G.R. No.

112019 January 4, 1995

LEOUEL SANTOS, petitioner,

vs.
THE HONORABLE COURT OF APPEALS AND JULIA ROSARIO BEDIA-SANTOS, respondents.

VITUG, J.:

Concededly a highly, if not indeed the most likely, controversial provision introduced by the Family Code is Article 36 (as amended by E.O. No. 227 dated 17 July
1987), which declares:

Art. 36. A marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated to comply with the
essential marital obligations of marriage, shall likewise be void even if such incapacity becomes manifest only after its solemnization.

The present petition for review on certiorari, at the instance of Leouel Santos ("Leouel"), brings into fore the above provision which is now invoked by
him. Undaunted by the decisions of the court a quo1 and the Court of Appeal,2 Leouel persists in beseeching its application in his attempt to have his
marriage with herein private respondent, Julia Rosario Bedia-Santos ("Julia"), declared a nullity.

It was in Iloilo City where Leouel, who then held the rank of First Lieutenant in the Philippine Army, first met Julia. The meeting later proved to be an eventful day
for Leouel and Julia. On 20 September 1986, the two exchanged vows before Municipal Trial Court Judge Cornelio G. Lazaro of Iloilo City, followed, shortly
thereafter, by a church wedding. Leouel and Julia lived with the latter's parents at the J. Bedia Compound, La Paz, Iloilo City. On 18 July 1987, Julia gave birth to
a baby boy, and he was christened Leouel Santos, Jr. The ecstasy, however, did not last long. It was bound to happen, Leouel averred, because of the frequent
interference by Julia's parents into the young spouses family affairs. Occasionally, the couple would also start a "quarrel" over a number of other things, like when
and where the couple should start living independently from Julia's parents or whenever Julia would express resentment on Leouel's spending a few days with
his own parents.

On 18 May 1988, Julia finally left for the United Sates of America to work as a nurse despite Leouel's pleas to so dissuade her. Seven months after her
departure, or on 01 January 1989, Julia called up Leouel for the first time by long distance telephone. She promised to return home upon the expiration of her
contract in July 1989. She never did. When Leouel got a chance to visit the United States, where he underwent a training program under the auspices of the
Armed Forces of the Philippines from 01 April up to 25 August 1990, he desperately tried to locate, or to somehow get in touch with, Julia but all his efforts were
of no avail.

Having failed to get Julia to somehow come home, Leouel filed with the regional trial Court of Negros Oriental, Branch 30, a complaint for "Voiding of marriage
Under Article 36 of the Family Code" (docketed, Civil Case No. 9814). Summons was served by publication in a newspaper of general circulation in Negros
Oriental.

On 31 May 1991, respondent Julia, in her answer (through counsel), opposed the complaint and denied its allegations, claiming, in main, that it was the petitioner
who had, in fact, been irresponsible and incompetent.

A possible collusion between the parties to obtain a decree of nullity of their marriage was ruled out by the Office of the Provincial Prosecutor (in its report to the
court).

On 25 October 1991, after pre-trial conferences had repeatedly been set, albeit unsuccessfully, by the court, Julia ultimately filed a manifestation, stating that she
would neither appear nor submit evidence.

On 06 November 1991, the court a quo finally dismissed the complaint for lack of merit.3

Leouel appealed to the Court of Appeal. The latter affirmed the decision of the trial court.4

The petition should be denied not only because of its non-compliance with Circular 28-91, which requires a certification of non-shopping, but also for its lack of
merit.

Leouel argues that the failure of Julia to return home, or at the very least to communicate with him, for more than five years are circumstances that clearly show
her being psychologically incapacitated to enter into married life. In his own words, Leouel asserts:

. . . (T)here is no leave, there is no affection for (him) because respondent Julia Rosario Bedia-Santos failed all these years to
communicate with the petitioner. A wife who does not care to inform her husband about her whereabouts for a period of five years, more or
less, is psychologically incapacitated.

The family Code did not define the term "psychological incapacity." The deliberations during the sessions of the Family Code Revision Committee, which has
drafted the Code, can, however, provide an insight on the import of the provision.

Art. 35. The following marriages shall be void from the beginning:

xxx xxx xxx

Art. 36. . . .

(7) Those marriages contracted by any party who, at the time of the celebration, was wanting in the sufficient use of reason or judgment to
understand the essential nature of marriage or was psychologically or mentally incapacitated to discharge the essential marital
obligations, even if such lack of incapacity is made manifest after the celebration.

On subparagraph (7), which as lifted from the Canon Law, Justice (Jose B.L.) Reyes suggested that they say "wanting in sufficient use,"
but Justice (Eduardo) Caguioa preferred to say "wanting in the sufficient use." On the other hand, Justice Reyes proposed that they say
"wanting in sufficient reason." Justice Caguioa, however, pointed out that the idea is that one is not lacking in judgment but that he is
lacking in the exercise of judgment. He added that lack of judgment would make the marriage voidable. Judge (Alicia Sempio-) Diy
remarked that lack of judgment is more serious than insufficient use of judgment and yet the latter would make the marriage null and void
and the former only voidable. Justice Caguioa suggested that subparagraph (7) be modified to read:

"That contracted by any party who, at the time of the celebration, was psychologically incapacitated to discharge
the essential marital obligations, even if such lack of incapacity is made manifest after the celebration."

Justice Caguioa explained that the phrase "was wanting in sufficient use of reason of judgment to understand the essential nature of
marriage" refers to defects in the mental faculties vitiating consent, which is not the idea in subparagraph (7), but lack of appreciation of
one's marital obligations.
Judge Diy raised the question: Since "insanity" is also a psychological or mental incapacity, why is "insanity" only a ground for annulment
and not for declaration or nullity? In reply, Justice Caguioa explained that in insanity, there is the appearance of consent, which is the
reason why it is a ground for voidable marriages, while subparagraph (7) does not refer to consent but to the very essence of marital
obligations.

Prof. (Araceli) Baviera suggested that, in subparagraph (7), the word "mentally" be deleted, with which Justice Caguioa concurred. Judge
Diy, however, prefers to retain the word "mentally."

Justice Caguioa remarked that subparagraph (7) refers to psychological impotence. Justice (Ricardo) Puno stated that sometimes a
person may be psychologically impotent with one but not with another. Justice (Leonor Ines-) Luciano said that it is called selective
impotency.

Dean (Fortunato) Gupit stated that the confusion lies in the fact that in inserting the Canon Law annulment in the Family Code, the
Committee used a language which describes a ground for voidable marriages under the Civil Code. Justice Caguioa added that in Canon
Law, there are voidable marriages under the Canon Law, there are no voidable marriages Dean Gupit said that this is precisely the reason
why they should make a distinction.

Justice Puno remarked that in Canon Law, the defects in marriage cannot be cured.

Justice Reyes pointed out that the problem is: Why is "insanity" a ground for void ab initio marriages? In reply, Justice Caguioa explained
that insanity is curable and there are lucid intervals, while psychological incapacity is not.

On another point, Justice Puno suggested that the phrase "even if such lack or incapacity is made manifest" be modified to read "even if
such lack or incapacity becomes manifest."

Justice Reyes remarked that in insanity, at the time of the marriage, it is not apparent.

Justice Caguioa stated that there are two interpretations of the phrase "psychological or mentally incapacitated" — in the first one, there is
vitiation of consent because one does not know all the consequences of the marriages, and if he had known these completely, he might
not have consented to the marriage.

xxx xxx xxx

Prof. Bautista stated that he is in favor of making psychological incapacity a ground for voidable marriages since otherwise it will
encourage one who really understood the consequences of marriage to claim that he did not and to make excuses for invalidating the
marriage by acting as if he did not understand the obligations of marriage. Dean Gupit added that it is a loose way of providing for divorce.

xxx xxx xxx

Justice Caguioa explained that his point is that in the case of incapacity by reason of defects in the mental faculties, which is less than
insanity, there is a defect in consent and, therefore, it is clear that it should be a ground for voidable marriage because there is the
appearance of consent and it is capable of convalidation for the simple reason that there are lucid intervals and there are cases when the
insanity is curable. He emphasized that psychological incapacity does not refer to mental faculties and has nothing to do with consent; it
refers to obligations attendant to marriage.

xxx xxx xxx

On psychological incapacity, Prof. (Flerida Ruth P.) Romero inquired if they do not consider it as going to the very essence of consent.
She asked if they are really removing it from consent. In reply, Justice Caguioa explained that, ultimately, consent in general is effected but
he stressed that his point is that it is not principally a vitiation of consent since there is a valid consent. He objected to the lumping together
of the validity of the marriage celebration and the obligations attendant to marriage, which are completely different from each other,
because they require a different capacity, which is eighteen years of age, for marriage but in contract, it is different. Justice Puno,
however, felt that psychological incapacity is still a kind of vice of consent and that it should not be classified as a voidable marriage which
is incapable of convalidation; it should be convalidated but there should be no prescription. In other words, as long as the defect has not
been cured, there is always a right to annul the marriage and if the defect has been really cured, it should be a defense in the action for
annulment so that when the action for annulment is instituted, the issue can be raised that actually, although one might have been
psychologically incapacitated, at the time the action is brought, it is no longer true that he has no concept of the consequence of marriage.

Prof. (Esteban) Bautista raised the question: Will not cohabitation be a defense? In response, Justice Puno stated that even the bearing of
children and cohabitation should not be a sign that psychological incapacity has been cured.

Prof. Romero opined that psychological incapacity is still insanity of a lesser degree. Justice Luciano suggested that they invite a
psychiatrist, who is the expert on this matter. Justice Caguioa, however, reiterated that psychological incapacity is not a defect in the mind
but in the understanding of the consequences of marriage, and therefore, a psychiatrist will not be a help.

Prof. Bautista stated that, in the same manner that there is a lucid interval in insanity, there are also momentary periods when there is an
understanding of the consequences of marriage. Justice Reyes and Dean Gupit remarked that the ground of psychological incapacity will
not apply if the marriage was contracted at the time when there is understanding of the consequences of marriage.5

xxx xxx xxx

Judge Diy proposed that they include physical incapacity to copulate among the grounds for void marriages. Justice Reyes commented
that in some instances the impotence that in some instances the impotence is only temporary and only with respect to a particular person.
Judge Diy stated that they can specify that it is incurable. Justice Caguioa remarked that the term "incurable" has a different meaning in
law and in medicine. Judge Diy stated that "psychological incapacity" can also be cured. Justice Caguioa, however, pointed out that
"psychological incapacity" is incurable.

Justice Puno observed that under the present draft provision, it is enough to show that at the time of the celebration of the marriage, one
was psychologically incapacitated so that later on if already he can comply with the essential marital obligations, the marriage is still void
ab initio. Justice Caguioa explained that since in divorce, the psychological incapacity may occur after the marriage, in void marriages, it
has to be at the time of the celebration of marriage. He, however, stressed that the idea in the provision is that at the time of the
celebration of the marriage, one is psychologically incapacitated to comply with the essential marital obligations, which incapacity
continues and later becomes manifest.

Justice Puno and Judge Diy, however, pointed out that it is possible that after the marriage, one's psychological incapacity become
manifest but later on he is cured. Justice Reyes and Justice Caguioa opined that the remedy in this case is to allow him to remarry.6

xxx xxx xxx

Justice Puno formulated the next Article as follows:

 Art. 37. A marriage contracted by any party who, at the time of the celebration, was psychologically incapacitated,
to comply with the essential obligations of marriage shall likewise be void from the beginning even if such
incapacity becomes manifest after its solemnization.

Justice Caguioa suggested that "even if" be substituted with "although." On the other hand, Prof. Bautista proposed that the clause
"although such incapacity becomes manifest after its solemnization" be deleted since it may encourage one to create the manifestation of
psychological incapacity. Justice Caguioa pointed out that, as in other provisions, they cannot argue on the basis of abuse.

Judge Diy suggested that they also include mental and physical incapacities, which are lesser in degree than psychological incapacity.
Justice Caguioa explained that mental and physical incapacities are vices of consent while psychological incapacity is not a species of
vice or consent.

Dean Gupit read what Bishop Cruz said on the matter in the minutes of their February 9, 1984 meeting:

"On the third ground, Bishop Cruz indicated that the phrase "psychological or mental impotence" is an invention of
some churchmen who are moralists but not canonists, that is why it is considered a weak phrase. He said that the
Code of Canon Law would rather express it as "psychological or mental incapacity to discharge . . ."

Justice Caguioa remarked that they deleted the word "mental" precisely to distinguish it from vice of consent. He explained that
"psychological incapacity" refers to lack of understanding of the essential obligations of marriage.

Justice Puno reminded the members that, at the last meeting, they have decided not to go into the classification of "psychological
incapacity" because there was a lot of debate on it and that this is precisely the reason why they classified it as a special case.

At this point, Justice Puno, remarked that, since there having been annulments of marriages arising from psychological incapacity, Civil
Law should not reconcile with Canon Law because it is a new ground even under Canon Law.

Prof. Romero raised the question: With this common provision in Civil Law and in Canon Law, are they going to have a provision in the
Family Code to the effect that marriages annulled or declared void by the church on the ground of psychological incapacity is
automatically annulled in Civil Law? The other members replied negatively.

Justice Puno and Prof. Romero inquired if Article 37 should be retroactive or prospective in application.

Justice Diy opined that she was for its retroactivity because it is their answer to the problem of church annulments of marriages, which are
still valid under the Civil Law. On the other hand, Justice Reyes and Justice Puno were concerned about the avalanche of cases.

Dean Gupit suggested that they put the issue to a vote, which the Committee approved.

The members voted as follows:

(1) Justice Reyes, Justice Puno and Prof. Romero were for prospectivity.

(2) Justice Caguioa, Judge Diy, Dean Gupit, Prof. Bautista and Director Eufemio were for retroactivity.

(3) Prof. Baviera abstained.

Justice Caguioa suggested that they put in the prescriptive period of ten years within which the action for declaration of nullity of the
marriage should be filed in court. The Committee approved the suggestion.7

It could well be that, in sum, the Family Code Revision Committee in ultimately deciding to adopt the provision with less specificity than expected, has in fact, so
designed the law as to allow some resiliency in its application. Mme. Justice Alicia V. Sempio-Diy, a member of the Code Committee, has been quoted by Mr.
Justice Josue N. Bellosillo in Salita vs. Hon. Magtolis (G.R. No. 106429, 13 June 1994); thus:8

The Committee did not give any examples of psychological incapacity for fear that the giving of examples would limit the applicability of
the provision under the principle of ejusdem generis. Rather, the Committee would like the judge to interpret the provision on a case-to-
case basis, guided by experience, the findings of experts and researchers in psychological disciplines, and by decisions of church
tribunals which, although not binding on the civil courts, may be given persuasive effect since the provision was taken from Canon Law.

A part of the provision is similar to Canon 1095 of the New Code of Canon Law,9 which reads:

Canon 1095. They are incapable of contracting marriage:

1. who lack sufficient use of reason;

2. who suffer from a grave defect of discretion of judgment concerning essentila matrimonial rights and duties, to be given and accepted
mutually;

3. who for causes of psychological nature are unable to assume the essential obligations of marriage. (Emphasis supplied.)

Accordingly, although neither decisive nor even perhaps all that persuasive for having no juridical or secular effect, the jurisprudence under Canon Law prevailing
at the time of the code's enactment, nevertheless, cannot be dismissed as impertinent for its value as an aid, at least, to the interpretation or construction of the
codal provision.

One author, Ladislas Orsy, S.J., in his treaties, 10 giving an account on how the third paragraph of Canon 1095 has been framed, states:

The history of the drafting of this canon does not leave any doubt that the legislator intended, indeed, to broaden the rule. A strict and
narrow norm was proposed first:

Those who cannot assume the essential obligations of marriage because of a grave psycho-sexual anomaly (ob
gravem anomaliam psychosexualem) are unable to contract marriage (cf. SCH/1975, canon 297, a new canon,
novus);

then a broader one followed:

. . . because of a grave psychological anomaly (ob gravem anomaliam psychicam) . . . (cf. SCH/1980, canon 1049);

then the same wording was retained in the text submitted to the pope (cf. SCH/1982, canon 1095, 3);

finally, a new version was promulgated:

because of causes of a psychological nature (ob causas naturae psychiae).

 So the progress was from psycho-sexual to psychological anomaly, then the term anomaly was altogether eliminated. it would be,
however, incorrect to draw the conclusion that the cause of the incapacity need not be some kind of psychological disorder; after all,
normal and healthy person should be able to assume the ordinary obligations of marriage.

Fr. Orsy concedes that the term "psychological incapacity" defies any precise definition since psychological causes can be of an infinite variety.

In a book, entitled "Canons and Commentaries on Marriage," written by Ignatius Gramunt, Javier Hervada and LeRoy Wauck, the following explanation appears:

This incapacity consists of the following: (a) a true inability to commit oneself to the essentials of marriage. Some psychosexual disorders
and other disorders of personality can be the psychic cause of this defect, which is here described in legal terms. This particular type of
incapacity consists of a real inability to render what is due by the contract. This could be compared to the incapacity of a farmer to enter a
binding contract to deliver the crops which he cannot possibly reap; (b) this inability to commit oneself must refer to the essential
obligations of marriage: the conjugal act, the community of life and love, the rendering of mutual help, the procreation and education of
offspring; (c) the inability must be tantamount to a psychological abnormality. The mere difficulty of assuming these obligations, which
could be overcome by normal effort, obviously does not constitute incapacity. The canon contemplates a true psychological disorder
which incapacitates a person from giving what is due (cf. John Paul II, Address to R. Rota, Feb. 5, 1987). However, if the marriage is to be
declared invalid under this incapacity, it must be proved not only that the person is afflicted by a psychological defect, but that the defect
did in fact deprive the person, at the moment of giving consent, of the ability to assume the essential duties of marriage and consequently
of the possibility of being bound by these duties.

Justice Sempio-Diy 11 cites with approval the work of Dr. Gerardo Veloso, a former Presiding Judge of the Metropolitan Marriage Tribunal of the Catholic
Archdiocese of Manila (Branch 1), who opines that psychological incapacity must be characterized by (a) gravity, (b) juridical antecedence, and (c) incurability.
The incapacity must be grave or serious such that the party would be incapable of carrying out the ordinary duties required in marriage; it must be rooted in the
history of the party antedating the marriage, although the overt manifestations may emerge only after the marriage; and it must be incurable or, even if it were
otherwise, the cure would be beyond the means of the party involved.

It should be obvious, looking at all the foregoing disquisitions, including, and most importantly, the deliberations of the Family Code Revision Committee itself,
that the use of the phrase "psychological incapacity" under Article 36 of the Code has not been meant to comprehend all such possible cases of psychoses as,
likewise mentioned by some ecclesiastical authorities, extremely low intelligence, immaturity, and like circumstances (cited in Fr. Artemio Baluma's "Void and
Voidable Marriages in the Family Code and their Parallels in Canon Law," quoting from the Diagnostic Statistical Manual of Mental Disorder by the American
Psychiatric Association; Edward Hudson's "Handbook II for Marriage Nullity Cases"). Article 36 of the Family Code cannot be taken and construed independently
of, but must stand in conjunction with, existing precepts in our law on marriage. Thus correlated, "psychological incapacity" should refer to no less than a mental
(not physical) incapacity that causes a party to be truly incognitive of the basic marital covenants that concomitantly must be assumed and discharged by the
parties to the marriage which, as so expressed by Article 68 of the Family Code, include their mutual obligations to live together, observe love, respect and
fidelity and render help and support. There is hardly any doubt that the intendment of the law has been to confine the meaning of "psychological incapacity" to
the most serious cases of personality disorders clearly demonstrative of an utter intensitivity or inability to give meaning and significance to the marriage. This
pschologic condition must exist at the time the marriage is celebrated. The law does not evidently envision, upon the other hand, an inability of the spouse to
have sexual relations with the other. This conclusion is implicit under Article 54 of the Family Code which considers children conceived prior to the judicial
declaration of nullity of the void marriage to be "legitimate."

The other forms of psychoses, if existing at the inception of marriage, like the state of a party being of unsound mind or concealment of drug addiction, habitual
alcoholism, homosexuality or lesbianism, merely renders the marriage contract voidable pursuant to Article 46, Family Code. If drug addiction, habitual alcholism,
lesbianism or homosexuality should occur only during the marriage, they become mere grounds for legal separation under Article 55 of the Family Code. These
provisions of the Code, however, do not necessarily preclude the possibility of these various circumstances being themselves, depending on the degree and
severity of the disorder, indicia of psychological incapacity.

Until further statutory and jurisprudential parameters are established, every circumstance that may have some bearing on the degree, extent, and other
conditions of that incapacity must, in every case, be carefully examined and evaluated so that no precipitate and indiscriminate nullity is peremptorily decreed.
The well-considered opinions of psychiatrists, psychologists, and persons with expertise in psychological disciplines might be helpful or even desirable.

Marriage is not an adventure but a lifetime commitment. We should continue to be reminded that innate in our society, then enshrined in our Civil Code, and even
now still indelible in Article 1 of the Family Code, is that —

Art. 1. Marriage is a special contract of permanent union between a man a woman entered into in accordance with law for the
establishment of conjugal and family life. It is the foundation of the family and an inviolable social institution whose nature, consequences,
and incidents are governed by law and not subject to stipulation, except that marriage settlements may fix the property relations during the
marriage within the limits provided by this Code. (Emphasis supplied.)

Our Constitution is no less emphatic:

Sec. 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its solidarity and actively
promote its total development.

Sec. 2. Marriage, as an inviolable social institution, is the foundation of the family and shall be protected by the State. (Article XV, 1987
Constitution).

The above provisions express so well and so distinctly the basic nucleus of our laws on marriage and the family, and they are doubt the tenets we still hold on to.

The factual settings in the case at bench, in no measure at all, can come close to the standards required to decree a nullity of marriage. Undeniably and
understandably, Leouel stands aggrieved, even desperate, in his present situation. Regrettably, neither law nor society itself can always provide all the specific
answers to every individual problem.

WHEREFORE, the petition is DENIED.

SO ORDERED.

[G.R. No. 135042. September 23, 1999]

ROBERN DEVELOPMENT CORPORATION, petitioner, vs. JUDGE JESUS V. QUITAIN, Regional
Trial Court of Davao City, Br. 15; and NATIONAL POWER CORPORATION, respondents.
DECISION
PANGANIBAN, J.:
Expropriation proceedings are governed by revised Rule 67 of the 1997 Rules of Civil Procedure which
took effect on July 1, 1997. Previous doctrines inconsistent with this Rule are deemed reversed or
modified. Specifically, (1) an answer, not a motion to dismiss, is the responsive pleading to a complaint
in eminent domain; (2) the trial court may issue a writ of possession once the plaintiff deposits an
amount equivalent to the assessed value of the property, pursuant to Section 2 of said Rule, without
need of a hearing to determine the provisional sum to be deposited; and (3) a final order of
expropriation may not be issued prior to a full hearing and resolution of the objections and defenses of
the property owner.
The Case

Before us is a Petition under Rule 45, challenging the Decision of the Court of Appeals[1] promulgated
February 27, 1998 and its Resolution promulgated July 23, 1998 in CA-GR SP-46002, which (1)
dismissed the action for certiorari and preliminary injunction filed by Robern Development
Corporation ("Robern" for brevity); and (2) effectively affirmed the Orders (dated August 13, 1997;
September 11, 1997; and November 5, 1997) and the Writ of Possession (dated September 19, 1997),
all issued by the Regional Trial Court of Davao City in Civil Case No. 25356-97.
The assailed Decision disposed as follows:[2]
IN VIEW OF ALL THE FOREGOING, the instant petition is ordered DISMISSED. Costs against the
petitioner.
In its assailed Resolution, the Court of Appeals denied reconsideration in this manner:[3]
There being no compelling reason to modify, reverse or reconsider the Decision rendered in the case
dated February 27, 1998[;] the Motion for Reconsideration posted by petitioner on March 23, 1998 is
DENIED, it appearing further that the arguments raised therein were already considered and passed
upon in the aforesaid Decision.
The Facts

The following facts are undisputed.

1. Robern is the registered owner of a parcel of land with an area of about 17,746.50 square meters,
which the National Power Corporation ("NPC" for brevity) is seeking to expropriate. The property
forms part of a proposed low-cost housing project in Inawayan, Binugao, Toril, Davao City.
2. On June 6, 1997, NPC filed a Complaint for Eminent Domain against Robern.[4] Instead of filing an
answer, petitioner countered with a Motion to Dismiss,[5] alleging (a) that the Complaint suffered a
jurisdictional defect for not showing that the action bore the approval of the NPC board of directors; (b)
that Nemesio S. Caete, who signed the verification and certification in the Complaint, was not the
president, the general manager or an officer specifically authorized under the NPC charter (RA 6395);
(c) that the choice of property to be expropriated was improper, as it had already been intended for use
in a low-cost housing project, a public purpose within the contemplation of law; and the choice was
also arbitrary, as there were similar properties available within the area.
3. Before this Motion could be resolved, NPC filed a Motion for the Issuance of Writ of Possession
based on Presidential Decree No. 42. On July 9, 1997, NPC deposited P6,121.20 at the Philippine
National Bank, Davao Branch, as evidenced by PNB Savings Account No. 385-560728-9.[6]
4. In its Order of August 13, 1997, the trial court denied the petitioner's Motion to Dismiss in this wise:
This refers to the motion to dismiss. The issues raised are matters that should be dealt with during the
trial proper. Suffice it to say that [NPC] has the privilege as a utility to use the power of eminent
domain.
The motion is denied for lack of merit. The pre-trial conference shall be on August 27, 1997 at 2:30
P.M.[7]
5. On September 2, 1997, petitioner filed a Motion for Reconsideration, pointing out that (a) the issues
raised in the Motion to Dismiss could be resolved without trial, as they could be readily appreciated on
the face of the Complaint itself vis--vis the applicable provisions of law on the matter; and (b) the
grounds relied upon for dismissing the Complaint did not require evidence aliunde.
6. On September 11, 1997, the trial court denied the Motion, as follows:
The xxx motion [of the petitioner] for reconsideration is denied for lack of merit. Finding the xxx
motion [of NPC] to be meritorious[,] let a writ of possession issue.[8]
7. On September 22, 1997, petitioner filed a Motion for Reconsideration of the Order of September 11,
1997, arguing among others that Section 15-A of RA 6395 was virtually amended when Caete was
allowed to verify and sign the certificate of non-forum shopping in regard to the Complaint for
expropriation filed by NPC.
8. Without awaiting the outcome of the Motion for Reconsideration, NPC filed a Motion to Implement
the Writ of Possession.
9. On September 19, 1997, in spite of petitioners opposition, the trial court issued a Writ of Possession
as follows:
WHEREAS, the applicant National Power Corporation in the above-titled case has presented to this
Court a petition praying for the issuance of a Writ of Possession of the affected property of the xxx
Robern Development Corporation, described hereinbelow, as follows:
TCT No. Total Area in Area Affected in
Square Meter Square Meter
T-251558
(T-141754) 11,469.00 3,393.00
T-251559
(T-141755) 10,000.00 2,124.00
T-251556
(T-14152) 30,000.00 3,402.00
T-251555 45,000.00 8,827.50
TOTAL - - 97,371.00 17,746.50 Total
affected area
WHEREAS, on September 11, 1997 the court issued an Order granting the issuance of a Writ of
Possession in favor of the xxx National Power Corporation for the immediate possession and control of
the parcels of land owned by the [petitioner] as aforestated for the construction of the Mantanao-New-
Loon 138 KV Transmission Line Project to be undertaken by the petitioner affecting 17,746.50 sq.m. of
the 97,371.00 sq. meters as shown above.
NOW THEREFORE, you are hereby commanded to place [NPC] in possession and control of the
affected property consisting 17,746.50 [s]quare [m]eters of the total area of 97,371.00 square meters
described above and to eject therefrom all adverse occupants, Robern Development Corporation and
[all other] persons xxx claiming under it.[9]
10. On November 5, 1997, before counsel for the petitioner received any order from the trial court
directing the implementation of the Writ of Possession, NPC occupied the disputed property.
11. In a Petition for Certiorari before the Court of Appeals (CA), Robern assailed the Writ on the
following grounds: (a) patent on the face of the complaint were its jurisdictional defect, prematurity
and noncompliance with RA 6395; and (b) the issuance of the Writ of Possession was irregular,
arbitrary and unconstitutional, as the trial court had yet to fix the appropriate value for purposes of
taking or entering upon the property to be expropriated.
Ruling of the Court of Appeals

The Court of Appeals upheld the trial court on the following grounds.
First, the verification and certification of the Complaint by someone other than the president or the
general manager of NPC was not a fatal jurisdictional defect. It was enough to allege that the
expropriating body had the right of eminent domain. The issues of whether the expropriation was
properly authorized by the board of directors and whether Caetes verification and certification of the
Complaint was likewise authorized were evidentiary and could be ruled upon only after the reception
of evidence.
Second, whether the disputed property could still be expropriated even if it had already been intended
to be used in a low-cost housing project and whether the choice of that lot was arbitrary and erroneous,
given the availability of similar properties in the area, were factual issues that would entail presentation
of evidence by both parties.
Third, the allegation in the Complaint that NPC sought to acquire an easement of right-of-way through
the disputed property did not preclude its expropriation. Section 3-A of the NPC charter allowed the
power company to acquire an easement of right-of-way or even the land itself if the servitude would
injure the land.
Fourth, the issuance of the Writ of Possession was proper in view of NPCs compliance with Section 2,
Rule 67 of the 1997 Rules of Civil Procedure, by depositing with the Philippine National Bank an
amount equivalent to the assessed value of the disputed property.
Fifth, certiorari was not the proper remedy, as the Order sustaining the right to expropriate the property
was not final and could still be appealed by the aggrieved party. The availability of appeal ruled out
certiorari.
Hence, this Petition.[10]
The Issues

In their Memorandum,[11] petitioner raises the following issues:[12]

I WHETHER OR NOT THE QUESTIONED ORDER OF THE RESPONDENT JUDGE DATED
SEPTEMBER 11, 1997 DIRECTING THE ISSUANCE OF A WRIT OF POSSESSION IS
UNCONSTITUTIONAL, HIGHLY IRREGULAR, ARBITRARY, AND DESPOTIC.
II WHETHER OR NOT THE COMPLAINT FILED IN THE INSTANT CASE IS DISMISSIBLE
ON ITS FACE FOR LACK OF JURISDICTION, BEING FLAWED WITH PREMATURITY,
AND VIOLATIVE OF RA 6395.
III WHETHER OR NOT THE COURT OF APPEALS MADE A FINDING NOT BORNE OUT
BY THE COMPLAINT, THUS IT EXCEEDED ITS JURISDICTION AMOUNTING TO LACK
OF JURISDICTION.
IV WHETHER OR NOT THE CHOICE OF THE PROPERTY TO BE EXPROPRIATED IS
ARBITRARY.
Simply stated, the petition raises the following issues:
1. Were there valid grounds to dismiss the Complaint?
2. Was the Writ of Possession validly issued, considering that the trial court had not conducted any
hearing on the amount to be deposited?
This Courts Ruling

The Court of Appeals was correct in its rulings, but in the interest of substantial justice, the petitioner
should be given an opportunity to file its answer.
First Issue:

Grounds for Dismissal

Jurisdiction

Petitioner contends that the trial court did not acquire jurisdiction over the case because, first, Atty.
Caete who signed the verification and certification of non-forum shopping was neither the president nor
the general manager of NPC; and second, under Section 15-A of RA 6395, only the NPC chief legal
counsel, under the supervision of the Office of the Solicitor General is authorized to handle legal
matters affecting the government power corporation. On the other hand, NPC argues that Caete, as its
regional legal counsel in Mindanao, is authorized to prepare the Complaint on its behalf.
We find the disputed verification and certification to be sufficient in form. Verification is intended to
assure that the allegations therein have been prepared in good faith or are true and correct, not mere
speculations.[13] Generally, lack of verification is merely a formal defect that is neither jurisdictional
nor fatal. Its absence does not divest the trial court of jurisdiction.[14] The trial court may order the
correction of the pleading or act on the unverified pleading, if the attending circumstances are such that
strict compliance with the rule may be dispensed with in order to serve the ends of justice.
The certificate of non-forum shopping directs the plaintiff or principal party to attest under oath that (1)
no action or claim involving the same issues have been filed or commenced in any court, tribunal or
quasi-judicial agency and that, to the best of the plaintiff's knowledge, no such other action or claim is
pending; (2) if there is such other pending action or claim, a complete statement of its present status
shall be made; and (3) if it should be learned that the same or a similar action or claim has been filed or
is pending, the plaintiff shall report this fact to the court where the complaint or initiatory pleading was
filed.[15] This rule is rooted in the principle that a party-litigant shall not be allowed to pursue
simultaneous remedies in different forums, as this practice is detrimental to orderly judicial procedure.
[16] Administrative Circular No. 04-94, which came before the 1997 Rules of Court, is deemed
mandatory but not jurisdictional, as jurisdiction over the subject or nature of the action is conferred by
law.[17]
In this case, the questioned verification stated that Atty. Caete was the acting regional legal counsel of
NPC at the Mindanao Regional Center in Iligan City. He was not merely a retained lawyer, but an NPC
in-house counsel and officer, whose basic function was to prepare legal pleadings and to represent
NPC-Mindanao in legal cases. As regional legal counsel for the Mindanao area, he was the officer who
was in the best position to verify the truthfulness and the correctness of the allegations in the Complaint
for expropriation in Davao City. As internal legal counsel, he was also in the best position to know and
to certify if an action for expropriation had already been filed and pending with the courts.
Besides, Atty. Caete was not the only signatory to the Complaint; he was joined by Comie P. Doromal,
OIC-assistant general counsel; and Catherine J. Pablo -- both of the NPC Litigation & Land and Land
Rights Department. They all signed on behalf of the solicitor general in accordance with the NPC
charter.[18] Their signatures prove that the NPC general counsel and the solicitor general approved the
filing of the Complaint for expropriation. Clearly then, the CA did not err in holding that the Complaint
was not dismissible on its face, simply because the person who had signed the verification and
certification of non-forum shopping was not the president or the general manager of NPC.
Legal Standing and Condition Precedent

Next, petitioner asserts that NPC had no legal standing to file the expropriation case, because the
Complaint did not allege that its board of directors had authorized its filing. It added that under Section
6, RA 6395, only the board was vested with the corporate power to sue and be sued.
The National Power Corporation explains that, like other corporate officers and employees whose
functions are defined by the board, Atty. Caete is authorized to file the expropriation case. Even if he is
not the general counsel, he has residual authority to prepare, verify and certify the Complaint for
expropriation.
We rule for the private respondent. Rule 67, Section 1 of the Rules of Court, provides:
SECTION 1. The complaint.The right of eminent domain shall be exercised by the filing of a verified
complaint which shall state with certainty the right and purpose of expropriation, describe the real or
personal property sought to be expropriated, and join as defendants all persons owning or claiming to
own, or occupying, any part thereof or interest therein, showing, so far as practicable, the separate
interest of each defendant. xxxx.
The foregoing Rule does not require that the Complaint be expressly approved by the board of directors
of a corporation. In any event, such authorization is a factual issue that can be threshed out during the
trial. As held by the appellate court, the issue of whether or not the expropriation proceedings [were]
authorized by the Board of Directors or that those who signed the complaint [were] authorized
representatives are evidentiary in character determinable only in [the] trial proper.
Prematurity of the Complaint

The same ruling applies to the argument alleging prematurity of the Complaint. Petitioner's insistence
that NPC must secure the approval of the provincial board and the municipal council is unfounded.
Section 3(j), RA 6395, merely requires that the Complaint be filed in the same manner as an
expropriation case of the national, the provincial or the municipal government. At bottom, all that is
needed is compliance with Rule 67 of the Rules of Court and the prevailing jurisprudence on
expropriation.
Defenses and Objections

Petitioner avers that the Complaint should be dismissed, because the subject property was already
committed to be used in a low-cost housing project. Besides, there were other available properties in
the area. Finally, the Complaint allegedly sought only an easement of a right-of-way, not essentially an
expropriation.
We disagree. Petitioner's argument in this case is premised on the old rule. Before the 1997 amendment,
Section 3 of Rule 67 allowed a defendant in lieu of an answer, [to] present in a single motion to dismiss
or for other appropriate relief, all of his objections and defenses to the right of the plaintiff to take his
property xxx. A motion to dismiss was not governed by Rule 15 which covered ordinary motions. Such
motion was the required responsive pleading that took the place of an answer and put in issue the
plaintiff's right to expropriate the defendant's property.[19] Any relevant and material fact could be
raised as a defense in a condemnation proceeding, such as that which tended to show that (1) the
exercise of the power to condemn was unauthorized, or (2) there was cause for not taking defendants
property for the purpose alleged in the petition, or (3) the purpose for the taking was not public in
character.[20]
This old rule found basis in the constitutional provisions on the exercise of the power of eminent
domain, which were deemed to be for the protection of the individual property owner against the
aggressions of the government.[21] Under the old rule, the hearing of the motion and the presentation
of evidence followed.
However, Rule 67 of the 1997 Rules of Civil Procedure no longer requires such extraordinary motion
to dismiss. Instead, it provides:
SEC. 3. Defenses and objections. x x x x
If a defendant has any objection to the filing of or the allegations in the complaint, or any objection or
defense to the taking of his property, he shall serve his answer within the time stated in the summons.
The answer shall specifically designate or identify the property in which he claims to have an interest,
state the nature and extent of the interest claimed, and adduce all his objections and defenses to the
taking of his property. x x x x.
In his book on remedial law, Justice Florenz D. Regalado writes that the old Rule was a bit confusing
as the previous holdings under that former provision also allowed the filing of another motion to
dismiss, as that is understood in Rule 16, to raise additionally the preliminary objections authorized by
that Rule. Further, an answer, which is now required, gives more leeway. First, even if it still applies
the omnibus motion rule, it allows amendments to be made within ten days from its filing.[22] Second,
the failure to file an answer does not produce all the disastrous consequences of default in ordinary
civil actions, because the defendant may still present evidence as to just compensation.[23]
When petitioner filed its Motion to Dismiss, the 1997 Rules of Civil Procedure had already taken
effect. Statutes regulating procedure in the courts are applicable to actions pending and undetermined at
the time those statutes were passed.[24] New court rules apply to proceedings that take place after the
date of their effectivity.[25] On April 8, 1997, the Court en banc issued a Resolution in Bar Matter No.
803, declaring that the revisions in the Rules of Court were to become effective on July 1, 1997.
Accordingly, Rule 16, Section 1 of the Rules of Court, does not consider as grounds for a motion to
dismiss the allotment of the disputed land for another public purpose or the petition for a mere
easement of right-of-way in the complaint for expropriation. The grounds for dismissal are exclusive to
those specifically mentioned in Section 1, Rule 16 of the Rules of Court, and an action can be
dismissed only on a ground authorized by this provision.[26]
To be exact, the issues raised by the petitioner are affirmative defenses that should be alleged in an
answer, since they require presentation of evidence aliunde.[27] Section 3 of Rule 67 provides that if a
defendant has any objection to the filing of or the allegations in the complaint, or any objection or
defense to the taking of his property, he should include them in his answer. Naturally, these issues will
have to be fully ventilated in a full-blown trial and hearing. It would be precipitate to dismiss the
Complaint on such grounds as claimed by the petitioner. Dismissal of an action upon a motion to
dismiss constitutes a denial of due process if, from a consideration of the pleadings, it appears that
there are issues that cannot be decided without a trial of the case on the merits.[28]
Inasmuch as the 1997 Rules had just taken effect when this case arose, we believe that in the interest of
substantial justice, the petitioner should be given an opportunity to file its answer to the Complaint for
expropriation in accordance with Section 3, Rule 67 of the 1997 Rules of Civil Procedure.
Order of Condemnation

The Court will now tackle the validity of the trial court's assailed Order of August 13, 1997, which
Respondent Court affirmed in this wise:
 xxxx The denial of Roberns Motion to Dismiss [is tantamount] to a confirmation or a
determination of the authority of NPC to exercise the power of eminent domain and the propriety
of its exercise in the context of the facts involved in the case. Under Section 4 of the present Rule
67, 1997 Rules, supra, an order sustaining the right to expropriate the property is a final one and
may be appealed by any aggrieved party (Municipality of Bian v. Garcia, 180 SCRA 576 [1989]).
xxxx.[29]
We clarify. Founded on common necessity and interest, eminent domain is the inherent right of the
state (and of those entities to which the power has been lawfully delegated) to condemn private
property to public use upon payment of just compensation. It may appear to be harsh and
encompassing, but judicial review limits the exercise of eminent domain to the following areas of
concern: (1) the adequacy of the compensation, (2) the necessity of the taking, and (3) the public-use
character of the purpose of the taking.[30]
If there are objections and defenses that require the presentation of evidence and the hearing of
arguments, the trial court should not immediately issue an order of expropriation. This is clearly
implied in Section 4 of Rule 67, which mandates that [i]f the objections to and the defenses against the
right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as
required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a
lawful right to take the property sought to be expropriated, for the public use or purpose described in
the complaint x x x.
The Court of Appeals ruled that there were issues that required presentation of evidence during the trial
proper; namely, whether the expropriation proceeding was authorized by the NPC board of directors,
whether the property to be expropriated was already devoted to public use, and whether the choice of
the property was arbitrary and erroneous in view of the other properties available in the area. The
necessity of the taking and the public character of the purpose of the expropriation were still in issue
and pending resolution by the trial court. To these we add the issue of whether the taking of the
disputed property would require only an easement of right-of-way or would perpetually deprive Robern
of its proprietary rights. Therefore, the trial court should not have issued the assailed Order of
Expropriation which foreclosed any further objection to the NPCs right to expropriate and to the public
purpose of the expropriation, leaving the matter of just compensation as the only remaining substantial
issue.
The nullity of the Order was glaring. While the trial court correctly denied the Motion to Dismiss, as
the issues raised by the petitioner should be dealt with during the trial proper, it nonetheless ruled that
NPC had the privilege as a [public] utility to use the power of eminent domain.
Second Issue

Requisites of a Writ of Possession

Petitioner objects to the issuance of the Writ of Possession for being highly irregular, arbitrary and
despotic, because the Motion to Dismiss was yet to be resolved. It stresses that there was no hearing on
the correct amount of just compensation for the taking of the disputed property, as required in Panes v.
Visayas State College of Agriculture.[31] We cannot uphold this contention.
There is no prohibition against a procedure whereby immediate possession of the land involved in
expropriation proceedings may be taken, provided always that due provision is made to secure the
prompt adjudication and payment of just compensation to the owners.[32] However, the requirements
for authorizing immediate entry in expropriation proceedings have changed.
To start with, in Manila Railroad Company v. Paredes,[33] the Court held that the railway corporation
had the right to enter and possess the land involved in condemnation proceedings under Section 1, Act
No. 1592,[34] immediately upon the filing of a deposit fixed by order of the court.
The Rules of Court of 1964[35] sanctioned this procedure as follows:
SEC. 2. Entry of plaintiff upon depositing value with National or Provincial Treasurer.-- Upon the
filing of the complaint or at any time thereafter the plaintiff shall have the right to take or enter upon
the possession of the real or personal property involved if he deposits with the National or Provincial
Treasurer its value, as provisionally and promptly ascertained and fixed by the court having jurisdiction
of the proceedings, to be held by such treasurer subject to the orders and final dispositon of the court.
xxxx. (Underscoring ours.)
Subsequently, former President Ferdinand E. Marcos signed into law Presidential Decree No. 42 and its
companion decrees, which removed the court's discretion in determining the amount of the provisional
value of the land to be expropriated and fixed the provisional deposit at its assessed value for taxation
purposes. Hearing was not required; only notice to the owner of the property sought to be condemned.
On the issue of immediate possession, PD 42 (Authorizing The Plaintiff In Eminent Domain
Proceedings To Take Possession Of The Property Involved Upon Depositing The Assessed Value, For
Purposes of Taxation) provided:
WHEREAS, the existing procedure for the exercise of the right of eminent domain is not expeditious
enough to enable the plaintiff to take or enter upon the possession of the real property involved as soon
as possible, when needed for public purposes;
xxxxxxxxx
xxx [T]hat, upon filing in the proper court of the complaint in eminent domain proceedings or at
anytime thereafter, and after due notice to the defendant, plaintiff shall have the right to take or enter
upon the possession of the real property involved if he deposits with the Philippine National Bank, xxx
an amount equivalent to the assessed value of the property for purposes of taxation, to be held by said
bank subject to the orders and final disposition of the court.
The provisions of Rule 67 of the Rules of Court and of any other existing law contrary to or
inconsistent herewith are hereby repealed.
Paragraph 3 of PD No. 1224 (Defining The Policy On The Expropriation Of Private Property For
Socialized Housing Upon Payment Of Just Compensation) also authorized immediate takeover of the
property in this manner:
3. Upon the filing of the petition for expropriation and the deposit of the amount of just compensation
as provided for herein, the Government, or its authorized agency or entity, shall immediately have
possession, control and disposition of the real property and the improvements thereon even pending
resolution of the issues that may be raised whether before the Court of First Instance or the higher
courts.
Where the taking was for socialized housing, Section 3, PD 1259 (Amending Paragraphs 1, 2, And 3
Of PD No. 1224 Further Defining The Policy On The Expropriation Of Private Property For
Socialized Housing Upon Payment Of Just Compensation), amending the above-quoted paragraph,
provided:
Upon the filing of the petition for expropriation and the deposit of the amount of the just compensation
provided for in Section 2 hereof, the Government, or its authorized agency or entity, shall immediately
have possession, control and disposition of the real property and the improvements thereon even
pending resolution of the issues that may be raised whether before the Court of First Instance, Court of
Agrarian Relations or the higher courts.
Similarly, Section 1, PD No. 1313 (Further Amending Paragraph 3 Of Presidential Decree No. 1224
As Amended By Presidential Decree No. 1259, Defining The Policy On The Expropriation Of Private
Property For Socialized Housing Upon Payment Of Just Compensation), amending paragraph 3 of PD
1224, decreed:
Upon the filing of the petition for expropriation and the deposit in the Philippine National Bank at its
main office or any of its branches of the amount equivalent to ten percent (10%) of the just
compensation provided for in Section 2 of Presidential Decree No. 1259, the government, or its
authorized agency or entity, shall immediately have possession, control and disposition of the real
property and the improvements thereon with the power of demolition, if necessary, even pending
resolution of the issues that may be raised whether before the Court of First Instance, Court of Agrarian
Relations, or the higher Courts.
In this connection, we also quote Section 7 of PD No. 1517 (Proclaiming Urban Land Reform In The
Philippines And Providing For The Implementing Machinery Thereof), which reads:
xxxxxxxxx
Upon the filing of the petition for expropriation and the deposit in the Philippine National Bank at its
main office or any of its branches of the amount equivalent to ten per cent (10%) of the declared
assessment value in 1975, the Government, or its authorized agency or entity shall immediately have
possession, control and disposition of the real property and the improvements thereon with the power
of demolition, if necessary, even pending resolution of the issues that may be raised whether before the
Court of First Instance, Court of Agrarian Relations, or the higher Courts.
Finally, PD 1533 (Establishing A Uniform Basis For Determining Just Compensation And The Amount
Of Deposit For Immediate Possession Of The Property Involved In Eminent Domain Proceedings)
mandated the deposit of only ten percent (10%) of the assessed value of the private property being
sought to be expropriated, after fixing the just compensation for it at a value not exceeding that
declared by the owner or determined by the assessor, whichever is lower. Section 2 thereof reads:
SEC. 2. Upon the filing of the petition for expropriation and the deposit in the Philippine National
Bank at its main office or any of its branches of an amount equivalent to ten per cent (10%) of the
amount of compensation provided in Section 1 hereof, the government or its authorized instrumentality
agency or entity shall be entitled to immediate possession, control and disposition of the real property
and the improvements thereon, including the power of demolition if necessary, notwithstanding the
pendency of the issues before the courts.
Accordingly, in San Diego v. Valdellon,[36] Municipality of Daet v. Court of Appeals,[37] and
Haguisan v. Emilia,[38] the Court reversed itself and ruled that Section 2, Rule 67 of the 1964 Rules,
was repealed by Presidential Decree No. 42. The judicial duty of ascertaining and fixing the provisional
value of the property was done away with, because the hearing on the matter had not been expeditious
enough to enable the plaintiff to take possession of the property involved as soon as possible, when
needed for public purpose.[39]
In Daet, the Court clarified that the provisional value of the land did not necessarily represent the true
and correct one but only tentatively served as the basis for immediate occupancy by the condemnor.
The just compensation for the property continued to be based on its current and fair market value, not
on its assessed value which constituted only a percentage of its current fair market value.
However, these rulings were abandoned in Export Processing Zone Authority v. Dulay,[40] because
[t]he method of ascertaining just compensation under the aforecited decrees constitute[d] impermissible
encroachment on judicial prerogatives. It tend[ed] to render this Court inutile in a matter which under
the Constitution [was] reserved to it for final determination. The Court added:
We return to older and more sound precedents. This Court has the duty to formulate guiding and
controlling constitutional principles, precepts, doctrines, or rules. (See Salonga v. Cruz Pano, supra).
The determination of just compensation in eminent domain cases is a judicial function. The executive
department or the legislature may make the initial determinations but when a party claims a violation of
the guarantee in the Bill of Rights that private property may not be taken for public use without just
compensation, no statute, decree, or executive order can mandate that its own determination shall
prevail over the courts findings. Much less can the courts be precluded from looking into the just-ness
of the decreed compensation.
In Province of Camarines Sur v. Court of Appeals,[41] the Court reaffirmed the unconstitutionality of
the presidential decrees that fixed the just compensation in an expropriation case at the value given to
the condemned property either by the owners or by the assessor, whichever was lower.
More precisely, Panes v. Visayas State College of Agriculture[42] ruled that the judicial determination
of just compensation included the determination of the provisional deposit. In that case, the Court
invalidated the Writ of Possession because of lack of hearing on the provisional deposit, as required
under then Section 2 of Rule 67, pre-1997 Rules. In the light of the declared unconstitutionality of PD
Nos. 76, 1533 and 42, insofar as they sanctioned executive determination of just compensation, any
right to immediate possession of the property must be firmly grounded on valid compliance with
Section 2 of Rule 67, pre-1997 Rules; that is, the value of the subject property, as provisionally and
promptly ascertained and fixed by the court that has jurisdiction over the proceedings, must be
deposited with the national or the provincial treasurer.[43]
However, the 1997 Rules of Civil Procedure revised Section 2 of Rule 67 and clearly reverted to the
San Diego, Daet and Haguisan rulings. Section 2 now reads:
SEC. 2. Entry of plaintiff upon depositing value with authorized government depositary.Upon the filing
of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have
the right to take or enter upon the possession of the real property involved if he deposits with the
authorized government depositary an amount equivalent to the assessed value of the property for
purposes of taxation to be held by such bank subject to the orders of the court. xxxx
xxxxxxxxx
After such deposit is made the court shall order the sheriff or other proper officer to forthwith place the
plaintiff in possession of the property involved and promptly submit a report thereof to the court with
service of copies to the parties. [Underscoring ours.]
In the present case, although the Complaint for expropriation was filed on June 6, 1997, the Motion for
the Issuance of the Writ of Possession was filed on July 28, 1997; thus, the issuance of the Writ is
covered by the 1997 Rules. As earlier stated, procedural rules are given immediate effect and are
applicable to actions pending and undetermined at the time they are passed; new court rules apply to
proceedings that take place after the date of their effectivity.[44] Therefore, Section 2, Rule 67 of the
1997 Rules of Civil Procedure, is the prevailing and governing law in this case.[45]
With the revision of the Rules, the trial court's issuance of the Writ of Possession becomes ministerial,
once the provisional compensation mentioned in the 1997 Rule is deposited. Thus, in the instant case
the trial court did not commit grave abuse of discretion when it granted the NPCs Motion for the
issuance of the Writ, despite the absence of hearing on the amount of the provisional deposit.
The Court nonetheless hastens to add that PD 1533 is not being revived.
Under Section 2, Rule 67 of the 1997 Rules, the provisional deposit should be in an amount equivalent
to the full assessed value of the property to be condemned, not merely ten percent of it. Therefore, the
provisional deposit of NPC is insufficient. Since it seeks to expropriate portions, not the whole, of four
parcels of land owned by Robern, the provisional deposit should be computed on the basis of the Tax
Declarations of the property:[46]
TCT No. Total Area Area Affected Assessed Provisional
in Sq. M. in Sq. M. Value Deposit
T-251558
(T-141754) 11,469.00 3,393.00 P4,250.00 P1,257.32
T-251559
(T-141755) 10,000.00 2,124.00 8,960.00 1,903.10
T-251556
(T-14152) 30,000.00 3,402.00 18,910.00 2,144.39
T-251555 45,000.00 8,827.50 18,450.00 3,619.28
TOTAL 97,371.00 17,746.50 P8,924.09
Hence, the amount of the provisional deposit should be increased, in order to conform to the
requirement that it should be equivalent to the assessed value of the property. In the interest of justice,
NPC should in the meantime pay Robern reasonable rental, to be fixed by the trial court in its final
decision, for the use and occupation of the disputed property from the date of entry until the deposit of
the full assessed value of the property, as mandated by Rule 67.
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-GR SP-46002 are
AFFIRMED with the following MODIFICATIONS: (1) petitioner is granted a period of ten days from
the finality of this Decision within which to file its answer, in accordance with Rule 67 of the 1997
Rules of Court; (2) NPC shall deposit, also within ten days from the finality if this Decision, the full
amount required under the aforecited Rule; and (3) the trial court shall, in its final decision, fix the
rental for the use and the occupation of the disputed property, from the date of NPCs entry until its
deposit of the full amount required under the 1997 Rules. No costs.
SO ORDERED.
SECOND DIVISION
G.R. No. L-48214 December 19, 1978
ILDEFONSO SANTIAGO, represented by his Attorney-in-Fact, ALFREDO T. SANTIAGO,
petitioner,
vs.
THE GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES, represented by the
Director, Bureau of Plant Industry, and the Regional Director, Region IX, Zamboanga
City, respondent,
Ahmad D. Sahak for petitioner.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Octavio R. Ramirez and
Solicitor Mariano M. Martinez for respondents.

FERNANDO, J.:
The first impression yielded by a perusal of this petition for certiorari is its inherent weakness
considering the explicit provision in the present Constitution prohibiting a suit against the
Republic without its consent. 1 Here petitioner Ildefonso Santiago 2 filed on August 9, 1976
an action in the Court of First Instance of Zamboanga City naming as defendant the
government of the Republic of the Philippines represented by the Director of the Bureau of
Plant Industry. 3 His plea was for the revocation of a deed of donation executed by him and
his spouse in January of 1971, 4 with the Bureau of Plant Industry as the donee. As alleged in
such complaint, such Bureau, contrary to the terms of the donation, failed to "install lighting
facilities and water system on the property donated and to build an office building and parking
[lot] thereon which should have been constructed and ready for occupancy on or before
December 7, 1974. 5 That led him to conclude that under the circumstances, he was exempt
from compliance with such an explicit constitutional command. The lower court, in the order
challenged in this petition, was of a different view. It sustained a motion to dismiss on the part
of the defendant Republic of the Philippines, now named as one of the respondents, the other
respondent being the Court of First Instance of Zamboanga City, Branch II. It premised such
an order on the settled "rule that the state cannot be sued without its consent. This is so,
because the New Constitution of the Philippines expressly provides that the state may not be
sued without its consent. 6 Solicitor General Estelito P. Mendoza, 7 in the com ment on the
petition filed with this Court, is for the affirmance of the order of dismissal of respondent Court
precisely to accord deference to the above categorical constitutional mandate.
On its face, such a submission carries persuasion. Upon further reflection, this Tribunal is
impressed with the unique aspect of this petition for certiorari, dealing as it does with a suit for
the revocation of a donation to the Republic, which allegedly fatted to conform with what was
agreed to by the donee. If an order of dismissal would suffice, then the element of unfairness
enters, the facts alleged being hypothetically admitted. It is the considered opinion of this
Court then that to conform to the high dictates of equity and justice, the presumption of
consent could be indulged in safely. That would serve to accord to petitioner as plaintiff, at the
very least, the right to be heard. certiorari lies.
1. This is not to deny the obstacle posed by the constitutional provision. It is expressed in
language plain and unmistakable: "The State may not be sued without its consent. 8 The
Republic cannot be proceeded against unless it allows itself to be sued. Neither can a
department, bureau, agency, office, or instrumentality of the government where the suit,
according to the then Justice, now Chief Justice, Castro in Del Mar v. Philippine Veterans
Administration, 9 may result "in adverse consequences to the public treasury, whether in the
disbursements of funds or loss of property. 10 Such a doctrine was reiterated in the following
cases: Republic v. Villasor, 11 Sayson v. Singson, 12 Director of the Bureau of Printing v.
Francisco, 13 and Republic v. Purisima. 14
2. It is contended by counsel for petitioner that the above constitutional provision would be
given a retroactive application in this case if the suit for the revocation of donation were
dismissed. That is not the case at all. In Republic v. Purisima, this Court made clear that such
a basic postulate is part and parcel of the system of government implanted in the Philippines
from the time of the acquisition of sovereignty by the United States, and therefore, was
implicit in the 1935 Constitution even in the absence of any explicit language to that effect.
This it did in a citation from Switzerland General Insurance Co., Ltd. v. Republic of the
Philippines: 15 "The doctrine of non-suability recognized in this jurisdiction even prior to the
effectivity of the [1935] Constitution is a logical corollary of the positivist concept of law which,
to paraphrase Holmes, negates the assertion of any legal right as against the state, in itself
the source of the law on which such a right may be predicated. Nor is this all. Even if such a
principle does give rise to problems, considering the vastly expanded role of government
enabling it to engage in business pursuits to promote the general welfare, it is not obeisance
to the analytical school of thought alone that calls for its continued applicability. 16 That is the
teaching of the leading case of Mobil Philippines Exploration, Inc. v. Customs Arrastre
Service, 17 promulgated in December of 1966. As a matter of fact, the Switzerland General
Insurance Co. decision was the thirty-seventh of its kind after Mobil. Clearly, then, the
contention that to dismiss the suit would be to give the applicable constitutional provision a
retroactive effect is, to put it at its mildest, untenable.
3. Petitioner's counsel invoked Santos v. Santos, 18 a 1952 decision. A more thorough
analysis ought to have cautioned him against reliance on such a case. It was therein clearly
pointed out that the government entity involved was originally the National Airports
Corporation. Thereafter, it "was abolished by Executive Order No. 365, series of 1950, and in
its place and stead the Civil Aeronautics Administration was created and took over all the
assets and assumed all the liabilities of the abolished corporation. The Civil Aeronautics
Administration, even if it is not a juridical entity, cannot legally prevent a party or parties from
enforcing their proprietary rights under the cloak or shield of lack of juridical personality,
because to took over all the powers and assumed all the obligations of the defunct
corporation which had entered into the contract in question." 19 Then came National Shipyard
and Steel Corporation v. Court of Industrial Relations, 20 a 1963 decision, where the then
Justice, later Chief Justice, Concepcion, as ponente, stated that a government-owned and
controlled corporation "has a personality of its own distinct and separate from that of the
government. ... Accordingly, it may sue and be sued and may be subjected to court processes
just like any other corporation. (Section 13, Act 1459, as amended). 21 In three recent
decisions, Philippine National Bank v. Court of Industrial Relations, 22 Philippine National
Bank v. Honorable Judge Pabalan, 23 and Philippine National Railways v. Union de
Maquinistas, 24 this constitutional provision on non-suability was unavailing in view of the suit
being against a government-owned or controlled corporation. That point apparently escaped
the attention of counsel for petitioner. Hence Santos v. Santos is hardly controlling.
4. It is to be noted further that the trend against the interpretation sought to be fastened in the
broad language of Santos v. Santos is quite discernible. Not long after, in Araneta v. Hon. M.
Gatmaitan, 25 decided in 1957, it was held that an action [against] Government officials, is
essentially one against the Government, ... . 26 In the same year, this Court, in Angat River
Irrigation System v. Angat River Workers 27 Union, after referring to the "basic and
fundamental principle of the law that the Government cannot be sued before courts of justice
without its consent," pointed out that "this privilege of non-suability of the Government" covers
with the mantle of its protection "an entity," in this case, the Angat River Irrigation System. 28
Then, in 1960, came Lim v. Brownell, Jr., 29 where there was a reaffirmation of the doctrine
that a "claim [constituting] a charge against, or financial liability to, the Government cannot be
entertained by the courts except with the consent of said government. 30 Bureau of Printing
v. Bureau of Printing Employees Association 31 came a year later; it reiterated such a
doctrine. It was not surprising therefore that in 1966, Mobil Philippines Exploration, Inc. was
decided the way it was. The remedy, where the liability is based on contract, according to this
Court, speaking through Justice J. P. Bengzon, is for plaintiff to file a claim with the general
office in accordance with the controlling statute, Commonwealth Act No. 327. 32 To repeat,
that doctrine has been adhered to ever since. The latest case in point is Travelers Indemnity
Company v. Barber Steamship Lines, Inc. 33 Justice Aquino's opinion concluded with this
paragraph: "It is settled that the Bureau of Customs, acting as part of the machinery of the
national government in the operation of the arrastre service, is immune from suit under the
doctrine of non-suability of the State. The claimant's remedy to recover the loss or damage to
the goods under the custody of the customs arrastre service is to file a claim with the
Commission in Audit as contemplated in Act No. 3083 and Commonwealth Act No. 327. 34
With the explicit provision found in the present Constitution, the fundamental principle of non-
suability becomes even more exigent in its command.
5. The reliance on Santos v. Santos as a prop for this petition having failed, it would ordinarily
follow that this suit cannot prosper. Nonetheless, as set forth at the outset, there is a novel
aspect that suffices to call for a contrary conclusion. It would be manifestly unfair for the
Republic, as donee, alleged to have violated the conditions under which it received
gratuitously certain property, thereafter to put as a barrier the concept of non-suitability. That
would be a purely one-sided arrangement offensive to one's sense of justice. Such conduct,
whether proceeding from an individual or governmental agency, is to be condemned. As a
matter of fact, in case it is the latter that is culpable, the affront to decency is even more
manifest. The government, to paraphrase Justice Brandeis, should set the example. If it is
susceptible to the charge of having acted dishonorably, then it forfeits public trust-and rightly
so.
6. Fortunately, the constitutional provision itself snows a waiver. Where there is consent, a
suit may be filed. Consent need not be express. It can be implied. So it was more than implied
in Ministerio v. Court of First Instance of Cebu: 35 "The doctrine of governmental immunity
from suit cannot serve as an instrument for perpetrating an injustice on a citizen. 36 The fact
that this decision arose from a suit against the Public Highways Commissioner and the
Auditor General for failure of the government to pay for land necessary to widen a national
highway, the defense of immunity without the consent proving unavailing, is not material. The
analogy is quite obvious. Where the government ordinarily benefited by the taking of the land,
the failure to institute the necessary condemnation proceedings should not be a bar to an
ordinary action for the collection of the just compensation due. Here, the alleged failure to
abide by the conditions under which a donation was given should not prove an insuperable
obstacle to a civil action, the consent likewise being presumed. This conclusion is
strengthened by the fact that while a donation partakes of a contract, there is no money claim,
and therefore reliance on Commonwealth Act No. 327 would be futile.
7. Our decision, it must be emphasized, goes no further than to rule that a donor, with the
Republic or any of its agency being the donee, is entitled to go to court in case of an alleged
breach of the conditions of such donation. He has the right to be heard. Under the
circumstances, the fundamental postulate of non-suability cannot stand in the way. It is made
to accommodate itself to the demands of procedural due process, which is the negation of
arbitrariness and inequity. The government, in the final analysis, is the beneficiary. It thereby
manifests its adherence to the highest ethical standards, which can only be ignored at the risk
of losing the confidence of the people, the repository of the sovereign power. The judiciary
under this circumstance has the grave responsibility of living up to the ideal of objectivity and
impartiality, the very essence of the rule of law. Only by displaying the neutrality expected of
an arbiter, even if it happens to be one of the departments of a litigant, can the decision
arrived at, whatever it may be, command respect and be entitled to acceptance.
WHEREFORE, the writ of certiorari prayed for is granted and the order of dismissal of
October 20, 1977 is nullified, set aside and declared to be without force and effect. The Court
of First Instance of Zamboanga City, Branch II, is hereby directed to proceed with this case,
observing the procedure set forth in the Rules of Court. No costs.
[G.R. No. 115849. ]
FIRST PHILIPPINE INTERNATIONAL BANK (Formerly Producers Bank of the Philippines) and
MERCURIO RIVERA, petitioners, vs. COURT OF APPEALS, CARLOS EJERCITO, in substitution
of DEMETRIO DEMETRIA, and JOSE JANOLO, respondents.
DECISION
PANGANIBAN, J.:
In the absence of a formal deed of sale, may commitments given by bank officers in an exchange of
letters and/or in a meeting with the buyers constitute a perfected and enforceable contract of sale over
101 hectares of land in Sta. Rosa, Laguna? Does the doctrine of apparent authority apply in this case? If
so, may the Central Bank-appointed conservator of Producers Bank (now First Philippine International
Bank) repudiate such apparent authority after said contract has been deemed perfected? During the
pendency of a suit for specific performance, does the filing of a derivative suit by the majority
shareholders and directors of the distressed bank to prevent the enforcement or implementation of the
sale violate the ban against forum-shopping?
Simply stated, these are the major questions brought before this Court in the instant Petition for review
on certiorari under Rule 45 of the Rules of Court, to set aside the Decision promulgated of the
respondent Court of Appeals[1] in CA-G.R. CV No. 35756 and the Resolution promulgated June 14,
1994 denying the motion for reconsideration. The dispositive portion of the said Decision reads:
WHEREFORE, the decision of the lower court is MODIFIED by the elimination of the damages
awarded under paragraphs 3, 4 and 6 of its dispositive portion and the reduction of the award in
paragraph 5 thereof to P75,000.00, to be assessed against defendant bank. In all other aspects, said
decision is hereby AFFIRMED.
All references to the original plaintiffs in the decision and its dispositive portion are deemed, herein and
hereafter, to legally refer to the plaintiff-appellee Carlos C. Ejercito.
Costs against appellant bank.
The dispositive portion of the trial courts[2] decision dated , on the other hand, is as follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs and against
the defendants as follows:
1. Declaring the existence of a perfected contract to buy and sell over the six (6) parcels of land situated
at Don Jose, Sta. Rosa, Laguna with an area of 101 hectares, more or less, covered by and embraced in
Transfer Certificates of Title Nos. T-106932 to T-106937, inclusive, of the Land Records of Laguna,
between the plaintiffs as buyers and the defendant Producers Bank for an agreed price of Five and One
Half Million (P5,500,000.00) Pesos;
2. Ordering defendant Producers Bank of the Philippines, upon finality of this decision and receipt
from the plaintiffs the amount of P5.5 Million, to execute in favor of said plaintiffs a deed of absolute
sale over the aforementioned six (6) parcels of land, and to immediately deliver to the plaintiffs the
owners copies of T.C.T. Nos. T-106932 to T-106937, inclusive, for purposes of registration of the same
deed and transfer of the six (6) titles in the names of the plaintiffs;
3. Ordering the defendants, jointly and severally, to pay plaintiffs Jose A. Janolo and Demetrio
Demetria the sums of P 200,000.00 each in moral damages;
4. Ordering the defendants, jointly and severally, to pay plaintiffs the sum of P 100,000.00 as
exemplary damages;
5. Ordering the defendants, jointly and severally, to pay the plaintiffs the amount of P400,000.00 for
and by way of attorneys fees;
6. Ordering the defendants to pay the plaintiffs, jointly and severally, actual and moderate damages in
the amount of P20,000.00;
With costs against the defendants.
After the parties filed their comment, reply, rejoinder, sur-rejoinder and reply to sur-rejoinder, the
petition was given due course in a Resolution dated . Thence, the parties filed their respective
memoranda and reply memoranda. The First Division transferred this case to the Third Division per
resolution dated . After carefully deliberating on the aforesaid submissions, the Court assigned the case
to the undersigned ponente for the writing of this Decision.
The Parties
Petitioner First Philippine International Bank (formerly Producers Bank of the ; petitioner Bank, for
brevity) is a banking institution organized and existing under the laws of the Republic of the . Petitioner
Mercurio Rivera (petitioner Rivera, for brevity) is of legal age and was, at all times material to this
case, Head Manager of the Property Management Department of the petitioner Bank.
Respondent Carlos Ejercito (respondent Ejercito, for brevity) is of legal age and is the assignee of
original plaintiffs-appellees Demetrio Demetria and Jose Janolo.
Respondent Court of Appeals is the court which issued the Decision and Resolution sought to be set
aside through this petition.
The Facts
The facts of this case are summarized in the respondent Courts Decision,[3] as follows:
(1) In the course of its banking operations, the defendant Producer Bank of the Philippines acquired six
parcels of land with a total area of 101 hectares located at Don Jose, Sta. Rosa, Laguna, and covered by
Transfer Certificates of Title Nos. T-106932 to T-106937. The property used to be owned by BYME
Investment and Development Corporation which had them mortgaged with the bank as collateral fora
loan. The original plaintiffs, Demetrio Demetria and Jose O. Janolo, wanted to purchase the property
and thus initiated negotiations for that purpose.
(2) In the early part of August 1987 said plaintiffs, upon the suggestion of BYME Investments legal
counsel, Jose Fajardo, met with defendant Mercurio Rivera, Manager of the Property Management
Department of the defendant bank. The meeting was held pursuant to plaintiffs plan to buy the property
(TSN of Jan. 16, 1990, pp. 7-10). After the meeting, plaintiff Janolo, following the advice of defendant
Rivera, made a formal purchase offer to the bank through a letter dated (Exh. B), as follows:
August 30, 1987
The Producers Bank of the Philippines
Makati, Metro Manila
Attn. Mr. Mercurio Q. Rivera
Manager, Property Management Dept.
Gentlemen:
I have the honor to submit my formal offer to purchase your properties covered by titles listed
hereunder located at Sta. Rosa, Laguna, with a total area of 101 hectares, more or less.
TCT NO. AREA
T-106932 113,580 sq.m.
T-106933 70,899 sq.m.
T-106934 52,246 sq.m.
T-106935 96,768 sq.m.
T-106936 187,114 sq.m.
T-106937 481,481 sq.m.
My offer is for PESOS: THREE MILLION FIVE HUNDRED THOUSAND (P3,500,000.00) PESOS, in
cash.
Kindly contact me at Telephone Number 921-1344.
(3) On September 1, 1987, defendant Rivera made on behalf of the bank a formal reply by letter which
is hereunder quoted (Exh. C):
September 1, 1987
J-P M-P GUTIERREZ ENTERPRISES
142 Charisma St., Doa Andres II
Rosario, Pasig, Metro Manila
Attention: JOSE O. JANOLO Dear Sir:
Dear Sir:
Thank you for your letter-offer to buy our six (6) parcels of acquired lots at Sta. Rosa, Laguna
(formerly owned by Byme industrial Corp.). Please be informed however that the banks counter-offer
is at P5.5 million for more than 101 hectares on lot basis.
We shall be very glad to hear your position on the matter.
Best regards.
(4)On , plaintiff Janolo, responding to Riveras aforequoted reply, wrote (Exh.
September 17, 1987
Producers Bank
Paseo de Roxas
Makati, Metro Manila
Attention: Mr. Mercurio Rivera
Gentlemen:
In reply to your letter regarding my proposal to purchase your 101-hectare lot located at Sta. Rosa
Laguna, I would like to amend my previous offer and I now propose to buy the said lot at P4.250
million in CASH.
Hoping that this proposal meets your satisfaction.
(5) There was no reply to Janolos foregoing letter of . What took place was a meeting on between the
plaintiffs and Luis Co, the Senior Vice-President of defendant bank. Rivera as well as Fajardo, the
BYME lawyer, attended the meeting. Two days later, or on , plaintiff Janolo sent to the bank, through
Rivera, the following letter (Exh. E):
The Producers Bank of the Philippines
Paseo de Roxas, Makati
Metro Manila
Attention: Mr. Mercurio Rivera
Re: 101 Hectares of Land in Sta. Rosa, Laguna
Gentlemen:
Pursuant to our discussion last 28 September 1987, we are pleased to inform you that we are accepting
your offer for us to purchase the property at Sta. Rosa, Laguna, formerly owned by Byme In-vestment,
for a total price of PESOS: FIVE MILLION FIVE HUNDRED THOUSAND (P5,500,000.00).
Thank you.
(6) On , the conservator of the bank (which has been placed under conservatorship by the Central Bank
since 1984) was replaced by an Acting Conservator in the person of defendant Leonida T. Encarnacion.
On , defendant Rivera wrote plaintiff Demetria the following letter (Exh. F):
Attention: Atty. Demetrio Demetria
Dear Sir:
Your proposal to buy the properties the bank foreclosed from Byme Investment Corp. located at Sta.
Rosa, Laguna is under study yet as of this time by the newly created committee for submission to the
newly designated Acting Conservator of the bank.
For your information.
(7) What thereafter transpired was a series of demands by the plaintiffs for compliance by the bank
with what plaintiff considered as a perfected contract of sale, which demands were in one form or
another refused by the bank. As detailed by the trial court in its decision, on November 17, 1987,
plaintiffs through a letter to defendant Rivera (Exhibit G) tendered payment of the amount of P5.5
million pursuant to (our) perfected sale agreement. Defendants refused to receive both the payment and
the letter. Instead, the parcels of land involved in the transaction were advertised by the bank for sale to
any interested buyer (Exhs. H and H-1). Plaintiffs demanded the execution by the bank of the
documents on what was considered as a perfected agreement. Thus:
Mr. Mercurio Rivera
Manager, Producers Bank
Paseo de Roxas, Makati
Metro Manila
Dear Mr. Rivera:
This is in connection with the offer of our client, Mr. Jose O. Janolo, to purchase your 101-hectare lot
located in Sta. Rosa, Laguna, and which are covered by TCT No. T-106932 to 106937.
From the documents at hand, it appears that your counter-offer dated September 1, 1987 of this same
lot in the amount of P5.5 million was accepted by our client thru a letter dated September 30, 1987 and
was received by you on October 5, 1987.
In view of the above circumstances, we believe that an agreement has been perfected. We were also
informed that despite repeated follow-up to consummate the purchase, you now refuse to honor your
commitment. Instead, you have advertised for sale the same lot to others.
In behalf of our client, therefore, we are making this formal demand upon you to consummate and
execute the necessary actions/documentation within three (3) days from your receipt hereof We are
ready to remit the agreed amount of P5.5 million at your advice. Otherwise, we shall be constrained to
file the necessary court action to protect the interest of our client.
We trust that you will be guided accordingly.
(8) Defendant bank, through defendant Rivera, acknowledged receipt of the foregoing letter and stated,
in its communication of (Exh. I), that said letter has been referred x x x to the office of our Conservator
for proper disposition. However, no response came from the Acting Conservator. On , the plaintiffs
made a second tender of payment (Exhs. L and L-1), this time through the Acting Conservator,
defendant Encarnacion. Plaintiffs letter reads:
PRODUCERS BANK OF
THE PHILIPPINES
Paseo de Roxas,
Makati, Metro Manila
Attn.: Atty. NIDA ENCARNACION Central Bank Conservator
Gentlemen:
We are sending you herewith, in-behalf of our client, Mr. JOSE O. JANOLO, MBTC Check No. 258387
in the amount of P5.5 million as our agreed purchase price of the 101-hectare lot covered by TCT Nos.
106932, 106933, 106934, 106935, 106936 and 106937 and registered under Producers Bank.
This is in connection with the perfected agreement consequent from your offer of P5.5 Million as the
purchase price of the said lots. Please inform us of the date of documentation of the sale immediately.
Kindly acknowledge receipt of our payment.
(9) The foregoing letter drew no response for more than four months. Then, on , plaintiff, through
counsel, made a final demand for compliance by the bank with its obligations under the considered
perfected contract of sale (Exhibit N). As recounted by the trial court (Original Record, p. 656), in a
reply letter dated (Annex 4 of defendants answer to amended complaint), the defendants through
Acting Conservator Encarnacion repudiated the authority of defendant Rivera and claimed that his
dealings with the plaintiffs, particularly his counter-offer of P5.5 Million are unauthorized or illegal.
On that basis, the defendants justified the refusal of the tenders of payment and the non-compliance
with the obligations under what the plaintiffs considered to be a perfected contract of sale.
(10) On , plaintiffs filed a suit for specific performance with damages against the bank, its Manager
Rivera and Acting Conservator Encarnacion. The basis of the suit was that the transaction had with the
bank resulted in a perfected contract of sale. The defendants took the position that there was no such
perfected sale because the defendant Rivera is not authorized to sell the property, and that there was no
meeting of the minds as to the price.
On March 14, 1991, Henry L. Co (the brother of Luis Co), through counsel Sycip Salazar Hernandez
and Gatmaitan, filed a motion to intervene in the trial court, alleging that as owner of 80% of the Banks
outstanding shares of stock, he had a substantial interest in resisting the complaint. On , the trial court
issued an order denying the motion to intervene on the ground that it was filed after trial had already
been concluded. It also denied a motion for reconsideration filed thereafter. From the trial courts
decision, the Bank, petitioner Rivera and conservator Encarnacion appealed to the Court of Appeals
which subsequently affirmed with modification the said judgment. Henry Co did not appeal the denial
of his motion for intervention.
In the course of the proceedings in the respondent Court, Carlos Ejercito was substituted in place of
Demetria and Janolo, in view of the assignment of the latters rights in the matter in litigation to said
private respondent.
On July 11, 1992, during the pendency of the proceedings in the Court of Appeals, Henry Co and
several other stockholders of the Bank, through counsel Angara Abello Concepcion Regala and Cruz,
filed an action (hereafter, the Second Case) -purportedly a derivative suit - with the Regional Trial
Court of Makati, Branch 134, docketed as Civil Case No. 92-1606, against Encarnacion, Demetria and
Janolo to declare any perfected sale of the property as unenforceable and to stop Ejercito from
enforcing or implementing the sale.[4] In his answer, Janolo argued that the Second Case was barred by
litis pendentia by virtue of the case then pending in the Court of Appeals. During the pre-trial
conference in the Second Case, plaintiffs filed a Motion for Leave of Court to Dismiss the Case
Without Prejudice. Private respondent opposed this motion on the ground, among others, that plaintiffs
act of forum shopping justifies the dismissal of both cases, with prejudice.[5] Private respondent, in his
memorandum, averred that this motion is still pending in the Makati RTC.
In their Petition[6] and Memorandum,[7] petitioners summarized their position as follows:
I.
The Court of Appeals erred in declaring that a contract of sale was perfected between Ejercito (in
substitution of Demetria and Janolo) and the bank.
II.
The Court of Appeals erred in declaring the existence of an enforceable contract of sale between the
parties.
III.
The Court of Appeals erred in declaring that the conservator does not have the power to overrule or
revoke acts of previous management.
IV.
The findings and conclusions of the Court of Appeals do not conform to the evidence on record.
On the other hand, private respondents prayed for dismissal of the instant suit on the ground[8] that:
I.
Petitioners have engaged in forum shopping.
II.
The factual findings and conclusions of the Court of Appeals are supported by the evidence on record
and may no longer be questioned in this case.
III.
The Court of Appeals correctly held that there was a perfected contract between Demetria and Janolo
(substituted by respondent Ejercito) and the bank.
IV.
The Court of Appeals has correctly held that the conservator, apart from being estopped from
repudiating the agency and the contract, has no authority to revoke the contract of sale.
The Issues
From the foregoing positions of the parties, the issues in this case may be summed up as follows:
1) Was there forum-shopping on the part of petitioner Bank?
2) Was there a perfected contract of sale between the parties?
3) Assuming there was, was the said contract enforceable under the statute of frauds?
4) Did the bank conservator have the unilateral power to repudiate the authority of the bank officers
and/or to revoke the said contract?
5) Did the respondent Court commit any reversible error in its findings of facts?
The First Issue: Was There Forum-Shopping?
In order to prevent the vexations of multiple petitions and actions, the Supreme Court promulgated
Revised Circular No. 28-91 requiring that a party must certify under oath x x x [that] (a) he has not
(t)heretofore commenced any other action or proceeding involving the same issues in the Supreme
Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such
action or proceeding is pending in said courts or agencies. A violation of the said circular entails
sanctions that include the summary dismissal of the multiple petitions or complaints. To be sure,
petitioners have included a VERIFICATION/CERTIFICATION in their Petition stating for the record(,)
the pendency of Civil Case No. 92-1606 before the Regional Trial Court of Makati, Branch 134,
involving a derivative suit filed by stockholders of petitioner Bank against the conservator and other
defendants but which is the subject of a pending Motion to Dismiss Without Prejudice.[9]
Private respondent Ejercito vigorously argues that in spite of this verification, petitioners are guilty of
actual forum shopping because the instant petition pending before this Court involves identical parties
or interests represented, rights asserted and reliefs sought (as that) currently pending before the
Regional Trial Court, Makati Branch 134 in the Second Case. In fact, the issues in the two cases are so
intertwined that a judgment or resolution in either case will constitute res judicata in the other.[10]
On the other hand, petitioners explain[11] that there is no forum-shopping because:
1) In the earlier or First Case from which this proceeding arose, the Bank was impleaded as a
defendant, whereas in the Second Case (assuming the Bank is the real party in interest in a derivative
suit), it was the plaintiff;
2) The derivative suit is not properly a suit for and in behalf of the corporation under the circumstances;
3) Although the CERTIFICATION/VERIFICATION (supra) signed by the Bank president and attached
to the Petition identifies the action as a derivative suit, it does not mean that it is one and (t)hat is a
legal question for the courts to decide;
4) Petitioners did not hide the Second Case as they mentioned it in the said
VERIFICATION/CERTIFICATION.
We rule for private respondent.
To begin with, forum-shopping originated as a concept in private international law,[12] where non-
resident litigants are given the option to choose the forum or place wherein to bring their suit for
various reasons or excuses, including to secure procedural advantages, to annoy and harass the
defendant, to avoid overcrowded dockets, or to select a more friendly venue. To combat these less than
honorable excuses, the principle of forum non conveniens was developed whereby a court, in conflicts
of law cases, may refuse impositions on its jurisdiction where it is not the most convenient or available
forum and the parties are not precluded from seeking remedies elsewhere.
In this light, Blacks Law Dictionary[13] says that forum-shopping occurs when a party attempts to have
his action tried in a particular court or jurisdiction where he feels he will receive the most favorable
judgment or verdict. Hence, according to Words and Phrases,[14] a litigant is open to the charge of
forum shopping whenever he chooses a forum with slight connection to factual circumstances
surrounding his suit, and litigants should be encouraged to attempt to settle their differences without
imposing undue expense and vexatious situations on the courts.
In the , forum-shopping has acquired a connotation encompassing not only a choice of venues, as it was
originally understood in conflicts of laws, but also to a choice of remedies. As to the first (choice of
venues), the Rules of Court, for example, allow a plaintiff to commence personal actions where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff (Rule 4, Sec. 2 [b]). As to remedies, aggrieved parties,
for example, are given a choice of pursuing civil liabilities independently of the criminal, arising from
the same set of facts. A passenger of a public utility vehicle involved in a vehicular accident may sue on
culpa contractual, culpa aquiliana or culpa criminal - each remedy being available independently of the
others - although he cannot recover more than once.
In either of these situations (choice of venue or choice of remedy), the litigant actually shops for a
forum of his action. This was the original concept of the term forum shopping.
Eventually, however, instead of actually making a choice of the forum of their actions, litigants,
through the encouragement of their lawyers, file their actions in all available courts, or invoke all
relevant remedies simultaneously. This practice had not only resulted to (sic) conflicting adjudications
among different courts and consequent confusion enimical (sic) to an orderly administration of justice.
It had created extreme inconvenience to some of the parties to the action.
Thus, forum-shopping had acquired a different concept - which is unethical professional legal practice.
And this necessitated or had given rise to the formulation of rules and canons discouraging or
altogether prohibiting the practice.[15]
What therefore originally started both in conflicts of laws and in our domestic law as a legitimate
device for solving problems has been abused and misused to assure scheming litigants of dubious
reliefs.
To avoid or minimize this unethical practice of subverting justice, the Supreme Court, as already
mentioned, promulgated Circular 28-91. And even before that, the Court had proscribed it in the
Interim Rules and Guidelines issued on and had struck down in several cases[16] the inveterate use of
this insidious malpractice. Forum-shopping as the filing of repetitious suits in different courts has been
condemned by Justice Andres R. Narvasa (now Chief Justice) in Minister of Natural Resources, et al.
vs. Heirs of Orval Hughes, et al., as a reprehensible manipulation of court processes and proceedings x
x x.[17] When does forum-shopping take place?
There is forum-shopping whenever, as a result of an adverse opinion in one forum, a party seeks a
favorable opinion (other than by appeal or certiorari) in another. The principle applies not only with
respect to suits filed in the courts but also in connection with litigations commenced in the courts while
an administrative proceeding is pending, as in this case, in order to defeat administrative processes and
in anticipation of an unfavorable administrative ruling and a favorable court ruling. This is specially so,
as in this case, where the court in which the second suit was brought, has no jurisdiction [18]
The test for determining whether a party violated the rule against forum-shopping has been laid down
in the 1986 case of Buan vs. Lopez,[19] also by Chief Justice Narvasa, and that is, forum-shopping
exists where the elements of litis pendentia are present or where a final judgment in one case will
amount to res judicata in the other, as follows:
There thus exists between the action before this Court and RTC Case No. 86-36563 identity of parties,
or at least such parties as represent the same interests in both actions, as well as identity of rights
asserted and relief prayed for, the relief being founded on the same facts, and the identity on the two
preceding particulars is such that any judgment rendered in the other action, will, regardless of which
party is successful, amount to res adjudicata in the action under consideration: all the requisites, in
fine, of auter action pendant.
xxx xxx xxx
As already observed, there is between the action at bar and RTC Case No. 86-36563, an identity as
regards parties, or interests represented, rights asserted and relief sought, as well as basis thereof, to a
degree sufficient to give rise to the ground for dismissal known as auter action pendant or lis pendens.
That same identity puts into operation the sanction of twin dismissals just mentioned. The application
of this sanction will prevent any further delay in the settlement of the controversy which might ensue
from attempts to seek reconsideration of or to appeal from the Order of the Regional Trial Court in
Civil Case No. 86-36563 promulgated on July 15, 1986, which dismissed the petition upon grounds
which appear persuasive.
Consequently, where a litigant (or one representing the same interest or person) sues the same party
against whom another action or actions for the alleged violation of the same right and the enforcement
of the same relief is/are still pending, the defense of litis pendencia in one case is a bar to the others;
and, a final judgment in one would constitute res judicata and thus would cause the dismissal of the
rest. In either case, forum shopping could be cited by the other party as a ground to ask for summary
dismissal of the two[20] (or more) complaints or petitions, and for the imposition of the other sanctions,
which are direct contempt of court, criminal prosecution, and disciplinary action against the erring
lawyer.
Applying the foregoing principles in the case before us and comparing it with the Second Case, it is
obvious that there exist identity of parties or interests represented, identity of rights or causes and
identity of reliefs sought.
Very simply stated, the original complaint in the court a quo which gave rise to the instant petition was
filed by the buyer (herein private respondent and his predecessors-in-interest) against the seller (herein
petitioners) to enforce the alleged perfected sale of real estate. On the other hand, the complaint[21] in
the Second Case seeks to declare such purported sale involving the same real property as unenforceable
as against the Bank, which is the petitioner herein. In other words, in the Second Case, the majority
stockholders, in representation of the Bank, are seeking to accomplish what the Bank itself failed to do
in the original case in the trial court. In brief, the objective or the relief being sought, though worded
differently, is the same, namely, to enable the petitioner Bank to escape from the obligation to sell the
property to respondent. In Danville Maritime, Inc. vs. Commission on Audit,[22] this Court ruled that the
filing by a party of two apparently different actions, but with the same objective, constituted forum
shopping:
In the attempt to make the two actions appear to be different, petitioner impleaded different
respondents therein - PNOC in the case before the lower court and the COA in the case before this
Court and sought what seems to be different reliefs. Petitioner asks this Court to set aside the
questioned letter-directive of the COA dated October 10, 1988 and to direct said body to approve the
Memorandum of Agreement entered into by and between the PNOC and petitioner, while in the
complaint before the lower court petitioner seeks to enjoin the PNOC from conducting a rebidding and
from selling to other parties the vessel T/T Andres Bonifacio, and for an extension of time for it to
comply with the paragraph 1 of the memorandum of agreement and damages. One can see that
although the relief prayed for in the two (2) actions are ostensibly different, the ultimate objective in
both actions is the same, that is, the approval of the sale of vessel in favor of petitioner, and to overturn
the letter-directive of the COA of October 10, 1988 disapproving the sale. (italics supplied)
In an earlier case,[23] but with the same logic and vigor, we held:
In other words, the filing by the petitioners of the instant special civil action for certiorari and
prohibition in this Court despite the pendency of their action in the Makati Regional Trial Court, is a
species of forum-shopping. Both actions unquestionably involve the same transactions, the same
essential facts and circumstances. The petitioners claim of absence of identity simply because the
PCGG had not been impleaded in the RTC suit, and the suit did not involve certain acts which
transpired after its commencement, is specious. In the RTC action, as in the action before this Court,
the validity of the contract to purchase and sell of September 1, 1986, i.e., whether or not it had been
efficaciously rescinded, and the propriety of implementing the same (by paying the pledgee banks the
amount of their loans, obtaining the release of the pledged shares, etc.) were the basic issues. So, too,
the relief was the same: the prevention of such implementation and/or the restoration of the status quo
ante. When the acts sought to be restrained took place anyway despite the issuance by the Trial Court
of a temporary restraining order, the RTC suit did not become functus oflcio. It remained an effective
vehicle for obtention of relief; and petitioners remedy in the premises was plain and patent: the filing of
an amended and supplemental pleading in the RTC suit, so as to include the PCGG as defendant and
seek nullification of the acts sought to be enjoined but nonetheless done. The remedy was certainly not
the institution of another action in another forum based on essentially the same facts. The adoption of
this latter recourse renders the petitioners amenable to disciplinary action and both their actions, in this
Court as well as in the Court a quo, dismissible.
In the instant case before us, there is also identity of parties, or at least, of interests represented.
Although the plaintiffs in the Second Case (Henry L. Co. et al.) are not name parties in the First Case,
they represent the same interest and entity, namely, petitioner Bank, because:
Firstly, they are not suing in their personal capacities, for they have no direct personal interest in the
matter in controversy. They are not principally or even subsidiarily liable; much less are they direct
parties in the assailed contract of sale; and
Secondly, the allegations of the complaint in the Second Case show that the stockholders are bringing a
derivative suit. In the caption itself, petitioners claim to have brought suit for and in behalf of the
Producers Bank of the .[24] Indeed, this is the very essence of a derivative suit:
An individual stockholder is permitted to institute a derivative suit on behalf of the corporation wherein
he holds stock in order to protect or vindicate corporate rights, whenever the officials of the corporation
refuse to sue, or are the ones to be sued or hold the control of the corporation. In such actions, the suing
stockholder is regarded as a nominal party, with the corporation as the real party in interest. (Gamboa v.
Victoriano, 90 SCRA 40, 47 [1979]; italics supplied).
In the face of the damaging admissions taken from the complaint in the Second Case, petitioners, quite
strangely, sought to deny that the Second Case was a derivative suit, reasoning that it was brought, not
by the minority shareholders, but by Henry Co et al., who not only own, hold or control over 80% of
the outstanding capital stock, but also constitute the majority in the Board of Directors of petitioner
Bank. That being so, then they really represent the Bank. So, whether they sued derivatively or directly,
there is undeniably an identity of interests/entity represented.
Petitioner also tried to seek refuge in the corporate fiction that the personality of the Bank is separate
and distinct from its shareholders. But the rulings of this Court are consistent: When the fiction is urged
as a means of perpetrating a fraud or an illegal act or as a vehicle for the evasion of an existing
obligation, the circumvention of statutes, the achievement or perfection of a monopoly or generally the
perpetration of knavery or crime, the veil with which the law covers and isolates the corporation from
the members or stockholders who compose it will be lifted to allow for its consideration merely as an
aggregation of individuals.[25]
In addition to the many cases[26] where the corporate fiction has been disregarded, we now add the
instant case, and declare herewith that the corporate veil cannot be used to shield an otherwise blatant
violation of the prohibition against forum-shopping. Shareholders, whether suing as the majority in
direct actions or as the minority in a derivative suit, cannot be allowed to trifle with court processes,
particularly where, as in this case, the corporation itself has not been remiss in vigorously prosecuting
or defending corporate causes and in using and applying remedies available to it. To rule otherwise
would be to encourage corporate litigants to use their shareholders as fronts to circumvent the stringent
rules against forum shopping.
Finally, petitioner Bank argued that there cannot be any forum shopping, even assuming arguendo that
there is identity of parties, causes of action and reliefs sought, because it (the Bank) was the defendant
in the (first) case while it was the plaintiff in the other (Second Case), citing as authority Victronics
Computers, Inc. vs. Regional Trial Court, Branch 63, Makati, etc. et al.,[27] where the Court held:
The rule has not been extended to a defendant who, for reasons known only to him, commences a new
action against the plaintiff - instead of filing a responsive pleading in the other case - setting forth
therein, as causes of action, specific denials, special and affirmative defenses or even counterclaims.
Thus, Velhagens and Kings motion to dismiss Civil Case No. 91-2069 by no means negates the charge
of forum-shopping as such did not exist in the first place. (italics supplied)
Petitioner pointed out that since it was merely the defendant in the original case, it could not have
chosen the forum in said case.
Respondent, on the other hand, replied that there is a difference in factual setting between Victronics
and the present suit. In the former, as underscored in the above-quoted Court ruling, the defendants did
not file any responsive pleading in the first case. In other words, they did not make any denial or raise
any defense or counter-claim therein. In the case before us however, petitioners filed a responsive
pleading to the complaint - as a result of which, the issues were joined.
Indeed, by praying for affirmative reliefs and interposing counter-claims in their responsive pleadings,
the petitioners became plaintiffs themselves in the original case, giving unto themselves the very
remedies they repeated in the Second Case.
Ultimately, what is truly important to consider in determining whether forum-shopping exists or not is
the vexation caused the courts and parties-litigant by a party who asks different courts and/or
administrative agencies to rule on the same or related causes and/or to grant the same or substantially
the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the
different fora upon the same issue. In this case, this is exactly the problem: a decision recognizing the
perfection and directing the enforcement of the contract of sale will directly conflict with a possible
decision in the Second Case barring the parties from enforcing or implementing the said sale. Indeed, a
final decision in one would constitute res judicata in the other.[28]
The foregoing conclusion finding the existence of forum-shopping notwithstanding, the only sanction
possible now is the dismissal of both cases with prejudice, as the other sanctions cannot be imposed
because petitioners present counsel entered their appearance only during the proceedings in this Court,
and the Petitions VERIFICATION/CERTIFICATION contained sufficient allegations as to the
pendency of the Second Case to show good faith in observing Circular 28-91. The lawyers who filed
the Second Case are not before us; thus the rudiments of due process prevent us from motu propio
imposing disciplinary measures against them in this Decision. However, petitioners themselves (and
particularly Henry Co, et al.) as litigants are admonished to strictly follow the rules against forum-
shopping and not to trifle with court proceedings and processes. They are warned that a repetition of
the same will be dealt with more severely.
Having said that, let it be emphasized that this petition should be dismissed not merely because of
forum-shopping but also because of the substantive issues raised, as will be discussed shortly.
The Second Issue: Was The Contract Perfected?
The respondent Court correctly treated the question of whether or not there was, on the basis of the
facts established, a perfected contract of sale as the ultimate issue. Holding that a valid contract has
been established, respondent Court stated:
There is no dispute that the object of the transaction is that property owned by the defendant bank as
acquired assets consisting of six (6) parcels of land specifically identified under Transfer Certificates of
Title Nos. T-106932 to T-106937. It is likewise beyond cavil that the bank intended to sell the property.
As testified to by the Banks Deputy Conservator, Jose Entereso, the bank was looking for buyers of the
property. It is definite that the plaintiffs wanted to purchase the property and it was precisely for this
purpose that they met with defendant Rivera, Manager of the Property Management Department of the
defendant bank, in early August 1987. The procedure in the sale of acquired assets as well as the nature
and scope of the authority of Rivera on the matter is clearly delineated in the testimony of Rivera
himself, which testimony was relied upon by both the bank and by Rivera in their appeal briefs. Thus
(TSN of July 30, 1990. pp. 19-20):
A: The procedure runs this way: Acquired assets was turned over to me and then I published it in the
form of an inter-office memorandum distributed to all branches that these are acquired assets for sale. I
was instructed to advertise acquired assets for sale so on that basis, I have to entertain offer; to accept
offer, formal offer and upon having been offered, I present it to the Committee. I provide the
Committee with necessary information about the property such as original loan of the borrower, bid
price during the foreclosure, total claim of the bank, the appraised value at the time the property is
being offered for sale and then the information which are relative to the evaluation of the bank to buy
which the Committee considers and it is the Committee that evaluate as against the exposure of the
bank and it is also the Committee that submit to the Conservator for final approval and once approved,
we have to execute the deed of sale and it is the Conservator that sign the deed of sale, sir.
The plaintiffs, therefore, at that meeting of August 1987 regarding their purpose of buying the property,
dealt with and talked to the right person. Necessarily, the agenda was the price of the property, and
plaintiffs were dealing with the bank official authorized to entertain offers, to accept offers and to
present the offer to the Committee before which the said official is authorized to discuss information
relative to price determination. Necessarily, too, it being inherent in his authority, Rivera is the officer
from whom official information regarding the price, as determined by the Committee and approved by
the Conservator, can be had. And Rivera confirmed his authority when he talked with the plaintiff in
August 1987. The testimony of plaintiff Demetria is clear on this point (TSN of May 31, 1990, pp. 27-
28):
Q: When you went to the Producers Bank and talked with Mr. Mercurio Rivera, did you ask him point-
blank his authority to sell any property?
A: No, sir. Not point blank although it came from him. (W)hen I asked him how long it would take
because he was saying that the matter of pricing will be passed upon by the committee. And when I
asked him how long it will take for the committee to decide and he said the committee meets every
week. If I am not mistaken Wednesday and in about two weeks (sic) time, in effect what he was saying
he was not the one who was to decide. But he would refer it to the committee and he would relay the
decision of the committee to me.
Q: Please answer the question.
A: He did not say that he had the authority(.) But he said he would refer the matter to the committee
and he would relay the decision to me and he did just like that.
Parenthetically, the Committee referred to was the Past Due Committee of which Luis Co was the
Head, with Jose Entereso as one of the members.
What transpired after the meeting of early August 1987 are consistent with the authority and the duties
of Rivera and the banks internal procedure in the matter of the sale of banks assets. As advised by
Rivera, the plaintiffs made a formal offer by a letter dated stating that they would buy at the price of
P3.5 Million in cash. The letter was for the attention of Mercurio Rivera who was tasked to convey and
accept such offers. Considering an aspect of the official duty of Rivera as some sort of intermediary
between the plaintiffs-buyers with their proposed buying price on one hand, and the bank Committee,
the Conservator and ultimately the bank itself with the set price on the other, and considering further
the discussion of price at the meeting of August resulting in a formal offer of P3.5 Million in cash,
there can be no other logical conclusion than that when, on September 1, 1987, Rivera informed
plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot
basis, such counter-offer price had been determined by the Past Due Committee and approved by the
Conservator after Rivera had duly presented plaintiffs offer for discussion by the Committee of such
matters as original loan of borrower, bid price during foreclosure, total claim of the bank, and market
value. Tersely put, under the established facts, the price of P5.5 Million was, as clearly worded in
Riveras letter (Exh. E), the official and definitive price at which the bank was selling the property.
There were averments by defendants below, as well as before this Court, that the P5.5 Million price
was not discussed by the Committee and that it was merely quoted to start negotiations regarding the
price. As correctly characterized by the trial court, this is not credible. The testimonies of Luis Co and
Jose Entereso on this point are at best equivocal and considering the gratuitous and self-serving
character of these declarations, the banks submission on this point does not inspire belief. Both Co and
Entereso, as members of the Past Due Committee of the bank, claim that the offer of the plaintiff was
never discussed by the Committee. In the same vein, both Co and Entereso openly admit that they
seldom attend the meetings of the Committee. It is important to note that negotiations on the price had
started in early August and the plaintiffs had already offered an amount as purchase price, having been
made to understand by Rivera, the official in charge of the negotiation, that the price will be submitted
for approval by the bank and that the banks decision will be relayed to plaintiffs. From the facts, the
amount of P5.5 Million has a definite significance. It is the official bank price. At any rate, the bank
placed its official, Rivera, in a position of authority to accept offers to buy and negotiate the sale by
having the offer officially acted upon by the bank. The bank cannot turn around and later say, as it now
does, that what Rivera states as the banks action on the matter is not in fact so. It is a familiar doctrine,
the doctrine of ostensible authority, that if a corporation knowingly permits one of its officers, or any
other agent, to do acts within the scope of an apparent authority, and thus holds him out to the public as
possessing power to do those acts, the corporation will, as against any one who has in good faith dealt
with the corporation through such agent, he estopped from denying his authority (Francisco v. GSIS, 7
SCRA 577, 583-584; PNB v. Court of Appeals, 94 SCRA 357, 369-370; Prudential Bank v. Court of
Appeals, G.R. No. 103957, June 14, 1993).[29]
Article 1318 of the Civil Code enumerates the requisites of a valid and perfected contract as follows:
(1) Consent of the contracting parties; (2) Object certain which is the subject matter of the contract; (3)
Cause of the obligation which is established.
There is no dispute on requisite no. 2. The object of the questioned contract consists of the six (6)
parcels of land in Sta. Rosa, Laguna with an aggregate area of about 101 hectares, more or less, and
covered by Transfer Certificates of Title Nos. T-106932 to T-106937. There is, however, a dispute on
the first and third requisites.
Petitioners allege that there is no counter-offer made by the Bank, and any supposed counter-offer
which Rivera (or Co) may have made is unauthorized. Since there was no counter-offer by the Bank,
there was nothing for Ejercito (in substitution of Demetria and Janolo) to accept.[30] They disputed the
factual basis of the respondent Courts findings that there was an offer made by Janolo for P3.5 million,
to which the Bank counter-offered P5.5 million. We have perused the evidence but cannot find fault
with the said Courts findings of fact. Verily, in a petition under Rule 45 such as this, errors of fact -if
there be any - are, as a rule, not reviewable. The mere fact that respondent Court (and the trial court as
well) chose to believe the evidence presented by respondent more than that presented by petitioners is
not by itself a reversible error. in fact, such findings merit serious consideration by this Court,
particularly where, as in this case, said courts carefully and meticulously discussed their findings. This
is basic.
Be that as it may, and in addition to the foregoing disquisitions by the Court of Appeals, let us review
the question of Riveras authority to act and petitioners allegations that the P5.5 million counter-offer
was extinguished by the P4.25 million revised offer of Janolo. Here, there are questions of law which
could be drawn from the factual findings of the respondent Court. They also delve into the contractual
elements of consent and cause.
The authority of a corporate officer in dealing with third persons may be actual or apparent. The
doctrine of apparent authority, with special reference to banks, was laid out in Prudential Bank vs.
Court of Appeals,[31] where it was held that:
Conformably, we have declared in countless decisions that the principal is liable for obligations
contracted by the agent. The agents apparent representation yields to the principals true representation
and the contract is considered as entered into between the principal and the third person (citing
National Food Authority vs. Intermediate Appellate Court, 184 SCRA 166).
A bank is liable for wrongful acts of its officers done in the interests of the bank or in the course of
dealings of the officers in their representative capacity but not for acts outside the scope of their
authority (9 C.J.S., p. 417). A bank holding out its officers and agents as worthy of confidence will not
be permitted to profit by the frauds they may thus be enabled to perpetrate in the apparent scope of
their employment; nor will it be permitted to shirk its responsibility for such frauds, even though no
benefit may accrue to the bank therefrom (10 Am Jur 2d, p. 114). Accordingly, a banking corporation is
liable to innocent third persons where the representation is made in the course of its business by an
agent acting within the general scope of his authority even though, in the particular case, the agent is
secretly abusing his authority and attempting to perpetrate a fraud upon his principal or some other
person, for his own ultimate benefit (McIntosh v. Dakota Trust Co., 52 ND 752, 204 NW 818, 40 ALR
1021).
Application of these principles is especially necessary because banks have a fiduciary relationship with
the public and their stability depends on the confidence of the people in their honesty and efficiency.
Such faith will be eroded where banks do not exercise strict care in the selection and supervision of its
employees, resulting in prejudice to their depositors.
From the evidence found by respondent Court, it is obvious that petitioner Rivera has apparent or
implied authority to act for the Bank in the matter of selling its acquired assets. This evidence includes
the following:
(a) The petition itself in par. II-1 (p. 3) states that Rivera was at all times material to this case, Manager
of the Property Management Department of the Bank. By his own admission, Rivera was already the
person in charge of the Banks acquired assets (TSN, August 6, 1990, pp. 8-9);
(b) As observed by respondent Court, the land was definitely being sold by the Bank. And during the
initial meeting between the buyers and Rivera, the latter suggested that the buyers offer should be no
less than P3.3 million (TSN, April 26, 1990, pp. 16-17);
(c) Rivera received the buyers letter dated offering P3.5 million (TSN, 30 July 1990, p. 11);
(d) Rivera signed the letter dated offering to sell the property for P5.5 million (TSN, July 30, p. 11);
(e) Rivera received the letter dated containing the buyers proposal to buy the property for P4.25 million
(TSN, July 30, 1990, p. 12);
(f) Rivera, in a telephone conversation, confirmed that the P5.5 million was the final price of the Bank
(TSN, January 16, 1990, p. 18);
(g) Rivera arranged the meeting between the buyers and Luis Co on , during which the Banks offer of
P5.5 million was confirmed by Rivera (TSN, April 26, 1990, pp. 34-35). At said meeting, Co, a major
shareholder and officer of the Bank, confirmed Riveras statement as to the finality of the Banks
counter-offer of P5.5 million (TSN, January 16, 1990, p. 21; TSN, April 26, 1990, p. 35);
(h) In its newspaper advertisements and announcements, the Bank referred to Rivera as the officer
acting for the Bank in relation to parties interested in buying assets owned/acquired by the Bank. In
fact, Rivera was the officer mentioned in the Banks advertisements offering for sale the property in
question (cf. Exhs. S and S-I).
In the very recent case of Limketkai Sons Milling, Inc. vs. Court of Appeals, et al.,[32] the Court,
through Justice Jose A. R. Melo, affirmed the doctrine of apparent authority as it held that the apparent
authority of the officer of the Bank of P.I. in charge of acquired assets is borne out by similar
circumstances surrounding his dealings with buyers.
To be sure, petitioners attempted to repudiate Riveras apparent authority through documents and
testimony which seek to establish Riveras actual authority. These pieces of evidence, however, are
inherently weak as they consist of Riveras self-serving testimony and various inter-office memoranda
that purport to show his limited actual authority, of which private respondent cannot be charged with
knowledge. In any event, since the issue is apparent authority, the existence of which is borne out by
the respondent Courts findings, the evidence of actual authority is immaterial insofar as the liability of
a corporation is concerned.[33]
Petitioners also argued that since Demetria and Janolo were experienced lawyers and their law firm had
once acted for the Bank in three criminal cases, they should be charged with actual knowledge of
Riveras limited authority. But the Court of Appeals in its Decision (p. 12) had already made a factual
finding that the buyers had no notice of Riveras actual authority prior to the sale. In fact, the Bank has
not shown that they acted as its counsel in respect to any acquired assets; on the other hand, respondent
has proven that Demetria and Janolo merely associated with a loose aggrupation of lawyers (not a
professional partnership), one of whose members (Atty. Susana Parker) acted in said criminal cases.
Petitioners also alleged that Demetrias and Janolos P4.25 million counter-offer in the letter dated
extinguished the Banks offer of P5.5 million.[34] They disputed the respondent Courts finding that there
was a meeting of minds when on 30 September 1987 Demetria and Janolo through Annex L (letter
dated September 30, 1987) accepted Riveras counter offer of P5.5 million under Annex J (letter dated
September 17, 1987), citing the late Justice Paras,[35] Art. 1319 of the Civil Code[36] and related
Supreme Court rulings starting with Beaumont vs. Prieto.[37]
However, the above-cited authorities and precedents cannot apply in the instant case because, as found
by the respondent Court which reviewed the testimonies on this point, what was accepted by Janolo in
his letter dated September 30, 1987 was the Banks offer of P5.5 million as confirmed and reiterated to
Demetria and Atty. Jose Fajardo by Rivera and Co during their meeting on September 28, 1987. Note
that the said letter of 30, 1987 begins with (p)ursuant to our discussion last 28 September 1987 x x x.
Petitioners insist that the respondent Court should have believed the testimonies of Rivera and Co that
the meeting was meant to have the offerors improve on their position of P5.5 million.[38] However, both
the trial court and the Court of Appeals found petitioners testimonial evidence not credible, and we find
no basis for changing this finding of fact.
Indeed, we see no reason to disturb the lower courts (both the RTC and the CA) common finding that
private respondents evidence is more in keeping with truth and logic - that during the meeting on
September 28, 1987, Luis Co and Rivera confirmed that the P5.5 million price has been passed upon by
the Committee and could no longer be lowered (TSN of April 27, 1990, pp. 34-35).[39] Hence, assuming
arguendo that the counter-offer of P4.25 million extinguished the offer of P5.5 million, Luis Cos
reiteration of the said P5.5 million price during the meeting revived the said offer. And by virtue of the
letter accepting this revived offer, there was a meeting of the minds, as the acceptance in said letter was
absolute and unqualified.
We note that the Banks repudiation, through Conservator Encarnacion, of Riveras authority and action,
particularly the latters counter-offer of P5.5 million, as being unauthorized and illegal came only on
May 12, 1988 or more than seven (7) months after Janolos acceptance. Such delay, and the absence of
any circumstance which might have justifiably prevented the Bank from acting earlier, clearly
characterizes the repudiation as nothing more than a last-minute attempt on the Banks part to get out of
a binding contractual obligation.
Taken together, the factual findings of the respondent Court point to an implied admission on the part
of the petitioners that the written offer made on was carried through during the meeting of . This is the
conclusion consistent with human experience, truth and good faith.
It also bears noting that this issue of extinguishment of the Banks offer of P5.5 million was raised for
the first time on appeal and should thus be disregarded.
This Court in several decisions has repeatedly adhered to the principle that points of law, theories,
issues of fact and arguments not adequately brought to the attention of the trial court need not be, and
ordinarily will not be, considered by a reviewing court, as they cannot be raised for the first time on
appeal (Santos vs. IAC, No. 74243, November 14, 1986, 145 SCRA 592).[40]
xxx It is settled jurisprudence that an issue which was neither averred in the complaint nor raised
during the trial in the court below cannot be raised for the first time on appeal as it would be offensive
to the basic rules of fair play, justice and due process (Dihiansan vs. CA, 153 SCRA 713 [1987];
Anchuelo vs. IAC, 147 SCRA 434 [1987]; Dulos Realty & Development Corp. vs. CA, 157 SCRA 425
[1988]; Ramos vs. IAC, 175 SCRA 70 [1989]; Gevero vs. IAC, G.R. 77029, August 30, 1990).[41]
Since the issue was not raised in the pleadings as an affirmative defense, private respondent was not
given an opportunity in the trial court to controvert the same through opposing evidence. Indeed, this is
a matter of due process. But we passed upon the issue anyway, if only to avoid deciding the case on
purely procedural grounds, and we repeat that, on the basis of the evidence already in the record and as
appreciated by the lower courts, the inevitable conclusion is simply that there was a perfected contract
of sale.
The Third Issue: Is the Contract Enforceable?
The petition alleged:[42]
Even assuming that Luis Co or Rivera did relay a verbal offer to sell at P5.5 million during the meeting
of 28 September 1987, and it was this verbal offer that Demetria and Janolo accepted with their letter of
30 September 1987, the contract produced thereby would be unenforceable by action - there being no
note, memorandum or writing subscribed by the Bank to evidence such contract. (Please see Article
1403[2], Civil Code.)
Upon the other hand, the respondent Court in its Decision (p. 14) stated:
x x x Of course, the banks letter of September 1, 1987 on the official price and the plaintiffs acceptance
of the price on September 30, 1987, are not, in themselves, formal contracts of sale. They are however
clear embodiments of the fact that a contract of sale was perfected between the parties, such contract
being binding in whatever form it may have been entered into (case citations omitted). Stated simply,
the banks letter of , taken together with plaintiffs letter dated , constitute in law a sufficient
memorandum of a perfected contract of sale.
The respondent Court could have added that the written communications commenced not only from but
from Janolos letter. We agree that, taken together, these letters constitute sufficient memoranda - since
they include the names of the parties, the terms and conditions of the contract, the price and a
description of the property as the object of the contract.
But let it be assumed arguendo that the counter-offer during the meeting on did constitute a new offer
which was accepted by Janolo on . Still, the statute of frauds will not apply by reason of the failure of
petitioners to object to oral testimony proving petitioner Banks counter-offer of P5.5 million. Hence,
petitioners - by such utter failure to object - are deemed to have waived any defects of the contract
under the statute of frauds, pursuant to Article 1405 of the Civil Code:
Art. 1405. Contracts infringing the Statute of Frauds, referred to in No. 2 of Article 1403, are ratified
by the failure to object to the presentation of oral evidence to prove the same, or by the acceptance of
benefits under them.
As private respondent pointed out in his Memorandum, oral testimony on the reaffirmation of the
counter-offer of P5.5 million is aplenty -and the silence of petitioners all throughout the presentation
makes the evidence binding on them thus:
A - Yes, sir. I think it was and I was again present because Atty. Demetria told me to accompany him
and we were able to meet Luis Co at the Bank.
xxx xxx xxx
Q - Now, what transpired during this meeting with Luis Co of the Producers Bank?
A - Atty. Demetria asked Mr. Luis Co whether the price could be reduced, sir.
Q - What price?
A - The 5.5 million pesos and Mr. Luis Co said that the amount cited by Mr. Mercurio Rivera is the
final price and that is the price they intends (sic) to have, sir.
Q - What do you mean?
A - That is the amount they want, sir.
Q - What is the reaction of the plaintiff Demetria to Luis Cos statment (sic) that the defendant Riveras
counter-offer of 5.5 million was the defendants bank (sic) final offer?
A - He said in a day or two, he will make final acceptance, sir.
Q - What is the response of Mr. Luis Co?
A - He said he will wait for the position of Atty. Demetria, sir.
[Direct testimony of Atty. Jose Fajardo, TSN, , at pp. 18-21.]
----0----
Q - What transpired during that meeting between you and Mr. Luis Co of the defendant Bank?
A - We went straight to the point because he being a busy person, I told him if the amount of P5.5
million could still be reduced and he said that was already passed upon by the committee. What the
bank expects which was contrary to what Mr. Rivera stated. And he told me that is the final offer of the
bank P5.5 million and we should indicate our position as soon as possible.
Q - What was your response to the answer of Mr. Luis Co?
A - I said that we are going to give him our answer in a few days and he said that was it. Atty. Fajardo
and I and Mr. Mercurio [Rivera] was with us at the time at his office.
Q - For the record, your Honor please, will you tell this Court who was with Mr. Co in his Office in
during this meeting?
A - Mr. Co himself, Mr. Rivera, Atty. Fajardo and I.
Q - By Mr. Co you are referring to?
A - Mr. Luis Co.
Q - After this meeting with Mr. Luis Co, did you and your partner accede on (sic) the counter offer by
the bank?
A - Yes, sir, we did. Two days thereafter we sent our acceptance to the bank which offer we accepted,
the offer of the bank which is P5.5 million.
[Direct testimony of Atty. Demetria, TSN, , at pp. 34-36.]
---- 0 ----
Q - According to Atty. Demetrio Demetria, the amount of P5.5 million was reached by the Committee
and it is not within his power to reduce this amount. What can you say to that statement that the amount
of P5.5 million was reached by the Committee?
A - It was not discussed by the Committee but it was discussed initially by Luis Co and the group of
Atty. Demetrio Demetria and Atty. Pajardo (sic), in that September 28, 1987 meeting, sir.
[Direct testimony of Mercurio Rivera, TSN, , pp. 14-15.]
The Fourth Issue: May the Conservator Revoke
the Perfected and Enforceable Contract?
It is not disputed that the petitioner Bank was under a conservator placed by the Central Bank of the
during the time that the negotiation and perfection of the contract of sale took place. Petitioners
energetically contended that the conservator has the power to revoke or overrule actions of the
management or the board of directors of a bank, under Section 28-A of Republic Act No. 265
(otherwise known as the Central Bank Act) as follows:
Whenever, on the basis of a report submitted by the appropriate supervising or examining department,
the Monetary Board finds that a bank or a non-bank financial intermediary performing quasi - banking
functions is in a state of continuing inability or unwillingness to maintain a state of liquidity deemed
adequate to protect the interest of depositors and creditors, the Monetary Board may appoint a
conservator to take charge of the assets, liabilities, and the management of that institution, collect all
monies and debts due said institution and exercise all powers necessary to preserve the assets of the
institution, reorganize the management thereof, and restore its viability. He shall have the power to
overrule or revoke the actions of the previous management and board of directors of the bank or non-
bank financial intermediary performing quasi-banking functions, any provision of law to the contrary
notwithstanding, and such other powers as the Monetary Board shall deem necessary.
In the first place, this issue of the Conservators alleged authority to revoke or repudiate the perfected
contract of sale was raised for the first time in this Petition - as this was not litigated in the trial court or
Court of Appeals. As already stated earlier, issues not raised and/or ventilated in the trial court, let
alone in the Court of Appeals, cannot be raised for the first time on appeal as it would be offensive to
the basic rules of fair play, justice and due process.[43]
In the second place, there is absolutely no evidence that the Conservator, at the time the contract was
perfected, actually repudiated or overruled said contract of sale. The Banks acting conservator at the
time, Rodolfo Romey, never objected to the sale of the property to Demetria and Janolo. What
petitioners are really referring to is the letter of Conservator Encarnacion, who took over from Romey
after the sale was perfected on (Annex V, petition) which unilaterally repudiated - not the contract - but
the authority of Rivera to make a binding offer - and which unarguably came months after the
perfection of the contract. Said letter dated is reproduced hereunder:
May 12, 1988
Atty. Noe C. Zarate
Zarate Carandang Perlas & Ass.
Suite 323 Rufino Building
Ayala Avenue, Makati, Metro Manila
Dear Atty. Zarate:
This pertains to your letter dated May 5, 1988 on behalf of Attys. Janolo and Demetria regarding the
six (6) parcels of land located at Sta. Rosa, Laguna.
We deny that Producers Bank has ever made a legal counter-offer to any of your clients nor perfected a
contract to sell and buy with any of them for the following reasons.
In the Inter-Office Memorandum dated April 25, 1986 addressed to and approved by former Acting
Conservator Mr. Andres I. Rustia, Producers Bank Senior Manager Perfecto M. Pascua detailed the
functions of Property Management Department (PMD) staff and officers (Annex A), you will
immediately read that Manager Mr. Mercurio Rivera or any of his subordinates has no authority,
power or right to make any alleged counter-offer. In short, your lawyer-clients did not deal with the
authorized officers of the bank.
Moreover, under Secs. 23 and 36 of the Corporation Code of the Philippines (Batas Pambansa Blg. 68)
and Sec. 28-A of the Central Bank Act (Rep. Act No. 265, as amended), only the Board of
Directors/Conservator may authorize the sale of any property of the corporation/bank.
Our records do not show that Mr. Rivera was authorized by the old board or by any of the bank
conservators (starting January, 1984) to sell the aforesaid property to any of your clients. Apparently,
what took place were just preliminary discussions/ consultations between him and your clients, which
everyone knows cannot bind the Banks Board or Conservator.
We are, therefore, constrained to refuse any tender of payment by your clients, as the same is patently
violative of corporate and banking laws. We believe that this is more than sufficient legal justification
for refusing said alleged tender.
Rest assured that we have nothing personal against your clients. All our acts are official, legal and in
accordance with law. We also have no personal interest in any of the properties of the Bank.
Please be advised accordingly.
Very truly yours,
(Sgd.) Leonida T. Encarnacion
LEONIDA T. ENCARNACION
Acting Conservator
In the third place, while admittedly, the Central Bank law gives vast and far-reaching powers to the
conservator of a bank, it must be pointed out that such powers must be related to the (preservation of)
the assets of the bank, (the reorganization of) the management thereof and (the restoration of) its
viability. Such powers, enormous and extensive as they are, cannot extend to the post-facto repudiation
of perfected transactions, otherwise they would infringe against the non-impairment clause of the
Constitution.[44] If the legislature itself cannot revoke an existing valid contract, how can it delegate
such non-existent powers to the conservator under Section 28-A of said law?
Obviously, therefore, Section 28-A merely gives the conservator power to revoke contracts that are,
under existing law, deemed to be defective - i.e., void, voidable, unenforceable or rescissible. Hence,
the conservator merely takes the place of a banks board of directors. What the said board cannot do -
such as repudiating a contract validly entered into under the doctrine of implied authority - the
conservator cannot do either. Ineluctably, his power is not unilateral and he cannot simply repudiate
valid obligations of the Bank. His authority would be only to bring court actions to assail such contracts
- as he has already done so in the instant case. A contrary understanding of the law would simply not be
permitted by the Constitution. Neither by common sense. To rule otherwise would be to enable a failing
bank to become solvent, at the expense of third parties, by simply getting the conservator to unilaterally
revoke all previous dealings which had one way or another come to be considered unfavorable to the
Bank, yielding nothing to perfected contractual rights nor vested interests of the third parties who had
dealt with the Bank.
The Fifth Issue: Were There Reversible Errors of Fact?
Basic is the doctrine that in petitions for review under Rule 45 of the Rules of Court, findings of fact by
the Court of Appeals are not reviewable by the Supreme Court. In Andres vs. Manufacturers Hanover
& Trust Corporation,[45] we held:
x x x. The rule regarding questions of fact being raised with this Court in a petition for certiorari under
Rule 45 of the Revised Rules of Court has been stated in Remalante vs. Tibe, G.R. No. 59514, February
25, 1988, 158 SCRA 138, thus:
The rule in this jurisdiction is that only questions of law may be raised in a petition for certiorari
under Rule 45 of the Revised Rules of Court. The jurisdiction of the Supreme Court in cases brought to
it from the Court of Appeals is limited to reviewing and revising the errors of law imputed to it, its
findings of the fact being conclusive [Chan vs. Court of Appeals, G.R. No. L-27488, June 30, 1970, 33
SCRA 737, reiterating a long line of decisions]. This Court has emphatically declared that it is not the
function of the Supreme Court to analyze or weigh such evidence all over again, its jurisdiction being
limited to reviewing errors of law that might have been committed by the lower court (Tiongco v. De la
Merced, G.R. No. L-24426, July 25, 1974, 58 SCRA 89; Corona vs. Court of Appeals, G.R. No. L-
62482, April 28, 1983, 121 SCRA 865; Baniqued vs. Court of Appeals, G.R. No. L-47531, February 20,
1984, 127 SCRA 596). Barring, therefore, a showing that the findings complained of are totally devoid
of support in the record, or that they are so glaringly erroneous as to constitute serious abuse of
discretion, such findings must stand, for this Court is not expected or required to examine or contrast
the oral and documentary evidence submitted by the parties [Santa Ana, Jr. vs. Hernandez, G.R. No. L-
16394, December 17, 1966, 18 SCRA 973] [at pp. 144-145.]
Likewise, in Bernardo vs. Court of Appeals,[46] we held:
The resolution of this petition invites us to closely scrutinize the facts of the case, relating to the
sufficiency of evidence and the credibility of witnesses presented. This Court so held that it is not the
function of the Supreme Court to analyze or weigh such evidence all over again. The Supreme Courts
jurisdiction is limited to reviewing errors of law that may have been committed by the lower court. The
Supreme Court is not a trier of facts. x x x
As held in the recent case of Chua Tiong Tay vs. Court of Appeals and Goldrock Construction and
Development Corp.:[47]
The Court has consistently held that the factual findings of the trial court, as well as the Court of
Appeals, are final and conclusive and may not be reviewed on appeal. Among the exceptional
circumstances where a reassessment of facts found by the lower courts is allowed are when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; when the inference
made is manifestly absurd, mistaken or impossible; when there is grave abuse of discretion in the
appreciation of facts; when the judgment is premised on a misapprehension of facts; when the findings
went beyond the issues of the case and the same are contrary to the admissions of both appellant and
appellee. After a careful study of the case at bench, we find none of the above grounds present to justify
the re-evaluation of the findings of fact made by the courts below.
In the same vein, the ruling of this Court in the recent case of South Sea Surety and Insurance
Company, Inc. vs. Hon. Court of Appeals, et al.[48] is equally applicable to the present case:
We see no valid reason to discard the factual conclusions of the appellate court. x x x (I)t is not the
function of this Court to assess and evaluate all over again the evidence, testimonial and documentary,
adduced by the parties, particularly where, such as here, the findings of both the trial court and the
appellate court on the matter coincide. (italics supplied)
Petitioners, however, assailed the respondent Courts Decision as fraught with findings and conclusions
which were not only contrary to the evidence on record but have no bases at all, specifically the
findings that (1) the Banks counter-offer price of P5.5 million had been determined by the past due
committee and approved by conservator Romey, after Rivera presented the same for discussion and (2)
the meeting with Co was not to scale down the price and start negotiations anew, but a meeting on the
already determined price of P5.5 million. Hence, citing Philippine National Bank vs. Court of Appeals,
[49] petitioners are asking us to review and reverse such factual findings.

The first point was clearly passed upon by the Court of Appeals,[50] thus:
There can be no other logical conclusion than that when, on September 1, 1987, Rivera informed
plaintiffs by letter that the banks counter-offer is at P5.5 Million for more than 101 hectares on lot
basis, such counter-offer price had been determined by the Past Due Committee and approved by the
Conservator after Rivera had duly presented plaintiffs offer for discussion by the Committee x x x.
Tersely put, under the established fact, the price of P5.5 Million was, as clearly worded in Riveras letter
(Exh. E), the official and definitive price at which the bank was selling the property. (p. 11, CA
Decision)
xxx xxx xxx
xxx. The argument deserves scant consideration. As pointed out by plaintiff, during the meeting of
September 28, 1987 between the plaintiffs, Rivera and Luis Co, the senior vice-president of the bank,
where the topic was the possible lowering of the price, the bank official refused it and confirmed that
the P5.5 Million price had been passed upon by the Committee and could no longer be lowered (TSN
of April 27, 1990, pp. 34-35) (p. 15, CA Decision).
The respondent Court did not believe the evidence of the petitioners on this point, characterizing it as
not credible and at best equivocal, and considering the gratuitous and self-serving character of these
declarations, the banks submissions on this point do not inspire belief.
To become credible and unequivocal, petitioners should have presented then Conservator Rodolfo
Romey to testify on their behalf, as he would have been in the best position to establish their thesis.
Under the rules on evidence,[51] such suppression gives rise to the presumption that his testimony would
have been adverse, if produced.
The second point was squarely raised in the Court of Appeals, but petitioners evidence was deemed
insufficient by both the trial court and the respondent Court, and instead, it was respondents
submissions that were believed and became bases of the conclusions arrived at.
In fine, it is quite evident that the legal conclusions arrived at from the findings of fact by the lower
courts are valid and correct. But the petitioners are now asking this Court to disturb these findings to fit
the conclusion they are espousing. This we cannot do.
To be sure, there are settled exceptions where the Supreme Court may disregard findings of fact by the
Court of Appeals.[52] We have studied both the records and the CA Decision and we find no such
exceptions in this case. On the contrary, the findings of the said Court are supported by a
preponderance of competent and credible evidence. The inferences and conclusions are reasonably
based on evidence duly identified in the Decision. Indeed, the appellate court patiently traversed and
dissected the issues presented before it, lending credibility and dependability to its findings. The best
that can be said in favor of petitioners on this point is that the factual findings of respondent Court did
not correspond to petitioners claims, but were closer to the evidence as presented in the trial court by
private respondent. But this alone is no reason to reverse or ignore such factual findings, particularly
where, as in this case, the trial court and the appellate court were in common agreement thereon.
Indeed, conclusions of fact of a trial judge - as affirmed by the Court of Appeals - are conclusive upon
this Court, absent any serious abuse or evident lack of basis or capriciousness of any kind, because the
trial court is in a better position to observe the demeanor of the witnesses and their courtroom manner
as well as to examine the real evidence presented.
Epilogue
In summary, there are two procedural issues involved - forum-shopping and the raising of issues for the
first time on appeal [viz., the extinguishment of the Banks offer of P5.5 million and the conservators
powers to repudiate contracts entered into by the Banks officers] - which per se could justify the
dismissal of the present case. We did not limit ourselves thereto, but delved as well into the substantive
issues - the perfection of the contract of sale and its enforceability, which required the determination of
questions of fact. While the Supreme Court is not a trier of facts and as a rule we are not required to
look into the factual bases of respondent Courts decisions and resolutions, we did so just the same, if
only to find out whether there is reason to disturb any of its factual findings, for we are only too aware
of the depth, magnitude and vigor by which the parties, through their respective eloquent counsel,
argued their positions before this Court.
We are not unmindful of the tenacious plea that the petitioner Bank is operating abnormally under a
government-appointed conservator and there is need to rehabilitate the Bank in order to get it back on
its feet x x x as many people depend on (it) for investments, deposits and well as employment. As of
June 1987, the Banks overdraft with the Central Bank had already reached P1.023 billion x x x and
there were (other) offers to buy the subject properties for a substantial amount of money.[53]
While we do not deny our sympathy for this distressed bank, at the same time, the Court cannot
emotionally close its eyes to overriding considerations of substantive and procedural law, like respect
for perfected contracts, non-impairment of obligations and sanctions against forum-shopping, which
must be upheld under the rule of law and blind justice.
This Court cannot just gloss over private respondents submission that, while the subject properties may
currently command a much higher price, it is equally true that at the time of the transaction in 1987, the
price agreed upon of P5.5 million was reasonable, considering that the Bank acquired these properties
at a foreclosure sale for no more than P 3.5 million.[54] That the Bank procrastinated and refused to
honor its commitment to sell cannot now be used by it to promote its own advantage, to enable it to
escape its binding obligation and to reap the benefits of the increase in land values. To rule in favor of
the Bank simply because the property in question has algebraically accelerated in price during the long
period of litigation is to reward lawlessness and delays in the fulfillment of binding contracts.
Certainly, the Court cannot stamp its imprimatur on such outrageous proposition.
WHEREFORE, finding no reversible error in the questioned Decision and Resolution, the Court
hereby DENIES the petition. The assailed Decision is AFFIRMED. Moreover, petitioner Bank is
REPRIMANDED for engaging in forum-shopping and WARNED that a repetition of the same or
similar acts will be dealt with more severely. Costs against petitioners.
SO ORDERED.

RULE 9

[G.R. No. 113150. March 29, 1999]

HENRY TANCHAN, doing business under the name and style FOREMOST INDUSTRIAL SALES,
petitioner, vs. COURT OF APPEALS and, PHILIPPINE ROCK PRODUCTS, INC., respondents.
DECISION
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court which seeks
to set aside the Decision[1] of the Court Appeals[2], reversing the Decision[3] of the Regional Trial
Court of Cebu, Branch 24[4], in Civil Case No. CEB -10026, and remanding the case to the court of
origin for further proceedings.
The controversy stemmed from a hauling agreement whereby petitioner Henry Tanchan undertook to
haul the construction materials of the private respondent Phil. Rock Products Inc., in Cebu.
On March 18, 1990, petitioner Henry Tanchan brought an action[5] against the private respondent for
collection of sum of money in the amount of P1,177,367.27 covering the period from March 1990 to
September 1990 plus 2% penalty and 2% interest per month and 25% attorney's fees, docketed as Civil
Case No. CEB-10026 before Branch 24 of the Regional Trial Court in Cebu City.
On August 22, 1991, the private respondent interposed a motion[6] to dismiss on the ground of
improper venue, theorizing that the proper court of Rizal had the exclusive jurisdiction thereover
pursuant to paragraph thirteen (13) of the contract sued upon which reads:
"13. Any action arising out of this Agreement shall be submitted to the jurisdiction of the proper court
in Rizal with the prevailing party being entitled to attorney's fees.[7] (emphasis supplied)
On June 3, 1991, after the denial of private respondent's motion to dismiss, the trial court directed the
movant to file its answer within fifteen (15) days from notice.
On July 1, 1990, instead of complying with the Order of the trial court the private respondent went to
the Court of Appeals on a Petition for Certiorari and Prohibition seeking to annul the said Order and to
enjoin the trial court from proceeding with the case.
On March 30, 1990, petitioner presented a motion[8] to declare the private respondent in default
contending that the filing of a petition for Certiorari and Prohibition with the Court of Appeals did not
suspend the reglementary period within which to file an answer. In opposition[9] thereto, the private
respondent theorized that it could not yet file its answer because of the pendency of its Petition before
the appellate Court. It was private respondent's stance that to file an answer would amount to
submission to the jurisdiction of the court and in turn, would be construed as a waiver of its objection
to the venue of the case.
On April 29, 1992, the trial court declared the private respondent in default. The Order[10] declaring it
in default was received by the private respondent on May 4, 1992. On the other hand, private
respondent's Petition for Certiorari was dismissed by the Court of Appeals"[11] on April 30, 1992.
Copy of the Decision[12] of the Court of Appeals was received by the private respondent on May 19,
1992, on which very day, the petitioner presented his evidence ex-parte.
On May 28, 1992, the private respondent filed with the trial court a motion[13] to lift the order of
default and to admit its answer, copy of which was attached to the said motion.
On June 23, 1992 the trial court a quo denied subject motion of private respondent and considered the
case submitted for decision on the basis of the evidence adduced by petitioner.
On July 2, 1992, the lower court came out with its decision, disposing thus:
"WHEREFORE, in view of all the foregoing, judgment is hereby rendered sentencing the defendant to
pay the plaintiff the amount of P3,553,896.10 plus interest thereon at 2% per month from May 15, 1992
as well as penalty charge of 2% per month from May 15, 1992 until fully paid and P490,118.52 as
attorney's fees.
SO ORDERED.[14]
On appeal by the private respondent to the Court of Appeals, it assigned as errors, that:
"A THE LOWER COURT ERRED IN ASSUMING JURISDICTION OVER THE CASE
NOTWITHSTANDING THE CLEAR STIPULATION OF THE PARTIES THAT THE VENUE OF
ANY COURT ACTION SHALL BE INSTITUTED AT ANY PROPER COURT OF RIZAL.
B. THE LOWER COURT ERRED IN DENYING DEFENDANT-APPELLANT'S MOTION TO LIFT
ORDER OF DEFAULT AND TO AFFORD APPELLANT ITS DAY IN COURT.
C. THE LOWER COURT ERRED IN AWARDING WITHOUT SUFFICIENT BASIS THE
PRINCIPAL AMOUNT OF P1,960,474.17.
D. THE LOWER COURT ERRED IN AWARDING THE INTEREST OF TWELVE PERCENT (12%)
PER ANNUM DESPITE THE ABSENCE OF ANY STIPULATION AS TO INTEREST IN THE
CONTRACT BETWEEN THE PARTIES.
E. THE LOWER COURT ERRED IN AWARDING WITHOUT SUFFICIENT BASIS PENALTY
INTEREST OF TWELVE PERCENT (12%) PER ANNUM AS WELL AS ATTORNEY'S FEES OF
TWENTY FIVE PERCENT (25%) OF THE AMOUNT ALLEGEDLY DUE.[15]
On November 26, 1993, the Court of Appeals set aside the decision appealed from and remanded the
case to the lower court of origin for further proceedings, to wit:
"WHEREFORE, the Decision appealed from is hereby REVERSED and SET ASIDE and the records of
the case will be remanded to the court a quo for further proceedings.
SO ORDERED.[16]
Dissatisfied with the aforesaid decision, petitioner found his way to this court via Petition for Review
on Certiorari at bar, theorizing that:
"I THE RESPONDENT COURT ERRED IN NOT HOLDING THAT THE MOTION TO LIFT
ORDER OF DEFAULT WAS FILED LATE AND NOT IN THE PROPER FORM.
II THE RESPONDENT COURT ERRED IN NOT HOLDING THAT PRIVATE RESPONDENT
OBSTINATELY REFUSED TO FILE ITS ANSWER TO THE COMPLAINT FOR EIGHT AND A
HALF (8 1/2) MONTHS.
III THE RESPONDENT COURT ERRED IN NOT HOLDING THAT PRIVATE RESPONDENT'S
DEFENSE WAS SHAM AND FALSE.
IV THE RESPONDENT COURT GRAVELY ABUSED ITS DISCRETION IN REMANDING THE
CASE TO THE LOWER COURT FOR FURTHER PROCEEDINGS INSTEAD OF DECIDING THE
CASE ON THE MERITS THUS PREJUDICING THE SUBSTANTIAL RIGHTS OF THE
PETITIONER WHO HAS NOT BEEN PAID A SINGLE CENTAVO BY PRIVATE RESPONDENT
ON HIS CLAIM IN THE SUBSTANTIAL SUM OF P 1,177,376.27 FOR THE PAST THREE (3)
YEARS.[17]
The petition is not impressed with merit.
The pivot of inquiry here is the propriety of the Decision of the respondent court setting aside the order
of default and remanding the case to the court a quo for further proceedings.
Section 3, Subparagraph (b), Rule 9, of the Revised Rules of Court, provides:
"(b) Relief from order of default. - A party declared in default may at anytime after notice thereof and
before judgment file a motion under oath to set aside the order of default upon proper showing that his
failure to answer was due to fraud, accident, mistake and excusable negligence and that he has a
meritorious defense. In such case, the order of default may be set aside on such terms and conditions
as the judge may impose in the interest of justice. (emphasis supplied)
It is thus required that the motion must be verified and accompanied by an affidavit of merits.[18]
Records on hand show that the private respondent filed its motion to set aside the order of default on
May 28, 1992, four days before the court of origin rendered its Decision of July 2, 1992. It is, therefore,
beyond cavil that the motion of private respondent to set aside the order of default was seasonably filed
within the reglementary period prescribed in Section 3, subparagraph (b), Rule 9 of the Revised Rules
of Court.
So also, the Court finds that the motion to set aside the order of default was in proper form though not
accompanied by an affidavit of merits. The answer which was attached to the motion set forth the
reason for its failure to answer within the required period. In Lim Tanhu vs. Ramolete[19], the Court
ruled thus:
"x x x when a motion to lift the order of default contains the reasons for the failure to answer as well as
the facts constituting the prospective defense of the defendant and it is sworn to by said defendant,
neither a formal verification nor a separate affidavit of merit is necessary.[20]
Under the aforestated circumstances, the court believes, and so holds, that the private respondent's
failure to file an answer on time is excusable. Private respondent was of the perception that to file an
answer while his Petition for Certiorari and Prohibition was pending resolution before the Court of
Appeals, would constitute voluntary submission to the jurisdiction of the Regional Trial Court of Cebu
and would render moot and academic the very issue raised in his Petition.
In sustaining the theory of the private respondent, the Court of Appeals held:
"As a rule, in order to cause the lifting of a default order, the mistake must be one of fact, and not of
law. But, 'if a mistake of law is a reasonable one under the facts as they are made to appear, the failure
to file an answer because of the belief entertained is at least excusable' (Vicente J. Francisco, The
Revised Rules of Court in the Philippines. Vol I, 1973, pp. 1016-1017, citing 49 C. J. S., 626-627).[21]
Furthermore, the defense relied upon by the private respondent appears meritorious. While admitting
its indebtedness, it averred that the petitioner also hauled for IPM Construction, a subcontractor of the
private respondent, and that the bills pertaining to the Curva-Bagay road construction, which should
have been charged to IPM, were included in the account of private respondent. Had the trial court lifted
the order of default and allowed the private respondent to present its evidence, the case would have
been properly threshed out without causing unnecessary delays to the proceedings.
Well settled is the rule that the court should be liberal in setting aside orders of default for judgment by
default is frowned upon, and unless it clearly appears that the reopening of the case is intended for
delay, it is best that both parties be given every chance to fight their case fairly and in the open, without
resort to technicality.[22]
To the end that substantial justice be better served, this case should therefore be remanded to the court
a quo for further proceedings.
WHEREFORE, the Petition is denied for lack of merit and the assailed decision of the Court of
Appeals AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.

G.R. No. 125986 January 28, 1999

LUXURIA HOMES, INC., and/or AIDA M. POSADAS, petitioners,
vs.
HONORABLE COURT OF APPEALS, JAMES BUILDER CONSTRUCTION and/or JAIME
T. BRAVO, respondents.

MARTINEZ, J.:
This petition for review assails the decision of the respondent Court of Appeals dated March
15, 1996,1 which affirmed with modification the judgment of default rendered by the Regional
Trial Court of Muntinlupa, Branch 276, in Civil Case No. 92-2592 granting all the reliefs
prayed for in the complaint of private respondents James Builder Construction and/or Jaime
T. Bravo.
As culled from the record, the facts are as follows:
Petitioner Aida M. Posadas and her two (2) minor children co-owned a 1.6 hectare property in
Sucat, Muntinlupa, which was occupied by squatters. Petitioner Posadas entered into
negotiations with private respondent Jaime T. Bravo regarding the development of the said
property into a residential subdivision. On May 3, 1989, she authorized private respondent to
negotiate with the squatters to leave the said property. With a written authorization,
respondent Bravo buckled down to work and started negotiations with the squatters.
Meanwhile, some seven (7) months later, on December 11, 1989, petitioner Posadas and her
two (2) children, through a Deed of Assignment, assigned the said property to petitioner
Luxuria Homes, Inc., purportedly for organizational and tax avoidance purposes. Respondent
Bravo signed as one of the witnesses to the execution of the Deed of Assignment and the
Articles of Incorporation of petitioner Luxuria Homes, Inc.
Then sometime in 1992, the harmonious and congenial relationship of petitioner Posadas and
respondent Bravo turned sour when the former supposedly could not accept the management
contracts to develop the 1.6 hectare property into a residential subdivision, the latter was
proposing. In retaliation, respondent Bravo demanded payment for services rendered in
connection with the development of the land. In his statement of account dated 21 August
19912 respondent demanded the payment of P1,708,489.00 for various services rendered,
i.e., relocation of squatters, preparation of the architectural design and site development plan,
survey and fencing.
Petitioner Posadas refused to pay the amount demanded. Thus, in September 1992, private
respondents James Builder Construction and Jaime T. Bravo instituted a complaint for
specific performance before the trial court against petitioners Posadas and Luxuria Homes,
Inc. Private respondents alleged therein that petitioner Posadas asked them to clear the
subject parcel of land of squatters for a fee of P1,100,000.00 for which they were partially
paid the amount of P461,511.50, leaving a balance of P638,488.50. They were also
supposedly asked to prepare a site development plan and an architectural design for a
contract price of P450,000.00 for which they were partially paid the amount of P25,000.00,
leaving a balance of P425,000.00. And in anticipation of the signing of the land development
contract, they had to construct a bunkhouse and warehouse on the property which amounted
to P300,000.00, and a hollow blocks factory for P60,000.00. Private respondents also claimed
that petitioner Posadas agreed that private respondents will develop the land into a first class
subdivision thru a management contract and that petitioner Posadas is unjustly refusing to
comply with her obligation to finalize the said management contract.
The prayer in the complaint of the private respondents before the trial court reads as follows:
WHEREFORE, premises considered, it is respectfully prayed of this Honorable
Court that after hearing/trial judgment be rendered ordering defendant to:
a) Comply with its obligation to deliver/finalize Management Contract of its land
in Sucat, Muntinlupa, Metro Manila and to pay plaintiff its balance in the amount
of P1,708,489.00:
b) Pay plaintiff moral and exemplary damages in the amount of P500.000.00;
c) Pay plaintiff actual damages in the amount of P500.000.00
(Bunkhouse/warehouse- P300.000.00, Hollow-block factory-P60.000.00, lumber,
cement, etc., P120.000.00, guard-P20.000.00);
d) Pay plaintiff attorney's fee of P50.000 plus P700 per appearance in court and
5% of that which may be awarded by the court to plaintiff re its monetary claims:
e) Pay cost of this suit.3
On September 27, 1993, the trial court declared petitioner Posadas in default and allowed the
private respondents to present their evidence ex-parte. On March 8, 1994, it ordered
petitioner Posadas, jointly and in solidum with petitioner Luxuria Homes, Inc., to pay private
respondents as follows:
 1. . . . the balance of the payment for the various services performed by Plaintiff
with respect to the land covered by TCT NO. 167895 previously No. 158290 in
the total amount of P1,708,489.00.
2. . . . actual damages incurred for the construction of the warehouse/bunks, and
for the material used in the total sum of P1,500.000.00.
3. Moral and exemplary damages of P500.000.00.
4. Attorney's fee of P50,000.00.
5. And cost of this proceedings.
Defendant Aida Posadas as the Representative of the Corporation Luxuria
Homes, Incorporated, is further directed to execute the management contract
she committed to do, also in consideration of the various undertakings that
Plaintiff rendered for her.4
Aggrieved by the aforecited decision, petitioners appealed to respondent Court of Appeals,
which, as aforestated, affirmed with modification the decision of the trial court. The appellate
court deleted the award of moral damages on the ground that respondent James Builder
Construction is a corporation and hence could not experience physical suffering and mental
anguish. It also reduced the award of exemplary damages. The dispositive portion of the
decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED with the
modification that the award of moral damages is ordered deleted and the award
of exemplary damages to the plaintiff's-appellee should only be in the amount of
FIFTY THOUSAND (P50,000.00) PESOS.5
Petitioners' motion for reconsideration was denied, prompting the filing of this petition for
review before this Court.
On January 15, 1997, the Third Division of this Court denied due course to this petition for
failing to show convincingly any reversible error on the part of the Court of Appeals. This
Court however deleted the grant of exemplary damages and attorney's fees. The Court also
reduced the trial court's award of actual damages from P1,500,000.00 to P500,000.00
reasoning that the grant should not exceed the amount prayed for in the complaint. In the
prayer in the complaint respondents asked for actual damages in the amount of P500,000.00
only.
Still feeling aggrieved with the resolution of this Court, petitioners filed a motion for
reconsideration. On March 17, 1997, this Court found merit in the petitioners' motion for
reconsideration and reinstated this petition for review.
From their petition for review and motion for reconsideration before this Court, we now
synthesize the issues as follows:
1. Were private respondents able to present ex-parte sufficient evidence to substantiate the
allegations in their complaint and entitle them to their prayers?
2. Can petitioner Luxuria Homes, Inc., be held liable to private respondents for the
transactions supposedly entered into between petitioner Posadas and private respondents?
3. Can petitioners be compelled to enter into a management contract with private
respondents?
Petitioners who were declared in default assert that the private respondents who presented
their evidence ex-parte nonetheless utterly failed to substantiate the allegations in their
complaint and as such cannot be entitled to the reliefs prayed for.
A perusal of the record shows that petitioner Posadas contracted respondent Bravo to render
various services for the initial development of the property as shown by vouchers evidencing
payments made by petitioner Posadas to respondent Bravo for squatter relocation,
architectural design, survey and fencing.
Respondents prepared the architectural design, site development plan and survey in
connection with petitioner Posadas' application with the Housing and Land Use Regulatory
Board (HLURB) for the issuance of the Development Permit, Preliminary Approval and
Locational Clearance.6 Petitioner benefited from said services as the Development Permit
and the Locational Clearance were eventually issued by the HLURB in her favor. Petitioner
Posadas is therefore liable to pay for these services rendered by respondents. The contract
price for the survey of the land is P140,000.00. Petitioner made partial payments totaling
P130,000.00 leaving a payable balance of P10,000.00.
In his testimony,7 he alleged that the agreed price for the preparation of the site development
plan is P500,000.00 and that the preparation of the architectural designs is for P450,000, or a
total of P950,000.00 for the two contracts. In his complaint however, respondent Bravo
alleged that he was asked "to prepare the site development plan and the architectural designs
. . . for a contract price of P450,000.00 . . . "8 The discrepancy or inconsistency was never
reconciled and clarified.
We reiterate that we cannot award an amount higher than what was claimed in the complaint.
Consequently for the preparation of both the architectural design and site development plan,
respondent is entitled to the amount of P450,000.00 less partial payments made in the
amount of P25,000.00. In Policarpio v. RTC of Quezon City,9 it was held that a court is bereft
of jurisdiction to award, in a judgment by default, a relief other than that specifically prayed for
in the complaint.
As regards the contracts for the ejectment of squatters and fencing, we believe however that
respondents failed to show proof that they actually fulfilled their commitments therein. Aside
from the bare testimony of respondent Bravo, no other evidence was presented to show that
all the squatters were ejected from the property. Respondent Bravo failed to show how many
shanties or structures were actually occupying the property before he entered the same, to
serve as basis for concluding whether the task was finished or not. His testimony alone that
he successfully negotiated for the ejectment of all the squatters from the property will not
suffice.
Likewise, in the case of fencing, there is no proof that it was accomplished as alleged.
Respondent Bravo claims that he finished sixty percent (60%) of the fencing project but he
failed to present evidence showing the area sought to be fenced and the actual area fenced
by him. We therefore have no basis to determining the veracity respondent's allegations. We
cannot assume that the said services rendered for it will be unfair to require petitioner to pay
the full amount claimed in case the respondents obligations were not completely fulfilled.
For respondents' failure to show proof of accomplishment of the aforesaid services, their
claims cannot be granted. In P.T. Cerna Corp. v. Court of Appeals,10 we ruled that in civil
cases, the burden of proof rests upon the party who, as determined by the pleadings or the
nature of the case, asserts the affirmative of an issue. In this case the burden lies on the
complainant, who is duty bound to prove the allegations in the complaint. As this Court has
held, he who alleges a fact has the burden of proving it and A MERE ALLEGATION IS NOT
EVIDENCE.
And the rules do not change even if the defendant is declared in default. In the leading case
of Lopez v. Mendezona,11 this Court ruled that after entry of judgment in default against a
defendant who has neither appeared nor answered, and before final judgment in favor of the
plaintiff, the latter must establish by competent evidence all the material allegations of his
complaint upon which he bases his prayer for relief. In De los Santos v. De la Cruz,12 this
Court declared that a judgement by default against a defendant does not imply a waiver of
rights except that of being heard and of presenting evidence in his favor. It does not imply
admission by the defendant of the facts and causes of action of the plaintiff, because the
codal section requires the latter to adduce his evidence in support of his allegations as an
indispensable condition before final judgment could be given in his favor. Nor could it be
interpreted as an admission by the defendant that the plaintiff's causes of action finds support
in the law or that the latter is entitled to the relief prayed for.
We explained the rule in judgments by default in Pascua v. Florendo,13 where we said that
nowhere is it stated that the complainants are automatically entitled to the relief prayed for,
once the defendants are declared in default. Favorable relief can be granted only after the
court has ascertained that the evidence offered and the facts proven by the presenting party
warrant the grant of the same. Otherwise it would be meaningless to require presentation of
evidence if everytime the other party is declared in default, a decision would automatically be
rendered in favor of the non-defaulting party and exactly according to the tenor of his prayer.
In Lim Tanhu v. Ramolete 14 we elaborated and said that a defaulted defendant is not actually thrown out of court. The rules see to it that any
judgment against him must be in accordance with law. The evidence to support the plaintiff's cause is, of course, presented in his absence, but the court is not
supposed to admit that which is basically incompetent. Although the defendant would not be in a position to object, elementary justice requires that only legal
evidence should be considered against him. If the evidence presented should not be sufficient to justify a judgment for the plaintiff, the complaint must be
dismissed. And if an unfavorable judgment should be justifiable, it cannot exceed the amount or be different in kind from what is prayed for in the complaint.

The prayer for actual damages in the amount of P500,000.00, supposedly for the bunkhouse/warehouse, hollow-block factory, lumber, cement, guard, etc., which
the trial court granted and even increased to P1,500,000.00, and which this Court would have rightly reduced to the amount prayed for in the complaint, was not
established, as shown upon further review of the record. No receipts or vouchers were presented by private respondents to show that they actually spent the
amount. In Salas v. Court of Appeals,15 we said that the burden of proof of the damages suffered is on the party claiming the same. It his duty to present
evidence to support his claim for actual damages. If he failed to do so, he has only himself to blame if no award for actual damages is handed down.

In fine, as we declared in PNOC Shipping & Transport Corp. v. Court of Appeals,16 basic is the rule that to recover actual damages, the amount of loss must not
only be capable of proof but must actually be proven with reasonable degree of certainty, premised upon competent proof or best evidence obtainable of the
actual amount thereof.

We go to the second issue of whether Luxuria Homes, Inc., was a party to the transactions entered into by petitioner Posadas and private respondents and thus
could be held jointly and severally with petitioner Posadas. Private respondents contend that petitioner Posadas surreptitiously formed Luxuria Homes, Inc., and
transferred the subject parcel of land to it to evade payment and defraud creditors, including private respondents. This allegation does not find support in the
evidence on record.

On the contrary we hold that respondent Court of Appeals committed a reversible error when it upheld the factual finding of the trial court that petitioners' liability
was aggravated by the fact that Luxuria Homes, Inc., was formed by petitioner Posadas after demand for payment had been made, evidently for her to evade
payment of her obligation, thereby showing that the transfer of her property to Luxuria Homes, Inc., was in fraud of creditors.

We easily glean from the record that private respondents sent demand letters on 21 August 1991 and 14 September 1991, or more than a year and a half after
the execution of the Deed of Assignment on 11 December 1989, and the issuance of the Articles of Incorporation of petitioner Luxuria Homes on 26 January
1990. And, the transfer was made at the time the relationship between petitioner Posadas and private respondents was supposedly very pleasant. In fact the
Deed of Assignment dated 11 December 1989 and the Articles of Incorporation of Luxuria Homes, Inc., issued 26 January 1990 were both signed by respondent
Bravo himself as witness. It cannot be said then that the incorporation of petitioner Luxuria Homes and the eventual transfer of the subject property to it were in
fraud of private respondents as such were done with the full knowledge of respondent Bravo himself.

Besides petitioner Posadas is not the majority stockholder of petitioner Luxuria Homes, Inc., as erroneously stated by the lower court. The Articles of
Incorporation of petitioner Luxuria Homes, Inc., clearly show that petitioner Posadas owns approximately 33% only of the capital stock. Hence petitioner Posadas
cannot be considered as an alter ego of petitioner Luxuria Homes, Inc.

To disregard the separate juridical personality of a corporation, the wrongdoing must be clearly and convincingly established. It cannot be presumed. This is
elementary. Thus in Bayer-Roxas v. Court of Appeals,17 we said that the separate personality of the corporation may be disregarded only when the corporation
is used as a cloak or cover for fraud or illegality, or to work injustice, or where necessary for the protection of the creditors. Accordingly in Del Roscrrio v.
NLRC,18 where the Philsa International Placement and Services Corp. was organized and registered with the POEA in 1981, several years before the
complainant was filed a case in 1985, we held that this cannot imply fraud.

Obviously in the instant case, private respondents failed to show proof that petitioner Posadas acted in bad faith. Consequently since private respondents failed
to show that petitioner Luxuria Homes, Inc., was a party to any of the supposed transactions, not even to the agreement to negotiate with and relocate the
squatters, it cannot be held liable, nay jointly and in solidum, to pay private respondents. In this case since it was petitioner Aida M. Posadas who contracted
respondent Bravo to render the subject services, only she is liable to pay the amounts adjudged herein.

We now resolve the third and final issue. Private respondents urge the court to compel petitioners to execute a management contract with them on the basis of
the authorization letter dated May 3, 1989. The full text of Exh. "D" reads:

I hereby certify that we have duly authorized the bearer, Engineer Bravo to negotiate, in our behalf, the ejectment of squatters from our
property of 1.6 hectares, more or less, in Sucat Muntinlupa. This authority is extended to him as the representative of the Managers; under
our agreement for them to undertake the development of said area and the construction of housing units intended to convert the land into
a first class subdivision.

The aforecited document is nothing more than a "to-whom-it-may-concern" authorization letter to negotiate with the squatters. Although it appears that there was
an agreement for the development of the area, there is no showing that same was ever perfected and finalized. Private respondents presented in evidence only
drafts of a proposed management contract with petitioner's handwritten marginal notes but the management contract was not put in its final form. The reason
why there was no final uncorrected draft was because the parties could not agree on the stipulations of said contract, which even private respondents admitted
as found by the trial court.19 As a consequence the management drafts submitted by the private respondents should at best be considered as mere unaccepted
offers. We find no cogent reason, considering that the parties no longer are in a harmonious relationship, for the execution of a contract to develop a subdivision.

It is fundamental that there can be no contract in the true sense in the absence of the element of agreement, or of mutual assent of the parties. To compel
petitioner Posadas, whether as representative of petitioner Luxuria Homes or in her personal capacity, to execute a management contract under the terms and
conditions of private respondents would be to violate the principle of consensuality of contracts. In Philippine National Bank v. Court of Appeals,20 we held that if
the assent is wanting on the part of one who contracts, his act has no more efficacy than if it had been done under duress or by a person of unsound mind. In
ordering petitioner Posadas to execute a management contract with private respondents, the trial court in effect is putting her under duress.

The parties are bound to fulfill the stipulations in a contract only upon its perfection. At anytime prior to the perfection of a contract, unaccepted offers and
proposals remain as such and cannot be considered as binding commitments; hence not demandable.

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision dated March 15, 1996, of respondent Honorable Court of Appeals and its Resolution
dated August 12, 1996, are MODIFIED ordering PETITIONER AIDA M. POSADAS to pay PRIVATE RESPONDENTS the amount of P435,000.00 as balance for
the preparation of the architectural design, site development plan and survey. All other claims of respondents are hereby DENIED for lack of merit.1âwphi1.nêt

SO ORDERED.

RULE 10

[G.R. Nos. 119511-13. November 24, 1998]

WILFREDO P. VERZOSA and PILAR MARTINEZ, petitioners vs. COURT OF APPEALS, HON.
NICODEMO FERRER, and FE GIRON USON, respondents
DECISION
PANGANIBAN, J.:
What constitutes the status quo ante in the application of an injunctive writ, in the event a complaint is
subsequently amended?
The Case

This is the main question raised in the present Petition for Review seeking to set aside the consolidated
January 31, 1994 Decision[1] of the Court of Appeals[2] in CA-GR SP No. 26626 and CA-GR SP No.
27300, which dismissed the petitions in this wise:
Succinctly put, petitioners have failed to show any grave abuse of discretion, or any act without or in
excess of jurisdiction, on the part of respondent judge in issuing the assailed orders.
WHEREFORE, the instant petitions are hereby dismissed for lack of merit.
Also assailed is the public respondents February 28, 1995 Resolution[3] denying the Motion for
Reconsideration.
Facts of the Case

The undisputed facts, as narrated by the Court of Appeals (CA) and reiterated by petitioners, are as
follows:[4]
Records reveal that Fe Giron Uson is the owner of a parcel of land consisting of 19,955 square meters
located at Baquioen, Sual, Pangasinan, covered by O.C.T. No. 12783. She mortgaged the land to
Wilfredo Verzosa.
Fe Uson failed to pay her entire obligation to Verzosa, prompting the latter to have the mortgage
foreclosed. On July 21, 1988, the Provincial Sheriff of Pangasinan set the foreclosure sale on August
17, 1988 at 10:00 A.M.
To prevent the Office of the Provincial Sheriff from proceeding with the foreclosure sale, Fe Uson, on
August 12, 1988, filed with the Regional Trial Court, Branch 37, Lingayen, Pangasinan, a complaint
against Wilfredo Verzosa and the Provincial Sheriff, docketed as Civil Case No. 16590, for annulment
of mortgage with prayer for the issuance of a writ of preliminary injunction.
On August 22, 1988, defendant Verzosa filed a motion to dismiss the complaint.
On June 8, 1989, the complaint was dismissed on the ground that it was not personally verified by
plaintiff Fe Uson.
On June 27, 1989, Fe Uson filed a motion for reconsideration which was granted by the court.
On June 29, 1989, she filed her amended complaint which bears the proper verification.
Meantime, Verzosa wrote the Provincial Sheriff to proceed with the foreclosure of mortgage.
Whereupon, Fe Uson, through counsel, wrote the Provincial Sheriff requesting him to discontinue the
foreclosure sale in deference to the said pending case and to the action to be taken by the Honorable
Presiding Judge of the Court.
On July 4, 1989, the foreclosure sale was conducted by the sheriff. The property was sold to Verzosa
being the highest bidder. Thereafter, the Sheriffs Certificate of Sale was approved by Executive Judge
Antonio Belen and issued to Verzosa.
On September 5, 1989, the trial court issued an order admitting the amended complaint of Fe Uson.
At this point, Verzosa filed with the Court of Appeals CA-G.R. SP No. 18898 for certiorari. He alleged
that the said order, admitting the amended complaint was issued with grave abuse of discretion.
On June 20, 1990, the Sheriffs Certificate of Sale was registered in the Registry of Deeds of Alaminos,
Pangasinan.
On July 5, 1990, or after the expiration of the redemption period of one year, the defendant Sheriff
issued the Sheriffs Final Deed of Sale. Thus, O.C.T. No. 12783 in Fe Usons name was cancelled and in
lieu thereof, T.C.T. No. 11087 was issued in the name of Wilfredo Verzosa.
On July 12, 1990, Verzosa sold the land to Pilar Martinez. As a result, Verzosas T.C.T. No. 11087 was
cancelled and T.C.T. No. 11107 was issued to Martinez.
Meantime, on October 16, 1990, or after one year from the filing of Verzosas petition for certiorari
with the Court of Appeals, the said court dismissed the petition, thus sustaining the validity of
respondent courts order dated September 5, 1989 admitting Fe Usons amended complaint.
On May 20, 1991, Fe Uson filed her second amended complaint impleading as additional defendants
the Register of Deeds of Alaminos, Pangasinan and Pilar Martinez and praying, among others, the
annulment of the latters title -- T.C.T. No. 11107.
On August 20, 1991, upon Usons application for preliminary injunction embodied in her Second
Amended Complaint (which was opposed by Verzosa and Martinez), respondent court issued an order
directing the latter to cease and desist from entering, making constructions and performing any act of
possession or ownership over the land in question covered by O.C.T. No. 12783, upon posting by
plaintiff Uson of a bond of P10,000.00.
Defendant Martinez filed a motion for consideration which was denied on September 18, 1991.
On October 30, 1991, after hearing and upon posting of a bond in the amount of P10,000.00 by Uson,
respondent Judge issued an order directing defendants Verzosa and Martinez and/or any and other
persons acting under their command to desist and cease from entering, intruding and making
constructions on the land covered by O.C.T. No. 12783.
On November 22, 1991, respondent judge, acting on Verzosas motion for clarification of the order
dated September 18, 1991, issued an order to the effect that the status quo being maintained is the
possession of plaintiff Fe Uson of the land and that such status quo does not refer to defendant Pilar
Martinez being the registered owner of T.C.T. No. 11107.
It should be noted that the Complaint alleged that Private Respondent Uson mortgaged the property to
Verzosa for P25,000, and that the remaining unpaid balance was P915.75, an amount she was willing to
consign to the trial court.[5]
Petitioners challenged by certiorari the two orders of the trial court. Because the CA dismissed their
petition, petitioners availed themselves of the present recourse.[6]
Public Respondents Ruling

In dismissing the petition for certiorari, the Court of Appeals held that the last peaceable uncontested
status that preceded the controversy [was] that point x x x when private respondent Fe Uson was the
registered owner of the land in dispute mortgaged to petitioner Verzosa. As owner of this property, Fe
Uson has every right to protect her rights as such. Clearly, the issuance of the writ would certainly
preserve that status quo.[7]
In debunking petitioners theory that the status quo referred to the period when Martinez had already
purchased the property from Verzosa, the Court of Appeals held that the property was registered in her
name two years after the start of the controversy, or when private respondent filed her complaint
against Verzosa.[8] Thus, the CA sustained the following findings of the trial court:[9]
For as long as the instant case (Civil Case No. 16590) remains pending, no act of the defendants
subsequent to the filing of this case can make TCT No. 11107 in the name of defendant Pilar Martinez,
and the alleged possession of the latter of the property in question, valid and be considered the status
quo.
Issues

Petitioners raise the following issues for the consideration of the Court:[10]
I The Court of Appeals erred in not taking into account or dealing squarely with the nature, effects
and proper interpretation and/or application of the doctrine on amendment of pleadings/complaints
to the instant case.
II The Court of Appeals erred when it concurred with the Respondent judge that the status quo
should be reckoned at the time of the filing of the original complaint.
III The Court of Appeals erred when it completely disregarded the legal implications and effects of
foreclosure, foreclosure sale, expiration of the redemption period, the consolidation of ownership
to your petitioner and the sale to Pilar Martinez.
IV The Court of Appeals erred when it concurred with the respondent judge in granting an
injunction to restrain consummated acts, and in forcing a transfer of possession from Pilar
Martinez to private respondent Fe Uson who has not shown her right thereto.
The present controversy hinges on two questions. First, is private respondent entitled to an injunctive
writ? Second, what is the status quo ante that the said writ seeks to preserve?
The Courts Ruling
The petition is devoid of merit.
First Issue: Issuance of the Injunctive Writ

Petitioners primarily allege that the injunctive writ was wrongfully issued in favor of private
respondent, as the latter had a doubtful, unclear and unadjudicated right for recovery of the property
which had been mortgaged, foreclosed and sold to a third party. We disagree.
An injunctive writ may be issued when the following requisites are established:
1. The invasion of the right is material and substantial;
2. The right of complainant is clear and unmistakable;
3. There is an urgent and permanent necessity for the writ to prevent serious damage.[11]
The foregoing requisites are present in this case. The undisputed owner of the property which was
mortgaged to Petitioner Verzosa was private respondent who, upon learning of the scheduled
foreclosure, immediately filed a Complaint to annul the mortgage, praying that a restraining order be
issued to restrain such foreclosure. Private respondent insisted that she had paid her P25,000 debt,
except for the remaining unpaid balance of P915.75 which she was willing to consign to the court. In
other words, she had title to and possession of the property and she claimed to have paid her obligation,
except for the nominal unpaid balance which she was willing to consign judicially. Hence, she had a
clear and unmistakable right to protect her title to and possession of the mortgaged property by
enjoining the foreclosure sale.
Given the above factual allegations, it is clear that private respondent was entitled to the injunctive
writ.
Second Issue: Status Quo Ante

The status quo is the last actual peaceful uncontested situation which precedes a controversy, and its
preservation is the office of an injunctive writ.[12] Petitioners insist that the status quo refers to the
point when Pilar Martinez was already the owner of the property, having purchased it from Verzosa.
We cannot sustain the petitioners, for Martinez claim to the property is precisely the bone of
contention. Private respondent, the original owner of the property, filed a Complaint against Wilfredo
Verzosa and the provincial sheriff for the annulment of mortgage and the issuance of an injunctive writ
to prevent the foreclosure of the property and the subsequent transfer of ownership. Although the
Complaint was subsequently amended, the controversy began when the first Complaint was filed.
Nevertheless, Petitioner Verzosa and the sheriff proceeded with the foreclosure before the filing of the
Amended Complaint. Worse, Verzosa sold the property to Martinez one week later. Now, Verzosa and
Martinez claim that the status quo to be preserved refers to the time before the filing of the second
Complaint and after Martinez had acquired the property from Verzosa.
Petitioners contend that the controversy started only when the Amended Complaint was filed, because
the previous Complaints were expunged from the records. Petitioners invoke Ruymann v. Director of
Lands,[13] in which the Court ruled that the filing of an amended pleading does not retroact to the date
of the filing of the original. Citing other jurisprudence, such as Waje v. Court of Appeals[14] and
Paradise v. Ng,[15] petitioners contend that the original pleading is deemed abandoned when it is
amended.
The cited cases offer scant support to the thesis of petitioners. In Ruymann, the Court held that an
amendment to a complaint which introduces a new or different cause of action, making a new or
different demand, is equivalent to a fresh suit upon a new cause of action, and the statute of limitations
continues to run until the amendment is filed.[16] In the said case, a complaint for injunction was
amended to include a larger tract of land which had not been included in the original suit. The Court
held that the suit will be deemed to have been commenced upon the date of amendment, in determining
whether the defendant had acquired title by adverse possession to the portion of the tract of land not
included in the original complaint (Montgomery v. Shaver, 40 Oregon 244).[17] It is clear therein that
the Complaint was amended to include a new or different cause of action or demand; hence, it was as if
a new complaint was filed.
It follows that when the amended complaint does not introduce new issues, causes of action, or
demands, the suit is deemed to have commenced on the date the original complaint was filed, not on
the date of the filing of the amended complaint. In other words, for demands already included in the
original complaint, the suit is deemed to have commenced upon the filing of such original complaint. In
short, for purposes of determining the commencement of a suit, the original complaint is deemed
abandoned and superseded by the amended complaint only if the amended complaint introduces a new
or different cause of action or demand.
Hence, it has been held that an amendment which merely supplements and amplifies the facts originally
alleged relates back to the date of the commencement of the action and is not barred by the statute of
limitations, the period of which expires after service of the original complaint but before service of
amendment.[18] It is the actual filing in court that controls and not the date of the formal admission of
the amended pleading.[19] The Court in Republic v. Marsman[20] elucidated:
While in the procedural sense, especially in relation to the possible necessity of and time for the filing
of responsive and other corresponding pleadings, an amended complaint is deemed filed only as of the
date of its admission, xxx , the self-evident proposition [is] that for practical reasons and to avoid the
complications that may arise from undue delays in the admission thereof, such an amended complaint
must be considered as filed, for the purpose of such a substantive matter as prescription, on the date it
is actually filed with the court, regardless of when it is ultimately formally admitted by the court. After
all, the only purpose of requiring leave of and formal admission by the court of an amended pleading
after issues have already been joined as to the original ones is to prevent the injection of other issues
which ought either to be considered as barred already or made the subject of another proceeding, if they
are not anyway indispensable for the resolution of the original ones and no unnecessary multiplicity of
suits would result; so, when the court ultimately admits the amendment, the legal effect, for substantive
purposes, of such admission retroacts as a rule to the date of its actual filing.
In the instant case, the Amended Complaint did not introduce a new or different cause of action or
demand. The original Complaint was amended only to rectify the lack of verification and thereafter to
implead Martinez, who had purchased the contested property from Verzosa.
In the same vein, Waje and Paradise do not apply because the Amended Complaints therein alleged
new causes of action.
Similarly unavailing is petitioners contention that the injunctive writ was applied retroactively and,
hence, violative of Ruymann and other subsequent cases. To repeat, Ruymann was wrongly applied by
petitioners. There being no new issues introduced in the Amended Complaint herein, the present suit is
deemed to have commenced on the date of the filing of the original Complaint. Hence, the CA was
correct in upholding the trial court that the status quo was the situation of the parties at the time of the
filing of the original Complaint.
Finally, petitioners assert that Respondent Court violated the well-entrenched doctrine that
consummated acts can no longer be restrained by injunction. As earlier noted, despite the fact that Pilar
Martinez already had title to and possession of the disputed property, the CA affirmed the order of the
trial court enjoining her from entering, intruding and making construction and/or performing any act of
ownership or possession and any activity over the land xxx. Petitioners cite the following ruling in
Reyes v. Harty:[21]
It is a universal principle of the law that an injunction will not issue to restrain the performance of an
act already done. It is undisputed proof in this case, presented by the plaintiffs themselves, that, at the
time this [case] was tried, the plaintiffs had been completely dispossessed, the defendant being in full
and complete possession of the lands in question xxx.
Again, the case cited by petitioner is incongruous with the factual milieu of the present controversy. In
that case, the party praying for an injunctive writ had been completely dispossessed of the land in
question prior to the commencement of the action. In the case at bar, private respondent was still the
owner and was in possession of the property at the time the original Complaint was filed. The rule is
that a court should not by means of preliminary injunction transfer the property in litigation from the
possession of one party to another where the legal title is in dispute and the party having possession
asserts ownership thereto.[22] When private respondent filed the original Complaint, she had title to
and possession of the property and was asserting ownership thereto.
Where the acts have been performed prior to the filing of the injunction suit, the general rule is that
consummated acts can no longer be restrained by injunction. However, where the acts are performed
after the injunction suit is brought, a defendant may not as [a matter] of right proceed to perform the
acts sought to be restrained and then be heard to assert in the suit that the injunction will not lie because
he has performed these acts before final hearing has been had, but after the beginning of the action. A
defendant thus acts at his peril.[23] It has been held that [t]he general rule of law is that, where a
defendant completes, after the beginning of an action, the act thereby sought to be restrained, and
before the issue of any final order or decree, the court has the power to, and may, compel, by a
mandatory injunction, the restoration of the former condition of things and thereby prevent the giving
of an advantage by reason of the wrongful act. And where a defendant does an act thus sought to be
restrained, he proceeds at his peril, and the court in which the action is pending may compel a
restoration of the former status or grant to the plaintiff such relief as may be proper.[24]
In this case, an action was brought to enjoin Petitioner Verzosa from proceeding with the mortgage
sale, yet he proceeded to do so while the action was still pending. Such conduct is reprehensible. If one
in the face of a pending suit for injunction, does the thing sought to be enjoined, he cannot thus outwit
equity and the court, but must restore the status quo. xxx Even where an injunction has not been issued,
if the suit is one for injunction, the defendant, if he does the thing sought to be enjoined does so at his
peril.[25] Hence, in proceeding with the mortgage sale and subsequently selling the property to Pilar
Martinez, Petitioner Verzosa was acting at his peril.
Clearly, the Respondent Court did not err in sustaining the Decision of the lower court that the status
quo to be maintained was the situation when title to and possession of the property were still with
Private Respondent Uson. The precise ruling of the appellate court is aptly reproduced hereunder:
When the present Civil Case No. 16590 was commenced on August 12, 1988, the property in dispute
was still covered by Original Certificate of Title No. 12783, in the name of plaintiff Fe Giron Uson, and
there is no dispute that the possession of the said property was still with the plaintiff. That is the status
quo sought to be maintained in the questioned preliminary injunction. It is, therefore, incorrect for
defendant Wilfredo P. Verzosa to claim that the status quo refers to Transfer Certificate of Title No.
11107 in the name of Pilar Martinez, which is precisely what is sought to be annul[l]ed in the present
case, and that the possessor of the property is defendant Pilar Martinez who may possibly have entered
into the property while the present case has long been pending, and by virtue of the purported sale of
the same to her by defendant Verzosa, whose claim of ownership thereof is, in turn, based on the
sheriffs sale which is also the very subject matter of the present case for annulment.[26]
WHEREFORE, the petition is DENIED for lack of merit and the assailed Decision of the Court of
Appeals is AFFIRMED.
SO ORDERED.

RULE 13

G.R. No. 132007 August 5, 1998

SOLAR TEAM ENTERTAINMENT, INC., petitioner,
vs.
HON. HELEN BAUTISTA RICA-FORT, in her capacity as Presiding Judge of the Regional Trial
Court of Parañaque, Metro Manila (Branch 260), TEAM IMAGE ENTERTAINMENT, INC.,
FELIX S. CO, JEFFREY C. CAL, and KING CUISIA, respondents.

DAVIDE, JR., J.:

At issue is whether respondent judge committed grave abuse of discretion amounting to lack or excess
of jurisdiction in denying petitioner's motion to expunge private respondents' answer with
counterclaims on the ground that said pleading was not served personally; moreover, there was no
written explanation as to why personal service was not accomplished, as required by Section 11 of Rule
13 of the 1997 Rules of Civil Procedure.
The antecedents are not disputed.
On 10 July 1997, petitioner, as plaintiff, filed before the Regional Trial Court (RTC) in Parañaque,
Metro Manila, a complaint for recovery of possession and damages with prayer for a writ of replevin 1
against herein private respondents. The case was docketed as Civil Case No. 97-0304 and was assigned
to Branch 260 of said court, presided over by public respondent Judge Helen Bautista-Ricafort.
Summonses and copies of the complaint were forthwith served on private respondents. On 25 July
1997, their counsel filed a notice of appearance with urgent ex-parte motion for extension of time to
plead, 2 which the court granted in its order of 4 August 1997.3
On 8 August 1997, private respondents, as defendants, filed their "Answer (with Counterclaims).'' 4 A
copy thereof was furnished counsel for petitioner by registered mail; however, the pleading did not
contain any written explanation as to why service was not made personally upon petitioner-plaintiff, as
required by Section 11 of Rule 13 of the 1997 Rules of Civil Procedure.
On 11 August 1997, petitioner filed a motion to expunge the "Answer (with Counterclaims)" and to
declare herein private respondents in default, 5 alleging therein that the latter did not observe the
mandate of the aforementioned Section 11, and that there was:
[A]bsolutely no valid reason why defendant[s] should not have personally served
plaintiff's . . . counsel with [a] copy of their answer [as] (t)he office of defendant's (sic)
counsel, Atty. Froilan Cabaltera, is just a stone [sic] throw away from the office of
[petitioner's] counsel, with an estimate (sic) distance of about 200 meters more or less.
Petitioner further alleged that the post office was "about ten (10) times farther from the office of Atty.
Cabaltera,"
On 15 August 1997, private respondents filed their opposition 6 to the abovementioned motion,
alleging that petitioner's "rigid and inflexible reliance on the provisions of Section 11, Rule 13 . . . is an
adventitious resort to technicality and is contrary to Section 6 of Rule 3 . . . which admonishes that said
Rules 'shall be liberally construed in order to promote their objective in securing a just, speedy and
inexpensive disposition of [e]very action and proceeding;'" and that Section 11, Rule 13
notwithstanding, private respondents "religiously complied with [Section 5 of Rule 13] by personally
present[ing] to the clerk of court their said Answer . . . furnishing a copy thereof to the counsel for
[petitioner] by way of registered mail."
On 8 September 1997, public respondent Judge Bautista-Ricafort issued an order 7 stating that under
Section 11 of Rule 13 "it is within the discretion of the [trial court] whether to consider the pleading as
filed or not," and denying, for lack of merit, petitioner's motion to expunge the "Answer (with
Counterclaims)" and to declare private respondents in default.
Petitioner immediately moved for reconsideration 8 of the order, but public respondent Judge Bautista-
Ricafort denied this motion in her order 9 of 17 November 1997. The order justified the denial in this
wise:
Sec. 6 [of] Rule 1 of the 1997 Rules of Civil Procedure ordains that the Rules shall be
liberally construed in order to promote their objective of securing a just, speedy and
inexpensive disposition of every action and proceeding.
Liberal construction of the rules and the pleading is the controlling principle to effect
substantial justice.
As pointed out by the Supreme Court in Alonso vs. Villamor, 16 Phil. 315, "the error in
this case is purely technical. To take advantage of it for other purposes than to cure it,
does not appeal to a fair sense of justice. Its presentation as fatal to plaintiff a [sic] case
smacks of skill rather than right. A litigation is not a game of technicalities in which one,
more deeply schooled and skilled in the subtle art of movement and position, entraps and
destroys the other. It is rather, a contest in which each contending party fully and fairly
lays before the Court the facts in issue and then, brushing aside as wholly trivial and
indecisive all imperfections or form of technicalities of procedure, asks that justice be
done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust."
While it is desirable that the above Rules be faithfully and even meticulously observed,
courts should not strict about procedural lapses that do not really impair the proper
administration of justice. Furthermore, it is well settled that litigations should, as much
as possible be decided on their merits and not on technicalities.
Petitioner thus filed the instant special civil action of certiorari, contending that public respondent
Judge Bautista-Ricafort committed grave abuse of discretion amounting to lack or excess of
jurisdiction when she admitted private respondents' "Answer (with Counterclaims)" notwithstanding
private respondents' clear, admitted and inexcusable violation of Section 11, Rule 13 of the 1997 Rules
of Civil Procedure, in that: (a) the "Answer (with Counterclaims)" was not served personally upon
petitioner's counsel despite the undisputed fact that the offices of private respondents' counsel and that
of petitioner's counsel are only about 200 meters away from each other; and (b) the Answer did not
contain any explanation as to why the answer was not served personally.
In their Comment, filed in compliance with the resolution of 2 February 1998, and to which petitioner
filed a Reply, private respondents aver that public respondent Judge Bautista-Ricafort correctly
admitted private respondents' "Answer (with Counterclaims)" in light of Section 6, Rule 1 of the 1997
Rules of Civil Procedure; that Section 11 of Rule 13 begins with the phrase "whenever practicable,"
thereby suggesting that service by mail may still be effected depending on the relative priority of the
pleading sought to be filed; and when service is not done personally, it is more prudent and judicious
for the courts to require a written explanation rather than to expunge the pleading outright or consider
the same as not being filed.
In view of the importance of the issue raised, which is, undoubtedly, one of the first impression, the
Court resolved to give due course to the petition and consider it submitted for decision on the basis of
the pleadings filed by the parties.
Sec. 5, Rule 13 of the 1997 Rules of Civil Procedure prescribes two modes of service of pleadings,
motions, notices, orders, judgments and other papers, namely: (1) personal service; and (2) service by
mail. The first is governed by Section 6, while the second, by Section 7 of said Rule. If service cannot
be done either personally or by mail, substituted service may be resorted to under Section 8 thereof.
Pursuant, however, to Section 11 of Rule 13, service and filing of pleadings and other papers must,
whenever practicable, be done personally; and if made through other modes, the party concerned must
provide a written explanation as to why the service or filing was not done personally. The section reads:
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. (n)
Note that Section 11 refers to both service of pleadings and other papers on the adverse party or
his counsel as provided for in Sections 6, 7 and 8; and to the filing of pleadings and other papers
in court.
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 parcel 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 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 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. This Court cannot rule otherwise, lest we allow
circumvention of the innovation introduced by the 1997 Rules in order to obviate delay in the
administration of justice.
Here, the proximity between the offices of opposing counsel was established; moreover, that the office
of private respondents' counsel was "ten times farther" from the post office than the distance separating
the offices of opposing counsel. Of course, proximity would seem to make personal service most
practicable, but exceptions may nonetheless apply. For instance, where the adverse party or opposing
counsel to be served with a pleading seldom reports to office and no employee is regularly present to
receive pleadings, or where service is done on the last day of the reglementary period and the office of
the adverse party or opposing counsel to be served is closed, for whatever reason.
Returning, however, to the merits of this case, in view of the proximity between the offices of opposing
counsel and the absence of any attendant explanation as to why personal service of the answer was not
effected, indubitably, private respondents' counsel violated Section 11 of Rule 13 and the motion to
expunge was prima facie meritorious. However, the grant or denial of said motion nevertheless
remained within the sound exercise of the trial court's discretion. Thus, as guided by Section 6, Rule 1
of the 1997 Rules of Civil Procedure, which ordains that the Rules shall be liberally construed in order
to promote their objective of securing a just, speedy and inexpensive disposition of every action or
proceeding, as well as by the dictum laid down in Alonso v. Villamor, 16 Phil. 315 [1910], the trial
court opted to exercise its discretion in favor of admitting the "Answer (with Counterclaims)," instead
of expunging it from the record.
To our mind, if motions to expunge or strike out pleadings for violation of Section 11 of Rule 13 were
to be indiscriminately resolved under Section 6 of Rule 1 or Alonzo v. Villamor and other analogous
cases, then Section 11 would become meaningless and its sound purpose negated. Nevertheless, we
sustain the challenged ruling of the trial court, but for reasons other than those provided for in the
challenged order.
The 1997 Rules of Civil Procedure took effect only on 1 July 1997, while the questioned "Answer
(with Counterclaims)" was filed only on 8 August 1997, or on the 39th day following the effectivity of
the 1997 Rules. Hence, private respondents' counsel may not have been fully aware of the requirements
and ramifications of Section 11, Rule 13. In fact, as pointed out by petitioner's counsel, in another case
where private respondents' counsel was likewise opposing counsel, the latter similarly failed to comply
with Section 11.
It has been several months since the 1997 Rules of Civil Procedure took effect. In the interim, this
Court has generally accommodated parties and counsel who failed to comply with the requirement of a
written explanation whenever personal service or filing was not practicable, guided, in the exercise of
our discretion, by the primary objective of Section 11, the importance of the subject matter of the case,
the issues involved and the prima facie merit of the challenged pleading. However, as we have in the
past, for the guidance of the Bench and Bar, strictest compliance with Section 11 of Rule 13 is
mandated one month from promulgation of this Decision.
WHEREFORE, the instant petition is DISMISSED considering that while the justification for the
denial of the motion to expunge the "Answer (with Counterclaims)" may not necessarily be correct,
yet, for the reasons above stated, the violation of Section 11 of Rule 13 may be condoned.
No pronouncement as to costs.
SO ORDERED.
[G.R. No. 108538. ]
LOURDES A. VALMONTE and ALFREDO D. VALMONTE, petitioners, vs. THE HONORABLE
COURT OF APPEALS, THIRD DIVISION and ROSITA DIMALANTA, respondents.
DECISION
MENDOZA, J.:
Petitioner Lourdes A. Valmonte is a foreign resident. The question is whether in an action for partition
filed against her and her husband, who is also her attorney, summons intended for her may be served on
her husband, who has a law office in the . The Regional Trial Court of Manila, Branch 48, said no and
refused to declare Lourdes A. Valmonte in default, but the Court of Appeals said yes. Hence this
petition for review on certiorari.
The facts of the case are as follows:
Petitioners Lourdes A. Valmonte and Alfredo D. Valmonte are husband and wife. They are both
residents of 90222 Carkeek Drive South Seattle, Washington, U.S.A. Petitioner Alfredo D. Valmonte,
who is a member of the Philippine bar, however, practices his profession in the Philippines, commuting
for this purpose between his residence in the state of Washington and Manila, where he holds office at
S-304 Gedisco Centre, 1564 A. Mabini, Ermita, Manila.
On , private respondent Rosita Dimalanta, who is the sister of petitioner Lourdes A. Valmonte, filed a
complaint for partition of real property and accounting of rentals against petitioners Lourdes A.
Valmonte and Alfredo D. Valmonte before the Regional Trial Court of Manila, Branch 48. The subject
of the action is a three-door apartment located in Paco, .
In her Complaint, private respondent alleged:
The plaintiff is of legal age, a widow and is at present a resident of 14823 Conway Road, Chesterfield,
Missouri, U.S.A., while the defendants are spouses, of legal age and at present residents of 90222
Carkeek Drive, South Seattle, Washington, U.S.A., but, for purposes of this complaint may be served
with summons at Gedisco Center, Unit 304, 1564 A. Mabini St., Ermita, Manila where defendant
Alfredo D. Valmonte as defendant Lourdes Arreola Valmontes spouse holds office and where he can be
found.
Apparently, the foregoing averments were made on the basis of a letter previously sent by petitioner
Lourdes A. Valmonte to private respondents counsel
in which, in regard to the partition of the property in question, she referred private respondents counsel
to her husband as the party to whom all communications intended for her should be sent. The letter
reads:
Dear Atty. Balgos:
This is in response to your letter, dated , which I received on . Please address all communications to my
lawyer, Atty. Alfredo D. Valmonte, whose address, telephone and fax numbers appear below.
c/o Prime Marine
, Unit 304
1564 A. Mabini, Ermita
Metro
Telephone: 521-1736
Fax: 21-2095
Service of summons was then made upon petitioner Alfredo D. Valmonte, who at the time, was at his
office in . Petitioner Alfredo D. Valmonte accepted the summons, insofar as he was concerned, but
refused to accept the summons for his wife, Lourdes A. Valmonte, on the ground that he was not
authorized to accept the process on her behalf. Accordingly the process server left without leaving a
copy of the summons and complaint for petitioner Lourdes A. Valmonte.
Petitioner Alfredo D. Valmonte thereafter filed his Answer with Counterclaim. Petitioner Lourdes A.
Valmonte, however, did not file her Answer. For this reason private respondent moved to declare her in
default. Petitioner Alfredo D. Valmonte entered a special appearance in behalf of his wife and opposed
the private respondents motion.
In its Order dated , the trial court, denied private respondents motion to declare petitioner Lourdes A.
Valmonte in default. A motion for reconsideration was similarly denied on . Whereupon, private
respondent filed a petition for certiorari, prohibition and mandamus with the Court of Appeals.
On , the Court of Appeals rendered a decision granting the petition and declaring Lourdes A. Valmonte
in default. A copy of the appellate courts decision was received by petitioner Alfredo D. Valmonte on
15, 1993 at his office and on in , . Hence, this petition.
The issue at bar is whether in light of the facts set forth above, petitioner Lourdes A. Valmonte was
validly served with summons. In holding that she had been, the Court of Appeals stated:[1]
[I]n her above-quoted reply, Mrs. Valmonte clearly and unequivocally directed the aforementioned
counsel of Dimalanta to address all communications (evidently referring to her controversy with her
sister Mrs. Dimalanta over the Paco property, now the subject of the instant case) to her lawyer who
happens also to be her husband. Such directive was made without any qualification just as was her
choice/designation of her husband Atty. Valmonte as her lawyer likewise made without any
qualification or reservation. Any disclaimer therefore on the part of Atty. Valmonte as to his being his
wifes attorney (at least with regard to the dispute vis-a-vis [sic] the Paco property) would appear to be
feeble or trifling, if not incredible.
This view is bolstered by Atty. Valmontes subsequent alleged special appearance made on behalf of his
wife. Whereas Mrs. Valmonte had manifestly authorized her husband to serve as her lawyer relative to
her dispute with her sister over the Paco property and to receive all communications regarding the same
and subsequently to appear on her behalf by way of a so-called special appearance, she would
nonetheless now insist that the same husband would nonetheless had absolutely no authority to receive
summons on her behalf. In effect, she is asserting that representation by her lawyer (who is also her
husband) as far as the Paco property controversy is concerned, should only be made by him when such
representation would be favorable to her but not otherwise. It would obviously be inequitable for this
Court to allow private respondent Lourdes A. Valmonte to hold that her husband has the authority to
represent her when an advantage is to be obtained by her and to deny such authority when it would turn
out to be her disadvantage. If this be allowed, Our Rules of Court, instead of being an instrument to
promote justice would be made use of to thwart or frustrate the same.
xxx xxx xxx
Turning to another point, it would not do for Us to overlook the fact that the disputed summons was
served not upon just an ordinary lawyer of private respondent Lourdes A. Valmonte, but upon her
lawyer husband. But that is not all, the same lawyer/husband happens to be also her co-defendant in the
instant case which involves real property which, according to her lawyer/husband/ co-defendant,
belongs to the conjugal partnership of the defendants (the spouses Valmonte). It is highly inconceivable
and certainly it would be contrary to human nature for the lawyer/husband/co-defendant to keep to
himself the fact that they (the spouses Valmonte) had been sued with regard to a property which he
claims to be conjugal. Parenthetically, there is nothing in the records of the case before Us regarding
any manifestation by private respondent Lourdes A. Valmonte about her lack of knowledge about the
case instituted against her and her lawyer/husband/co-defendant by her sister Rosita.
PREMISES CONSIDERED, the instant petition for certiorari, prohibition and mandamus is given due
course. This Court hereby Resolves to nullify the orders of the court a quo dated and and further
declares private respondent Lourdes Arreola Valmonte as having been properly served with summons.
Petitioners assail the aforequoted decision, alleging that the Court of Appeals erred (1) in refusing to
apply the provisions of Rule 14, 17 of the Revised Rules of Court and applying instead Rule 14, 8
when the fact is that petitioner Lourdes A. Valmonte is a nonresident defendant; and (2) because even if
Rule 14, 8 is the applicable provision, there was no valid substituted service as there was no strict
compliance with the requirement by leaving a copy of the summons and complaint with petitioner
Alfredo D. Valmonte. Private respondent, upon the other hand, asserts that petitioners are invoking a
technicality and that strict adherence to the rules would only result in a useless ceremony.
We hold that there was no valid service of process on Lourdes A. Valmonte.
To provide perspective, it will be helpful to determine first the nature of the action filed against
petitioners Lourdes A. Valmonte and Alfredo D. Valmonte by private respondent, whether it is an action
in personam, in rem or quasi in rem. This is because the rules on service of summons embodied in Rule
14 apply according to whether an action is one or the other of these actions.
In an action in personam, personal service of summons or, if this is not possible and he cannot be
personally served, substituted service, as provided in Rule 14, 7-8[2] is essential for the acquisition by
the court of jurisdiction over the person of a defendant who does not voluntarily submit himself to the
authority of the court.[3] If defendant cannot be served with summons because he is temporarily
abroad, but otherwise he is a Philippine resident, service of summons may, by leave of court, be made
by publication.[4] Otherwise stated, a resident defendant in an action in personam, who cannot be
personally served with summons, may be summoned either by means of substituted service in
accordance with Rule 14, 8 or by publication as provided in 17 and 18 of the same Rule.[5]
In all of these cases, it should be noted, defendant must be a resident of the , otherwise an action in
personam cannot be brought because jurisdiction over his person is essential to make a binding
decision.
On the other hand, if the action is in rem or quasi in rem, jurisdiction over the person of the defendant
is not essential for giving the court jurisdiction so long as the court acquires jurisdiction over the res. If
the defendant is a nonresident and he is not found in the country, summons may be served
extraterritorially in accordance with Rule 14, 17, which provides:
17. 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 7; 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.
In such cases, what gives the court jurisdiction in an action in rem or quasi in rem is that it has
jurisdiction over the res, i.e. the personal status of the plaintiff who is domiciled in the Philippines or
the property litigated or attached. Service of summons in the manner provided in 17 is not for the
purpose of vesting it with jurisdiction but for complying with the requirements of fair play or due
process, so that he 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.
[6]
Applying the foregoing rules to the case at bar, private respondents action, which is for partition and
accounting under Rule 69, is in the nature of an action quasi in rem. Such an action is essentially for the
purpose of affecting the defendants interest in a specific property and not to render a judgment against
him. As explained in the leading case of Banco Espaol Filipino v. Palanca :[7]
[An action quasi in rem is] an action which while not strictly speaking an action in rem partakes of that
nature and is substantially such. . . . The action quasi in rem differs from the true action in rem in the
circumstance that in the former an individual is named as defendant and the purpose of the proceeding
is to subject his interest therein to the obligation or lien burdening the property. All proceedings having
for their sole object the sale or other disposition of the property of the defendant, whether by
attachment, foreclosure, or other form of remedy, are in a general way thus designated. The judgment
entered in these proceedings is conclusive only between the parties.
As petitioner Lourdes A. Valmonte is a nonresident who is not found in the Philippines, service of
summons on her must be in accordance with Rule 14, 17. Such service, to be effective outside the
Philippines, must be made either (1) by personal service; (2) 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 should be sent by registered mail to the last known address of the
defendant; or (3) in any other manner which the court may deem sufficient.
Since in the case at bar, the service of summons upon petitioner Lourdes A. Valmonte was not done by
means of any of the first two modes, the question is whether the service on her attorney, petitioner
Alfredo D. Valmonte, can be justified under the third mode, namely, in any . . . manner the court may
deem sufficient.
We hold it cannot. This mode of service, like the first two, must be made outside the , such as through
the Philippine Embassy in the foreign country where the defendant resides.[8] Moreover, there are
several reasons why the service of summons on Atty. Alfredo D. Valmonte cannot be considered a valid
service of summons on petitioner Lourdes A. Valmonte. In the first place, service of summons on
petitioner Alfredo D. Valmonte was not made upon the order of the court as required by Rule 14, 17
and certainly was not a mode deemed sufficient by the court which in fact refused to consider the
service to be valid and on that basis declare petitioner Lourdes A. Valmonte in default for her failure to
file an answer.
In the second place, service in the attempted manner on petitioner was not made upon prior leave of the
trial court as required also in Rule 14, 17. As provided in 19, such leave must be applied for by motion
in writing, supported by affidavit of the plaintiff or some person on his behalf and setting forth the
grounds for the application.
Finally, and most importantly, because there was no order granting such leave, petitioner Lourdes A.
Valmonte was not given ample time to file her Answer which, according to the rules, shall be not less
than sixty (60) days after notice. It must be noted that the period to file an Answer in an action against a
resident defendant differs from the period given in an action filed against a nonresident defendant who
is not found in the . In the former, the period is fifteen (15) days from service of summons, while in the
latter, it is at least sixty (60) days from notice.
Strict compliance with these requirements alone can assure observance of due process. That is why in
one case,[9] although the Court considered publication in the of the summons (against the contention
that it should be made in the foreign state where defendant was residing) sufficient, nonetheless the
service was considered insufficient because no copy of the summons was sent to the last known correct
address in the .
Private respondent cites the ruling in De Leon v. Hontanosas, 67 SCRA 458,462-463 (1975), in which
it was held that service of summons upon the defendants husband was binding on her. But the ruling in
that case is justified because summons were served upon defendants husband in their conjugal home in
Cebu City and the wife was only temporarily absent, having gone to Dumaguete City for a vacation.
The action was for collection of a sum of money. In accordance with Rule 14, 8, substituted service
could be made on any person of sufficient discretion in the dwelling place of the defendant, and
certainly defendants husband, who was there, was competent to receive the summons on her behalf. In
any event, it appears that defendant in that case submitted to the jurisdiction of the court by instructing
her husband to move for the dissolution of the writ of attachment issued in that case.
On the other hand, in the case of Gemperle v. Schenker,[10] it was held that service on the wife of a
nonresident defendant was found sufficient because the defendant had appointed his wife as his
attorney-in-fact. It was held that although defendant Paul Schenker was a Swiss citizen and resident of
Switzerland, service of summons upon his wife Helen Schenker who was in the Philippines was
sufficient because she was her husbands representative and attorney-in-fact in a civil case, which he
had earlier filed against William Gemperle. In fact Gemperles action was for damages arising from
allegedly derogatory statements contained in the complaint filed in the first case. As this Court said, i]n
other words, Mrs. Schenker had authority to sue, and had actually sued, on behalf of her husband, so
that she was, also, empowered to represent him in suits filed against him, particularly in a case, like the
one at bar, which is a consequence of the action brought by her on his behalf.[11] Indeed, if instead of
filing an independent action Gemperle filed a counterclaim in the action brought by Mr. Schenker
against him, there would have been no doubt that the trial court could have acquired jurisdiction over
Mr. Schenker through his agent and attorney-in-fact, Mrs. Schenker.
In contrast, in the case at bar, petitioner Lourdes A. Valmonte did not appoint her husband as her
attorney-in-fact. Although she wrote private respondent s attorney that all communications intended for
her should be addressed to her husband who is also her lawyer at the latters address in Manila, no
power of attorney to receive summons for her can be inferred therefrom. In fact the letter was written
seven months before the filing of this case below, and it appears that it was written in connection with
the negotiations between her and her sister, respondent Rosita Dimalanta, concerning the partition of
the property in question. As is usual in negotiations of this kind, the exchange of correspondence was
carried on by counsel for the parties. But the authority given to petitioners husband in these
negotiations certainly cannot be construed as also including an authority to represent her in any
litigation.
For the foregoing reasons, we hold that there was no valid service on petitioner Lourdes A. Valmonte in
this case.
WHEREFORE, the decision appealed from is REVERSED and the orders dated and of the Regional
Trial Court of Manila, Branch 48 are REINSTATED.
SO ORDERED.
G.R. No. 128803 September 25, 1998
ASIAVEST LIMITED, petitioner,
vs.
THE COURT OF APPEALS and ANTONIO HERAS, respondents.
DAVIDE, JR., J.:
In issue is the enforceability in the Philippines of a foreign judgment. The antecedents are summarized
in the 24 August 1990 Decision1 of Branch 107 of the Regional Trial Court of Quezon City in Civil
Case No. Q-52452; thus:
The plaintiff Asiavest Limited filed a complaint on December 3, 1987 against the
defendant Antonio Heras praying that said defendant be ordered to pay to the plaintiff
the amounts awarded by the Hong Kong Court Judgment dated December 28, 1984 and
amended on April 13, 1987, to wit:
1) US$1,810,265.40 or its equivalent in Hong Kong
currency at the time of payment with legal interest from
December 28, 1984 until fully paid;
2) interest on the sum of US$1,500.00 at 9.875% per
annum from October 31, 1984 to December 28, 1984; and
3) HK$905.00 at fixed cost in the action; and
4) at least $80,000.00 representing attorney's fees,
litigation expenses and cost, with interest thereon from the
date of the judgment until fully paid.
On March 3, 1988, the defendant filed a Motion to Dismiss. However, before the court
could resolve the said motion, a fire which partially razed the Quezon City Hall Building
on June 11, 1988 totally destroyed the office of this Court, together with all its records,
equipment and properties. On July 26, 1988, the plaintiff, through counsel filed a Motion
for Reconstitution of Case Records. The Court, after allowing the defendant to react
thereto, granted the said Motion and admitted the annexes attached thereto as the
reconstituted records of this case per Order dated September 6, 1988. Thereafter, the
Motion to Dismiss, the resolution of which had been deferred; was denied by the Court
in its Order of October 4, 1988.
On October 19, 1988, defendant filed his Answer. The case was then set for pre-trial
conference. At the conference, the parties could not arrive at any settlement. However,
they agreed on the following stipulations of facts:
1. The defendant admits the existence of the judgment
dated December 28, 1984 as well as its amendment dated
April 13, 1987, but not necessarily the authenticity or
validity thereof;
2. The plaintiff is not doing business and is not licensed to
do business in the Philippines;
3. The residence of defendant, Antonio Heras, is New
Manila, Quezon City.
The only issue for this Court to determine is, whether or not the judgment of the Hong
Kong Court has been repelled by evidence of want of jurisdiction, want of notice to the
party, collusion, fraud or clear mistake of law or fact, such as to overcome the
presumption established in Section 50, Rule 39 of the Rules of Court in favor of foreign
judgments.
In view of the admission by the defendant of the existence of the aforementioned
judgment (Pls. See Stipulations of Facts in the Order dated January 5, 1989 as amended
by the Order of January 18, 1989), as well as the legal presumption in favor of the
plaintiff as provided for in paragraph (b); Sec. 50, (Ibid.), the plaintiff presented only
documentary evidence to show rendition, existence, and authentication of such judgment
by the proper officials concerned (Pls. See Exhibits "A" thru "B", with their
submarkings). In addition, the plaintiff presented testimonial and documentary evidence
to show its entitlement to attorney's fees and other expenses of litigation. . . . .
On the other hand, the defendant presented two witnesses, namely. Fortunata dela Vega
and Russel Warren Lousich.
The gist of Ms. dela Vega's testimony is to the effect that no writ of summons or copy of
a statement of claim of Asiavest Limited was ever served in the office of the Navegante
Shipping Agency Limited and/or for Mr. Antonio Heras, and that no service of the writ
of summons was either served on the defendant at his residence in New Manila, Quezon
City. Her knowledge is based on the fact that she was the personal secretary of Mr. Heras
during his JD Transit days up to the latter part of 1972 when he shifted or diversified to
shipping business in Hong Kong; that she was in-charge of all his letters and
correspondence, business commitments, undertakings, conferences and appointments,
until October 1984 when Mr. Heras left Hong Kong for good; that she was also the
Officer-in-Charge or Office Manager of Navegante Shipping Agency LTD, a Hong Kong
registered and based company acting as ships agent, up to and until the company closed
shop sometime in the first quarter of 1985, when shipping business collapsed worldwide;
that the said company held office at 34-35 Connaught Road, Central Hong Kong and
later transferred to Carton House at Duddel Street, Hong Kong, until the company closed
shop in 1985; and that she was certain of such facts because she held office at Caxton
House up to the first quarter of 1985.
Mr. Lousich was presented as an expert on the laws of Hong Kong, and as a
representative of the law office of the defendant's counsel who made a verification of the
record of the case filed by the plaintiff in Hong Kong against the defendant, as well as
the procedure in serving Court processes in Hong Kong.
In his affidavit (Exh. "2") which constitutes his direct testimony, the said witness stated
that:
The defendant was sued on the basis of his personal guarantee of the
obligations of Compania Hermanos de Navegacion S.A. There is no
record that a writ of summons was served on the person of the defendant
in Hong Kong, or that any such attempt at service was made. Likewise,
there is no record that a copy of the judgment of the High Court was
furnished or served on the defendant; anyway, it is not a legal requirement
to do so under Hong Kong laws;
a) The writ of summons or claim can be served by the
solicitor (lawyer) of the claimant or plaintiff. In Hong
Kong there are no Court personnel who serve writs of
summons and/or most other processes.
b) If the writ of summons or claim (or complaint) is not
contested, the claimant or the plaintiff is not required to
present proof of his claim or complaint nor present
evidence under oath of the claim in order to obtain a
 Judgment.
c) There is no legal requirement that such a Judgment or
decision rendered by the Court in Hong Kong [to] make a
recitation of the facts or the law upon which the claim is
based.
d) There is no necessity to furnish the defendant with a
copy of the Judgment or decision rendered against him.
e) In an action based on a guarantee, there is no established
legal requirement or obligation under Hong Kong laws that
the creditor must first bring proceedings against the
principal debtor. The creditor can immediately go against
the guarantor.
On cross examination, Mr. Lousich stated that before he was commissioned by the law
firm of the defendant's counsel as an expert witness and to verify the records of the
Hong Kong case, he had been acting as counsel for the defendant in a number of
commercial matters; that there was an application for service of summons upon the
defendant outside the jurisdiction of Hong Kong; that there was an order of the Court
authorizing service upon Heras outside of Hong Kong, particularly in Manila or any
other place in the Philippines (p. 9, TSN, 2/14/90); that there must be adequate proof of
service of summons, otherwise the Hong Kong Court will refuse to render judgment (p.
10, ibid); that the mere fact that the Hong Kong Court rendered judgment, it can be
presumed that there was service of summons; that in this case, it is not just a
presumption because there was an affidavit stating that service was effected in [sic] a
particular man here in Manila; that such affidavit was filed by one Jose R. Fernandez of
the firm Sycip Salazar on the 21st of December 1984, and stated in essence that "on
Friday, the 23rd of November 1984 he served the 4th defendant at No. 6 First Street,
Quezon City by leaving it at that address with Mr. Dionisio Lopez, the son-in-law of the
4th defendant the copy of the writ and Mr. Lopez informed me and I barely believed that
he would bring the said writ to the attention of the 4th defendant" (pp. 11-12, ibid.); that
upon filing of that affidavit, the Court was asked and granted judgment against the 4th
defendant; and that if the summons or claim is not contested, the claimant of the plaintiff
is not required to present proof of his claim or complaint or present evidence under oath
of the claim in order to obtain judgment; and that such judgment can be enforced in the
same manner as a judgment rendered after full hearing.
The trial court held that since the Hong Kong court judgment had been duly proved, it is a presumptive
evidence of a right as between the parties; hence, the party impugning it had the burden to prove want
of jurisdiction over his person. HERAS failed to discharge that burden. He did not testify to state
categorically and under oath that he never received summons. Even his own witness Lousich admitted
that HERAS was served with summons in his Quezon City residence. As to De la Vega's testimony
regarding non-service of summons, the same was hearsay and had no probative value.
As to HERAS' contention that the Hong Kong court judgment violated the Constitution and the
procedural laws of the Philippines because it contained no statements of the facts and the law on which
it was based, the trial court ruled that since the issue relate to procedural matters, the law of the forum,
i.e., Hong Kong laws, should govern. As testified by the expert witness Lousich, such legalities were
not required under Hong Kong laws. The trial Court also debunked HERAS' contention that the
principle of excussion under Article 2058 of the Civil Code of the Philippines was violated. It declared
that matters of substance are subject to the law of the place where the transaction occurred; in this case,
Hong Kong laws must govern.
The trial court concluded that the Hong Kong court judgment should be recognized and given effect in
this jurisdiction for failure of HERAS to overcome the legal presumption in favor of the foreign
judgment. It then decreed; thus:
WHEREFORE, judgment is hereby rendered ordering defendant to pay to the plaintiff
the following sums or their equivalents in Philippine currency at the time of payment:
US$1,810,265.40 plus interest on the sum of US$1,500,000.00 at 9.875% per annum
from October 31, 1984 to December 28, 1984, and HK$905 as fixed cost, with legal
interests on the aggregate amount from December 28, 1984, and to pay attorney's fees in
the sum of P80,000.00.
ASIAVEST moved for the reconsideration of the decision. It sought an award of judicial costs and an
increase in attorney's fees in the amount of US$19,346.45 with interest until full payment of the said
obligations. On the other hand, HERAS no longer opposed the motion and instead appealed the
decision to the Court of Appeals, which docketed the appeal as CA-G.R. CV No. 29513.
In its order2 of 2 November 1990, the trial court granted ASIAVEST's motion for reconsideration by
increasing the award of attorney's fees to "US$19,345.65 OR ITS EQUIVALENT IN PHILIPPINE
CURRENCY, AND TO PAY THE COSTS OF THIS SUIT," provided that ASIAVEST would pay the
corresponding filing fees for the increase. ASIAVEST appealed the order requiring prior payment of
filing fees. However, it later withdrew its appeal and paid the additional filing fees.
On 3 April 1997, the Court of Appeals rendered its decision3 reversing the decision of the trial court
and dismissing ASIAVEST's complaint without prejudice. It underscored the fact that a foreign
judgment does not of itself have any extraterritorial application. For it to be given effect, the foreign
tribunal should have acquired jurisdiction over the person and the subject matter. If such tribunal has
not acquired jurisdiction, its judgment is void.
The Court of Appeals agreed with the trial court that matters of remedy and procedure, such as those
relating to service of summons upon the defendant are governed by the lex fori, which was, in this case,
the law of Hong Kong. Relative thereto, it gave weight to Lousich's testimony that under the Hong
Kong law, the substituted service of summons upon HERAS effected in the Philippines by the clerk of
Sycip Salazar Hernandez & Gatmaitan firm would be valid provided that it was done in accordance
with Philippine laws. It then stressed that where the action is in personam and the defendant is in the
Philippines, the summons should be personally served on the defendant pursuant to Section 7, Rule 14
of the Rules of Court.4 Substituted service may only be availed of where the defendant cannot be
promptly served in person, the fact of impossibility of personal service should be explained in the proof
of service. It also found as persuasive HERAS' argument that instead of directly using the clerk of the
Sycip Salazar Hernandez & Gatmaitan law office, who was not authorized by the judge of the court
issuing the summons, ASIAVEST should have asked for leave of the local courts to have the foreign
summons served by the sheriff or other court officer of the place where service was to be made, or for
special reasons by any person authorized by the judge.
The Court of Appeals agreed with HERAS that "notice sent outside the state to a non-resident is
unavailing to give jurisdiction in an action against him personally for money recovery." Summons
should have been personally served on HERAS in Hong Kong, for, as claimed by ASIAVEST, HERAS
was physically present in Hong Kong for nearly 14 years. Since there was not even an attempt to serve
summons on HERAS in Hong Kong, the Hong Kong Supreme Court did not acquire jurisdiction over
HERAS. Nonetheless it did not totally foreclose the claim of ASIAVEST; thus:
 While We are not fully convinced that [HERAS] has a meritorious defense against
[ASIAVEST's] claims or that [HERAS] ought to be absolved of any liability,
nevertheless, in view of the foregoing discussion, there is a need to deviate front the
findings of the lower court in the interest of justice and fair play. This, however, is
without prejudice to whatever action [ASIAVEST] might deem proper in order to
enforce its claims against [HERAS].
Finally, the Court of Appeals also agreed with HERAS that it was necessary that evidence supporting
the validity of the foreign judgment be submitted, and that our courts are not bound to give effect to
foreign judgments which contravene our laws and the principle of sound morality and public policy.
ASIAVEST forthwith filed the instant petition alleging that the Court of Appeals erred in ruling that
I.
. . . IT WAS NECESSARY FOR [ASIAVEST] TO PRESENT EVIDENCE
"SUPPORTING THE VALIDITY OF THE JUDGMENT";
II.
. . . THE SERVICE OF SUMMONS ON [HERAS] WAS DEFECTIVE UNDER
PHILIPPINES LAW;
III.
. . . SUMMONS SHOULD HAVE BEEN PERSONALLY SERVED ON HERAS IN
HONG KONG;
IV.
. . . THE HONG KONG SUMMONS SHOULD HAVE BEEN SERVED WITH LEAVE
OF PHILIPPINE COURTS;
V.
. . . THE FOREIGN JUDGMENT "CONTRAVENES PHILIPPINE LAWS, THE
PRINCIPLES OF SOUND MORALITY, AND THE PUBLIC POLICY OF THE
PHILIPPINES.
Being interrelated, we shall take up together the assigned errors.
Under paragraph (b) of Section 50, Rule 39 of the Rules of Court,5 which was the governing law at the
time this case was decided by the trial court and respondent Court of Appeals, a foreign judgment
against a person rendered by a court having jurisdiction to pronounce the judgment is presumptive
evidence of a right as between the parties and their successors in interest by the subsequent title.
However, the judgment may be repelled by evidence of want of jurisdiction, want of notice to the party,
collusion, fraud, or clear mistake of law or fact.
Also, Section 3(n) of Rule 131 of the New Rules of Evidence provides that in the absence of proof to
the contrary, a court, or judge acting as such, whether in the Philippines or elsewhere, is presumed to
have acted in the lawful exercise of jurisdiction.
Hence, once the authenticity of the foreign judgment is proved, the burden to repel it on grounds
provided for in paragraph (b) of Section 50, Rule 39 of the Rules of Court is on the party challenging
the foreign judgment — HERAS in this case.
At the pre-trial conference, HERAS admitted the existence of the Hong Kong judgment. On the other
hand, ASIAVEST presented evidence to prove rendition, existence, and authentication of the judgment
by the proper officials. The judgment is thus presumed to be valid and binding in the country from
which it comes, until the contrary is shown. 6 Consequently, the first ground relied upon by ASIAVEST
has merit. The presumption of validity accorded foreign judgment would be rendered meaningless were
the party seeking to enforce it be required to first establish its validity.
The main argument raised against the Hong Kong judgment is that the Hong Kong Supreme Court did
not acquire jurisdiction over the person of HERAS. This involves the issue of whether summons was
properly and validly served on HERAS. It is settled that matters of remedy and procedure such as those
relating to the service of process upon the defendant are governed by the lex fori or the law of the
forum, 7 i.e., the law of Hong Kong in this case. HERAS insisted that according to his witness Mr.
Lousich, who was presented as an expert on Hong Kong laws, there was no valid service of summons
on him.
In his counter-affidavit,8 which served as his direct testimony per agreement of the parties,9 Lousich
declared that the record of the Hong Kong case failed to show that a writ of summons was served upon
HERAS in Hong Kong or that any such attempt was made. Neither did the record show that a copy of
the judgment of the court was served on HERAS. He stated further that under Hong Kong laws (a) a
writ of summons could be served by the solicitor of the claimant or plaintiff; and (b) where the said
writ or claim was not contested, the claimant or plaintiff was not required to present proof under oath in
order to obtain judgment.
On cross-examination by counsel for ASIAVEST, Lousich' testified that the Hong Kong court
authorized service of summons on HERAS outside of its jurisdiction, particularly in the Philippines. He
admitted also the existence of an affidavit of one Jose R. Fernandez of the Sycip Salazar Hernandez &
Gatmaitan law firm stating that he (Fernandez) served summons on HERAS on 13 November 1984 at
No. 6, 1st St., Quezon City, by leaving a copy with HERAS's son-in-law Dionisio Lopez. 10 On
redirect examination, Lousich declared that such service of summons would be valid under Hong Kong
laws provided that it was in accordance with Philippine laws. 11
We note that there was no objection on the part of ASIAVEST on the qualification of Mr. Lousich as an
expert on the Hong Kong law. Under Sections 24 and 25, Rule 132 of the New Rules of Evidence, the
record of public documents of a sovereign authority, tribunal, official body, or public officer may be
proved by (1) an official publication thereof or (2) a copy attested by the officer having the legal
custody thereof, which must be accompanied, if the record is not kept in the Philippines, with a
certificate that such officer has the custody. The certificate may be issued by a secretary of the embassy
or legation, consul general, consul, vice consul, or consular agent, or any officer in the foreign service
of the Philippines stationed in the foreign country in which the record is kept, and authenticated by the
seal of his office. The attestation must state, in substance, that the copy is a correct copy of the original,
or a specific part thereof, as the case may be, and must be under the official seal of the attesting officer.
Nevertheless, the testimony of an expert witness may be allowed to prove a foreign law. An authority
12 on private international law thus noted:
Although it is desirable that foreign law be proved in accordance with the above rule,
however, the Supreme Court held in the case of Willamette Iron and Steel Works v.
Muzzal, 13 that Section 41, Rule 123 (Section 25, Rule 132 of the Revised Rules of
Court) does not exclude the presentation of other competent evidence to prove the
existence of a foreign law. In that case, the Supreme Court considered the testimony
under oath of an attorney-at-law of San Francisco, California, who quoted verbatim a
section of California Civil Code and who stated that the same was in force at the time
the obligations were contracted, as sufficient evidence to establish the existence of said
law. Accordingly, in line with this view, the Supreme Court in the Collector of Internal
 Revenue v. Fisher et al., 14 upheld the Tax Court in considering the pertinent law of
California as proved by the respondents' witness. In that case, the counsel for respondent
"testified that as an active member of the California Bar since 1951, he is familiar with
the revenue and taxation laws of the State of California. When asked by the lower court
to state the pertinent California law as regards exemption of intangible personal
properties, the witness cited Article 4, Sec. 13851 (a) & (b) of the California Internal and
Revenue Code as published in Derring's California Code, a publication of Bancroft-
Whitney Co., Inc. And as part of his testimony, a full quotation of the cited section was
offered in evidence by respondents." Likewise, in several naturalization cases, it was
held by the Court that evidence of the law of a foreign country on reciprocity regarding
the acquisition of citizenship, although not meeting the prescribed rule of practice, may
be allowed and used as basis for favorable action, if, in the light of all the circumstances,
the Court is "satisfied of the authenticity of the written proof offered." 15 Thus, in, a
number of decisions, mere authentication of the Chinese Naturalization Law by the
Chinese Consulate General of Manila was held to be competent proof of that law. 16
There is, however, nothing in the testimony of Mr. Lousich that touched on the specific law of Hong
Kong in respect of service of summons either in actions in rem or in personam, and where the
defendant is either a resident or nonresident of Hong Kong. In view of the absence of proof of the Hong
Kong law on this particular issue, the presumption of identity or similarity or the so-called processual
presumption shall come into play. It will thus be presumed that the Hong Kong law on the matter is
similar to the Philippine law. 17
As stated in Valmonte vs. Court of Appeals, 18 it will be helpful to determine first whether the action is
in personam, in rem, or quasi in rem because the rules on service of summons under Rule 14 of the
Rules of Court of the Philippines apply according to the nature of the action.
An action in personam is an action against a person on the basis of his personal liability. An action in
rem is an action against the thing itself instead of against the person. 19 An action quasi in rem is one
wherein an individual is named as defendant and the purpose of the proceeding is to subject his interest
therein to the obligation or lien burdening the property. 20
In an action in personam, jurisdiction over the person of the defendant is necessary for the court to
validly try and decide the case. Jurisdiction over the person of a resident defendant who does not
voluntarily appear in court can be acquired by personal service of summons as provided under Section
7, Rule 14 of the Rules of Court. If he cannot be personally served with summons within a reasonable
time, substituted service may be made in accordance with Section 8 of said Rule. If he is temporarily
out of the country, any of the following modes of service may be resorted to: (1) substituted service set
forth in Section 8; 21 (2) personal service outside the country, with leave of court; (3) service by
publication, also with leave of court; 22 or (4) any other manner the court may deem sufficient. 23
However, in an action in personam wherein the defendant is a non-resident who does not voluntarily
submit himself to the authority of the court, personal service of summons within the state is essential to
the acquisition of jurisdiction over her person. 24 This method of service is possible if such defendant
is physically present in the country. If he is not found therein, the court cannot acquire jurisdiction over
his person and therefore cannot validly try and decide the case against him. 25 An exception was laid
down in Gemperle v. Schenker 26 wherein a non-resident was served with summons through his wife,
who was a resident of the Philippines and who was his representatives and attorney-in-fact in a prior
civil case filed by him; moreover, the second case was a mere offshoot of the first case.
On the other hand, in a proceeding in rem or quasi in rem, jurisdiction over the person of the defendant
is not a prerequisite to confer jurisdiction on the court provided that the court acquires jurisdiction over
the res. Nonetheless summons must be served upon the defendant not for the purpose of vesting the
court with jurisdiction but merely for satisfying the due process requirements. 27 Thus, where the
defendant is a non-resident who is not found in the Philippines and (1) the action affects the personal
status of the plaintiff; (2) the action relates to, or the subject matter of which is property in the
Philippines in which the defendant has or claims a lien or interest; (3) the action seeks the exclusion of
the defendant from any interest in the property located in the Philippines; or (4) the property of the
defendant has been attached in the Philippines — service of summons may be effected by (a) personal
service out of the country, with leave of court; (b) publication, also with leave of court, or (c) any other
manner the court may deem sufficient. 28
In the case at bar, the action filed in Hong Kong against HERAS was in personam, since it was based
on his personal guarantee of the obligation of the principal debtor. Before we can apply the foregoing
rules, we must determine first whether HERAS was a resident of Hong Kong.
Fortunata de la Vega, HERAS's personal secretary in Hong Kong since 1972 until 1985, 29 testified
that HERAS was the President and part owner of a shipping company in Hong Kong during all those
times that she served as his secretary. He had in his employ a staff of twelve. 30 He had "business
commitments, undertakings, conferences, and appointments until October 1984 when [he] left Hong
Kong for good," 31 HERAS's other witness, Russel Warren Lousich, testified that he had acted as
counsel for HERAS "for a number of commercial matters." 32 ASIAVEST then infers that HERAS was
a resident of Hong Kong because he maintained a business there.
It must be noted that in his Motion to Dismiss, 33 as well as in his
Answer 34 to ASIAVEST's complaint for the enforcement of the Hong Kong court judgment, HERAS
maintained that the Hong Kong court did not have jurisdiction over him because the fundamental rule
is that jurisdiction in personam over non-resident defendants, so as to sustain a money judgment, must
be based upon personal service of summons within the state which renders the judgment. 35
For its part, ASIAVEST, in its Opposition to the Motion to Dismiss 36 contended: "The question of
Hong Kong court's 'want of jurisdiction' is therefore a triable issue if it is to be pleaded by the
defendant to 'repel' the foreign judgment. Facts showing jurisdictional lack (e.g. that the Hong Kong
suit was in personam, that defendant was not a resident of Hong Kong when the suit was filed or that
he did not voluntarily submit to the Hong Kong court's jurisdiction) should be alleged and proved by
the defendant." 37
In his Reply (to the Opposition to Motion to Dismiss), 38 HERAS argued that the lack of jurisdiction
over his person was corroborated by ASIAVEST's allegation in the complaint that he "has his residence
at No. 6, 1st St., New Manila, Quezon City, Philippines." He then concluded that such judicial
admission amounted to evidence that he was and is not a resident of Hong Kong.
Significantly, in the pre-trial conference, the parties came up with stipulations of facts, among which
was that "the residence of defendant, Antonio Heras, is New Manila, Quezon City." 39
We note that the residence of HERAS insofar as the action for the enforcement of the Hong Kong court
judgment is concerned, was never in issue. He never challenged the service of summons on him
through a security guard in his Quezon City residence and through a lawyer in his office in that city. In
his Motion to Dismiss, he did not question the jurisdiction of the Philippine court over his person on
the ground of invalid service of summons. What was in issue was his residence as far as the Hong
Kong suit was concerned. We therefore conclude that the stipulated fact that HERAS "is a resident of
New Manila, Quezon City, Philippines" refers to his residence at the time jurisdiction over his person
was being sought by the Hong Kong court. With that stipulation of fact, ASIAVEST cannot now claim
that HERAS was a resident of Hong Kong at the time.
Accordingly, since HERAS was not a resident of Hong Kong and the action against him was,
indisputably, one in personam, summons should have been personally served on him in Hong Kong.
The extraterritorial service in the Philippines was therefore invalid and did not confer on the Hong
Kong court jurisdiction over his person. It follows that the Hong Kong court judgment cannot be given
force and effect here in the Philippines for having been rendered without jurisdiction.
Even assuming that HERAS was formerly a resident of Hong Kong, he was no longer so in November
1984 when the extraterritorial service of summons was attempted to be made on him. As declared by
his secretary, which statement was not disputed by ASIAVEST, HERAS left Hong Kong in October
1984 "for good." 40 His absence in Hong Kong must have been the reason why summons was not
served on him therein; thus, ASIAVEST was constrained to apply for leave to effect service in the
Philippines, and upon obtaining a favorable action on the matter, it commissioned the Sycip Salazar
Hernandez & Gatmaitan law firm to serve the summons here in the Philippines.
In Brown v. Brown, 41 the defendant was previously a resident of the Philippines. Several days after a
criminal action for concubinage was filed against him, he abandoned the Philippines. Later, a
proceeding quasi in rem was instituted against him. Summons in the latter case was served on the
defendant's attorney-in-fact at the latter's address. The Court held that under the facts of the case, it
could not be said that the defendant was "still a resident of the Philippines because he ha[d] escaped to
his country and [was] therefore an absentee in the Philippines." As such, he should have been
"summoned in the same manner as one who does not reside and is not found in the Philippines."
Similarly, HERAS, who was also an absentee, should have been served with summons in the same
manner as a non-resident not found in Hong Kong. Section 17, Rule 14 of the Rules of Court providing
for extraterritorial service will not apply because the suit against him was in personam. Neither can we
apply Section 18, which allows extraterritorial service on a resident defendant who is temporarily
absent from the country, because even if HERAS be considered as a resident of Hong Kong, the
undisputed fact remains that he left Hong Kong not only "temporarily" but "for good."
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered DENYING the petition in this
case and AFFIRMING the assailed judgment of the Court of Appeals in CA-G.R. CV No. 29513.
No costs.
SO ORDERED.