments were to be approved by the Board of Directors. x
x x35 Notably, the CA has sufficiently explained why petitioner could not
be considered a College Director in its previous decision. The appellate
court explained: True, the By-Laws of [Liceo de Cagayan University]
provides that there shall be a College Director. This means a College
Director is a corporate officer. However, contrary to the allegation of
petitioner, the position of Dean does not appear to be the same as that
of a College Director. Aside from the obvious disparity in name, the By-
Laws of [Liceo de Cagayan University] provides for only one College
Director. But as shown by [Liceo de Cagayan University] itself,
numerous persons have been appointed as Deans. They could not be the
College Director contemplated by the By-Laws inasmuch as the By-Laws
authorize only the appointment of one not many. If it is indeed the
intention of [Liceo de Cagayan University] to give its many Deans the
rank of College Director, then it exceeded the authority given to it by its
By-Laws because only one College Director is authorized to be
appointed. It must amend its By-Laws. Prior to such amendment, the
office of [the] College Dean is not a corporate office. Another telling sign
that a College Director is not the same as a Dean is the manner of
appointment. A College Director is directly appointed by the Board of
Directors. However, a College Dean is appointed by the President upon
the recommendation of the Vice President for Academic Affairs and the
Executive Vice President and approval of the Board of Directors. There
is a clear distinction on the manner of appointment indicating that the
offices are not one and the same.36 (Additional emphasis supplied)
Undoubtedly, petitioner is not a College Director and she is not a
corporate officer but an employee of respondent. Applying the four-fold
test 35 CA rollo, p. 195. 36 Rollo, p. 65. Decision 17 G.R. No. 193857
concerning (1) the selection and engagement of the employee; (2) the
payment of wages; (3) the power of dismissal; (4) the employer’s power
to control the employee with respect to the means and methods by
which the work is to be accomplished, it is clear that there exists an
employer-employee relationship between petitioner and respondent.
Records show that petitioner was appointed to her position as Dean by
Dr. Golez, the university president and was paid a salary of P32,500 plus
transportation allowance. It was evident that respondent had the power
of control over petitioner as one of its deans. It was also the university
president who informed petitioner that her services as Dean of the
College of Physical Therapy was terminated effective March 31, 2005
and she was subsequently directed to report to the Acting Dean of the
College of Nursing for assignment of teaching load. Thus, petitioner,
being an employee of respondent, her complaint for illegal/constructive
dismissal against respondent was properly within the jurisdiction of the
Labor Arbiter and the NLRC. Article 217 of the Labor Code provides: ART.
217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as
otherwise provided under this Code, the Arbiters shall have original and
exclusive jurisdiction to hear and decide xxx the following cases
involving all workers, whether agricultural or nonagricultural: 1. Unfair
labor practice cases; 2. Termination disputes; 3. If accompanied with a
claim for reinstatement, those cases that workers may file involving
wage, rates of pay, hours of work and other terms and conditions of
employment; 4. Claims for actual, moral, exemplary and other forms of
damages arising from the employer-employee relations; 5. Cases
arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts; and 6. Except claims for
Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims arising from employeremployee relations,
including those of persons in domestic or household service, involving
an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement. (b) The
Commission shall have exclusive appellate jurisdiction over all cases
decided by Labor Arbiters. x x x x Decision 18 G.R. No. 193857 Moreover,
we agree with the CA’s earlier pronouncement that since respondent
actively participated in the proceedings before the Labor Arbiter and the
NLRC, it is already estopped from belatedly raising the issue of lack of
jurisdiction. In this case, respondent filed position papers and other
supporting documents to bolster its defense before the labor tribunals
but in all these pleadings, the issue of lack of jurisdiction was never
raised. It was only in its Supplemental Petition filed before the CA that
respondent first brought the issue of lack of jurisdiction. We have
consistently held that while jurisdiction may be assailed at any stage, a
party’s active participation in the proceedings will estop such party
from assailing its jurisdiction. It is an undesirable practice of a party
participating in the proceedings and submitting his case for decision and
then accepting the judgment, only if favorable, and attacking it for lack
of jurisdiction, when adverse.37 Under Section 6, Rule 10 of the 1997
Rules of Civil Procedure, as amended, governing supplemental pleadings,
the court “may” admit supplemental pleadings, such as the supplemental
petition filed by respondent before the appellate court, but the
admission of these pleadings remains in the sound discretion of the
court. Nevertheless, we have already found no credence in respondent’s
claim that petitioner is a corporate officer, consequently, the alleged
lack of jurisdiction asserted by respondent in the supplemental petition
is bereft of merit. On the issue of constructive dismissal, we agree with
the Labor Arbiter and the appellate court’s earlier ruling that petitioner
was not constructively dismissed. Petitioner’s letter of appointment
specifically appointed her as Dean of the College of Physical Therapy and
Doctor-inCharge of the Rehabilitation Clinic “for a period of three years
effective July 1, 2002 unless sooner revoked for valid cause or causes.”
Evidently, petitioner’s appointment as College Dean was for a fixed term,
subject to reappointment and revocation or termination for a valid
cause. When respondent decided to close its College of Physical Therapy
due to drastic 37 Philippine Veterans Bank v. National Labor Relations
Commission (Fourth Division), G.R. No. 188882, March 30, 2010, 617 SCRA
204, 211. Decision 19 G.R. No. 193857 decrease in enrollees, petitioner’s
appointment as its College Dean was validly revoked and her subsequent
assignment to teach in the College of Nursing was justified as it is still
related to her scholarship studies in Physical Therapy. As we observed
in Brent School, Inc. v. Zamora, 38 also cited by the CA, it is common
practice in educational institutions to have fixed-term contracts in
administrative positions, thus: Some familiar examples may be cited of
employment contracts which may be neither for seasonal work nor for
specific projects, but to which a fixed term is an essential and natural
appurtenance: overseas employment contracts, for one, to which,
whatever the nature of the engagement, the concept of regular
employment with all that it implies does not appear ever to have been
applied, Article 280 of the Labor Code notwithstanding; also
appointments to the positions of dean, assistant dean, college secretary,
principal, and other administrative offices in educational institutions,
which are by practice or tradition rotated among the faculty members,
and where fixed terms are a necessity without which no reasonable
rotation would be possible. x x x (Emphasis supplied) In constructive
dismissal cases, the employer has the burden of proving that its
conduct and action or the transfer of an employee are for valid and
legitimate grounds such as genuine business necessity.39 Particularly,
for a transfer not to be considered a constructive dismissal, the
employer must be able to show that such transfer is not unreasonable,
inconvenient, or prejudicial to the employee. In this case, petitioner’s
transfer was not unreasonable, inconvenient or prejudicial to her. On
the contrary, the assignment of a teaching load in the College of Nursing
was undertaken by respondent to accommodate petitioner following the
closure of the College of Physical Therapy. Respondent further
considered the fact that petitioner still has two years to serve the
university under the Scholarship Contract. Petitioner’s subsequent
transfer to another department or college is not tantamount to
demotion as it was a valid transfer. There is therefore no 38 G.R. No.
48494, February 5, 1990, 181 SCRA 702, 714. 39 See Julie’s Bakeshop v.
Arnaiz, G.R. No. 173882, February 15, 2012, 666 SCRA 101, 115. Decision 20
G.R. No. 193857 constructive dismissal to speak of. That petitioner
ceased to enjoy the compensation, privileges and benefits as College
Dean was but a logical consequence of the valid revocation or
termination of such fixed-term position. Indeed, it would be absurd and
unjust for respondent to maintain a deanship position in a college or
department that has ceased to exist. Under the circumstances, giving
petitioner a teaching load in another College/Department that is related
to Physical Therapy -- thus enabling her to serve and complete her
remaining two years under the Scholarship Contract -- is a valid
exercise of management prerogative on the part of respondent. Lastly,
as to whether respondent was guilty of forum shopping when it failed to
inform the appellate court of the pendency of Civil Case No. 2009- 320,
a complaint for breach of contract filed by respondent against
petitioner, we rule in the negative. Forum shopping exists when the
elements of litis pendentia are present or where a final judgment in one
case will amount to res judicata in another. Litis pendentia requires the
concurrence of the following requisites: (1) identity of parties, or at least
such parties as those representing the same interests in both actions;
(2) identity of rights asserted and reliefs prayed for, the reliefs being
founded on the same facts; and (3) identity with respect to the two
preceding particulars in the two cases, such that any judgment that may
be rendered in the pending case, regardless of which party is
successful, would amount to res judicata in the other case.40 While
there is identity of parties in the two cases, the causes of action and the
reliefs sought are different. The issue raised in the present case is
whether there was constructive dismissal committed by respondent. On
the other hand, the issue in the civil case pending before the RTC is
whether petitioner was guilty of breach of contract. Hence, respondent
is not guilty of forum shopping. 40 Yu v. Lim, G.R. No. 182291, September
22, 2010, 631 SCRA 172, 184. Decision 21 G.R. No. 193857 WHEREFORE, the
petition for review on certiorari is GRANTED. The Amended Decision
dated March 29, 2010 and Resolution dated September 14, 2010 of the
Court of Appeals in CA-G.R. SP No. 02508-MIN are hereby SET ASIDE. The
earlier Decision dated October 22, 2009 of the Court of Appeals in said
case is REINSTATED and UPHELD.
G.R. No. 154096 August 22, 2008
IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and
JOSE G. RESLIN,petitioners,
vs.
COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA
BENEDICTO-PAULINO,respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to
nullify the Decision1 dated October 17, 2001 of the Court of Appeals (CA)
in CA-G.R. SP No. 64246 and its Resolution2 of June 20, 2002 denying
petitioners' motion for reconsideration. The assailed CA decision
annulled and set aside the Orders dated October 9, 2000, December 18,
2000, and March 15, 2001 of the Regional Trial Court (RTC), Branch 17 in
Batac, Ilocos Norte which admitted petitioners' amended complaint in
Civil Case Nos. 3341-17 and 3342-17.
The Facts
Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now
deceased, and his business associates (Benedicto Group) organized Far
East Managers and Investors, Inc. (FEMII) and Universal Equity
Corporation (UEC), respectively. As petitioner Irene Marcos-Araneta
would later allege, both corporations were organized pursuant to a
contract or arrangement whereby Benedicto, as trustor, placed in his
name and in the name of his associates, as trustees, the shares of
stocks of FEMII and UEC with the obligation to hold those shares and
their fruits in trust and for the benefit of Irene to the extent of 65% of
such shares. Several years after, Irene, through her trustee-husband,
Gregorio Ma. Araneta III, demanded the reconveyance of said 65%
stockholdings, but the Benedicto Group refused to oblige.
In March 2000, Irene thereupon instituted before the RTC two similar
complaints for conveyance of shares of stock, accounting and
receivership against the Benedicto Group with prayer for the issuance
of a temporary restraining order (TRO). The first, docketed as Civil Case
No. 3341-17, covered the UEC shares and named Benedicto, his daughter,
and at least 20 other individuals as defendants. The second, docketed as
Civil Case No. 3342-17, sought the recovery to the extent of 65% of
FEMII shares held by Benedicto and the other defendants named therein.
Respondent Francisca Benedicto-Paulino,3 Benedicto's daughter, filed a
Motion to Dismiss Civil Case No. 3341-17, followed later by an Amended
Motion to Dismiss. Benedicto, on the other hand, moved to dismiss 4 Civil
Case No. 3342-17, adopting in toto the five (5) grounds raised by
Francisca in her amended motion to dismiss. Among these were: (1) the
cases involved an intra-corporate dispute over which the Securities and
Exchange Commission, not the RTC, has jurisdiction; (2) venue was
improperly laid; and (3) the complaint failed to state a cause of action,
as there was no allegation therein that plaintiff, as beneficiary of the
purported trust, has accepted the trust created in her favor.
To the motions to dismiss, Irene filed a Consolidated Opposition, which
Benedicto and Francisca countered with a Joint Reply to Opposition.
Upon Benedicto's motion, both cases were consolidated.
During the preliminary proceedings on their motions to dismiss,
Benedicto and Francisca, by way of bolstering their contentions on
improper venue, presented the Joint Affidavit5 of Gilmia B. Valdez,
Catalino A. Bactat, and Conchita R. Rasco who all attested being
employed as household staff at the Marcos' Mansion in Brgy. Lacub,
Batac, Ilocos Norte and that Irene did not maintain residence in said
place as she in fact only visited the mansion twice in 1999; that she did
not vote in Batac in the 1998 national elections; and that she was staying
at her husband's house in Makati City.
Against the aforesaid unrebutted joint affidavit, Irene presented her PhP
5 community tax certificate6(CTC) issued on "11/07/99" in Curimao,
Ilocos Norte to support her claimed residency in Batac, Ilocos Norte.
In the meantime, on May 15, 2000, Benedicto died and was substituted by
his wife, Julita C. Benedicto, and Francisca.
On June 29, 2000, the RTC dismissed both complaints, stating that these
partly constituted "real action," and that Irene did not actually reside in
Ilocos Norte, and, therefore, venue was improperly laid. In its dismissal
order,7 the court also declared "all the other issues raised in the
different Motions to Dismiss x x x moot and academic."
From the above order, Irene interposed a Motion for
Reconsideration8 which Julita and Francisca duly opposed.
Pending resolution of her motion for reconsideration, Irene filed on July
17, 2000 a Motion (to Admit Amended Complaint),9 attaching therewith a
copy of the Amended Complaint10 dated July 14, 2000 in which the names
of Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin appeared as
additional plaintiffs. As stated in the amended complaint, the added
plaintiffs, all from Ilocos Norte, were Irene's new trustees.
Parenthetically, the amended complaint stated practically the same
cause of action but, as couched, sought the reconveyance of the FEMII
shares only.
During the August 25, 2000 hearing, the RTC dictated in open court an
order denying Irene's motion for reconsideration aforementioned, but
deferred action on her motion to admit amended complaint and the
opposition thereto.11
On October 9, 2000, the RTC issued an Order12 entertaining the amended
complaint, dispositively stating:
WHEREFORE, the admission of the Amended Complaint being tenable and
legal, the same is GRANTED.
Let copies of the Amended Complaint be served to the defendants who
are ordered to answer within the reglementary period provided by the
rules.
The RTC predicated its order on the following premises:
(1) Pursuant to Section 2, Rule 10 of the Rules of Court,13 Irene may opt
to file, as a matter of right, an amended complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an
Ilocos Norte resident, in the amended complaint setting out the same
cause of action cured the defect of improper venue.
(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing
of the amended complaint in question in the place of residence of any of
Irene's co-plaintiffs.
In time, Julita and Francisca moved to dismiss the amended complaint,
but the RTC, by Order14dated December 18, 2000, denied the motion and
reiterated its directive for the two to answer the amended complaint.
In said order, the RTC stood pat on its holding on the rule on
amendments of pleadings. And scoffing at the argument about there
being no complaint to amend in the first place as of October 9, 2000
(when the RTC granted the motion to amend) as the original complaints
were dismissed with finality earlier, i.e., on August 25, 2000 when the
court denied Irene's motion for reconsideration of the June 29, 2000
order dismissing the original complaints, the court stated thusly: there
was actually no need to act on Irene's motion to admit, it being her right
as plaintiff to amend her complaints absent any responsive pleading
thereto. Pushing its point, the RTC added the observation that the filing
of the amended complaint on July 17, 2000 ipso facto superseded the
original complaints, the dismissal of which, per the June 29, 2000
Order, had not yet become final at the time of the filing of the amended
complaint.
Following the denial on March 15, 2001 of their motion for the RTC to
reconsider its December 18, 2000 order aforestated, Julita and
Francisca, in a bid to evade being declared in default, filed on April 10,
2001 their Answer to the amended complaint. 15 But on the same day, they
went to the CA via a petition for certiorari, docketed as CA-G.R. SP No.
64246, seeking to nullify the following RTC orders: the first, admitting
the amended complaint; the second, denying their motion to dismiss the
amended complaint; and the third, denying their motion for
reconsideration of the second issuance.
Inasmuch as the verification portion of the joint petition and the
certification on non-forum shopping bore only Francisca's signature, the
CA required the joint petitioners "to submit x x x either the written
authority of Julita C. Benedicto to Francisca B. Paulino authorizing the
latter to represent her in these proceedings, or a supplemental
verification and certification duly signed by x x x Julita C.
Benedicto."16 Records show the submission of the corresponding
authorizing Affidavit17 executed by Julita in favor of Francisca.
Later developments saw the CA issuing a TRO18 and then a writ of
preliminary injunction19 enjoining the RTC from conducting further
proceedings on the subject civil cases.
On October 17, 2001, the CA rendered a Decision, setting aside the
assailed RTC orders and dismissing the amended complaints in Civil
Case Nos. 3341-17 and 3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby
GRANTED. The assailed Orders admitting the amended complaints are
SET ASIDE for being null and void, and the amended complaints a
quo are, accordingly, DISMISSED.20
Irene and her new trustees' motion for reconsideration of the assailed
decision was denied through the equally assailed June 20, 2002 CA
Resolution. Hence, this petition for review is before us.
The Issues
Petitioners urge the setting aside and annulment of the assailed CA
decision and resolution on the following submissions that the appellate
court erred in: (1) allowing the submission of an affidavit by Julita as
sufficient compliance with the requirement on verification and
certification of non-forum shopping; (2) ruling on the merits of the trust
issue which involves factual and evidentiary determination, processes
not proper in a petition for certiorari under Rule 65 of the Rules of
Court; (3) ruling that the amended complaints in the lower court should
be dismissed because, at the time it was filed, there was no more
original complaint to amend; (4) ruling that the respondents did not
waive improper venue; and (5) ruling that petitioner Irene was not a
resident of Batac, Ilocos Norte and that none of the principal parties are
residents of Ilocos Norte.21
The Court's Ruling
We affirm, but not for all the reasons set out in, the CA's decision.
First Issue: Substantial Compliance with the Rule
on Verification and Certification of Non-Forum Shopping
Petitioners tag private respondents' petition in CA-G.R. SP No. 64246 as
defective for non-compliance with the requirements of Secs. 422 and
523 of Rule 7 of the Rules of Court at least with regard to Julita, who
failed to sign the verification and certification of non-forum shopping.
Petitioners thus fault the appellate court for directing Julita's counsel to
submit a written authority for Francisca to represent Julita in the
certiorari proceedings.
We are not persuaded.
Verification not Jurisdictional; May be Corrected
Verification is, under the Rules, not a jurisdictional but merely a formal
requirement which the court may motu proprio direct a party to comply
with or correct, as the case may be. As the Court articulated in Kimberly
Independent Labor Union for Solidarity, Activism and Nationalism
(KILUSAN)-Organized Labor Associations in Line Industries and
Agriculture (OLALIA) v. Court of Appeals:
V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the
allegations therein made are done in good faith or are true and correct and not mere speculation. The Court may
order the correction of the pleading, if not verified, or act on the unverified pleading if the attending
circumstances are such that a strict compliance with the rule may be dispensed with in order that the ends of
justice may be served.24
Given this consideration, the CA acted within its sound discretion in
ordering the submission of proof of Francisca's authority to sign on
Julita's behalf and represent her in the proceedings before the appellate
court.
Signature by Any of the Principal Petitioners is Substantial
Compliance
Regarding the certificate of non-forum shopping, the general rule is that
all the petitioners or plaintiffs in a case should sign it.25 However, the
Court has time and again stressed that the rules on forum shopping,
which were designed to promote the orderly administration of justice,
do not interdict substantial compliance with its provisions under
justifiable circumstances.26 As has been ruled by the Court, the
signature of any of the principal petitioners27 or principal parties,28 as
Francisca is in this case, would constitute a substantial compliance with
the rule on verification and certification of non-forum shopping. It
cannot be overemphasized that Francisca herself was a principal party
in Civil Case No. 3341-17 before the RTC and in the certiorari
proceedings before the CA. Besides being an heir of Benedicto,
Francisca, with her mother, Julita, was substituted for Benedicto in the
instant case after his demise.
And should there exist a commonality of interest among the parties, or
where the parties filed the case as a "collective," raising only one
common cause of action or presenting a common defense, then the
signature of one of the petitioners or complainants, acting as
representative, is sufficient compliance. We said so in Cavile v. Heirs of
Clarita Cavile.29 Like Thomas Cavile, Sr. and the other petitioners in
Cavile, Francisca and Julita, as petitioners before the CA, had filed their
petition as a collective, sharing a common interest and having a
common single defense to protect their rights over the shares of stocks
in question.
Second Issue: Merits of the Case cannot be Resolved
on Certiorari under Rule 65
Petitioners' posture on the second issue is correct. As they aptly
pointed out, the CA, in the exercise of its certiorari jurisdiction under
Rule 65, is limited to reviewing and correcting errors of jurisdiction
only. It cannot validly delve into the issue of trust which, under the
premises, cannot be judiciously resolved without first establishing
certain facts based on evidence.
Whether a determinative question is one of law or of fact depends on the
nature of the dispute. A question of law exists when the doubt or
controversy concerns the correct application of law or jurisprudence to
a certain given set of facts; or when the issue does not call for an
examination of the probative value of the evidence presented, the truth
or falsehood of facts being admitted. A question of fact obtains when the
doubt or difference arises as to the truth or falsehood of facts or when
the query invites the calibration of the whole evidence considering
mainly the credibility of the witnesses, the existence and relevancy of
specific surrounding circumstances, as well as their relation to each
other and to the whole, and the probability of the situation. 30
Clearly then, the CA overstepped its boundaries when, in disposing of
private respondents' petition for certiorari, it did not confine itself to
determining whether or not lack of jurisdiction or grave abuse of
discretion tainted the issuance of the assailed RTC orders, but
proceeded to pass on the factual issue of the existence and
enforceability of the asserted trust. In the process, the CA virtually
resolved petitioner Irene's case for reconveyance on its substantive
merits even before evidence on the matter could be adduced. Civil Case
Nos. 3341-17 and 3342-17 in fact have not even reached the pre-trial
stage. To stress, the nature of the trust allegedly constituted in Irene's
favor and its enforceability, being evidentiary in nature, are best
determined by the trial court. The original complaints and the amended
complaint certainly do not even clearly indicate whether the asserted
trust is implied or express. To be sure, an express trust differs from the
implied variety in terms of the manner of proving its existence. 31 Surely,
the onus of factually determining whether the trust allegedly established
in favor of Irene, if one was indeed established, was implied or express
properly pertains, at the first instance, to the trial court and not to the
appellate court in a special civil action for certiorari, as here. In the
absence of evidence to prove or disprove the constitution and
necessarily the existence of the trust agreement between Irene, on one
hand, and the Benedicto Group, on the other, the appellate court cannot
intelligently pass upon the issue of trust. A pronouncement on said issue
of trust rooted on speculation and conjecture, if properly challenged,
must be struck down. So it must be here.
Third Issue: Admission of Amended Complaint Proper
As may be recalled, the CA veritably declared as reversibly erroneous
the admission of the amended complaint. The flaw in the RTC's act of
admitting the amended complaint lies, so the CA held, in the fact that the
filing of the amended complaint on July 17, 2000 came after the RTC had
ordered with finality the dismissal of the original complaints. According
to petitioners, scoring the CA for its declaration adverted to and
debunking its posture on the finality of the said RTC order, the CA failed
to take stock of their motion for reconsideration of the said dismissal
order.
We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of
the Rules of Court which provides:
SEC. 2. Amendments as a matter of right. -- A party may amend his
pleading once as a matter of right at any time before a responsive
pleading is served or in the case of a reply, at any time within ten (10)
days after it is served.
As the aforequoted provision makes it abundantly clear that the plaintiff
may amend his complaint once as a matter of right, i.e., without leave of
court, before any responsive pleading is filed or served. Responsive
pleadings are those which seek affirmative relief and/or set up
defenses,32 like an answer. A motion to dismiss is not a responsive
pleading for purposes of Sec. 2 of Rule 10. 33Assayed against the
foregoing perspective, the RTC did not err in admitting petitioners'
amended complaint, Julita and Francisca not having yet answered the
original complaints when the amended complaint was filed. At that
precise moment, Irene, by force of said Sec. 2 of Rule 10, had, as a
matter of right, the option of amending her underlying reconveyance
complaints. As aptly observed by the RTC, Irene's motion to admit
amended complaint was not even necessary. The Court notes though
that the RTC has not offered an explanation why it saw fit to grant the
motion to admit in the first place.
In Alpine Lending Investors v. Corpuz, the Court, expounding on the
propriety of admitting an amended complaint before a responsive
pleading is filed, wrote:
W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled is the rule
that a motion to dismiss is not a responsive pleading for purposes of Section 2, Rule 10. As no responsive pleading
had been filed, respondent could amend her complaint in Civil Case No. C-20124 as a matter of right. Following
this Court's ruling in Breslin v. Luzon Stevedoring Co. considering that respondent has the right to amend her
complaint, it is the correlative duty of the trial court to accept the amended complaint; otherwise, mandamus
would lie against it. In other words, the trial court's duty to admit the amended complaint was purely ministerial.
In fact, respondent should not have filed a motion to admit her amended complaint.34
It may be argued that the original complaints had been dismissed
through the June 29, 2000 RTC order. It should be pointed out, however,
that the finality of such dismissal order had not set in when Irene filed
the amended complaint on July 17, 2000, she having meanwhile
seasonably sought reconsideration thereof. Irene's motion for
reconsideration was only resolved on August 25, 2000. Thus, when Irene
filed the amended complaint on July 17, 2000, the order of dismissal was
not yet final, implying that there was strictly no legal impediment to her
amending her original complaints.35
Fourth Issue: Private Respondents did not Waive Improper Venue
Petitioners maintain that Julita and Francisca were effectively
precluded from raising the matter of improper venue by their
subsequent acts of filing numerous pleadings. To petitioners, these
pleadings, taken together, signify a waiver of private respondents' initial
objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially
concerns a rule of procedure which, in personal actions, is fixed for the
greatest convenience possible of the plaintiff and his witnesses. The
ground of improperly laid venue must be raised seasonably, else it is
deemed waived. Where the defendant failed to either file a motion to
dismiss on the ground of improper venue or include the same as an
affirmative defense, he is deemed to have waived his right to object to
improper venue.36 In the case at bench, Benedicto and Francisca raised
at the earliest time possible, meaning "within the time for but before
filing the answer to the complaint,"37 the matter of improper venue. They
would thereafter reiterate and pursue their objection on venue, first, in
their answer to the amended complaints and then in their petition for
certiorari before the CA. Any suggestion, therefore, that Francisca and
Benedicto or his substitutes abandoned along the way improper venue
as ground to defeat Irene's claim before the RTC has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction
on the Ground of Improper Venue
Subject Civil Cases are Personal Actions
It is the posture of Julita and Francisca that the venue was in this case
improperly laid since the suit in question partakes of a real action
involving real properties located outside the territorial jurisdiction of
the RTC in Batac.
This contention is not well-taken. In a personal action, the plaintiff seeks
the recovery of personal property, the enforcement of a contract, or
the recovery of damages.38 Real actions, on the other hand, are those
affecting title to or possession of real property, or interest therein. In
accordance with the wordings of Sec. 1 of Rule 4, the venue of real
actions shall be the proper court which has territorial jurisdiction over
the area wherein the real property involved, or a portion thereof, is
situated. The venue of personal actions is the court where the plaintiff
or any of the principal plaintiffs resides, or where the defendant or any
of the principal defendants resides, or in the case of a non-resident
defendant where he may be found, at the election of the plaintiff. 39
In the instant case, petitioners are basically asking Benedicto and his
Group, as defendants a quo, to acknowledge holding in trust Irene's
purported 65% stockownership of UEC and FEMII, inclusive of the fruits
of the trust, and to execute in Irene's favor the necessary conveying
deed over the said 65% shareholdings. In other words, Irene seeks to
compel recognition of the trust arrangement she has with the Benedicto
Group. The fact that FEMII's assets include real properties does not
materially change the nature of the action, for the ownership interest of
a stockholder over corporate assets is only inchoate as the corporation,
as a juridical person, solely owns such assets. It is only upon the
liquidation of the corporation that the stockholders, depending on the
type and nature of their stockownership, may have a real inchoate right
over the corporate assets, but then only to the extent of their
stockownership.
The amended complaint is an action in personam, it being a suit against
Francisca and the late Benedicto (now represented by Julita and
Francisca), on the basis of their alleged personal liability to Irene upon
an alleged trust constituted in 1968 and/or 1972. They are not actions in
rem where the actions are against the real properties instead of against
persons.40 We particularly note that possession or title to the real
properties of FEMII and UEC is not being disputed, albeit part of the
assets of the corporation happens to be real properties.
Given the foregoing perspective, we now tackle the determinative
question of venue in the light of the inclusion of additional plaintiffs in
the amended complaint.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4
We point out at the outset that Irene, as categorically and peremptorily
found by the RTC after a hearing, is not a resident of Batac, Ilocos Norte,
as she claimed. The Court perceives no compelling reason to disturb, in
the confines of this case, the factual determination of the trial court and
the premises holding it together. Accordingly, Irene cannot, in a
personal action, contextually opt for Batac as venue of her
reconveyance complaint. As to her, Batac, Ilocos Norte is not what Sec.
2, Rule 4 of the Rules of Court adverts to as the place "where the
plaintiff or any of the principal plaintiffs resides" at the time she filed
her amended complaint. That Irene holds CTC No. 1701945141 issued
sometime in June 2000 in Batac, Ilocos Norte and in which she indicated
her address as Brgy. Lacub, Batac, Ilocos is really of no moment. Let
alone the fact that one can easily secure a basic residence certificate
practically anytime in any Bureau of Internal Revenue or treasurer's
office and dictate whatever relevant data one desires entered, Irene
procured CTC No. 17019451 and appended the same to her motion for
reconsideration following the RTC's pronouncement against her being a
resident of Batac.
Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte
is the proper court venue, asseverate that Batac, Ilocos Norte is where
the principal parties reside.
Pivotal to the resolution of the venue issue is a determination of the
status of Irene's co-plaintiffs in the context of Secs. 2 and 3 of Rule 3 in
relation to Sec. 2 of Rule 4, which pertinently provide as follows:
Rule 3 of Batac, Ilocos Norte. But it ought to be stressed in this regard that not
PARTIES TO CIVIL ACTIONS
SEC. 2. Parties in interest. -- A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the
party entitled to the avails of the suit. Unless otherwise authorized by
law or these Rules, every action must be prosecuted or defended in the
name of the real party in interest.
SEC. 3. Representatives as parties. -- Where the action is allowed to be
prosecuted or defended by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be included in the title of the
case and shall be deemed to be the real party in interest. A
representative may be a trustee of an express trust, a guardian, an
executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when
the contract involves things belonging to the principal.
Rule 4 can have several residences, if such were the established fact. The
VENUE OF ACTIONS
SEC. 2. Venue of personal actions. -- All other actions may be
commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may be
found, at the election of the plaintiff.
Venue is Improperly Laid
There can be no serious dispute that the real party-in-interest plaintiff
is Irene. As self-styled beneficiary of the disputed trust, she stands to
be benefited or entitled to the avails of the present suit. It is undisputed
too that petitioners Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin,
all from Ilocos Norte, were included as co-plaintiffs in the amended
complaint as Irene's new designated trustees. As trustees, they can only
serve as mere representatives of Irene.
Upon the foregoing consideration, the resolution of the crucial issue of
whether or not venue had properly been laid should not be difficult.
Sec. 2 of Rule 4 indicates quite clearly that when there is more than one
plaintiff in a personal action case, the residences of
the principal parties should be the basis for determining proper venue.
According to the late Justice Jose Y. Feria, "the word 'principal' has
been added [in the uniform procedure rule] in order to prevent the
plaintiff from choosing the residence of a minor plaintiff or defendant as
the venue."42 Eliminate the qualifying term "principal" and the purpose of
the Rule would, to borrow from Justice Regalado, "be defeated where a
nominal or formal party is impleaded in the action since the latter would
not have the degree of interest in the subject of the action which would
warrant and entail the desirably active participation expected of
litigants in a case."43
Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene
stands undisputedly as the principal plaintiff, the real party-in-interest.
Following Sec. 2 of Rule 4, the subject civil cases ought to be
commenced and prosecuted at the place where Irene resides.
Principal Plaintiff not a Resident in Venue of Action
As earlier stated, no less than the RTC in Batac declared Irene as not a
resident of Batac, Ilocos Norte. Withal, that court was an improper
venue for her conveyance action.
The Court can concede that Irene's three co-plaintiffs are all residents
one of the three can be considered as principal party-plaintiffs in Civil
Case Nos. 3341-17 and 3342-17, included as they were in the amended
complaint as trustees of the principal plaintiff. As trustees, they may be
accorded, by virtue of Sec. 3 of Rule 3, the right to prosecute a suit, but
only on behalf of the beneficiary who must be included in the title of the
case and shall be deemed to be the real party-in-interest. In the final
analysis, the residences of Irene's co-plaintiffs cannot be made the
basis in determining the venue of the subject suit. This conclusion
becomes all the more forceful considering that Irene herself initiated
and was actively prosecuting her claim against Benedicto, his heirs,
assigns, or associates, virtually rendering the impleading of the
trustees unnecessary.
And this brings us to the final point. Irene was a resident during the
period material of Forbes Park, Makati City. She was not a resident of
Brgy. Lacub, Batac, Ilocos Norte, although jurisprudence44 has it that one
Court will not speculate on the reason why petitioner Irene, for all the
inconvenience and expenses she and her adversaries would have to
endure by a Batac trial, preferred that her case be heard and decided
by the RTC in Batac. On the heels of the dismissal of the original
complaints on the ground of improper venue, three new personalities
were added to the complaint doubtless to insure, but in vain as it turned
out, that the case stays with the RTC in Batac.
Litigants ought to bank on the righteousness of their causes, the
superiority of their cases, and the persuasiveness of arguments to
secure a favorable verdict. It is high time that courts, judges, and those
who come to court for redress keep this ideal in mind.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision
and Resolution dated October 17, 2001 and June 20, 2002, respectively,
of the CA in CA-G.R. SP No. 64246, insofar as they nullified the assailed
orders of the RTC, Branch 17 in Batac, Ilocos Norte in Civil Case Nos.
3341-17 and 3342-17 on the ground of lack of jurisdiction due to
improper venue, are hereby AFFIRMED. The Orders dated October 9,
2000, December 18, 2000, and March 15, 2001 of the RTC in Civil Case
Nos. 3341-17 and 3342-17 are accordingly ANNULLED and SET
ASIDE and said civil cases are DISMISSED.
Costs against petitioners.
G.R. No. 161135. April 8, 2005
SWAGMAN HOTELS AND TRAVEL, INC., Petitioners,
vs.
HON. COURT OF APPEALS, and NEAL B. CHRISTIAN, Respondents.
DECISION
DAVIDE, JR., C.J.:
May a complaint that lacks a cause of action at the time it was filed be
cured by the accrual of a cause of action during the pendency of the
case? This is the basic issue raised in this petition for the Court’s
consideration.
Sometime in 1996 and 1997, petitioner Swagman Hotels and Travel, Inc.,
through Atty. Leonor L. Infante and Rodney David Hegerty, its president
and vice-president, respectively, obtained from private respondent Neal
B. Christian loans evidenced by three promissory notes dated 7 August
1996, 14 March 1997, and 14 July 1997. Each of the promissory notes is in
the amount of US$50,000 payable after three years from its date with
an interest of 15% per annum payable every three months. 1 In a letter
dated 16 December 1998, Christian informed the petitioner corporation
that he was terminating the loans and demanded from the latter
payment in the total amount of US$150,000 plus unpaid interests in the
total amount of US$13,500.2
On 2 February 1999, private respondent Christian filed with the Regional
Trial Court of Baguio City, Branch 59, a complaint for a sum of money
and damages against the petitioner corporation, Hegerty, and Atty.
Infante. The complaint alleged as follows: On 7 August 1996, 14 March
1997, and 14 July 1997, the petitioner, as well as its president and vice-
president obtained loans from him in the total amount of US$150,000
payable after three years, with an interest of 15% per annum payable
quarterly or every three months. For a while, they paid an interest of
15% per annum every three months in accordance with the three
promissory notes. However, starting January 1998 until December 1998,
they paid him only an interest of 6% per annum, instead of 15% per
annum, in violation of the terms of the three promissory notes. Thus,
Christian prayed that the trial court order them to pay him jointly and
solidarily the amount of US$150,000 representing the total amount of
the loans; US$13,500 representing unpaid interests from January 1998
until December 1998; ₱100,000 for moral damages; ₱50,000 for
attorney’s fees; and the cost of the suit.3
The petitioner corporation, together with its president and vice-
president, filed an Answer raising as defenses lack of cause of action
and novation of the principal obligations. According to them, Christian
had no cause of action because the three promissory notes were not yet
due and demandable. In December 1997, since the petitioner corporation
was experiencing huge losses due to the Asian financial crisis, Christian
agreed (a) to waive the interest of 15% per annum, and (b) accept
payments of the principal loans in installment basis, the amount and
period of which would depend on the state of business of the petitioner
corporation. Thus, the petitioner paid Christian capital repayment in the
amount of US$750 per month from January 1998 until the time the
complaint was filed in February 1999. The petitioner and its co-
defendants then prayed that the complaint be dismissed and that
Christian be ordered to pay ₱1 million as moral damages; ₱500,000 as
exemplary damages; and ₱100,000 as attorney’s fees.4
In due course and after hearing, the trial court rendered a decision5 on
5 May 2000 declaring the first two promissory notes dated 7 August
1996 and 14 March 1997 as already due and demandable and that the
interest on the loans had been reduced by the parties from 15% to 6%
per annum. It then ordered the petitioner corporation to pay Christian
the amount of $100,000 representing the principal obligation covered by
the promissory notes dated 7 August 1996 and 14 March 1997, "plus
interest of 6% per month thereon until fully paid, with all interest
payments already paid by the defendant to the plaintiff to be deducted
therefrom."
The trial court ratiocinated in this wise:
(1) There was no novation of defendant’s obligation to the plaintiff. Under
Article 1292 of the Civil Code, there is an implied novation only if the old
and the new obligation be on every point incompatible with one another.
The test of incompatibility between the two obligations or contracts,
according to an imminent author, is whether they can stand together,
each one having an independent existence. If they cannot, they are
incompatible, and the subsequent obligation novates the first (Tolentino,
Civil Code of the Philippines, Vol. IV, 1991 ed., p. 384). Otherwise, the old
obligation will continue to subsist subject to the modifications agreed
upon by the parties. Thus, it has been written that accidental
modifications in an existing obligation do not extinguish it by novation.
Mere modifications of the debt agreed upon between the parties do not
constitute novation. When the changes refer to secondary agreement
and not to the object or principal conditions of the contract, there is no
novation; such changes will produce modifications of incidental facts,
but will not extinguish the original obligation. Thus, the acceptance of
partial payments or a partial remission does not involve novation ( id., p.
387). Neither does the reduction of the amount of an obligation amount
to a novation because it only means a partial remission or condonation
of the same debt.
In the instant case, the Court is of the view that the parties merely
intended to change the rate of interest from 15% per annum to 6% per
annum when the defendant started paying $750 per month which
payments were all accepted by the plaintiff from January 1998 onward.
The payment of the principal obligation, however, remains unaffected
which means that the defendant should still pay the plaintiff $50,000 on
August 9, 1999, March 14, 2000 and July 14, 2000.
(2) When the instant case was filed on February 2, 1999, none of the
promissory notes was due and demandable. As of this date however, the
first and the second promissory notes have already matured. Hence,
payment is already due.
Under Section 5 of Rule 10 of the 1997 Rules of Civil Procedure, a
complaint which states no cause of action may be cured by evidence
presented without objection. Thus, even if the plaintiff had no cause of
action at the time he filed the instant complaint, as defendants’
obligation are not yet due and demandable then, he may nevertheless
recover on the first two promissory notes in view of the introduction of
evidence showing that the obligations covered by the two promissory
notes are now due and demandable.
(3) Individual defendants Rodney Hegerty and Atty. Leonor L. Infante can
not be held personally liable for the obligations contracted by the
defendant corporation it being clear that they merely acted in
representation of the defendant corporation in their capacity as General
Manager and President, respectively, when they signed the promissory
notes as evidenced by Board Resolution No. 1(94) passed by the Board of
Directors of the defendant corporation (Exhibit "4").6
In its decision7 of 5 September 2003, the Court of Appeals denied
petitioner’s appeal and affirmed in toto the decision of the trial court,
holding as follows:
In the case at bench, there is no incompatibility because the changes
referred to by appellant Swagman consist only in the manner of
payment. . . .
Appellant Swagman’s interpretation that the three (3) promissory notes
have been novated by reason of appellee Christian’s acceptance of the
monthly payments of US$750.00 as capital repayments continuously
even after the filing of the instant case is a little bit strained considering
the stiff requirements of the law on novation that the intention to novate
must appear by express agreement of the parties, or by their acts that
are too clear and unequivocal to be mistaken. Under the circumstances,
the more reasonable interpretation of the act of the appellee Christian
in receiving the monthly payments of US$750.00 is that appellee
Christian merely allowed appellant Swagman to pay whatever amount
the latter is capable of. This interpretation is supported by the letter of
demand dated December 16, 1998 wherein appellee Christian demanded
from appellant Swagman to return the principal loan in the amount of
US$150,000 plus unpaid interest in the amount of US$13,500.00
...
Appellant Swagman, likewise, contends that, at the time of the filing of
the complaint, appellee Christian ha[d] no cause of action because none
of the promissory notes was due and demandable.
Again, We are not persuaded.
...
In the case at bench, while it is true that appellant Swagman raised in its
Answer the issue of prematurity in the filing of the complaint, appellant
Swagman nonetheless failed to object to appellee Christian’s
presentation of evidence to the effect that the promissory notes have
become due and demandable.
The afore-quoted rule allows a complaint which states no cause of
action to be cured either by evidence presented without objection or, in
the event of an objection sustained by the court, by an amendment of
the complaint with leave of court (Herrera, Remedial Law, Vol. VII, 1997
ed., p. 108).8
Its motion for reconsideration having been denied by the Court of
Appeals in its Resolution of 4 December 2003,9the petitioner came to
this Court raising the following issues:
I. WHERE THE DECISION OF THE TRIAL COURT DROPPING TWO DEFENDANTS
HAS BECOME FINAL AND EXECUTORY, MAY THE RESPONDENT COURT OF
APPEALS STILL STUBBORNLY CONSIDER THEM AS APPELLANTS WHEN THEY
DID NOT APPEAL?
ii. Where there is no cause of action, is the decision of the lower court
valid?
III. MAY THE RESPONDENT COURT OF APPEALS VALIDLY AFFIRM A DECISION
OF THE LOWER COURT WHICH IS INVALID DUE TO LACK OF CAUSE OF
ACTION?
IV. Where there is a valid novation, may the original terms of contract
which has been novated still prevail?10
The petitioner harps on the absence of a cause of action at the time the
private respondent’s complaint was filed with the trial court. In
connection with this, the petitioner raises the issue of novation by
arguing that its obligations under the three promissory notes were
novated by the renegotiation that happened in December 1997 wherein
the private respondent agreed to waive the interest in each of the three
promissory notes and to accept US$750 per month as installment
payment for the principal loans in the total amount of US$150,000.
Lastly, the petitioner questions the act of the Court of Appeals in
considering Hegerty and Infante as appellants when they no longer
appealed because the trial court had already absolved them of the
liability of the petitioner corporation.
On the other hand, the private respondent asserts that this petition is "a
mere ploy to continue delaying the payment of a just obligation." Anent
the fact that Hegerty and Atty. Infante were considered by the Court of
Appeals as appellants, the private respondent finds it immaterial
because they are not affected by the assailed decision anyway.
Cause of action, as defined in Section 2, Rule 2 of the 1997 Rules of Civil
Procedure, is the act or omission by which a party violates the right of
another. Its essential elements are as follows:
1. A right in favor of the plaintiff by whatever means and under whatever
law it arises or is created;
2. An obligation on the part of the named defendant to respect or not to
violate such right; and
3. Act or omission on the part of such defendant in violation of the right
of the plaintiff or constituting a breach of the obligation of the defendant
to the plaintiff for which the latter may maintain an action for recovery
of damages or other appropriate relief. 11
It is, thus, only upon the occurrence of the last element that a cause of
action arises, giving the plaintiff the right to maintain an action in court
for recovery of damages or other appropriate relief.
It is undisputed that the three promissory notes were for the amount of
P50,000 each and uniformly provided for (1) a term of three years; (2)
an interest of 15 % per annum, payable quarterly; and (3) the repayment
of the principal loans after three years from their respective dates.
However, both the Court of Appeals and the trial court found that a
renegotiation of the three promissory notes indeed happened in
December 1997 between the private respondent and the petitioner
resulting in the reduction – not waiver – of the interest from 15% to 6%
per annum, which from then on was payable monthly, instead of
quarterly. The term of the principal loans remained unchanged in that
they were still due three years from the respective dates of the
promissory notes. Thus, at the time the complaint was filed with the trial
court on 2 February 1999, none of the three promissory notes was due
yet; although, two of the promissory notes with the due dates of 7
August 1999 and 14 March 2000 matured during the pendency of the
case with the trial court. Both courts also found that the petitioner had
been religiously paying the private respondent US$750 per month from
January 1998 and even during the pendency of the case before the trial
court and that the private respondent had accepted all these monthly
payments.
With these findings of facts, it has become glaringly obvious that when
the complaint for a sum of money and damages was filed with the trial
court on 2 February 1999, no cause of action has as yet existed because
the petitioner had not committed any act in violation of the terms of the
three promissory notes as modified by the renegotiation in December
1997. Without a cause of action, the private respondent had no right to
maintain an action in court, and the trial court should have therefore
dismissed his complaint.
Despite its finding that the petitioner corporation did not violate the
modified terms of the three promissory notes and that the payment of
the principal loans were not yet due when the complaint was filed, the
trial court did not dismiss the complaint, citing Section 5, Rule 10 of the
1997 Rules of Civil Procedure, which reads:
Section 5. Amendment to conform to or authorize presentation of
evidence. — When issues not raised by the pleadings are tried with the
express or implied consent of the parties, they shall be treated in all
respects as if they had been raised in the pleadings. Such amendment of
the pleadings as may be necessary to cause them to conform to the
evidence and to raise these issues may be made upon motion of any
party at any time, even after judgment; but failure to amend does not
affect the result of the trial of these issues. If evidence is objected to at
the trial on the ground that it is not within the issues made by the
pleadings, the court may allow the pleadings to be amended and shall do
so with liberality if the presentation of the merits of the action and the
ends of substantial justice will be subserved thereby. The court may
grant a continuance to enable the amendment to be made.
According to the trial court, and sustained by the Court of Appeals, this
Section allows a complaint that does not state a cause of action to be
cured by evidence presented without objection during the trial. Thus, it
ruled that even if the private respondent had no cause of action when he
filed the complaint for a sum of money and damages because none of
the three promissory notes was due yet, he could nevertheless recover
on the first two promissory notes dated 7 August 1996 and 14 March
1997, which became due during the pendency of the case in view of the
introduction of evidence of their maturity during the trial.
Such interpretation of Section 5, Rule 10 of the 1997 Rules of Civil
Procedure is erroneous.
Amendments of pleadings are allowed under Rule 10 of the 1997 Rules of
Civil Procedure in order that the actual merits of a case may be
determined in the most expeditious and inexpensive manner without
regard to technicalities, and that all other matters included in the case
may be determined in a single proceeding, thereby avoiding multiplicity
of suits.12 Section 5 thereof applies to situations wherein evidence not
within the issues raised in the pleadings is presented by the parties
during the trial, and to conform to such evidence the pleadings are
subsequently amended on motion of a party. Thus, a complaint which
fails to state a cause of action may be cured by evidence presented
during the trial.
However, the curing effect under Section 5 is applicable only if a cause
of action in fact exists at the time the complaint is filed, but the
complaint is defective for failure to allege the essential facts . For
example, if a complaint failed to allege the fulfillment of a condition
precedent upon which the cause of action depends, evidence showing
that such condition had already been fulfilled when the complaint was
filed may be presented during the trial, and the complaint may
accordingly be amended thereafter. 13 Thus, in Roces v. Jalandoni,14 this
Court upheld the trial court in taking cognizance of an otherwise
defective complaint which was later cured by the testimony of the
plaintiff during the trial. In that case, there was in fact a cause of action
and the only problem was the insufficiency of the allegations in the
complaint. This ruling was reiterated in Pascua v. Court of Appeals.15
It thus follows that a complaint whose cause of action has not yet
accrued cannot be cured or remedied by an amended or supplemental
pleading alleging the existence or accrual of a cause of action while the
case is pending.16 Such an action is prematurely brought and is,
therefore, a groundless suit, which should be dismissed by the court
upon proper motion seasonably filed by the defendant. The underlying
reason for this rule is that a person should not be summoned before the
public tribunals to answer for complaints which are immature. As this
Court eloquently said in Surigao Mine Exploration Co., Inc. v. Harris :17
It is a rule of law to which there is, perhaps, no exception, either at law
or in equity, that to recover at all there must be some cause of action
at the commencement of the suit. As observed by counsel for
appellees, there are reasons of public policy why there should be no
needless haste in bringing up litigation, and why people who are in no
default and against whom there is yet no cause of action should not be
summoned before the public tribunals to answer complaints which are
groundless. We say groundless because if the action is immature, it
should not be entertained, and an action prematurely brought is a
groundless suit.
It is true that an amended complaint and the answer thereto take the
place of the originals which are thereby regarded as abandoned (Reynes
vs. Compañía General de Tabacos [1912], 21 Phil. 416; Ruyman and Farris
vs. Director of Lands [1916], 34 Phil., 428) and that "the complaint and
answer having been superseded by the amended complaint and answer
thereto, and the answer to the original complaint not having been
presented in evidence as an exhibit, the trial court was not authorized to
take it into account." (Bastida vs. Menzi & Co. [1933], 58 Phil., 188.) But
in none of these cases or in any other case have we held that if a right
of action did not exist when the original complaint was filed, one could
be created by filing an amended complaint. In some jurisdictions in the
United States what was termed an "imperfect cause of action" could be
perfected by suitable amendment (Brown vs. Galena Mining & Smelting
Co., 32 Kan., 528; Hooper vs. City of Atlanta, 26 Ga. App., 221) and this is
virtually permitted in Banzon and Rosauro vs. Sellner ([1933], 58 Phil.,
453); Asiatic Potroleum [sic] Co. vs. Veloso ([1935], 62 Phil., 683); and
recently in Ramos vs. Gibbon (38 Off. Gaz., 241). That, however, which
is no cause of action whatsoever cannot by amendment or
supplemental pleading be converted into a cause of action: Nihil de re
accrescit ei qui nihil in re quando jus accresceret habet.
We are therefore of the opinion, and so hold, that unless the plaintiff
has a valid and subsisting cause of action at the time his action is
commenced, the defect cannot be cured or remedied by the
acquisition or accrual of one while the action is pending, and a
supplemental complaint or an amendment setting up such after-
accrued cause of action is not permissible. (Emphasis ours).
Hence, contrary to the holding of the trial court and the Court of
Appeals, the defect of lack of cause of action at the commencement of
this suit cannot be cured by the accrual of a cause of action during the
pendency of this case arising from the alleged maturity of two of the
promissory notes on 7 August 1999 and 14 March 2000.
Anent the issue of novation, this Court observes that the petitioner
corporation argues the existence of novation based on its own version
of what transpired during the renegotiation of the three promissory
notes in December 1997. By using its own version of facts, the petitioner
is, in a way, questioning the findings of facts of the trial court and the
Court of Appeals.
As a rule, the findings of fact of the trial court and the Court of Appeals
are final and conclusive and cannot be reviewed on appeal to the
Supreme Court18 as long as they are borne out by the record or are
based on substantial evidence.19 The Supreme Court is not a trier of
facts, its jurisdiction being limited to reviewing only errors of law that
may have been committed by the lower courts. Among the exceptions is
when the finding of fact of the trial court or the Court of Appeals is not
supported by the evidence on record or is based on a misapprehension
of facts. Such exception obtains in the present case.20
This Court finds to be contrary to the evidence on record the finding of
both the trial court and the Court of Appeals that the renegotiation in
December 1997 resulted in the reduction of the interest from 15% to 6%
per annum and that the monthly payments of US$750 made by the
petitioner were for the reduced interests.
It is worthy to note that the cash voucher dated January 199821 states
that the payment of US$750 represents "INVESTMENT PAYMENT." All the
succeeding cash vouchers describe the payments from February 1998
to September 1999 as "CAPITAL REPAYMENT."22 All these cash vouchers
served as receipts evidencing private respondent’s acknowledgment of
the payments made by the petitioner: two of which were signed by the
private respondent himself and all the others were signed by his
representatives. The private respondent even identified and confirmed
the existence of these receipts during the hearing. 23 Significantly,
cognizant of these receipts, the private respondent applied these
payments to the three consolidated principal loans in the summary of
payments he submitted to the court.24
Under Article 1253 of the Civil Code, if the debt produces interest,
payment of the principal shall not be deemed to have been made until
the interest has been covered. In this case, the private respondent
would not have signed the receipts describing the payments made by the
petitioner as "capital repayment" if the obligation to pay the interest
was still subsisting. The receipts, as well as private respondent’s
summary of payments, lend credence to petitioner’s claim that the
payments were for the principal loans and that the interests on the
three consolidated loans were waived by the private respondent during
the undisputed renegotiation of the loans on account of the business
reverses suffered by the petitioner at the time.
There was therefore a novation of the terms of the three promissory
notes in that the interest was waived and the principal was payable in
monthly installments of US$750. Alterations of the terms and conditions
of the obligation would generally result only in modificatory novation
unless such terms and conditions are considered to be the essence of
the obligation itself.25 The resulting novation in this case was, therefore,
of the modificatory type, not the extinctive type, since the obligation to
pay a sum of money remains in force.
Thus, since the petitioner did not renege on its obligation to pay the
monthly installments conformably with their new agreement and even
continued paying during the pendency of the case, the private
respondent had no cause of action to file the complaint. It is only upon
petitioner’s default in the payment of the monthly amortizations that a
cause of action would arise and give the private respondent a right to
maintain an action against the petitioner.
Lastly, the petitioner contends that the Court of Appeals obstinately
included its President Infante and Vice-President Hegerty as appellants
even if they did not appeal the trial court’s decision since they were
found to be not personally liable for the obligation of the petitioner.
Indeed, the Court of Appeals erred in referring to them as defendants-
appellants; nevertheless, that error is no cause for alarm because its
ruling was clear that the petitioner corporation was the one solely liable
for its obligation. In fact, the Court of Appeals affirmed in toto the
decision of the trial court, which means that it also upheld the latter’s
ruling that Hegerty and Infante were not personally liable for the
pecuniary obligations of the petitioner to the private respondent.
In sum, based on our disquisition on the lack of cause of action when the
complaint for sum of money and damages was filed by the private
respondent, the petition in the case at bar is impressed with merit.
WHEREFORE, the petition is hereby GRANTED. The Decision of 5
September 2003 of the Court of Appeals in CA-G.R. CV No. 68109, which
affirmed the Decision of 5 May 2000 of the Regional Trial Court of
Baguio, Branch 59, granting in part private respondent’s complaint for
sum of money and damages, and its Resolution of 4 December 2003,
which denied petitioner’s motion for reconsideration are hereby
REVERSED and SET ASIDE. The complaint docketed as Civil Case No.
4282-R is hereby DISMISSED for lack of cause of action.
G.R. No. 110844 April 27, 2000
ALFREDO CHING, petitioner,
vs.
HON. COURT OF APPEALS, HON. ZOSIMO Z. ANGELES, RTC- BR. 58,
MAKATI, METRO MANILA, PEOPLE OF THE PHILIPPINES AND ALLIED
BANKING CORPORATION, respondents.
BUENA, J.:
Confronting the Court in this instant petition for review
on certiorari under Rule 45 is the task of resolving the issue of whether
the pendency of a civil action for damages and declaration of nullity of
documents, specifically trust receipts, warrants the suspension of
criminal proceedings instituted for violation of Article 315 1(b) of the
Revised Penal Code, in relation to P.D. 115, otherwise known as the "Trust
Receipts Law".
Petitioner Alfredo Ching challenges before us the decision1 of the Court
of Appeals promulgated on 27 January 1993 in CA G.R. SP No. 28912,
dismissing his "Petition for Certiorari and Prohibition with Prayer for
Issuance of Temporary Restraining Order/ Preliminary Injunction", on
the ground of lack of merit.
Assailed similarly is the resolution2 of the Court of Appeals dated 28
June 1993 denying petitioner's motion for reconsideration.
As borne by the records, the controversy arose from the following
facts:
On 04 February 1992,3 petitioner was charged before the Regional Trial
Court of Makati (RTC-Makati), Branch 58, with four counts of estafa
punishable under Article 315 par. 1(b) of the Revised Penal Code, in
relation to Presidential Decree 115, otherwise known as the "Trust
Receipts Law".
The four separate informations4 which were couched in similar language
except for the date, subject goods and amount thereof, charged herein
petitioner in this wise:
That on or about the (18th day of May 1981; 3rd day of June 1981; 24th
day of June 1981 and 24th day of June 1981), in the Municipality of Makati,
Metro Manila, Philippines and within the jurisdiction of this Honorable
Court, the above-named accused having executed a trust receipt
agreement in favor of Allied Banking Corporation in consideration of the
receipt by the said accused of goods described as "12 Containers (200
M/T) Magtar Brand Dolomites"; "18 Containers (Zoom M/T) Magtar
Brand Dolomites"; "High Fired Refractory Sliding Nozzle Bricks"; and
"High Fired Refractory Sliding Nozzle Bricks" for which there is now due
the sum of (P278, 917.80; P419,719.20; P387, 551. 95; and P389,085.14
respectively) under the terms of which the accused agreed to sell the
same for cash with the express obligation to remit to the complainant
bank the proceeds of the sale and/or to turn over the goods, if not sold,
on demand, but the accused, once in possession of said goods, far from
complying with his obligation and with grave abuse of confidence, did
then and there, willfully, unlawfully and feloniously misappropriate,
misapply and convert to his own personal use and benefit the said goods
and/or the proceeds of the sale thereof, and despite repeated demands,
failed and refused and still fails and refuses, to account for and/or
remit the proceeds of sale thereof to the Allied Banking Corporation to
the damage and prejudice of the said complainant bank in the
aforementioned amount of (P278,917.80; P419,719.20; P387,551.95; and
P389,085.14).
On 10 February 1992, an "Omnibus Motion 5 to Strike Out Information, or
in the Alternative to Require Public Prosecutor to Conduct Preliminary
Investigation, and to Suspend in the Meantime Further Proceedings in
these Cases," was filed by the petitioner.
In an order dated 13 February 1992, the Regional Trial Court of Makati,
Branch 58, acting on the omnibus motion, required the prosecutor's
office to conduct a preliminary investigation and suspended further
proceedings in the criminal cases.
On 05 March 1992, petitioner Ching, together with Philippine Blooming
Mills Co. Inc., filed a case6 before the Regional Trial Court of Manila (RTC-
Manila), Branch 53, for declaration of nullity of documents and for
damages docketed as Civil Case No. 92-60600, entitled "Philippine
Blooming Mills, Inc. et. al. vs. Allied Banking Corporation.
On 07 August 1992, Ching filed a petition7 before the RTC-Makati, Branch
58, for the suspension of the criminal proceedings on the ground of
prejudicial question in a civil action.
The prosecution then filed an opposition to the petition for suspension,
against which opposition, herein petitioner filed a reply. 8
On 26 August 1992, the RTC-Makati issued an order9 which denied the
petition for suspension and scheduled the arraignment and pre-trial of
the criminal cases. As a result, petitioner moved to reconsider 10 the
order to which the prosecution filed an opposition.
In an order11 dated 04 September 1992, the RTC-Makati, before which the
criminal cases are pending, denied petitioner's motion for
reconsideration and set the criminal cases for arraignment and pre-
trial.
Aggrieved by these orders12 of the lower court in the criminal cases,
petitioner brought before the Court of Appeals a petition
for certiorari and prohibition which sought to declare the nullity of the
aforementioned orders and to prohibit the RTC-Makati from conducting
further proceedings in the criminal cases.
In denying the petition,13 the Court of Appeals, in CA G.R. SP No. 28912,
ruled:
. . . Civil Case No. 90-60600 pending before the Manila Regional Trial
Court seeking (sic) the declaration of nullity of the trust receipts in
question is not a prejudicial question to Criminal Case Nos. 92-0934 to
37 pending before the respondent court charging the petitioner with
four counts of violation of Article 315, par. 1(b), RPC, in relation to PD 115
as to warrant the suspension of the proceedings in the latter . . . .
Consequently, petitioner filed a motion for reconsideration of the
decision which the appellate court denied for lack of merit, via a
resolution 14 dated 28 June 1993.
Notwithstanding the decision rendered by the Court of Appeals, the RTC-
Manila, Branch 53 in an order dated 19 November 1993 in Civil Case No.
92-60600, admitted petitioner's amended complaint15 which, inter alia,
prayed the court for a judgment:
xxx xxx xxx
1. Declaring the 'Trust Receipts," annexes D, F, H and J hereof, null and
void, or otherwise annulling the same, for failure to express the true
intent and agreement of the parties;
2. Declaring the transaction subject hereof as one of pure and simple
loan without any trust receipt agreement and/or not one involving a
trust receipt, and accordingly declaring all the documents annexed
hereto as mere loan documents . . . (emphasis ours).
In its amended answer,16 herein private respondent Allied Banking
Corporation submitted in riposte that the transaction applied for was a
"letter of credit/trust receipt accommodation" and not a "pure and
simple loan with the trust receipts as mere additional or side
documents", as asserted by herein petitioner in its amended complaint. 17
Through the expediency of Rule 45, petitioner seeks the intervention of
this Court and prays:
After due consideration, to render judgment reversing the decision and
resolution, Annexes A and B hereof, respectively, and ordering the
suspension of Criminal Cases (sic) Nos. 92-0934 to 92-0937, inclusive,
entitled "People of the Philippines vs. Alfredo Ching" pending before
Branch 58 of the Regional Trial Court of Makati, Metro Manila, until final
determination of Civil Case No. 92-600 entitled Philippine Blooming Mills
Co. Inc. and Alfredo Ching vs. Allied Banking Corporation" pending before
Branch 53 of the Regional Trial Court of Manila.
The instant petition is bereft of merit.
We agree with the findings of the trial court, as affirmed by the Court of
Appeals, that no prejudicial question exists in the present case.
As defined, a prejudicial question is one that arises in a case the
resolution of which is a logical antecedent of the issue involved therein,
and the cognizance of which pertains to another tribunal. The prejudicial
question must be determinative of the case before the court but the
jurisdiction to try and resolve the question must be lodged in another
court or tribunal.18
It is a question based on a fact distinct and separate from the crime but
so intimately connected with it that it determines the guilt or innocence
of the accused, and for it to suspend the criminal action, it must appear
not only that said case involves facts intimately related to those upon
which the criminal prosecution would be based but also that in the
resolution of the issue or issues raised in the civil case, the guilt or
innocence of the accused would necessarily be determined. 19 It comes
into play generally in a situation where a civil action and a criminal
action are both pending and there exists in the former an issue which
must be preemptively resolved before the criminal action may proceed,
because howsoever the issue raised in the civil action is resolved would
be determinative juris et de jure of the guilt or innocence of the accused
in the criminal case.20
More simply, for the court to appreciate the pendency of a prejudicial
question, the law,21 in no uncertain terms, requires the concurrence of
two essential requisites, to wit:
a) The civil action involves an issue similar or intimately related to the
issue raised in the criminal action; and
b) The resolution of such issue determines whether or not the criminal
action may proceed.
Verily, under the prevailing circumstances, the alleged prejudicial
question in the civil case for declaration of nullity of documents and for
damages, does not juris et de jure determine the guilt or innocence of
the accused in the criminal action for estafa. Assuming arguendo that
the court hearing the civil aspect of the case adjudicates that the
transaction entered into between the parties was not a trust receipt
agreement, nonetheless the guilt of the accused could still be
established and his culpability under penal laws determined by other
evidence. To put it differently, even on the assumption that the
documents are declared of null, it does not ipso facto follow that such
declaration of nullity shall exonerate the accused from criminal
prosecution and liability.
Accordingly, the prosecution may adduce evidence to prove the criminal
liability of the accused for estafa, specifically under Article 315 1(b) of
the Revised Penal Code which explicitly provides that said crime is
committed:
. . . (b) By misappropriating or converting, to the prejudice of another,
money; goods, or any other personal property received by the offender
in trust or on commission, or for administration, or any other obligation
involving the duty to make delivery of or to return the same, even
though such obligation be totally or partially guaranteed by a bond; or by
denying having received such money, goods, or other property.
Applying the foregoing principles, the criminal liability of the accused for
violation of Article 315 1(b) of the Revised Penal Code, may still be shown
through the presentation of evidence to the effect that: (a) the accused
received the subject goods in trust or under the obligation to sell the
same and to remit the proceeds thereof to Allied Banking Corporation,
or to return the goods, if not sold; (b) that accused Ching
misappropriated or converted the goods and/or the proceeds of the
sale; (c) that accused Ching performed such acts with abuse of
confidence to the damage and prejudice of Allied Banking Corporation;
and (d) that demand was made by the bank to herein petitioner.
Presidential Decree 115, otherwise known as the "Trust Receipts Law",
specifically Section 13 thereof, provides:
The failure of an entrustee to turn over the proceeds of the sale of the
goods, documents or instruments covered by a trust receipt to the
extent of the amount owing to the entruster or as appears in the trust
receipt or to return said goods, documents or instruments if they were
not sold or disposed of in accordance with the terms of the trust receipt
shall constitute the crime of estafa, punishable under the provisions of
Article Three hundred fifteen, paragraph one (b) of Act Numbered Three
thousand eight hundred and fifteen, as amended, otherwise known as the
Revised Penal Code.
We must stress though, that an act violative of a trust receipt
agreement is only one mode of committing estafa under the
abovementioned provision of the Revised Penal Code. Stated differently,
a violation of a trust receipt arrangement is not the sole basis for
incurring liability under Article 315 1 (b) of the Code.
In Jimenez vs. Averia,22 where the accused was likewise charged with
estafa, this Court had occasion to rule that a civil case contesting the
validity of a certain receipt is not a prejudicial question that would
warrant the suspension of criminal proceedings for estafa. 1âwphi1.nêt
In the abovementioned case, a criminal charge for estafa was filed in
the Court of First Instance of Cavite against the two accused. The
information alleged that the accused, having received the amount of
P20,000.00 from Manuel Jimenez for the purchase of a fishing boat,
with the obligation on the part of the former to return the money in case
the boat was not purchased, misappropriated the said amount to the
damage and prejudice of Jimenez.23
Before arraignment, the accused filed a civil case contesting the validity
of a certain receipt signed by them. In the receipt, the accused
acknowledged having received the aforesaid sum, in addition to the
amount of P240.00 as agent's commission. The complaint, however,
alleged that the accused never received any amount from Jimenez and
that the signatures on the questioned receipt were secured by means of
fraud, deceit and intimidation.
In ruling out the existence of prejudicial question, we declared:
. . . It will be readily seen that the alleged prejudicial question is not
determinative of the guilt or innocence of the parties charged with
estafa, because even on the assumption that the execution of the receipt
whose annulment they sought in the civil case was vitiated by fraud,
duress or intimidation, their guilt could still be established by other
evidence showing, to the degree required by law, that they had actually
received from the complainant the sum of P20,000,00 with which to buy
for him a fishing boat, and that, instead of doing so, they
misappropriated the money and refused or otherwise failed to return it
to him upon demand. . . .
Furthermore, petitioner submits that the truth or falsity of the parties'
respective claims as regards the true nature of the transactions and of
the documents, shall have to be first determined by the Regional Trial
Court of Manila, which is the court hearing the civil case.
While this may be true, it is no less true that the Supreme Court may, on
certain exceptional instances, resolve the merits of a case on the basis
of the records and other evidence before it, most especially when the
resolution of these issues would best serve the ends of justice and
promote the speedy disposition of cases.
Thus, considering the peculiar circumstances attendant in the instant
case, this Court sees the cogency to exercise its plenary power:
It is a rule of procedure for the Supreme Court to strive to settle the
entire controversy in a single proceeding leaving no root or branch to
bear the seeds of future litigation. No useful purpose will be served if a
case or the determination of an issue in a case is remanded to the trial
court only to have its decision raised again to the Court of Appeals and
from there to the Supreme Court (citing Board of Commissioners vs.
Judge Joselito de la Rosa and Judge Capulong, G.R. Nos. 95122-23).
We have laid down the rule that the remand of the case or of an issue to
the lower court for further reception of evidence is not necessary
where the Court is in position to resolve the dispute based on the
records before it and particularly where the ends of justice would not
be subserved by the remand thereof (Escudero vs. Dulay, 158 SCRA 69).
Moreover, the Supreme Court is clothed with ample authority to review
matters, even those not raised on appeal if it finds that their
consideration is necessary in arriving at a just disposition of the case. 24
On many occasions, the Court, in the public interest and for the
expeditious administration of justice, has resolved actions on the merits
instead of remanding them to the trial court for further proceedings,
such as where the ends of justice would not be subserved by the
remand of the case.25
Inexorably, the records would show that petitioner signed and executed
an application and agreement for a commercial letter of credit to
finance the purchase of imported goods. Likewise, it is undisputed that
petitioner signed and executed trust receipt documents in favor of
private respondent Allied Banking Corporation.
In its amended complaint, however, which notably was filed only after
the Court of Appeals rendered its assailed decision, petitioner urges
that the transaction entered into between the parties was one of "pure
loan without any trust receipt agreement". According to petitioner, the
trust receipt documents were intended merely as "additional or side
documents covering the said loan" contrary to petitioner's allegation in
his original complaint that the trust receipts were executed as
collateral or security.
We do not agree. As Mr. Justice Story succinctly puts it: "Naked
statements must be entitled to little weight when the parties hold better
evidence behind the scenes. 26
Hence, with affirmance, we quote the findings of the Court of Appeals:
The concept in which petitioner signed the trust receipts, that is
whether he signed the trust receipts as such trust receipts or as a
mere evidence of a pure and simple loan transaction is not decisive
because precisely, a trust receipt is a security agreement of an
indebtedness.
Contrary to petitioner's assertions and in view of jurisprudence
established in this jurisdiction, a trust receipt is not merely an additional
or side document to a principal contract, which in the instant case is
alleged by petitioner to be a pure and simple loan.
As elucidated in Samo vs. People,27 a trust receipt is considered a
security transaction intended to aid in financing importers and retail
dealers who do not have sufficient funds or resources to finance the
importation or purchase of merchandise, and who may not be able to
acquire credit except through utilization, as collateral, of the
merchandise imported or purchased.
Further, a trust receipt is a document in which is expressed a security
transaction whereunder the lender, having no prior title in the goods on
which the lien is to be given and not having possession which remains in
the borrower, lends his money to the borrower on security of the goods
which the borrower is privileged to sell clear of the lien with an
agreement to pay all or part of the proceeds of the sale to the
lender.28 It is a security agreement pursuant to which a bank acquires a
"security interest" in the goods. It secures an indebtedness and there
can be no such thing as security interest that secures no obligation.29
Clearly, a trust receipt partakes the nature of a security transaction. It
could never be a mere additional or side document as alleged by
petitioner. Otherwise, a party to a trust receipt agreement could easily
renege on its obligations thereunder, thus undermining the importance
and defeating with impunity the purpose of such an indispensable tool in
commercial transactions.
Of equal importance is the fact that in his complaint in Civil Case No. 92-
60600, dated 05 March 1992, petitioner alleged that the trust receipts
were executed and intended as collateral or security. Pursuant to the
rules, such particular allegation in the complaint is tantamount to a
judicial admission on the part of petitioner Ching to which he must be
bound.
Thus, the Court of Appeals in its resolution dated 28 June 1993,
correctly observed:
It was petitioner himself who acknowledged the trust receipts as mere
collateral and security for the payment of the loan but kept on insisting
that the real and true transaction was one of pure loan. . . .
In his present motion, the petitioner alleges that the trust receipts are
evidence of a pure loan or that the same were additional or side
documents that actually stood as promissory notes and not a collateral
or security agreement. He cannot assume a position inconsistent with
his previous allegations in his civil complaint that the trust receipts
were intended as mere collateral or security . . . .
Perhaps, realizing such flaw, petitioner, in a complete turn around, filed
a motion to admit amended complaint before the RTC-Manila. Among
others, the amended complaint alleged that the trust receipts stood as
additional or side documents, the real transaction between the parties
being that of a pure loan without any trust receipt agreement.
In an order dated 19 November 1993, the RTC-Manila, Branch 53,
admitted the amended complaint. Accordingly, with the lower court's
admission of the amended complaint, the judicial admission made in the
original complaint was, in effect, superseded.
Under the Rules, pleadings superseded or amended disappear from the
record, lose their status as pleadings and cease to be judicial
admissions. While they may nonetheless be utilized against the pleader
as extrajudicial admissions, they must, in order to have such effect, be
formally offered in evidence. If not offered in evidence, the admission
contained therein will not be considered.30
Consequently, the original complaint, having been amended, lost its
character as a judicial admission, which would have required no proof,
and became merely an extrajudicial admission, the admissibility of
which, as evidence, required its formal offer. 31
In virtue thereof, the amended complaint takes the place of the original.
The latter is regarded as abandoned and ceases to perform any further
function as a pleading. The original complaint no longer forms part of
the record.32
Thus, in the instant case, the original complaint is deemed superseded
by the amended complaint. Corollarily, the judicial admissions in the
original complaint are considered abandoned. Nonetheless, we must
stress that the actuations of petitioner, as sanctioned by the RTC-
Manila, Branch 53 through its order admitting the amended complaint,
demands stern rebuke from this Court.
Certainly, this Court is not unwary of the tactics employed by the
petitioner specifically in filing the amended complaint only after the
promulgation of the assailed decision of the Court of Appeals. It bears
noting that a lapse of almost eighteen months (from March 1992 to
September 1993), from the filing of the original complaint to the filing of
the amended complaint, is too lengthy a time sufficient to enkindle
suspicion and enflame doubts as to the true intentions of petitioner
regarding the early disposition of the pending cases.
Although the granting of leave to file amended pleadings is a matter
peculiarly within the sound discretion of the trial court and such
discretion would not normally be disturbed on appeal, it is also well to
mention that this rule is relaxed when evident abuse thereof is
apparent. 33
Hence, in certain instances we ruled that amendments are not proper
and should be denied when delay would arise,34 or when the amendments
would result in a change of cause of action or defense or change the
theory of the case, 35 or would be inconsistent with the allegations in the
original complaint.36
Applying the foregoing rules, petitioner, by filing the amended complaint,
in effect, altered the theory of his case. Likewise, the allegations
embodied in the amended complaint are inconsistent with that of the
original complaint inasmuch as in the latter, petitioner alleged that the
trust receipts were intended as mere collateral or security, the
principal transaction being one of pure loan.
Yet, in the amended complaint, petitioner argued that the said trust
receipts were executed as additional or side documents, the transaction
being strictly one of pure loan without any trust receipt arrangement.
Obviously these allegations are in discord in relation to each other and
therefore cannot stand in harmony.
These circumstances, taken as a whole, lead this Court to doubt the
genuine purpose of petitioner in filing the amended
complaint.1âwphi1 Again, we view petitioner's actuations with abhorrence
and displeasure.
Moreover, petitioner contends that the transaction between Philippine
Blooming Mills (PBM) and private respondent Allied Banking Corporation
does not fall under the category of a trust receipt arrangement claiming
that the goods were not to be sold but were to be used, consumed and
destroyed by the importer PBM.
To our mind, petitioner's contention is a stealthy attempt to circumvent
the principle enunciated in the case of Alied Banking Corporation vs.
Ordonez, 37 thus:
. . . In an attempt to escape criminal liability, private respondent claims
P.D. 115 covers goods which are ultimately destined for sale and not
goods for use in manufacture. But the wording of Section 13 covers
failure to turn over the proceeds of the sale of the entrusted goods, or
to return said goods if unsold or disposed of in accordance with the
terms of the trust receipts. Private respondent claims that at the time
of PBM's application for the issuance of the LC's, it was not represented
to the petitioner that the items were intended for sale, hence, there was
no deceit resulting in a violation of the trust receipts which would
constitute a criminal liability. Again we cannot uphold this contention.
The non-payment of the amount covered by a trust receipt is an act
violative of the entrustee's obligation to pay. There is no reason why the
law should not apply to all transactions covered by trust receipts,
except those expressly excluded (68 Am. Jur. 125).
The Court takes judicial notice of customary banking and business
practices where trust receipts are used for importation of heavy
equipment, machineries and supplies used in manufacturing operations.
We are perplexed by the statements in the assailed DOJ resolution that
the goods subject of the instant case are outside the ambit of the
provisions of PD 115 albeit covered by trust receipt agreements (17
February 1988 resolution) and that not all transactions covered by trust
receipts may be considered as trust receipt transactions defined and
penalized under P.D. 115 (11 January 1988 resolution). A construction
should be avoided when it affords an opportunity to defeat compliance
with the terms of a statute.
xxx xxx xxx
The penal provision of P.D. 115 encompasses any act violative of an
obligation covered by the trust receipt; it is not limited to transactions
in goods which are to be sold (retailed), reshipped, stored or processed
as a component of a product ultimately sold.
An examination of P.D. 115 shows the growing importance of trust
receipts in Philippine business, the need to provide for the rights and
obligations of parties to a trust receipt transaction, the study of the
problems involved and the action by monetary authorities, and the
necessity of regulating the enforcement of rights arising from default or
violations of trust receipt agreements. The legislative intent to meet a
pressing need is clearly expressed. 38
In fine, we reiterate that the civil action for declaration of nullity of
documents and for damages does not constitute a prejudicial question
to the criminal cases for estafa filed against petitioner Ching.
WHEREFORE, premises considered, the assailed decision and resolution
of the Court of Appeals are hereby AFFIRMED and the instant petition is
DISMISSED for lack of merit. Accordingly, the Regional Trial Court of
Makati, Branch 58, is hereby directed to proceed with the hearing and
trial on the merits of Criminal Case Nos. 92-0934 to 92-0937, inclusive,
and to expedite proceedings therein, without prejudice to the right of the
accused to due process.1âwphi1.nêt
G.R. No. 168973 August 24, 2011
CITY OF DUMAGUETE, herein Represented by City Mayor, Agustin R.
Perdices, Petitioner,
vs.
PHILIPPINE PORTS AUTHORITY,Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
Before Us is a Petition for Review under Rule 45 of the Rules of Court
assailing the Decision1 dated March 4, 2005 and Resolution2 dated June
6, 2005 of the Court Appeals in CA-G.R. SP No. 64379, which granted the
Petition for Certiorari and Prohibition of respondent Philippine Ports
Authority and set aside the Orders dated December 7, 2000 and
February 20, 2001 of the Regional Trial Court (RTC), Branch 44 of the
City of Dumaguete in LRC Case No. N-201.
The antecedent facts are as follows:
On October 14, 1998, petitioner City of Dumaguete, through Mayor Felipe
Antonio B. Remollo (Remollo), filed before the RTC an Application for
Original Registration of Title over a parcel of land with improvements,
located at Barangay Looc, City of Dumaguete (subject property), under
the Property Registration Decree. The application was docketed as LRC
Case No. N-201.
Petitioner alleged in support of its application:
1. That the applicant, City of Dumaguete through its Honorable Mayor
Felipe Antonio B. Remollo, is the owner of the land subject of this
application with all improvements and buildings comprising the
Engineer’s Compound where it is now situated and has been in
continuous occupation and possession of the same for more than 30
years or from the year 1960 (Affidavit of Ownership executed by Felipe
Antonio G. Remollo, the City Mayor, dated August 21, 1998 herein
attached as ANNEX A). The said land consist of 5,410 square meters and
is situated and bounded and described as shown on the plan (true and
photostatic copies of the original plan marked Psu-07-006805 approved
by the Regional Technical Director of the [Department of Environment
and Natural Resources] DENR, Regional Office, Cebu City herein attached
as ANNEX B) and technical descriptions attached hereto (technical
description attached as ANNEX C) and made a part hereof;
2. That said land at the last assessment for taxation was assessed at
₱676,250, Philippine currency, with market value of ₱1,352,500.00,
Philippine currency. (Declaration of Real Property with the assessed and
market values attached as ANNEX D);
3. That to the best of my knowledge and belief, there is no mortgage or
encumbrance of any kind whatsoever affecting said land, nor another
person having any estate or interest therein, legal or equitable, in
possession, remainder, reversion or expectancy;
4. That the land was acquired by possessory title in open, continuous,
adverse occupation and possession in the concept of owner for more
than thirty years since 1960 (please refer to ANNEX A);
5. That the land is adjoined by the following:
NorthWest
NorthEast
SouthEast
All along line 1-2-3-4-5-6-7-8-9-10 by Flores Avenue, City Road and the
Dumaguete Port Road
SouthWest – along line 10-1 by Plan Msi-V-20453
xxxx
8. That the land included is bounded on the West by Flores Avenue and on
the North by the City Road, all public highways and on the East by the
Dumaguete Port Road, a private road made part of the Port Zone.3
In an Order4 dated October 23, 1998, the RTC noted that:
A perusal of the records of the case shows that the annexes lack the
following copies:
a) two blue print copies of the approved plan;
b) two copies of the technical description of the lot sought to be
registered;
c) two copies of the Surveyor’s certificate;
d) a certificate in quadruplicate of the City Assessor of the assessed
value of the land;
e) all original muniments of title in the possession of the applicant which
prove ownership of the land;
f) two copies of the petition/application.
Further, the application did not state the number of the lot sought to be
registered, the number of parcels applied for, the improvements found
thereon, and indicate whether it claims a portion of the road which
serves as a boundary line.
All these must be alleged in the petition so that the Court will know the
nature of the property.
The RTC explained that the extra copies submitted by petitioner shall be
forwarded by the RTC Clerk of Court to the Land Registration
Commission (LRC) in Manila for comment. Only thereafter would the RTC
set the application for hearing.
Petitioner filed its Compliance5 with the above-mentioned Order,
submitting additional copies of the required documents and clarifying
thus:
1. The approved plan does not state the number of lot sought to be
registered because it is a public land, thus, only PSU-07-006805
appears on the plan which is being applied for registration;
2. Only one (1) parcel of land is applied for by petitioners which consist
of five thousand four hundred ten (5,410) square meters, more or less;
3. The City Engineer’s Building within the City Engineer’s compound are
the only improvement found thereon; and
4. Petitioners do not claim any portion of the road which serves as a
boundary line.
The RTC accordingly set the initial hearing of LRC Case No. N-201 on April
12, 1999, and sent notices to the parties.
The Republic of the Philippines, represented by the Director of Lands,
and respondent, represented by the Office of the Government Corporate
Counsel, filed separate Oppositions 6 to the application for registration
of petitioner. Both the Republic and respondent averred that petitioner
may not register the subject property in its name since petitioner had
never been in open, continuous, exclusive, and notorious possession of
the said property for at least 30 years immediately preceding the filing
of the application; and the subject property remains to be a portion of
the public domain which belongs to the Republic.
After several postponements of the scheduled hearings, petitioner
presented the testimony of its first witness, Engineer Rilthe P. Dorado
(Engr. Dorado), on January 14, 2000. Engr. Dorado’s examination on the
witness stand was terminated on April 7, 2000. The presentation of the
other witnesses of petitioner was then scheduled to continue on June 2,
2000. 7
However, before the next hearing, respondent filed a Motion to
Dismiss,8 seeking the dismissal of LRC Case No. N-201 on the ground that
the RTC lacked jurisdiction to hear and decide the case. Respondent
argued that Section 14(1) of Presidential Decree No. 1529, otherwise
known as the Property Registration Decree, refers only to alienable and
disposable lands of the public domain under a bona fide claim of
ownership. The subject property in LRC Case No. N-201 is not alienable
and disposable, since it is a foreshore land, as explicitly testified to by
petitioner’s own witness, Engr. Dorado. A foreshore land is not
registerable. This was precisely the reason why, respondent points out,
that the subject property was included in Presidential Proclamation No.
1232 (delineating the territorial boundaries of the Dumaguete Port
Zone), so that the same would be administered and managed by the
State, through respondent, for the benefit of the people.
In its Terse Opposition to Oppositor’s Motion to Dismiss, petitioner
claimed that the subject property was a swamp reclaimed about 40
years ago, which it occupied openly, continuously, exclusively, and
notoriously under a bona fide claim of ownership. The technical
description and approved plan of the subject property showed that the
said property was not bounded by any part of the sea. Petitioner invoked
Republic Act No. 1899,9 which authorizes chartered cities and
municipalities to undertake and carry out, at their own expense, the
reclamation of foreshore lands bordering them; and grants said
chartered cities and municipalities ownership over the reclaimed lands.
Presidential Proclamation No. 1232 is immaterial to the present
application for registration because it merely authorizes respondent to
administer and manage the Dumaguete Port Zone and does not confer
upon respondent ownership of the subject property. 10
Respondent filed a Reply/Rejoinder (To Applicant’s Opposition to
Oppositor’s Motion to Dismiss), 11 asserting that there are no factual or
legal basis for the claim of petitioner that the subject property is
reclaimed land. Petitioner sought the original registration of its title
over the subject property acquired through alleged continuous
possession for 30 years under Section 14(1) of the Property Registration
Decree, and not through the reclamation of the said property at its own
expense under Republic Act No. 1899. The present claim of petitioner
that the subject property is reclaimed land should not be allowed for it
would improperly change the earlier theory in support of the application
for registration. Respondent reiterated that the subject property is
foreshore land which cannot be registered; and that Presidential
Proclamation No. 1232 is very material to LRC Case No. N-201 because it
confirms that areas within the Dumaguete Port Zone, including the
subject property, are not alienable and disposable lands of the public
domain. 1avvphi1
On September 7, 2000, the RTC issued an Order12 granting the Motion to
Dismiss of respondent based on the following ratiocination:
The Court agrees with [herein respondent] Philippine Ports Authority
that the basis of the [herein petitioner’s] application for original
registration of the subject lot is Section 14 of the Presidential Decree
No. 1529, otherwise known as the Property Registration Decree. A
circumspect scrutiny of said Section readily shows that it refers to
alienable and disposable lands of the public domain as proper subjects
of registration, provided the applicant has met the other requirements
such as open, continuous, exclusive and notorious possession for at
least thirty (30) years under a bona fide claim of ownership.
It having been shown by [petitioner’s] own evidence that the lot subject
of the application for original registration is a foreshore land, and
therefore not registerable (Dizon, et al. vs. Bayona, et al., 98 SCRA 942,
944), the application must be denied.
Again as correctly argued by [respondent], [petitioner’s] reliance on
Republic Act 1899 which authorizes all municipalities and chartered
cities to undertake and carry out the reclamation by dredging, filling or
other means of any foreshore lands bordering them and which confers
ownership on them of the lands so reclaimed, is misplaced, as such has
never been alleged in the application. It is fundamental that a party
cannot prove what it has not alleged in his complaint or application, as
in this case.
The admission by Engr. Dorado that there is no formal declaration from
the executive branch of government or law passed by Congress that the
land in question is no longer needed for public use or special industries
x x x further militates against the application.
Moreover, the authority granted to municipalities and chartered cities to
undertake and carry out at their own expense the reclamation by
dredging, filling, or other means, of any foreshore lands bordering them
is for the purpose of establishing, providing, constructing, maintaining,
and repairing proper and adequate docking and harbor facilities as such
municipalities and chartered cities may determine in consultation with
the Secretary of Finance and the Secretary of Public Works and
Communications.
By its own evidence, [petitioner] has utilized the subject property
allegedly reclaimed by it as Office of the City Engineer and not as
docking and harboring facilities. [Petitioner] has failed to show that
such reclamation was undertaken by it in consultation with the
Secretary of Finance and the Secretary of Public Works and
Communications.13
The RTC decreed in the end that "the instant application for original
registration is dismissed for lack of merit."14
In its Motion for Reconsideration15 and Supplemental Motion for
Reconsideration,16 petitioner contended that the dismissal of its
application was premature and tantamount to a denial of its right to due
process. It has yet to present evidence to prove factual matters in
support of its application, such as the subject property already being
alienable and disposable at the time it was occupied and possessed by
petitioner.
Petitioner also pointed out that its witness, Engr. Dorado, "testified only
as to the physical status of the land in question at the time when the
cadastral survey of Dumaguete was made sometime in 1916."17 In fact,
Engr. Dorado expressly testified that the subject property was "part of
the shore or foreshore a long time ago[;]"18 and he did not testify at all
that the subject property was a foreshore lot at the time petitioner
occupied and possessed the same. The physical state of the subject
property had already changed since 1916. It is now within the "alienable
and disposable area as per the Land Classification Map No. 674, Project
No. 1-D, BL C-6, certified on July 3, 1927, of the Bureau of Lands, now
Land Management Sector of the Department of Environment and Natural
Resources[,]"19as verified and certified by the Chief of the Map
Projection Section, Land Management Sector, DENR Regional Office in
Cebu City, who has yet to take the witness stand before the RTC.
Petitioner insisted that the RTC should continue with the hearing of LRC
Case No. N-201 and allow petitioner to present evidence that the subject
property is reclaimed land. Petitioner sufficiently alleged in its
application for registration that it has been in "open, continuous,
exclusive, and notorious possession of the [subject property] for more
than thirty (30) years under a bona fide claim of ownership."20 In
support of such allegation, petitioner must necessarily prove that the
subject property was previously a swampy area, which had to be filled
or reclaimed before the construction of the City Engineer’s Office
building thereon.
Respondent based its Opposition (To Applicant’s Motion for
Reconsideration dated September 28, 2000)21 and Opposition (To
Applicant’s Supplemental Motion for Reconsideration)22 on technical and
substantive grounds.
According to respondent, the Motion for Reconsideration of petitioner
violated Sections 4 (Hearing of motion), 5 (Notice of hearing), and 6
(Proof of service necessary), Rule 15 of the Rules of Court. Petitioner did
not set its Motion for Reconsideration for hearing even when the said
Motion could not be considered as non-litigable. The RTC could not hear
the motion for reconsideration ex parte as they are prejudicial to the
rights of respondent. Petitioner also failed to comply with Section 11,
Rule 13 of the Rules of Court when it did not attach to the Motion for
Reconsideration a written explanation why it did not resort to personal
service of the said Motion. Thus, respondent averred that the Motion for
Reconsideration of petitioner should be treated as a mere scrap of
paper with no legal effect. It did not interrupt the reglementary period
to appeal and the RTC Order dated September 7, 2000, dismissing LRC
Case No. N-201, had already attained finality. Respondent also pointed
out that the Supplemental Motion for Reconsideration of petitioner
suffered from the same fatal defects as the original Motion for
Reconsideration.
Respondent again posited that the subject property was foreshore land
belonging to the State and not subject to private appropriation, unless
the same had already been declared by the executive or legislative
department of the national government as no longer needed for coast
guard service, public use, or special industries, and classified as
alienable and disposable. Full- blown trial in LRC Case No. N-201 was no
longer necessary as the evidence so far presented by petitioner had
already established that the RTC lacked jurisdiction over the subject
matter of the case.
In its Order23 dated November 16, 2000, the RTC initially agreed with
respondent that the Motion for Reconsideration of petitioner violated
Sections 4, 5, and 6, Rule 15 and Section 11, Rule 13 of the Rules of Court.
Resultantly, the Motion for Reconsideration of petitioner was considered
as not filed and did not toll the running of the period to file an appeal,
rendering final and executory the order of dismissal of LRC Case No. N-
201.
However, after taking into consideration the Supplemental Motion for
Reconsideration of petitioner, the RTC issued another Order24 dated
December 7, 2000, setting aside its Order dated September 7, 2000 in
the interest of justice and resolving to have a full-blown proceeding to
determine factual issues in LRC Case No. N-201.
It was then the turn of respondent to file with the RTC a Motion for
Reconsideration25 of the Order dated December 7, 2000. In an
Order26 dated February 20, 2001, the RTC denied the motion of
respondent and admitted the following:
A thorough review and perusal of the disputed order dated September 7,
2000 and December 7, 2000, whereby this Court dismissed
[petitioner’s] petition for registration of Lot No. 1, Dumaguete Cadastre,
and later set aside the Order of September 7, 2000, shows that there
was honest mistake in declaring said lot 1, as a shoreline. Indeed, the
adjoining lots are already titled and bounded by a City Road. It is not
bounded by a sea. The Court wants to correct this error in its findings
on the September 7, 2000 Order, that Lot No. 1 is situated on the
shoreline of Dumaguete City. The Court simply committed an oversight
on the petitioner’s evidence that the lot in question is a foreshore land x
x x when in fact it is not. And it is for this reason that the court
reconsidered and set aside said September 7, 2000 Order, to correct
the same while it is true that said September 7, 2000 Order had
attained its finality, yet this Court cannot in conscience allow injustice to
perpetuate in this case and that hearing on the merits must proceed to
determine the legality and truthfulness of its application for registration
of title.
Respondent sought recourse from the Court of Appeals by filing a
Petition for Certiorari and Prohibition under Rule 65 of the Rules of
Court, docketed as CA-G.R. SP No. 64379. Respondent challenged the
RTC Orders dated December 7, 2000 and February 20, 2001 for having
been issued by the RTC in grave abuse of discretion amounting to lack or
excess of jurisdiction. Respondent reiterated that the RTC Order dated
September 7, 2000, dismissing LRC Case No. N-201 had already attained
finality. The defects of the Motion for Reconsideration of petitioner
rendered the same as a mere scrap of paper, which did not toll the
running of the prescriptive period to appeal the RTC Order dated
September 7, 2000.
The Court of Appeals, in its Decision dated March 4, 2005, found merit in
the Petition of respondent and set aside the RTC Orders dated
December 7, 2000 and February 20, 2001. The appellate court, in its
Resolution dated June 6, 2005, denied the Motion for Reconsideration of
petitioner.
Hence, petitioner comes before us via the instant Petition for Review
with the following assignment of error:
GROUND FOR THE APPEAL
Error of law: The March 4, 2005 decision of the Court of Appeals and its
June 6, 2005 Resolution, erred on question of law in setting aside the
Orders of the Regional Trial Court, Branch 44, dated December 7, 2000
and February 20, 2001. The said Orders of the trial court were made in
order to determine factual issues and to correct its error in its findings
on the September 7, 2000 Order. Thus, the Court of Appeals decision is
contrary to law, justice, equity and existing jurisprudence.27
Respondent insists on the strict application of Sections 4, 5, and 6, Rule
15 and Section 11, Rule 13 of the Rules of Court. Violations of the said
rules were fatal to the Motion for Reconsideration and Supplemental
Motion for Reconsideration of the petitioner, and as a result, the RTC
Order dated September 7, 2000, dismissing LRC Case No. N-201, had
already become final and executory and, thus, beyond the jurisdiction of
the RTC to set aside. Respondent urges us to reject the plea of
petitioner for a liberal application of the rules in the absence of a
compelling reason to do so.
We grant the Petition.
The grant of a petition for certiorari under Rule 65 of the Rules of Court
requires grave abuse of discretion amounting to lack or excess of
jurisdiction. Grave abuse of discretion exists where an act is performed
with a capricious or whimsical exercise of judgment equivalent to lack of
jurisdiction. The abuse of discretion must be patent and gross as to
amount to an evasion of positive duty or to a virtual refusal to perform a
duty enjoined by law, or to act at all in contemplation of law, as where
the power is exercised in an arbitrary and despotic manner by reason of
passion or personal hostility.28
The Court of Appeals erred in granting the writ of certiorari in favor of
respondent. The RTC did not commit grave abuse of discretion when, in
its Orders dated December 7, 2000 and February 20, 2001, it set aside
the order of dismissal of LRC Case No. N-201 and resolved to have a full-
blown proceeding to determine factual issues in said case.
Procedural rules were conceived to aid the attainment of justice. If a
stringent application of the rules would hinder rather than serve the
demands of substantial justice, the former must yield to the latter.29 In
Basco v. Court of Appeals,30 we allowed a liberal application of technical
rules of procedure, pertaining to the requisites of a proper notice of
hearing, upon consideration of the importance of the subject matter of
the controversy, as illustrated in well-settled cases, to wit:
The liberal construction of the rules on notice of hearing is exemplified
in Goldloop Properties, Inc. v. CA:
Admittedly, the filing of respondent-spouses' motion for reconsideration
did not stop the running of the period of appeal because of the absence
of a notice of hearing required in Secs. 3, 4 and 5, Rule 15, of the Rules
of Court. As we have repeatedly held, a motion that does not contain a
notice of hearing is a mere scrap of paper; it presents no question
which merits the attention of the court. Being a mere scrap of paper,
the trial court had no alternative but to disregard it. Such being the
case, it was as if no motion for reconsideration was filed and, therefore,
the reglementary period within which respondent-spouses should have
filed an appeal expired on 23 November 1989.
But, where a rigid application of that rule will result in a manifest failure
or miscarriage of justice, then the rule may be relaxed, especially if a
party successfully shows that the alleged defect in the questioned final
and executory judgment is not apparent on its face or from the recitals
contained therein. Technicalities may thus be disregarded in order to
resolve the case. After all, no party can even claim a vested right in
technicalities. Litigations should, as much as possible, be decided on the
merits and not on technicalities.
Hence, this Court should not easily allow a party to lose title and
ownership over a party worth ₱4,000,000.00 for a measly
P650,000.00 without affording him ample opportunity to prove his claim
that the transaction entered into was not in fact an absolute sale but
one of mortgage. Such grave injustice must not be permitted to prevail
on the anvil of technicalities.
Likewise, in Samoso v. CA, the Court ruled:
But time and again, the Court has stressed that the rules of procedure
are not to be applied in a very strict and technical sense. The rules of
procedure are used only to help secure not override substantial justice
(National Waterworks & Sewerage System vs. Municipality of Libmanan,
97 SCRA 138 [1980]; Gregorio v. Court of Appeals, 72 SCRA 120 [1976]).
The right to appeal should not be lightly disregarded by a stringent
application of rules of procedure especially where the appeal is on its
face meritorious and the interests of substantial justice would be
served by permitting the appeal (Siguenza v. Court of Appeals, 137 SCRA
570 [1985]; Pacific Asia Overseas Shipping Corporation v. National Labor
Relations Commission, et al., G.R. No. 76595, May 6, 1998). . . .
In the instant case, it is petitioner's life and liberty that is at stake. The
trial court has sentenced him to suffer the penalty of reclusion perpetua
and his conviction attained finality on the basis of mere technicality. It is
but just, therefore, that petitioner be given the opportunity to defend
himself and pursue his appeal. To do otherwise would be tantamount to
grave injustice. A relaxation of the procedural rules, considering the
particular circumstances herein, is justified.31 (Emphasis ours.)
In the case at bar, the Motion for Reconsideration and Supplemental
Motion for Reconsideration of petitioner, which sought the reversal of
RTC Order dated September 7, 2000 dismissing LRC Case No. N-201, cite
meritorious grounds that justify a liberal application of procedural
rules.
The dismissal by the RTC of LRC Case No. N-201 for lack of jurisdiction is
patently erroneous.
Basic as a hornbook principle is that jurisdiction over the subject matter
of a case is conferred by law and determined by the allegations in the
complaint which comprise a concise statement of the ultimate facts
constituting the plaintiff's cause of action. The nature of an action, as
well as which court or body has jurisdiction over it, is determined based
on the allegations contained in the complaint of the plaintiff, irrespective
of whether or not the plaintiff is entitled to recover upon all or some of
the claims asserted therein. The averments in the complaint and the
character of the relief sought are the ones to be consulted. Once vested
by the allegations in the complaint, jurisdiction also remains vested
irrespective of whether or not the plaintiff is entitled to recover upon all
or some of the claims asserted therein.32
As a necessary consequence, the jurisdiction of the court cannot be
made to depend upon the defenses set up in the answer or upon the
motion to dismiss; for otherwise, the question of jurisdiction would
almost entirely depend upon the defendant. What determines the
jurisdiction of the court is the nature of the action pleaded as appearing
from the allegations in the complaint. The averments therein and the
character of the relief sought are the ones to be consulted. 33
Under Act No. 496, otherwise known as the Land Registration Act, as
amended by Act No. 2347, jurisdiction over all applications for
registration of title to land was conferred upon the Courts of First
Instance (CFI) of the respective provinces in which the land sought to be
registered was situated. Jurisdiction over land registration cases, as in
ordinary actions, is acquired upon the filing in court of the application
for registration, and is retained up to the end of the litigation. 34
The land registration laws were updated and codified by the Property
Registration Decree, and under Section 17 thereof, jurisdiction over an
application for land registration was still vested on the CFI of the
province or city where the land was situated, viz:
SEC. 17. What and where to file. – The application for land registration
shall be filed with the Court of First Instance of the province or city
where the land is situated. The applicant shall file together with the
application all original muniments of titles or copies thereof and a
survey plan of the land approved by the Bureau of Lands.
The Clerk of Court shall not accept any application unless it is shown
that the applicant has furnished the Director of Lands with a copy of the
application and all annexes.
Batas Pambansa Blg. 129, otherwise known as The Judiciary
Reorganization Act of 1980, created the RTC35 in place of the CFI.
Presently, jurisdiction over an application for land registration remains
with the RTC where the land is situated, except when such jurisdiction is
delegated by the Supreme Court to the Metropolitan Trial Court,
Municipal Trial Courts, and Municipal Circuit Trial Courts under certain
circumstances.36
It is not disputed that the Application for Original Registration of Title
filed by petitioner before the RTC of the City of Dumaguete conformed to
Section 15 of the Property Registration Decree, which prescribes the
form and contents of such applications. In its Application, petitioner
prayed that its title to the subject property, which it repeatedly alleged
to have acquired through continuous and adverse possession and
occupation of the said property for more than 30 years or since 1960,
be placed under the land registration laws. The allegations and prayer in
the Application of petitioner were sufficient to vest jurisdiction on the
RTC over the said Application upon the filing thereof.
Respondent sought the dismissal of LRC Case No. N-201 on the ground of
lack of jurisdiction, not because of the insufficiency of the allegations
and prayer therein, but because the evidence presented by petitioner
itself during the trial supposedly showed that the subject property is a
foreshore land, which is not alienable and disposable. The RTC granted
the Motion to Dismiss of respondent in its Order dated September 7,
2000. The RTC went beyond the allegations and prayer for relief in the
Application for Original Registration of petitioner, and already
scrutinized and weighed the testimony of Engr. Dorado, the only witness
petitioner was able to present.
As to whether or not the subject property is indeed foreshore land is a
factual issue which the RTC should resolve in the exercise of its
jurisdiction, after giving both parties the opportunity to present their
respective evidence at a full-blown trial. As we have explained in the
Estate of the Late Jesus S. Yujuico v. Republic37 :
The plain import of Municipality of Antipolo is that a land registration
court, the RTC at present, has no jurisdiction over the subject matter of
the application which respondent Republic claims is public land. This
ruling needs elucidation.
Firmly entrenched is the principle that jurisdiction over the subject
matter is conferred by law. Consequently, the proper CFI (now the RTC)
under Section 14 of PD 1529 (Property Registration Decree) has
jurisdiction over applications for registration of title to land.
xxxx
Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the
subject matter of the land registration case filed by Fermina Castro,
petitioners’ predecessor-in-interest, since jurisdiction over the subject
matter is determined by the allegations of the initiatory pleading – the
application. Settled is the rule that "the authority to decide a case and
not the decision rendered therein is what makes up jurisdiction. When
there is jurisdiction, the decision of all questions arising in the case is
but an exercise of jurisdiction.
In our view, it was imprecise to state in Municipality of Antipolo that the
"Land Registration Court [has] no jurisdiction to entertain the
application for registration of public property x x x" for such court
precisely has the jurisdiction to entertain land registration applications
since that is conferred by PD 1529. The applicant in a land registration
case usually claims the land subject matter of the application as his/her
private property, as in the case of the application of Castro. Thus, the
conclusion of the CA that the Pasig-Rizal CFI has no jurisdiction over the
subject matter of the application of Castro has no mooring. The land
registration court initially has jurisdiction over the land applied for at
the time of the filing of the application. After trial, the court, in the
exercise of its jurisdiction, can determine whether the title to the land
applied for is registerable and can be confirmed. In the event that the
subject matter of the application turns out to be inalienable public land,
then it has no jurisdiction to order the registration of the land and
perforce must dismiss the application. 38 (Emphasis ours.)
It is true that petitioner, as the applicant, has the burden of proving that
the subject property is alienable and disposable and its title to the same
is capable of registration. However, we stress that the RTC, when it
issued its Order dated September 7, 2000, had so far heard only the
testimony of Engr. Dorado, the first witness for the petitioner. Petitioner
was no longer afforded the opportunity to present other witnesses and
pieces of evidence in support of its Application. The RTC Order dated
September 7, 2000 – already declaring the subject property as
inalienable public land, over which the RTC has no jurisdiction to order
registration – was evidently premature.
The RTC Order dated September 7, 2000 has not yet become final and
executory as petitioner was able to duly file a Motion for
Reconsideration and Supplemental Motion for Reconsideration of the
same, which the RTC eventually granted in its Order dated December 7,
2000. Admittedly, said motions filed by petitioner did not comply with
certain rules of procedure. Ordinarily, such non-compliance would have
rendered said motions as mere scraps of paper, considered as not
having been filed at all, and unable to toll the reglementary period for an
appeal. However, we find that the exceptional circumstances extant in
the present case warrant the liberal application of the rules.
Also, the Motion for Reconsideration and Supplemental Motion for
Reconsideration of the Order dated September 7, 2000 filed by
petitioner did not comply with Section 11, Rule 13 of the Rules of Court,
for these did not include a written explanation why service or filing
thereof was not done personally. Nonetheless, in Maceda v. Encarnacion
de Guzman Vda. de Magpantay,39 citing Solar Team Entertainment, Inc. v.
Ricafort,40 and Musa v. Amor,41 we explained the rationale behind said
rule and the mandatory nature of the same, vis-à-vis the exercise of
discretion by the court in case of non-compliance therewith:
In Solar Team Entertainment, Inc. v. Ricafort, this Court, passing upon
Section 11 of Rule 13 of the Rules of Court, held that a court has the
discretion to consider a pleading or paper as not filed if said rule is not
complied with.
Personal service and filing are preferred for obvious reasons. Plainly,
such should expedite action or resolution on a pleading, motion or other
paper; and conversely, minimize, if not eliminate, delays likely to be
incurred if service or filing is done by mail, considering the inefficiency
of the postal service. Likewise, personal service will do away with the
practice of some lawyers who, wanting to appear clever, resort to the
following less than ethical practices: (1) serving or filing pleadings by
mail to catch opposing counsel off-guard, thus leaving the latter with
little or no time to prepare, for instance, responsive pleadings or an
opposition; or (2) upon receiving notice from the post office that the
registered containing the pleading of or other paper from the adverse
party may be claimed, unduly procrastinating before claiming the parcel,
or, worse, not claiming it at all, thereby causing undue delay in the
disposition of such pleading or other papers.
If only to underscore the mandatory nature of this innovation to our set
of adjective rules requiring personal service whenever practicable,
Section 11 of Rule 13 then gives the court the discretion to consider a
pleading or paper as not filed if the other modes of service or filing
were not resorted to and no written explanation was made as to why
personal service was not done in the first place. The exercise of
discretion must, necessarily consider the practicability of personal
service, for Section 11 itself begins with the clause "whenever
practicable."
We thus take this opportunity to clarify that under Section 11, Rule 13 of
the 1997 Rules of Civil Procedure, personal service and filing is the
general rule, and resort to other modes of service and filing, the
exception. Henceforth, whenever personal service or filing is
practicable, in the light of the circumstances of time, place and person,
personal service or filing is mandatory. Only when personal service or
filing is not practicable may resort to other modes be had, which must
then be accompanied by a written explanation as to why personal
service or filing was not practicable to begin with. In adjudging the
plausibility of an explanation, a court shall likewise consider the
importance of the subject matter of the case or the issues involved
therein, and the prima facie merit of the pleading sought to be expunged
for violation of Section 11.
In Musa v. Amor, this Court, on noting the impracticality of personal
service, exercised its discretion and liberally applied Section 11 of Rule
13:
As [Section 11, Rule 13 of the Rules of Court] requires, service and filing
of pleadings must be done personally whenever practicable. The court
notes that in the present case, personal service would not be
practicable. Considering the distance between the Court of Appeals and
Donsol, Sorsogon where the petition was posted, clearly, service by
registered mail [sic] would have entailed considerable time, effort and
expense. A written explanation why service was not done personally
might have been superfluous. In any case, as the rule is so worded with
the use of "may," signifying permissiveness, a violation thereof gives the
court discretion whether or not to consider the paper as not filed. While
it is true that procedural rules are necessary to secure an orderly and
speedy administration of justice, rigid application of Section 11, Rule 13
may be relaxed in this case in the interest of substantial justice.
In the case at bar, the address of respondent’s counsel is Lopez,
Quezon, while petitioner Sonia’s counsel’s is Lucena City. Lopez, Quezon
is 83 kilometers away from Lucena City. Such distance makes personal
service impracticable. As in Musa v. Amor, a written explanation why
service was not done personally "might have been
superfluous."42 (Emphases supplied and citations omitted.)
Our ruling in the above-cited cases is relevant to the instant case.
Counsel for petitioner holds office in Dumaguete City, Negros Oriental, in
the Visayas; while counsel for respondent holds office in Quezon City,
Metro Manila, in Luzon. Given the considerable distance between the
offices of these two counsels, personal service of pleadings and motions
by one upon the other was clearly not practicable and a written
explanation as to why personal service was not done would only be
superfluous.43 In addition, we refer once more to the merits of the
Motion for Reconsideration and Supplemental Motion for
Reconsideration of the RTC Order dated September 7, 2000 filed by
petitioner, which justify the liberal interpretation of Section 11, Rule 13 of
the Rules of Court in this case.1avvphi1
Jurisprudence confirms that the requirements laid down in Sections 4,
5, and 6, Rule 15 of the Rules of Court that the notice of hearing shall be
directed to the parties concerned, and shall state the time and place for
the hearing of the motion, are mandatory. If not religiously complied
with, they render the motion pro forma. As such, the motion is a useless
piece of paper that will not toll the running of the prescriptive period. 44
Yet, again, there were previous cases with peculiar circumstances that
had compelled us to liberally apply the rules on notice of hearing and
recognize substantial compliance with the same. Once such case is
Philippine National Bank v. Paneda,45 where we adjudged:
Thus, even if the Motion may be defective for failure to address the
notice of hearing of said motion to the parties concerned, the defect
was cured by the court's taking cognizance thereof and the fact that the
adverse party was otherwise notified of the existence of said pleading.
There is substantial compliance with the foregoing rules if a copy of the
said motion for reconsideration was furnished to the counsel of herein
private respondents.
In the present case, records reveal that the notices in the Motion were
addressed to the respective counsels of the private respondents and
they were duly furnished with copies of the same as shown by the
receipts signed by their staff or agents.
Consequently, the Court finds that the petitioner substantially complied
with the pertinent provisions of the Rules of Court and existing
jurisprudence on the requirements of motions and
pleadings.46 (Emphasis supplied.)
It was not refuted that petitioner furnished respondent and respondent
actually received copies of the Motion for Reconsideration, as well as
the Supplemental Motion for Reconsideration of the RTC Order dated
September 7, 2000 filed by petitioner. As a result, respondent was able
to file its Oppositions to the said Motions. The RTC, in issuing its Order
dated December 7, 2000, was able to consider the arguments presented
by both sides. Hence, there was substantial compliance by petitioner
with the rules on notice of hearing for its Motion for Reconsideration
and Supplemental Motion for Reconsideration of the RTC Order dated
September 7, 2000. Respondent cannot claim that it was deprived of the
opportunity to be heard on its opposition to said Motions.
In view of the foregoing circumstances, the RTC judiciously, rather than
abusively or arbitrarily, exercised its discretion when it subsequently
issued the Order dated December 7, 2000, setting aside its Order dated
September 7, 2000 and proceeding with the trial in LRC Case No. N-201.
WHEREFORE, the instant Petition for Review of petitioner City of
Dumaguete is hereby GRANTED. The Decision dated March 4, 2005 and
Resolution dated June 6, 2005 of the Court Appeals in CA-G.R. SP No.
64379 are SET ASIDE, and the Orders dated December 7, 2000 and
February 20, 2001 of Branch 44 of the Regional Trial Court of the City of
Dumaguete in LRC Case No. N-201 are REINSTATED. The said trial court is
DIRECTED to proceed with the hearing of LRC Case No. N-201 with
dispatch.
G.R. No. 178789 November 14, 2012
NATIVIDAD LIM, Petitioner,
vs.
NATIONAL POWER CORPORATION, SPOUSES ROBERTO LL. ARCINUE
and ARABELA ARCINUE,Respondents.
DECISION
ABAD, J.:
This case is about the consequence of a party's failure to explain in his
motion why he served a copy of it on the adverse party by registered
mail rather than by personal service.
The Facts and the Case
On February 8, 1995 respondent National Power Corporation (NPC) filed
an expropriation suit1 against petitioner Natividad B. Lim (Lim) before the
Regional Trial Court (RTC) of Lingayen, Pangasinan, Branch 37 in Civil
Case 17352 covering Lots 2373 and 2374 that the NPC needed for its
Sual Coal-Fired Thermal Power Project. Since Lim was residing in the
United States, the court caused the service of summons on her on
February 20, 1995 through her tenant, a certain Wilfredo
Tabongbong.2 On March 1, 1995, upon notice to Lim and the deposit of the
provisional value of the property, the RTC ordered the issued writ of
possession in NPC’s favor that would enable it to cause the removal of
Lim from the land.3
On April 24, 1995, however, Lim, represented by her husband Delfin, filed
an omnibus motion to dismiss the action and to suspend the writ of
possession,4 questioning the RTC’s jurisdiction over Lim’s person and the
nature of the action. She also assailed the failure of the complaint to
state a cause of action. The RTC denied the motions.5
On December 6, 1996 respondent spouses Roberto and Arabela Arcinue
(the Arcinues) filed a motion for leave to admit complaint in
intervention,6 alleging that they owned and were in possession of Lot
2374, one of the two lots subject of the expropriation. On January 7,
1997 the RTC granted the Arcinues’ motion and required both the NPC
and Lim to answer the complaint-in-intervention within 10 days from
receipt of its order. 7
When Lim and the NPC still did not file their answers to the complaint-in-
intervention after 10 months, on December 7, 1998 the Arcinues filed a
motion for judgment by default. 8 Lim sought to expunge the motion on
the ground that it lacked the requisite explanation why the Arcinues
resorted to service by registered mail rather than to personal service.
At the scheduled hearing of the motion, Lim’s counsel did not appear.
The NPC for its part manifested that it did not file an answer since its
interest lay in determining who was entitled to just compensation.
On March 1, 1999 the RTC issued an order of default9 against both Lim
and the NPC. The RTC pointed out that the Arcinues’ failure to explain
their resort to service by registered mail had already been cured by the
manifestation of Lim’s counsel that he received a copy of the Arcinues’
motion on December 7, 1998 or 10 days before its scheduled hearing.
Lim filed a motion for reconsideration10 to lift the default order but the
Court denied the motion,11 prompting Lim to file a petition for
certiorari12 before the Court of Appeals (CA) in CA-G.R. SP 52842.
On March 23, 2007 the CA rendered a decision 13 that affirmed the RTC’s
order of default. Lim filed a motion for reconsideration14 but the CA
denied it,15 prompting her to file the present petition for review. 16 On
September 24, 2007 the Court initially denied Lim’s petition 17 but on
motion for reconsideration, the Court reinstated the same. 18
Issue Presented
The only issue presented in this case is whether or not the CA gravely
abused its discretion in affirming the order of default that the RTC
entered against Lim.
Ruling of the Court
Lim points out that an answer-in-intervention cannot give rise to default
since the filing of such an answer is only permissive. But Section 4, Rule
1919 of the 1997 Rules of Civil Procedure requires the original parties to
file an answer to the complaint-in-intervention within 15 days from
notice of the order admitting the same, unless a different period is fixed
by the court. This changes the procedure under the former rule where
such an answer was regarded as optional.20 Thus, Lim’s failure to file the
required answer can give rise to default.
The trial court had been liberal with Lim. It considered her motion for
reconsideration as a motion to lift the order of default and gave her an
opportunity to explain her side. The court set her motion for hearing but
Lim’s counsel did not show up in court. She remained unable to show
that her failure to file the required answer was due to fraud, accident,
mistake, or excusable negligence. And, although she claimed that she
had a meritorious defense, she was unable to specify what constituted
such defense.21
Lim points out that the RTC should have ordered the Arcinues’ motion
for judgment by default expunged from the records since it lacked the
requisite explanation as to why they resorted to service by registered
mail in place of personal service.
There is no question that the Arcinues’ motion failed to comply with the
requirement of Section 11, Rule 13 of the 1997 Rules of Civil Procedure
which provides:
SECTION 11. Priorities in modes of service and filing. — Whenever
practicable, the service and filing of pleadings and other papers shall be
done personally. Except with respect to papers emanating from the
court, a resort to other modes must be accompanied by a written
explanation, why the service or filing was not done personally. A
violation of this Rule may be cause to consider the paper as not filed.
But the above does not provide for automatic sanction should a party
fail to submit the required explanation. It merely provides for that
possibility considering its use of the term "may." The question is
whether or not the RTC gravely abused its discretion in not going for the
sanction of striking out the erring motion. 1âwphi1
The Court finds no such grave abuse of discretion here. As the RTC
pointed out, notwithstanding that the Arcinues' failed to explain their
resort to service by registered mail rather than by personal service,
the fact is that Lim's counsel expressly admitted having received a copy
of the Arcinues' motion for judgment by default on December 7, 1998 or I
0 days before its scheduled hearing. This means that the Arcinues were
diligent enough to file their motion by registered mail long before the
scheduled hearing.
Personal service is required precisely because it often happens that
hearings do not push through because, while a copy of the motion may
have been served by registered mail before the date of the hearing,
such is received by the adverse party already after the hearing. Thus,
the rules prefer personal service. But it does not altogether prohibit
service by registered mail when such service, when adopted, ensures as
in this case receipt by the adverse party.
WHEREFORE, the Court DENIES the petition and AFFIRMS the Court of
Appeals Decision in CA-G.R. SP 52842 dated March 23, 2007 and
Resolution dated July 5, 2007 that upheld the orders of the Regional
Trial Court in Civil Case 17352. The Court DIRECTS the RTC to proceed
with its hearing and adjudication of the case.
MARTIN PEÑOSO and ELIZABETH PEÑOSO, Petitioners, v.MACROSMAN
DONA, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court assailing the Resolution1 dated March 22, 2002
promulgated by the Court of Appeals (CA) in CA-G.R. SP No. 69472, which
dismissed the appeal before it because Martin Peñoso and his mother
Elizabeth Peñoso (petitioners) failed to submit a written explanation why
service of pleading was not done personally as required under Section 11
of Rule 13 of the Rules of Court and to pay the requisite docket fees; and,
the CA Resolution2 dated June 3, 2002 which denied petitioners' Motion
for Reconsideration.
This case originated from a Complaint for Abatement of Nuisance filed
with the Municipal Trial Court (MTC), Branch No. 001, San Jose,
Occidental Mindoro, by Macrosman Dona (respondent) against the
petitioners, which was tried and decided under the Rule on Summary
Procedure. Respondent alleged that he is the owner of a house and lot
located at San Jose, Occidental Mindoro; that in front of the house and
lot is a barangay road where the petitioners constructed their house
against the objections of the respondent; and that the house of the
petitioners constituted a public nuisance.
The petitioners, in their defense, contended that their house was
constructed by the late Praxido Peñoso, Martin's father and Elizabeth's
husband, way ahead before the respondent arrived; that their house
constitutes no public nuisance; that the respondent cannot demand a
right of way; that the continued existence of their house brings no harm
to the respondent; and that the respondent is not authorized to file the
instant Complaint.
On October 1, 1997, the MTC rendered its Decision, in favor of the
petitioners and against the respondent on the ground that respondent
has no cause of action against the petitioners. It ordered the dismissal
of the complaint on the ground that the house in question was
constructed on a public property which "may be abated only by the
Municipal Mayor, unless it is specially injurious to a private person;" and
the respondent to pay petitioners P10,000.00 by way of attorney's fee.3
Respondent appealed the Decision of the MTC to the RTC, docketed as
Civil Case No. R-1061.
On January 2, 2002, the RTC rendered its Decision reversing the MTC.
The RTC declared the house erected by the petitioners on a portion of
the road fronting the house of the respondent as a nuisance; ordered
the petitioners to immediately remove the said house at their own
expense; ordered the petitioners to jointly and severally pay plaintiff-
appellant the amount of P20,000.00, as and for reasonable attorney's
fees; and, ordered the petitioners to pay respondent P5,000.00 as
litigation expenses and to pay the costs of this suit. 4
On January 21, 2002, the RTC denied the petitioners' Motion for
Reconsideration.
Petitioners filed a Petition for Review with the CA. On March 22, 2002,
the CA issued a Resolution dismissing the Petition, to wit:
For failure of the petitioners to include in their petition the required
explanation on why personal service upon the respondent was not
resorted to pursuant to Sec. 11, Rule 13 of the 1997 Rules of Civil
Procedure, as amended, the herein petition is hereby DISMISSED
OUTRIGHT. Strict compliance with this rule is mandated. (Solar Team
Entertainment, Inc. v. Hon. Helen Bautista-Ricafort, et al., 293 SCRA 661).
Moreover, payment of the required docketing and other legal fees is
short by P530.00.
SO ORDERED.5 (emphasis in the original)
On May 16, 2002, a Motion for Reconsideration was filed by the
petitioners attaching a Certification dated April 15, 2002 from the
Postmaster that the pleading in question had been actually received by
the respondent as well as a Letter dated February 12, 2002 to the CA
Clerk of Court stating that if the docket fee is insufficient, counsel for
the petitioners shall remit the balance immediately, if any. But on June
3, 2002, the CA issued another Resolution which states:
Petitioners' motion for reconsideration is hereby DENIED, for lack of
merit. Petitioners' subsequent compliance with the RULES does not
cleanse the petition of its infirmity.
Atty. Ma. Conchita Lucero-De Mesa is hereby ordered to RETURN the
two (2) Postal Money Orders for P530.00 to the petitioners.
SO ORDERED.6 (emphasis in the original)
Hence, the instant Petition averring that the CA erred in dismissing the
petition on the following grounds:
A.
Failure of the petitioners to include in their petition the required
explanation on why personal service upon the respondent was not
resorted to pursuant to Section 11, rule 13, of the 1997 Rules of Civil
Procedure;
B.
Payment of the required docketing and other legal fees is short by
P520.00. 7
The petition has merit.
Section 11, Rule 13 of the Rules of Court provides:
Sec. 11. Priorities in modes of service and filing. - Whenever practicable,
the service and filing of pleadings and other papers shall be done
personally. Except with respect to papers emanating from the court, a
resort to other modes must be accompanied by a written explanation
why the service or filing was not done personally. A violation of this Rule
may be cause to consider the paper as not filed.
Jurisprudence holds that the rule that a pleading must be accompanied
by a written explanation why the service or filing was not done
personally is mandatory.8
However, in Ello v. Court of Appeals,9 the Court defined the
circumstances when the court may exercise its discretionary power
under Section 11 of Rule 13, viz:
However, such discretionary power of the court must be exercised
properly and reasonably, taking into account the following factors: (1)
"the practicability of personal service;" (2) "the importance of the
subject matter of the case or the issues involved therein;" and (3)
"the prima facie merit of the pleading sought to be expunged for
violation of Section 11. x x x"10
Considering the prima facie merit of the pleading involving the issues
whether the petitioners' house is a public nuisance; whether the subject
house is constructed on an abandoned road; and whether the alleged
nuisance is specially injurious to respondent; and, considering further
the fact that the MTC and the RTC decisions are conflicting, the CA had
valid grounds to refrain from dismissing the appeal solely on technical
grounds.11
As the Court has expounded in Aguam v. Court of Appeals:12
The court has the discretion to dismiss or not to dismiss an appellant's
appeal. It is a power conferred on the court, not a duty. The "discretion
must be a sound one, to be exercised in accordance with the tenets of
justice and fair play, having in mind the circumstances obtaining in each
case." Technicalities, however, must be
avoided.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
The law abhors technicalities that impede the cause of justice. The
court's primary duty is to render or dispense justice. "A litigation is not
a game of technicalities." "Lawsuits unlike duels are not to be won by a
rapier's thrust. Technicality, when it deserts its proper office as an aid
to justice and becomes its great hindrance and chief enemy, deserves
scant consideration from courts." Litigations must be decided on their
merits and not on technicality. Every party litigant must be afforded the
amplest opportunity for the proper and just determination of his cause,
free from the unacceptable plea of technicalities. Thus, dismissal of
appeals purely on technical grounds is frowned upon where the
policy of the court is to encourage hearings of appeals on their
merits and the rules of procedure ought not to be applied in a very
rigid, technical sense; rules of procedure are used only to help
secure, not override substantial justice. It is a far better and more
prudent course of action for the court to excuse a technical lapse
and afford the parties a review of the case on appeal to attain the
ends of justice rather than dispose of the case on technicality and
cause a grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if
not a miscarriage of justice.13 (Emphasis supplied)cralawlibrary
In Ginete v. Court of Appeals,14 the Court further held:
Let it be emphasized that the rules of procedure should be viewed as
mere tools designed to facilitate the attainment of justice. Their strict
and rigid application, which would result in technicalities that tend to
frustrate rather than promote substantial justice, must always be
eschewed. Even the Rules of Court reflect this principle. The power to
suspend or even disregard rules can be so pervasive and compelling as
to alter even that which this Court itself has already declared to be final,
as we are now constrained to do in the instant case.
x x x
The emerging trend in the rulings of this Court is to afford every party
litigant the amplest opportunity for the proper and just determination of
his cause, free from the constraints of technicalities. Time and again,
this Court has consistently held that rules must not be applied rigidly so
as not to override substantial justice.15 (Emphasis supplied)cralawlibrary
Rules of procedure being designed to facilitate the attainment of justice,
their rigid application resulting in technicalities that tend to delay or
frustrate rather than promote substantial justice, must always be
avoided.16
In Philippine Amusement and Gaming Corporation v. Angara,17 this Court
held:
While it is true that rules of procedure are intended to promote rather
than frustrate the ends of justice, and the swift unclogging of court
dockets is a laudable objective, it nevertheless must not be met at the
expense of substantial justice. Time and again, this Court has reiterated
the doctrine that the rules of procedure are mere tools intended to
facilitate the attainment of justice, rather than frustrate it. A strict and
rigid application of the rules must always be eschewed when it would
subvert the primary objective of the rules, that is, to enhance fair trials
and expedite justice. Technicalities should never be used to defeat the
substantive rights of the other party. Every party-litigant must be
afforded the amplest opportunity for the proper and just determination
of his cause, free from the constraints of technicalities. Thus, the CA
should have refrained from hastily dismissing the petition on procedural
flaws.
In similar cases, the Court ordinarily remands the case to the CA for
proper disposition on the merits. However, in the present case,
considering the issues raised and the fact that the records of the case
are before us, the Court deems it more appropriate and practical to
resolve the present controversy in order to avoid further delay. 18
Thus, in view of the foregoing jurisprudential trend to afford every party
litigant the amplest opportunity for a just determination of his case, free
from the severities of technicalities; the prima facie merit of the
pleading; and, especially considering the conflicting rulings of the
MTC and the RTC, the CA erred in dismissing the appeal on mere
technical grounds.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Furthermore, considering the peculiar circumstances of the case, the
shortage of the payment of the docketing fee cannot be used as a
ground for dismissing petitioners' appeal before the CA. It is undisputed
that they and their counsel are living in a remote town and are not
aware of the exact amount of the lawful fees for petitions for review.
Hence, it is understandable why they place sheer reliance on the Rules
of Court, notably, Section 1 of Rule 42, which only specifies the amount
of P500.00 for the appeal cost in question. Petitioners sent P500.00
with a request from the Clerk of Court for notification of any
insufficiency which will be sent immediately if there is any. The
deficiency in payment was not at all intentional. There was a willingness
to comply should any deficiency occur, as stated in their Letter to the
CA Clerk of Court: "Please acknowledge receipt of the amount and if the
amount is insufficient pursuant to Sec. 1, Rule 42 of the Revised Rules of
Court, kindly notify the undersigned and the balance if any will be
immediately sent. Thank you very much." This clearly shows that the
petitioners acted in good faith and substantially complied with the Rules.
In Heirs of Bertuldo Hinog v. Melicor,19 the Court held:
Time and again, the Court has held that the Manchester rule has been
modified in Sun Insurance Office, Ltd. (SIOL) v. Asuncion which defined
the following guidelines involving the payment of docket fees:
x x x
Plainly, while the payment of the prescribed docket fee is a jurisdictional
requirement, even its non-payment at the time of filing does not
automatically cause the dismissal of the case, as long as the fee is paid
within the applicable prescriptive or reglementary period, more so when
the party involved demonstrates a willingness to abide by the rules
prescribing such payment. Thus, when insufficient filing fees were
initially paid by the plaintiffs and there was no intention to defraud
the government, the Manchester rule does not apply.20
In fine, the CA erred in dismissing the Petition for Review outright.
In light of Philippine Amusement and Gaming Corporation v.
Angara,21since the records of the case are not before this Court, a
remand of the case to the CA for proper disposition on the merits is
necessary, bearing in mind the judicial policy to resolve the present
controversy with all dispatch in order to avoid further delay.
WHEREFORE, the instant petition is GRANTED and the assailed
Resolutions of the Court of Appeals are REVERSED and SET ASIDE. The
Court of Appeals is directed to REINSTATE the Petition for Review,
docketed as CA-G.R. SP No. 69472, for further proceedings.
G.R. No. 156759 June 5, 2013
ALLEN A. MACASAET, NICOLAS V. QUIJANO, JR., ISAIAS ALBANO, LILY
REYES, JANET BAY, JESUS R. GALANG, AND RANDY
HAGOS, Petitioners,
vs.
FRANCISCO R. CO, JR., Respondent.
DECISION
BERSAMIN, J.:
To warrant the substituted service of the summons and copy of the
complaint, the serving officer must first attempt to effect the same
upon the defendant in person. Only after the attempt at personal service
has become futile or impossible within a reasonable time may the
officer resort to substituted service.
The Case
Petitioners – defendants in a suit for libel brought by respondent –
appeal the decision promulgated on March 8, 2002 1 and the resolution
promulgated on January 13, 2003,2 whereby the Court of Appeals (CA)
respectively dismissed their petition for certiorari, prohibition and
mandamus and denied their motion for reconsideration. Thereby, the CA
upheld the order the Regional Trial Court (RTC), Branch 51, in Manila had
issued on March 12, 2001 denying their motion to dismiss because the
substituted service of the summons and copies of the complaint on each
of them had been valid and effective. 3
Antecedents
On July 3, 2000, respondent, a retired police officer assigned at the
Western Police District in Manila, sued Abante Tonite, a daily tabloid of
general circulation; its Publisher Allen A. Macasaet; its Managing
Director Nicolas V. Quijano; its Circulation Manager Isaias Albano; its
Editors Janet Bay, Jesus R. Galang and Randy Hagos; and its
Columnist/Reporter Lily Reyes (petitioners), claiming damages because
of an allegedly libelous article petitioners published in the June 6, 2000
issue of Abante Tonite. The suit, docketed as Civil Case No. 00-97907,
was raffled to Branch 51 of the RTC, which in due course issued
summons to be served on each defendant, including Abante Tonite, at
their business address at Monica Publishing Corporation, 301-305 3rd
Floor, BF Condominium Building, Solana Street corner A. Soriano Street,
Intramuros, Manila. 4
In the morning of September 18, 2000, RTC Sheriff Raul Medina
proceeded to the stated address to effect the personal service of the
summons on the defendants. But his efforts to personally serve each
defendant in the address were futile because the defendants were then
out of the office and unavailable. He returned in the afternoon of that
day to make a second attempt at serving the summons, but he was
informed that petitioners were still out of the office. He decided to
resort to substituted service of the summons, and explained why in his
sheriff’s return dated September 22, 2005,5 to wit:
SHERIFF’S RETURN
This is to certify that on September 18, 2000, I caused the service of
summons together with copies of complaint and its annexes attached
thereto, upon the following:
1. Defendant Allen A. Macasaet, President/Publisher of defendant
AbanteTonite, at Monica Publishing Corporation, Rooms 301-305 3rd
Floor, BF Condominium Building, Solana corner A. Soriano Streets,
Intramuros, Manila, thru his secretary Lu-Ann Quijano, a person of
sufficient age and discretion working therein, who signed to
acknowledge receipt thereof. That effort (sic) to serve the said
summons personally upon said defendant were made, but the same
were ineffectual and unavailing on the ground that per information of
Ms. Quijano said defendant is always out and not available, thus,
substituted service was applied;
2. Defendant Nicolas V. Quijano, at the same address, thru his wife Lu-
Ann Quijano, who signed to acknowledge receipt thereof. That effort (sic)
to serve the said summons personally upon said defendant were made,
but the same were ineffectual and unavailing on the ground that per
information of (sic) his wife said defendant is always out and not
available, thus, substituted service was applied;
3. Defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos
and Lily Reyes, at the same address, thru Rene Esleta, Editorial Assistant
of defendant AbanteTonite, a person of sufficient age and discretion
working therein who signed to acknowledge receipt thereof. That effort
(sic) to serve the said summons personally upon said defendants were
made, but the same were ineffectual and unavailing on the ground that
per information of (sic) Mr. Esleta said defendants is (sic) always roving
outside and gathering news, thus, substituted service was applied.
Original copy of summons is therefore, respectfully returned duly
served.
Manila, September 22, 2000.
On October 3, 2000, petitioners moved for the dismissal of the
complaint through counsel’s special appearance in their behalf, alleging
lack of jurisdiction over their persons because of the invalid and
ineffectual substituted service of summons. They contended that the
sheriff had made no prior attempt to serve the summons personally on
each of them in accordance with Section 6 and Section 7, Rule 14 of the
Rules of Court. They further moved to drop Abante Tonite as a defendant
by virtue of its being neither a natural nor a juridical person that could
be impleaded as a party in a civil action.
At the hearing of petitioners’ motion to dismiss, Medina testified that he
had gone to the office address of petitioners in the morning of
September 18, 2000 to personally serve the summons on each
defendant; that petitioners were out of the office at the time; that he had
returned in the afternoon of the same day to again attempt to serve on
each defendant personally but his attempt had still proved futile
because all of petitioners were still out of the office; that some
competent persons working in petitioners’ office had informed him that
Macasaet and Quijano were always out and unavailable, and that Albano,
Bay, Galang, Hagos and Reyes were always out roving to gather news;
and that he had then resorted to substituted service upon realizing the
impossibility of his finding petitioners in person within a reasonable
time.
On March 12, 2001, the RTC denied the motion to dismiss, and directed
petitioners to file their answers to the complaint within the remaining
period allowed by the Rules of Court,6 relevantly stating:
Records show that the summonses were served upon Allen A. Macasaet,
President/Publisher of defendant AbanteTonite, through LuAnn Quijano;
upon defendants Isaias Albano, Janet Bay, Jesus R. Galang, Randy Hagos
and Lily Reyes, through Rene Esleta, Editorial Assistant of defendant
Abante Tonite (p. 12, records). It is apparent in the Sheriff’s Return that
on several occasions, efforts to served (sic) the summons personally
upon all the defendants were ineffectual as they were always out and
unavailable, so the Sheriff served the summons by substituted service.
Considering that summonses cannot be served within a reasonable time
to the persons of all the defendants, hence substituted service of
summonses was validly applied. Secretary of the President who is duly
authorized to receive such document, the wife of the defendant and the
Editorial Assistant of the defendant, were considered competent
persons with sufficient discretion to realize the importance of the legal
papers served upon them and to relay the same to the defendants
named therein (Sec. 7, Rule 14, 1997 Rules of Civil Procedure).
WHEREFORE, in view of the foregoing, the Motion to Dismiss is hereby
DENIED for lack of merit..
Accordingly, defendants are directed to file their Answers to the
complaint within the period still open to them, pursuant to the rules.
SO ORDERED.
Petitioners filed a motion for reconsideration, asserting that the sheriff
had immediately resorted to substituted service of the summons upon
being informed that they were not around to personally receive the
summons, and that Abante Tonite, being neither a natural nor a juridical
person, could not be made a party in the action.
On June 29, 2001, the RTC denied petitioners’ motion for
reconsideration. 7 It stated in respect of the service of summons, as
follows:
The allegations of the defendants that the Sheriff immediately resorted
to substituted service of summons upon them when he was informed
that they were not around to personally receive the same is untenable.
During the hearing of the herein motion, Sheriff Raul Medina of this
Branch of the Court testified that on September 18, 2000 in the morning,
he went to the office address of the defendants to personally serve
summons upon them but they were out. So he went back to serve said
summons upon the defendants in the afternoon of the same day, but
then again he was informed that the defendants were out and
unavailable, and that they were always out because they were roving
around to gather news. Because of that information and because of the
nature of the work of the defendants that they are always on field, so
the sheriff resorted to substituted service of summons. There was
substantial compliance with the rules, considering the difficulty to serve
the summons personally to them because of the nature of their job
which compels them to be always out and unavailable. Additional
matters regarding the service of summons upon defendants were
sufficiently discussed in the Order of this Court dated March 12, 2001.
Regarding the impleading of Abante Tonite as defendant, the RTC held,
viz:
"Abante Tonite" is a daily tabloid of general circulation. People all over
the country could buy a copy of "Abante Tonite" and read it, hence, it is
for public consumption. The persons who organized said publication
obviously derived profit from it. The information written on the said
newspaper will affect the person, natural as well as juridical, who was
stated or implicated in the news. All of these facts imply that "Abante
Tonite" falls within the provision of Art. 44 (2 or 3), New Civil Code.
Assuming arguendo that "Abante Tonite" is not registered with the
Securities and Exchange Commission, it is deemed a corporation by
estoppels considering that it possesses attributes of a juridical person,
otherwise it cannot be held liable for damages and injuries it may inflict
to other persons.
Undaunted, petitioners brought a petition for certiorari, prohibition,
mandamusin the CA to nullify the orders of the RTC dated March 12, 2001
and June 29, 2001.
Ruling of the CA
On March 8, 2002, the CA promulgated its questioned
decision,8 dismissing the petition for certiorari, prohibition, mandamus,
to wit:
We find petitioners’ argument without merit. The rule is that certiorari
will prosper only if there is a showing of grave abuse of discretion or an
act without or in excess of jurisdiction committed by the respondent
Judge. A judicious reading of the questioned orders of respondent Judge
would show that the same were not issued in a capricious or whimsical
exercise of judgment. There are factual bases and legal justification for
the assailed orders. From the Return, the sheriff certified that "effort to
serve the summons personally xxx were made, but the same were
ineffectual and unavailing xxx.
and upholding the trial court’s finding that there was a substantial
compliance with the rules that allowed the substituted service.
Furthermore, the CA ruled:
Anent the issue raised by petitioners that "Abante Tonite is neither a
natural or juridical person who may be a party in a civil case," and
therefore the case against it must be dismissed and/or dropped, is
untenable.
The respondent Judge, in denying petitioners’ motion for
reconsideration, held that:
xxxx
Abante Tonite’s newspapers are circulated nationwide, showing
ostensibly its being a corporate entity, thus the doctrine of corporation
by estoppel may appropriately apply.
An unincorporated association, which represents itself to be a
corporation, will be estopped from denying its corporate capacity in a
suit against it by a third person who relies in good faith on such
representation.
There being no grave abuse of discretion committed by the respondent
Judge in the exercise of his jurisdiction, the relief of prohibition is also
unavailable.
WHEREFORE, the instant petition is DENIED. The assailed Orders of
respondent Judge are AFFIRMED.
SO ORDERED.9
On January 13, 2003, the CA denied petitioners’ motion for
reconsideration.10
Issues
Petitioners hereby submit that:
1. THE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN HOLDING THAT
THE TRIAL COURT ACQUIRED JURISDICTION OVER HEREIN PETITIONERS.
2. THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR BY
SUSTAINING THE INCLUSION OF ABANTE TONITE AS PARTY IN THE INSTANT
CASE.11
Ruling
The petition for review lacks merit.
Jurisdiction over the person, or jurisdiction in personam –the power of
the court to render a personal judgment or to subject the parties in a
particular action to the judgment and other rulings rendered in the
action – is an element of due process that is essential in all actions, civil
as well as criminal, except in actions in rem or quasi in rem. Jurisdiction
over the defendantin an action in rem or quasi in rem is not required,
and the court acquires jurisdiction over an actionas long as it acquires
jurisdiction over the resthat is thesubject matter of the action. The
purpose of summons in such action is not the acquisition of jurisdiction
over the defendant but mainly to satisfy the constitutional requirement
of due process.12
The distinctions that need to be perceived between an action in
personam, on the one hand, and an action inrem or quasi in rem, on the
other hand, are aptly delineated in Domagas v. Jensen,13 thusly:
The settled rule is that the aim and object of an action determine its
character. Whether a proceeding is in rem, or in personam, or quasi in
rem for that matter, is determined by its nature and purpose, and by
these only. A proceeding in personam is a proceeding to enforce
personal rights and obligations brought against the person and is based
on the jurisdiction of the person, although it may involve his right to, or
the exercise of ownership of, specific property, or seek to compel him to
control or dispose of it in accordance with the mandate of the court. The
purpose of a proceeding in personam is to impose, through the judgment
of a court, some responsibility or liability directly upon the person of the
defendant. Of this character are suits to compel a defendant to
specifically perform some act or actions to fasten a pecuniary liability
on him. An action in personam is said to be one which has for its object
a judgment against the person, as distinguished from a judgment against
the property to determine its state. It has been held that an action in
personam is a proceeding to enforce personal rights or obligations;
such action is brought against the person. As far as suits for injunctive
relief are concerned, it is well-settled that it is an injunctive act in
personam. In Combs v. Combs, the appellate court held that proceedings
to enforce personal rights and obligations and in which personal
judgments are rendered adjusting the rights and obligations between
the affected parties is in personam. Actions for recovery of real
property are in personam.
On the other hand, a proceeding quasi in rem is one brought against
persons seeking to subject the property of such persons to the
discharge of the claims assailed. In an action quasi in rem, an individual
is named as defendant and the purpose of the proceeding is to subject
his interests therein to the obligation or loan burdening the property.
Actions quasi in rem deal with the status, ownership or liability of a
particular property but which are intended to operate on these
questions only as between the particular parties to the proceedings and
not to ascertain or cut off the rights or interests of all possible
claimants. The judgments therein are binding only upon the parties who
joined in the action.
As a rule, Philippine courts cannot try any case against a defendant who
does not reside and is not found in the Philippines because of the
impossibility of acquiring jurisdiction over his person unless he
voluntarily appears in court; but when the case is an action in rem or
quasi in rem enumerated in Section 15, Rule 14 of the Rules of Court,
Philippine courts have jurisdiction to hear and decide the case because
they have jurisdiction over the res, and jurisdiction over the person of
the non-resident defendant is not essential. In the latter instance,
extraterritorial service of summons can be made upon the defendant,
and such extraterritorial service of summons is not for the purpose of
vesting the court with jurisdiction, but for the purpose of complying with
the requirements of fair play or due process, so that the defendant will
be informed of the pendency of the action against him and the possibility
that property in the Philippines belonging to him or in which he has an
interest may be subjected to a judgment in favor of the plaintiff, and he
can thereby take steps to protect his interest if he is so minded. On the
other hand, when the defendant in an action in personam does not
reside and is not found in the Philippines, our courts cannot try the case
against him because of the impossibility of acquiring jurisdiction over
his person unless he voluntarily appears in court. 14
As the initiating party, the plaintiff in a civil action voluntarily submits
himself to the jurisdiction of the court by the act of filing the initiatory
pleading. As to the defendant, the court acquires jurisdiction over his
person either by the proper service of the summons, or by a voluntary
appearance in the action.15
Upon the filing of the complaint and the payment of the requisite legal
fees, the clerk of court forthwith issues the corresponding summons to
the defendant.16 The summons is directed to the defendant and signed by
the clerk of court under seal. It contains the name of the court and the
names of the parties to the action; a direction that the defendant
answers within the time fixed by the Rules of Court; and a notice that
unless the defendant so answers, the plaintiff will take judgment by
default and may be granted the relief applied for. 17 To be attached to the
original copy of the summons and all copies thereof is a copy of the
complaint (and its attachments, if any) and the order, if any, for the
appointment of a guardian ad litem.18
The significance of the proper service of the summons on the defendant
in an action in personam cannot be overemphasized. The service of the
summons fulfills two fundamental objectives, namely: (a) to vest in the
court jurisdiction over the person of the defendant; and (b) to afford to
the defendant the opportunity to be heard on the claim brought against
him.19 As to the former, when jurisdiction in personam is not acquired in
a civil action through the proper service of the summons or upon a valid
waiver of such proper service, the ensuing trial and judgment are
void.20 If the defendant knowingly does an act inconsistent with the right
to object to the lack of personal jurisdiction as to him, like voluntarily
appearing in the action, he is deemed to have submitted himself to the
jurisdiction of the court.21 As to the latter, the essence of due process
lies in the reasonable opportunity to be heard and to submit any
evidence the defendant may have in support of his defense. With the
proper service of the summons being intended to afford to him the
opportunity to be heard on the claim against him, he may also waive the
process.21 In other words, compliance with the rules regarding the
service of the summons is as much an issue of due process as it is of
jurisdiction.23
Under the Rules of Court, the service of the summons should firstly be
effected on the defendant himself whenever practicable. Such personal
service consists either in handing a copy of the summons to the
defendant in person, or, if the defendant refuses to receive and sign for
it, in tendering it to him.24 The rule on personal service is to be rigidly
enforced in order to ensure the realization of the two fundamental
objectives earlier mentioned. If, for justifiable reasons, the defendant
cannot be served in person within a reasonable time, the service of the
summons may then be effected either (a) by leaving a copy of the
summons at his residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copy at his office
or regular place of business with some competent person in charge
thereof.25 The latter mode of service is known as substituted service
because the service of the summons on the defendant is made through
his substitute.
It is no longer debatable that the statutory requirements of substituted
service must be followed strictly, faithfully and fully, and any substituted
service other than that authorized by statute is considered
ineffective.26 This is because substituted service, being in derogation of
the usual method of service, is extraordinary in character and may be
used only as prescribed and in the circumstances authorized by
statute.27 Only when the defendant cannot be served personally within a
reasonable time may substituted service be resorted to. Hence, the
impossibility of prompt personal service should be shown by stating the
efforts made to find the defendant himself and the fact that such efforts
failed, which statement should be found in the proof of service or
sheriff’s return.28 Nonetheless, the requisite showing of the impossibility
of prompt personal service as basis for resorting to substituted service
may be waived by the defendant either expressly or impliedly. 29
There is no question that Sheriff Medina twice attempted to serve the
summons upon each of petitioners in person at their office address, the
first in the morning of September 18, 2000 and the second in the
afternoon of the same date. Each attempt failed because Macasaet and
Quijano were "always out and not available" and the other petitioners
were "always roving outside and gathering news." After Medina learned
from those present in the office address on his second attempt that
there was no likelihood of any of petitioners going to the office during
the business hours of that or any other day, he concluded that further
attempts to serve them in person within a reasonable time would be
futile. The circumstances fully warranted his conclusion. He was not
expected or required as the serving officer to effect personal service by
all means and at all times, considering that he was expressly authorized
to resort to substituted service should he be unable to effect the
personal service within a reasonable time. In that regard, what was a
reasonable time was dependent on the circumstances obtaining. While
we are strict in insisting on personal service on the defendant, we do
not cling to such strictness should the circumstances already justify
substituted service instead. It is the spirit of the procedural rules, not
their letter, that governs.30
In reality, petitioners’ insistence on personal service by the serving
officer was demonstrably superfluous. They had actually received the
summonses served through their substitutes, as borne out by their filing
of several pleadings in the RTC, including an answer with compulsory
counterclaim ad cautelam and a pre-trial brief ad cautelam. They had
also availed themselves of the modes of discovery available under the
Rules of Court. Such acts evinced their voluntary appearance in the
action.
Nor can we sustain petitioners’ contention that Abante Tonite could not
be sued as a defendant due to its not being either a natural or a juridical
person. In rejecting their contention, the CA categorized Abante Tonite
as a corporation by estoppel as the result of its having represented
itself to the reading public as a corporation despite its not being
incorporated. Thereby, the CA concluded that the RTC did not gravely
abuse its discretion in holding that the non-incorporation of Abante
Tonite with the Securities and Exchange Commission was of no
consequence, for, otherwise, whoever of the public who would suffer any
damage from the publication of articles in the pages of its tabloids
would be left without recourse. We cannot disagree with the CA,
considering that the editorial box of the daily tabloid disclosed that
basis, nothing in the box indicated that Monica Publishing Corporation
had owned Abante Tonite.
WHEREFORE, the Court AFFIRMS the decision promulgated on March 8,
2002; and ORDERS petitioners to pay the costs of suit.
.R. No. 156162 June 22, 2015
CCC INSURANCE CORPORATION, Petitioner,
vs.
KAWASAKI STEEL CORPORATION, F.F. MAÑACOP CONSTRUCTION CO.,
INC., and FLORANTE F. MAÑACOP, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Assailed in this Petition for Review on Certiorari are: (1) the
Decision1 dated May 30, 2002 of the Court of Appeals in CA-G.R. CV No.
54066, which reversed and set aside the Decision2 dated May 2, 1996 of
the Regional Trial Court (RTC), Makati City, Branch 66, and held
petitioner CCC Insurance Corporation (CCCIC) liable under its Surety
and Performance Bonds to respondent Kawasaki Steel Corporation
(Kawasaki); and (2) the Resolution3 dated November 14, 2002 of the
appellate court in the same case which denied the Motion for
Reconsideration of CCCIC.
The antecedents of this case are as follows:
On August 16, 1988, Kawasaki, represented by its Manager, Yoshimitsu
Hosoya, and F .F. Mañacop Construction Company, Inc. (FFMCCI),
represented by its President, Florante F. Mañacop (Mañacop ), executed
a Consortium Agreement for Pangasinan Fishing Port Network Project
(Consortium Agreement).4 Kawasaki and FFMCCI formed a consortium
(Kawasaki-FFMCCI Consortium) for the purpose of contracting with the
Philippine Government for the construction of a fishing port network in
Pangasinan (Project). According to their Consortium Agreement,
Kawasaki and FFMCIA undertook to perform and accomplish their
respective and specific portions of work in the intended contract with
the Philippine Government.5
The Project was awarded to the Kawasaki-FFMCCI Consortium for the
contract price of ₱62,000,441.00, 33 .3 7% of which or
₱20,692,026.00 was the price of work of FFMCCI. On October 4, 1988,
the Republic of the Philippines (Republic), through the Department of
Public Works and Highways (DPWH), represented by former Secretary
Romulo M. del Rosario, as owner, and the Kawasaki-FFMCCI Consortium,
represented by Shigeru Kohda, as contractor, entered into a Contract
Agreement entitled Stage I-A Construction of Pangasinan Fishing Port
Network (Construction Contract).6
In accordance with Article 10 of the Consortium
Agreement,7 "Consortium Leader" Kawasaki, on behalf of the
Consortium, secured from the Philippine Commercial International Bank
(PCIB) Letter of Credit No. 38-001-1836178in the amount of
₱6,200,044.10 in favor of DPWH, available from September 9, 1988 to
November 19, 1990. Said Letter of Credit guaranteed the faithful
performance by Kawasaki-FFMCCI Consortium of its obligation under the
Construction Contract.
The Republic made an advance payment for the Project to the Kawasaki-
FFMCCI Consortium in the amount of ₱9,300,066.15, representing 15%
of the contract price of: ₱62,000,441.00.
For the release of its share in the advance payment made by the
Republic, and also pursuant to Article 10 of the Consortium Agreement,
FFMCCI secured from CCCIC the following bonds in favor of Kawasaki: (a)
Surety Bond No. B-88/111919 in the amount of ₱3,103,803.90 (equivalent
to 15% of the price of work of FFMCCI), effective from October 26, 1988
to October 26, 1989, to counter guarantee the amount of advance
payment FFMCCI would receive from Kawasaki; and (b) Performance
Bond B-88/1119310 in the amount of ₱2,069,202.60 (equivalent to 10% of
the price of work of FFMCCI), effective from October 27, 1988 to October
27, 1989, to guarantee completion by FFMCCI of its scope of work in the
Project. In turn, FFMCCI and Mañacop executed two Indemnity
Agreements11promising to compensate CCCIC for any damages the
insurance company might incur from issuing the Surety and
Performance Bonds.
In two letters dated October 27, 1998,12 FFMCCI submitted the Surety and
Performance Bonds to Kawasaki and requested Kawasaki to release the
advance payment in the amount of ₱3,103,803.90. FFMCCI eventually
received the amount of advance payment it requested on a staggered
basis.13
The Project commenced in November 1988. 14 Sometime in April 1989,
FFMCCI ceased performing its work in the Project after suffering
financial problems and/or business reverses. After discussions,
Kawasaki and FFMCCI then executed a new Agreement 15 on August 24,
1989 wherein Kawasaki recognized the "Completed Portion of Work" of
FFMCCI as of April 25, 1989, and agreed to take over the unfinished
portion of work of FFMCCI, referred to as "Transferred Portion of Work."
Kawasaki and FFMCCI further agreed that "[a]ny profit or benefit arising
from the performance by [Kawasaki] of the Transferred Portion of Work
shall accrue to [Kawasaki]."
In a letter dated September 14, 1989,16 Kawasaki informed CCCIC about
the cessation of operations of FFMCCI, and the failure of FFMCCI to
perform its obligations in the Project and repay the advance payment
made by Kawasaki. Consequently, Kawasaki formally demanded that
CCCIC, as surety, pay Kawasaki the amounts covered by the Surety and
Performance Bonds. Because CCCIC did not act upon its demand,
Kawasaki filed on November 6, 1989 before the RTC a Complaint 17 against
CCCIC to collect on Surety Bond No. B-88/11191 and Performance Bond
No. B-88/11193.
In its Answer with Counterclaims,18 CCCIC denied any liability on its
Surety and Performance Bonds on the following grounds: (a) the rights
of Kawasaki under the Surety and Performance Bonds had not yet
accrued since the said Bonds were mere counter-guarantees, for which
CCCIC could only be held liable upon the filing of a claim by the Republic
against the Kawasaki-FFMCCI Consortium; (b) Kawasaki and FFMCCI,
without the consent of CCCIC, executed a new Agreement dated August
24, 1989 novating the terms of the Consortium Agreement, which
prevented CCCIC from being subrogated to the right of Kawasaki against
FFMCCI; (c) Kawasaki, in completing the Transferred Portion of Work was
correspondingly compensated, which negated any allegation of loss on
the part of Kawasaki; and (d) the obligation of CCCIC was extinguished
when the Republic granted the Kawasaki-FFMCCI Consortium an
extension of time to complete the Project, without the consent of CCCIC.
CCCIC subsequently filed on August 19, 1991 before the RTC a Third-Party
Complaint19 against FFMCCI and its President Mañacop based on the two
Indemnity Agreements which FFMCCI and Mañacop executed in favor of
CCCIC. The RTC issued summonses but FFMCCI and Mañacop failed to file
any responsive pleading to the Third-Party Complaint of CCCIC. Upon
motion of CCCIC, the RTC issued an Order20 dated December 2, 1991
declaring FFMCCI and Mañacop in default.
After trial, the RTC rendered a Decision on May 2, 1996 dismissing the
Complaint of Kawasaki and the counterclaim of CCCIC. The RTC agreed
with CCCIC that the Surety and Performance Bonds issued by the
insurance company were mere counter-guarantees and the cause of
action of Kawasaki based on said Bonds had not yet accrued. Since the
Republic did not exercise its right to claim against the PCIB Letter of
Credit No. 38-001-183617, nor compelled Kawasaki to perform the
unfinished work of FFMCCI, Kawasaki could not claim indemnification
from CCCIC. Moreover, the RTC, citing Article 2079 of the Civil Code,
ruled that the obligations of CCCIC under the Surety and Performance
Bonds were extinguished when the Republic granted the Kawasaki-
FFMCCI Consortium a 43-day extension to finish the Project, absent the
consent of CCCIC. The RTC found no deliberate intent on the part of
Kawasaki to cause prejudice to CCCIC, so it did not grant the
counterclaims for moral and exemplary damages and attorney's fees of
CCCIC against Kawasaki.
Kawasaki appealed before the Court of Appeals assigning the following
errors on the part of the RTC:
I. THE COURT A QUO GROSSLY ERRED IN HOLDING THAT [CCCIC] CAN BE
HELD LIABLE TO [Kawasaki] UNDER THE SUBJECT BONDS ONLY "IF THE
GOVERNMENT EXERCISES ITS RIGHTS AGAINST THE GUARANTEE-BONDS
ISSUED TO IT BY [Kawasaki]" ON THE THEORY ADVANCED BY [CCCIC],
WHICH THE COURT A QUO FULLY EMBRACED AND ADOPTED, THAT THE
BONDS ARE MERE "COUNTER-GUARANTEES."
II. THE COURT A QUO GROSSLY ERRED IN HOLDING THAT THE EXTENSION
GRANTED BY THE GOVERNMENT TO THE CONSORTIUM FOR THE
CONSTRUCTION OF THE PANGASINAN FISHING PORT NETWORK PROJECT
EXTINGUISHED THE LIABILITY OF [CCCIC].
III. THE COURT A QUO GROSSLY ERRED IN HOLDING THAT ARTICLE 2079 OF
THE CIVIL CODE OF THE PHILIPPINES APPLIES TO THE CASE AT BAR. IN A
LONG LINE OF DECISIONS, THE SUPREME COURT HAS HELD THAT THE RULE
OF "STRICTISSIMI JURIS" DOES NOT APPLY TO SURETY COMPANIES SUCH
AS [CCCIC] HEREIN.
IV. THE SUBJECT BONDS ARE FIXED UNTIL OCTOBER 26 AND 27, 1989
RESPECTIVELY WHILE THE ORIGINAL PERIOD OF THE CONTRACT WITH THE
GOVERNMENT, THE PERFORMANCE OF WHICH BY [CCCIC] ARE PRECISELY
GUARANTEED BY THESE BONDS, IS UNTIL DECEMBER 30, 1989. ON THE
OTHER HAND, THE DEF AULT BY [FFMCCI] WHICH THE BONDS GUARANTEED
AGAINST OCCURRED ON [OR] ABOUT AUGUST 24, 1989. THEREFORE,
IRRESPECTIVE OF WHETHER THERE WAS AN EXTENSION OR NOT AT THE END
OF THE ORIGINAL CONTRACT PERIOD AND IRRESPECTIVE OF WHETHER THIS
EXTENSION IS KNOWN OR UNKNOWN TO [CCCIC], THE LIABILITY THAT IT
BOUND ITSELF UNTO UNDER THE BONDS IS VERY CLEARLY AND
UNEQUIVOCALLY FIXED UNTIL OCTOBER 26 AND 27, 1989 RESPECTIVELY.
THEREFORE, ARTICLE 2079 WILL NOT APPLY. HENCE, THE COURT A QUO
GROSSLY ERRED IN HOLDING OTHERWISE.21
The Court of Appeals, in its Decision dated May 30, 2002, reversed the
appealed RTC Decision, reasoning as follows:21
From the language of the aforesaid bonds, it is clear that, in the case of
the surety bond, the same was posted, jointly and severally, by [FFMCCI]
and CCCIC "to fully and faithfully guarantee the repayment of the
downpayment made by the principal ([FFMCCI]) to the obligee
(KAWASAKI) in connection with the construction of the Pangasinan
Fishing Port Network Project at Pangasin.an" subject only to the
condition that "the liability of the [herein] surety shall in no case exceed
the amount of Pesos: THREE MILLION ONE HUNDRED THREE THOUSAND
EIGHT HUNDRED THREE & 90/100 (₱3,103,803.90) Philippine currency;
and in the case of the performance bond, the same was posted, jointly
and severally by [FFMCCI] and CCCIC "to guarantee the full and faithful
performance of the principal ([FFMCCI]) of its obligation in connection
with the project for the construction of the Pangasinan Fishing Port
Network located at Pangasinan in accordance with the plans and
specifications of the contract" subject only to the condition that "the
liability of the [herein] surety shall in no case exceed the amount of
Pesos: TWO MILLION SIXTY-NINE THOUSAND TWO HUNDRED TWO & 60/100
(₱2,069,202.60) Philippine currency."
The right of KAW AS AKI as the obligee/creditor of the said bonds was
not made subject to any other condition expressly so provided in the
Consortium Agreement, which was the reason for the bonds posted by
[FFMCCI] and CCCIC, or in the subject bonds themselves.
Hence, this Court finds that the court a quo did err in ruling that
"[u]nder the Consortium Agreement, the bonds are counter-guarantees
which only guarantee the plaintiff KAWASAKI for reimbursement to the
extent of the value of the bonds in case the employer (government)
successfully exercised its rights under the bonds issued to it by plaintiff
KAW AS AKI;" and that "[ c]onsidering that the government did not
exercise its rights against the bond issued to it by the Consortium
Leader, it follows that the Consortium Leader cannot collect from the
counter-guarantees furnished by [FFMCCI]."
Time and again, the Supreme Court has stressed the rule that a
contract is the law between the parties, and courts have no choice but
to enforce such contract so long as they are not contrary to law,
morals, good customs or public policy.
With respect to the second, third and fourth issues raised, suffice it to
say that this Court finds Article 2079 of the Civil Code of the Philippines
not applicable. [Kawasaki] claims that since the issue in this case is the
liability of CCCIC to KAWASAKI, the extension of forty-three (43) days
within which to complete the Pangasinan Fishing Port Network Project
granted by the Philippine government, who is not a party to the two (2)
bonds posted by [FFMCCI] and CCCIC, to the consortium, does not
absolve CCCI C's liabilities to KAWASAKI under the subject bonds.
We agree.
As stated earlier, the parties insofar as the surety bond and
performance bond are concerned are: KAWASAKI, as obligee, [FFMCCI],
as principal; and CCCIC, as surety. Considering therefore that the
extension of time within which to complete the construction of the
Pangasinan Fishing Port Network Project was granted by the Philippine
government, who is not the creditor of the bonds, this Court finds that
Article 2079 of the Civil Code of the Philippines does not apply and the
extension of time granted by the Philippine government, contrary to the
ruling of the trial court, does not absolve the surety of its liabilities to
KAWASAKI under the subject bonds.
The principle of relativity of contracts provides that contracts can only
bind the parties who entered into it.
Finally, this Court finds the award of attorney's fees in favor of the
appellant warranted under the circumstance, pursuant to paragraph (2)
of Article 2208 of the Civil Code of the Philippines.22
In the end, the Court of Appeals decreed:
WHEREFORE, the instant appeal is hereby GRANTED. Accordingly, the
assailed decision of the Regional Trial Court of Makati City, Branch 66, is
hereby REVERSED and SET ASIDE. CCC Insurance Corporation is hereby
ordered to pay KAWASAKI the following:
1. The amount of ₱3,103,803.90 representing its liability to Kawasaki
Steel Corporation under Surety Bond No. B-88/11191, plus legal interest
at the rate of 12% per annum computed from 15 September 1989, until
fully paid;
2. The amount of ₱2,069,202.80 representing its liability to Kawasaki
Steel Corporation under Performance Bond No. B-88/11193, plus legal
interest at the rate of 12% per annum computed from 15 September
1989, until fully paid; and
3. 15% of the total amount due as and for attorney's fees. 23 In its
Resolution dated November 14, 2002, the Court of Appeals denied the
Motion for Reconsideration of CCCIC. However, in the same Resolution,
the appellate court partially granted the Third-Party Complaint of CCCIC
by holding Mañacop liable under the Indemnity Agreements he executed
in favor of the insurance company, while declaring the RTC was without
jurisdiction over FFMCCI due to invalid service of summons. The Court of
Appeals ultimately resolved:
WHEREFORE, judgment is hereby rendered in favor of third-party plaintiff
CCC Insurance Corporation and against third-party defendant Florante
F. Mañacop, ordering the latter to indemnify the former the total amount
paid by the former to Kawasaki Steel Corporation representing CCC
Insurance Corporation's liabilities under Surety Bond No. B-88/11191 and
Performance Bond No. B88/11193 and to pay CCC Insurance Corporation
25% of the total amount due, as and for attorney's fees.24
In the instant Petition for Review on Certiorari, CCCIC assails the
aforementioned Decision and Resolution of the Court of Appeals on six
grounds, viz.:
A.
THE COURT OF APPEALS, CONTRARY TO LAW, FAILED TO CONSIDER THE
TRUE NATURE OF THE TRANSACTION BETWEEN THE PARTIES AND THE TRUE
NATURE OF A COUNTER-GUARANTEE.
B.
THE COURT OF APPEALS, CONTRARY TO LAW, FAILED TO APPRECIATE THE
APPLICABILITY OF ARTICLE 2079 OF THE CIVIL CODE, WHICH PROVIDES
THAT AN EXTENSION GRANTED TO THE DEBTOR BY THE CREDITOR WITHOUT
THE CONSENT OF THE GUARANTOR EXTINGUISHES THE GUARANTY.
C.
THE COURT OF APPEALS, CONTRARY TO LAW, ERRONEOUSLY FAILED TO
CONSIDER THE FACT THAT KAWASAKI AND FFMCCI HAVE NOVATED THEIR
ORIGINAL AGREEMENT
WITHOUT THE KNOWLEDGE AND CONSENT OF CCCIC, THEREBY RELEASING
THE LATTER FROM ANY OBLIGATION UNDER THE BONDS IT ISSUED.
D.
THE COURT OF APPEALS, CONTRARY TO LAW, ERRONEOUSLY RENDERED
CCCIC LIABLE TO PAY THE FULL AMOUNT OF THE SURETY AND
PERFORMANCE BONDS DESPITE THE FACT THAT FFMCCI WAS ABLE TO
PARTIALLY EXECUTE ITS PORTION OF THE WORK AND THAT KAWASAKI HAD
BEEN FULLY COMPENSATED FOR TAKING OVER THE UNFINISHED PORTION.
E.
THE COURT OF APPEALS, CONTRARY TO LAW, ERRONEOUSLY AWARDED
ATTORNEY'S FEES TO KAWASAKI UNDER PARAGRAPH 2 OF ARTICLE 2208
OF THE CIVIL CODE.
F.
THE COURT OF APPEALS, CONTRARY TO LAW, ERRONEOUSLY RULED THAT
THER WAS NO VALID SERVICE OF SUMMONS UPON FFMCCI.25
CCCIC avers that its liabilities under the Surety and Performance Bonds
are directly linked with the obligation of the Kawasaki-FFMCCI
Consortium to finish the Project for the Republic, so that its liability as
surety of FFMCCI will only arise if the Republic made a claim on the PCIB
Letter of Credit furnished by Kawasaki, on behalf of the Consortium.
Since the Republic has not exercised its right against said Letter of
Credit, Kawasaki does not have a cause of action against CCCIC.
CCCIC also maintains that its obligations under the Surety and
Performance Bonds had been extinguished when (a) the Republic
extended the completion period for the Project upon the request of
Kawasaki but without the knowledge or consent of CCCIC, based on
Article 2079 of the Civil Code; and (b) when Kawasaki and FFMCCI
executed the Agreement dated August 24, 1989, without the consent of
CCCIC, there being a novation of the Consortium Agreement.
CCCIC further argues that when Kawasaki, under the Agreement dated
August 24, 1989, voluntarily took over the Transferred Portion of Work
from FFMCCI, it resulted in the reduction of revenue of FFMCCI on which
CCCIC relied upon as a source of indemnification. CCCIC additionally
posits that Kawasaki already received compensation for doing the
Transferred Portion of Work, so the Court of Appeals had no basis for
still ordering Kawasaki to pay the full value of the Surety and
Performance Bonds, plus interest.
Moreover, CCCIC contends that the Court of Appeals erred in awarding
attorney's fees in favor of Kawasaki based on paragraph 2 of Article
2208 of the Civil Code as it is not a sound policy to place a penalty on
the right to litigate.
Lastly, CCCIC insists that there was proper service of summons upon
FFMCCI, through one of its directors, as authorized by the Rules of
Court.
The Petition is partly meritorious.
The liability of CCCIC under the
Surety and Performance Bonds is
dependent on the fulfillment and/or
non-fulfillment of the obligation of
FFMCCI to KAWASAKI under the
Consortium Agreement.
The statutory definition of suretyship is found in Article 204 7 of the Civil
Code, thus:
Art. 2047. By guaranty a person, called the guarantor, binds himself to
the creditor to fulfill the obligation of the principal debtor in case the
latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the
provisions of Section 4, Chapter 3, Title I of this Book shall be observed.
In such case the contract is called a suretyship. (Emphasis supplied.)
Jurisprudence also defines a contract of suretyship as "an agreement
where a party called the surety guarantees the performance by another
party called the principal or obligor of an obligation or undertaking in
favor of a third person called the obligee. Specifically, suretyship is a
contractual relation resulting from an agreement whereby one person,
the surety, engages to be answerable for the debt, default or
miscarriage of another, known as the principal." 26 The Court expounds
that "a surety's liability is joint and several, limited to the amount of the
bond, and determined strictly by the terms of contract of suretyship in
relation to the principal contract between the obligor and the obligee. It
bears stressing, however, that although the contract of suretyship is
secondary to the principal contract, the surety's liability to the obligee
is nevertheless direct, primary, and absolute."27
At the outset, the Court ascertains that there are two principal
contracts in this case: (1) the Consortium Agreement wherein Kawasaki
and FFMCCI agreed to jointly enter into a contract with the Republic for
the Project, each assuming the performance of specific scopes of work
in said Project; and (2) the Construction Contract whereby the Republic
awards the Project to the Kawasaki-FFMCCI Consortium. While there is a
connection between these two contracts, they are each distinguishable
from and enforceable independently of one another: the first governs
the rights and obligations between Kawasaki and FFMCCI, while the
second covers contractual relations between the Republic and the
Kawasaki-FFMCCI Consortium. The Surety and Performance Bonds from
CCCIC guaranteed the performance by FFMCCI of its obligations under
the Consortium Agreement; whereas the Letter of Credit from PCIB
warranted the completion of the Project by the Kawasaki FFMCCI
Consortium. At the crux of the instant controversy are the Surety and
Performance Bonds issued by CCCIC in relation to the Consortium
Agreement.
FFMCCI secured the Surety and Performance Bonds from CCCIC in
compliance with Article 10 of the Consortium Agreement which provided:
ARTICLE 10 - BONDS
10.1 The CONSORTIUM LEADER [Kawasaki] shall arrange, at [its] own cost,
all necessary bonds or guarantees as required under the CONTRACT on
behalf of the CONSORTIUM. [FFMCCI] shall, at its own cost, furnish the
CONSORTIUM LEADER [Kawasaki] with a suitable counter guarantees of
its advance payment under the CONTRACT and the performance of its
PORTION OF WORK in the amount of fifteen (15%) percent (in the case of
the repayment guarantee for the advance) and ten (10%) percent (in the
case of the performance guarantee) of the price of its PORTION OF THE
WORK.
10.2 If the EMPLOYER [Republic] exercises its right on the bonds or
guarantees furnished by the CONSORTIUM LEADER, the PARTIES shall
decide the respective responsibilities according to the provisions of this
AGREEMENT and the necessary reimbursement or compensation shall be
made also according to the provisions of this AGREEMENT. Pertinent
portions of Surety Bond No. B-88/11191 read:
SURETY BOND
KNOW ALL MEN BY THESE PRESENTS:
That we, F.F. MANACOP CONSTRUCTION CO., INC., x xx, as principal, and
CCC Insurance Corporation, x x x, as SURETY, are held and firmly bound
unto KAWASAKI STEEL CORPORATION, hereinafter referred to as the
OBLIGEE: in the sum of PESOS: THREE MILLION ONE HUNDRED THREE
THOUSAND EIGHT HUNDRED THREE & 90/100 ONLY (₱3,103,803.90),
Philippine currency, for the payment of which, well and truly to be made,
we bind ourselves, our heirs, executors, administrators, successors and
assigns, jointly and severally, firmly bound from notice of acceptance, by
these presents.
THE CONDITIONS OF THIS OBLIGATION ARE AS FOLLOWS:
TO FULLY AND FAITHFULLY GUARANTEE THE REPAYMENT OF THE
DOWNPAYMENT MADE BY THE PRINCIPAL TO THE OBLIGEE IN CONNECTION
WITH THE CONSTRUCTION OF THE PANGASINAN FISHING PORT NETWORK
PROJECT AT PANGASINAN; AND PROVIDED HOWEVER, THAT THE LIABILITY
OF THE HEREIN SURETY SHALL IN NO CASE EXCEED THE AMOUNT OF
PESOS: THREE MILLION ONE HUNDRED THREE THOUSAND EIGHT HUNDRED
THREE & 90/100 ONLY (₱3,103,803.90) PHILIPPINE CURRENCY.
xxxx
WHEREAS, the said OBLIGEE requires said Principal to give a good and
sufficient bond in the above-stated sum to secure the full and faithful
performance on his part of said UNDERTAKING. NOW, THEREFORE, if the
above bounden principal shall in all respects duly and fully observe and
perform all and singular the aforesaid covenants, conditions and
agreements to the true intent and meaning thereof, then this obligation
shall be null and void, otherwise to remain in full force and effect.
The liability of the Surety under this bond shall expire on October 26,
1989 and the Surety does not assume responsibility for any liability
incurred or created after said date. Any claims against this bond must
be presented to the Surety in writing not later than ten (10) days after
said expiry date; otherwise, failure to do so shall forthwith release the
Surety from all liabilities under this bond and shall be a bar to any court
action against it and which right to sue is hereby waived by the Obligee
after the lapse of said period often (10) days above cited.29
(Emphases supplied.)
Performance Bond No. B-88111193 contains the following terms and
conditions:
PERFORMANCE BOND
KNOW ALL MEN BY THESE PRESENTS:
That we, F.F. MANACOP CONSTRUCTION CO., INC., xx x, as principal, and
CCC Insurance Corporation, x x x, as SURETY, are held and firmly bound
unto KAWASAKI STEEL CORPORATION, hereinafter referred to as the
OBLIGEE: in the sum of PESOS: TWO MILLION SIXTY-NINE THOUSAND TWO
HUNDRED TWO & 60/100 ONLY (₱2,069,202.60), Philippine currency, for
the payment of which, well and truly to be made, we bind ourselves, our
heirs, executors, administrators, successors and assigns, jointly and
severally, firmly bound from notice of acceptance, by these presents.
THE CONDITIONS OF THIS OBLIGATION ARE AS FOLLOWS:
TO GUARANTEE THE FULL AND FAITHFUL PERFORMANCE OF THE PRINCIPAL
OF ITS OBLIGATION IN CONNECTION WITH THE PROJECT FOR THE
CONSTRUCTION OF PANGASINAN FISHING PORT NETWORK LOCATED AT
PANGASINAN IN ACCORDANCE WITH THE PLANS AND SPECIFICATION OF
THE CONTRACT, AND; PROVIDED HOWEVER, THAT THE LIABILITY OF THE
HEREIN SURETY SHALL IN NO CASE EXCEED THE AMOUNT OF PESOS: TWO
MILLION SIXTY-NINE THOUSAND TWO HUNDRED TWO & 60/100 ONLY
(₱2,069,202.60) PHILIPPINE CURRENCY.
xxxx
WHEREAS, the said OBLIGEE requires said Principal to give a good and
sufficient bond in the above-stated sum to secure the full and faithful
performance on his part of said UNDERTAKING.
NOW, THEREFORE, if the above bounden principal shall in all respects duly
and fully observe and perform all and singular the aforesaid covenants,
conditions and agreements to the true intent and meaning thereof, then
this obligation shall be null and void, otherwise to remain in full force
and effect.
The liability of the Surety under this bond shall expire on October 27,
1989 and the Surety does not assume responsibility for any liability
incurred or created after said date. Any claims against this bond must
be presented to the Surety in writing not later than ten (10) days after
said expiry date; otherwise, failure to do so shall forthwith release the
Surety from all liabilities under this bond and shall be a bar to any court
action against it and which right to sue is hereby waived by the Obligee
after the lapse of said period of ten ( 10) days above cited. 30
(Emphasis supplied.)
The Court reiterates that a surety's liability is determined strictly by the
terms of contract of suretyship, in relation to the principal contract
between the obligor and the obligee. Hence, the Court looks at the
Surety and Performance Bonds, in relation to the Consortium
Agreement.
According to the principle of relativity of contracts in Article 1311 of the
Civil Code,31 a contract takes effect only between the parties, their
assigns, and heirs; except when the contract contains a stipulation in
favor of a third person, which gives said person the right to demand
fulfillment of said stipulation. In this case, the Surety and Performance
Bonds are enforceable by and against the parties FFMCCI (the obligor)
and CCCIC (the surety), as well as the third person Kawasaki (the
obligee) in whose favor said bonds had been explicitly constituted; while
the related Consortium Agreement binds the parties Kawasaki and
FFMCCI. Since the Republic is neither a party to the Surety and
Performance Bonds nor the Consortium Agreement, any action or
omission on its part has no effect on the liability of CCCIC under said
bonds.
The Surety and Performance Bonds state that their purpose was "to
secure the full and faithful performance on [FFMCCI' s] part of said
undertaking," particularly, the repayment by FFMCCI of the
downpayment advanced to it by Kawasaki (in the case of the Surety
Bond) and the full and faithful performance by FFMCCI of its portion of
work in the Project (in the case of the Performance Bond).These are the
only undertakings expressly guaranteed by the bonds, the fulfillment of
which by FFMCCI would release CCCIC from its obligations as surety; or
conversely, the non-performance of which would give rise to the
liabilities of CCCIC as a surety.
The Surety and Performance Bonds do not contain any condition that
CCCIC would be liable only if, in addition to the default on its
undertakings by FFMCCI, the Republic also made a claim against the PCIB
Letter of Credit furnished by Kawasaki, on behalf of the Kawasaki-
FFMCCI Consortium. The Court agrees with the observation of the Court
of Appeals that "it is not provided, neither in the Consortium Agreement
nor in the subject bonds themselves that before KAWASAKI may proceed
against the bonds posted by [FFMCCI] and CCCIC, the Philippine
government as employer must first exercise its rights against the bond
issued in its favor by the consortium."32
The Court cannot give any additional meaning to the plain language of
the undertakings in the Surety and Performance Bonds. The extent of a
surety's liability is determined by the language of the suretyship
contract or bond itself. Article 1370 of the Civil Code provides that "[i]f
the terms of a contract are clear and leave no doubt upon the intention
of the contracting parties, the literal meaning of its stipulations shall
control. "33
There is no basis for the interpretation by CCCIC of the word "counter-
guarantee" in Article 10 of the Consortium Agreement. The first
paragraph of Article 10 of the Consortium Agreement provides that
Kawasaki, as the Consortium Leader, shall arrange, at its own cost but
on behalf of the Kawasaki-FFMCCI Consortium, for all necessary bonds
and guarantees under the Construction Contract with the Republic. The
same paragraph requires, in turn, that FFMCCI, at its own cost, to
furnish Kawasaki with suitable counter-guarantees for the repayment by
FFMCCI for the advance payment from Kawasaki and performance by
FFMCCI of its portion of work in the Project. Clearly, the "guarantees"
and "counter-guarantees" were securities for the fulfillment of the
obligations of the Kawasaki-FFMCCI Consortium to the Republic under
the Construction Contract and of FFMCCI to the Consortium Leader
Kawasaki under the Consortium Agreement, respectively. The CCCIC
Surety and Performance Bonds were not counter-guarantees to the
PCIB Letter of Credit. In fact, in the event that the Republic did make a
claim on the PCIB Letter of Credit, the second paragraph of Article 10 of
the Consortium Agreement stipulates
that Kawasaki and FFMCCI would still have to determine their respective
responsibilities, reimbursements, and/or compensations according to
the provisions of the Consortium Agreement, instead of simply allowing
Kawasaki to recover on the "counter-guarantees" of FFMCCI.
It is not disputed that FFMCCI, due to financial difficulties, was unable to
repay the advance payment it received from Kawasaki and to finish its
scope of work in the Project, thus, FFMCCI defaulted on its obligations to
Kawasaki. Given the default of FFMCCI, CCCIC as surety
became directly, primarily, and absolutely liable to Kawasaki as the
obligee under the Surety and Performance Bonds. The following
pronouncements of the Court in Asset Builders Corporation v.
Stronghold Insurance Company, Inc.34 are relevant herein:
Respondent, along with its principal, Lucky Star, bound itself to the
petitioner when it executed in its favor surety and performance bonds.
The contents of the said contracts clearly establish that the parties
entered into a surety agreement as defined under Article 2047 of the
New Civil Code. x x x.
xxxx
As provided in Article 204 7, the surety undertakes to be bound
solidarily with the principal obligor. That undertaking makes a surety
agreement an ancillary contract as it presupposes the existence of a
principal contract. Although the contract of a surety is in essence
secondary only to a valid principal obligation, the surety becomes liable
for the debt or duty of another although it possesses no direct or
personal interest over the obligations nor does it receive any benefit
therefrom. Let it be stressed that notwithstanding the fact that the
surety contract is secondary to the principal obligation, the surety
assumes liability as a regular party to the undertaking.
Stronghold Insurance Company, Inc. v. Republic-Asahi Glass
Corporation, reiterating the ruling in Garcia v. Court of Appeals,
expounds on the nature of the surety's liability:
x x x. The surety's obligation is not an original and direct one for the
performance of his own act, but merely accessory or collateral to the
obligation contracted by the principal. Nevertheless, although the
contract of a surety is in essence secondary only to a valid principal
obligation,
his liability to the creditor or promisee of the principal is said to be
direct, primary and absolute; in other words, he is directly and equally
bound with the principal.
Suretyship, in essence, contains two types of relationship - the principal
relationship between the obligee (petitioner) and the obligor (Lucky
Star), and the accessory surety relationship between the principal
(Lucky Star) and the surety (respondent). In this arrangement, the
obligee accepts the surety's solidary undertaking to pay if the obligor
does not pay. Such acceptance, however, does not change in any
material way the obligee's relationship with the principal obligor. Neither
does it make the surety an active party to the principal obligee-obligor
relationship. Thus, the acceptance does not give the surety the right to
intervene in the principal contract. The surety's role arises only upon
the obligor's default, at which time, it can be directly held liable by the
obligee for payment as a solidary obligor.
In the case at bench, when Lucky Star failed to finish the drilling work
within the agreed time frame despite petitioner's demand for
completion, it was already in delay. Due to this default, Lucky Star's
liability attached and, as a necessary consequence, respondent's liability
under the surety agreement arose. Undeniably, when Lucky Star
reneged on its undertaking with the petitioner and further failed to
return the ₱575,000.00 downpayment that was already advanced to it,
respondent, as surety, became solidarily bound with Lucky Star for the
repayment of the said amount to petitioner. The clause, "this bond is
callable on demand," strongly speaks of respondent's primary and direct
responsibility to the petitioner.
Accordingly, after liability has attached to the principal, the obligee or, in
this case, the petitioner, can exercise the right to proceed against Lucky
Star or respondent or both. x x x. (Emphases supplied, citations
omitted.)
Article 2079 of the New Civil Code is not applicable to the instant case.
To free itself from its liabilities under the Surety and Performance
Bonds, CCCIC cites Article 2079 of the Civil Code, which reads: Art.
2079. An extension granted to the debtor by the creditor without the
consent of the guarantor extinguishes the guaranty. The mere failure on
the part of the creditor to demand payment after the debt has become
due does not of itself constitute any extension of time referred to
herein.
The aforequoted provision clearly speaks of an extension for the
payment of a debt granted by the creditor to a debtor without the
consent of the surety. The theory behind Article 2079 was further
explained by the Court in Trade and Investment Development
Corporation of the Philippines (Formerly Philippine Export and Foreign
Loan Guarantee Corporation) v. Asia Paces Corporation,35 thus:
Comparing a surety's obligations with that of a guarantor, the Court, in
the case of Palmares v. CA, illumined that a surety is responsible for the
debt's payment at once if the principal debtor makes default, whereas a
guarantor pays only if the principal debtor is unable to pay, viz.:
A surety is an insurer of the debt, whereas a guarantor is an insurer of
the solvency of the debtor. A suretyship is an undertaking that the debt
shall be paid; a guaranty, an undertaking that the debtor shall pay.
Stated differently, a surety promises to pay the principal's debt if the
principal will not pay, while a guarantor agrees that the creditor, after
proceeding against the principal, may proceed against the guarantor if
the principal is unable to pay. A surety binds himself to perform if the
principal does not, without regard to his ability to do so. A guarantor, on
the other hand, does not contract that the principal will pay, but simply
that he is able to do so. In other words, a surety undertakes directly for
the payment and is so responsible at once if the principal debtor makes
default, while a guarantor contracts to pay if, by the use of due
diligence, the debt cannot be made out of the principal debtor.
xxx.
Despite these distinctions, the Court in Cochingyan, Jr. v. R&B Surety &
Insurance Co., Inc., and later in the case of Security Bank, held that
Article 2079 of the Civil Code, which pertinently provides that "[a]n
extension granted to the debtor by the creditor without the consent of
the guarantor extinguishes the guaranty," equally applies to both
contracts of guaranty and suretyship. The rationale therefore was
explained by the Court as follows:
The theory behind Article 2079 is that an extension of time given to the
principal debtor by the creditor without the surety's consent would
deprive the surety of his right to pay the creditor and to be immediately
subrogated to the creditor's remedies against the principal debtor upon
the maturity date. The surety is said to be entitled to protect himself
against the contingency of the principal debtor or the indemnitors
becoming insolvent during the extended period.
Applying these principles, the Court finds that the payment extensions
granted by Banque Indosuez and PCI Capital to TIDCORP under the
Restructuring Agreement did riot have the effect of extinguishing the
bonding companies' obligations to TIDCORP under the Surety Bonds,
notwithstanding the fact that said extensions were made without their
consent. This is because Article 2079 of the Civil Code refers to a
payment extension granted by the creditor to the principal
debtor without the consent of the guarantor or surety. In this case, the
Surety Bonds are suretyship contracts which secure the debt of ASP AC,
the principal debtor, under the Deeds of Undertaking to pay TIDCORP,
the creditor, the damages and liabilities it may incur under the Letters
of Guarantee, within the bounds of the bonds' respective coverage
periods and amounts. No payment extension was, however, granted by
TIDCORP in favor of ASP AC in this regard; hence, Article 2079 of the
Civil Code should not be applied with respect to the bonding companies'
liabilities to TIDCORP under the Surety Bonds.
The payment extensions granted by Banque Indosuez and PCI Capital
pertain to TIDCORP's own debt under the Letters of Guarantee wherein it
(TIDCORP) irrevocably and unconditionally guaranteed full payment of
ASPAC's loan obligations to the banks in the event of its (ASP AC)
default. In other words, the Letters of Guarantee secured ASPAC's loan
agreements to the banks. Under this arrangement, TIDCORP therefore
acted as a guarantor, with ASP AC as the principal debtor, and the banks
as creditors.
Proceeding from the foregoing discussion, it is quite clear that there
are two sets of transactions that should be treated separately and
distinctly from one another following the civil law principle of relativity
of contracts "which provides that contracts can only bind the parties
who entered into it, and it cannot favor or prejudice a third person, even
if he is aware of such contract and has acted with knowledge thereof."
Verily, as the Surety Bonds concern ASPAC's debt to TIDCORP and not
TIDCORP's debt to the banks, the payments extensions (which conversely
concern TIDCORP's debt to the banks and not ASP A C's debt to TIDCORP)
would not deprive the bonding companies of their right to pay their
creditor (TIDCORP) and to be immediately subrogated to the latter's
remedies against the principal debtor (ASP AC) upon the maturity date.
It must be stressed that these payment extensions did not modify the
terms of the Letters of Guarantee but only provided for a new payment
scheme covering TIDCORP's liability to the banks. In fine, considering the
inoperability of Article 2079 of the Civil Code in this case, the bonding
companies' liabilities to TIDCORP under the Surety Bonds - except those
issued by Paramount and covered by its Compromise Agreement with
TIDCORP - have not been extinguished. Since these obligations arose and
have been duly demanded within the coverage periods of all the Surety
Bonds, TIDCORP's claim is hereby granted.
Similarly, there are two sets of transactions in the present case
covered by two different contracts: the Consortium Agreement between
Kawasaki and FFMCCI and the Construction Contract between the
Republic and the Kawasaki-FFMCCI Consortium. The Surety and
Performance Bonds guaranteed the performance of the obligations of
FFMCCI to Kawasaki under the Consortium Agreement. The Republic was
not a party in either the Surety and Performance Bonds or the
Consortium Agreement. Under these circumstances, there was no
creditor-debtor relationship between the Republic and FFMCCI and
Article 2079 of the Civil Code did not apply. The extension granted by the
Republic to Kawasaki modified the deadline for the completion of the
Project under the Construction Contract, but had no effect on the
obligations of FFMCCI to Kawasaki under the Consortium Agreement,
much less, on the liabilities of CCCIC under the
Surety and Performance Bonds.
CCCIC failed to discharge the
burden of proving the novation of
the Consortium Agreement which
would have extinguished its
obligations under the Surety and
Performance Bonds.
CCCIC argues that it was released from its obligations as surety under
the Surety and Performance Bonds because of the novation of the
Consortium Agreement by the subsequent Agreement dated August 24,
1989 executed between Kawasaki and FFMCCI, without the consent of
CCCIC.
The Court first notes that the default of FFMCCI preceded the execution
of the Agreement on August 24, 1989 which purportedly novated the
Consortium Agreement and, in effect, extinguished the Surety and
Performance Bonds. As early as his letter dated July 20, 1989, Mañacop,
FFMCCI President, already admitted the inability of FFMCCI to continue
with its portion of work in the Project and authorized Kawasaki to
continue the same. It was precisely because FFMCCI defaulted on its
obligations under the Consortium Agreement that necessitated the
execution of the Agreement dated August 24, 1989 between Kawasaki
and FFMCCI, and this is evident from one of the "whereas" clauses in the
said Agreement which says that "due to some financial reverses[,
FFMCCI] can no longer do its portion of the work under the Contract."
The liabilities of CCCIC as surety to Kawasaki under the Surety and
Performance Bonds had already attached upon the default of FFMCCI
while the said bonds were still in effect and prior to the alleged novation
of the Consortium Agreement by the Agreement dated August 24, 1989
which resulted in the extinguishment of the bonds.
The Court expounded on the concept of novation in Reyes v. BPI Family
Savings Bank, Inc.36
Novation is defined as the extinguishment of an obligation by the
substitution or change of the obligation by a subsequent one which
terminates the first, either by changing the object or principal
conditions, or by substituting the person of the debtor, or subrogating a
third person in the rights of the creditor.
Article 1292 of the Civil Code on novation further provides:
Article 1292. In order that an obligation may be extinguished by another
which substitute the same, it is imperative that it be so declared in
unequivocal terms, or that the old and the new obligations be on every
point incompatible with each other.
The cancellation of the old obligation by the new one is a necessary
element of novation which may be effected either expressly or impliedly.
While there is really no hard and fast rule to determine what might
constitute sufficient change resulting in novation, the touchstone,
however, is irreconcilable incompatibility between the old and the new
obligations.
In Garcia, Jr. v. Court of Appeals, we held that:
In every novation there are four essential requisites: (1) a previous valid
obligation; (2) the agreement of all the parties to the new contract; (3)
the extinguishment of the old contract; and (4) validity of the new one.
There must be consent of all the parties to the substitution, resulting in
the extinction of the old obligation and the creation of a valid new one .xx
x. (Citations omitted.)
It is well-settled that novation is never presumed - novatio non
praesumitur. As the party alleging novation, the onus of showing clearly
and unequivocally that novation had indeed taken place rests on
CCCIC.The Court laid down guidelines in establishing novation, viz.:
Novation is never presumed, and the animus novandi, whether totally or
partially, must appear by express agreement of the parties, or by their
acts that are too clear and unequivocal to be mistaken.
The extinguishment of the old obligation by the new one is a necessary
element of novation which may be effected either expressly or impliedly.
The term "expressly" means that the contracting parties
incontrovertibly disclose that their object in executing the new contract
is to extinguish the old one. Upon the other hand, no specific form is
required for an implied novation, and all that is prescribed by law would
be an incompatibility between the two contracts. While there is really no
hard and fast rule to determine what might constitute to be a sufficient
change that can bring about novation, the touchstone for contrariety,
however, would be an irreconcilable incompatibility between the old and
the new obligations.
There are two ways which could indicate, in fine, the presence of
novation and thereby produce the effect of extinguishing an obligation by
another which substitutes the same. The first is when novation has been
explicitly stated and declared in unequivocal terms. The second is when
the old and the new obligations are incompatible on every point. The test
of incompatibility is whether or not the two obligations can stand
together, each one having its independent existence. If they cannot, they
are incompatible and the latter obligation novates the first. Corollarily,
changes that breed incompatibility must be essential in nature and not
merely accidental. The incompatibility must take place in any of the
essential elements of the obligation, such as its object, cause or
principal conditions thereof; otherwise, the change would be merely
modificatory in nature and insufficient to extinguish the original
obligation.38(Citations omitted.)
CCCIC failed to discharge the burden of proving novation of the
Consortium Agreement by the Agreement dated August 24, 1989. The
Court failed to see the presence of the essential requisites for a
novation of contract, specifically, the irreconcilable incompatibility
between the old and new contracts. Indeed, Kawasaki and FFMCCI
executed the Agreement dated August 24, 1989 pursuant to Article 8.3
of the Consortium Agreement:
8.3 If, for any reason, any PARTY should fail in the performance of its
PORTION OF WORK or contractual obligations and if such defaulting PAR
TY refuses to cure or makes no remedial action, without presenting any
valid cause, within fifteen (15) days following demand of rectification by
registered letter sent by the other PARTY, the defaulting PARTY's
PORTION OF WORK may be performed at the account and responsibility
of the defaulting PARTY, by the non-defaulting PARTY or by any other
contractor selected by the non-defaulting PARTY and approved by the
EMPLOYER. In such event, the defaulting PARTY or its representative
shall, in no way, interfere with the performance of the CONTRACT or
impede the progress thereof, on any ground, and shall allow such
performing PARTY or the said contractor to use the materials and
equipment of such defaulting PARTY, for the purpose of remedial action.
FFMCCI was unable to finish its portion of work in the Project because of
business reverses, and by the Agreement dated August 24, 1989,
Kawasaki assumed the Transferred Portion of Work from FFMCCI and
was accorded the right to receive the profits and benefits
corresponding to said portion. Although the Agreement dated August 24,
1989 resulted in the reallocation of the respective portions of work of
Kawasaki and FFMCCI, as well as their corresponding shares in the
profits and benefits under the Consortium Agreement, such changes
were not incompatible with the object, cause, and principal conditions of
the Consortium Agreement. Consequently, the changes under the
Agreement dated August 24, 1989 were only modificatory and did not
extinguish the original obligations under the Consortium Agreement.
Even granting that there is novation, the Court in Stronghold Insurance
Company, Incorporated v. Tokyu Construction Company, Ltd.,39 held that
to release the surety, the material change in the principal contract must
make the obligation of the surety more onerous. The Court ratiocinated
in Stronghold as follows:
Petitioner's liability was not affected by the revision of the contract
price, scope of work, and contract schedule. Neither was it extinguished
because of the issuance of new bonds procured from Tico.
As early as February 10, 1997, respondent already sent a letter to
Gabriel informing the latter of the delay incurred in the performance of
the work, and of the former's intention to terminate the subcontract
agreement to prevent further losses. Apparently, Gabriel had already
been in default even prior to the aforesaid letter; and demands had been
previously made but to no avail. By reason of said default, Gabriel's
liability had arisen; as a consequence, so also did the liability of
petitioner as a surety arise.
xxxx
By the language of the bonds issued by petitioner, it guaranteed the full
and faithful compliance by Gabriel of its obligations in the construction
of the SDS and STP specifically set forth in the subcontract agreement,
and the repayment of the 15% advance payment given by respondent.
These guarantees made by petitioner gave respondent the right to
proceed against the former following Gabriel's non-compliance with her
obligation.
Confusion, however, transpired when Gabriel and respondent agreed, on
February 26, 1997, to reduce the scope of work and, consequently, the
contract price. Petitioner viewed such revision as novation of the
original subcontract agreement; and since no notice was given to it as a
surety, it resulted in the extinguishment of its obligation.
We wish to stress herein the nature of suretyship, which actually
involves two types of relationship --the underlying principal relationship
between the creditor (respondent) and the debtor (Gabriel), and the
accessory surety relationship between the principal (Gabriel) and the
surety (petitioner). The creditor accepts the surety's solidary
undertaking to pay if the debtor does not pay. Such acceptance,
however, does not change in any material way the creditor's
relationship with the principal debtor nor does it make the surety an
active party to the principal creditor-debtor relationship. In other
words, the acceptance does not give the surety the right to intervene in
the principal contract. The surety's role arises only upon the debtor's
default, at which time, it can be directly held liable by the creditor for
payment as a solidary obliger.
The surety is considered in law as possessed of the identity of the
debtor in relation to whatever is adjudged touching upon the obligation
of the latter. Their liabilities are so interwoven as to be inseparable.
Although the contract of a surety is, in essence, secondary only to a
valid principal
obligation, the surety's liability to the creditor is direct, primary, and
absolute; he becomes liable for the debt and duty of another although he
possesses no direct or personal interest over the obligations nor does
he receive any benefit therefrom.
Indeed, a surety is released from its obligation when there is a material
alteration of the principal contract in connection with which the bond is
given, such as a change which imposes a new obligation on the
promising party, or which takes away some obligation already imposed,
or one which changes the legal effect of the original contract and not
merely its form. However, a surety is not released by a change in the
contract, which does not have the effect of making its obligation more
onerous.
In the instant case, the revision of the subcontract agreement did not in
any way make the obligations of both the principal and the surety more
onerous. To be sure, petitioner never assumed added obligations, nor
were there any additional obligations imposed, due to the modification of
the terms of the contract. Failure to receive any notice of such change
did
not, therefore, exonerate petitioner from its liabilities as surety.
(Emphasis supplied, citations omitted.)
There is no showing herein that the obligations of CCCIC as surety had
become more onerous with the execution of the Agreement dated
August 24, 1989 between Kawasaki and FFMCCI. The Agreement dated
August 24, 1989 did not alter in any way the original coverage and the
terms and conditions of the Surety and Performance Bonds of CCCIC. If
truth be told, the Agreement dated August 24, 1989 made it more
onerous for Kawasaki which had to take over the Transferred Portion of
Work from FFMCCI.
That Kawasaki was to receive the profits and benefits corresponding to
the Transferred Portion of Work would not extinguish the liabilities of
CCCIC under the Surety and Performance Bonds. The right of Kawasaki
to the profits and benefits corresponding to the Transferred Portion of
Work was granted under the Agreement dated August 24, 1989 because
Kawasaki was the one that would actually perform the remaining portion
of work and complete the Project and should be duly compensated for
the same. It is separate and distinct from the right of Kawasaki to
demand payment of the amounts guaranteed by CCCIC as surety upon
the default of FFMCCI on its undertakings under the Surety and
Performance Bonds. CCCIC cannot standby passively and be benefitted
by payments made by the Republic, as owner of the Project, to Kawasaki,
as contractor, for the Transferred Portion of Work. The only way CCCIC
can extinguish its liabilities as surety, which
already attached upon the default of FFMCCI, is to make its own
payments to Kawasaki of the amounts guaranteed under the Surety and
Performance Bonds.
Equally without merit is the averment of CCCIC that by executing the
Agreement dated August 24, 1989, which gave Kawasaki the right to the
profits and benefits corresponding to the Transferred Portion of Work,
Kawasaki and FFMCCI colluded or connived to deprive CCCIC of its
source of indemnification. Other than its allegation, CCCIC failed to
present any evidence of collusion or connivance between Kawasaki and
FFMCCI to intentionally prejudice CCCIC. The Court reiterates that the
execution of the Agreement dated August 24, 1989 was actually
authorized under Article 8.3 of the Consortium Agreement. Kawasaki
was given the right to the profits and benefits corresponding to the
Transferred Portion of Work because it would be the one to perform the
same. It would be the height of inequity to allow FFMCCI to continue
collecting payments for work it was not able to do. Besides, there is
utter lack of basis for the claim of CCCIC that without the compensation
for the Transferred Portion of Work, FFMCCI would have no means to
indemnify CCCIC for any payments the latter would have to make to
Kawasaki under the Surety and Performance Bonds. As the succeeding
discussion will show, it is premature for CCCIC to question the capacity
of FFMCCI to indemnify it.
CCCIC must first pay its liabilities to
Kawasaki under the Surety and
Performance Bonds before it could
be indemnified and subrogated to the
rights of Kawasaki against FFMCCI.
The rights of a guarantor who pays for the debt of the debtor are
governed by the following provisions of the Civil Code:
Art. 2066. The guarantor who pays for a debtor must be indemnified by
the latter.
The indemnity comprises:
(1) The total amount of the debt;
(2) The legal interests thereon from the time the payment was made
known to the debtor, even though it did not earn interest for the
creditor;
(3) The expenses incurred by the guarantor after having notified the
debtor that payment had been demanded of him;
(4) Damages, if they are due. Art. 2067. The guarantor who pays is
subrogated by virtue thereof to all the rights which the creditor had
against the debtor.
If the guarantor has compromised with the creditor, he cannot demand
of the debtor more than what he has really paid.
Although the foregoing provisions only speak of a guarantor, they also
apply to a surety, as the Court held in Escano v. Ortigas, Jr. 40
What is the source of this right to full reimbursement by the surety? We
find the right under Article 2066 of the Civil Code, which assures that
"[t]he guarantor who pays for a debtor must be indemnified by the
latter," such indemnity comprising of, among others, "the total amount
of the debt." Further, Article 2067 of the Civil Code likewise establishes
that "[t]he guarantor who pays is subrogated by virtue thereof to all the
rights which the creditor had against the debtor."
Articles 2066 and 2067 explicitly pertain to guarantors, and one might
argue that the provisions should not extend to sureties, especially in
light of the qualifier in Article 2047 that the provisions on joint and
several obligations should apply to sureties. We reject that argument,
and instead adopt Dr. Tolentino's observation that "[t]he reference in
the second paragraph of [Article 2047] to the provisions of Section 4,
Chapter 3, Title I, Book IV, on solidary or several obligations, however,
does not mean that suretyship is withdrawn from the applicable
provisions governing guaranty." For if that were not the implication,
there would be no material difference between the surety as defined
under Article 204 7 and the joint and several debtors, for both classes
of obligors would be
governed by exactly the same rules and limitations.
Accordingly, the rights to indemnification and subrogation as
established and granted to the guarantor by Articles 2066 and 2067
extend as well to sureties as defined under Article 2047. x x x. (Citations
omitted.)
Pursuant to Articles 2066 and 2067, the rights of CCCIC as surety to
indemnification and subrogation will arise only after it has paid its
obligations to Kawasaki as the debtor-obligee. In Autocorp Group v. Intra
Strata Assurance Corporation,41 the Court ruled that:
The benefit of subrogation, an extinctive subjective novation by a change
of creditor, which "transfers to the person subrogated, the credit and
all the rights thereto appertaining, either against the debtor or against
third persons," is granted by the Article 2067 of the Civil Code only to
the "guarantor (or surety) who pays." (Emphases supplied, citations
omitted.)
In the present case, CCCIC has yet to pay Kawasaki.
While summons was validly served
upon FFMCCI, the Third-Party
Complaint of CCCJC against
FFMCCI is dismissed on the ground
of lack of cause of action.
The Court disagrees with the ruling of the Court of Appeals that there
was no proper service of summons upon FFMCCI. The appellate court
overlooked the fact that the service of summons on FFMCCI at its
principal address at #86 West A venue, Quezon City failed because
FFMCCI had already vacated said premises without notifying anyone as
to where it transferred. For this reason, the RTC, upon the motion of
CCCIC, issued an Order42 dated September 4, 1991, directing the
issuance and service of Alias Summons to the individual directors of
FFMCCI. Eventually, the Alias Summons was personally served upon
FFMCCI director Vicente Concepcion on September 25, 1991. 43
Rule 14, Section 13 of the 1964 Rules of Court, which was then in force,
allowed the service of summons upon a director of a private domestic
corporation:
Sec. 13. Service upon private domestic corporation or partnership. - If
the defendant is a corporation organized under the laws of the
Philippines or a partnership duly registered, service may be made on
the president, manager, secretary, cashier, agent, or any of its
directors.
The aforementioned rule does not require that service on the private
domestic corporation be served at its principal office in order for the
court to acquire jurisdiction over the same. The Court, in Talsan
Enterprises, Inc. vs. Baliwag Transit, lnc.,44 citing Baltazar v. Court of
Appeals,45 affirmed that:
[S]ervice on respondent's bus terminal at the address stated in the
summons and not in its main office in Baliwag do not render the service
of summons invalid. 1âwphi1 In Artemio Baltazar v. Court of Appeals, we
held:
"The regular mode, in other words, of serving summons upon a private
Philippine Corporation is by personal service upon one of the officers of
such corporation identified in Section 13. Ordinarily, such personal
service may be expected to be made at the principal office of the
corporation. Section 13, does not, however, impose such requirement,
and so personal service upon the corporation may be effected through
service upon, for instance, the president of the corporation at his office
or residential address." xx x.
In fine, the service of summons upon respondent Baliwag Transit is
proper. Consequently, the trial court validly acquired jurisdiction over
respondent Baliwag. (Citation omitted.)
Hence, the personal service of the Alias Summons on an FFMCCI director
was sufficient for the RTC to acquire jurisdiction over FFMCCI itself.
Nevertheless, the Third-Party Complaint filed by CCCIC against FFMCCI
and Mañacop must be dismissed on the ground of lack of cause of
action.
A cause of action is defined as the act or omission by which a party
violates a right of another. The essential elements of a cause of action
are: (a) the existence of a legal right in favor of the plaintiff; (b) a
correlative legal duty of the defendant to respect such right; and ( c) an
act or omission by such defendant in violation of the right of the plaintiff
with a resulting injury or damage to the plaintiff for which the latter may
maintain an action for the recovery of relief from the defendant. 46
As discussed earlier, the rights to indemnification and subrogation of a
surety only arise upon its payment of the obligation to the obligee. In the
case at bar, since CCCIC up to this point refuses to acknowledge and pay
its obligation to Kawasaki under the Surety and Performance Bonds, it
has not yet acquired the rights to seek indemnification from FFMCCI and
subrogation to Kawasaki as against FFMCCI. In the same vein, the
corresponding obligation of FFMCCI to indemnify CCCIC under the
Indemnity Agreements has yet to accrue. Thus far, there is no act or
omission on the part of FFMCCI which violated the right of CCCIC and for
which CCCIC may seek relief from the courts. In the absence of these
elements, CCCIC has no cause of action against FFMCCI and/or FFMCCI
President Mañacop. Resultantly, the Third-Party Complaint of CCCIC
should be dismissed.
There is no basis for awarding
attorney's fees in favor of Kawasaki.
In addition, the rate of legal interest
imposed shall conform with latest
jurisprudence.
Article 2208(2) of the Civil Code allows the award of attorney's fees
"[w]hen the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his
interest[.]" In Servicewide Specialists, Incorporated v. Court of
Appeals,47 the Court declared that:
Article 2208 of the Civil Code allows attorney's fees to be awarded by a
court when its claimant is compelled to litigate with third persons or to
incur expenses to protect his interest by reason of an unjustified act or
omission on the part of the party from whom it is sought. To be sure,
private respondents were forced to litigate to protect their rights but as
we have previously held: "where no sufficient showing of bad faith would
be reflected in a party's persistence in a case other than an erroneous
conviction of the righteousness of his cause, attorney's fee shall not be
recovered as cost." (Citation omitted.)
Bad faith has been defined as "a breach of a known duty through some
motive of interest or ill will. It must, however, be substantiated by
evidence. Bad faith under the law cannot be presumed, it must be
established by clear and convincing evidence."48 There is no evidence in
this case to show bad faith on the part of CCCIC. CCCIC, in refusing the
claim of Kawasaki, was merely acting based on its belief in the
righteousness of its defense. Hence, even though Kawasaki was
compelled to litigate to enforce its claim against CCCIC, the award of
attorney's fees is not proper.
Finally, the Court, in Nacar v. Gallery Frames,49 modified the guidelines in
imposing interests, taking into account Bangko Sentral ng Pilipinas-
Monetary Board Resolution No. 796 dated May 16, 2013 and Circular No.
799, series of 2013, which fixed the legal rate at 6% per annum effective
July 1, 2013. In the absence of stipulated interest in the present case, the
Court imposes upon the amounts covered by the Surety and
Performance Bonds the legal rate of 12% per annum from September 15,
1989, the date of demand, until June 30, 2013; and then the legal rate
of6% per annum from July 1, 2013 until full payment of the same.
WHEREFORE, premises considered, the instant Petition for Review on
Certiorari is PARTLY GRANTED. The Decision dated May 30, 2002 and
Resolution dated November 14, 2002 of the Court of Appeals are
AFFIRMED with the following MODIFICATIONS:
1) The Third-Party Complaint filed by CCC Insurance Corporation against
F.F. Mañacop Construction Company, Inc. and Mr. Florante F. Mañacop is
DISMISSED on the ground of lack of cause of action;
2) The award of attorney's fees in favor of Kawasaki Steel Corporation is
DELETED; and
3) In addition to the amounts CCC Insurance Corporation is ordered to
pay Kawasaki Steel Corporation under Surety Bond No. B-88/11191 and
Performance Bond No. B-88/11193, CCC Insurance Corporation is further
ORDERED to pay Kawasaki Steel Corporation legal interest on said
amounts at the rates of 12% per annum from September 15, 1989 to
June 30, 2013 and 6% per annum from July 1, 2013 until full payment
thereof.
SO ORDERED.
R. No. 206653, February 25, 2015
YUK LING ONG, Petitioner, v. BENJAMIN T. CO, Respondent.
DECISION
MENDOZA, J.:
In court proceedings, there is no right more cherished than the right of
every litigant to be given an opportunity to be heard. This right begins at
the very moment that summons is served on the defendant. The Rules of
Court places utmost importance in ensuring that the defendant
personally grasp the weight of responsibility that will befall him. Thus, it
is only in exceptional circumstances that constructive notification, or
substituted service of summons, is allowed. If the server falls short of
the rigorous requirements for substituted service of summons, then the
Court has no other option but to strike down a void judgment,
regardless of the consequences.
This is a petition for review on certiorari seeking to reverse and set
aside the June 27, 2012 Decision1and the March 26, 2013 Resolution2 of
the Court of Appeals (CA) in CA-G.R. SP No. 106271, which denied the
petition for annulment of judgment.
The Facts
Petitioner Yuk Ling Ong (petitioner), a British-Hong Kong national, and
respondent Benjamin Co (respondent), a Filipino citizen, were married
on October 3, 1982 at Ellinwood-Malate Church.3cralawlawlibrary
Sometime in November 2008, petitioner received a subpoena from the
Bureau of Immigration and Deportation (BID) directing her to appear
before the said agency because her permanent residence visa was
being subjected to cancellation proceedings. Reportedly, her marriage
with respondent was nullified by the court.
When petitioner appeared before the BID, she was furnished with the
copies of the following documents: (1) petition for declaration of nullity
of marriage filed as Civil Case No. CV-01-0177; (2) petition for
declaration of nullity of marriage docketed as Civil Case No. 02-0306;
(3) Decision,4 dated December 11, 2002, in Civil Case No. 02-0306 of the
Regional Trial Court, Branch 260 (RTC), Parañaque City, declaring the
marriage between petitioner and respondent as void ab initio; and (4)
their marriage contract5 with the subject decision annotated thereon.
Petitioner was perplexed that her marriage with respondent had been
declared void ab initio.
The above documents showed that on April 26, 2001, respondent filed a
petition for declaration of nullity6 on the ground of psychological
incapacity before the RTC, which was docketed as Civil Case No. CV-01-
0177. Respondent stated that petitioner’s address was 600 Elcano St.,
Binondo, Manila. There was no showing of its status, whether pending,
withdrawn or terminated.
On July 19, 2002, respondent filed another petition for declaration of
nullity7 on the ground of psychological incapacity before the RTC,
docketed as Civil Case No. 02-0306. Respondent indicated that
petitioner’s address was 23 Sta. Rosa Street, Unit B-2 Manresa Garden
Homes, Quezon City. On July 29, 2002, the RTC issued summons.8 In his
Server’s Return,9 process server Rodolfo Torres, Jr. stated that, on
August 1, 2002, substituted service of summons with the copy of the
petition was effected after several futile attempts to serve the same
personally on petitioner. The said documents were received by Mr. Roly
Espinosa, a security officer.
On December 11, 2002, the RTC rendered a decision10 in Civil Case No.
02-0306 finding respondent’s marriage with petitioner as void ab
initio on the ground of psychological incapacity under Article 36 of the
Family Code. It stated that summons was served on petitioner on August
1, 2002, but she failed to file her responsive pleading within the
reglementary period. The public prosecutor also stated that there were
no indicative facts to manifest collusion. Thus, the RTC concluded that
petitioner was psychologically incapacitated to perform her essential
marital obligations.
Consequently, petitioner filed a petition for annulment of
judgment11 under Rule 47 of the Rules of Court before the CA on
November 24, 2008, claiming that she was never notified of the cases
filed against her. She prayed that the RTC decision, dated December 11,
2002, in Civil Case No. 02-0306, be nullified on the grounds of extrinsic
fraud and lack of jurisdiction.
Petitioner alleged that first, respondent committed extrinsic fraud
because, as seen in Civil Case No. CV-01-0177, he deliberately indicated a
wrong address to prevent her from participating in the trial; second,
jurisdiction over her person was not acquired in Civil Case No. 02-0306
because of an invalid substituted service of summons as no sufficient
explanation, showing impossibility of personal service, was stated
before resorting to substituted service of summons; third, the alleged
substituted service was made on a security guard of their townhouse
and not on a member of her household; and fourth, she was not
psychologically incapacitated to perform her marital
obligations.12cralawlawlibrary
Ruling of the Court of Appeals
On June 27, 2012, the CA rendered the assailed decision finding the
petition for annulment of judgment to be devoid of merit. It held that
there was no sufficient proof to establish that respondent employed
fraud to insure petitioner’s non-participation in the trial of Civil Case No.
CV-01-0177.
Relying on Robinson v. Miralles,13the CA further ruled that the
substituted service of summons in Civil Case No. 02-0306 was valid. It
found that there was a customary practice in petitioner’s townhouse
that the security guard would first entertain any visitors and receive
any communication in behalf of the homeowners. With this set-up, it was
obviously impossible for the process server to personally serve the
summons upon petitioner. It also declared that the process server’s
return carries with it the presumption of regularity in the discharge of a
public officer’s duties and functions.
Petitioner moved for reconsideration, but her motion was denied by the
CA in its Resolution,14 dated March 26, 2013.
Hence, this petition, anchored on the following
ISSUES
Whether or not the Trial Court in Civil Case No. 02-0306 validly acquired
jurisdiction over the person of the petitioner.
Whether or not the facts proven by the petitioner constitute extrinsic
fraud within the purview of Rule 47 of the Rules of Court.15
Petitioner argues that there was an invalid substituted service of
summons. The process server’s return only contained a general
statement that substituted service was resorted to “after several futile
attempts to serve the same personally,”16 without stating the dates and
reasons of the failed attempts. Petitioner also reiterates her argument
that extrinsic fraud was employed.
In his Comment,17 filed on July 9, 2014, respondent contended that the
server’s return satisfactorily stated the reason for the resort to a
substituted service of summons on August 1, 2002; and it was
improbable that petitioner failed to receive the summons because it was
sent to the same address which she declared in this present petition.
Petitioner filed her Reply18 on October 8, 2014 reiterating her previous
arguments.
The Court’s Ruling
The Court finds merit in the petition.
Annulment of judgment is a recourse equitable in character, allowed
only in exceptional cases as where there is no available or other
adequate remedy. Rule 47 of the 1997 Rules of Civil Procedure, as
amended, governs actions for annulment of judgments or final orders
and resolutions, and Section 2 thereof explicitly provides only two
grounds for annulment of judgment, that is, extrinsic fraud and lack of
jurisdiction.19 Annulment of judgment is an equitable principle not
because it allows a party-litigant another opportunity to reopen a
judgment that has long lapsed into finality but because it enables him to
be discharged from the burden of being bound to a judgment that is an
absolute nullity to begin with.20cralawlawlibrary
Petitioner raises two grounds to support her claim for annulment of
judgment: (1) extrinsic fraud and (2) lack of jurisdiction. Her contention
on the existence of extrinsic fraud, however, is too unsubstantial to
warrant consideration. The discussion shall then focus on the ground of
lack of jurisdiction.
Lack of jurisdiction on the part of the trial court in rendering the
judgment or final order is either lack of jurisdiction over the subject
matter or nature of the action, or lack of jurisdiction over the person of
the petitioner. The former is a matter of substantive law because
statutory law defines the jurisdiction of the courts over the subject
matter or nature of the action. The latter is a matter of procedural law,
for it involves the service of summons or other processes on the
petitioner.21cralawlawlibrary
In the present case, petitioner contends that there was lack of
jurisdiction over her person because there was an invalid substituted
service of summons. Jurisdiction over the defendant is acquired either
upon a valid service of summons or the defendant's voluntary
appearance in court.22 If the defendant does not voluntarily appear in
court, jurisdiction can be acquired by personal or substituted service of
summons as laid out under Sections 6 and 7 of Rule 14 of the Rules of
Court, which state:chanRoblesvirtualLawlibrary
Sec. 6. Service in person on defendant. - Whenever practicable, the
summons shall be served by handing a copy thereof to the defendant in
person, or, if he refuses to receive and sign for it, by tendering it to him.
Sec. 7. Substituted Service. - If, for justifiable causes, the defendant
cannot be served within a reasonable time as provided in the preceding
section, service may be effected (a) by leaving copies of the summons
at the defendant's residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent
person in charge thereof.
The landmark case of Manotoc v. CA (Manotoc)23 thoroughly discussed
the rigorous requirements of a substituted service of summons, to wit:
xxx
(1) Impossibility of Prompt Personal Service
xxx

For substituted service of summons to be available, there must be
several attempts by the sheriff to personally serve the summons within
a reasonable period of one month which eventually resulted in failure to
prove impossibility of prompt service. "Several attempts" means at
least three (3) tries, preferably on at least two different dates. In
addition, the sheriff must cite why such efforts were
unsuccessful. It is only then that impossibility of service can be
confirmed or accepted.
(2) Specific Details in the Return
The sheriff must describe in the Return of Summons the facts and
circumstances surrounding the attempted personal service. The efforts
made to find the defendant and the reasons behind the failure must be
clearly narrated in detail in the Return. The date and time of the
attempts on personal service, the inquiries made to locate the
defendant, the name/s of the occupants of the alleged residence or
house of defendant and all other acts done, though futile, to serve
the summons on defendant must be specified in the Return to
justify substituted service.
(3) A Person of Suitable Age and Discretion
xxx
The sheriff must therefore determine if the person found in the alleged
dwelling or residence of defendant is of legal age, what the recipient's
relationship with the defendant is, and whether said person
comprehends the significance of the receipt of the summons and his
duty to immediately deliver it to the defendant or at least notify the
defendant of said receipt of summons. These matters must be clearly
and specifically described in the Return of Summons. (Emphases
and underscoring supplied)
The pronouncements of the Court in Manotoc have been applied to
several succeeding cases. In Pascual v. Pascual,24 the return of
summons did not show or indicate the actual exertion or positive steps
taken by the officer or process server in serving the summons
personally to the defendant. Similarly, in Spouses Afdal v. Carlos,25 the
process server’s indorsements therein failed to state that the personal
service on the defendants was rendered impossible and that efforts
were made to find them personally. In both those cases, the Court ruled
that the meticulous requirements for substituted service of summons
were not met.
There are cases, however, in which Manotoc was applied, but,
nevertheless, it was ruled that there was no lack of jurisdiction over the
person of the defendant. In Sagana v. Francisco,26 the diligent efforts
exerted by the sheriff to locate the respondent were determined, not
only based on the sheriff's return, but also on the process server's
notation and case records. In the case of Wong v. Factor-Koyama,27 on
the other hand, even if the sheriff performed an invalid substituted
service of summons, jurisdiction over the person of defendant was
obtained because the latter had actively participated in trial, amounting
to a voluntary appearance under Section 20 of Rule
14.28cralawlawlibrary
In the case at bench, the summons in Civil Case No. 02-030629 was
issued on July 29, 2002. In his server’s return,30 the process server
resorted to substituted service of summons on August 1, 2002.
Surprisingly, the process server immediately opted for substituted
service of summons after only two (2) days from the issuance of the
summons. The server’s return stated the
following:chanRoblesvirtualLawlibrary
SERVER’S RETURN
THIS IS TO CERTIFY THAT on August 1, 2002, substituted service of
summons with copy of petition, were effected to respondent, Yuk Ling H.
Ong, at the Unit B-2, No. 23 Sta. Rosa St., Manresa Garden Homes,
Manresa Garden City, Quezon City, after several futile attempts to
serve the same personally. The said documents were received by Mr.
Roly Espinosa of sufficient age and discretion, the Security Officer
thereat.
Therefore, respectfully returning to Court, original copy of summons,
Duly Served, this 2nd day of August, 2002.
RODOLFO P. TORRES, JR.
Process Server
(Emphasis supplied)
The server’s return utterly lacks sufficient detail of the attempts
undertaken by the process server to personally serve the summons on
petitioner. The server simply made a general statement that summons
was effected after several futile attempts to serve the same personally.
The server did not state the specific number of attempts made to
perform the personal service of summons; the dates and the
corresponding time the attempts were made; and the underlying reason
for each unsuccessful service. He did not explain either if there were
inquiries made to locate the petitioner, who was the defendant in the
case. These important acts to serve the summons on petitioner, though
futile, must be specified in the return to justify substituted service.
The server’s return did not describe in detail the person who received
the summons, on behalf of petitioner. It simply stated that the summons
was received “by Mr. Roly Espinosa of sufficient age and discretion, the
Security Officer thereat.” It did not expound on the competence of the
security officer to receive the summons.
Also, aside from the server’s return, respondent failed to indicate any
portion of the records which would describe the specific attempts to
personally serve the summons. Respondent did not even claim that
petitioner made any voluntary appearance and actively participated in
Civil Case No. 02-0306.
The case of Robinson v. Miralles, cited by the CA, is not applicable. In
that case, the return described in thorough detail how the security
guard refused the sheriff’s entry despite several attempts. The
defendant in the said case specifically instructed the guard to prevent
anybody to proceed to her residence. In the present case, the attempts
made by the process server were stated in a broad and ambiguous
statement.
The CA likewise erred in ruling that the presumption of regularity in the
performance of official duty could be applied in the case at bench. This
presumption of regularity, however, was never intended to be applied
even in cases where there are no showing of substantial compliance
with the requirements of the rules of procedure. Such presumption does
not apply where it is patent that the sheriff’s or server’s return is
defective.31 As earlier explained, the server’s return did not comply with
the stringent requirements of substituted service of summons.
Given that the meticulous requirements in Manotoc were not met, the
Court is not inclined to uphold the CA’s denial of the petition for
annulment of judgment for lack of jurisdiction over the person of
petitioner because there was an invalid substituted service of summons.
Accordingly, the decision in Civil Case No. 02-0306 must be declared
null and void.
The stricter rule in substituted service of summons was meant to
address “[t]he numerous claims of irregularities in substituted service
which have spawned the filing of a great number of unnecessary special
civil actions of certiorari and appeals to higher courts, resulting in
prolonged litigation and wasteful legal expenses.”32cralawlawlibrary
Although the decision in Civil Case No. 02-0306 was promulgated as
early as December 11, 2002, the Court must strike it down for lack of
jurisdiction over the person of petitioner. The favorable judgment
enjoyed by respondent cannot be categorized as a genuine victory
because it was fought against an adversary, who was ignorant of the
existing dispute. Whatever prize bestowed upon the victor in such a void
decision must also be undone. Respondent, if he wishes to pursue, must
start from scratch and institute his action for declaration of nullity
again; this time with petitioner fully aware and ready for litigation.
WHEREFORE, the petition is GRANTED. The June 27, 2012 Decision and
the March 26, 2013 Resolution of the Court of Appeals in CA-G.R. SP No.
106271 are hereby REVERSED and SET ASIDE. The December 11, 2002
Decision of the Regional Trial Court, Branch 260, Parañaque City is
hereby declared VOID.
G.R. No. 167230 August 14, 2009
SPOUSES DANTE and MA. TERESA L. GALURA, Petitioners,
vs.
MATH-AGRO CORPORATION, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition1 for review on certiorari under Rule 45 of the
Rules of Court, with prayer for the issuance of a writ of
preliminary injunction or temporary restraining order. The petition
challenges the 25 January and 28 February 2005 Resolutions2 of
the Court of Appeals in CA-G.R. SP No. 88088 dismissing the
petition3 for annulment of judgment and final order and denying the
motion4 for reconsideration, respectively, filed by Dante and Ma.
Teresa L. Galura (Spouses Galura). The Spouses Galura sought to
annul the 27 June 2001 Decision5 and 10 November 2004 Order6 of
the Regional Trial Court (RTC), Judicial Region 3, Malolos, Bulacan,
Branch 22, in Civil Case No. 473-M-2000.
The Facts
In March 1997, the Spouses Galura purchased broiler starters and
finishers worth ₱426,000 from Math-Agro Corporation (MAC). The
Spouses Galura paid MAC ₱72,500. Despite several demands, they
failed to pay the ₱353,500 unpaid balance.
MAC engaged the services of a certain Atty. Ronolfo S. Pasamba
(Atty. Pasamba) for the purpose of collecting the ₱353,500 unpaid
balance from the Spouses Galura. In his letter7 dated 13 November
1998 and addressed to the Spouses Galura, Atty. Pasamba stated:
Ang kinatawan ng aming kliyente na Math Agro Corporation na may
tanggapan sa Balagtas , Bulacan, ay lumapit sa aming tanggapan at
kinuha ang aming paglilingkod bilang manananggol kaugnay sa
inyong natitirang pagkakautang sa kanila na halagang
₱353,500.00, na hanggang sa ngayon ay hindi pa ninyo
nababayaran.
Dahilan dito , kayo ay binibigyan namin ng limang (5) araw mula sa
pagkatanggap ng sulat na ito upang bayaran ang aming nabanggit
na kliyente, pati na ang kaukulang tubo nito. Ikinalulungkot naming
sabihin sa inyo na kung hindi ninyo bibigyang pansin ang mga bagay
na ito, mapipilitan na kaming magsampa ng kaukulang dimanda sa
hukuman laban sa inyo upang mapangalagaan namin ang karapatan
at interes ng aming nabanggit na kliyente.
Inaasahan namin na bibigyang pansin ninyo ang mga bagay na ito .
In its complaint8 dated 21 June 2000 and filed with the RTC, MAC
prayed that the RTC order the Spouses Galura to pay the
₱353,500 unpaid balance and ₱60,000 attorney’s fees and
litigation expenses. In the complaint, MAC stated that "defendants
are both of legal age, spouses, and residents of G.L. Calayan Agro
System Inc., Bo. Kalayaan, Gerona, Tarlac, and/or 230 Apo St., Sta.
Mesa Heights, Quezon City, where they may be served with
summonses and other processes of this Honorable Court."
Clerk of Court Emmanuel L. Ortega issued the corresponding
summons9 dated 15 August 2000 requiring the Spouses Galura to file
their answer within 15 days, otherwise judgment by default would be
taken against them.
On 17 September 2000, Court Process Server Faustino B. Sildo (Sildo)
went to 230 Apo Street, Sta. Mesa Heights, Quezon City, to serve the
summons. There, Dante Galura’s father, Dominador Galura, told Sildo
that the Spouses Galura were presently residing at Tierra Pura
Subdivision, Tandang Sora, Quezon City. On 22 September 2000, Sildo
went to G.L. Calayan Agro System, Inc. in Barrio Kalayaan, Gerona, Tarlac
to serve the summons. Sildo learned that the property had been
foreclosed and that the Spouses Galura no longer resided there. On 26
September 2000, Sildo went to Tierra Pura Subdivision, Tandang Sora,
Quezon City, to serve the summons. Sildo served the summons on
Teresa L. Galura’s sister, Victoria Lapuz (Lapuz). In his return of
service10 dated 4 October 2000, Sildo stated:
THIS IS TO CERTIFY that on September 22, 2000 the undersigned went to
the given address of the defendant at G. Bo. Kalayaan, Gerona, Tarlac for
the purpose of serving the summons, issued in the above-entitled case
That the defendants is [sic] no longer residing at the given address and
their property was foreclose [sic] by the Bank,
That on September 17, the undersigned went to the given address of the
defendants at 230 Apo St., Sta Mesa Heights, Quezon City;
That the defendants is [sic] not residing at the given address as per
information given by Mr. Dominador Galura father of the defendants.
That Mr. Dominador Galura give [sic] the address of the defendant
where they are presently residing at Tierra Fura [sic] Subd. at Tandang
Sora, Quezon City.
That on September 26, 2000 the undersigned went to Tandang Sora
where the defendants presently residing [sic] Tierra Fura [sic] Subd.
for the purpose of serving the summons, complaint together with the
annexes,
That Ms. Victoria Lapuz sister-in-Law of Dante Galura received the copy
of said summons, as evidence [sic] by her signature appearing on the
face of original summons.
The Spouses Galura failed to file their answer. In its Order dated 23
January 2001, the RTC declared the Spouses Galura in default and
allowed MAC to present its evidence ex parte.
In its 27 June 2001 Decision, the RTC ruled in favor of MAC and ordered
the Spouses Galura to pay the ₱353,500 unpaid balance, ₱30,000
attorney’s fees, and expenses of litigation. The RTC stated:
Based on the facts and findings established above, the Court is of the
considered view that a judgment in favor of the plaintiff is in order.
Likewise, this Court strongly believes that the failure of the defendants
or their refusal to file any answer to the complaint is a clear admission
on their part of their obligation to the plaintiff. It may even be safely
presumed that by their inaction, defendants have no valid defense
against the claim of the plaintiff such that under the circumstances, this
Court has no other alternative but to pass judgment on the issued [sic]
based on the evidence on record.
The award of attorney’s fees in the amount of ₱30,000.00 is justified
under the premises in view of the court’s finding that the defendants
acted in gross and evident bad faith in refusing to satisfy plaintiff’s
plainly valid, just and demandable claim.
WHEREFORE, judgment is hereby rendered ordering the defendants to
pay the plaintiff the following:
1. The sum of ₱353,500.00 representing the unpaid purchase price of
the poultry products plus interest of 6% per annum accruing from the
date of defendants’ receipt of the first demand letter on October 18,
1998 until full payment is made;
2. The sum of ₱30,000.00 as and for attorney’s fees; and
3. The costs of suit.
SO ORDERED.11
In its Order dated 10 November 2004, the RTC issued a writ of execution
to implement the 27 June 2001 Decision. The RTC stated:
In support of the motion, it is alleged among others that on June 27,
2001, the Decision was rendered in the above-entitled case, has become
final and executory on August 1, 2001 and was duly recorded in the Book
of Entry of Judgment.
On the other hand, the fifteen (15) days period given to the defendants,
from receipt of the order of the Court dated November 11, 2003 had
already lapsed without complying therewith, hence his right to file
comment on the Motion for Execution filed by the plaintiff was waived.
For reasons heretofore made apparent, the Court resolves to grant the
motion for execution.12 1avvphi1
On 13 December 2004, the Spouses Galura received "from their
parents-in-law" a copy of the 10 November 2004 Order. On 6 January
2005, the Spouses Galura filed with the Court of Appeals a petition 13 for
annulment of judgment and final order under Rule 47 of the Rules of
Court, with prayer for the issuance of a writ of preliminary injunction or
temporary restraining order. The Spouses Galura claimed that the RTC’s
27 June 2001 Decision and 10 November 2004 Order were void for two
reasons: (1) the RTC failed to acquire jurisdiction over their persons
because the substituted service of summons was invalid, and (2) there
was extrinsic fraud because MAC made them believe that it would not
file a case against them. The Spouses Galura stated:
The assailed decision dated June 27, 2001 and the order of execution
dated November 10, 2004, issued by respondent Judge in Civil Case No.
473-M-2000, should be annulled pursuant to Rule 47 of the 1997 Rules of
Court.
1. The assailed decision and order of execution are null and void having
been rendered and issued despite failure of the court a quo to first
acquire jurisdiction over the persons of the petitioners, on account of
the improper service of summons upon them.
2. The assailed decision and order of execution were rendered with
extrinsic fraud in attendance. The owner of Math-Agro and herein
petitioners had an existing agreement for the settlement of their
obligation, and herein petitioners were complying with the agreement.
Math-Agro, despite the commitment of its owner not to file the
complaint, did so. Such an act on the part of Math-Agro and its owner
constitutes extrinsic fraud, as it prevented petitioners from defending
themselves in the action lodged with the court a quo. 14
The Court of Appeals’ Ruling
In its 25 January 2005 Resolution, the Court of Appeals dismissed the
petition for lack of merit. The Court of Appeals held that there was a
valid substituted service of summons, that the allegation of extrinsic
fraud was unbelievable, and that the Spouses Galura should have first
availed of the ordinary remedies of new trial, appeal, or petition for
relief. The Court of Appeals stated:
1. Petitioners make no denial that insofar as known by the respondent
Math-Agro Corporation, their address at the time of the filing of the
complaint on July 25, 2000 was at G.L. Calayaan Agro System Inc., Bo.
Kalayaan, Gerona, Tarlac and/or 230 Apo St., Sta. Mesa Heights, Quezon
City. They likewise do not deny the proceedings taken by Court Process
Server Paulino Sildo as narrated in his Return of Service dated October
4, 2000 x x x.
Under the circumstances, we believe, and so hold, that there was a valid
substituted service of summons on the petitioners as defendants in the
case. To begin with, the petitioners never took the bother of informing
the creditor Math-Agro Corporation that they were leaving their address
known to the latter and were moving on to another place of residence,
so the process server took it upon himself to diligently trace the
whereabouts of the petitioners until he was able to effect service of the
summons on Victoria Lapuz, a sister-in-law of petitioner Dante Galura at
Tierra Fura Subdivision in Tandang Sora, Quezon City, where the
defendants were then residing. What they claim is that substituted
service was immediately resorted to without the process server first
exhausting all opportunities for personal service which is improper. x x
x attempts to serve the summons by personal service upon the
Far from being improper, the actuations taken and the efforts exerted
by the process server are highly commendable for he started looking
for the petitioners in the addresses given by them to their creditor and
alleged by the latter in the complaint. Finding them not to be there, he
methodically traced their whereabouts until he came upon their latest
address at Tierra Fura Subdivision, Tandang Sora, Quezon City, as given
by Dominador Galura, father of petitioner-husband, Dante Galura. Quite
conspicuously, the petitioner do not deny that they were residing at that
place when service of the summons was made on petitioner-husband’s
sister-in-law, Victoria Lapuz.
xxxx
2. Petitioners’ posturing that they are at the receiving end of extrinsic
fraud because they had an existing payment arrangement with their
creditor, Math-Agro Corporation, that the latter would not resort to
judicial action for as long as payments are being made by them and that
they had been paying their obligation until July, 2004 is hard to be
believed in. This is but a bare and vagrant allegation without any visible
means of support for nowhere in their petition, as well as in their joint
affidavit of merit, did they attach copies of the corresponding receipts
of their payments. x x x
3. Prescinding from the foregoing records also show that contrary to
Section 1, Rule 47 of the 1997 Rules of Civil Procedure, petitioners have
not availed themselves first of the ordinary remedies of a motion to lift
order of default, new trial, appeal, petition for relief before resorting to
this extra-ordinary action for annulment of judgment. 15
The Spouses Galura filed a motion for reconsideration dated 14 February
2005. In its Resolution dated 28 February 2005, the Court of Appeals
denied the motion for lack of merit.
Hence, the present petition.
The Issues
In their petition dated 8 April 2005, the Spouses Galura raised as issues
that the Court of Appeals erred when it ruled that (1) there was a valid
substituted service of summons; (2) the allegation of extrinsic fraud was
unbelievable; and (3) they should have availed first of the ordinary
remedies of new trial, appeal, or petition for relief.
In its Resolution16 dated 27 April 2005, the Court issued a temporary
restraining order enjoining the Court of Appeals from implementing its
25 January and 28 February 2005 Resolutions.
The Court’s Ruling
The petition is meritorious.
The Spouses Galura claim that the RTC failed to acquire jurisdiction over
their persons because the substituted service of summons was invalid.
They stated:
The resort of the process server to what purports to be a substituted
service, when he left the summons with Ms. Victoria Lapuz is clearly
unjustified, as it was premature. He could still serve the summons
personally upon herein petitioners had he exerted efforts to do so.
Unfortunately, he did not, and he immediately resorted to a substituted
service of the summons. Clearly, the acts of the trial court’s process
server contravenes the rulings espoused by the Honorable Supreme
Court that summons must be served personally on the defendant as
much as possible.
xxxx
The process server, in his return of service above, did not state that his
petitioners at the Tierra Pura Subdivision address failed, and that the
same could not be made within a reasonable time. He likewise failed to
state facts and circumstances showing why personal service of the
summons upon the petitioners at the said address was impossible.
Finally, he also failed to state that Ms. Victoria Lapuz, the person with
whom he left the summons, was a person of sufficient age and
discretion, and residing in the said Tierra Pura address. 17
The Court agrees. Section 6, Rule 14 of the Rules of Court states that,
"Whenever practicable, the summons shall be served by handing a copy
thereof to the defendant in person, or, if he refuses to receive and sign
for it, by tendering it to him." Section 7 states:
SEC. 7. Substituted service. — If, for justifiable causes, the defendant
cannot be served within a reasonable time as provided in the preceding
section, service may be effected (a) by leaving copies of the summons
at the defendant’s residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at
defendant’s office or regular place of business with some competent
person in charge thereof.
In Sandoval II v. HRET,18 the Court enumerated the requisites of a valid
substituted service: (1) service of summons within a reasonable time is
impossible; (2) the person serving the summons exerted efforts to
locate the defendant; (3) the person to whom the summons is served is
of sufficient age and discretion; (4) the person to whom the summons is
served resides at the defendant’s place of residence; and (5) pertinent
facts showing the enumerated circumstances are stated in the return of
service. In Sandoval, the Court held that "statutory restrictions for
substituted service must be strictly, faithfully and fully observed."
In the present case, there is no showing that personal service of
summons within a reasonable time was impossible. On 17 September
2000, Sildo went to 230 Apo Street, Sta. Mesa Heights, Quezon City, to
serve the summons. There, Dominador Galura told him that the Spouses
Galura were presently residing at Tierra Pura Subdivision, Tandang
Sora, Quezon City. Despite being told of the Spouses Galura’s correct
address, Sildo still went to G.L. Calayan Agro System, Inc. in Barrio
Kalayaan, Gerona, Tarlac to serve the summons, only to find out that the
property had already been foreclosed and that the Spouses Galura no
longer resided there. On 26 September 2000, Sildo went to Tierra Pura
Subdivision, Tandang Sora, Quezon City, and, without any explanation,
served the summons on Lapuz. In his 4 October 2000 return of service,
Sildo stated:
That on September 26, 2000 the undersigned went to Tandang Sora
where the defendants presently residing [sic] Tierra Fura [sic] Subd.
for the purpose of serving the summons, complaint together with the
annexes,
That Ms. Victoria Lapuz sister-in-Law of Dante Galura received the copy
of said summons, as evidence [sic] by her signature appearing on the
face of original summons.
Whenever practicable, the summons must be served on the defendant in
person. Substituted service may be resorted to only when service of
summons within a reasonable time is impossible. Impossibility of prompt
service should appear in the return of service — the efforts exerted to
find the defendant and the fact that such efforts failed must be stated in
the return of service. In Keister v. Judge Navarro,19 the Court held:
Service of summons upon the defendant is the means by which the court
may acquire jurisdiction over his person. In the absence of a valid
waiver, trial and judgment without such service are null and void. This
process is solely for the benefit of the defendant. Its purpose is not only
to give the court jurisdiction of the person of the defendant, but also to
afford the latter an opportunity to be heard on the claim made against
him.
The summons must be served to the defendant in person. It is only when
the defendant cannot be served personally within a reasonable time that
a substituted service may be made. Impossibility of prompt service
should be shown by stating the efforts made to find the defendant
personally and the fact that such efforts failed. This statement should be
made in the proof of service. This is necessary because substituted
service is in derogation of the usual method of service. It has been held
that this method of service is "in derogation of the common law; it is a
method extraordinary in character, and hence may be used only as
prescribed and in the circumstances authorized by statute." Thus, under
the controlling decisions, the statutory requirements of substituted
service must be followed strictly, faithfully and fully, and any substituted
service other than that authorized by the statute is considered
ineffective.
Indeed, the constitutional requirement of due process requires that the
service be such as may be reasonably expected to give the desired
notice to the party of the claim against him.
In the present case, there was no showing in the return of service (1) of
the impossibility of personal service within a reasonable time; (2) that
Lapuz, the person on whom summons was served, was of suitable age
and discretion; and (3) that Lapuz resided in the residence of the
Spouses Galura. Consequently, the RTC did not acquire jurisdiction over
the persons of the Spouses Galura, and thus the Spouses Galura are not
bound by the RTC’s 27 June 2001 Decision and 10 November 2004
Order.20
The Spouses Galura claim that the Court of Appeals erred when it ruled
that they should have first availed of the ordinary remedies of new trial,
appeal, or petition for relief. The Spouses Galura stated:
In the case at bar, the assailed decision was rendered in June 27, 2001.
More than three years have passed since the said decision, clearly the
remedies for a motion to lift order of default, new trial, appeal, petition
for relief, have already prescribed. Herein petitioners, therefore, are
left only with the remedy of a petition for the annulment of judgment.21
The Court agrees. When a petition for annulment of judgment or final
order under Rule 47 is grounded on lack of jurisdiction over the person
of the defendant, the petitioner does not need to allege that the ordinary
remedies of new trial, appeal, or petition for relief are no longer
available through no fault of his or her own. In Ancheta v. Ancheta,22 the
Court held:
[T]he Court of Appeals erred in dismissing the original petition and
denying admission of the amended petition. This is so because
apparently, the Court of Appeals failed to take note from the material
allegations of the petition, that the petition was based not only on
extrinsic fraud but also on lack of jurisdiction over the person of the
petitioner, on her claim that the summons and the copy of the complaint
in Sp. Proc. No. NC-662 were not served on her. While the original
petition and amended petition did not state a cause of action for the
nullification of the assailed order on the ground of extrinsic fraud, we
rule, however, that it states a sufficient cause of action for the
nullification of the assailed order on the ground of lack of jursdiction of
the RTC over the person of the petitioner, notwithstanding the absence
of any allegation therein that the ordinary remedy of new trial or
reconsideration, or appeal are no longer available through no fault of
the petitioner.
In a case where a petition for annulment of a judgment or final order of
the RTC filed under Rule 47 of the Rules of Court is grounded on lack of
jurisdiction over the person of the defendant/respondent or over the
nature or subject of the action, the petitioner need not allege in the
petition that the ordinary remedy of new trial or reconsideration of the
final order or judgment or appeal therefrom are no longer available
through no fault of her own. This is so because a judgment rendered or
final order issued by the RTC without jurisdiction is null and void and
may be assailed any time either collaterally or in a direct action or by
resisting such judgment or final order an any action or proceeding
whenever it is invoked, unless barred by laches. (Emphasis supplied)
WHEREFORE, the Court (1) GRANTS the petition, (2) SETS ASIDE the 25
January and 28 February 2005 Resolutions of the Court of Appeals in
CA-G.R. SP No. 88088, (3) MAKES PERMANENT the temporary restraining
order issued on 27 April 2005, and (4) SETS ASIDE the 27 2001 Decision
and 10 November 2004 Order of the Regional Trial Court, Judicial Region
3, Malolos, Bulacan, Branch 22, in Civil Case No. 473-M-2000.
G.R. No. 171916 December 4, 2009
CONSTANTINO A. PASCUAL, substituted by his heirs, represented
by Zenaida Pascual, Petitioner,
vs.
LOURDES S. PASCUAL, Respondent.
DECISION
PERALTA, J.:
Due process dictates that jurisdiction over the person of a defendant
can only be acquired by the courts after a strict compliance with the
rules on the proper service of summons.
Before this Court is a Petition for Review on Certiorari under Rule 45 of
the Rules of Court, with Prayer for Temporary Restraining Order and
Writ of Preliminary Injunction, seeking to annul the Decision1 dated June
29, 2005 and the Resolution2 dated March 14, 2006 of the Court of
Appeals (CA) nullifying and vacating the Decision3 dated December 3,
2002 and Order4 dated April 4, 2003 of the Regional Trial Court (RTC),
Branch 12, Malolos, Bulacan.
The facts, as found in the records, are the following:
Petitioner filed a Complaint for Specific Performance with Prayer for
Issuance of Preliminary Mandatory Injunction with Damages before the
RTC of Malolos, Bulacan against respondent. The process server, in his
Return of Service5 dated May 21, 2002, reported, among others that:
The undersigned Process Server of this Honorable Court went at
defendant's given address at No. 4 Manikling St., Talayan Village, Quezon
City on May 20, 2002 to serve the summons and copy of the Complaint
together with the annexes thereto in connection with the above-entitled
case.
At the time of the service of the said summons, the defendant was not at
her home and only her maid was there who refused to receive the said
summons [in spite] of the insistence of the undersigned.
The undersigned, upon his request with the Brgy. Clerk at the said place,
was given a certification that he really exerted effort to effect the
service of the said summons but failed due to the above reason. (Annex
"A").
The following day, May 21, 2002, the undersigned went back at
defendant's residence to have her receive the subject summons but
again the above defendant was not at her house.
WHEREFORE, the original summons and copy of the complaint is hereby
returned to the Honorable Court NOT SERVED.
Malolos, Bulacan, May 21, 2002.
Thereafter, an alias summons was issued by the RTC and, on May 29,
2002, the following report was submitted:
The undersigned, on May 29, 2002, made a 3rd attempt to serve the
alias summons issued by the Hon. Court relative with the above-entitled
case at the given address of the defendant.
The undersigned, accompanied by the barangay officials of the said
place, proceeded at defendant's residence but the undersigned was not
permitted to go inside her house and was given information by her maid
that the defendant was not there.
The defendant's car was parked inside her house and
inquiries/verification made on her neighbors revealed that the
defendant was inside her house at the time of service of said summons
and probably did not want to show-up when her maid informed her of
undersigned's presence.
WHEREFORE, the undersigned court process server respectfully
returned the alias summons dated May 29, 2002 issued by the Hon.
Court "UNSERVED" for its information and guidance.
Malolos, Bulacan, May 30, 2002.6
Subsequently, on August 14, 2002, the process server returned with the
following report,7 stating that a substituted service was effected:
This is to certify that on the 14th day of August, 2002, I personally went
at Dr. Lourdes Pascual's residence at #4 Manikling Street, Talayan
Village, Quezon City, to serve the copy of the Summons dated August 12,
2002, together with a copy of the Complaint and its annexes
thereto. 1avvphi1
Defendant Dr. Lourdes Pascual was out during the time of service of the
said summons and only her housemaid was present. The undersigned
left a copy of the same to the latter who is at the age of reason but
refused to sign the same.
WHEREFORE, the undersigned respectfully return the service of
summons duly served for information and guidance of the Honorable
Court.
Malolos, Bulacan, August 14, 2002.
For failure of the respondent to file a responsive pleading, petitioner, on
September 17, 2002, filed a Motion to Declare Defendant in Default8 to
which the petitioner filed an Opposition/Comment to Plaintiff's Motion to
Declare Defendant in Default9 dated October 1, 2002, claiming that she
was not able to receive any summons and copy of the complaint. The
RTC, in its Order10 dated October 30, 2002, declared respondent in
default and allowed petitioner to file his evidence ex-parte.
Respondent filed a Motion for Reconsideration11 dated November 18,
2002 seeking to set aside the above-mentioned Order dated October 30,
2002. However, the said motion was denied by the RTC in its
Order12 dated November 27, 2002.
Consequently, on December 3, 2002, the RTC, in its Decision,13 found in
favor of the petitioner. The dispositive portion of the said Decision
reads:
WHEREFORE, in light of all the foregoing, judgment is hereby rendered in
favor of the plaintiff, Constantino A. Pascual, and against Lourdes S.
Pascual, ordering the latter as follows:
a. to CEASE AND DESIST from further intervening with the corporate and
internal affairs of Rosemoor Mining Corporation, consisting of acts and
omissions prejudicial and detrimental to the interest of the said
corporation resulting to irreparable injury to herein plaintiff;
b. to pay plaintiff the sum of One Hundred Thousand
Pesos (P100,000.00), for and by way of moral damages;
c. to pay the sum of Thirty Thousand Pesos (₱30,000.00) for and by
way of Attorney's fees; and
d. to pay the costs of this suit.
SO ORDERED.
Respondent then filed a Motion to Set Aside Order of Default14 dated
December 13, 2002, with the argument of non-service of summons upon
her. This was denied by the RTC in its Order15 dated April 4, 2003; and on
the same day, a Certificate of Finality and Entry of Judgment was issued.
Eventually, respondent, on April 28, 2003, filed a Motion for
Reconsideration16 of the Order dated April 4, 2003, which was denied by
the RTC in its Order17 dated June 23, 2003. Finally, on June 26, 2003, a
Writ of Execution was issued to enforce the Decision dated December 3,
2002 of the RTC.
Aggrieved, respondent filed with the CA a Petition for Certiorari and
Prohibition under Rule 65 of the Rules of Court which was granted by
the same Court in its Decision18 dated June 29, 2005, the dispositive
portion of which reads:
WHEREFORE, the petition is GIVEN DUE COURSE and GRANTED. The said
Decision, as well as the Orders and the processes on which this is
premised, are NULLIFIED and VACATED.
SO ORDERED.
Petitioner comes now to this Court through a Petition for Review
on Certiorari under Rule 45 of the Rules of Court, with Prayer for
Temporary Restraining Order and Writ of Preliminary Injunction, on the
following grounds:
I
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS
AN INVALID SERVICE OF SUMMONS UPON THE RESPONDENT AND, HENCE,
THE COURT (REGIONAL TRIAL COURT) DID NOT ACQUIRE JURISDICTION
OVER THE RESPONDENT.
II
THE HONORABLE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO
THE PETITION WHEN FROM THE UNDISPUTED FACTS, THE RESPONDENT'S
FAILURE TO INTERPOSE AN APPEAL OR TO FILE A MOTION FOR
RECONSIDERATION OR A PETITION FOR RELIEF FROM JUDGMENT CLEARLY
BARS THE INSTITUTION OF THE SPECIAL CIVIL ACTION FOR CERTIORARI
UNDER RULE 65, 1997 RULES OF CIVIL PROCEDURE.
Petitioner insists that there was a valid substituted service of summons
and that there should be a presumption of regularity in the performance
of official functions. He also avers that certiorari, which was filed by the
respondent with the CA, does not lie when the remedy of appeal has
been lost.
In her Comment with Motion to Cite for Contempt 19 dated August 29,
2006, respondent raises the following issues:
1. SHOULD THE PETITION BE DISMISSED FOR HAVING BEEN FILED IN
VIOLATION REPUBLIC ACT NO. 6713 IN RELATION TO ART. 5 OF THE CIVIL
CODE?
2. ARE THE PETITIONER AND HIS COUNSEL PUNISHABLE FOR CONTEMPT OF
COURT FOR KNOWINGLY MISLEADING THIS HONORABLE COURT?
3. WAS THE ALLEGED SERVICE OF SUMMONS ON THE ILLITERATE MAID
EFFECTIVE TO CONFER JURISDICTION OVER THE DEFENDANT BEFORE THE
RTC OF MALOLOS, BULACAN?
4. ASSUMING FOR THE SAKE OF ARGUMENT THAT THE SERVICE OF
SUMMONS WAS VALID, WAS THE ORDER DECLARING THE DEFENDANT IN
DEFAULT RENDERED WITH GRAVE ABUSE OF DISCRETION?
5. WAS THE ORDER DENYING THE MOTION TO LIFT AND SET ASIDE THE
ORDER OF DEFAULT RENDERED WITH GRAVE ABUSE OF DISCRETION?
6. IS THE PETITIONER GUILTY OF FORUM SHOPPING?
7. WILL THIS HONORABLE COURT ALLOW THE NULL AND VOID DECEMBER 3,
2002 DECISION OF THE RTC TO BECOME FINAL AND EXECUTORY AND
OBLITERATE THE CRIMINAL ACT OF FALSIFICATION, THEREBY REWARDING
THE AUTHOR OF THE CRIMINAL OFFENSE?
In addressing the above issues, the respondent argues that the CA
decision became final by operation of law because the present petition
is null and void for being a violation of the provisions of Republic Act No.
6712, in relation to Article 5 of the Civil Code, the counsel for petitioner
having filed a Motion for Extension of Time to File Petition for Review
and, thereafter, the Petition for Review itself. She also claims that there
was no proper service of summons as the maid who was purportedly
served a copy thereof was illiterate and has denied being served in a
sworn statement executed before a notary public and, thus, the RTC
never acquired jurisdiction over her person. According to her, assuming
that the summons were indeed served, the RTC was guilty of grave
abuse of discretion for declaring her in default and for refusing to lift
the order of default because it deprived her of her right to present
evidence in support of her defense. She further disputes the argument
of the petitioner that the Decision dated December 3, 2002 became final
because it did not become the subject of appeal by stating that the said
principle can only be applied to valid judgments that were rendered in
accordance with law and not to void judgments rendered without
jurisdiction or in excess thereof. In addition, she avers that petitioner
made a deliberate and malicious concealment of the fact that at the time
he filed the case for specific performance, as well as during the time it
was being heard, he was already being investigated in administrative
proceedings before the National Bureau of Investigation, the Department
of Justice and the Municipal Trial Court of Malolos, Bulacan, Branch 2,
involving the same subject matter, issues and parties; hence, he violated
the law against forum shopping. Lastly, respondent points out that the
CA Decision dated June 29, 2005 is a permanent injunction against the
implementation of the contested Orders and Decisions of the RTC;
therefore, there is an urgent necessity to enforce the said judgment.
On June 30, 2008, this Court granted20 the substitution of the
respondent by his heirs as represented by his wife Zenaida Pascual,
after the Manifestation21 dated June 12, 2008 was filed informing this
Court of the demise of the same respondent.
After a careful study of the records of this case, this Court finds the
petition bereft of any merit.
Clearly, the main, if not the only issue that needs to be resolved is
whether or not there was a proper and valid substituted service of
summons, the resolution of which, will determine whether jurisdiction
was indeed acquired by the trial court over the person of the petitioner.
In a case where the action is in personam and the defendant is in the
Philippines, the service of summons may be done by personal or
substituted service as laid out in Sections 6 and 7 of Rule 14 of the
Revised Rules of Court. The provisions state:
Section 6. Service in person on defendant. - Whenever practicable, the
summons shall be served by handing a copy thereof to the defendant in
person, or, if he refuses to receive and sign for it, by tendering it to him.
Section 7. Substituted service. - If, for justifiable causes, the defendant
cannot be served within a reasonable time as provided in the preceding
section, service may be effected (a) by leaving copies of the summons
at the defendant's residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at
defendant’s office or regular place of business with some competent
person in charge thereof.
A plain and simple reading of the above provisions indicates that
personal service of summons should and always be the first option, and
it is only when the said summons cannot be served within a reasonable
time can the process server resort to substituted service.
This Court gave an in-depth discussion as to the nature and requisites of
substituted service in Manotoc v. Court of Appeals, et al.:22
We can break down this section into the following requirements to effect
a valid substituted service:
(1) Impossibility of Prompt Personal Service
The party relying on substituted service or the sheriff must show
that defendant cannot be served promptly or there is impossibility
of prompt service.23 Section 8, Rule 14 provides that the plaintiff or the
sheriff is given a "reasonable time" to serve the summons to the
defendant in person, but no specific time frame is mentioned.
"Reasonable time" is defined as "so much time as is necessary under
the circumstances for a reasonably prudent and diligent man to do,
conveniently, what the contract or duty requires that should be done,
having a regard for the rights and possibility of loss, if any, to the other
party."24 Under the Rules, the service of summons has no set period.
However, when the court, clerk of court, or the plaintiff asks the sheriff
to make the return of the summons and the latter submits the return of
summons, then the validity of the summons lapses. The plaintiff may
then ask for an alias summons if the service of summons has
failed.25What then is a reasonable time for the sheriff to effect a
personal service in order to demonstrate impossibility of prompt
service? To the plaintiff, "reasonable time" means no more than seven
(7) days since an expeditious processing of a complaint is what a
plaintiff wants. To the sheriff, "reasonable time" means 15 to 30 days
because at the end of the month, it is a practice for the branch clerk of
court to require the sheriff to submit a return of the summons assigned
to the sheriff for service. The Sheriff’s Return provides data to the Clerk
of Court, which the clerk uses in the Monthly Report of Cases to be
submitted to the Office of the Court Administrator within the first ten
(10) days of the succeeding month. Thus, one month from the issuance of
summons can be considered "reasonable time" with regard to personal
service on the defendant.
Sheriffs are asked to discharge their duties on the service of summons
with due care, utmost diligence, and reasonable promptness and speed
so as not to prejudice the expeditious dispensation of justice. Thus, they
are enjoined to try their best efforts to accomplish personal service on
defendant. On the other hand, since the defendant is expected to try to
avoid and evade service of summons, the sheriff must be resourceful,
persevering, canny, and diligent in serving the process on the defendant.
For substituted service of summons to be available, there must be
several attempts by the sheriff to personally serve the summons within
a reasonable period [of one month] which eventually resulted in failure
to prove impossibility of prompt service. "Several attempts" means at
least three (3) tries, preferably on at least two different dates. In
addition, the sheriff must cite why such efforts were unsuccessful. It is
only then that impossibility of service can be confirmed or accepted.
(2) Specific Details in the Return
The sheriff must describe in the Return of Summons the facts and
circumstances surrounding the attempted personal service.26 The
efforts made to find the defendant and the reasons behind the
failure must be clearly narrated in detail in the Return. The date and
time of the attempts on personal service, the inquiries made to locate
the defendant, the name/s of the occupants of the alleged residence or
house of defendant and all other acts done, though futile, to serve the
summons on defendant must be specified in the Return to justify
substituted service. The form on Sheriff’s Return of Summons on
Substituted Service prescribed in the Handbook for Sheriffs published
by the Philippine Judicial Academy requires a narration of the efforts
made to find the defendant personally and the fact of failure. 27 Supreme
Court Administrative Circular No. 5 dated November 9, 1989 requires
that "impossibility of prompt service should be shown by stating the
efforts made to find the defendant personally and the failure of such
efforts," which should be made in the proof of service.
(3) A Person of Suitable Age and Discretion
If the substituted service will be effected at defendant’s house or
residence, it should be left with a person of "suitable age and
discretion then residing therein."28 A person of suitable age and
discretion is one who has attained the age of full legal capacity (18 years
old) and is considered to have enough discernment to understand the
importance of a summons. "Discretion" is defined as "the ability to make
decisions which represent a responsible choice and for which an
understanding of what is lawful, right or wise may be
presupposed".29 Thus, to be of sufficient discretion, such person must
know how to read and understand English to comprehend the import of
the summons, and fully realize the need to deliver the summons and
complaint to the defendant at the earliest possible time for the person
to take appropriate action. Thus, the person must have the "relation of
confidence" to the defendant, ensuring that the latter would receive or
at least be notified of the receipt of the summons. The sheriff must
therefore determine if the person found in the alleged dwelling or
residence of defendant is of legal age, what the recipient’s relationship
with the defendant is, and whether said person comprehends the
significance of the receipt of the summons and his duty to immediately
deliver it to the defendant or at least notify the defendant of said receipt
of summons. These matters must be clearly and specifically described
in the Return of Summons.
(4) A Competent Person in Charge
If the substituted service will be done at defendant’s office or regular
place of business, then it should be served on a competent person in
charge of the place. Thus, the person on whom the substituted service
will be made must be the one managing the office or business of
defendant, such as the president or manager; and such individual must
have sufficient knowledge to understand the obligation of the defendant
in the summons, its importance, and the prejudicial effects arising from
inaction on the summons. Again, these details must be contained in the
Return.
Petitioner contends that there was a valid substituted service of
summons as shown in not one, but three Officer's Return. He points out
that the absence in the officer's return of a statement about the
impossibility of personal service does not conclusively prove that the
service was invalid. He adds that proof of prior attempts to serve
personally can be deduced from the other returns when there are
several in a series of officer's returns all tending to establish the
impossibility of personal service upon the respondent. However, the said
argument of the petitioner is merely a plain deduction that veers away
from the well-established requisite that the officer must show that the
defendant cannot be served promptly, or that there was an impossibility
of prompt service. A cursory reading of the three Officer's Returns does
not show any compliance with the said requisite. The Return of Service
dated May 21, 2002 inadequately states that:
xxxx
At the time of service of the said summons, the defendant was not at
her home and only her maid was there who refused to receive the said
summons [in spite] of the insistence of the undersigned.
The undersigned, upon his request with the Brgy. Clerk at the said place,
was given a certification that he really exerted effort to effect the
service of the said summons but failed due to the above reason. (Annex
"A").
The following day, May 21, 2002, the undersigned went back at
defendant's residence to have her receive the subject summons but
again the above defendant was not at her house.
xxxx
Similarly, in the Return of Service dated May 30, 2002, pertinent details
were wanting, as it reads:
xxxx
The undersigned accompanied by the barangay officials of the said place
proceeded at defendant's residence but the undersigned was not
permitted to go inside her house and was given information by her maid
that the defendant was not there.
The defendant's car was parked inside her house and
inquiries/verification made on her neighbors revealed that the
defendant was inside her house at the time of service of said summons
and probably did not want to show-up when her maid informed her of
undersigned's presence.
xxxx
Lastly, the Return of Service dated August 14, 2002 was no different. It
reads:
xxxx
Defendant Dr. Lourdes Pascual was out during the time of service of the
said summons and only her housemaid was present. The undersigned
left a copy of the same to the latter who is at the age of reason but
refused to sign the same.
xxxx
The above Return of Summons does not show or indicate the actual
exertion or any positive steps taken by the officer or process server in
serving the summons personally to the defendant. As in Jose v.
Boyon,30 this Court ruled that:
The Return of Summons shows no effort was actually exerted and no
positive step taken by either the process server or petitioners to locate
and serve the summons personally on respondents. At best, the Return
merely states the alleged whereabouts of respondents without
indicating that such information was verified from a person who had
knowledge thereof. Certainly, without specifying the details of the
attendant circumstances or of the efforts exerted to serve the
summons, a general statement that such efforts were made will not
suffice for purposes of complying with the rules of substituted service
of summons.
The necessity of stating in the process server's Return or Proof of
Service the material facts and circumstances sustaining the validity of
substituted service was explained by this Court in Hamilton v.
Levy,31 from which we quote:
x x x The pertinent facts and circumstances attendant to the service of
summons must be stated in the proof of service or Officer's Return;
otherwise, any substituted service made in lieu of personal service
cannot be upheld. This is necessary because substituted service is in
derogation of the usual method of service. It is a method extraordinary
in character and, hence, may be used only as prescribed and in the
circumstances authorized by statute. Here, no such explanation was
made. Failure to faithfully, strictly, and fully comply with the
requirements of substituted service renders said service ineffective. 32
Petitioner further states that the presumption of regularity in the
performance of official functions must be applied to the present case.
He expounds on the fact that as between the process server's return of
substituted service, which carries with it the presumption of regularity
and the respondent's self-serving assertion that she only came to know
of the case against her when she received a copy of the petitioner's
motion to declare her in default, the process server's return is
undoubtedly more deserving of credit. The said argument, however, is
only meritorious, provided that there was a strict compliance with the
procedure for serving a summons. In the absence of even the barest
compliance with the procedure for a substituted service of summons
outlined in the Rules of Court, the presumption of regularity in the
performance of public functions does not apply. 33
Applying the above disquisitions, the jurisdiction over the person of the
respondent was never vested with the RTC, because the manner of
substituted service by the process server was apparently invalid and
ineffective. As such, there was a violation of due process. Jurisdiction
over the defendant is acquired either upon a valid service of summons
or the defendant’s voluntary appearance in court. When the defendant
does not voluntarily submit to the court’s jurisdiction or when there is
no valid service of summons, "any judgment of the court which has no
jurisdiction over the person of the defendant is null and void."34
Petitioner also raises the issue of the impropriety of the remedy
resorted to by the respondent which is the filing of a Petition
for Certiorari under Rule 65 of the Rules of Court, claiming that the said
remedy is inappropriate because there are still other plain, speedy and
adequate remedies available, such as an ordinary appeal, the Decision of
the RTC having attained its finality. The question, however, is whether
the said Decision has indeed attained finality. The importance of the
doctrine of the finality of judgment has always been emphasized by this
Court. In Pasiona, Jr. v. Court of Appeals ,35 this Court has expounded on
the said doctrine, thus:
The Court re-emphasizes the doctrine of finality of judgment.
In Alcantara v. Ponce,36 the Court, citing its much earlier ruling
in Arnedo v. Llorente,37 stressed the importance of said doctrine, to wit:
It is true that it is the purpose and intention of the law that courts
should decide all questions submitted to them "as truth and justice
require," and that it is greatly to be desired that all judgments should be
so decided; but controlling and irresistible reasons of public policy and
of sound practice in the courts demand that at the risk of occasional
error, judgments of courts determining controversies submitted to
them should become final at some definite time fixed by law, or by a rule
of practice recognized by law, so as to be thereafter beyond the control
even of the court which rendered them for the purpose of correcting
errors of fact or of law, into which, in the opinion of the court it may
have fallen. The very purpose for which the courts are organized is to
put an end to controversy, to decide the questions submitted to the
litigants, and to determine the respective rights of the parties. With the
full knowledge that courts are not infallible, the litigants submit their
respective claims for judgment, and they have a right at some time or
other to have final judgment on which they can rely as a final disposition
of the issue submitted, and to know that there is an end to the
litigation.38
Then, in Juani v. Alarcon,39 it was held, thus:
This doctrine of finality of judgment is grounded on fundamental
considerations of public policy and sound practice. In fact, nothing is
more settled in law than that once a judgment attains finality it thereby
becomes immutable and unalterable. It may no longer be modified in any
respect, even if the modification is meant to correct what is perceived
to be an erroneous conclusion of fact or law, and regardless of whether
the modification is attempted to be made by the court rendering it or by
the highest court of the land.40
Again, in Dinglasan v. Court of Appeals,41 the Court declared that:
After the judgment or final resolution is entered in the entries of
judgment, the case shall be laid to rest. x x x
xxxx
The finality of decision is a jurisdictional event which cannot be made to
depend on the convenience of the party. To rule otherwise would
completely negate the purpose of the rule on completeness of service,
which is to place the date of receipt of pleadings, judgment and
processes beyond the power of the party being served to determine at
his pleasure.42
The said doctrine, however, is applicable only when the judgment or
decision is valid. In the present case, as earlier pronounced, and as
ruled by the CA, the judgment in question is void, the RTC not having
acquired jurisdiction over the person of the respondent. It is a well-
entrenched principle that a void judgment can never become final. As
ruled by this Court in Metropolitan Bank & Trust Company v. Alejo:43
In Leonor v. Court of Appeals44 and Arcelona v. Court of Appeals,45 we
held thus:
A void judgment for want of jurisdiction is no judgment at all. It
cannot be the source of any right nor the creator of any obligation. All
acts performed pursuant to it and all claims emanating from it have no
legal effect. Hence, it can never become final and any writ of execution
based on it is void: "x x x it may be said to be a lawless thing which can
be treated as an outlaw and slain at sight, or ignored wherever and
whenever it exhibits its head."
Thus, from the above discussion, the Decision of the RTC, not having
attained its finality due to its being void, the Petition for Certiorari under
Rule 65, filed by the respondent with the CA, was proper.
WHEREFORE, the Petition dated May 3, 2006 is hereby DENIED and the
Decision dated June 29, 2005 of the Court of Appeals in CA-G.R. SP No.
77789 is hereby AFFIRMED in toto.
SO ORDERED.
G.R. NO. 184333 : April 1, 2013
SIXTO N. CHU, Petitioner, v. MACH ASIA TRADING
CORPORATION, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari assailing the Decision1 dated
July 25, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 70666, and
the Resolution2 dated August 28, 2008 denying petitioner's Motion for
Reconsideration.
The factual and procedural antecedents are as
follows:chanroblesvirtualawlibrary
Respondent Mach Asia Trading Corporation is a corporation engaged in
importing dump trucks and heavy equipments. On December 8, 1998,
petitioner Sixto N. Chu purchased on installment one (1) Hitachi
Excavator worth P900,000.00 from the respondent. Petitioner initially
paid P180,000.00 with the balance of P720,000.00 to be paid in 12
monthly installments through Prime Bank postdated checks. On March
29, 1999, petitioner again purchased two (2) heavy equipments from the
respondent on installment basis in the sum of P1,000,000.00, namely:
one (1) motorgrader and one (1) payloader. Petitioner made a down
payment of P200,000.00 with the balance of P800,000.00 payable in 12
monthly installments through Land Bank postdated
checks.3chanroblesvirtualawlibrary
However, upon presentment of the checks for encashment, they were
dishonored by the bank either by reason of "closed account," "drawn
against insufficient funds," or "payment stopped." Respondent informed
petitioner that the checks were dishonored and invited him to its office
to replace the checks. On September 16, 1999, respondent sent
petitioner a formal demand letter urging the latter to settle his accounts
within five days from receipt of the letter. In response, petitioner sent
respondent a letter explaining that his business was badly hit by the
Asian economic crisis and that he shall endeavor to pay his obligation by
giving partial payments. He said that he shall also voluntarily surrender
the subject units should he fail to do so.4chanroblesvirtualawlibrary
On November 11, 1999, respondent filed a complaint before the Regional
Trial Court (RTC) of Cebu City for sum of money, replevin, attorney's
fees and damages against the petitioner. Respondent prayed for the
payment of the unpaid balance of P1,661,947.27 at 21% per annum until
full payment, 25% of the total amount to be recovered as attorney's
fees, litigation expenses and costs.5chanroblesvirtualawlibrary
On November 29, 1999, the RTC issued an Order6 allowing the issuance
of a writ of replevin on the subject heavy equipments.
On December 9, 1999, Sheriff Doroteo P. Cortes proceeded at
petitioner's given address for the purpose of serving the summons,
together with the complaint, writ of replevin and bond. However, the
Sheriff failed to serve the summons personally upon the petitioner,
since the latter was not there. The Sheriff then resorted to substituted
service by having the summons and the complaint received by a certain
Rolando Bonayon, a security guard of the
petitioner. 7chanroblesvirtualawlibrary
Petitioner failed to file any responsive pleading, which prompted
respondent to move for the declaration of defendant in default. On
January 12, 2000, the RTC issued an Order declaring defendant in
default and, thereafter, allowed respondent to present its evidence ex
parte.
On December 15, 2000, after respondent presented its evidence, the RTC
rendered a Decision against the petitioner,
thus:chanroblesvirtualawlibrary
1. By adjudicating and adjudging plaintiff's right of ownership and
possession over the subject units mentioned and described in the
complaint, and which were already seized and turned over to the
plaintiff by virtue of the writ of replevin.
2. Ordering defendants to pay to plaintiff the sum of (sic) equivalent to
25% of the total amount recovered or value of the heavy equipments
possessed as attorney's fees, and to reimburse no less than P15,000.00
as expenses for litigation, plus the cost of the premium of replevin bond
in the amount of P11,333.50.8chanroblesvirtualawlibrary
Aggrieved, petitioner sought recourse before the CA, docketed as CA-
G.R. CV No. 70666. Petitioner argued that the RTC erred in concluding
that the substituted service of summons was valid, and that,
consequently, there was error on the part of the RTC when it declared
him in default, in proceeding with the trial of the case, and rendering an
unfavorable judgment against him.
On July 25, 2007, the CA rendered a Decision9 affirming the Decision of
the RTC, the decretal portion of which reads:chanroblesvirtualawlibrary
WHEREFORE, IN LIGHT OF THE FOREGOING, the Decision of the Regional
Trial Court of Cebu, Branch 17, in Civil Case No. CEB-24551, rendered on
December 15, 2000, is hereby AFFIRMED with the sole modification as to
award of attorney's fees, which is hereby reduced to 10% of the value of
the heavy equipments recovered.
SO ORDERED.10chanroblesvirtualawlibrary
Ruling in favor of the respondent, the CA opined, among others, that the
requirement of due process was complied with, considering that
petitioner actually received the summons through his security guard. It
held that where the summons was in fact received by the defendant, his
argument that the Sheriff should have first tried to serve summons on
him personally before resorting to substituted service of summons
deserves scant consideration. Thus, in the interest of fairness, the CA
said that the process server's neglect or inadvertence in the service of
summons should not unduly prejudice the respondent's right to speedy
justice.
The CA also noted that petitioner failed to set up a meritorious defense
aside from his contention that summons was not properly served. It
went further and decided the case on the merits and ruled that
petitioner has an unpaid obligation due to respondent for the heavy
machineries he purchased from the latter. It, however, reduced the
amount of attorney's fees awarded to 10% of the value of the heavy
equipments recovered.
Petitioner filed a Motion for Reconsideration, but it was denied in the
Resolution11 dated August 28, 2008.
Hence, the petition assigning the following
errors:chanroblesvirtualawlibrary
I Respectfully returned to the Honorable Regional Trial Court, Branch 17,
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN
DEFIANCE OF LAW AND JURISPRUDENCE IN FINDING THAT THE TRIAL
COURT ACQUIRED JURISDICTION OVER THE PERSON OF THE DEFENDANT
EVEN WHEN THE SUBSTITUTED SERVICE OF SUMMONS WAS
IMPROPER.12chanroblesvirtualawlibrary
II
THE HONORABLE COURT OF APPEALS COMMITTED A SERIOUS ERROR IN
DEFIANCE OF LAW AND JURISPRUDENCE IN HOLDING THAT HEREIN
PETITIONER SHOULD HAVE SET UP A MERITORIOUS DEFENSE EVEN WHEN
THE SUMMONS WAS IMPROPERLY SERVED.13chanroblesvirtualawlibrary
Petitioner argues that there was no valid substituted service of
summons in the present case. He maintains that jurisdiction over the
person of the defendant is acquired only through a valid service of
summons or the voluntary appearance of the defendant in court. Hence,
when there is no valid service of summons and no voluntary appearance
by the defendant, any judgment of a court, which acquired no jurisdiction
over the defendant, is null and void.
On its part, respondent posits that the RTC acquired jurisdiction over
the person of the petitioner and the judgment by default of the RTC was
based on facts, law, and jurisprudence and, therefore, should be
enforced against the petitioner.
The petition is meritorious.
Courts acquire jurisdiction over the plaintiffs upon the filing of the
complaint. On the other hand, jurisdiction over the defendants in a civil
case is acquired either through the service of summons upon them or
through their voluntary appearance in court and their submission to its
authority. 14chanroblesvirtualawlibrary
As a rule, summons should be personally served on the defendant. It is
only when summons cannot be served personally within a reasonable
period of time that substituted service may be resorted to. 15Section 7,
Rule 14 of the Rules of Court provides:chanroblesvirtualawlibrary
SEC. 7. Substituted service. If, for justifiable causes, the defendant
cannot be served within a reasonable time as provided in the preceding
section, service may be effected (a) by leaving copies of the summons
at the defendant's residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at
defendant's office or regular place of business with some competent
person in charge thereof.
It is to be noted that in case of substituted service, there should be a
report indicating that the person who received the summons in the
defendant's behalf was one with whom the defendant had a relation of
confidence, ensuring that the latter would actually receive the
summons.16chanroblesvirtualawlibrary
Also, impossibility of prompt personal service must be shown by stating
that efforts have been made to find the defendant personally and that
such efforts have failed. This is necessary because substituted service
is in derogation of the usual method of service. It is a method
extraordinary in character, hence, may be used only as prescribed and
in the circumstances authorized by statute. The statutory requirements
of substituted service must be followed strictly, faithfully and fully, and
any substituted service other than that authorized by statute is
considered ineffective.17chanroblesvirtualawlibrary
In the case at bar, the Sheriff's Return
provides:chanroblesvirtualawlibrary
Cebu City, the Summons and writ issued in the above-entitled case with
the following information, to wit:chanroblesvirtualawlibrary
1. That the Summons, together with the complaint, writ of replevin and
bond was received on December 7, 1999, by Rolando Bonayon, a security
guard on defendant Sixto Chu at his given address who received and
signed receipt thereof.
2. That the writ of replevin was duly executed on the same date,
December 7, 1999, Tacloban City and San Jorge, Samar of the following
properties subject of the writ.
a) Excavator Hitachi with Serial No. WHO44-116-0743
b) Motorgrader with Serial No. N525PS-1014
c) Payloader with Serial No. KLD70-54224
After the issuance of the Sheriff's inventory receipt, the units were
turned over to Al Caballero and companion, representatives of plaintiff,
who shipped the same to Cebu to be deposited with MACH ASIA TRADING
CORPORATION, Block 26 MacArthur Highway, Reclamation Area, Cebu
City, for safekeeping, subject to the provision of Sec. 6, Rule 60 of the
Rules of Court.18chanroblesvirtualawlibrary
Clearly, it was not shown that the security guard who received the
summons in behalf of the petitioner was authorized and possessed a
relation of confidence that petitioner would definitely receive the
summons. This is not the kind of service contemplated by law. Thus,
service on the security guard could not be considered as substantial
compliance with the requirements of substituted service.
Moreover, the reasoning advanced by the CA in ruling against the
petitioner was based merely on conjectures and surmises. The CA even
went as far as to conclude that the process server's neglect should not
have unduly prejudiced the respondent, thus:chanroblesvirtualawlibrary
Hence, if Chu had actually received the summons through his security
guard, the requirement of due process would have nevertheless been
complied with. x x x. Based on the presumption that a person takes
ordinary care of his concerns, the security guard would not have
allowed the sheriff to take possession of the equipments without the
prior permission of Chu; otherwise he would be accountable to Chu for
the said units. Chu, for his part, would not have given his permission
without being informed of the fact of the summons and the writ of
replevin issued by the lower court, which permission includes the
authority to receive the summons and the writ of replevin.
Thus, where summons was in fact received by defendant, his argument
that the sheriff should have tried first to serve summons on him
personally before resorting to substituted service of summons is not
meritorious.
x x x.
Evidently, plaintiff-appellee cannot be penalized, through no fault of its
own, for an irregular or defective return on service of summons. x x x.
x x x.
In the interest of fairness, the process server's neglect or inadvertence
in the service of summons should not, thus, unduly prejudice plaintiff-
appellee's right to speedy justice. x x x 19chanroblesvirtualawlibrary
The service of summons is a vital and indispensable ingredient of due
process. As a rule, if defendants have not been validly summoned, the
court acquires no jurisdiction over their person, and a judgment
rendered against them is null and void.20 Since the RTC never acquired
jurisdiction over the person of the petitioner, the judgment rendered by
the court could not be considered binding upon him for being null and
void.
WHEREFORE, premises considered, the petition is GRANTED. The Decision
of the Court of Appeals, dated July 25, 2007, as well as its Resolution
dated August 28, 2008, in CA-G.R. CV No. 70666 is hereby REVERSED and
SET ASIDE. The Decision of the Regional Trial Court dated December 15,
2000 is declared NULL and VOID. The Regional Trial Court is hereby
ORDERED to validly serve summons upon Sixto N. Chu and, thereafter,
proceed with the trial of the main action with dispatch.
SO ORDERED.
FIRST DIVISION
G.R. No. 131482 July 3, 2002
REGALADO P. SAMARTINO, petitioner,
vs.
LEONOR B. RAON, AGUSTIN G. CRISOSTOMO, THE MUNICIPAL TRIAL
COURT OF NOVELETA, CAVITE, HON. MANUEL A. MAYO, REGIONAL
TRIAL COURT, BRANCH 16, CAVITE CITY, HON. ROLANDO D. DIAZ,
REGIONAL TRIAL COURT, BRANCH 17, CAVITE CITY, SHERIFF DANILO
G. LAPUZ, CAVITE CITY and THE HON. COURT OF
APPEALS, respondents.
YNARES-SANTIAGO, J.:
Respondents Leonor Bernardo-Raon and Agustin G. Crisostomo are the
surviving sister and spouse, respectively, of the late Filomena Bernardo-
Crisostomo, who passed away on May 17, 1994. Among the properties left
by the deceased was her one-half share in a parcel of land in Noveleta,
Cavite, registered under Transfer Certificate of Title No. T- 131898 in the
name of co-owners Lido Beach Corporation and Filomena Bernardo.
On January 25, 1996, respondents instituted against petitioner Regalado
P. Samartino a complaint for ejectment, docketed as Civil Case No. 744
of the Municipal Trial Court of Noveleta, Cavite. 1 They alleged that during
the lifetime of Filomena Bernardo, she leased her share in the property
to petitioner for a period of five years counted from 1986; that the said
lease expired and was not extended thereafter; and that petitioner
refused to vacate the property despite demands therefor.
Summons was served on Roberto Samartino, brother of petitioner.2 At
the time of service of summons at petitioner’s house, he was not at
home as he was then confined at the National Bureau of Investigation
Treatment and Rehabilitation Center (NBI-TRC), Tagaytay City since
January 19, 1996, where he was undergoing treatment and rehabilitation
for drug dependency. Thus, on February 2, 1996, a liaison officer of the
NBI-TRC appeared before the trial court with a certification that
petitioner will be unable to comply with the directive to answer the
complaint within the reglementary period, inasmuch as it will take six
months for him to complete the rehabilitation program and before he
can be recommended for discharge by the Rehabilitation Committee. 3
The trial court, despite the written certification from NBI-TRC, granted
respondents’ motion to declare petitioner in default and ordered them
to present evidence ex-parte. On March 21, 1996, the trial court
rendered judgment in favor of respondents as follows:
FROM THE FOREGOING CONSIDERATIONS, judgment is hereby rendered in
favor of the plaintiffs and against the defendant ordering the latter and
other person/s claiming rights under him:
1. To vacate immediately the land in question after the finality of the
decision.
2. For the defendant to pay the plaintiffs the sum of P5,000.00 monthly
from January, 1992 up to the time he surrenders the premises
considered as damages for the use of the subject land.
3. For the defendant to pay the plaintiffs P 10,000.00 as and for
attorney’s fees with an additional P800.00 as appearance fees.
4. To pay the plaintiffs P 100.00 as filing fee.
SO ORDERED. 4
After learning of the adverse decision against him, petitioner’s counsel
filed with the Regional Trial Court of Cavite City, Branch 16, a motion to
set aside judgment. The motion was treated as an appeal and docketed
as Civil Case No. N-6281. On July 18, 1996, the RTC affirmed the decision
of the MTC.5
The aforesaid decision became final. Accordingly, the court of origin
issued on September 17, 1996 a writ of execution.6 Petitioner was given a
grace period of one month within which to vacate the premises. His real
property situated in Noveleta, Cavite, covered by Transfer Certificate of
Title No. T-283572, was levied and sold at public auction to respondents
in full satisfaction of the monetary award. 7
On November 25, 1996, petitioner filed with the Regional Trial Court of
Cavite City, a petition for relief from judgment, docketed as Civil Case
No. N-6393.8 In support thereof, petitioner submitted an affidavit of
merit,9alleging in fine that the parcel of land from which he was being
evicted had been sold to him by Filomena Bernardo-Crisostomo, as
evidenced by the Deed of Absolute Sale dated December 13, 1988. 10
The following day, November 26, 1996, the RTC issued an Order
dismissing the petition for relief from judgment. 11Petitioner’s Motion for
Reconsideration was denied on December 12, 1996. A second Motion for
Reconsideration was likewise denied on January 14, 1997. 12 On the same
day, a writ of demolition was issued commanding the sheriff to remove
the building and improvements made by petitioner on the subject
premises and to deliver the possession thereof to respondents. 13
Petitioner thus filed a petition for certiorari with the Court of Appeals,
docketed as CA-G.R. SP No. 432O2. 14 On August 29, 1997, the Court of
Appeals dismissed the petition. 15 Petitioner’s Motion for Reconsideration
was denied on November 14, 1997. 16 Hence this petition for review.
The petition is impressed with merit.
In actions in personam, summons on the defendant must be served by
handing a copy thereof to the defendant in person, or, if he refuses to
receive it, by tendering it to him. If efforts to serve the summons
personally to defendant is impossible, service may be effected by
leaving copies of the summons at the defendant’s dwelling house or
residence with some person of suitable age and discretion residing
therein, or by leaving the copies at the defendant’s office or regular
place of business with some competent person in charge thereof.
Otherwise stated, service of summons upon the defendant shall be by
personal service first and only when the defendant cannot be promptly
served in person will substituted service be availed of. 17
Rule 14 of the 1997 Rules of Civil Procedure clearly provides:
Sec. 6. Service in person on defendant. - Whenever practicable, the
summons shall be served by handing a copy thereof to the defendant in
person, or, if he refuses to receive and sign for it, by tendering it to him.
Sec. 7. Substituted service. - If, for justifiable causes, the defendant
cannot be served within a reasonable time as provided in the preceding
section, service may be effected (a) by leaving copies of the summons
at the defendant’s residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at
defendant’s office or regular place of business with some competent
person in charge thereof.
We have long held that the impossibility of personal service justifying
availment of substituted service should be explained in the proof of
service; why efforts exerted towards personal service failed. The
pertinent facts and circumstances attendant to the service of summons
must be stated in the proof of service or Officer’s Return; otherwise, the
substituted service cannot be upheld. It is only under exceptional terms
that the circumstances warranting substituted service of summons may
be proved by evidence aliunde. It bears stressing that since service of
summons, especially for actions in personam, is essential for the
acquisition of jurisdiction over the person of the defendant, the resort
to a substituted service must be duly justified. Failure to do so would
invalidate all subsequent proceedings on jurisdictional grounds. 18
In this connection, Supreme Court Administrative Circular No. 59 was
issued on November 19, 1989 to stress the importance of strict
compliance with the requisites for a valid substituted service, to wit:
Delays in court proceedings have been caused by faulty and erroneous
implementation of Section 8, Rule 14, Rules of Court on Substituted
Service of Summons.
The Trial Judges of all lower courts, as well as the Clerks of Court in
their capacity as Ex-Officio Sheriffs together with the Deputy Sheriffs
are reminded of the provision of Section 8, Rule 14, Rules of Court on
substituted service as follows:
xxx xxx xxx
The manner of effecting substituted service as prescribed in Venturanza
vs. Court of Appeals, 156 SCRA 305, must be strictly complied with, thus:
"The substituted service should be availed only when the defendant
cannot be served promptly in person. Impossibility of prompt service
should be shown by stating the efforts made to find the defendant
personally and the failure of such efforts. The statement should be made
in the proof of service. This is necessary because substituted service is
in derogation of the usual method of service.
Substituted service is a method extraordinary in character, and hence
may be used only as prescribed in the circumstances authorized by
statute. Thus, the statutory requirements of substituted service must be
followed strictly, faithfully and any substituted service other than
authorized by the statute is considered ineffective."
For immediate compliance.
In the case at bar, the sheriff’s Return of Summons simply states:
This is to certify that on this date: 26th day of January I have caused the
service of summons, together with the attached complaint and its
annexes issued in the above entitled case upon defendant REGALADO
SAMARTINO thru ROBERTO SAMARTINO, Brother of the defendant
acknowledge receipt of said court processes by affixing his signature at
the lower left portion of the original summons hereto attached.
WHEREFORE, the attached original summons is hereby respectfully
returned to the court of origin duly served for information and record
purposes.
Noveleta, Cavite, February 9, 1996.19
Clearly, the above return failed to show the reason why personal
service could not be made. It failed to state that prompt and personal
service on the defendant was rendered impossible. It was not shown
that efforts were made to find the defendant personally and that said
efforts failed; hence the resort to substituted service. As stated above,
these requirements are indispensable because substituted service is in
derogation of the usual method of service. It is an extraordinary method
since it seeks to bind the defendant to the consequences of a suit even
though notice of such action is served not upon him but upon another
whom law could only presume would notify him of the pending
proceedings. For this reason, failure to faithfully, strictly, and fully
comply with the requirements of substituted service renders said
service ineffective.20
Furthermore, nowhere in the return of summons or in the records of
this case is it shown that petitioner’s brother, on whom substituted
service of summons was effected, was a person of suitable age and
discretion residing at petitioner’s residence.
There being no valid substituted service of summons, the trial court did
not acquire jurisdiction over the person of petitioner. It should be
emphasized that the service of summons is not only required to give the
court jurisdiction over the person of the defendant, but also to afford
the latter an opportunity to be heard on the claim made against him.
Thus, compliance with the rules regarding the service of summons is as
much an issue of due process as of jurisdiction. The essence of due
process is to be found in the reasonable opportunity to be heard and
submit any evidence one may have in support of his defense. It is
elementary that before a person can be deprived of his property, he
should first be informed of the claim against him and the theory on
which such claim is premised.21
By reason of the ineffective service of summons, petitioner was not duly
apprised of the action against him. Consequently, he was prevented
from answering the claims against him. He was not given a chance to be
heard on his defenses. What made matters worse was that the trial
court had actual knowledge that petitioner was then indisposed and
unable to file his answer to the complaint, as he was then confined at
the NBI-TRC. The trial court’s failure to give petitioner a reasonable
opportunity to file his answer violated his right to due process.
Perforce, the judgment rendered against petitioner is nugatory and
without effect.
The trial court should not have been too rash in declaring petitioner in
default, considering it had actual notice of valid reasons that prevented
him from answering. Well-settled is the rule that courts should be
liberal in setting aside orders of default for default judgments are
frowned upon, unless in cases where it clearly appears that the
reopening of the case is intended for delay. The issuance of orders of
default should be the exception rather than the rule, to be allowed only
in clear cases of obstinate refusal by the defendant to comply with the
orders of the trial court.22
Suits should as much as possible be decided on the merits and not on
technicalities. In this regard, we have often admonished courts to be
liberal in setting aside orders of default as default judgments are
frowned upon and not looked upon with favor for they may amount to a
positive and considerable injustice to the defendant and the possibility of
such serious consequences necessitates a careful examination of the
grounds upon which the defendant asks that it be set aside. Since rules
of procedure are mere tools designed to facilitate the attainment of
justice, it is well recognized that this Court is empowered to suspend its
operation, or except a particular case from its operation, when the rigid
application thereof tends to frustrate rather than promote the ends of
justice. We are not unmindful of the fact that during the pendency of the
instant petition, the trial court has rendered judgment against
petitioners. However, being the court of last resort, we deem it in the
best interest that liberality and relaxation of the Rules be extended to
petitioners by setting aside the order of default issued by the trial court
and the consequent default judgment; otherwise, great injustice would
result if petitioners are not afforded an opportunity to prove their
claims.23
In addition, the Regional Trial Court committed reversible error in
dismissing the petition for relief from judgment for having been filed out
of time. According to the Regional Trial Court, the petition for relief, filed
on November 25, 1996, was late because petitioner had actual
knowledge of the judgment in the ejectment case since March 1996. The
period within which to file a petition for relief should have been
reckoned from the date petitioner learned of the judgment of the
Regional Trial Court. It should not have been counted from the date of
the Municipal Trial Court’s decision because, precisely, petitioner
appealed the same. It was the Regional Trial Court’s decision that
became final and, hence, was the proper subject of the petition for relief
from judgment. It is axiomatic that a petition for relief is only available
against a final and executory judgment.24
Section 3, Rule 38, of the 1997 Rules of Civil Procedure provides that a
verified petition for relief must be filed within sixty (60) days after the
petitioner learns of the judgment, final order, or other proceeding to be
set aside and not more than six (6) months after such judgment or final
order has been entered or such proceeding has been taken. It must be
accompanied with affidavits showing the fraud, accident, mistake, or
excusable negligence relied upon, and the facts constituting petitioner’s
good and substantial cause of action or defense.25
It is not clear from the records of the case at bar when petitioner
learned of the decision of the Regional Trial Court affirming the
judgment of the Municipal Trial Court. What appears is that the said
decision became final only on August 15 , 1996, and must have been
entered sometime thereafter. Hence, the petition for relief filed on
November 25, 1996 was well within the six-month period prescribed by
the Rules.
Finally, the records show that petitioner raised a meritorious defense in
his affidavit of merit. He alleged therein that the property from which he
was being ejected had been sold to him by its registered owner.
Ownership is a valid defense in unlawful detainer cases. While
possession is the main issue in ejectment, it is also one of the essential
attributes of ownership. It follows that an owner of real property is
entitled to possession of the same. Petitioner can, therefore, properly
plead his right of possession to defeat that of respondents. Indeed, an
owner who cannot exercise the seven "juses" or attributes of ownership
- the right to possess, to use and enjoy, to abuse or consume, to
accessories, to dispose or alienate, to recover or vindicate and to the
fruits - is a crippled owner.26
All told, the Municipal Trial Court of Noveleta and the Regional Trial Court
of Cavite City did not have jurisdiction over the person of petitioner.
Hence, all proceedings had as regards petitioner were null and void.
Necessarily, the enforcement of the writ of execution as well as the sale
at public auction of petitioner’s real property to satisfy the void
judgment must also be declared of no legal effect.
There is a real need to resolve the issue of ownership over the premises
in order to determine who, as between petitioner and respondents, has
a better right to possess the property in dispute. This can only be done
in the proper proceeding before the trial court wherein petitioner will be
afforded every right to present evidence in his behalf.
WHEREFORE, in view of the foregoing, the petition is GRANTED. The
decision of the Court of Appeals in CA-G.R. SP No. 43202
is REVERSED and SET ASIDE. This case is REMANDED to the Municipal
Trial Court of Noveleta, Cavite, which is directed to continue
proceedings in Civil Case No. 744 by affording petitioner Regalado P.
Samartino a chance to file his answer and present evidence in his
defense, and thereafter to hear and decide the case. The Writ of
Execution dated September 17, 1996, the Writ of Demolition dated
January 14, 1997, and the certificate of sale over Transfer Certificate of
Title No. T-283572, as well as all acts and deeds incidental to the
judgment in Civil Case No. 744, are declared NULL AND VOID.
G.R. No. 165016 June 17, 2008
DOLORES MONTEFALCON & LAURENCE MONTEFALCON, petitioners,
vs.
RONNIE S. VASQUEZ, respondent.
DECISION
QUISUMBING, J.:
This petition for review assails the September 29, 2003 Decision 1 and
the July 19, 2004 Resolution2 of the Court of Appeals in CA-G.R. CV No.
71944, which had reversed the May 28, 2001 Decision3 of the Regional
Trial Court (RTC), Branch 19, of Naga City in Civil Case No. RTC '99-4460.
The facts culled from the records are as follows.
In 1999, petitioner Dolores P. Montefalcon filed a Complaint 4 for
acknowledgment and support against respondent Ronnie S. Vasquez
before the RTC of Naga City. Alleging that her son Laurence is the
illegitimate child of Vasquez, she prayed that Vasquez be obliged to give
support to co-petitioner Laurence Montefalcon, whose certificate of live
birth he signed as father.5 According to petitioners, Vasquez only gave a
total of P19,000 as support for Laurence since Laurence was born in
1993. Vasquez allegedly also refused to give him regular school
allowance despite repeated demands. Petitioner Dolores added that she
and Vasquez are not legally married, and that Vasquez has his own
family.
A sheriff tried to serve the summons and complaint on Vasquez in Aro-
aldao, Nabua, Camarines Sur. Vasquez's grandfather received them as
Vasquez was in Manila. Vasquez's mother returned the documents to the
clerk of court, who informed the court of the non-service of summons.6
Petitioners then filed a motion to declare Vasquez in default. The court
denied it for lack of proper service of summons. 7
In 2000, the court issued an alias summons on Vasquez at "10 Int.
President Garcia St., Zone 6, Signal Village, Taguig, Metro Manila" upon
petitioners' motion. Albeit a Taguig deputy sheriff served it by
substituted service on Vasquez's caretaker Raquel Bejer, the sheriff's
return incorrectly stated "Lazaro" as Vasquez's surname. 8
Another alias summons9 was issued, also received by Bejer. The second
sheriff's return states:
THIS IS TO CERTIFY THAT on the 19 th day of July 2000 the undersigned
sheriff caused the service of summons issued by the court in the above-
entitled case together with the copy of the complaint and annexes
attached thereon upon defendant RONNIE S. VASQUEZ, by substituted
service, thru his caretaker, RAQUEL BEJER, a person of sufficient
discretion, who acknowledged the receipt thereof at No. 10 Int. President
Garcia St. Zone 6, Signal Village, Taguig, Metro Manila, as evidenced by
her signature appearing at the lower portion of the original copy of
summons.
WHEREFORE, said summons is hereby returned to the court of origin
DULY SERVED for its records and information.
Taguig for Naga City, July 19, 2000
(SGD.)
ERNESTO G. RAYMUNDO, JR.,
Deputy Sheriff
MTC BR 74
Taguig, Metro Manila10
On petitioners' motion, the trial court declared Vasquez in default for
failure to file an answer despite the substituted service of summons.
Vasquez was furnished with court orders and notices of the proceedings
at his last known address, but these were returned as he had allegedly
moved to another place and left no new address. 11
In 2001, the court granted petitioners' prayers, explaining that they had
no ill-motive and that Dolores gave a truthful testimony. The court added
that Vasquez admitted the truth of the allegations by his silence. It
further explained that Laurence's certificate of live birth, being a public
document, is irrefutably a prima facie evidence of illegitimate filiation.
The trial court decreed:
WHEREFORE, by preponderant evidence, judgment is hereby rendered in
favor of the plaintiffs Dolores Montefalcon and her minor child Laurence
Montefalcon and against defendant Ronnie S. Vasquez who is hereby
ordered to:
1. Acknowledge plaintiff Laurence Montefalcon as his illegitimate child
with Dolores Montefalcon;
2. Give support to the said minor in the amount of FIVE THOUSAND
(P5,000.00) PESOS monthly commencing on June 1, 1993, the past
support for eight (8) years in the amount of FOUR HUNDRED EIGHTY
THOUSAND (P480,000.00) PESOS less the amount of NINETEEN
THOUSAND (P19,000.00) PESOS previously given, shall be paid promptly
and the monthly support of FIVE THOUSAND (P5,000.00) PESOS shall be
paid not later than the end of each month beginning on July 31, 2001 and
every end of the month thereafter as prayed for in the complaint; and
3. Pay the sum of TEN THOUSAND (P10,000.00) PESOS and THREE
THOUSAND (P3,000.00) PESOS as attorney's and appearance fees,
respectively, and litigation expenses of ONE THOUSAND (P1,000.00)
PESOS.
SO ORDERED.12
In the same year, Vasquez surfaced. He filed a notice of appeal to which
petitioners opposed. Appeal was granted by the court. 13 Before the
appellate court, he argued that the trial court erred in trying and
deciding the case as it "never" acquired jurisdiction over his person, as
well as in awarding P5,000-per-month support, which was allegedly
"excessive and exorbitant." The appellate court noted that the service of
summons on Vasquez was "defective" as there was no explanation of
impossibility of personal service and an attempt to effect personal
service, and decreed as follows:
WHEREFORE, based on the foregoing premises, the instant appeal
is GRANTED. The appealed May 28, 2001 Decision of the Regional Trial
Court of Naga City in Civil Case No. RTC '99-4460 is
hereby NULLIFIEDand SET ASIDE. Accordingly, let this case
be REMANDED to the court a quo for further proceedings.
SO ORDERED.14
Petitioners argued in their motion for reconsideration15 that any attempt
at personal service of summons was needless as Vasquez already left
for abroad. The appellate court, however, denied the motion. Hence, this
petition.
Petitioners assign two appellate court errors:
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE RESPONDENT IN
THIS CASE WAS NOT VALIDLY SERVED WITH THE SUMMONS AND
COMPLAINT IN CIVIL CASE NO. RTC '99-4460; AND THAT
II.
THE COURT OF APPEALS ERRED IN ANNUL[L]ING AND SETTING ASIDE THE
TRIAL COURT'S DECISION (ANNEX "B") FOR LACK OF JURISDICTION. 16
Petitioners justify the validity of substituted service as Vasquez had left
as overseas seafarer when the sheriff served the summons on July 19,
2000 in Taguig. Noting that Vasquez's seaman's book indicated that he
left the country on January 24, 2000 and came back on October 12,
2000, they criticize the appellate court for anchoring its rulings on
mere technicality.
Vasquez counters that because he was abroad, service of summons
should have been personal or by publication as substituted service is
proper only if a defendant is in the country. Vasquez also added that the
sheriff's return did not state that he exerted efforts to personally serve
the summons.17
In their reply, petitioners insist that a substituted service is the normal
method if one is temporarily away from the country as personal service
abroad or by publication are not ordinary means of service. 18
Simply put, the issues now for resolution are: (1) whether there is a valid
substituted service of summons on Vasquez to clothe the trial court with
jurisdiction over his person; and (2) whether he is obliged to give
support to co-petitioner Laurence.
To acquire jurisdiction over the person of a defendant, service of
summons must be personal,19 or if this is not feasible within a
reasonable time, then by substituted service.20 It is of judicial notice that
overseas Filipino seafarers are contractual employees. They go back to
the country once their contracts expire, and wait for the signing of
another contract with the same or new manning agency and principal if
they wish. It is therefore common knowledge that a Filipino seaman
often has a temporary residence in the urban areas like Metro Manila,
where majority of the manning agencies hold offices, aside from his
home address in the province where he originates. In this case,
respondent Vasquez hails from Camarines Sur but he has lived in Taguig
City when the complaint was filed. Notice may then be taken that he has
established a residence in either place. Residence is a place where the
person named in the summons is living at the time when the service was
made, even though he was temporarily abroad at the time. As an
overseas seafarer, Vasquez was a Filipino resident temporarily out of
the country. Hence, service of summons on him is governed by Rule 14,
Section 16 of the Rules of Court:
SEC. 16. Residents temporarily out of the Philippines. ─ When any action
is commenced against a defendant who ordinarily resides within the
Philippines, but who is temporarily out of it, service may, by leave of
court, be also effected out of the Philippines, as under the preceding
section. (Emphasis supplied.)
The preceding section referred to states:
SEC. 15. Extraterritorial service.─ When the defendant does not reside
and is not found in the Philippines, and the action affects the personal
status of the plaintiff or relates to, or the subject of which is, property
within the Philippines, in which the defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded consists,
wholly or in part, in excluding the defendant from any interest therein,
or the property of the defendant has been attached within the
Philippines, service may, by leave of court, be effected out of the
Philippines by personal service as under section 6; or by publication in a
newspaper of general circulation in such places and for such time as
the court may order, in which case a copy of the summons and order of
the court shall be sent by registered mail to the last known address of
the defendant, or in any other manner the court may deem sufficient.
Any order granting such leave shall specify a reasonable time, which
shall not be less than sixty (60) days after notice, within which the
defendant must answer.
Because Section 16 of Rule 14 uses the words "may" and "also," it is not
mandatory. Other methods of service of summons allowed under the
Rules may also be availed of by the serving officer on a defendant-
seaman.
Ideally, Vasquez must be personally served summons. But was personal
service of summons practicable? Conversely, was substituted service of
summons justified?
Obviously, personal service of summons was not practicable since the
defendant was temporarily out of the country. To proceed with personal
service of summons on a defendant-seaman who went on overseas
contract work ─ would not only be impractical and futile ─ it would
also be absurd.
The impossibility of prompt personal service was shown by the fact that
the Naga City-based sheriff purposely went to a barrio in Camarines Sur
to serve the summons personally on Vasquez. When service of summons
failed, said sheriff ascertained the whereabouts of Vasquez. Upon being
informed that Vasquez was in Manila, the Naga court commissioned a
Taguig City-based sheriff to serve the summons. Both the Naga and
Taguig sheriffs inquired about Vasquez's whereabouts, signifying that
they did not immediately resort to substituted service. There was no
undue haste in effecting substituted service. The fact that the Naga
court allowed a reasonable time to locate Vasquez to as far as Taguig
shows that there was indeed no precipitate haste in serving the
summons.
In this case, we agree that the substituted service in Taguig was valid
and justified because previous attempts were made by the sheriffs to
serve the summons, but to no avail. Diligent efforts were evidently
exerted in the conduct of the concerned sheriffs in the performance of
their official duty. Also, the person who received the alias summons was
of suitable age and discretion, then residing at Vasquez's dwelling. There
is no quarrel that it was really Vasquez's residence, as evidenced by his
employment contract, executed under the supervision and authority of
the Philippine Overseas Employment Administration (POEA). Vasquez
cannot deny that in his contract of employment and seafarer's
information sheet, both bearing POEA's letterhead, his address in Metro
Manila was what was correctly mentioned in the alias summons that
Bejer received. She must have informed Vasquez one way or another of
the suit upon his return in October 2000 after finishing his nine-month
contract with Fathom Ship Management.
Thus, it is reasonable to conclude that he had enough time to have the
default order set aside. The default judgment was rendered on May 28,
2001. He also had enough time to file a motion for reconsideration. But
he did nothing. The interregnum between the first but failed attempt at
personal service by the RTC of Naga City in Vasquez's place in
Camarines Sur to the final substituted service in Metro Manila by a
Taguig RTC sheriff was almost eight months, a reasonable time long
enough to conclude that personal service had failed and was futile.
Montalban v. Maximo21 offers a rational and logical solution of the issue.
We held in said case that the normal method of service of summons on
one temporarily absent is by substituted service because personal
service abroad and service by publication are not ordinary means of
summoning defendants. Summons in a suit in personamagainst a
temporarily absent resident may be by substituted service as
domiciliaries of a State are always amenable to suits in
personam therein.22
"Residence" is the place where the person named in the summons is
living at the time when the service is made, even though he may be
temporarily out of the country at the time. A plaintiff is merely required
to know the defendant's residence, office or regular business place. He
need not know where a resident defendant actually is at the very
moment of filing suit. He is not even duty-bound to ensure that the
person upon whom service was actually made delivers the summons to
the defendant or informs him about it. The law presumes that for him. It
is immaterial that defendant does not receive actual notice.
As well said in Montalban:
. . . A man temporarily absent from this country leaves a definite place
of residence, a dwelling where he lives, a local base, so to speak, to
which any inquiry about him may be directed and where he is bound to
return. Where one temporarily absents himself, he leaves his affairs in
the hands of one who may be reasonably expected to act in his place and
stead; to do all that is necessary to protect his interests; and to
communicate with him from time to time any incident of importance that
may affect him or his business or his affairs. It is usual for such a man
to leave at his home or with his business associates information as to
where he may be contacted in the event a question that affects him
crops up. If he does not do what is expected of him, and a case comes up
in court against him, he cannot in justice raise his voice and say that he
is not subject to the processes of our courts. He cannot stop a suit from
being filed against him upon a claim that he cannot be summoned at his
dwelling house or residence or his office or regular place of business.
Not that he cannot be reached within a reasonable time to enable him to
contest a suit against him. There are now advanced facilities of
communication. Long distance telephone calls and cablegrams make it
easy for one he left behind to communicate with him.23
Aside from, at present, various forms of texting and short message
services by the ubiquitous cellular phones.
More importantly, the letter of the law must yield to its spirit. The
absence in the final sheriff's return of a statement about the
impossibility of personal service does not conclusively prove that the
service is invalid. Such failure should not unduly prejudice petitioners if
what was undisclosed was in fact done. Proof of prior attempts at
personal service may have been submitted by the plaintiff during the
hearing of any incident assailing the validity of the substituted
service24 had Vasquez surfaced when the case was heard. In fact, he
was declared in default. It was only when a judgment against him was
rendered by the trial court that he questioned the validity of service of
summons before the appellate court. Such failure to appear, and then
later to question the court's jurisdiction over his person, should not be
taken against herein petitioners.
Between Vasquez's self-serving assertion that he only came to know of
the case when his mother told him about the trial court's decision and
the sheriff's return on the substituted service which carries a
presumption of regularity, the latter is undoubtedly deserving of more
faith and credit. The sheriff's certificate of service of summons is prima
facieevidence of the facts set out in it. Only clear and convincing
evidence may overcome its presumption of regularity. Given the
circumstances in the present case, we agree that the presumption of
regularity in the performance of duty on the part of the sheriff stands.25
On the second issue, the trial court's order must also be sustained. Co-
petitioner Laurence is legally entitled to support from the respondent,
and the amount of P5,000 monthly set by the trial court is neither
excessive nor unreasonable.
Article 17526 of the Family Code of the Philippines mandates that
illegitimate filiation may be established in the same way and on the same
evidence as legitimate children. Under Article 172,27 the filiation of
legitimate children is established by any of the following: (1) through
record of birth appearing in the civil register or a final order; or (2) by
admission of filiation in a public document or private handwritten
instrument and signed by the parent concerned; or in default of these
two, by open and continuous possession of the status of a legitimate
child or by any other means allowed by the Rules of Court and special
laws.
Laurence's record of birth is an authentic, relevant and admissible piece
of evidence to prove paternity and filiation. Vasquez did not deny that
Laurence is his child with Dolores. He signed as father in Laurence's
certificate of live birth, a public document. He supplied the data entered
in it. Thus, it is a competent evidence of filiation as he had a hand in its
preparation. In fact, if the child had been recognized by any of the
modes in the first paragraph of Article 172, there is no further need to
file any action for acknowledgment because any of said modes is by
itself a consummated act.28
As filiation is beyond question, support follows as matter of obligation.
Petitioners were able to prove that Laurence needs Vasquez's support
and that Vasquez is capable of giving such support. Dolores testified
that she spent around P200,000 for Laurence; she spends P8,000 a
month for his schooling and their subsistence. She told the lower court
Vasquez was earning US$535 monthly based on his January 10, 2000
contract of employment29 with Fathom Ship Management and his
seafarer information sheet.30 That income, if converted at the prevailing
rate, would be more than sufficient to cover the monthly support for
Laurence.
Under Article 195 (4)31 of the Family Code, a parent is obliged to support
his illegitimate child. The amount is variable. There is no final judgment
thereof as it shall be in proportion to the resources or means of the
giver and the necessities of the recipient. 32 It may be reduced or
increased proportionately according to the reduction or increase of the
necessities of the recipient and the resources or means of the person
obliged to support.33 Support comprises everything indispensable for
sustenance, dwelling, clothing, medical attendance, education and
transportation, in keeping with the financial capacity of the
family.34 Under the premises, the award of P5,000 monthly support to
Laurence is reasonable, and not excessive nor exorbitant.
In sum, we rule that the Court of Appeals erred in invalidating the
substituted service of summons and remanding the case. As there was
valid substituted service of summons under the circumstances of this
case, the lower court acquired jurisdiction over his person and
correctly ordered him to pay past and present monthly support to his
illegitimate child as well as attorney's fees and litigation expenses to
petitioners.
WHEREFORE, the petition is GRANTED. The Decision dated September
29, 2003 and Resolution dated July 19, 2004 of the Court of Appeals in
CA-G.R. CV No. 71944 are REVERSED and SET ASIDE. The Decision dated
May 28, 2001 of the Regional Trial Court, Branch 19, Naga City in Civil
Case No. RTC '99-4460 is hereby REINSTATED.
Costs against respondent.
G.R. No. 165273 March 10, 2010
LEAH PALMA, Petitioner,
vs.
HON. DANILO P. GALVEZ, in his capacity as PRESIDING JUDGE of the
REGIONAL TRIAL COURT OF ILOILO CITY, BRANCH 24; and PSYCHE
ELENA AGUDO, Respondents.
DECISION
PERALTA, J.:
Assailed in this petition for certiorari under Rule 65 of the Rules of
Court are the Orders dated May 7, 20041 and July 21, 20042 of the
Regional Trial Court (RTC) of Iloilo City, Branch 24, granting the motion
to dismiss filed by private respondent Psyche Elena Agudo and denying
reconsideration thereof, respectively.
On July 28, 2003, petitioner Leah Palma filed with the RTC an action for
damages against the Philippine Heart Center (PHC), Dr. Danilo Giron and
Dr. Bernadette O. Cruz, alleging that the defendants committed
professional fault, negligence and omission for having removed her right
ovary against her will, and losing the same and the tissues extracted
from her during the surgery; and that although the specimens were
subsequently found, petitioner was doubtful and uncertain that the same
was hers as the label therein pertained that of somebody else.
Defendants filed their respective Answers. Petitioner subsequently filed
a Motion for Leave to Admit Amended Complaint, praying for the
inclusion of additional defendants who were all nurses at the PHC,
namely, Karla Reyes, Myra Mangaser and herein private respondent
Agudo. Thus, summons were subsequently issued to them.
On February 17, 2004, the RTC's process server submitted his return of
summons stating that the alias summons, together with a copy of the
amended complaint and its annexes, were served upon private
respondent thru her husband Alfredo Agudo, who received and signed
the same as private respondent was out of the country. 3
On March 1, 2004, counsel of private respondent filed a Notice of
Appearance and a Motion for Extension of Time to File Answer4 stating
that he was just engaged by private respondent's husband as she was
out of the country and the Answer was already due.
On March 15, 2004, private respondent's counsel filed a Motion for
Another Extension of Time to File Answer,5 and stating that while the
draft answer was already finished, the same would be sent to private
respondent for her clarification/verification before the Philippine
Consulate in Ireland; thus, the counsel prayed for another 20 days to file
the Answer.
On March 30, 2004, private respondent filed a Motion to Dismiss 6 on the
ground that the RTC had not acquired jurisdiction over her as she was
not properly served with summons, since she was temporarily out of the
country; that service of summons on her should conform to Section 16,
Rule 14 of the Rules of Court. Petitioner filed her Opposition 7 to the
motion to dismiss, arguing that a substituted service of summons on
private respondent's husband was valid and binding on her; that service
of summons under Section 16, Rule 14 was not exclusive and may be
effected by other modes of service, i.e., by personal or substituted
service. Private respondent filed a Comment8 on petitioner's Opposition,
and petitioner filed a Reply9 thereto.
On May 7, 2004, the RTC issued its assailed Order granting private
respondent's motion to dismiss. It found that while the summons was
served at private respondent's house and received by respondent's
husband, such service did not qualify as a valid service of summons on
her as she was out of the country at the time the summons was served,
thus, she was not personally served a summons; and even granting that
she knew that a complaint was filed against her, nevertheless, the court
did not acquire jurisdiction over her person as she was not validly
served with summons; that substituted service could not be resorted to
since it was established that private respondent was out of the country,
thus, Section 16, Rule 14 provides for the service of summons on her by
publication.
Petitioner filed a motion for reconsideration, which the RTC denied in its
Order dated July 21, 2004.
Petitioner is now before us alleging that the public respondent
committed a grave abuse of discretion amounting to lack or excess of
jurisdiction when he ruled that:
I. Substituted service of summons upon private respondent, a defendant
residing in the Philippines but temporarily outside the country is invalid;
II. Section 16, Rule 14, of the 1997 Rules of Civil Procedure limits the
mode of service of summons upon a defendant residing in the
Philippines, but temporarily outside the country, exclusively to
extraterritorial service of summons under section 15 of the same rule;
III. In not ruling that by filing two (2) motions for extension of time to file
Answer, private respondent had voluntarily submitted herself to the
jurisdiction of respondent court, pursuant to Section 20, Rule 14 of the
1997 Rules of Civil Procedure, hence, equivalent to having been served
with summons;
IV. The cases cited in his challenged Order of May 7, 2004 constitute
stare decisis despite his own admission that the factual landscape in
those decided cases are entirely different from those in this case. 10
Petitioner claims that the RTC committed a grave abuse of discretion in
ruling that Section 16, Rule 14, limits the service of summons upon the
defendant-resident who is temporarily out of the country exclusively by
means of extraterritorial service, i.e., by personal service or by
publication, pursuant to Section 15 of the same Rule. Petitioner further
argues that in filing two motions for extension of time to file answer,
private respondent voluntarily submitted to the jurisdiction of the court.
In her Comment, private respondent claims that
petitioner's certiorari under Rule 65 is not the proper remedy but a
petition for review under Rule 45, since the RTC ruling cannot be
considered as having been issued with grave abuse of discretion; that
the petition was not properly verified because while the verification was
dated September 15, 2004, the petition was dated September 30, 2004.
She insists that since she was out of the country at the time the service
of summons was made, such service should be governed by Section 16,
in relation to Section 15, Rule 14 of the Rules of Court; that there was no
voluntary appearance on her part when her counsel filed two motions
for extension of time to file answer, since she filed her motion to
dismiss on the ground of lack of jurisdiction within the period provided
under Section 1, Rule 16 of the Rules of Court.
In her Reply, petitioner claims that the draft of the petition and the
verification and certification against forum shopping were sent to her
for her signature earlier than the date of the finalized petition, since the
petition could not be filed without her signed verification. Petitioner
avers that when private respondent filed her two motions for extension
of time to file answer, no special appearance was made to challenge the
validity of the service of summons on her.
The parties subsequently filed their respective memoranda as required.
We shall first resolve the procedural issues raised by private
respondent.
Private respondent's claim that the petition for certiorari under Rule 65
is a wrong remedy thus the petition should be dismissed, is not
persuasive. A petition for certiorari is proper when any tribunal, board
or officer exercising judicial or quasi-judicial functions has acted
without or in excess of jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction and there is no appeal, or any
plain, speedy, and adequate remedy at law. 11 There is "grave abuse of
discretion" when public respondent acts in a capricious or whimsical
manner in the exercise of its judgment as to be equivalent to lack of
jurisdiction.
Section 1, Rule 41 of the 1997 Rules of Civil Procedure states that an
appeal may be taken only from a final order that completely disposes of
the case; that no appeal may be taken from (a) an order denying a
motion for new trial or reconsideration; (b) an order denying a petition
for relief or any similar motion seeking relief from judgment; (c) an
interlocutory order; (d) an order disallowing or dismissing an appeal; (e)
an order denying a motion to set aside a judgment by consent,
confession or compromise on the ground of fraud, mistake or duress, or
any other ground vitiating consent; (f) an order of execution; (g) a
judgment or final order for or against one or more of several parties or
in separate claims, counterclaims, cross-claims and third-party
complaints, while the main case is pending, unless the court allows an
appeal therefrom; or (h) an order dismissing an action without
prejudice. In all the above instances where the judgment or final order is
not appealable, the aggrieved party may file an appropriate special civil
action for certiorari under Rule 65.
In this case, the RTC Order granting the motion to dismiss filed by
private respondent is a final order because it terminates the
proceedings against her, but it falls within exception (g) of the Rule
since the case involves several defendants, and the complaint for
damages against these defendants is still pending. 12 Since there is no
appeal, or any plain, speedy, and adequate remedy in law, the remedy of
a special civil action for certiorari is proper as there is a need to
promptly relieve the aggrieved party from the injurious effects of the
acts of an inferior court or tribunal.13
Anent private respondent's allegation that the petition was not properly
verified, we find the same to be devoid of merit. The purpose of
requiring a verification is to secure an assurance that the allegations of
the petition have been made in good faith, or are true and correct, not
merely speculative.14 In this instance, petitioner attached a verification
to her petition although dated earlier than the filing of her petition.
Petitioner explains that since a draft of the petition and the verification
were earlier sent to her in New York for her signature, the verification
was earlier dated than the petition for certiorari filed with us. We accept
such explanation. While Section 1, Rule 65 requires that the petition
for certiorari be verified, this is not an absolute necessity where the
material facts alleged are a matter of record and the questions raised
are mainly of law.15 In this case, the issue raised is purely of law.
Now on the merits, the issue for resolution is whether there was a valid
service of summons on private respondent.
In civil cases, the trial court acquires jurisdiction over the person of the
defendant either by the service of summons or by the latter’s voluntary
appearance and submission to the authority of the former. 16 Private
respondent was a Filipino resident who was temporarily out of the
Philippines at the time of the service of summons; thus, service of
summons on her is governed by Section 16, Rule 14 of the Rules of Court,
which provides:
Sec. 16. Residents temporarily out of the Philippines. – When an action is
commenced against a defendant who ordinarily resides within the
Philippines, but who is temporarily out of it, service may, by leave of
court, be alsoeffected out of the Philippines, as under the preceding
section. (Emphasis supplied)
The preceding section referred to in the above provision is Section 15,
which speaks of extraterritorial service, thus:
SEC. 15. Extraterritorial service. ─ When the defendant does not reside
and is not found in the Philippines, and the action affects the personal
status of the plaintiff or relates to, or the subject of which is, property
within the Philippines, in which the defendant has or claims a lien or
interest, actual or contingent, or in which the relief demanded consists,
wholly or in part, in excluding the defendant from any interest therein,
or the property of the defendant has been attached within the
Philippines, service may, by leave of court, be effected out of the
Philippines by personal service as under section 6; or by publication in a
newspaper of general circulation in such places and for such time as
the court may order, in which case a copy of the summons and order of
the court shall be sent by registered mail to the last known address of
the defendant, or in any other manner the court may deem sufficient.
Any order granting such leave shall specify a reasonable time, which
shall not be less than sixty (60) days after notice, within which the
defendant must answer.
The RTC found that since private respondent was abroad at the time of
the service of summons, she was a resident who was temporarily out of
the country; thus, service of summons may be made only by publication.
We do not agree.
In Montefalcon v. Vasquez,17 we said that because Section 16 of Rule 14
uses the words "may" and "also," it is not mandatory. Other methods of
service of summons allowed under the Rules may also be availed of by
the serving officer on a defendant-resident who is temporarily out of
the Philippines. Thus, if a resident defendant is temporarily out of the
country, any of the following modes of service may be resorted to: (1)
substituted service set forth in section 7 ( formerly Section 8), Rule 14;
(2) personal service outside the country, with leave of court; (3) service
by publication, also with leave of court; or (4) in any other manner the
court may deem sufficient.18
In Montalban v. Maximo,19 we held that substituted service of summons
under the present Section 7, Rule 14 of the Rules of Court in a suit in
personam against residents of the Philippines temporarily absent
therefrom is the normal method of service of summons that will confer
jurisdiction on the court over such defendant. In the same case, we
expounded on the rationale in providing for substituted service as the
normal mode of service for residents temporarily out of the Philippines.
x x x A man temporarily absent from this country leaves a definite place
of residence, a dwelling where he lives, a local base, so to speak, to
which any inquiry about him may be directed and where he is bound to
return. Where one temporarily absents himself, he leaves his affairs in
the hands of one who may be reasonably expected to act in his place and
stead; to do all that is necessary to protect his interests; and to
communicate with him from time to time any incident of importance that
may affect him or his business or his affairs. It is usual for such a man
to leave at his home or with his business associates information as to
where he may be contacted in the event a question that affects him
crops up. If he does not do what is expected of him, and a case comes up
in court against him, he cannot just raise his voice and say that he is not
subject to the processes of our courts. He cannot stop a suit from being
filed against him upon a claim that he cannot be summoned at his
dwelling house or residence or his office or regular place of business.
Not that he cannot be reached within a reasonable time to enable him to
contest a suit against him. There are now advanced facilities of
communication. Long distance telephone calls and cablegrams make it
easy for one he left behind to communicate with him.20
Considering that private respondent was temporarily out of the country,
the summons and complaint may be validly served on her through
substituted service under Section 7, Rule 14 of the Rules of Court which
reads:
SEC. 7. Substituted service. — If, for justifiable causes, the defendant
cannot be served within a reasonable time as provided in the preceding
section, service may be effected (a) by leaving copies of the summons
at the defendant’s residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at
defendant’s office or regular place of business with some competent
person in charge thereof.
We have held that a dwelling, house or residence refers to the place
where the person named in the summons is living at the time when the
service is made, even though he may be temporarily out of the country
at the time.21 It is, thus, the service of the summons intended for the
defendant that must be left with the person of suitable age and
discretion residing in the house of the defendant. Compliance with the
rules regarding the service of summons is as important as the issue of
due process as that of jurisdiction.221avvphi1
Section 7 also designates the persons with whom copies of the process
may be left. The rule presupposes that such a relation of confidence
exists between the person with whom the copy is left and the defendant
and, therefore, assumes that such person will deliver the process to
defendant or in some way give him notice thereof.23
In this case, the Sheriff's Return stated that private respondent was out
of the country; thus, the service of summons was made at her residence
with her husband, Alfredo P. Agudo, acknowledging receipt thereof.
Alfredo was presumably of suitable age and discretion, who was residing
in that place and, therefore, was competent to receive the summons on
private respondent's behalf.
Notably, private respondent makes no issue as to the fact that the place
where the summons was served was her residence, though she was
temporarily out of the country at that time, and that Alfredo is her
husband. In fact, in the notice of appearance and motion for extension of
time to file answer submitted by private respondent's counsel, he
confirmed the Sheriff's Return by stating that private respondent was
out of the country and that his service was engaged by respondent's
husband. In his motion for another extension of time to file answer,
private respondent's counsel stated that a draft of the answer had
already been prepared, which would be submitted to private respondent,
who was in Ireland for her clarification and/or verification before the
Philippine Consulate there. These statements establish the fact that
private respondent had knowledge of the case filed against her, and that
her husband had told her about the case as Alfredo even engaged the
services of her counsel.
In addition, we agree with petitioner that the RTC had indeed acquired
jurisdiction over the person of private respondent when the latter's
counsel entered his appearance on private respondent's behalf, without
qualification and without questioning the propriety of the service of
summons, and even filed two Motions for Extension of Time to File
Answer. In effect, private respondent, through counsel, had already
invoked the RTC’s jurisdiction over her person by praying that the
motions for extension of time to file answer be granted. We have held
that the filing of motions seeking affirmative relief, such as, to admit
answer, for additional time to file answer, for reconsideration of a
default judgment, and to lift order of default with motion for
reconsideration, are considered voluntary submission to the jurisdiction
of the court.24 When private respondent earlier invoked the jurisdiction
of the RTC to secure affirmative relief in her motions for additional time
to file answer, she voluntarily submitted to the jurisdiction of the RTC
and is thereby estopped from asserting otherwise.25
Considering the foregoing, we find that the RTC committed a grave
abuse of discretion amounting to excess of jurisdiction in issuing its
assailed Orders.
WHEREFORE, the petition is GRANTED. The Orders dated May 7, 2004 and
July 21, 2004 of the Regional Trial Court of Iloilo City, Branch 24, are
hereby SET ASIDE. Private respondent is DIRECTED to file her Answer
within the reglementary period from receipt of this decision.
SO ORDERED
G.R. No. 171137 June 5, 2009
PHILIPPINE COMMERCIAL INTERNATIONAL BANK, Petitioner,
vs.
SPOUSES WILSON DY HONG PI and LOLITA DY and SPOUSES PRIMO
CHUYACO, JR. and LILIA CHUYACO,Respondents.
DECISION
PUNO, C.J.:
Before the Court is a petition for review on certiorari assailing the
Decision1 dated July 18, 2005 of the Court of Appeals in CA–G.R. SP. No.
85282, and its Resolution2 dated January 10, 2006, denying petitioner’s
motion for reconsideration.
Spouses Damian and Tessie Amadeo are indebted to petitioner Philippine
Commercial International Bank, a domestic uni-banking corporation, as
sureties for Streamline Cotton Development Corporation. The
promissory notes became due and demandable, but the Amadeo spouses
failed to pay their outstanding obligations despite repeated demands. As
of February 15, 1994, these obligations stood at Ten Million, Six Hundred
Seventy-One Thousand, Seven Hundred Twenty-Six Pesos and Sixty-One
Centavos (P10,671,726.61).
Petitioner subsequently discovered that roughly a month before the due
date of the promissory notes, the Amadeo spouses (i) sold three (3) or
nearly all of their real properties to respondents, Spouses Wilson and
Lolita Dy and Spouses Primo and Lilia Chuyaco, and (ii) immediately
caused the transfer of the titles covering the parcels of land in favor of
the latter. The consideration for these sales was further alleged to have
been grossly insufficient or inadequate.
Believing that the transfers were done in fraud of creditors, petitioner
instituted an action for rescission and damages on April 22, 1994. In its
Complaint3 in Civil Case No. 94-1585 against Spouses Amadeo, Dy and
Chuyaco, petitioner asked the Regional Trial Court of Makati City for the
following reliefs:
1. Annulling the Deeds of Absolute Sale both dated September 16, 1993
and thereafter, direct the Registries of Deeds of Sultan Kudarat and
Davao City to cancel the Transfer Certificates of Title Nos. (sic) T-27628,
T-202868, and T-202869 issued in the name of Wilson Dy Hong Pi and
Lolita G. Dy AND Primo Chuyaco, Jr. and Lilia O. Chuyaco, respectively,
and in lieu thereof, issue new ones under the name of Damian and Tessie
Amadeo.
2. Ordering the defendants to pay the plaintiff moral damages in the sum
of P200,000.00; exemplary damages in the sum of P200,000.00; and
P100,000.00 as[,] and for[,] attorney’s fees.4
The case was then raffled to Branch 133, presided over by Judge
Napoleon E. Inoturan.
Upon service of summons on the Amadeo spouses, the latter filed a
Motion to Dismiss5 on the ground that the Complaint violated the explicit
terms of Supreme Court Circular No. 04-94, as the Verification was
executed by petitioner’s legal counsel. 6 Petitioner filed its Opposition to
the Motion to Dismiss,7where it argued that (i) the rule cited by the
Amadeo spouses should not be applied literally, and (ii) at any rate,
petitioner’s legal counsel was authorized by petitioner to institute the
Complaint.8 On February 4, 1995, the trial court issued an
Order9 denying the Motion to Dismiss.
The Amadeo spouses subsequently filed an Answer10 where they alleged
that petitioner failed to release the loans to Streamline Cotton
Development Corporation on the agreed date, thereby constraining them
to incur loans from third parties at high interest rates to keep the
company afloat. These loans were covered by postdated checks which
had to be funded once the obligations fell due, lest the Amadeo spouses
face criminal prosecution. In order to pay the said loans, they thus had
to sell the properties subject of this case. The Amadeo spouses further
claimed that the purchase price for the three (3) parcels of land was
the fair market value, and that they had other personal and real
properties which may be availed of to answer for their obligations. In
their Counterclaim, they prayed for moral damages of P200,000.00,
attorney’s fees and expenses of litigation.
Petitioner filed its Reply and Answer to Counterclaim11 on March 8, 1995.
On September 13, 1995, petitioner filed an Ex Parte Motion for Leave to
Serve Summons by Publication12 on Spouses Dy and Chuyaco. However,
this was denied in an Order13 dated September 14, 1995 on the ground
that summons by publication cannot be availed of in an action in
personam.
Accordingly, on March 4, 1996, petitioner filed an Amended Complaint 14 to
include allegations in support of, and a prayer for, a writ of preliminary
attachment. Petitioner then presented evidence in relation thereto, and
on February 25, 1997, the trial court issued an Order 15 for the issuance
of the writ. Upon petitioner’s ex-parte motion, the trial court likewise
directed the Clerk of Court of the Regional Trial Court of Davao City to
designate a Special Sheriff to implement the writ of preliminary
attachment.16
In Orders17 dated January 12, 1998 and February 20, 1998, respectively,
petitioner was directed to inform the court whether it still intended to
pursue the case. This appears to have been motivated by the fact that
no property of the defendants had been attached as of yet. Petitioner did
not comply with the said Orders; consequently, the case was dismissed
without prejudice on June 26, 1998 for failure to prosecute. 18 By this
time, petitioner had already caused the annotation of a notice of lis
pendens at the back of the titles of the properties subject of this case
(i.e., TCT Nos. T-27628, T-202868, and T-202869).
On August 3, 1998, petitioner filed a Motion for Reconsideration of the
June 26, 1998 Order, alleging that its failure to notify the trial court of
its intention to pursue the case was prompted solely by the difficulty of
locating properties against which the writ of attachment could be
enforced. In the interest of justice, the trial court granted the motion.19
Defendant Spouses Amadeo, Dy and Chuyaco then filed an "Omnibus
Motion to Dismiss and to Annul All the Proceedings Taken Against the
Defendants"20 on December 11, 1998, in which motion they questioned the
jurisdiction of the trial court over their persons. Petitioner filed its
Opposition21 thereto on February 15, 1999. Defendants filed their
Reply22 on March 10, 1999, while petitioner filed its Rejoinder23 on June 9,
1999. Said motion, however, was merely noted without action in an
August 2, 2001 Order24 since its notice of hearing was addressed only to
the Clerk of Court, viz.:
It appears from the Motion that its Notice of Hearing is not addressed to
any of the parties concerned as otherwise required by Rule 15[,] Section
5 of the 1997 Rules of Civil Procedure. Such being the case, the Motion is
deemed a mere scrap of paper as held in Provident International
Resources Corporation vs. Court of Appeals, 259 SCRA 510.
In any event, the record shows that defendants Sps. Amadeo have been
duly served with summons as early as November 11, 1994 per Sheriff’s
Return of Service dated November 14, 1994, and they are therefore
within the jurisdiction of the Court. However, defendants Spouses Dy and
Chuyaco have not been served with summons as evidenced by Officer’s
Return dated May 24, 1994 and Return of Service dated June 10, 1994,
respectively, and so the Court has not yet acquired jurisdiction over
them. Since aforesaid Motion is deemed a scrap of paper, it cannot be
construed to manifest a (sic) voluntary appearance on their part.
Wherefore, the Omnibus Motion is noted without action. Let alias
summons be issued to defendants-spouses Dy and Chuyaco. For
plaintiff’s guidance, it may avail itself of Rule 14[,] Section 14 on
summons by publication if it so desires, upon proper motion.
SO ORDERED. (underscoring in the original)
Spouses Dy and Chuyaco subsequently filed a "Motion to Dismiss (for
Lack of Jurisdiction)"25 on February 18, 2002, in which motion they
essentially accused petitioner of not causing summons to be served
upon them and losing interest in the case. Petitioner filed its
Opposition26 thereto, and in an April 23, 2002 Order,27 the trial court
denied the Motion to Dismiss on account of (i) petitioner’s Compliance
and Manifestation28 that it had not lost interest in pursuing the case, and
(ii) the Motion for Leave of Court to Serve Summons by Publication that
petitioner filed simultaneously with its Opposition. On April 24, 2002, the
Motion for Leave of Court to Serve Summons by Publication was
submitted for resolution.29
Respondent Spouses Dy and Chuyaco next filed a "Motion to Dismiss for
Failure to Prosecute"30 on June 17, 2003. The significant portions of the
motion state:
2. That based on the order of this Honorable Court dated April 23, 2003
(sic), the Motion for Leave of Court to Serve Summons by Publication
was submitted for resolution, but the movants-defendants would like to
remind the Honorable Court that a Motion of the same nature was
already filed on September 13, 1995 and was DENIED on September 14,
1995. xxx;
3. That therefore, the order dated August 21, 2001 of this Honorable
Court which advised the complainant to avail of Rule 14 Section 14 of the
Rules is contrary to its order dated September 14, 1995;
4. That up to this date, the complainant has not lifted a finger to pursue
this case against movants-defendants, hence, this Motion to Dismiss.
WHEREFORE, premises considered, it is most respectfully prayed that
this case be dismissed against the movants-defendants and to order the
deletion of the Notice of Lis Pendens at the back of the subject title (sic).
This was opposed by petitioner, arguing that it had already filed a motion
for the service of summons by publication, but the trial court had yet to
act on it.31 On July 25, 2003, this Motion was submitted for resolution.32
On November 4, 2003, Spouses Dy and Chuyaco personally, and not
through their counsel, filed a "Motion for Inhibition without submitting
themselves to the jurisdiction of this Honorable Court,"33 the relevant
portions of which state:
1. That since 1998, the defendants-movants have been moving for the
dismissal of this case as far as the movants are concerned and to nullify
the proceedings taken against them since the Honorable Court has not
yet acquired jurisdiction over their persons when the plaintiff presented
its evidence against defendants (sic) Sps. Damian and Tessie Amadeo
and even thereafter;
2. That, however only on (sic) August 2, 2001 or after more than three
(3) years, that this Honorable Court denied the said Motion to Dismiss
due to technicality (sic) and merely require (sic) the plaintiff to serve
the summons either personally or thru publication;
3. That, however in the order of this Honorable Court dated September
14, 1995, it already denied the Ex-Parte Motion for Leave to Serve
Summons by Publication "considering that the action herein is in
personam", hence, this order is contrary to its latest order dated
August 2, 2001;
4. That another Motion to Dismiss was filed last June 11, 2003 34 on the
ground of lack of interest to pursue the case but up to this date, the
Honorable Court has done nothing that delays (sic) the proceedings to
the prejudice of the defendants-movants;
5. That this continuous delay in the proceedings shows that the
Honorable Court may not be competent enough to further hear this
case.
WHEREFORE, premises considered, it is most respectfully prayed for the
inhibition of this Honorable Court (sic) from further hearing this case.
This was submitted for resolution on November 13, 2003.
The motion for inhibition was adopted by their counsel on record,
Clarissa Castro, through a "Motion to Adopt Motion for Inhibition and
Manifestation," which was filed on February 11, 200435 and noted by the
trial court in a February 20, 2004 Order. 36 On June 23, 2004, however,
the trial court (i) denied the motion for inhibition for lack of merit, (ii)
ruled that Spouses Dy and Chuyaco have voluntarily submitted
themselves to the jurisdiction of the trial court, and (iii) gave them
fifteen (15) days from receipt of the Order within which to file their
respective answers, as follows:
Acting on the Motion for Inhibition, the Court hereby denies the same for
lack of legal basis.
In any event, the fact that defendants Wilson Dy and Primo Chuyaco, Jr.
signed said Motion themselves and in behalf of their respective spouses
undoubtedly indicates their voluntary appearance in this case and their
submission to the jurisdiction of this Court. The phrase "without
submitting themselves to the jurisdiction of this Honorable Court" in the
heading of said Motion can not qualify the clear import of Rule 14 section
20 which states:
Voluntary appearance. — The defendant's voluntary appearance in the
action shall be equivalent to service of summons. The inclusion in a
motion to dismiss of other grounds aside from lack of jurisdiction over
the person of the defendant shall not be deemed a voluntary
appearance. (23a)
It may be noted that subject Motion for Inhibition is not a Motion to
Dismiss.
Wherefore, defendants-spouses Dy and Chuyaco are given fifteen (15)
days from receipt hereof within which to file their respective answers.
All pending incidents are deemed resolved. 37
Unsatisfied with the Order, respondent Spouses Dy and Chuyaco filed a
Petition for Certiorari under Rule 6538before the CA, alleging that "the
public respondent committed grave abuse of discretion when he
considered the Motion to Inhibit (without submitting to the jurisdiction of
the Honorable Court) which they had filed to question his impartiality
and competence due to the delay in resolving the Motion to Dismiss
based on lack of jurisdiction, as voluntary appearance, and wherein he
required the respondents to file their Answer within the required
period." The CA granted the petition in this wise:
The old provision under Section 23, Rule 14 of the Revised Rules of Court
provided that:
Section 23. What is equivalent to service. The defendant’s voluntary
appearance in the action shall be equivalent to service.
Under Section 20, Rule 14 of the 1997 Rules of Civil Procedure, the
provision now reads as follows:
Sec. 20. Voluntary Appearance. — The defendant's voluntary appearance
in the action shall be equivalent to service of summons. The inclusion in
a motion to dismiss of other grounds aside from lack of jurisdiction over
the person of the defendant shall not be deemed a voluntary
appearance.
What remains the same, carry (sic) over from the old doctrine, is that
the issue of jurisdiction must be raised seasonably.
But everything else changed.
What changed is that: if a motion is filed, whatever kind it is, it need no
longer be for the sole and separate purpose of objecting to the
jurisdiction of the court because the motion may raise myriad issues in
that one motion of special appearance as long as the objection to the
jurisdiction of the court is included. xxx
What necessarily changed also is that the medium of "special
appearance" is no longer restricted to a motion to dismiss because one
could now file any type of motion provided you included the issue of lack
of jurisdiction due to defective service of summons.
Thus, in this case at bar, the "two motions to dismiss" and the "motion
to inhibit" may be treated as "special appearance" since they all
included the issue of lack of jurisdiction due to non-service of summons.
They did not constitute as submitting the movant to the jurisdiction of
the court.
xxx xxx xxx
There being no proper service of summons on petitioners and there
being no voluntary appearance by petitioners, the trial court did not
acquire jurisdiction over the persons of the defendants, the herein
petitioners. Any proceeding undertaken by the trial court against them
would consequently be null and void.
WHEREFORE, premises considered, the assailed June 23, 2004 Order of
the Regional Trial Court of Makati City, Branch 133, is hereby DECLARED
NULL AND VOID as against herein petitioners. The April 22, 1994
complaint filed by Philippine Commercial International Bank is hereby
DISMISSED as against herein petitioners DY and CHUYACO only, no
jurisdiction over their persons having been acquired.
SO ORDERED.39
Petitioner’s motion for reconsideration was denied by the appellate
court.40
Hence this appeal, where petitioner argues that:
I.
THE COURT OF APPEALS ERRED IN DECLARING THE JUNE 23, 2004 ORDER
OF THE TRIAL COURT NULL AND VOID AND IN DISMISSING THE COMPLAINT
AS AGAINST RESPONDENTS DY AND CHUYACO AND RENDERING THE
QUESTIONED DECISION AND RESOLUTION IN A WAY THAT IS NOT IN
ACCORD WITH THE FACTS AND APPLICABLE LAWS AND JURISPRUDENCE,
WHICH HOLD THAT BY THEIR SUCCESSIVE FILING OF MOTIONS WITH THE
CONVENIENT CAVEAT THAT THEY ARE NOT SUBMITTING TO THE
JURISDICTION OF THE COURT A QUO, THEY HAVE VOLUNTARILY SUBMITTED
TO THE TRIAL COURT’S JURISDICTION.
A. THE HONORABLE COURT OF APPEALS ERRED WHEN IT DISMISSED THE
CASE AS AGAINST DY AND CHUYACO.
B. THE SPOUSES DY AND CHUYACO HAVE LOST THEIR RIGHT TO QUESTION
THE TRIAL COURT’S JURISDICTION OVER THEM WHEN THEY DID NOT RAISE
THE DENIAL OF THEIR APRIL 22, 2002 MOTION TO DISMISS TO THE COURT
OF APPEALS.
C. THE SPOUSES DY AND CHUYACO HAVE MISERABLY FAILED TO SHOW
BASIS IN SEEKING THE TRIAL COURT’S JURISDICTION.
D. THE SPOUSES DY AND CHUYACO HAVE VOLUNTARILY SUBMITTED
THEMSELVES TO THE TRIAL COURT’S JURISDICTION.
II.
THE COURT OF APPEALS ERRED IN A WAY THAT IS NOT IN ACCORD WITH
APPLICABLE LAWS AND JURISPRUDENCE IN NOT DISMISSING THE PETITION
FOR CERTIORARI NOTWITHSTANDING THAT THE DY AND CHUYACO
SPOUSES FAILED TO SHOW THAT THERE IS NO APPEAL, OR ANY PLAIN,
SPEEDY AND ADEQUATE REMEDY IN THE ORDINARY COURSE OF LAW
AVAILABLE TO THEM. 41
Simply stated, the issues are: (1) Was the petition for certiorari
prematurely filed? (2) Has there been voluntary appearance on the part
of respondent Spouses Dy and Chuyaco as to confer the trial court with
jurisdiction over their persons? and (3) Did the trial court correctly
deny the motion for inhibition?
We shall discuss these issues in seriatim.
First Issue: Propriety of Certiorari
Petitioner contends that respondents subverted the settled rule that a
Petition for Certiorari under Rule 65 is available only when there is no
appeal, or any plain, speedy, and adequate remedy in the ordinary
course of law.42 It asserts that respondents’ failure to move for
reconsideration of the June 23, 2004 Order of the trial court, denying
the latter’s motion for inhibition, provides sufficient cause for the
outright dismissal of the instant petition.
We disagree.
Petitioner is correct that a motion for reconsideration, as a general
rule, must have first been filed before the tribunal, board, or officer
against whom the writ of certiorari is sought. 43 This is intended to afford
the latter an opportunity to correct any actual or fancied error
attributed to it. 44 However, there are several exceptions where the
special civil action for certiorari will lie even without the filing of a
motion for reconsideration, namely:
a. where the order is a patent nullity, as where the court a quo has no
jurisdiction;
b. where the questions raised in the certiorari proceeding have been
duly raised and passed upon by the lower court, or are the same as
those raised and passed upon in the lower court;
c. where there is an urgent necessity for the resolution of the question
and any further delay would prejudice the interests of the government
or the petitioner, or the subject matter of the action is perishable;
d. where, under the circumstances, a motion for reconsideration would
be useless;
e. where petitioner was deprived of due process and there is extreme
urgency for relief;
f. where, in a criminal case, relief from an order of arrest is urgent and
the granting of such relief by the trial court is improbable;
g. where the proceedings in the lower court are a nullity for lack of due
process;
h. where the proceedings were ex parte or in which the petitioner had
no opportunity to object; and
i. where the issue raised is one purely of law or where public interest is
involved. 45
Otherwise stated, a motion for reconsideration may be dispensed with
only if there are concrete, compelling, and valid reasons for doing so. 46
We find that respondents’ non-filing of a motion for reconsideration is
justifiable under the circumstances of this case. It is not disputed that
the trial court, rightly or wrongly, considered them to have voluntarily
submitted to its jurisdiction by virtue of their motion for inhibition. Thus,
respondents’ apprehension that the motion for reconsideration might be
construed as further manifesting their voluntary appearance is
certainly well-grounded. They may not, therefore, be faulted for having
resorted immediately to a special civil action for certiorari. 1avvphil
Second Issue: Voluntary Appearance
Preliminarily, jurisdiction over the defendant in a civil case is acquired
either by the coercive power of legal processes exerted over his
person, or his voluntary appearance in court. 47 As a general proposition,
one who seeks an affirmative relief is deemed to have submitted to the
jurisdiction of the court. 48 It is by reason of this rule that we have had
occasion to declare that the filing of motions to admit answer, for
additional time to file answer, for reconsideration of a default judgment,
and to lift order of default with motion for reconsideration, is
considered voluntary submission to the court’s jurisdiction. 49 This,
however, is tempered by the concept of conditional appearance, such
that a party who makes a special appearance to challenge, among
others, the court’s jurisdiction over his person cannot be considered to
have submitted to its authority.50
Prescinding from the foregoing, it is thus clear that:
(1) Special appearance operates as an exception to the general rule on
voluntary appearance;
(2) Accordingly, objections to the jurisdiction of the court over the
person of the defendant must be explicitly made, i.e., set forth in an
unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the jurisdiction
of the court, especially in instances where a pleading or motion seeking
affirmative relief is filed and submitted to the court for resolution.
Measured against these standards, it is readily apparent that
respondents have acquiesced to the jurisdiction of the trial court as
early as June 17, 2003, when they filed their Motion to Dismiss for
Failure to Prosecute. Significantly, the motion did not categorically and
expressly raise the jurisdiction of the court over their persons as an
issue. It merely (i) "reminded" the court of its purportedly conflicting
Orders in respect of summons by publication, (ii) alleged that because
petitioner "has not lifted a finger to pursue this case against movants-
defendants," the case may be dismissed for failure to prosecute, and
(iii) prayed additionally for the deletion of the Notice of Lis Pendens
indicated at the back of the transfer certificates of title covering the
subject properties. We note, furthermore, that the motion failed to
qualify the capacity in which respondents were appearing and seeking
recourse.51 It is in this light that the Court’s pronouncement in Busuego
v. Court of Appeals52 finds cogent application:
A voluntary appearance is a waiver of the necessity of a formal notice.
An appearance in whatever form, without explicitly objecting to the
jurisdiction of the court over the person, is a submission to the
jurisdiction of the court over the person. While the formal method of
entering an appearance in a cause pending in the courts is to deliver to
the clerk a written direction ordering him to enter the appearance of
the person who subscribes it, an appearance may be made by simply
filing a formal motion, or plea or answer. This formal method of
appearance is not necessary. He may appear without such formal
appearance and thus submit himself to the jurisdiction of the court. He
may appear by presenting a motion, for example, and unless by such
appearance he specifically objects to the jurisdiction of the court, he
thereby gives his assent to the jurisdiction of the court over his
person.53 (emphasis supplied)
Besides, any lingering doubts on the issue of voluntary appearance
dissipate when the respondents’ motion for inhibition is considered. This
motion seeks a sole relief: inhibition of Judge Napoleon Inoturan from
further hearing the case. Evidently, by seeking affirmative relief other
than dismissal of the case, respondents manifested their voluntary
submission to the court’s jurisdiction. It is well-settled that the active
participation of a party in the proceedings is tantamount to an
invocation of the court’s jurisdiction and a willingness to abide by the
resolution of the case, and will bar said party from later on impugning
the court’s jurisdiction.54
To be sure, the convenient caveat in the title of the motion for inhibition
(i.e., "without submitting themselves to the jurisdiction of this Honorable
Court") does not detract from this conclusion. It would suffice to say
that the allegations in a pleading or motion are determinative of its
nature; the designation or caption thereof is not
controlling.55Furthermore, no amount of caveat can change the fact that
respondents tellingly signed the motion to inhibit in their own behalf and
not through counsel, let alone through a counsel making a special
appearance.
Third Issue: Inhibition
Respondents argue that the trial court’s so-called "continuous delay in
the proceedings" is indicative of the fact that it is incompetent to
continue hearing the case. Respondents therefore assert that the trial
court acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when it denied their motion to inhibit and required them
to file their Answer.
We are not convinced.
Under the first paragraph of Section 1, Rule 137 of the Rules of Court, a
judge or judicial officer shall be mandatorily disqualified to sit in any
case in which:
(a) he, or his wife or child, is pecuniarily interested as heir, legatee,
creditor or otherwise; or
(b) he is related to either party within the sixth degree of consanguinity
or affinity, or to counsel within the fourth degree, computed according
to the rules of civil law; or
(c) he has been executor, administrator, guardian, trustee or counsel;
or
(d) he has presided in any inferior court when his ruling or decision is
the subject of review, without the written consent of all parties in
interest, signed by them and entered upon the record.56
Paragraph two of the same provision meanwhile provides for the rule on
voluntary inhibition and states: "[a] judge may, in the exercise of his
sound discretion, disqualify himself from sitting in a case, for just or
valid reasons other than those mentioned above." That discretion is a
matter of conscience and is addressed primarily to the judge’s sense of
fairness and justice.57 We have elucidated on this point in Pimentel v.
Salanga,58 as follows:
A judge may not be legally prohibited from sitting in a litigation. But
when suggestion is made of record that he might be induced to act in
favor of one party or with bias or prejudice against a litigant arising out
of circumstances reasonably capable of inciting such a state of mind, he
should conduct a careful self-examination. He should exercise his
discretion in a way that the people's faith in the courts of justice is not
impaired. A salutary norm is that he reflect on the probability that a
losing party might nurture at the back of his mind the thought that the
judge had unmeritoriously tilted the scales of justice against him. That
passion on the part of a judge may be generated because of serious
charges of misconduct against him by a suitor or his counsel, is not
altogether remote. He is a man, subject to the frailties of other men. He
should, therefore, exercise great care and caution before making up his
mind to act in or withdraw from a suit where that party or counsel is
involved. He could in good grace inhibit himself where that case could be
heard by another judge and where no appreciable prejudice would be
occasioned to others involved therein. On the result of his decision to sit
or not to sit may depend to a great extent the all-important confidence
in the impartiality of the judiciary. If after reflection he should resolve to
voluntarily desist from sitting in a case where his motives or fairness
might be seriously impugned, his action is to be interpreted as giving
meaning and substances to the second paragraph of Section 1, Rule 137.
He serves the cause of the law who forestalls miscarriage of justice.
The present case not being covered by the rule on mandatory inhibition,
the issue thus turns on whether Judge Napoleon Inoturan should have
voluntarily inhibited himself.
At the outset, we underscore that while a party has the right to seek the
inhibition or disqualification of a judge who does not appear to be wholly
free, disinterested, impartial and independent in handling the case, this
right must be weighed with the duty of a judge to decide cases without
fear of repression.59 Respondents consequently have no vested right to
the issuance of an Order granting the motion to inhibit, given its
discretionary nature.60
However, the second paragraph of Rule 137, Section 1 does not give
judges unfettered discretion to decide whether to desist from hearing a
case.61 The inhibition must be for just and valid causes, and in this
regard, we have noted that the mere imputation of bias or partiality is
not enough ground for inhibition, especially when the charge is without
basis.62 This Court has to be shown acts or conduct clearly indicative of
arbitrariness or prejudice before it can brand them with the stigma of
bias or partiality. 63 Moreover, extrinsic evidence is required to establish
bias, bad faith, malice or corrupt purpose, in addition to palpable error
which may be inferred from the decision or order itself. 64 The only
exception to the rule is when the error is so gross and patent as to
produce an ineluctable inference of bad faith or malice.65
We do not find any abuse of discretion by the trial court in denying
respondents’ motion to inhibit. Our pronouncement in Webb, et al. v.
People of the Philippines, et al. 66 is apropos:
A perusal of the records will reveal that petitioners failed to adduce any
extrinsic evidence to prove that respondent judge was motivated by
malice or bad faith in issuing the assailed rulings. Petitioners simply
lean on the alleged series of adverse rulings of the respondent judge
which they characterized as palpable errors. This is not enough. We note
that respondent judge's rulings resolving the various motions filed by
petitioners were all made after considering the arguments raised by all
the parties. xxx
xxx xxx xxx
We hasten to stress that a party aggrieved by erroneous interlocutory
rulings in the course of a trial is not without remedy. The range of
remedy is provided in our Rules of Court and we need not make an
elongated discourse on the subject. But certainly, the remedy for
erroneous rulings, absent any extrinsic evidence of malice or bad faith,
is not the outright disqualification of the judge. For there is yet to come
a judge with the omniscience to issue rulings that are always infallible.
The courts will close shop if we disqualify judges who err for we all err.
(emphasis supplied)
Truth be told, respondents are not entirely blameless for any perceived
delay in the resolution of the various incidents of the case. For instance,
they make much of the fact that close to three years passed before
their "Omnibus Motion to Dismiss and to Annul All the Proceedings Taken
Against the Defendants," filed on December 11, 1998, was noted by the
trial court. But the fact remains that the said "motion," not having a
notice of hearing addressed to the adverse party, is legally a mere
scrap of paper.67 It presents no question which merits the attention and
consideration of the court, and is not entitled to judicial cognizance. 68
Considering the foregoing, we rule that respondents’ accusations of
delay, incompetence, and bias on the part of the trial court are
unfounded. Hence, they are not entitled to the inhibition of Judge
Inoturan as a relief.
IN VIEW WHEREOF, the Petition is hereby GRANTED. The Decision dated
July 18, 2005 of the Court of Appeals and its Resolution dated January
10, 2006 are hereby REVERSED and SET ASIDE, and another in their stead
is hereby rendered ORDERING respondent Spouses Dy and Chuyaco to
answer the Complaint in Civil Case No. 94-1585 within fifteen (15) days
from receipt of this Decision.
The trial court is directed to proceed hearing the case, and to resolve
the same with dispatch.
G.R. No. 195619 September 5, 2012
PLANTERS DEVELOPMENT BANK, Petitioner,
vs.
JULIE CHANDUMAL, Respondent.
DECISION
REYES, J.:
In this petition for review under Rule 45 of the Rules of Court, Planters
Development Bank (PDB) questions the Decision1 dated July 27, 2010 of
the Court of Appeals (CA), as well as its Resolution2 dated February 16,
2011, denying the petitioner's motion for reconsideration in CA-G.R. CV
No. 82861. The assailed decision nullified the Decision3 dated May 31,
2004 of the Regional Trial Court (RTC), Las Piñas City, Branch 255 in
Civil Case No. LP-99-0137.
Antecedent Facts
The instant case stemmed from a contract to sell a parcel of land,
together with improvements, between BF Homes, Inc. (BF Homes) and
herein respondent Julie Chandumal (Chandumal). The property subject
of the contract is located in Talon Dos, Las Piñas City and covered by
Transfer Certificate of Title No. T-10779. On February 12, 1993, BF Homes
sold to PDB all its rights, participations and interests over the contract.
Chandumal paid her monthly amortizations from December 1990 until
May 1994 when she began to default in her payments. In a Notice of
Delinquency and Rescission of Contract with Demand to Vacate 4 dated
July 14, 1998, PDB gave Chandumal a period of thirty (30) days from
receipt within which to settle her installment arrearages together with
all its increments; otherwise, all her rights under the contract shall be
deemed extinguished and terminated and the contract declared as
rescinded. Despite demand, Chandumal still failed to settle her
obligation.
On June 18, 1999, an action for judicial confirmation of notarial
rescission and delivery of possession was filed by PDB against
Chandumal, docketed as Civil Case No. LP-99-0137. PDB alleged that
despite demand, Chandumal failed and/or refused to pay the
amortizations as they fell due; hence, it caused the rescission of the
contract by means of notarial act, as provided in Republic Act (R.A.) No.
6552.5 According to PDB, it tried to deliver the cash surrender value of
the subject property, as required under R.A. No. 6552, in the amount of
₱ 10,000.00; however, the defendant was unavailable for such purpose. 6
Consequently, summons was issued and served by deputy sheriff
Roberto T. Galing (Sheriff Galing). According to his return, Sheriff Galing
attempted to personally serve the summons upon Chandumal on July 15,
19 and 22, 1999 but it was unavailing as she was always out of the house
on said dates. Hence, the sheriff caused substituted service of summons
on August 5, 1999 by serving the same through Chandumal’s mother who
acknowledged receipt thereof. 7
For her failure to file an answer within the prescribed period, PDB filed
on April 24, 2000 an ex parte motion to declare Chandumal in default. On
January 12, 2001, the RTC issued an Order granting the motion of PDB. 8
On February 23, 2001, Chandumal filed an Urgent Motion to Set Aside
Order of Default and to Admit Attached Answer. She maintained that she
did not receive the summons and/or was not notified of the same. She
further alleged that her failure to file an answer within the reglementary
period was due to fraud, mistake or excusable negligence. In her
answer, Chandumal alleged the following defenses: (a) contrary to the
position of PDB, the latter did not make any demand for her to pay the
unpaid monthly amortization; and (b) PDB did not tender or offer to give
the cash surrender value of the property in an amount equivalent to fifty
percent (50%) of the actual total payment made, as provided for under
Section 3(b) of R.A. No. 6552. Moreover, Chandumal claimed that since
the total payment she made amounts to ₱ 782,000.00, the
corresponding cash surrender value due her should be ₱ 391,000.00.9
Per Order10 dated August 2, 2001, the RTC denied Chandumal’s motion to
set aside the order of default. Her motion for reconsideration was also
denied for lack of merit.11 Conformably, the RTC allowed PDB to present
its evidence ex parte.12 On May 31, 2004, the RTC rendered a
Decision13 in favor of PDB, the dispositive portion of which reads:
WHEREFORE, the foregoing considered, judgment is hereby rendered in
favor of the plaintiff Planters Development Bank and against defendant
Julie Chandumal as follows, to wit:
1. Declaring the notarial rescission of the Contract to Sell dated 03
January 1990 made by the plaintiff per the Notice of Delinquency and
Rescission of Contract with Demand to Vacate dated 14 July 1998 as
judicially confirmed and ratified;
2. Requiring the plaintiff to deposit in the name of the defendant the
amount of ₱ 10,000.00 representing the cash surrender value for the
subject property with the Land Bank of the Philippines, Las Pi[ñ]as City
Branch in satisfaction of the provisions of R.A. No. 6552; and,
3. Ordering the defendant to pay the plaintiff the amount of ₱
50,000.00 as and by way of attorney’s fees, including the costs of suit.
SO ORDERED.14
From the foregoing judgment, Chandumal appealed to the CA.
On July 27, 2010, the CA, without ruling on the propriety of the judicial
confirmation of the notarial rescission, rendered the assailed decision
nullifying the RTC decision due to invalid and ineffective substituted
service of summons. The dispositive portion of the CA decision provides:
WHEREFORE, premises considered, the decision of Branch 255 of the
Regional Trial Court of Las Piñas City, dated May 31, 2004, in Civil Case
No. LP-99-0137 is hereby NULLIFIED and VACATED.
SO ORDERED.15
PDB filed a motion for reconsideration but it was denied by the CA in its
Resolution dated February 16, 2011.
Hence, this petition based on the following assignment of errors:
I In this case, the sheriff resorted to substituted service of summons due
The Honorable Court of Appeals erred in reversing the decision of the
trial court on the ground of improper service of summons;
II
The decision of the trial court is valid as it duly acquired jurisdiction
over the person of respondent Chandumal through voluntary
appearance; and
III
The trial court did not err in confirming and ratifying the notarial
rescission of the subject contract to sell. 16
PDB contends that the RTC properly acquired jurisdiction over the
person of Chandumal.1âwphi1 According to PDB, there was proper
service of summons since the sheriff complied with the proper
procedure governing substituted service of summons as laid down in
Section 7, Rule 14 of the Rules of Court. PDB alleges that it is clear from
the sheriff’s return that there were several attempts on at least three
(3) different dates to effect personal service within a reasonable period
of nearly a month, before he caused substituted service of summons.
The sheriff likewise stated the reason for his failure to effect personal
service and that on his fourth attempt, he effected the service of
summons through Chandumal’s mother who is unarguably, a person of
legal age and with sufficient discretion. PDB also argues that Chandumal
voluntarily submitted herself to the jurisdiction of the court when she
filed an Urgent Motion to Set Aside Order of Default and to Admit
Attached Answer.
For her part, Chandumal asserts that she never received a copy of the
summons or was ever notified of it and she only came to know of the
case sometime in July or August 2000, but she was already in the
United States of America by that time, and that the CA correctly ruled
that there was no valid service of summons; hence, the RTC never
acquired jurisdiction over her person.
Issues
1. Whether there was a valid substituted service of summons;
2. Whether Chandumal voluntarily submitted to the jurisdiction of the
trial court; and
3. Whether there was proper rescission by notarial act of the contract
to sell.
Our Ruling
The fundamental rule is that jurisdiction over a defendant in a civil case
is acquired either through service of summons or through voluntary
appearance in court and submission to its authority. If a defendant has
not been properly summoned, the court acquires no jurisdiction over its
person, and a judgment rendered against it is null and void. 17
Where the action is in personam18 and the defendant is in the Philippines,
service of summons may be made through personal service, that is,
summons shall be served by handing to the defendant in person a copy
thereof, or if he refuses to receive and sign for it, by tendering it to
him.19 If the defendant cannot be personally served with summons within
a reasonable time, it is then that substituted service may be
made.20 Personal service of summons should and always be the first
option, and it is only when the said summons cannot be served within a
reasonable time can the process server resort to substituted service.21
No valid substituted service of
summons
to his failure to serve it personally. In Manotoc v. Court of Appeals,22 the
Court detailed the requisites for a valid substituted service of summons,
summed up as follows: (1) impossibility of prompt personal service – the
party relying on substituted service or the sheriff must show that the
defendant cannot be served promptly or there is impossibility of prompt
service; (2) specific details in the return – the sheriff must describe in
the Return of Summons the facts and circumstances surrounding the
attempted personal service; (3) a person of suitable age and discretion
– the sheriff must determine if the person found in the alleged dwelling
or residence of defendant is of legal age, what the recipient’s
relationship with the defendant is, and whether said person
comprehends the significance of the receipt of the summons and his
duty to immediately deliver it to the defendant or at least notify the
defendant of said receipt of summons, which matters must be clearly
and specifically described in the Return of Summons; and (4) a
competent person in charge, who must have sufficient knowledge to
understand the obligation of the defendant in the summons, its
importance, and the prejudicial effects arising from inaction on the
summons.23 These were reiterated and applied in Pascual v.
Pascual,24 where the substituted service of summon made was
invalidated due to the sheriff’s failure to specify in the return the
necessary details of the failed attempts to effect personal service which
would justify resort to substituted service of summons.
In applying the foregoing requisites in the instant case, the CA correctly
ruled that the sheriff’s return failed to justify a resort to substituted
service of summons. According to the CA, the Return of Summons does
not specifically show or indicate in detail the actual exertion of efforts
or any positive step taken by the officer or process server in attempting
to serve the summons personally to the defendant. The return merely
states the alleged whereabouts of the defendant without indicating that
such information was verified from a person who had knowledge
thereof.25Indeed, the sheriff’s return shows a mere perfunctory attempt
to cause personal service of the summons on Chandumal. There was no
indication if he even asked Chandumal’s mother as to her specific
whereabouts except that she was "out of the house", where she can be
reached or whether he even tried to await her return. The "efforts"
exerted by the sheriff clearly do not suffice to justify substituted service
and his failure to comply with the requisites renders such service
ineffective.26
Respondent voluntarily submitted
to the jurisdiction of the trial court
Despite that there was no valid substituted service of summons, the
Court, nevertheless, finds that Chandumal voluntarily submitted to the
jurisdiction of the trial court.
Section 20, Rule 14 of the Rules of Court states:
Sec. 20. Voluntary appearance. – The defendant’s voluntary appearance
in the action shall be equivalent to service of summons. The inclusion in
a motion to dismiss of other grounds aside from lack of jurisdiction over
the person of the defendant shall not be deemed a voluntary
appearance.
When Chandumal filed an Urgent Motion to Set Aside Order of Default
and to Admit Attached Answer, she effectively submitted her person to
the jurisdiction of the trial court as the filing of a pleading where one
seeks an affirmative relief is equivalent to service of summons and
vests the trial court with jurisdiction over the defendant’s person. Thus,
it was ruled that the filing of motions to admit answer, for additional
time to file answer, for reconsideration of a default judgment, and to lift
order of default with motion for reconsideration is considered voluntary
submission to the trial court’s jurisdiction.27 The Court notes that aside
from the allegation that she did not receive any summons, Chandumal’s
motion to set aside order of default and to admit attached answer failed
to positively assert the trial court’s lack of jurisdiction. In fact, what was
set forth therein was the substantial claim that PDB failed to comply
with the requirements of R.A. No. 6552 on payment of cash surrender
value,28 which already delves into the merits of PDB’s cause of action. In
addition, Chandumal even appealed the RTC decision to the CA, an act
which demonstrates her recognition of the trial court’s jurisdiction to
render said judgment.
Given Chandumal’s voluntary submission to the jurisdiction of the trial
court, the RTC, Las Piñas City, Branch 255, had all authority to render its
Decision dated May 31, 2004. The CA, therefore, erred in nullifying said
RTC decision and dispensing with the resolution of the substantial issue
raised herein, i.e., validity of the notarial rescission. Instead, however, of
remanding this case to the CA, the Court will resolve the same
considering that the records of the case are already before us and in
order to avoid any further delay.29
There is no valid rescission of the
contract to sell by notarial act
pursuant to Section 3(b), R.A. No. 6552
That the RTC had jurisdiction to render the decision does not necessarily
mean, however, that its ruling on the validity of the notarial rescission is
in accord with the established facts of the case, the relevant law and
jurisprudence.1âwphi1
PDB claims that it has validly rescinded the contract by notarial act as
provided under R.A. No. 6552. Basically, PDB instituted Civil Case No. LP-
99-0137 in order to secure judicial confirmation of the rescission and to
recover possession of the property subject of the contract.
In Leaño v. Court of Appeals,30 it was held that:
R. A. No. 6552 recognizes in conditional sales of all kinds of real estate
(industrial, commercial, residential) the right of the seller to cancel the
contract upon non-payment of an installment by the buyer, which is
simply an event that prevents the obligation of the vendor to convey title
from acquiring binding force. The law also provides for the rights of the
buyer in case of cancellation. Thus, Sec. 3 (b) of the law provides that:
"If the contract is cancelled, the seller shall refund to the buyer the
cash surrender value of the payments on the property equivalent to fifty
percent of the total payments made and, after five years of installments,
an additional five percent every year but not to exceed ninety percent of
the total payments made: Provided, That the actual cancellation of the
contract shall take place after thirty days from receipt by the buyer of
the notice of cancellation or the demand for rescission of the contract
by a notarial act and upon full payment of the cash surrender value to
the buyer."31 (Citation omitted and emphasis ours)
R.A. No. 6552 recognizes the right of the seller to cancel the contract
but any such cancellation must be done in conformity with the
requirements therein prescribed. In addition to the notarial act of
rescission, the seller is required to refund to the buyer the cash
surrender value of the payments on the property. The actual
cancellation of the contract can only be deemed to take place upon the
expiry of a thirty (30)-day period following the receipt by the buyer of
the notice of cancellation or demand for rescission by a notarial act and
the full payment of the cash surrender value.32
In this case, it is an admitted fact that PDB failed to give Chandumal the
full payment of the cash surrender value. In its complaint,33 PDB
admitted that it tried to deliver the cash surrender value of the subject
property as required under R.A. No. 6552 but Chandumal was
"unavailable" for such purpose. Thus, it prayed in its complaint that it be
ordered to "deposit with a banking institution in the Philippines, for the
account of Defendants (sic), the amount of Ten Thousand Pesos (₱
10,000.00), Philippine Currency, representing the cash surrender value
of the subject property; x x x."34 The allegation that Chandumal made
herself unavailable for payment is not an excuse as the twin
requirements for a valid and effective cancellation under the law, i.e.,
notice of cancellation or demand for rescission by a notarial act and the
full payment of the cash surrender value, is mandatory. 35 Consequently,
there was no valid rescission of the contract to sell by notarial act
undertaken by PDB and the RTC should not have given judicial
confirmation over the same.
WHEREFORE, the petition is DENIED. The Decision dated July 27, 2010 of
the Court of Appeals, as well as its Resolution dated February 16, 2011,
denying the Motion for Reconsideration in CA-G.R. CV No. 82861
are AFFIRMED in so far as there was no valid service of summons.
Further, the Court DECLARES that there was no valid rescission of
contract pursuant to R.A. No. 6552. Accordingly, the Decision dated May
31, 2004 of the Regional Trial Court, Las Piñas City, Branch 255 in Civil
Case No. LP-99-0 137 is REVERSED and SET ASIDE, and is
therefore, DISMISSED for lack of merit.
G.R. No. 173379 December 1, 2010
ABUBAKAR A. AFDAL and FATIMA A. AFDAL, Petitioners,
vs.
ROMEO CARLOS, Respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 of the 3 January 20052 and 16 June
20063 Orders of the Regional Trial Court, Branch 25, Biñan, Laguna
(RTC) in Civil Case No. B-6721. In its 3 January 2005 Order, the RTC
ordered the dismissal of petitioners Abubakar A. Afdal and Fatima A.
Afdal’s (petitioners) petition for relief from judgment. In its 16 June
2006 Order, the RTC denied petitioners’ motion for reconsideration.
The Facts
On 18 December 2003, respondent Romeo Carlos (respondent) filed a
complaint for unlawful detainer and damages against petitioners,
Zenaida Guijabar (Guijabar), John Doe, Peter Doe, Juana Doe, and all
persons claiming rights under them docketed as Civil Case No. 3719
before the Municipal Trial Court, Biñan, Laguna (MTC). Respondent
alleged that petitioners, Guijabar, and all other persons claiming rights
under them were occupying, by mere tolerance, a parcel of land in
respondent’s name covered by Transfer Certificate of Title No. T-
5301394 in the Registry of Deeds Calamba, Laguna. Respondent claimed
that petitioner Abubakar Afdal (petitioner Abubakar) sold the property to
him but that he allowed petitioners to stay in the property. On 25 August
2003, respondent demanded that petitioners, Guijabar, and all persons
claiming rights under them turn over the property to him because he
needed the property for his personal use.5 Respondent further alleged
that petitioners refused to heed his demand and he was constrained to
file a complaint before the Lupon ng Tagapamayapa (Lupon). According
to respondent, petitioners ignored the notices and the Lupon issued a
"certificate to file action."6 Then, respondent filed the complaint before
the MTC.
According to the records, there were three attempts to serve the
summons and complaint on petitioners – 14 January, 3 and 18 February
2004. 7 However, petitioners failed to file an answer.
On 2 June 2004, respondent filed an ex-parte motion and compliance
with position paper submitting the case for decision based on the
pleadings on record.8
In its 23 August 2004 Decision,9 the MTC ruled in favor of respondent.
The dispositive portion of the 23 August 2004 Decision reads:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and
against defendants as follows:
1. Ordering defendants Abubakar Afdal, Zenaida Guijabar and all persons
claiming rights under them to vacate the subject property and
peacefully turn-over possession of the same to plaintiff;
2. Ordering defendants to pay plaintiff the amount of TEN THOUSAND
PESOS (₱10,000.00) as rental arrears from August 25, 2003 up to the
date of decision;
3. Ordering defendants to pay plaintiff the amount of TEN THOUSAND
PESOS (₱10,000.00) a month thereafter, as reasonable compensation
for the use of the subject premises until they finally vacate the same;
4. Ordering defendants to pay plaintiff the amount of FIFTY THOUSAND
PESOS (₱50,000.00) as and for attorney’s fees plus ONE THOUSAND
FIVE HUNDRED PESOS (₱1,500.00) appearance fee;
5. Ordering defendants to pay the costs of suit.
SO ORDERED.10
On 1 October 2004, the MTC issued a writ of execution. 11
On 30 October 2004, petitioners filed a petition for relief from judgment
with the MTC. 12 Respondent filed a motion to dismiss or strike out the
petition for relief.13 Subsequently, petitioners manifested their intention
to withdraw the petition for relief after realizing that it was a prohibited
pleading under the Revised Rule on Summary Procedure. On 10
November 2004, the MTC granted petitioners’ request to withdraw the
petition for relief.14
On 6 December 2004, petitioners filed the petition for relief before the
RTC.15 Petitioners alleged that they are the lawful owners of the property
which they purchased from spouses Martha D.G. Ubaldo and Francisco D.
Ubaldo. Petitioners denied that they sold the property to respondent.
Petitioners added that on 15 December 2003, petitioner Abubakar filed
with the Commission on Elections his certificate of candidacy as mayor
in the municipality of Labangan, Zamboanga del Sur, for the 10 May 2004
elections. Petitioners said they only learned of the MTC’s 23 August
2004 Decision on 27 October 2004. Petitioners also pointed out that
they never received respondent’s demand letter nor were they informed
of, much less participated in, the proceedings before the Lupon.
Moreover, petitioners said they were not served a copy of the summons
and the complaint.
On 3 January 2005, the RTC issued the assailed Order dismissing the
petition for relief. The RTC said it had no jurisdiction over the petition
because the petition should have been filed before the MTC in
accordance with Section 1 of Rule 38 of the Rules of Court which
provides that a petition for relief should be filed "in such court and in
the same case praying that the judgment, order or proceeding be set
aside."
Petitioners filed a motion for reconsideration. In its 16 June 2006 Order,
the RTC denied petitioners’ motion.
Hence, this petition.
The Issue
Petitioners raise the sole issue of whether the RTC erred in dismissing
their petition for relief from judgment.
The Ruling of the Court
Petitioners maintain that the RTC erred in dismissing their petition for
relief. Petitioners argue that they have no other recourse but to file the
petition for relief with the RTC. Petitioners allege the need to reconcile
the apparent inconsistencies with respect to the filing of a petition for
relief from judgment under Rule 38 of the Rules of Court and the
prohibition under the Revised Rule on Summary Procedure. Petitioners
suggest that petitions for relief from judgment in forcible entry and
unlawful detainer cases can be filed with the RTC provided that
petitioners have complied with all the legal requirements to entitle him
to avail of such legal remedy.
Section 13(4) of Rule 70 of the Rules of Court provides:
SEC. 13. Prohibited pleadings and motions. - The following petitions,
motions, or pleadings shall not be allowed: x x x
4. Petition for relief from judgment; x x x
Section 19(d) of the Revised Rule on Summary Procedure also provides:
SEC. 19. Prohibited pleadings and motions. - The following pleadings,
motions, or petitions shall not be allowed in the cases covered by this
Rule: x x x
(d) Petition for relief from judgment; x x x
Clearly, a petition for relief from judgment in forcible entry and unlawful
detainer cases, as in the present case, is a prohibited pleading. The
reason for this is to achieve an expeditious and inexpensive
determination of the cases subject of summary procedure.16
Moreover, Section 1, Rule 38 of the Rules of Court provides:
SEC. 1. Petition for relief from judgment, order or other proceedings. -
When a judgment or final order is entered, or any other proceeding is
thereafter taken against a party in any court through fraud, accident,
mistake or excusable negligence, he may file a petition in such court
and in the same case praying that the judgment, order or
proceeding be set aside. (Emphasis supplied)
A petition for relief from judgment, if allowed by the Rules and not a
prohibited pleading, should be filed with and resolved by the court in the
same case from which the petition arose.171avvphi1
In the present case, petitioners cannot file the petition for relief with the
MTC because it is a prohibited pleading in an unlawful detainer case.
Petitioners cannot also file the petition for relief with the RTC because
the RTC has no jurisdiction to entertain petitions for relief from
judgments of the MTC. Therefore, the RTC did not err in dismissing the
petition for relief from judgment of the MTC.
The remedy of petitioners in such a situation is to file a petition for
certiorari with the RTC under Rule 65 18 of the Rules of Court on the
ground of lack of jurisdiction of the MTC over the person of petitioners
in view of the absence of summons to petitioners. Here, we shall treat
petitioners’ petition for relief from judgment as a petition for certiorari
before the RTC.
An action for unlawful detainer or forcible entry is a real action and in
personam because the plaintiff seeks to enforce a personal obligation
on the defendant for the latter to vacate the property subject of the
action, restore physical possession thereof to the plaintiff, and pay
actual damages by way of reasonable compensation for his use or
occupation of the property. 19 In an action in personam, jurisdiction over
the person of the defendant is necessary for the court to validly try and
decide the case.20 Jurisdiction over the defendant is acquired either
upon a valid service of summons or the defendant’s voluntary
appearance in court.21 If the defendant does not voluntarily appear in
court, jurisdiction can be acquired by personal or substituted service of
summons as laid out under Sections 6 and 7 of Rule 14 of the Rules of
Court, which state:
Sec. 6. Service in person on defendant. - Whenever practicable, the
summons shall be served by handing a copy thereof to the defendant in
person, or, if he refuses to receive and sign for it, by tendering it to him.
Sec. 7. Substituted Service. - If, for justifiable causes, the defendant
cannot be served within a reasonable time as provided in the preceding
section, service may be effected (a) by leaving copies of the summons
at the defendant’s residence with some person of suitable age and
discretion then residing therein, or (b) by leaving the copies at
defendant’s office or regular place of business with some competent
person in charge thereof.
Any judgment of the court which has no jurisdiction over the person of
the defendant is null and void.22
The 23 August 2004 Decision of the MTC states:
Record shows that there were three attempts to serve the summons to
the defendants. The first was on January 14, 2004 where the same was
unserved. The second was on February 3, 2004 where the same was
served to one Gary Akob and the last was on February 18, 2004 where
the return was duly served but refused to sign.23
A closer look at the records of the case also reveals that the first
indorsement dated 14 January 2004 carried the annotation that it was
"unsatisfied/given address cannot be located."24 The second
indorsement dated 3 February 2004 stated that the summons was "duly
served as evidenced by his signature of one Gary
Acob25 (relative)."26While the last indorsement dated 18 February 2004
carried the annotation that it was "duly served but refused to sign"
without specifying to whom it was served.27
Service of summons upon the defendant shall be by personal service
first and only when the defendant cannot be promptly served in person
will substituted service be availed of.28 In Samartino v. Raon,29 we said:
We have long held that the impossibility of personal service justifying
availment of substituted service should be explained in the proof of
service; why efforts exerted towards personal service failed. The
pertinent facts and circumstances attendant to the service of summons
must be stated in the proof of service or Officer’s Return; otherwise, the
substituted service cannot be upheld.30
In this case, the indorsements failed to state that prompt and personal
service on petitioners was rendered impossible. It failed to show the
reason why personal service could not be made. It was also not shown
that efforts were made to find petitioners personally and that said
efforts failed. These requirements are indispensable because
substituted service is in derogation of the usual method of service. It is
an extraordinary method since it seeks to bind the defendant to the
consequences of a suit even though notice of such action is served not
upon him but upon another whom the law could only presume would
notify him of the pending proceedings. Failure to faithfully, strictly, and
fully comply with the statutory requirements of substituted service
renders such service ineffective.31
Likewise, nowhere in the return of summons or in the records of the
case was it shown that Gary Acob, the person on whom substituted
service of summons was effected, was a person of suitable age and
discretion residing in petitioners’ residence. In Manotoc v. Court of
Appeals,32 we said:
If the substituted service will be effected at defendant’s house or
residence, it should be left with a person of "suitable age and discretion
then residing therein." A person of suitable age and discretion is one
who has attained the age of full legal capacity (18 years old) and is
considered to have enough discernment to understand the importance
of a summons. "Discretion" is defined as "the ability to make decisions
which represent a responsible choice and for which an understanding of
what is lawful, right or wise may be presupposed." Thus, to be of
sufficient discretion, such person must know how to read and
understand English to comprehend the import of the summons, and fully
realize the need to deliver the summons and complaint to the defendant
at the earliest possible time for the person to take appropriate action.
Thus, the person must have the "relation of confidence" to the
defendant, ensuring that the latter would receive or at least be notified
of the receipt of the summons. The sheriff must therefore determine
if the person found in the alleged dwelling or residence of
defendant is of legal age, what the recipient’s relationship with the
defendant is, and whether said person comprehends the
significance of the receipt of the summons and his duty to
immediately deliver it to the defendant or at least notify the
defendant of said receipt of summons. These matters must be
clearly and specifically described in the Return of
Summons.33 (Emphasis supplied)
In this case, the process server failed to specify Gary Acob’s age, his
relationship to petitioners and to ascertain whether he comprehends
the significance of the receipt of the summons and his duty to deliver it
to petitioners or at least notify them of said receipt of summons.
In sum, petitioners were not validly served with summons and the
complaint in Civil Case No. 3719 by substituted service. Hence, the MTC
failed to acquire jurisdiction over the person of the petitioners and,
thus, the MTC’s 23 August 2004 Decision is void. 34 Since the MTC’s 23
August 2004 Decision is void, it also never became final. 35
WHEREFORE, we GRANT the petition. We SET ASIDE the 3 January 2005
and 16 June 2006 Orders of the Regional Trial Court, Branch 25, Biñan,
Laguna. The 23 August 2004 Decision and the 1 October 2004 Writ of
Execution, as well as all acts and deeds incidental to the judgment in
Civil Case No. 3719, are declared VOID. We REMAND the case to the
Municipal Trial Court, Biñan, Laguna, for consolidation with the unlawful
detainer case in Civil Case No. 3719 and for the said Municipal Trial Court
to continue proceedings thereon by affording petitioners Abubakar A.
Afdal and Fatima A. Afdal a chance to file their answer and present
evidence in their defense, and thereafter to hear and decide the case.
G.R. No. 183035 : January 9, 2013
OPTIMA REALTY CORPORATION, Petitioner, v. HERTZ PHIL. EXCLUSIVE
CARS, INC., Respondent.
DECISION
SERENO, C.J.:
Before us is a Rule 45 Petition assailing the Decision 1 and Resolution2 of
the Court of Appeals (CA) in CA-GR SP No. 99890, which reversed the
Decision3 and Resolution4 of the Regional Trial Court (RTC), Branch 13 7,
Makati City in Civil Case No. 06-672. The RTC had affirmed in toto the 22
May 2006 Decision5 of the Metropolitan Trial Court (MeTC), Branch 64,
Makati City in Civil Case No. 90842 evicting respondent Hertz Phil.
Exclusive Cars, Inc. (Hertz) and ordering it to pay back rentals and other
arrearages to petitioner Optima Realty Corporation (Optima).
Optima is engaged in the business of leasing and renting out commercial
spaces and buildings to its tenants. On 12 December 2002, it entered
into a Contract of Lease with respondent over a 131-square-meter office
unit and a parking slot in the Optima Building for a period of three years
commencing on 1 March 2003 and ending on 28 February 2006. 6 On 9
March 2004, the parties amended their lease agreement by shortening
the lease period to two years and five months, commencing on 1 October
2003 and ending on 28 February 2006. 7?r?l1
Renovations in the Optima Building commenced in January and ended in
November 2005.8 As a result, Hertz alleged that it experienced a 50%
drop in monthly sales and a significant decrease in its personnels
productivity. It then requested a 50% discount on its rent for the
months of May, June, July and August 2005.9?r?l1
On 8 December 2005, Optima granted the request of Hertz. 10 However,
the latter still failed to pay its rentals for the months of August to
December of 2005 and January to February 2006,11 or a total of seven
months. In addition, Hertz likewise failed to pay its utility bills for the
months of November and December of 2005 and January and February
of 2006,12 or a total of four months.
On 8 December 2005, Optima wrote another letter to Hertz,13 reminding
the latter that the Contract of Lease could be renewed only by a new
negotiation between the parties and upon written notice by the lessee to
the lessor at least 90 days prior to the termination of the lease
period.14 As no letter was received from Hertz regarding its intention to
seek negotiation and extension of the lease contract within the 90-day
period, Optima informed it that the lease would expire on 28 February
2006 and would not be renewed.15?r?l1
On 21 December 2005, Hertz wrote a letter belatedly advising Optima of
the formers desire to negotiate and extend the lease. 16 However, as the
Contract of Lease provided that the notice to negotiate its renewal must
be given by the lessee at least 90 days prior to the expiration of the
contract, petitioner no longer entertained respondents notice.
On 30 January 2006, Hertz filed a Complaint for Specific Performance,
Injunction and Damages and/or Sum of Money with prayer for the
issuance of a Temporary Restraining Order (TRO) and Writ of
Preliminary Injunction (Complaint for Specific Performance) against
Optima. In that Complaint, Hertz prayed for the issuance of a TRO to
enjoin petitioner from committing acts that would tend to disrupt
respondents peaceful use and possession of the leased premises; for a
Writ of Preliminary Injunction ordering petitioner to reconnect its
utilities; for petitioner to be ordered to renegotiate a renewal of the
Contract of Lease; and for actual, moral and exemplary damages, as well
as attorneys fees and costs.
On 1 March 2006, Optima, through counsel, wrote Hertz a letter
requiring the latter to surrender and vacate the leased premises in view
of the expiration of the Contract of Lease on 28 February 2006.17 It
likewise demanded payment of the sum of ?420,967.28 in rental
arrearages, unpaid utility bills and other charges. 18 Hertz, however,
refused to vacate the leased premises. 19 As a result, Optima was
constrained to file before the MeTC a Complaint for Unlawful Detainer
and Damages with Prayer for the Issuance of a TRO and/or Preliminary
Mandatory Injunction (Unlawful Detainer Complaint) against Hertz.20?r?l1
On 14 March 2006, Summons for the Unlawful Detainer Complaint was
served on Henry Bobiles, quality control supervisor of Hertz, who
complied with the telephone instruction of manager Rudy Tirador to
receive the Summons.21?r?l1
On 28 March 2006, or 14 days after service of the Summons, Hertz filed
a Motion for Leave of Court to file Answer with Counterclaim and to
Admit Answer with Counterclaim (Motion for Leave to File Answer).22 In
that Motion, Hertz stated that, "in spite of the defective service of
summons, it opted to file the instant Answer with Counterclaim with
Leave of Court."23 In the same Motion, it likewise prayed that, in the
interest of substantial justice, the Answer with Counterclaim attached to
the Motion for Leave to File Answer should be admitted regardless of its
belated filing, since the service of summons was defective.24?r?l1
On 22 May 2006, the MeTC rendered a Decision,25 ruling that petitioner
Optima had established its right to evict Hertz from the subject
premises due to nonpayment of rentals and the expiration of the period
of lease.26 The dispositive portion of the Decision reads:cralawlibrary
WHEREFORE, premises considered, the Court hereby renders judgment
for the plaintiff and against the defendant, ordering:cralawlibrary
1. the defendant corporation and all persons claiming rights from it to
immediately vacate the leased premises and to surrender possession
thereof to the plaintiff;
2. the defendant corporation to pay the plaintiff the amount of Four
Hundred Twenty Thousand Nine Hundred Sixty Seven Pesos and 28/100
(P420,967.28) representing its rentals arrearages and utility charges
for the period of August 2005 to February 2006, deducting therefrom
defendants security deposit;
3. the defendant corporation to pay the amount of Fifty Four Thousand
Two Hundred Pesos (P54,200.00) as a reasonable monthly
compensation for the use and occupancy of the premises starting from
March 2006 until possession thereof is restored to the plaintiff; and
4. the defendant corporation to pay the amount of Thirty Thousand
Pesos (P30,000.00) as and for attorneys fees; and
5. the cost of suit. ???ñr?bl?š ??r†??l l?? l?br?rÿ
SO ORDERED.27?r?l1
Hertz appealed the MeTCs Decision to the RTC. 28?r?l1
Finding no compelling reason to warrant the reversal of the MeTCs
Decision, the RTC affirmed it by dismissing the appeal in a
Decision29 dated 16 March 2007.
On 18 June 2007, the RTC denied respondents Motion for
Reconsideration of its assailed Decision.30?r?l1
Hertz thereafter filed a verified Rule 42 Petition for Review on Certiorari
with the CA.31?r?l1
On appeal, the CA ruled that, due to the improper service of summons,
the MeTC failed to acquire jurisdiction over the person of respondent
Hertz. The appellate court thereafter reversed the RTC and remanded
the case to the MeTC to ensure the proper service of summons.
Accordingly, the CA issued its 17 March 2008 Decision, the fallo of which
reads:cralawlibrary
WHEREFORE, premises considered, the May 22, 2006 Decision of the
Metropolitan Trial Court of Makati City, Branch 64, in Civil Case No.
90842, and both the March 16, 2007 Decision, as well as the June 18,
2007 Resolution, of the Regional Trial Court of Makati City, Branch 137, in
Civil Case No. 06-672, are hereby REVERSED, ANNULLED and SET ASIDE
due to lack of jurisdiction over the person of the defendant corporation
HERTZ. This case is hereby REMANDED to the Metropolitan Trial Court of
Makati City, Branch 64, in Civil Case No. 90842, which is DIRECTED to
ensure that its Sheriff properly serve summons to only those persons
listed in Sec. 11, Rule 14 of the Rules of Civil Procedure in order that the
MTC could acquire jurisdiction over the person of the defendant
corporation HERTZ.
SO ORDERED.32 ?r?l1
Petitioners Motion for Reconsideration of the CAs Decision was denied in
a Resolution dated 20 May 2008.33?r?l1
Aggrieved by the ruling of the appellate court, petitioner then filed the
instant Rule 45 Petition for Review on Certiorari with this Court. 34?r?l1
THE ISSUES
As culled from the records, the following issues are submitted for
resolution by this Court:cralawlibrary
1. Whether the MeTC properly acquired jurisdiction over the person of
respondent Hertz;
2. Whether the unlawful detainer case is barred by litis pendentia; and
3. Whether the ejectment of Hertz and the award of damages, attorneys
fees and costs are proper. ???ñr?bl?š ??r†??l l?? l?br?rÿ
THE COURTS RULING
We grant the Petition and reverse the assailed Decision and Resolution
of the appellate court.
I
The MeTC acquired jurisdiction over the person of respondent Hertz.
In civil cases, jurisdiction over the person of the defendant may be
acquired either by service of summons or by the defendants voluntary
appearance in court and submission to its authority.35?r?l1
In this case, the MeTC acquired jurisdiction over the person of
respondent Hertz by reason of the latters voluntary appearance in
court.
In Philippine Commercial International Bank v. Spouses Dy,36 we had
occasion to state:cralawlibrary
Preliminarily, jurisdiction over the defendant in a civil case is acquired
either by the coercive power of legal processes exerted over his
person, or his voluntary appearance in court. As a general proposition,
one who seeks an affirmative relief is deemed to have submitted to the
jurisdiction of the court. It is by reason of this rule that we have had
occasion to declare that the filing of motions to admit answer, for
additional time to file answer, for reconsideration of a default judgment,
and to lift order of default with motion for reconsideration, is
considered voluntary submission to the court's jurisdiction. This,
however, is tempered by the concept of conditional appearance, such
that a party who makes a special appearance to challenge, among
others, the court's jurisdiction over his person cannot be considered to
have submitted to its authority.
Prescinding from the foregoing, it is thus clear that:cralawlibrary
(1) Special appearance operates as an exception to the general rule on
voluntary appearance;
(2) Accordingly, objections to the jurisdiction of the court over the
person of the defendant must be explicitly made, i.e., set forth in an
unequivocal manner; and
(3) Failure to do so constitutes voluntary submission to the jurisdiction
of the court, especially in instances where a pleading or motion seeking
affirmative relief is filed and submitted to the court for resolution.
(Emphases supplied) ???ñr?bl?š ??r†??l l?? l?br?rÿ
In this case, the records show that the following statement appeared in
respondents Motion for Leave to File Answer:cralawlibrary
In spite of the defective service of summons, the defendant opted to file
the instant Answer with Counterclaim with Leave of Court, upon
inquiring from the office of the clerk of court of this Honorable Court
and due to its notice of hearing on March 29, 2005 application for
TRO/Preliminary Mandatory Injunction was received on March 26, 2006.
(Emphasis supplied)37?r?l1
Furthermore, the Answer with Counterclaim filed by Hertz never raised
the defense of improper service of summons. The defenses that it
pleaded were limited to litis pendentia, pari delicto, performance of its
obligations and lack of cause of action.38 Finally, it even asserted its own
counterclaim against Optima. 39?r?l1
Measured against the standards in Philippine Commercial International
Bank, these actions lead to no other conclusion than that Hertz
voluntarily appeared before the court a quo. We therefore rule that, by
virtue of the voluntary appearance of respondent Hertz before the
MeTC, the trial court acquired jurisdiction over respondents.
II
The instant ejectment case is not barred by litis pendentia. Hertz
contends that the instant case is barred by litis pendentia because of
the pendency of its Complaint for Specific Performance against Optima
before the RTC.
We disagree.
Litis pendentia requires the concurrence of the following
elements:cralawlibrary
(1) Identity of parties, or at least their representation of the same
interests in both actions;
(2) Identity of rights asserted and reliefs prayed for, the relief being
founded on the same facts; and
(3) Identity with respect to the two preceding particulars in the two
cases, such that any judgment that may be rendered in the pending
case, regardless of which party is successful, would amount to res
judicata in the other case.40?r?l1 ???ñr?bl?š ??r†??l l?? l?br?rÿ
Here, while there is identity of parties in both cases, we find that the
rights asserted and the reliefs prayed for under the Complaint for
Specific Performance and those under the present Unlawful Detainer
Complaint are different. As aptly found by the trial court:cralawlibrary
The Complaint for Specific Performance] seeks to compel plaintiff-
appellee Optima to: (1) renegotiate the contract of lease; (2) reconnect
the utilities at the leased premises; and (3) pay damages. On the other
hand, the unlawful detainer case sought the ejectment of defendant-
appellant Hertz from the leased premises and to collect arrears in
rentals and utility bills. 41?r?l1
As the rights asserted and the reliefs sought in the two cases are
different, we find that the pendency of the Complaint for Specific
Performance is not a bar to the institution of the present case for
ejectment.
III
The eviction of respondent and the award of damages,
attorneys fees and costs were proper.
We find that the RTCs ruling upholding the ejectment of Hertz from the
building premises was proper. First, respondent failed to pay rental
arrearages and utility bills to Optima; and, second, the Contract of Lease
expired without any request from Hertz for a renegotiation thereof at
least 90 days prior to its expiration.
On the first ground, the records show that Hertz failed to pay rental
arrearages and utility bills to Optima. Failure to pay timely rentals and
utility charges is an event of default under the Contract of
Lease,42entitling the lessor to terminate the lease.
Moreover, the failure of Hertz to pay timely rentals and utility charges
entitles the lessor to judicially eject it under the provisions of the Civil
Code.43?r?l1
On the second ground, the records likewise show that the lease had
already expired on 28 February 2006 because of Hertzs failure to
request a renegotiation at least 90 days prior to the termination of the
lease period.
The pertinent provision of the Contract of Lease reads:cralawlibrary
x x x. The lease can be renewed only by a new negotiation between the
parties upon written notice by the LESSEE to be given to the LESSOR at
least 90 days prior to termination of the above lease period. 44?r?l1
As the lease was set to expire on 28 February 2006, Hertz had until 30
November 2005 within which to express its interest in negotiating an
extension of the lease with Optima. However, Hertz failed to
communicate its intention to negotiate for an extension of the lease
within the time agreed upon by the parties. Thus, by its own provisions,
the Contract of Lease expired on 28 February 2006.
Under the Civil Code, the expiry of the period agreed upon by the parties
is likewise a ground for judicial ejectment. 45?r?l1
As to the award of monthly compensation, we find that Hertz should pay
adequate compensation to Optima, since the former continued to occupy
the leased premises even after the expiration of the lease contract. As
the lease price during the effectivity of the lease contract was P54,200
per month, we find it to be a reasonable award.
Finally, we uphold the award of attorney's fees in the amount of P30,000
and judicial costs in the light of Hertz's unjustifiable and unlawful
retention of the leased premises, thus forcing Optima to file the instant
case in order to protect its rights and interest.
From the foregoing, we find that the MeTC committed no reversible
error in its 22 May 2006 Decision, and that the RTC committed no
reversible error either in affirming the MeTC's Decision.
WHEREFORE, in view of the foregoing, the instant Rule 45 Petition for
Review is GRANTED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 99890 are hereby REVERSED and SET ASIDE.
The Decision of the Regional Trial Court, Branch 13 7, Makati City in Civil
Case No. 06-672 affirming in toto the Decision of the Metropolitan Trial
Court, Branch 64, Makati City in Civil Case No. 90842 is hereby
REINSTATED and AFFIRMED.
SO ORDERED.
DECISION BRION, J.: Before us is the petition for review on certiorari, 1
filed by Pablo Pua under Rule 45 of the Rules of Court, assailing the
decision2 dated February 23, 2006 and the resolution3 dated June 23,
2006 of the Court of Appeals (CA) in CA-G.R. CV No. 84331. TheCA
affirmed the order4 dated January Designated as Additional Member in
lieu of Associate Justice Estela M. Perlas-Bernabe per Special Order No.
13 77 dated November 22, 2012. •• Designated as Additional Member in
lieu of Associate Justice Mariano C. del Castillo per Raft1e dated
November 26,2012. 1 Rollo, pp. 9-28. Id. at 30-43. Id. at 45-46. Records,
pp. 189-191. Decision G.R. No. 173336 2 3, 2005 of the Regional Trial
Court (RTC), Branch 19, Manila, in Civil Case No. 00-99353 which
dismissed the case for failure to prosecute. The Antecedent Facts Pua is
engaged in the business of wholesale rice trading. Among his clients was
respondent Jennelita Ang, allegedly operating under the business and
trade name of JD Grains Center. In October 2000, Pua delivered to Ang
truckloads of rice worth P766,800.00. Ang paid Pua through two (2)
postdated checks dated November 4, 2000 and November 6, 2000.
When the checks fell due, Pua tried to encash them, but they were
dishonored because they were drawn from a closed account. Pua
immediately went to Ang’s residence to complain. Unfortunately, he was
only able to talk to Ang’s mother and co-respondent, Lourdes Deyto, who
told him that Ang had been missing. Unable to locate Ang, Pua demanded
payment from Deyto, but she refused to pay. On November 24, 2000,
Pua filed a complaint5 with the RTC for collection of sum of money with
preliminary attachment against Ang and Deyto, as co-owners of JD
Grains Center. The complaint alleged that the respondents were guilty of
fraud in contracting the obligation, as they persuaded Pua to conduct
business with them and presented documents regarding their financial
capacity to fund the postdated checks. On November 28, 2000, the RTC
issued an order for the issuance of a writ of preliminary attachment
upon an attachment bond of P766,800.00. Since Ang could not be found
and had no available properties to satisfy the lien, the properties of
Deyto were levied upon. Decision G.R. No. 173336 3 Summons was duly
served on Deyto, but not on Ang who had absconded. On April 16, 2001,
Deyto submitted her answer with special and affirmative defenses.6 On
May 8, 2001, Deyto filed a “Motion to Set Hearing of Defendant’s Special
and Affirmative Defenses,” which was in the nature of a motion to
dismiss.7 In an order dated July 12, 2001, the RTC denied Deyto’s motion
to dismiss, stating that: The allegations raised by defendant Lourdes
Deyto as special and affirmative defenses are largely evidentiary in
nature and therefore can be threshed out in a trial on the merit.
Consequently, the prayer to dismiss the complaint upon these grounds,
is hereby Denied.8 After Pua and Deyto filed their respective pre-trial
briefs, the case was set for pre-trial conference on November 13, 2001.
On the scheduled date, the RTC ordered the resetting of the pre-trial
conference to January 22, 2002, upon the parties’ agreement.9 The RTC,
upon motion by Pua, also ordered the sheriff to submit the return of
summons for Ang. The summons by publication to Ang Since service of
summons could not be effected on Ang, Pua moved for leave of court to
serve summons by publication on Ang on January 8, 2002.10 The RTC
granted the motion in an order dated January 11, 2002.11 By March 2002,
Pua’s counsel manifested that the summons for Ang remained
unpublished; the RTC accordingly cancelled the pre-trial scheduled on
March 5, 2002.12 5 Rollo, pp. 258-267. 6 Id. at 238. 7 Ibid. 8 Ibid. 9
Records, p. 94. 10 Id. at 97-98. Decision G.R. No. 173336 4 On May 17,
2002, Pua again filed a manifestation that as early as April 17, 2002, he
had already paid P9,500.00 to Manila Standard for the publication of the
summons on Ang, but it failed to do so.13 This prompted the RTC to issue
an order directing Manila Standard to explain why the summons was not
published despite payment of the corresponding fees.14 On May 30,
2002, Manila Standard explained15 to the trial court that when Pua paid
the publication fee, he issued a specific order to hold the publication
until he ordered otherwise. Eventually, the summons for Ang was
published in the May 31, 2002 edition of the Manila Standard. On January
24, 2003, more than (6) months after the publication of summons for
Ang, the case was archived for inactivity. 16 Since neither party filed any
further motions, the RTC dismissed the case for the plaintiff’s lack of
interest to prosecute on October 1, 2004. 17 On November 3, 2004, Pua
submitted a motion for reconsideration and a motion to declare Ang in
default. The RTC, however, denied the motion in an order dated January
3, 2005; it added that the dismissal of the main case amounts to the
dismissal of the motion to declare Ang in default. Pua appealed the case
to the CA. He argued that the reason for the delay in prosecuting the
case was the untimely death of his counsel – Atty. Kamid Abdul. He
added that he had shown interest in the case by securing the properties
of Deyto; paying the annual premium of the attachment bond 11 Id. at 101.
12 Id. at 113. 13 Id. at 116-118. 14 Id. at 120. 15 Letter addressed to Hon.
Zenaida R. Daguna, Regional Trial Court, Branch 19, Manila; rollo, p. 151. 16
Records, p. 129. 17 Id. at 133. Decision G.R. No. 173336 5 for the years
2002, 2003, and 2004; and causing the publication of summons on Ang.
On February 23, 2006, the CA denied Pua’s appeal. While the CA
recognized some of Pua’s actions in prosecuting the case, it still found
that the totality of the surrounding circumstances of the case pointed to
gross and immoderate delay in the prosecution of the complaint.18 Pua
moved for reconsideration, which the CA denied in its resolution dated
June 23, 2006. The Petition Pua now questions the CA rulings before us.
He insists that it was the untimely demise of his counsel that created
the hiatus in the prosecution of the case. He adds that he has
consistently paid the annual premiums of the attachment bond and has
also served summons by publication on Ang. He also questions the delay
in the filing of Deyto’s answer. Pua pleads that the case be decided on
the merits and not on mere technicalities. He contends that he has
adequately shown his interest in pursuing his meritorious claim against
the respondents before the RTC; and the RTC and the CA committed
patent error in dismissing his case for his alleged lack of interest. For
her part, Deyto reiterates that the numerous delays involved in this
case warrant its dismissal for failure to prosecute. First, the motion to
serve summons by publication on Ang was filed about four hundred
(400) days after the filing of the complaint; second, the delay of
seventy-seven (77) days before the case was set for pre-trial; and third,
the delay of almost four (4) years in the prosecution of the case.
Decision G.R. No. 173336 6 The Issue The issue centers on whether the
plaintiff incurred unreasonable delay in prosecuting the present case.
The Court’s Ruling We deny the petition for lack of merit. We agree with
the finding that Pua committed delay in prosecuting his case against the
respondents. We clarify, however, that Pua’s delay is limited to his
failure to move the case forward after the summons for Ang had been
published in the Manila Standard; he could not be faulted for the delay in
the service of summons for Ang. A 13-month delay occurred between the
filing of the complaint and the filing of the motion to serve summons by
publication on Ang. This delay, however, is attributable to the failure of
the sheriff to immediately file a return of service of summons. The
complaint was filed on November 24, 2000, but the return of service of
summons was filed only on January 3, 2002, after the RTC ordered its
submission and upon Pua’s motion.19 Under Section 14, Rule 14 of the
Rules of Court, service of summons may be effected on a defendant by
publication, with leave of court, when his whereabouts are unknown and
cannot be ascertained by diligent inquiry. The Rules of Court provides: 18
Rollo, pp. 36-37. 19 Records, p. 94. Decision G.R. No. 173336 7 SEC. 14.
Service upon defendant whose identity or whereabouts are unknown. –
In any action where the defendant is designated as an unknown owner,
or the like, or whenever his whereabouts are unknown and cannot be
ascertained by diligent inquiry, service may, by leave of court, be
effected upon him by publication in a newspaper of general circulation
and in such places and for such time as the court may order. [emphases
ours] In Santos, Jr. v. PNOC Exploration Corporation, 20 the Court
authorized resort to service of summons by publication even in actions
in personam, considering that the provision itself allow this mode in any
action, i.e., whether the action is in personam, in rem, or quasi in rem. have the effect of an adjudication upon the merits, unless otherwise
The ruling, notwithstanding, there must be prior resort to service in declared by the court. [emphases ours; italics supplied] Once a case is
person on the defendant21 and substituted service,22 and proof that dismissed for failure to prosecute, the dismissal has the effect of an
service by these modes were ineffective before service by publication23 adjudication on the merits and is understood to be with prejudice to the
may be allowed for defendants whose whereabouts are unknown, filing of another action unless otherwise provided in the order of
considering that Section 14, Rule 14 of the Rules of Court requires a dismissal.32 In this case, Pua failed to take any action on the case after
diligent inquiry of the defendant’s whereabouts.24 Until the summons summons was served by publication on Ang. It took him more than two
has been served on Ang, the case cannot proceed since Ang is an years to file a motion to declare Ang in default and only after the RTC
indispensable party to the case; Pua alleged in his complaint that the has already dismissed his case for failure to prosecute. That Pua
respondents are co-owners of JD Grains Center.25 An indispensable renewed the attachment bond is not an indication of his intention to
party is one who must be included in an action before it may properly go prosecute. The payment of an attachment bond is not the appropriate
forward. A court must acquire jurisdiction over the person of procedure to settle a legal dispute in court; it could not be considered
indispensable parties before it can validly pronounce judgments as a substitute for the submission of necessary pleadings or motions
personal to the parties. The absence of an indispensable party renders that would lead to prompt action on the case. WHEREFORE, the foregoing
all subsequent actions of the court null and void for want of authority to premise considered, this present petition is DENIED. Accordingly, the
act, not only as to the absent parties but even as to those present.26 20 decision and the resolution of the Court of Appeals in CA-G.R. CV No.
G.R. No. 170943, September 23, 2008, 566 SCRA 272. 21 RULES OF 84331 are hereby AFFIRMED. 32 Insular Veneer, Inc. v. Judge Plan, 165
COURT, Rule 14, Section 6. 22 Id., Section 7. 23 Id., Section 14. 24 Mangila Phil. 1, 11-12 (1976); Malvar v. Pallingayan, No. L- 24736, September 27,
v. Court of Appeals, 435 Phil. 870, 882 (2002). 25 Rollo, p. 259. Decision 1966, 18 SCRA 121, 124; Rivera v. Luciano, No. L-20844, August 14, 1965, 14
G.R. No. 173336 8 After the summons for Ang was published on May 31, SCRA 947, 948; and Guanzon, et al. v. Mapa, 117 Phil. 471, 472-473 (1963).
2002 and the Affidavit of Service was issued by Manila Standard’s Decision 10 G.R. No. 173336 attachment bond is not an indication of his
Advertising Manager on June 3, 2002, no further action was taken on intention to prosecute. The payment of an attachment bond is not the
the case by Pua. Even after the RTC issued its order dated January 24, appropriate procedure to settle a legal dispute in court; it could not be
2003 to archive the case, Pua made no move to have the case reopened. considered as a substitute for the submission of necessary pleadings or
More than a year after the case was sent to the archives (October 1, motions that would lead to prompt action on the case. WHEREFORE, the
2004), the RTC decided to dismiss the case for Pua’s lack of interest to foregoing premtse considered, this present petition is DENIED.
prosecute the case. It was only after Pua received the order of Accordingly, the decision and the resolution of the Court of Appeals in
dismissal that he filed his motion for reconsideration and motion to CA-G.R. CV No. 84331 are hereby AFFIRMED.
declare Ang in default.27 We give scant consideration to Pua’s claim that
the untimely demise of his counsel caused the delay in prosecuting the
case. Pua had employed the services of a law firm;28 hence, the death
of one partner does not excuse such delay; the law firm had other
lawyers who would take up the slack created by the death of a partner.
The more relevant rule is that a client is bound by the action of his
counsel in the conduct of his case; he cannot complain that the result of
the litigation could have been different had the counsel proceeded
differently.29 Moreover, Pua had also secured the services of another
law firm even before the death of Atty. Kamid Abdul.30 In fact, this
second law firm signed the formal appearance in court on October 15,
2001.31 To our mind, with two (2) law firms collaborating on the case, no
reason exists for delay if only Pua had been more vigilant. 26 Regner v.
Logarta, G.R. No. 168747, October 19, 2007, 537 SCRA 277, 289. 27 Dated
November 3, 2004; records, pp. 137-141. 28 Abdul & Maningas Law
Offices; rollo, p. 201. 29 United States v. Umali, 15 Phil. 33, 35 (1910). 30
Cruz Durian Alday & Cruz Matters; records, p. 74. 31 Ibid. Decision G.R.
No. 173336 9 Section 3, Rule 17 of the Revised Rules of Court authorizes
the dismissal of a case when the plaintiff fails to prosecute his action
for an unreasonable length of time: SEC. 3. Dismissal due to fault of
plaintiff. — If, for no justifiable cause, the plaintiff fails to appear on the
date of the presentation of his evidence in chief on the complaint, or to
prosecute his action for an unreasonable length of time, or to comply
with these Rules or any order of the court, the complaint may be
dismissed upon motion of the defendant or upon the court’s own motion,
without prejudice to the right of the defendant to prosecute his
counterclaim in the same or in a separate action. This dismissal shall