G.R. No.

179922

December 16, 2008

JUAN DE DIOS CARLOS, petitioner,

vs.
FELICIDAD SANDOVAL, also known as FELICIDAD S. VDA. DE CARLOS or FELICIDAD
SANDOVAL CARLOS or FELICIDAD SANDOVAL VDA. DE CARLOS, and TEOFILO
CARLOS II, respondents.
DECISION
REYES, R.T., J.:
ONLY a spouse can initiate an action to sever the marital bond for marriages solemnized during
the effectivity of the Family Code, except cases commenced prior to March 15, 2003. The nullity
and annulment of a marriage cannot be declared in a judgment on the pleadings, summary
judgment, or confession of judgment.
We pronounce these principles as We review on certiorari the Decision1 of the Court of Appeals
(CA) which reversed and set aside the summary judgment2 of the Regional Trial Court (RTC) in
an action for declaration of nullity of marriage, status of a child, recovery of property,
reconveyance, sum of money, and damages.
The Facts
The events that led to the institution of the instant suitare unveiled as follows:
Spouses Felix B. Carlos and Felipa Elemia died intestate. They left six parcels of land to their
compulsory heirs, Teofilo Carlos and petitioner Juan De Dios Carlos. The lots are particularly
described as follows:
Parcel No. 1
Lot No. 162 of the MUNTINLUPA ESTATE SUBDIVISION, Case No. 6137 of the Court of
Land Registration.
Exemption from the provisions of Article 567 of the Civil Code is specifically reserved.
Area: 1 hectare, 06 ares, 07 centares.
Parcel No. 2
A parcel of land (Lot No. 159-B), being a portion of Lot 159, situated in the Bo. of Alabang,
Municipality of Muntinlupa, Province of Rizal, x x x containing an area of Thirteen Thousand
Four Hundred Forty One (13,441) square meters.
Parcel No. 3
A parcel of land (Lot 159-B-2 of the subd. plan [LRC] Psd-325903, approved as a non-subd.
project), being a portion of Lot 159-B [LRC] Psd- Alabang, Mun. of Muntinlupa, Metro Manila,
Island of Luzon. Bounded on the NE, points 2 to 4 by Lot 155, Muntinlupa Estate; on the SE,

point 4 to 5 by Lot 159-B-5; on the S, points 5 to 1 by Lot 159-B-3; on the W, points 1 to 2 by

Lot 159-B-1 (Road widening) all of the subd. plan, containing an area of ONE HUNDRED
THIRTY (130) SQ. METERS, more or less.
PARCEL No. 4
A parcel of land (Lot 28-C of the subd. plan Psd-13-007090, being a portion of Lot 28,
Muntinlupa Estate, L.R.C. Rec. No. 6137), situated in the Bo. of Alabang, Mun. of
Muntinlupa, Metro Manila. Bounded on the NE, along lines 1-2 by Lot 27, Muntinlupa Estate;
on the East & SE, along lines 2 to 6 by Mangangata River; and on the West., along line 6-1,
by Lot 28-B of the subd. plan x x x containing an area of ONE THUSAND AND SEVENTYSIX (1,076) SQUARE METERS.
PARCEL No. 5
PARCELA DE TERRENO No. 50, Manzana No. 18, de la subd. de Solocan. Linda por el
NW, con la parcela 49; por el NE, con la parcela 36; por el SE, con la parcela 51; y por el
SW, con la calle Dos Castillas. Partiendo de un punto marcado 1 en el plano, el cual se halla
a S. gds. 01'W, 72.50 mts. Desde el punto 1 de esta manzana, que es un mojon de concreto
de la Ciudad de Manila, situado on el esquina E. que forman las Calles Laong Laan y Dos.
Castillas, continiendo un extension superficial de CIENTO CINCUENTA (150) METROS
CUADRADOS.
PARCEL No. 6
PARCELA DE TERRENO No. 51, Manzana No. 18, de la subd. De Solocon. Linda por el
NW, con la parcela 50; por el NE, con la parcela 37; por el SE, con la parcela 52; por el SW,
con la Calle Dos Castillas. Partiendo de un punto Marcado 1 en el plano, el cual se halla at
S. 43 gds. 01'E, 82.50 mts. Desde el punto 1 de esta manzana, que es un mojon de
concreto de la Ciudad de Manila, situado on el esquina E. que forman las Calles Laong Laan
y Dos. Castillas, continiendo una extension superficial de CIENTO CINCUENTA (150)
METROS CUADRADOS.3

During the lifetime of Felix Carlos, he agreed to transfer his estate to Teofilo. The agreement
was made in order to avoid the payment of inheritance taxes. Teofilo, in turn, undertook to
deliver and turn over the share of the other legal heir, petitioner Juan De Dios Carlos.
Eventually, the first three (3) parcels of land were transferred and registered in the name of
Teofilo. These three (3) lots are now covered by Transfer Certificate of Title (TCT) No. 234824
issued by the Registry of Deeds of Makati City; TCT No. 139061 issued by the Registry of
Deeds of Makati City; and TCT No. 139058 issued by the Registry of Deeds of Makati City.
Parcel No. 4 was registered in the name of petitioner. The lot is now covered by TCT No.
160401 issued by the Registry of Deeds of Makati City.
On May 13, 1992, Teofilo died intestate. He was survived by respondents Felicidad and their
son, Teofilo Carlos II (Teofilo II). Upon Teofilo's death, Parcel Nos. 5 & 6 were registered in the
name of respondent Felicidad and co-respondent, Teofilo II. The said two (2) parcels of land are
covered by TCT Nos. 219877 and 210878, respectively, issued by the Registry of Deeds of
Manila.

In 1994, petitioner instituted a suit against respondents before the RTC in Muntinlupa City,
docketed as Civil Case No. 94-1964. In the said case, the parties submitted and caused the
approval of a partial compromise agreement. Under the compromise, the parties acknowledged
their respective shares in the proceeds from the sale of a portion of the first parcel of land. This
includes the remaining 6,691-square-meter portion of said land.
On September 17, 1994, the parties executed a deed of extrajudicial partition, dividing the
remaining land of the first parcel between them.
Meanwhile, in a separate case entitled Rillo v. Carlos,4 2,331 square meters of the second
parcel of land were adjudicated in favor of plaintiffs Rillo. The remaining 10,000-square meter
portion was later divided between petitioner and respondents.
The division was incorporated in a supplemental compromise agreement executed on August
17, 1994, with respect to Civil Case No. 94-1964. The parties submitted the supplemental
compromise agreement, which was approved accordingly.
Petitioner and respondents entered into two more contracts in August 1994. Under the
contracts, the parties equally divided between them the third and fourth parcels of land.
In August 1995, petitioner commenced an action, docketed as Civil Case No. 95-135, against
respondents before the court a quo with the following causes of action: (a) declaration of nullity
of marriage; (b) status of a child; (c) recovery of property; (d) reconveyance; and (e) sum of
money and damages. The complaint was raffled to Branch 256 of the RTC in Muntinlupa.
In his complaint, petitioner asserted that the marriage between his late brother Teofilo and
respondent Felicidad was a nullity in view of the absence of the required marriage license. He
likewise maintained that his deceased brother was neither the natural nor the adoptive father of
respondent Teofilo Carlos II.
Petitioner likewise sought the avoidance of the contracts he entered into with respondent
Felicidad with respect to the subject real properties. He also prayed for the cancellation of the
certificates of title issued in the name of respondents. He argued that the properties covered by
such certificates of title, including the sums received by respondents as proceeds, should be
reconveyed to him.
Finally, petitioner claimed indemnification as and by way of moral and exemplary damages,
attorney's fees, litigation expenses, and costs of suit.
On October 16, 1995, respondents submitted their answer. They denied the material averments
of petitioner's complaint. Respondents contended that the dearth of details regarding the
requisite marriage license did not invalidate Felicidad's marriage to Teofilo. Respondents
declared that Teofilo II was the illegitimate child of the deceased Teofilo Carlos with another
woman.
On the grounds of lack of cause of action and lack of jurisdiction over the subject matter,
respondents prayed for the dismissal of the case before the trial court. They also asked that
their counterclaims for moral and exemplary damages, as well as attorney's fees, be granted.

But before the parties could even proceed to pre-trial, respondents moved for summary
judgment. Attached to the motion was the affidavit of the justice of the peace who solemnized
the marriage. Respondents also submitted the Certificate of Live Birth of respondent Teofilo II.
In the certificate, the late Teofilo Carlos and respondent Felicidad were designated as parents.
On January 5, 1996, petitioner opposed the motion for summary judgment on the ground of
irregularity of the contract evidencing the marriage. In the same breath, petitioner lodged his
own motion for summary judgment. Petitioner presented a certification from the Local Civil
Registrar of Calumpit, Bulacan, certifying that there is no record of birth of respondent Teofilo II.
Petitioner also incorporated in the counter-motion for summary judgment the testimony of
respondent Felicidad in another case. Said testimony was made in Civil Case No. 89-2384,
entitled Carlos v. Gorospe, before the RTC Branch 255, Las Pias. In her testimony, respondent
Felicidad narrated that co-respondent Teofilo II is her child with Teofilo.5
Subsequently, the Office of the City Prosecutor of Muntinlupa submitted to the trial court its
report and manifestation, discounting the possibility of collusion between the parties.
RTC and CA Dispositions
On April 8, 1996, the RTC rendered judgment, disposing as follows:
WHEREFORE, premises considered, defendant's (respondent's) Motion for Summary
Judgment is hereby denied. Plaintiff's (petitioner's) Counter-Motion for Summary Judgment is
hereby granted and summary judgment is hereby rendered in favor of plaintiff as follows:
1. Declaring the marriage between defendant Felicidad Sandoval and Teofilo Carlos
solemnized at Silang, Cavite on May 14, 1962, evidenced by the Marriage Certificate
submitted in this case, null and void ab initio for lack of the requisite marriage license;
2. Declaring that the defendant minor, Teofilo S. Carlos II, is not the natural, illegitimate, or
legally adopted child of the late Teofilo E. Carlos;
3. Ordering defendant Sandoval to pay and restitute to plaintiff the sum of P18,924,800.00
together with the interest thereon at the legal rate from date of filing of the instant complaint
until fully paid;
4. Declaring plaintiff as the sole and exclusive owner of the parcel of land, less the portion
adjudicated to plaintiffs in Civil Case No. 11975, covered by TCT No. 139061 of the Register
of Deeds of Makati City, and ordering said Register of Deeds to cancel said title and to issue
another title in the sole name of plaintiff herein;
5. Declaring the Contract, Annex "K" of complaint, between plaintiff and defendant Sandoval
null and void, and ordering the Register of Deeds of Makati City to cancel TCT No. 139058 in
the name of Teofilo Carlos, and to issue another title in the sole name of plaintiff herein;
6. Declaring the Contract, Annex M of the complaint, between plaintiff and defendant
Sandoval null and void;

7. Ordering the cancellation of TCT No. 210877 in the names of defendant Sandoval and
defendant minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue
another title in the exclusive name of plaintiff herein;
8. Ordering the cancellation of TCT No. 210878 in the name of defendant Sandoval and
defendant Minor Teofilo S. Carlos II and ordering the Register of Deeds of Manila to issue
another title in the sole name of plaintiff herein.
Let this case be set for hearing for the reception of plaintiff's evidence on his claim for moral
damages, exemplary damages, attorney's fees, appearance fees, and litigation expenses on
June 7, 1996 at 1:30 o'clock in the afternoon.
SO ORDERED.6

Dissatisfied, respondents appealed to the CA. In the appeal, respondents argued, inter alia, that
the trial court acted without or in excess of jurisdiction in rendering summary judgment annulling
the marriage of Teofilo, Sr. and Felicidad and in declaring Teofilo II as not an illegitimate child of
Teofilo, Sr.
On October 15, 2002, the CA reversed and set aside the RTC ruling, disposing as follows:
WHEREFORE, the summary judgment appealed from is REVERSED and SET ASIDE and in
lieu thereof, a new one is entered REMANDING the case to the court of origin for further
proceedings.
SO ORDERED.7

The CA opined:
We find the rendition of the herein appealed summary judgment by the court a quo contrary
to law and public policy as ensconced in the aforesaid safeguards. The fact that it was
appellants who first sought summary judgment from the trial court, did not justify the grant
thereof in favor of appellee. Not being an action "to recover upon a claim" or "to obtain a
declaratory relief," the rule on summary judgment apply (sic) to an action to annul a
marriage. The mere fact that no genuine issue was presented and the desire to expedite the
disposition of the case cannot justify a misinterpretation of the rule. The first paragraph of
Article 88 and 101 of the Civil Code expressly prohibit the rendition of decree of annulment of
a marriage upon a stipulation of facts or a confession of judgment. Yet, the affidavits
annexed to the petition for summary judgment practically amount to these methods explicitly
proscribed by the law.
We are not unmindful of appellee's argument that the foregoing safeguards have traditionally
been applied to prevent collusion of spouses in the matter of dissolution of marriages and
that the death of Teofilo Carlos on May 13, 1992 had effectively dissolved the marriage
herein impugned. The fact, however, that appellee's own brother and appellant Felicidad
Sandoval lived together as husband and wife for thirty years and that the annulment of their
marriage is the very means by which the latter is sought to be deprived of her participation in
the estate left by the former call for a closer and more thorough inquiry into the
circumstances surrounding the case. Rather that the summary nature by which the court a
quoresolved the issues in the case, the rule is to the effect that the material facts alleged in

the complaint for annulment of marriage should always be proved. Section 1, Rule 19 of the
Revised Rules of Court provides:
"Section 1. Judgment on the pleadings. - Where an answer fails to tender an issue,
or otherwise admits the material allegations of the adverse party's pleading, the court
may, on motion of that party, direct judgment on such pleading. But in actions for
annulment of marriage or for legal separation, the material facts alleged in the
complaint shall always be proved." (Underscoring supplied)
Moreover, even if We were to sustain the applicability of the rules on summary judgment to
the case at bench, Our perusal of the record shows that the finding of the court a quo for
appellee would still not be warranted. While it may be readily conceded that a valid marriage
license is among the formal requisites of marriage, the absence of which renders the
marriage void ab initio pursuant to Article 80(3) in relation to Article 58 of the Civil Code the
failure to reflect the serial number of the marriage license on the marriage contract
evidencing the marriage between Teofilo Carlos and appellant Felicidad Sandoval, although
irregular, is not as fatal as appellee represents it to be. Aside from the dearth of evidence to
the contrary, appellant Felicidad Sandoval's affirmation of the existence of said marriage
license is corroborated by the following statement in the affidavit executed by Godofredo
Fojas, then Justice of the Peace who officiated the impugned marriage, to wit:
"That as far as I could remember, there was a marriage license issued at Silang,
Cavite on May 14, 1962 as basis of the said marriage contract executed by Teofilo
Carlos and Felicidad Sandoval, but the number of said marriage license was
inadvertently not placed in the marriage contract for the reason that it was the Office
Clerk who filled up the blanks in the Marriage Contract who in turn, may have
overlooked the same."
Rather than the inferences merely drawn by the trial court, We are of the considered view
that the veracity and credibility of the foregoing statement as well as the motivations
underlying the same should be properly threshed out in a trial of the case on the merits.
If the non-presentation of the marriage contract - the primary evidence of marriage - is not
proof that a marriage did not take place, neither should appellants' non-presentation of the
subject marriage license be taken as proof that the same was not procured. The burden of
proof to show the nullity of the marriage, it must be emphasized, rests upon the plaintiff and
any doubt should be resolved in favor of the validity of the marriage.
Considering that the burden of proof also rests on the party who disputes the legitimacy of a
particular party, the same may be said of the trial court's rejection of the relationship between
appellant Teofilo Carlos II and his putative father on the basis of the inconsistencies in
appellant Felicidad Sandoval's statements. Although it had effectively disavowed appellant's
prior claims regarding the legitimacy of appellant Teofilo Carlos II, the averment in the
answer that he is the illegitimate son of appellee's brother, to Our mind, did not altogether
foreclose the possibility of the said appellant's illegitimate filiation, his right to prove the same
or, for that matter, his entitlement to inheritance rights as such.
Without trial on the merits having been conducted in the case, We find appellee's bare
allegation that appellant Teofilo Carlos II was merely purchased from an indigent couple by
appellant Felicidad Sandoval, on the whole, insufficient to support what could well be a
minor's total forfeiture of the rights arising from his putative filiation. Inconsistent though it
may be to her previous statements, appellant Felicidad Sandoval's declaration regarding the

illegitimate filiation of Teofilo Carlos II is more credible when considered in the light of the
fact that, during the last eight years of his life, Teofilo Carlos allowed said appellant the use
of his name and the shelter of his household. The least that the trial court could have done in
the premises was to conduct a trial on the merits in order to be able to thoroughly resolve the
issues pertaining to the filiation of appellant Teofilo Carlos II.8

On November 22, 2006, petitioner moved for reconsideration and for the inhibition of
the ponente, Justice Rebecca De Guia-Salvador. The CA denied the twin motions.
Issues
In this petition under Rule 45, petitioner hoists the following issues:
1. That, in reversing and setting aside the Summary Judgment under the Decision, Annex A
hereof, and in denying petitioner's Motion for reconsideration under the Resolution, Annex F
hereof, with respect to the nullity of the impugned marriage, petitioner respectfully submits
that the Court of Appeals committed a grave reversible error in applying Articles 88 and 101
of the Civil Code, despite the fact that the circumstances of this case are different from that
contemplated and intended by law, or has otherwise decided a question of substance not
theretofore decided by the Supreme Court, or has decided it in a manner probably not in
accord with law or with the applicable decisions of this Honorable Court;
2. That in setting aside and reversing the Summary Judgment and, in lieu thereof, entering
another remanding the case to the court of origin for further proceedings, petitioner most
respectfully submits that the Court of Appeals committed a serious reversible error in
applying Section 1, Rule 19 (now Section 1, Rule 34) of the Rules of Court providing for
judgment on the pleadings, instead of Rule 35 governing Summary Judgments;
3. That in reversing and setting aside the Summary Judgment and, in lieu thereof, entering
another remanding the case to the court of origin for further proceedings, petitioner most
respectfully submits that the Court of Appeals committed grave abuse of discretion,
disregarded judicial admissions, made findings on ground of speculations, surmises, and
conjectures, or otherwise committed misapplications of the laws and misapprehension of the
facts.9 (Underscoring supplied)

Essentially, the Court is tasked to resolve whether a marriage may be declared void ab
initio through a judgment on the pleadings or a summary judgment and without the benefit of a
trial. But there are other procedural issues, including the capacity of one who is not a spouse in
bringing the action for nullity of marriage.
Our Ruling
I. The grounds for declaration of absolute nullity of marriage must be proved. Neither
judgment on the pleadings nor summary judgment is allowed. So is confession of
judgment disallowed.
Petitioner faults the CA in applying Section 1, Rule 1910 of the Revised Rules of Court, which
provides:
SECTION 1. Judgment on the pleadings. - Where an answer fails to tender an issue, or
otherwise admits the material allegations of the adverse party's pleading, the court may, on

motion of that party, direct judgment on such pleading. But in actions for annulment of
marriage or for legal separation, the material facts alleged in the complaint shall always be
proved.

He argues that the CA should have applied Rule 35 of the Rules of Court governing summary
judgment, instead of the rule on judgment on the pleadings.
Petitioner is misguided. The CA did not limit its finding solely within the provisions of the Rule on
judgment on the pleadings. In disagreeing with the trial court, the CA likewise considered the
provisions on summary judgments, to wit:
Moreover, even if We are to sustain the applicability of the rules on summary judgment to the
case at bench, Our perusal of the record shows that the finding of the court a quo for
appellee would still not be warranted. x x x11

But whether it is based on judgment on the pleadings or summary judgment, the CA was correct
in reversing the summary judgment rendered by the trial court. Both the rules on judgment on
the pleadings and summary judgments have no place in cases of declaration of absolute nullity
of marriage and even in annulment of marriage.
With the advent of A.M. No. 02-11-10-SC, known as "Rule on Declaration of Absolute Nullity of
Void Marriages and Annulment of Voidable Marriages," the question on the application of
summary judgments or even judgment on the pleadings in cases of nullity or annulment of
marriage has been stamped with clarity. The significant principle laid down by the said Rule,
which took effect on March 15, 200312 is found in Section 17, viz.:
SEC. 17. Trial. - (1) The presiding judge shall personally conduct the trial of the case. No
delegation of evidence to a commissioner shall be allowed except as to matters involving
property relations of the spouses.
(2) The grounds for declaration of absolute nullity or annulment of marriage must be
proved. No judgment on the pleadings, summary judgment, or confession of judgment shall
be allowed. (Underscoring supplied)

Likewise instructive is the Court's pronouncement in Republic v. Sandiganbayan.13 In that case,

We excluded actions for nullity or annulment of marriage from the application of summary
judgments.
Prescinding from the foregoing discussion, save for annulment of marriage or declaration of
its nullity or for legal separation, summary judgment is applicable to all kinds of
actions.14 (Underscoring supplied)

By issuing said summary judgment, the trial court has divested the State of its lawful right and
duty to intervene in the case. The participation of the State is not terminated by the declaration
of the public prosecutor that no collusion exists between the parties. The State should have
been given the opportunity to present controverting evidence before the judgment was
rendered.15
Both the Civil Code and the Family Code ordain that the court should order the prosecuting
attorney to appear and intervene for the State. It is at this stage when the public prosecutor

sees to it that there is no suppression of evidence. Concomitantly, even if there is no

suppression of evidence, the public prosecutor has to make sure that the evidence to be
presented or laid down before the court is not fabricated.
To further bolster its role towards the preservation of marriage, the Rule on Declaration of
Absolute Nullity of Void Marriages reiterates the duty of the public prosecutor, viz.:
SEC. 13. Effect of failure to appear at the pre-trial. - (a) x x x
(b) x x x If there is no collusion, the court shall require the public prosecutor to intervene for
the State during the trial on the merits to prevent suppression or fabrication of evidence.
(Underscoring supplied)

Truly, only the active participation of the public prosecutor or the Solicitor General will ensure
that the interest of the State is represented and protected in proceedings for declaration of
nullity of marriages by preventing the fabrication or suppression of evidence.16
II. A petition for declaration of absolute nullity of void marriage may be filed solely by the
husband or wife. Exceptions: (1) Nullity of marriage cases commenced before the
effectivity of A.M. No. 02-11-10-SC; and (2) Marriages celebrated during the effectivity of
the Civil Code.
Under the Rule on Declaration of Absolute Nullity of Void Marriages and Annulment of
Voidable Marriages, the petition for declaration of absolute nullity of marriage may not be filed
by any party outside of the marriage. The Rule made it exclusively a right of the spouses by
stating:
SEC. 2. Petition for declaration of absolute nullity of void marriages. (a) Who may file. - A petition for declaration of absolute nullity of void marriage may be filed
solely by the husband or the wife. (Underscoring supplied)

Section 2(a) of the Rule makes it the sole right of the husband or the wife to file a petition for
declaration of absolute nullity of void marriage. The rationale of the Rule is enlightening, viz.:
Only an aggrieved or injured spouse may file a petition for annulment of voidable marriages
or declaration of absolute nullity of void marriages. Such petition cannot be filed by
compulsory or intestate heirs of the spouses or by the State. The Committee is of the belief
that they do not have a legal right to file the petition. Compulsory or intestate heirs have only
inchoate rights prior to the death of their predecessor, and, hence, can only question the
validity of the marriage of the spouses upon the death of a spouse in a proceeding for the
settlement of the estate of the deceased spouse filed in the regular courts. On the other
hand, the concern of the State is to preserve marriage and not to seek its
dissolution.17 (Underscoring supplied)

The new Rule recognizes that the husband and the wife are the sole architects of a healthy,
loving, peaceful marriage. They are the only ones who can decide when and how to build the
foundations of marriage. The spouses alone are the engineers of their marital life. They are
simultaneously the directors and actors of their matrimonial true-to-life play. Hence, they alone

can and should decide when to take a cut, but only in accordance with the grounds allowed by
law.
The innovation incorporated in A.M. No. 02-11-10-SC sets forth a demarcation line between
marriages covered by the Family Code and those solemnized under the Civil Code. The Rule
extends only to marriages entered into during the effectivity of the Family Code which took
effect on August 3, 1988.18
The advent of the Rule on Declaration of Absolute Nullity of Void Marriages marks the beginning
of the end of the right of the heirs of the deceased spouse to bring a nullity of marriage case
against the surviving spouse. But the Rule never intended to deprive the compulsory or intestate
heirs of their successional rights.
While A.M. No. 02-11-10-SC declares that a petition for declaration of absolute nullity of
marriage may be filed solely by the husband or the wife, it does not mean that the compulsory
or intestate heirs are without any recourse under the law. They can still protect their
successional right, for, as stated in the Rationale of the Rules on Annulment of Voidable
Marriages and Declaration of Absolute Nullity of Void Marriages, compulsory or intestate heirs
can still question the validity of the marriage of the spouses, not in a proceeding for declaration
of nullity but upon the death of a spouse in a proceeding for the settlement of the estate of the
deceased spouse filed in the regular courts.19
It is emphasized, however, that the Rule does not apply to cases already commenced before
March 15, 2003 although the marriage involved is within the coverage of the Family Code. This
is so, as the new Rule which became effective on March 15, 200320 is prospective in its
application. Thus, the Court held in Enrico v. Heirs of Sps. Medinaceli,21 viz.:
As has been emphasized, A.M. No. 02-11-10-SC covers marriages under the Family Code of
the Philippines, and is prospective in its application.22 (Underscoring supplied)

Petitioner commenced the nullity of marriage case against respondent Felicidad in 1995. The
marriage in controversy was celebrated on May 14, 1962. Which law would govern depends
upon when the marriage took place.23
The marriage having been solemnized prior to the effectivity of the Family Code, the applicable
law is the Civil Code which was the law in effect at the time of its celebration.24 But the Civil
Code is silent as to who may bring an action to declare the marriage void. Does this mean that
any person can bring an action for the declaration of nullity of marriage?
We respond in the negative. The absence of a provision in the Civil Code cannot be construed
as a license for any person to institute a nullity of marriage case. Such person must appear to
be the party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit.25 Elsewise stated, plaintiff must be the real party-in-interest. For
it is basic in procedural law that every action must be prosecuted and defended in the name of
the real party-in-interest.26
Interest within the meaning of the rule means material interest or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from mere curiosity about the
question involved or a mere incidental interest. One having no material interest to protect cannot

invoke the jurisdiction of the court as plaintiff in an action. When plaintiff is not the real party-ininterest, the case is dismissible on the ground of lack of cause of action.27
Illuminating on this point is Amor-Catalan v. Court of Appeals,28 where the Court held:
True, under the New Civil Code which is the law in force at the time the respondents were
married, or even in the Family Code, there is no specific provision as to who can file a
petition to declare the nullity of marriage; however, only a party who can
demonstrate "proper interest" can file the same. A petition to declare the nullity of marriage,
like any other actions, must be prosecuted or defended in the name of the real party-ininterest and must be based on a cause of action. Thus, in Nial v. Badayog, the Court held
that the children have the personality to file the petition to declare the nullity of marriage of
their deceased father to their stepmother as it affects their successional rights.
xxxx
In fine, petitioner's personality to file the petition to declare the nullity of marriage cannot be
ascertained because of the absence of the divorce decree and the foreign law allowing it.
Hence, a remand of the case to the trial court for reception of additional evidence is
necessary to determine whether respondent Orlando was granted a divorce decree and
whether the foreign law which granted the same allows or restricts remarriage. If it is proved
that a valid divorce decree was obtained and the same did not allow respondent Orlando's
remarriage, then the trial court should declare respondent's marriage as bigamous and
void ab initio but reduced the amount of moral damages from P300,000.00 to P50,000.00
and exemplary damages from P200,000.00 to P25,000.00. On the contrary, if it is proved
that a valid divorce decree was obtained which allowed Orlando to remarry, then the trial
court must dismiss the instant petition to declare nullity of marriage on the ground that
petitioner Felicitas Amor-Catalan lacks legal personality to file the same.29(Underscoring
supplied)

III. The case must be remanded to determine whether or not petitioner is a real-party-ininterest to seek the declaration of nullity of the marriage in controversy.
In the case at bench, the records reveal that when Teofilo died intestate in 1992, his only
surviving compulsory heirs are respondent Felicidad and their son, Teofilo II. Under the law on
succession, successional rights are transmitted from the moment of death of the decedent and
the compulsory heirs are called to succeed by operation of law.30
Upon Teofilo's death in 1992, all his property, rights and obligations to the extent of the value of
the inheritance are transmitted to his compulsory heirs. These heirs were respondents Felicidad
and Teofilo II, as the surviving spouse and child, respectively.
Article 887 of the Civil Code outlined who are compulsory heirs, to wit:
(1) Legitimate children and descendants, with respect to their legitimate parents and
ascendants;
(2) In default of the foregoing, legitimate parents and ascendants, with respect to their
legitimate children and descendants;
(3) The widow or widower;

(4) Acknowledged natural children, and natural children by legal fiction;

(5) Other illegitimate children referred to in Article 287 of the Civil Code.31

Clearly, a brother is not among those considered as compulsory heirs. But although a collateral
relative, such as a brother, does not fall within the ambit of a compulsory heir, he still has a right
to succeed to the estate. Articles 1001 and 1003 of the New Civil Code provide:
ART. 1001. Should brothers and sisters or their children survive with the widow or
widower, the latter shall be entitled to one-half of the inheritance and the brothers and
sisters or their children to the other half.
ART. 1003. If there are no descendants, ascendants, illegitimate children, or a surviving
spouse, the collateral relatives shall succeed to the entire estate of the deceased in
accordance with the following articles. (Underscoring supplied)

Indeed, only the presence of descendants, ascendants or illegitimate children excludes

collateral relatives from succeeding to the estate of the decedent. The presence of legitimate,
illegitimate, or adopted child or children of the deceased precludes succession by collateral
relatives.32 Conversely, if there are no descendants, ascendants, illegitimate children, or a
surviving spouse, the collateral relatives shall succeed to the entire estate of the decedent.33
If respondent Teofilo II is declared and finally proven not to be the legitimate, illegitimate, or
adopted son of Teofilo, petitioner would then have a personality to seek the nullity of marriage of
his deceased brother with respondent Felicidad. This is so, considering that collateral relatives,
like a brother and sister, acquire successional right over the estate if the decedent dies without
issue and without ascendants in the direct line.
The records reveal that Teofilo was predeceased by his parents. He had no other siblings but
petitioner. Thus, if Teofilo II is finally found and proven to be not a legitimate, illegitimate, or
adopted son of Teofilo, petitioner succeeds to the other half of the estate of his brother, the first
half being allotted to the widow pursuant to Article 1001 of the New Civil Code. This makes
petitioner a real-party-interest to seek the declaration of absolute nullity of marriage of his
deceased brother with respondent Felicidad. If the subject marriage is found to be void ab initio,
petitioner succeeds to the entire estate.
It bears stressing, however, that the legal personality of petitioner to bring the nullity of marriage
case is contingent upon the final declaration that Teofilo II is not a legitimate, adopted, or
illegitimate son of Teofilo.
If Teofilo II is proven to be a legitimate, illegitimate, or legally adopted son of Teofilo, then
petitioner has no legal personality to ask for the nullity of marriage of his deceased brother and
respondent Felicidad. This is based on the ground that he has no successional right to be
protected, hence, does not have proper interest. For although the marriage in controversy may
be found to be void from the beginning, still, petitioner would not inherit. This is because the
presence of descendant, illegitimate,34 or even an adopted child35 excludes the collateral
relatives from inheriting from the decedent.
Thus, the Court finds that a remand of the case for trial on the merits to determine the validity or
nullity of the subject marriage is called for. But the RTC is strictly instructed to dismiss the

nullity of marriage case for lack of cause of action if it is proven by evidence that Teofilo
II is a legitimate, illegitimate, or legally adopted son of Teofilo Carlos, the deceased
brother of petitioner.
IV. Remand of the case regarding the question of filiation of respondent Teofilo II is
proper and in order. There is a need to vacate the disposition of the trial court as to the other
causes of action before it.
Petitioner did not assign as error or interpose as issue the ruling of the CA on the remand of the
case concerning the filiation of respondent Teofilo II. This notwithstanding, We should not leave
the matter hanging in limbo.
This Court has the authority to review matters not specifically raised or assigned as error by the
parties, if their consideration is necessary in arriving at a just resolution of the case.36
We agree with the CA that without trial on the merits having been conducted in the case,
petitioner's bare allegation that respondent Teofilo II was adopted from an indigent couple is
insufficient to support a total forfeiture of rights arising from his putative filiation. However, We
are not inclined to support its pronouncement that the declaration of respondent Felicidad as to
the illegitimate filiation of respondent Teofilo II is more credible. For the guidance of the
appellate court, such declaration of respondent Felicidad should not be afforded credence. We
remind the CA of the guaranty provided by Article 167 of the Family Code to protect the status
of legitimacy of a child, to wit:
ARTICLE 167. The child shall be considered legitimate although the mother may have
declared against its legitimacy or may have been sentenced as an adulteress. (Underscoring
supplied)

It is stressed that Felicidad's declaration against the legitimate status of Teofilo II is the very act
that is proscribed by Article 167 of the Family Code. The language of the law is unmistakable.
An assertion by the mother against the legitimacy of her child cannot affect the legitimacy of a
child born or conceived within a valid marriage.37
Finally, the disposition of the trial court in favor of petitioner for causes of action concerning
reconveyance, recovery of property, and sum of money must be vacated. This has to be so, as
said disposition was made on the basis of its finding that the marriage in controversy was null
and void ab initio.
WHEREFORE, the appealed Decision is MODIFIED as follows:
1. The case is REMANDED to the Regional Trial Court in regard to the action on the status
and filiation of respondent Teofilo Carlos II and the validity or nullity of marriage between
respondent Felicidad Sandoval and the late Teofilo Carlos;
2. If Teofilo Carlos II is proven to be the legitimate, or illegitimate, or legally adopted son of
the late Teofilo Carlos, the RTC is strictly INSTRUCTED to DISMISS the action for nullity of
marriage for lack of cause of action;
3. The disposition of the RTC in Nos. 1 to 8 of the fallo of its decision is VACATED AND SET
ASIDE.

The Regional Trial Court is ORDERED to conduct trial on the merits with dispatch and to give
this case priority in its calendar.
No costs.
SO ORDERED.

JAMES ESTRELLER, EDUARDO

CULIANAN, GREG CARROS,
RAQUEL YEE, JOSELITO
PENILLA, LORNA DOTE,
CRESENCIANA CLEOPAS,
TRINIDAD TEVES, SONIA
PENILLA, ANITA GOMINTONG,
CHING DIONESIO, MARIBEL
MANALO, DESIRES HUERTO,
and RAYMUNDO CORTES,
Petitioners,

G.R. No. 170264

Present:
YNARES-SANTIAGO, J.,
Chairperson,
AUSTRIA-MARTINEZ,
CHICO-NAZARIO,
NACHURA, and
PERALTA, JJ.

- versus LUIS MIGUEL YSMAEL and

Promulgated:
CRISTETA L. SANTOS-ALVAREZ,

March 13, 2009

Respondents.
x-----------------------------------------------------x

DECISION
AUSTRIA-MARTINEZ, J.:

In the present petition, the Court finds occasion to reassert the legal precepts that a
co-owner may file an action for recovery of possession without the necessity of joining all
the other co-owners as co-plaintiffs since the suit is deemed to be instituted for the benefit
of all; and that Section 2 of Presidential Decree (P.D.) No. 2016, reinforced by P.D. No.
1517, which prohibits the eviction of qualified tenants/occupants, extends only to landless
urban families who are rightful occupants of the land and its structures, and does not

include those whose presence on the land is merely tolerated and without the benefit of
contract, those who enter the land by force or deceit, or those whose possession is under
litigation.
Respondents filed with the Regional Trial Court (RTC), Branch 216, Quezon City,
a case for Recovery of Possession against petitioners, claiming ownership of the property
subject of dispute located in E. Rodriguez Avenue and La Filonila Streets in Quezon City,
by virtue of Transfer Certificate of Title (TCT) No. 41698 issued by the Register of Deeds
of Quezon City on June 10, 1958. Respondents alleged that on various dates in 1973,
petitioners entered the property through stealth and strategy and had since occupied the
same; and despite demands made in March 1993, petitioners refused to vacate the
premises, prompting respondents to file the action.[1]
Petitioners denied respondents' allegations. According to them, respondent Luis
Miguel Ysmael (Ysmael) had no personality to file the suit since he only owned a small
portion of the property, while respondent Cristeta Santos-Alvarez (Alvarez) did not appear
to be a registered owner thereof. Petitioners also contended that their occupation of the
property was lawful, having leased the same from the Magdalena Estate, and later on from
Alvarez. Lastly, petitioners asserted that the property has already been proclaimed by the
Quezon City Government as an Area for Priority Development under P. D. Nos. 1517 and
2016, which prohibits the eviction of lawful tenants and demolition of their homes.[2]
After trial, the RTC rendered its Decision dated September 15, 2000 in favor of
respondents. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of plaintiffs Luis Miguel Ysmael and Cristeta L. Santos-Alvarez and
against defendants ordering the latter and all persons claiming rights under them
to immediately vacate the subject property and peacefully surrender the same to
the plaintiffs.
Defendants are likewise ordered to pay plaintiffs the following:

1. The amount of P400.00 each per month from the date of

extra-judicial demand until the subject property is surrendered
to plaintiffs as reasonable compensation for the use and
possession thereof;
2. The amount of P20,000.00 by way of exemplary damages;
3. The amount of P20,000.00 by way of attorney's fees and
litigation expenses;
4. Cost of suit.
Corollarily, the counter-claims of defendants are hereby DISMISSED
for lack of merit.
SO ORDERED.[3]

Petitioners appealed to the Court of Appeals (CA), which, in a

Decision[4] dated March 14, 2005, dismissed their appeal and affirmed in toto the RTC
Decision.
Hence, the present petition for review under Rule 45 of the Rules of Court, on the
following grounds:
I
THE HONORABLE COURT OF APPEALS ERRED IN
CONCLUDING THAT RESPONDENTS YSMAEL AND ALVAREZ ARE
BOTH REAL PARTIES IN INTEREST WHO WOULD BE BENEFITED
OR INJURED BY THE JUDGMENT OR THE PARTY ENTITLED TO
THE AVAILS OF THE SUIT.
II
THE HONORABLE COURT OF APPEALS FAILED TO
CONSIDER AND DECIDE THE RELEVANT QUESTIONS AND ISSUES
PRESENTED BY THE PETITIONERS IN ROMAN NUMERALS II, III
AND IV OF THEIR DISCUSSIONS AND ARGUMENTS IN THE
APPELLANTS BRIEF WHICH ARE HEREUNTO COPIED OR
REPRODUCED.[5]

The present petition merely reiterates the issues raised and settled by the RTC and
the CA. On this score, it is well to emphasize the rule that the Courts role in a petition

under Rule 45 is limited to reviewing or reversing errors of law allegedly committed by the
appellate court. Factual findings of the trial court, especially when affirmed by the CA, are
conclusive on the parties. Since such findings are generally not reviewable, this Court is
not duty-bound to analyze and weigh all over again the evidence already considered in the
proceedings below, unless the factual findings complained of are devoid of support from
the evidence on record or the assailed judgment is based on a misapprehension of facts.[6]
The Court then finds that the petition is without merit.
Respondents are real parties-in-interest in the suit below and may, therefore,
commence the complaint for accion publiciana. On the part of Ysmael, he is a named coowner of the subject property under TCT No. 41698, together with Julian Felipe Ysmael,
Teresa Ysmael, and Ramon Ysmael.[7] For her part, Alvarez was a buyer of a portion of
the property, as confirmed in several documents, namely: (1) Decision dated August 30,
1974 rendered by the Regional Trial Court of Quezon City, Branch 9 (IX), in Civil Case
No. Q-8426, which was based on a Compromise Agreement between Alvarez and the
Magdalena Estate;[8] (2) an unnotarized Deed of Absolute Sale dated May 1985 executed
between the Ysmael Heirs and Alvarez;[9] and (3) a notarized Memorandum of Agreement
between the Ysmael Heirs and Alvarez executed on May 2, 1991.[10]
Recently, in Wee v. De Castro,[11] the Court, citing Article 487 of the Civil Code,
reasserted the rule that any one of the co-owners may bring any kind of action for the
recovery of co-owned properties since the suit is presumed to have been filed for the
benefit of all co-owners. The Court also stressed that Article 487 covers all kinds of action
for the recovery of possession, i.e., forcible entry and unlawful detainer (accion interdictal),
recovery of possession (accion publiciana), and recovery of ownership (accion de
reivindicacion), thus:
In the more recent case of Carandang v. Heirs of De Guzman,this Court
declared that a co-owner is not even a necessary party to an action for ejectment,
for complete relief can be afforded even in his absence, thus:

In sum, in suits to recover properties, all co-owners are real parties in

interest. However, pursuant to Article 487 of the Civil Code and the relevant
jurisprudence, any one of them may bring an action, any kind of action for the
recovery of co-owned properties. Therefore, only one of the co-owners, namely
the co-owner who filed the suit for the recovery of the co-owned property, is
an indispensable party thereto. The other co-owners are not indispensable
parties. They are not even necessary parties, for a complete relief can be afforded
in the suit even without their participation, since the suit is presumed to have been
filed for the benefit of all co-owners. (Emphasis supplied)

Petitioners persistently question the validity of the transfer of ownership to

Alvarez. They insist that Alvarez failed to establish any right over the property since the
Deed of Absolute Sale was not inscribed on TCT No. 41698. Interestingly, petitioners
debunked their own argument when they themselves claimed in their Answer with
Counter-claim that they derived their right to occupy the property from a lease agreement
with, first, the Magdalena Estate, and thereafter, Alvarez herself.[12] More importantly, the
fact that the sale was not annotated or inscribed on TCT No. 41698 does not make it any
less valid. A contract of sale has the force of law between the contracting parties and they
are expected to abide, in good faith, by their respective contractual commitments. Article
1358 of the Civil Code which requires the embodiment of certain contracts in a public
instrument, is only for convenience; and registration of the instrument only adversely
affects third parties, and non-compliance therewith does not adversely affect the validity of
the contract or the contractual rights and obligations of the parties thereunder.[13]
Petitioners further contend that the property subject of the Deed of Absolute Sale
Lot 6, Block 4 of Subd. Plan Psd No. 33309 is different from that being claimed in this
case, which are Lots 2 and 3. They claim that there exists another title covering the subject
property, i.e., TCT No. 41698 in the names of Victoria M. Panganiban and Teodoro M.
Panganiban.
Notably, TCT No. 41698 in the name of the Ysmael Heirs covers several parcels of
land under Subd. Plan Psd No. 33309. These include: Lot 2, Block 4; Lot 3, Block 4;
and Lot 6, Block 4, each of which contains 1,000 square meters. In the Decision
dated August 30, 1974 rendered by the RTC of Quezon City, Branch 9, in Civil Case No.

Q-8426, the ownership of 200 square meters of Lot 2, Block 4; 250 square meters of Lot 3,
Block 4; and the full 1,000 square meters of Lot 6, Block 4, was conferred on Alvarez. A
Deed of Absolute Sale dated May 1985 was later executed by the Ysmael Heirs in favor of
Alvarez, but it covered only Lot 6, Block 4. Nevertheless, a Memorandum of Agreement
dated May 2, 1991 was subsequently entered into by the Ysmael Heirs and Alvarez,
whereby all three apportioned parcels of land allocated to Alvarez under the RTC Decision
dated August 30, 1974, were finally sold, transferred and conveyed to her. Evidently,
while the title was yet to be registered in the name of Alvarez, for all intents and purposes,
however, the subject property was already owned by her. The Ysmael Heirs are merely
naked owners of the property, while Alvarez is already the beneficial or equitable owner
thereof; and the right to the gains, rewards and advantages generated by the property
pertains to her.
The existence of a title in the same TCT No. 41698, this time in the names of
Victoria M. Panganiban and Teodoro M. Panganiban, was adequately explained by the
Certification of the Register of Deeds dated March 1, 1994, and which reads:
At the instance of RUY ALBERTO S. RONDAIN, I, SAMUEL C.
CLEOFE, Register of Deeds of Quezon City, do hereby certify that TCT No.
41698, covering Lot 19, Blk. 8 of the cons.-subd. plan Pos-817, with an area of
Three Hundred Seventy Five (375) Square Meters, registered in the name of
VICTORIA M. PANGANIBAN; and TEODORO M. PANGANIBAN,
married to Elizabeth G. Panganiban, issued on February 8, 1991, is existing and
on file in this Registry.
This is to certify further that TCT No. 41698 presented by Ruy Alberto
S. Rondain covering Lot 3, Blk. 2 of the subd. Plan PSD-3309, with an area of
Nine Hundred Ninety Six (996) Square Meters, issued on June 10, 1958 and
registered in the name of JUAN FELIPE YSMAEL, TERESA YSMAEL,
RAMON YSMAEL, LUIS MIGUEL YSMAEL, which is also an existing
title is different and distinct from each other inasmuch as they cover
different Lots and Plans.
That it is further certified that the similarity in the title numbers is due
to the fact that after the fire of June 11, 1988, the Quezon City Registry
issued new title numbers beginning with TCT No. 1.[14] (Emphasis supplied)

Finally, petitioners' claim that they are entitled to the protection against eviction and
demolition afforded by P.D. Nos. 2016,[15] 1517,[16] and Republic Act (R.A.) No.
7279,[17] is not plausible.
Section 6 of P.D. No. 1517 grants preferential rights to landless tenants/occupants to
acquire land within urban land reform areas, while Section 2 of P.D. No. 2016 prohibits the
eviction of qualified tenants/ occupants.
In Dimaculangan v. Casalla,[18] the Court was emphatic in ruling that the protective
mantle of P.D. No. 1517 and P.D. No. 2016 extends only to landless urban families who
meet these qualifications: a) they are tenants as defined under Section 3(f) of P.D. No.
1517; b) they built a home on the land they are leasing or occupying; c) the land they are
leasing or occupying is within an Area for Priority Development and Urban Land Reform
Zone; and d) they have resided on the land continuously for the last 10 years or more.
Section 3(f) of P.D. No. No. 1517 defines the term "tenant" covered by the said
decree as the rightful occupant of land and its structures, but does not include those whose
presence on the land is merely tolerated and without the benefit of contract, those who
enter the land by force or deceit, or those whose possession is under litigation. It has
already been ruled that occupants of the land whose presence therein is devoid of any legal
authority, or those whose contracts of lease were already terminated or had already expired,
or whose possession is under litigation, are not considered "tenants" under the Section
3(f).[19]
Petitioners claim that they are lawful lessees of the property. However, they failed
to prove any lease relationship or, at the very least, show with whom they entered the lease
contract. Respondents, on the other hand, were able to prove their right to enjoy possession
of the property. Thus, petitioners, whose occupation of the subject property by mere

tolerance has been terminated by respondents, clearly do not qualify as tenants covered
by these social legislations.
Finally, petitioners failed to demonstrate that they qualify for coverage under R. A.
No. 7279 or the Urban Development and Housing Act of 1992.
R. A. No. 7279 provides for the procedure to be undertaken by the concerned local
governments in the urban land development process, to wit: conduct an inventory of all
lands and improvements within their respective localities, and in coordination with the
National Housing Authority, the Housing and Land Use Regulatory Board, the National
Mapping Resource Information Authority, and the Land Management Bureau; identify
lands for socialized housing and resettlement areas for the immediate and future needs of
the underprivileged and homeless in the urban areas; acquire the lands; and dispose of said
lands to the beneficiaries of the program.[20] While there is a Certification that the area
bounded by E. Rodriguez, Victoria Avenue, San Juan River and 10th Street of Barangay.
Damayang Lagi, Quezon City is included in the list of Areas for Priority Development
under Presidential Proclamation No. 1967,[21] there is no showing that the property has
already been acquired by the local government for this purpose; or that petitioners have
duly qualified as beneficiaries.
All told, the Court finds no reason to grant the present petition.
WHEREFORE, the petition is DENIED for lack of merit. The Decision
dated March 14, 2005 of the Court of Appeals is AFFIRMED.
SO ORDERED.

G.R. No. 173297

March 6, 2013

STRONGHOLD INSURANCE COMPANY, INC., Petitioner,

vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T. TAYACTAC,
and MANUEL D. MARANON, JR., Respondents.
DECISION
BERSAMIN, J.:
The personality of a corporation is distinct and separate from the personalities of its
stockholders. Hence, its stockholders are not themselves the real parties in interest to claim and
recover compensation for the damages arising from the wrongful attachment of its assets. Only
the corporation is the real party in interest for that purpose.
The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic insurance company,
assails the decision promulgated on January 31, 2006,1 whereby the Court of Appeals (CA) in
CA-G.R. CV No. 79145 affirmed the judgment rendered on April 28, 2003 by the Regional Trial
Court in Parafiaque City (RTC) holding Stronghold Insurance and respondent Manuel D.
Marafion, Jr. jointly and solidarily liable for damages to respondents Tomas Cuenca, Marcelina
Cuenca, Milagros Cuenca (collectively referred to as Cuencas), and Bramie Tayactac, upon the
latters claims against the surety bond issued by Stronghold Insurance for the benefit of
Maraon.2
Antecedents
On January 19, 1998, Maraon filed a complaint in the RTC against the Cuencas for the
collection of a sum of money and damages. His complaint, docketed as Civil Case No. 98-023,
included an application for the issuance of a writ of preliminary attachment.3 On January 26,
1998, the RTC granted the application for the issuance of the writ of preliminary attachment
conditioned upon the posting of a bond of P1,000,000.00 executed in favor of the Cuencas.
Less than a month later, Maraon amended the complaint to implead Tayactac as a defendant.4
On February 11, 1998, Maraon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount
of P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of
preliminary attachment.5 The sheriff served the writ, the summons and a copy of the complaint
on the Cuencas on the same day. The service of the writ, summons and copy of the complaint
were made on Tayactac on February 16, 1998.6
Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff
levied upon the equipment, supplies, materials and various other personal property belonging to
Arc Cuisine, Inc. that were found in the leased corporate office-cum-commissary or kitchen of
the corporation.7 On February 19, 1998, the sheriff submitted a report on his proceedings,8 and
filed an ex parte motion seeking the transfer of the levied properties to a safe place. The RTC
granted the ex parte motion on February 23, 1998.9

On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss
and to Quash Writ of Preliminary Attachment on the grounds that: (1) the action involved intracorporate matters that were within the original and exclusive jurisdiction of the Securities and
Exchange Commission (SEC); and (2) there was another action pending in the SEC as well as
a criminal complaint in the Office of the City Prosecutor of Paraaque City. 10
On March 5, 1998, Maraon opposed the motion.11
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary
Attachment, stating that the action, being one for the recovery of a sum of money and damages,
was within its jurisdiction.12
Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of
the denial of their Motion to Dismiss and to Quash Writ of Preliminary Attachment, but the RTC
denied their motion for reconsideration on September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and
prohibition to challenge the August 10, 1998 and September 16, 1998 orders of the RTC on the
basis of being issued with grave abuse of discretion amounting to lack or excess of jurisdiction
(C.A.-G.R. SP No. 49288).13
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No.
49288,14 granting the petition. It annulled and set aside the challenged orders, and dismissed
the amended complaint in Civil Case No. 98-023 for lack of jurisdiction, to wit:
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET ASIDE, and the
judgment is hereby rendered DISMISSING the Amended Complaint in Civil Case No. 98-023 of
the respondent court, for lack of jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and resolution of the Cuencas
and Tayactacs claim for the damages sustained from the enforcement of the writ of preliminary
attachment.15
On February 17, 2000,16 the sheriff reported to the RTC, as follows:
On the scheduled inventory of the properties (February 17, 2000) and to comply with the
Resolution of the Court of Appeals dated December 24, 1999 ordering the delivery of the
attached properties to the defendants, the proceedings thereon being:
1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit, Atty. Ayo,
defendant Marcelina Cuenca, and two Court Personnel, Robertson Catorce and Danilo
Abanto, went to the warehouse where Mr. Maraon recommended for safekeeping the
properties in which he personally assured its safety, at No. 14, Marian II Street, East Service
Road, Paraaque Metro Manila.
2. That to our surprise, said warehouse is now tenanted by a new lessee and the properties
were all gone and missing.

3. That there are informations (sic) that the properties are seen at Contis Pastry & Bake
Shop owned by Mr. Maraon, located at BF Homes in Paraaque City.

On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver
Attached Properties and to Set Case for Hearing,17 praying that: (1) the Branch Sheriff be
ordered to immediately deliver the attached properties to them; (2) Stronghold Insurance be
directed to pay them the damages being sought in accordance with its undertaking under the
surety bond for P1,000,0000.00; (3) Maraon be held personally liable to them considering the
insufficiency of the amount of the surety bond; (4) they be paid the total of P1,721,557.20 as
actual damages representing the value of the lost attached properties because they, being
accountable for the properties, would be turning that amount over to Arc Cuisine, Inc.; and (5)
Maraon be made to pay P200,000.00 as moral damages, P100,000.00 as exemplary
damages, and P100,000.00 as attorneys fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and
Tayactac filed their reply on May 5, 2000.
On May 25, 2000, Maraon filed his own comment/opposition to the Motion to Require Sheriff to
Deliver Attached Properties and to Set Case for Hearing of the Cuencas and Tayactac, arguing
that because the attached properties belonged to Arc Cuisine, Inc. 50% of the stockholding of
which he and his relatives owned, it should follow that 50% of the value of the missing attached
properties constituted liquidating dividends that should remain with and belong to him.
Accordingly, he prayed that he should be required to return only P100,000.00 to the Cuencas
and Tayactac.18
On June 5, 2000, the RTC commanded Maraon to surrender all the attached properties to the
RTC through the sheriff within 10 days from notice; and directed the Cuencas and Tayactac to
submit the affidavits of their witnesses in support of their claim for damages.19
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance.20
Ruling of the RTC
After trial, the RTC rendered its judgment on April 28, 2003, holding Maraon and Stronghold
Insurance jointly and solidarily liable for damages to the Cuencas and Tayactac,21 viz:
WHEREFORE, premises considered, as the defendants were able to preponderantly prove their
entitlement for damages by reason of the unlawful and wrongful issuance of the writ of
attachment, MANUEL D. MARAON, JR., plaintiff and defendant, Stronghold Insurance
Company Inc., are found to be jointly and solidarily liable to pay the defendants the following
amount to wit:
(1) PhP1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorneys fees; and

(5) To pay the cost of suit.

SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145), assigning the
following errors to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO PAY THE AMOUNT
OFP1,000,000.00 REPRESENTING THE AMOUNT OF THE BOND AND OTHER DAMAGES
TO THE DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE INDEMNITY
AGREEMENT (EXH. "2-SURETY") EXECUTED BY MANUEL D. MARAON, JR. IN FAVOR
OF STRONGHOLD WHEREIN HE BOUND HIMSELF TO INDEMNIFY STRONGHOLD OF
WHATEVER AMOUNT IT MAY BE HELD LIABLE ON ACCOUNT OF THE ISSUANCE OF THE
ATTACHMENT BOND.22
On January 31, 2006, the CA, finding no reversible error, promulgated its decision affirming the
judgment of the RTC.23
Stronghold Insurance moved for reconsideration, but the CA denied its motion for
reconsideration on June 22, 2006.
Issues
Hence, this appeal by petition for review on certiorari by Stronghold Insurance, which submits
that:
I.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED
QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND
APPLICABLE DECISIONS OF THE HONORABLE COURT CONSIDERING THAT THE
COURT OF APPEALS AFFIRMED THE ERRONEOUS DECISION OF THE TRIAL COURT
HOLDING RESPONDENT MARA[]ON AND PETITIONER STRONGHOLD JOINTLY AND
SOLIDARILY LIABLE TO PAY THE RESPONDENTS CUENCA, et al., FOR PURPORTED
DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND WRONGFUL ISSUANCE OF
THE WRIT OF ATTACHMENT, DESPITE THE FACT THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE PROPERTIES
ATTACHED AND THUS, ARE NOT THE PROPER PARTIES TO CLAIM ANY PURPORTED
DAMAGES ARISING THEREFROM.

B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND

WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT WERE CAUSED BY THE
NEGLIGENCE OF THE BRANCH SHERIFF OF THE TRIAL COURT AND HIS FAILURE TO
COMPLY WITH THE PROVISIONS OF THE RULES OF COURT PERTAINING TO THE
ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER STRONGHOLD
TO BE SOLIDARILY LIABLE WITH RESPONDENT MARA[]ON TO RESPONDENTS
CUENCA et al., FOR MORAL DAMAGES, EXEMPLARY DAMAGES, ATTORNEYS FEES
AND COST OF SUIT DESPITE THE FACT THAT THE GUARANTY OF PETITIONER
STRONGHOLD PURSUANT TO ITS SURETY BOND IS LIMITED ONLY TO THE AMOUNT
OF P1,000,000.00.

II
IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD HAVE HELD
RESPONDENT MARA[]ON TO BE LIABLE TO INDEMNIFY PETITIONER STRONGHOLD
FOR ALL PAYMENTS, DAMAGES, COSTS, LOSSES, PENALTIES, CHARGES AND
EXPENSES IT SUSTAINED IN CONNECTION WITH THE INSTANT CASE, PURSUANT TO
THE INDEMNITY AGREEMENT ENTERED INTO BY PETITIONER STRONGHOLD AND
RESPONDENT MARA[]ON.24
On their part, the Cuencas and Tayactac counter:
A. Having actively participated in the trial and appellate proceedings of this case before the
Regional Trial Court and the Court of Appeals, respectively, petitioner Stronghold is legally
and effectively BARRED by ESTOPPEL from raising for the first time on appeal before this
Honorable Court a defense and/or issue not raised below.25
B. Even assuming arguendo without admitting that the principle of estoppel is not applicable
in this instant case, the assailed Decision and Resolution find firm basis in law considering
that the writ of attachment issued and enforced against herein respondents has been
declared ILLEGAL, NULL AND VOID for having been issued beyond the jurisdiction of the
trial court.
C. There having been a factual and legal finding of the illegality of the issuance and
consequently, the enforcement of the writ of attachment, Maranon and his surety Stronghold,
consistent with the facts and the law, including the contract of suretyship they entered into,
are JOINTLY AND SEVERALLY liable for the damages sustained by herein respondents by
reason thereof.
D. Contrary to the allegations of Stronghold, its liability as surety under the attachment bond
without which the writ of attachment shall not issue and be enforced against herein
respondent if prescribed by law. In like manner, the obligations and liability on the
attachment bond are also prescribed by law and not left to the discretion or will of the
contracting parties to the prejudice of the persons against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the damages sustained by herein
respondents is both a statutory and contractual obligation and for which, it cannot escape
accountability and liability in favor of the person against whom the illegal writ of attachment

was issued and enforced. To allow Stronghold to delay, excuse or exempt itself from liability
is unconstitutional, unlawful, and contrary to the basic tenets of equity and fair play.
F. While the liability of Stronghold as surety indeed covers the principal amount
of P1,000,000.00, nothing in the law and the contract between the parties limit or exempt
Stronghold from liability for other damages. Including costs of suit and interest.26

In his own comment,27

Maraon insisted that he could not be personally held liable under the attachment bond
because the judgment of the RTC was rendered without jurisdiction over the subject matter of
the action that involved an intra-corporate controversy among the stockholders of Arc Cuisine,
Inc.; and that the jurisdiction properly pertained to the SEC, where another action was already
pending between the parties.
Ruling
Although the question of whether the Cuencas and Tayactac could themselves recover
damages arising from the wrongful attachment of the assets of Arc Cuisine, Inc. by claiming
against the bond issued by Stronghold Insurance was not raised in the CA, we do not brush it
aside because the actual legal interest of the parties in the subject of the litigation is a matter of
substance that has jurisdictional impact, even on appeal before this Court.
The petition for review is meritorious.
There is no question that a litigation should be disallowed immediately if it involves a person
without any interest at stake, for it would be futile and meaningless to still proceed and render a
judgment where there is no actual controversy to be thereby determined. Courts of law in our
judicial system are not allowed to delve on academic issues or to render advisory opinions.
They only resolve actual controversies, for that is what they are authorized to do by the
Fundamental Law itself, which forthrightly ordains that the judicial power is wielded only to settle
actual controversies involving rights that are legally demandable and enforceable.28
To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of
Court requires that unless otherwise authorized by law or the Rules of Court every action must
be prosecuted or defended in the name of the real party in interest.29 Under the same rule, a
real party in interest is one who stands to be benefited or injured by the judgment in the suit, or
one who is entitled to the avails of the suit. Accordingly, a person , to be a real party in interest
in whose name an action must be prosecuted, should appear to be the present real owner of the
right sought to be enforced, that is, his interest must be a present substantial interest, not a
mere expectancy, or a future, contingent, subordinate, or consequential interest. 30
Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of
cause of action.31 The reason for this is that the courts ought not to pass upon questions not
derived from any actual controversy. Truly, a person having no material interest to protect
cannot invoke the jurisdiction of the court as the plaintiff in an action.32 Nor does a court acquire
jurisdiction over a case where the real party in interest is not present or impleaded.
The purposes of the requirement for the real party in interest prosecuting or defending an action
at law are: (a) to prevent the prosecution of actions by persons without any right, title or interest

in the case; (b) to require that the actual party entitled to legal relief be the one to prosecute the
action; (c) to avoid a multiplicity of suits; and (d) to discourage litigation and keep it within
certain bounds, pursuant to sound public policy.33 Indeed, considering that all civil actions must
be based on a cause of action,34 defined as the act or omission by which a party violates the
right of another,35 the former as the defendant must be allowed to insist upon being opposed by
the real party in interest so that he is protected from further suits regarding the same
claim.36 Under this rationale, the requirement benefits the defendant because "the defendant
can insist upon a plaintiff who will afford him a setup providing good res judicata protection if the
struggle is carried through on the merits to the end."37
The rule on real party in interest ensures, therefore, that the party with the legal right to sue
brings the action, and this interest ends when a judgment involving the nominal plaintiff will
protect the defendant from a subsequent identical action. Such a rule is intended to bring before
the court the party rightfully interested in the litigation so that only real controversies will be
presented and the judgment, when entered, will be binding and conclusive and the defendant
will be saved from further harassment and vexation at the hands of other claimants to the same
demand.38
But the real party in interest need not be the person who ultimately will benefit from the
successful prosecution of the action. Hence, to aid itself in the proper identification of the real
party in interest, the court should first ascertain the nature of the substantive right being
asserted, and then must determine whether the party asserting that right is recognized as the
real party in interest under the rules of procedure. Truly, that a party stands to gain from the
litigation is not necessarily controlling.39
It is fundamental that the courts are established in order to afford reliefs to persons whose rights
or property interests have been invaded or violated, or are threatened with invasion by others
conduct or acts, and to give relief only at the instance of such persons. The jurisdiction of a
court of law or equity may not be invoked by or for an individual whose rights have not been
breached.40
The remedial right or the remedial obligation is the persons interest in the controversy. The right
of the plaintiff or other claimant is alleged to be violated by the defendant, who has the
correlative obligation to respect the right of the former. Otherwise put, without the right, a person
may not become a party plaintiff; without the obligation, a person may not be sued as a party
defendant; without the violation, there may not be a suit. In such a situation, it is legally
impossible for any person or entity to be both plaintiff and defendant in the same action, thereby
ensuring that the controversy is actual and exists between adversary parties. Where there are
no adversary parties before it, the court would be without jurisdiction to render a judgment.41
There is no dispute that the properties subject to the levy on attachment belonged to Arc
Cuisine, Inc. alone, not to the Cuencas and Tayactac in their own right. They were only
stockholders of Arc Cuisine, Inc., which had a personality distinct and separate from that of any
or all of them.42 The damages occasioned to the properties by the levy on attachment, wrongful
or not, prejudiced Arc Cuisine, Inc., not them. As such, only Arc Cuisine, Inc. had the right under
the substantive law to claim and recover such damages. This right could not also be asserted by
the Cuencas and Tayactac unless they did so in the name of the corporation itself. But that did
not happen herein, because Arc Cuisine, Inc. was not even joined in the action either as an
original party or as an intervenor.

The Cuencas and Tayactac were clearly not vested with any direct interest in the personal
properties coming under the levy on attachment by virtue alone of their being stockholders in
Arc Cuisine, Inc. Their stockholdings represented only their proportionate or aliquot interest in
the properties of the corporation, but did not vest in them any legal right or title to any specific
properties of the corporation. Without doubt, Arc Cuisine, Inc. remained the owner as a distinct
legal person.43
Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac
lacked the legal personality to claim the damages sustained from the levy of the formers
properties. According to Asset Privatization Trust v. Court of Appeals,44 even when the
foreclosure on the assets of the corporation was wrongful and done in bad faith the stockholders
had no standing to recover for themselves moral damages; otherwise, they would be
appropriating and distributing part of the corporations assets prior to the dissolution of the
corporation and the liquidation of its debts and liabilities. Moreover, in Evangelista v.
Santos,45 the Court, resolving whether or not the minority stockholders had the right to bring an
action for damages against the principal officers of the corporation for their own benefit, said:
As to the second question, the complaint shows that the action is for damages resulting from
mismanagement of the affairs and assets of the corporation by its principal officer, it being
alleged that defendants maladministration has brought about the ruin of the corporation and the
consequent loss of value of its stocks. The injury complained of is thus primarily to the
corporation, so that the suit for the damages claimed should be by the corporation rather than
by the stockholders (3 Fletcher, Cyclopedia of Corporation pp. 977-980). The stockholders may
not directly claim those damages for themselves for that would result in the appropriation by,
and the distribution among them of part of the corporate assets before the dissolution of the
corporation and the liquidation of its debts and liabilities, something which cannot be legally
done in view of section 16 of the Corporation Law, which provides:
No shall corporation shall make or declare any stock or bond dividend or any dividend
whatsoever except from the surplus profits arising from its business, or divide or distribute its
capital stock or property other than actual profits among its members or stockholders until after
the payment of its debts and the termination of its existence by limitation or lawful dissolution.
xxxx
In the present case, the plaintiff stockholders have brought the action not for the benefit of the
corporation but for their own benefit, since they ask that the defendant make good the losses
occasioned by his mismanagement and pay to them the value of their respective participation in
the corporate assets on the basis of their respective holdings. Clearly, this cannot be done until
all corporate debts, if there be any, are paid and the existence of the corporation terminated by
the limitation of its charter or by lawful dissolution in view of the provisions of section 16 of the
Corporation Law. (Emphasis ours)
It results that plaintiffs complaint shows no cause of action in their favor so that the lower court
did not err in dismissing the complaint on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the requirement of section
16 of the Corporation Law be first complied with, we note that the action stated in their
complaint is susceptible of being converted into a derivative suit for the benefit of the

corporation by a mere change in the prayer. Such amendment, however, is not possible now,
since the complaint has been filed in the wrong court, so that the same has to be dismissed.46
That Maraon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still
excluded Arc Cuisine, Inc. from his complaint was of no consequence now. The Cuencas and
Tayactac still had no right of action even if the affected properties were then under their custody
at the time of the attachment, considering that their custody was only incidental to the operation
of the corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper
action to recover damages resulting from the attachment. Such action would be one directly
brought in the name of the corporation. Yet, that was not true here, for, instead, the Cuencas
and Tayactac presented the claim in their own names.
In view of the outcome just reached, the Court deems it unnecessary to give any extensive
consideration to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review; and REVERSES and SETS ASIDE
the decision of the Court of Appeals in CA-G.R. CV No. 79145 promulgated on January
31,2006.
No pronouncements on costs of suit.
SO ORDERED.

G.R. No. 192986

January 15, 2013

ADVOCATES FOR TRUTH IN LENDING, INC. and EDUARDO B. OLAGUER, Petitioners,

vs.
BANGKO SENTRAL MONETARY BOARD, represented by its Chairman, GOVERNOR
ARMANDO M. TETANGCO, JR., and its incumbent members: JUANITA D. AMATONG,
ALFREDO C. ANTONIO, PETER FA VILA, NELLY F. VILLAFUERTE, IGNACIO R. BUNYE
and CESAR V. PURISIMA, Respondents.
DECISION
REYES, J.:
Petitioners, claiming that they are raising issues of transcendental importance to the public, filed
directly with this Court this Petition for Certiorari under Rule 65 of the 1997 Rules of Court,
seeking to declare that the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), replacing

the Central Bank Monetary Board (CB-MB) by virtue of Republic Act (R.A.) No. 7653, has no
authority to continue enforcing Central Bank Circular No. 905,1 issued by the CB-MB in 1982,
which "suspended" Act No. 2655, or the Usury Law of 1916.
Factual Antecedents
Petitioner "Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, non-stock corporation
organized to engage in pro bono concerns and activities relating to money lending issues. It was
incorporated on July 9, 2010,2 and a month later, it filed this petition, joined by its founder and
president, Eduardo B. Olaguer, suing as a taxpayer and a citizen.
R.A. No. 265, which created the Central Bank (CB) of the Philippines on June 15, 1948,
empowered the CB-MB to, among others, set the maximum interest rates which banks may
charge for all types of loans and other credit operations, within limits prescribed by the Usury
Law. Section 109 of R.A. No. 265 reads:
Sec. 109. Interest Rates, Commissions and Charges. The Monetary Board may fix the
maximum rates of interest which banks may pay on deposits and on other obligations.
The Monetary Board may, within the limits prescribed in the Usury Law fix the maximum rates of
interest which banks may charge for different types of loans and for any other credit operations,
or may fix the maximum differences which may exist between the interest or rediscount rates of
the Central Bank and the rates which the banks may charge their customers if the respective
credit documents are not to lose their eligibility for rediscount or advances in the Central Bank.
Any modifications in the maximum interest rates permitted for the borrowing or lending
operations of the banks shall apply only to future operations and not to those made prior to the
date on which the modification becomes effective.
In order to avoid possible evasion of maximum interest rates set by the Monetary Board, the
Board may also fix the maximum rates that banks may pay to or collect from their customers in
the form of commissions, discounts, charges, fees or payments of any sort. (Underlining ours)
On March 17, 1980, the Usury Law was amended by Presidential Decree (P.D.) No. 1684,
giving the CB-MB authority to prescribe different maximum rates of interest which may be
imposed for a loan or renewal thereof or the forbearance of any money, goods or credits,
provided that the changes are effected gradually and announced in advance. Thus, Section 1-a
of Act No. 2655 now reads:
Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of
interest for the loan or renewal thereof or the forbearance of any money, goods or credits, and
to change such rate or rates whenever warranted by prevailing economic and social conditions:
Provided, That changes in such rate or rates may be effected gradually on scheduled dates
announced in advance.
In the exercise of the authority herein granted the Monetary Board may prescribe higher
maximum rates for loans of low priority, such as consumer loans or renewals thereof as well as
such loans made by pawnshops, finance companies and other similar credit institutions
although the rates prescribed for these institutions need not necessarily be uniform. The
Monetary Board is also authorized to prescribe different maximum rate or rates for different

types of borrowings, including deposits and deposit substitutes, or loans of financial

intermediaries. (Underlining and emphasis ours)
In its Resolution No. 2224 dated December 3, 1982,3 the CB-MB issued CB Circular No. 905,
Series of 1982, effective on January 1, 1983. Section 1 of the Circular, under its General
Provisions, removed the ceilings on interest rates on loans or forbearance of any money, goods
or credits, to wit:
Sec. 1. The rate of interest, including commissions, premiums, fees and other charges, on a
loan or forbearance of any money, goods, or credits, regardless of maturity and whether
secured or unsecured, that may be charged or collected by any person, whether natural or
juridical, shall not be subject to any ceiling prescribed under or pursuant to the Usury Law, as
amended. (Underscoring and emphasis ours)
The Circular then went on to amend Books I to IV of the CBs "Manual of Regulations for Banks
and Other Financial Intermediaries" (Manual of Regulations) by removing the applicable ceilings
on specific interest rates. Thus, Sections 5, 9 and 10 of CB Circular No. 905 amended Book I,
Subsections 1303, 1349, 1388.1 of the Manual of Regulations, by removing the ceilings for
interest and other charges, commissions, premiums, and fees applicable to commercial banks;
Sections 12 and 17 removed the interest ceilings for thrift banks (Book II, Subsections 2303,
2349); Sections 19 and 21 removed the ceilings applicable to rural banks (Book III, Subsection
3152.3-c); and, Sections 26, 28, 30 and 32 removed the ceilings for non-bank financial
intermediaries (Book IV, Subsections 4303Q.1 to 4303Q.9, 4303N.1, 4303P).4
On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653 establishing the
Bangko Sentral ng Pilipinas (BSP) to replace the CB. The repealing clause thereof, Section 135,
reads:
Sec. 135. Repealing Clause. Except as may be provided for in Sections 46 and 132 of this
Act, Republic Act No. 265, as amended, the provisions of any other law, special charters, rule or
regulation issued pursuant to said Republic Act No. 265, as amended, or parts thereof, which
may be inconsistent with the provisions of this Act are hereby repealed. Presidential Decree No.
1792 is likewise repealed.
Petition for Certiorari
To justify their skipping the hierarchy of courts and going directly to this Court to secure a writ of
certiorari, petitioners contend that the transcendental importance of their Petition can readily be
seen in the issues raised therein, to wit:
a) Whether under R.A. No. 265 and/or P.D. No. 1684, the CB-MB had the statutory or
constitutional authority to prescribe the maximum rates of interest for all kinds of credit
transactions and forbearance of money, goods or credit beyond the limits prescribed in the
Usury Law;
b) If so, whether the CB-MB exceeded its authority when it issued CB Circular No. 905,
which removed all interest ceilings and thus suspended Act No. 2655 as regards usurious
interest rates;

c) Whether under R.A. No. 7653, the new BSP-MB may continue to enforce CB Circular No.
905.5

Petitioners attached to their petition copies of several Senate Bills and Resolutions of the 10th
Congress, which held its sessions from 1995 to 1998, calling for investigations by the Senate
Committee on Banks and Financial Institutions into alleged unconscionable commercial rates of
interest imposed by these entities. Senate Bill (SB) Nos. 376 and 1860,7 filed by Senator Vicente
C. Sotto III and the late Senator Blas F. Ople, respectively, sought to amend Act No. 2655 by
fixing the rates of interest on loans and forbearance of credit; Philippine Senate Resolution (SR)
No. 1053,8 10739 and 1102,10 filed by Senators Ramon B. Magsaysay, Jr., Gregorio B. Honasan
and Franklin M. Drilon, respectively, urged the aforesaid Senate Committee to investigate ways
to curb the high commercial interest rates then obtaining in the country; Senator Ernesto
Maceda filed SB No. 1151 to prohibit the collection of more than two months of advance interest
on any loan of money; and Senator Raul Roco filed SR No. 114411 seeking an investigation into
an alleged cartel of commercial banks, called "Club 1821", reportedly behind the regime of high
interest rates. The petitioners also attached news clippings12 showing that in February 1998 the
banks prime lending rates, or interests on loans to their best borrowers, ranged from 26% to
31%.
Petitioners contend that under Section 1-a of Act No. 2655, as amended by P.D. No. 1684, the
CB-MB was authorized only to prescribe or set the maximum rates of interest for a loan or
renewal thereof or for the forbearance of any money, goods or credits, and to change such rates
whenever warranted by prevailing economic and social conditions, the changes to be effected
gradually and on scheduled dates; that nothing in P.D. No. 1684 authorized the CB-MB to lift or
suspend the limits of interest on all credit transactions, when it issued CB Circular No. 905.
They further insist that under Section 109 of R.A. No. 265, the authority of the CB-MB was
clearly only to fix the banks maximum rates of interest, but always within the limits prescribed
by the Usury Law.
Thus, according to petitioners, CB Circular No. 905, which was promulgated without the benefit
of any prior public hearing, is void because it violated Article 5 of the New Civil Code, which
provides that "Acts executed against the provisions of mandatory or prohibitory laws shall be
void, except when the law itself authorizes their validity."
They further claim that just weeks after the issuance of CB Circular No. 905, the benchmark 91day Treasury bills (T-bills),13 then known as "Jobo" bills14 shot up to 40% per annum, as a result.
The banks immediately followed suit and re-priced their loans to rates which were even higher
than those of the "Jobo" bills. Petitioners thus assert that CB Circular No. 905 is also
unconstitutional in light of Section 1 of the Bill of Rights, which commands that "no person shall
be deprived of life, liberty or property without due process of law, nor shall any person be denied
the equal protection of the laws."
Finally, petitioners point out that R.A. No. 7653 did not re-enact a provision similar to Section
109 of R.A. No. 265, and therefore, in view of the repealing clause in Section 135 of R.A. No.
7653, the BSP-MB has been stripped of the power either to prescribe the maximum rates of
interest which banks may charge for different kinds of loans and credit transactions, or to
suspend Act No. 2655 and continue enforcing CB Circular No. 905.
Ruling

The petition must fail.

A. The Petition is procedurally infirm.
The decision on whether or not to accept a petition for certiorari, as well as to grant due course
thereto, is addressed to the sound discretion of the court.15 A petition for certiorari being an
extraordinary remedy, the party seeking to avail of the same must strictly observe the
procedural rules laid down by law, and non-observance thereof may not be brushed aside as
mere technicality.16
As provided in Section 1 of Rule 65, a writ of certiorari is directed against a tribunal exercising
judicial or quasi-judicial functions.17 Judicial functions are exercised by a body or officer clothed
with authority to determine what the law is and what the legal rights of the parties are with
respect to the matter in controversy. Quasi-judicial function is a term that applies to the action or
discretion of public administrative officers or bodies given the authority to investigate facts or
ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for
their official action using discretion of a judicial nature.18
The CB-MB (now BSP-MB) was created to perform executive functions with respect to the
establishment, operation or liquidation of banking and credit institutions, and branches and
agencies thereof.19 It does not perform judicial or quasi-judicial functions. Certainly, the issuance
of CB Circular No. 905 was done in the exercise of an executive function. Certiorari will not lie in
the instant case.20
B. Petitioners have no locus standi to file the Petition
Locus standi is defined as "a right of appearance in a court of justice on a given question." In
private suits, Section 2, Rule 3 of the 1997 Rules of Civil Procedure provides that "every action
must be prosecuted or defended in the name of the real party in interest," who is "the party who
stands to be benefited or injured by the judgment in the suit or the party entitled to the avails of
the suit." Succinctly put, a partys standing is based on his own right to the relief sought.21
Even in public interest cases such as this petition, the Court has generally adopted the "direct
injury" test that the person who impugns the validity of a statute must have "a personal and
substantial interest in the case such that he has sustained, or will sustain direct injury as a
result."22 Thus, while petitioners assert a public right to assail CB Circular No. 905 as an illegal
executive action, it is nonetheless required of them to make out a sufficient interest in the
vindication of the public order and the securing of relief. It is significant that in this petition, the
petitioners do not allege that they sustained any personal injury from the issuance of CB
Circular No. 905.
Petitioners also do not claim that public funds were being misused in the enforcement of CB
Circular No. 905. In Kilosbayan, Inc. v. Morato,23 involving the on-line lottery contract of the
PCSO, there was no allegation that public funds were being misspent, which according to the
Court would have made the action a public one, "and justify relaxation of the requirement that
an action must be prosecuted in the name of the real party-in-interest." The Court held,
moreover, that the status of Kilosbayan as a peoples organization did not give it the requisite
personality to question the validity of the contract. Thus:

Petitioners do not in fact show what particularized interest they have for bringing this suit. It
does not detract from the high regard for petitioners as civic leaders to say that their interest
falls short of that required to maintain an action under the Rule 3, Sec. 2.24
C. The Petition raises no issues of transcendental importance.
In the 1993 case of Joya v. Presidential Commission on Good Government,25 it was held that no
question involving the constitutionality or validity of a law or governmental act may be heard and
decided by the court unless there is compliance with the legal requisites for judicial inquiry,
namely: (a) that the question must be raised by the proper party; (b) that there must be an
actual case or controversy; (c) that the question must be raised at the earliest possible
opportunity; and (d) that the decision on the constitutional or legal question must be necessary
to the determination of the case itself.
In Prof. David v. Pres. Macapagal-Arroyo,26 the Court summarized the requirements before
taxpayers, voters, concerned citizens, and legislators can be accorded a standing to sue, viz:
(1) the cases involve constitutional issues;
(2) for taxpayers, there must be a claim of illegal disbursement of public funds or that the tax
measure is unconstitutional;
(3) for voters, there must be a showing of obvious interest in the validity of the election law in
question;
(4) for concerned citizens, there must be a showing that the issues raised are of
transcendental importance which must be settled early; and
(5) for legislators, there must be a claim that the official action complained of infringes upon
their prerogatives as legislators.

While the Court may have shown in recent decisions a certain toughening in its attitude
concerning the question of legal standing, it has nonetheless always made an exception where
the transcendental importance of the issues has been established, notwithstanding the
petitioners failure to show a direct injury.27 In CREBA v. ERC,28 the Court set out the following
instructive guides as determinants on whether a matter is of transcendental importance, namely:
(1) the character of the funds or other assets involved in the case; (2) the presence of a clear
case of disregard of a constitutional or statutory prohibition by the public respondent agency or
instrumentality of the government; and (3) the lack of any other party with a more direct and
specific interest in the questions being raised. Further, the Court stated in Anak Mindanao
Party-List Group v. The Executive Secretary29 that the rule on standing will not be waived where
these determinants are not established.
In the instant case, there is no allegation of misuse of public funds in the implementation of CB
Circular No. 905. Neither were borrowers who were actually affected by the suspension of the
Usury Law joined in this petition. Absent any showing of transcendental importance, the petition
must fail.
More importantly, the Court notes that the instant petition adverted to the regime of high interest
rates which obtained at least 15 years ago, when the banks prime lending rates ranged from

26% to 31%,30 or even 29 years ago, when the 91-day Jobo bills reached 40% per annum. In
contrast, according to the BSP, in the first two (2) months of 2012 the bank lending rates
averaged 5.91%, which implies that the banks prime lending rates were lower; moreover,
deposit interests on savings and long-term deposits have also gone very low, averaging 1.75%
and 1.62%, respectively.31
Judging from the most recent auctions of T-bills, the savings rates must be approaching 0%. In
the auctions held on November 12, 2012, the rates of 3-month, 6-month and 1-year T-bills have
dropped to 0.150%, 0.450% and 0.680%, respectively.32 According to Manila Bulletin, this very
low interest regime has been attributed to "high liquidity and strong investor demand amid
positive economic indicators of the country."33
1wphi 1

While the Court acknowledges that cases of transcendental importance demand that they be
settled promptly and definitely, brushing aside, if we must, technicalities of procedure,34 the
delay of at least 15 years in the filing of the instant petition has actually rendered moot and
academic the issues it now raises.
For its part, BSP-MB maintains that the petitioners allegations of constitutional and statutory
violations of CB Circular No. 905 are really mere challenges made by petitioners concerning the
wisdom of the Circular. It explains that it was in view of the global economic downturn in the
early 1980s that the executive department through the CB-MB had to formulate policies to
achieve economic recovery, and among these policies was the establishment of a marketoriented interest rate structure which would require the removal of the government-imposed
interest rate ceilings.35
D. The CB-MB merely suspended the effectivity of the Usury Law when it issued CB Circular
No. 905.
The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long
been recognized and upheld in many cases. As the Court explained in the landmark case of
Medel v. CA,36 citing several cases, CB Circular No. 905 "did not repeal nor in anyway amend
the Usury Law but simply suspended the latters effectivity;"37 that "a CB Circular cannot repeal
a law, [for] only a law can repeal another law;"38 that "by virtue of CB Circular No. 905, the Usury
Law has been rendered ineffective;"39 and "Usury has been legally non-existent in our
jurisdiction. Interest can now be charged as lender and borrower may agree upon."40
In First Metro Investment Corp. v. Este Del Sol Mountain Reserve, Inc.41 cited in DBP v.
Perez,42 we also belied the contention that the CB was engaged in self-legislation. Thus:
Central Bank Circular No. 905 did not repeal nor in any way amend the Usury Law but simply
suspended the latters effectivity. The illegality of usury is wholly the creature of legislation. A
Central Bank Circular cannot repeal a law. Only a law can repeal another law. x x x.43
In PNB v. Court of Appeals,44 an escalation clause in a loan agreement authorized the PNB to
unilaterally increase the rate of interest to 25% per annum, plus a penalty of 6% per annum on
past dues, then to 30% on October 15, 1984, and to 42% on October 25, 1984. The Supreme
Court invalidated the rate increases made by the PNB and upheld the 12% interest imposed by
the CA, in this wise:

P.D. No. 1684 and C.B. Circular No. 905 no more than allow contracting parties to stipulate
freely regarding any subsequent adjustment in the interest rate that shall accrue on a loan or
forbearance of money, goods or credits. In fine, they can agree to adjust, upward or downward,
the interest previously stipulated. x x x.45
Thus, according to the Court, by lifting the interest ceiling, CB Circular No. 905 merely upheld
the parties freedom of contract to agree freely on the rate of interest. It cited Article 1306 of the
New Civil Code, under which the contracting parties may establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy.
E. The BSP-MB has authority to enforce CB Circular No. 905.
Section 1 of CB Circular No. 905 provides that "The rate of interest, including commissions,
premiums, fees and other charges, on a loan or forbearance of any money, goods, or credits,
regardless of maturity and whether secured or unsecured, that may be charged or collected by
any person, whether natural or juridical, shall not be subject to any ceiling prescribed under or
pursuant to the Usury Law, as amended." It does not purport to suspend the Usury Law only as
it applies to banks, but to all lenders.
Petitioners contend that, granting that the CB had power to "suspend" the Usury Law, the new
BSP-MB did not retain this power of its predecessor, in view of Section 135 of R.A. No. 7653,
which expressly repealed R.A. No. 265. The petitioners point out that R.A. No. 7653 did not
reenact a provision similar to Section 109 of R.A. No. 265.
A closer perusal shows that Section 109 of R.A. No. 265 covered only loans extended by banks,
whereas under Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe the
maximum rate or rates of interest for all loans or renewals thereof or the forbearance of any
money, goods or credits, including those for loans of low priority such as consumer loans, as
well as such loans made by pawnshops, finance companies and similar credit institutions. It
even authorizes the BSP-MB to prescribe different maximum rate or rates for different types of
borrowings, including deposits and deposit substitutes, or loans of financial intermediaries.
Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No. 265, now R.A. No.
7653, merely supplemented it as it concerns loans by banks and other financial institutions. Had
R.A. No. 7653 been intended to repeal Section 1-a of Act No. 2655, it would have so stated in
unequivocal terms.
Moreover, the rule is settled that repeals by implication are not favored, because laws are
presumed to be passed with deliberation and full knowledge of all laws existing pertaining to the
subject.46 An implied repeal is predicated upon the condition that a substantial conflict or
repugnancy is found between the new and prior laws. Thus, in the absence of an express
repeal, a subsequent law cannot be construed as repealing a prior law unless an irreconcilable
inconsistency and repugnancy exists in the terms of the new and old laws.47 We find no such
conflict between the provisions of Act 2655 and R.A. No. 7653.
F. The lifting of the ceilings for interest rates does not authorize stipulations charging excessive,
unconscionable, and iniquitous interest.

It is settled that nothing in CB Circular No. 905 grants lenders a carte blanche authority to raise
interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of
their assets.48 As held in Castro v. Tan:49
The imposition of an unconscionable rate of interest on a money debt, even if knowingly and
voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an
iniquitous deprivation of property, repulsive to the common sense of man. It has no support in
law, in principles of justice, or in the human conscience nor is there any reason whatsoever
which may justify such imposition as righteous and as one that may be sustained within the
sphere of public or private morals.50
Stipulations authorizing iniquitous or unconscionable interests have been invariably struck down
for being contrary to morals, if not against the law.51 Indeed, under Article 1409 of the Civil
Code, these contracts are deemed inexistent and void ab initio, and therefore cannot be ratified,
nor may the right to set up their illegality as a defense be waived.
Nonetheless, the nullity of the stipulation of usurious interest does not affect the lenders right to
recover the principal of a loan, nor affect the other terms thereof.52 Thus, in a usurious loan with
mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the
creditor upon failure by the debtor to pay the debt due. The debt due is considered as without
the stipulated excessive interest, and a legal interest of 12% per annum will be added in place
of the excessive interest formerly imposed,53following the guidelines laid down in the landmark
case of Eastern Shipping Lines, Inc. v. Court of Appeals,54 regarding the manner of computing
legal interest:
II. With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time
it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per
annum to be computed from default, i.e., from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an
interest on the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or
damages except when or until the demand can be established with reasonable certainty.
Accordingly, where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code)
but when such certainty cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the judgment of the court is made (at
which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on
the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.55 (Citations omitted)

The foregoing rules were further clarified in Sunga-Chan v. Court of Appeals, 56 as follows:
Eastern Shipping Lines, Inc. synthesized the rules on the imposition of interest, if proper, and
the applicable rate, as follows: The 12% per annum rate under CB Circular No. 416 shall apply
only to loans or forbearance of money, goods, or credits, as well as to judgments involving such
loan or forbearance of money, goods, or credit, while the 6% per annum under Art. 2209 of the
Civil Code applies "when the transaction involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the performance of obligations in general," with
the application of both rates reckoned "from the time the complaint was filed until the [adjudged]
amount is fully paid." In either instance, the reckoning period for the commencement of the
running of the legal interest shall be subject to the condition "that the courts are vested with
discretion, depending on the equities of each case, on the award of interest."57 (Citations
omitted)
WHEREFORE, premises considered, the Petition for certiorari is DISMISSED.
SO ORDERED.

G.R. No. 162575

December 15, 2010

BEATRIZ SIOK PING TANG, Petitioner,

vs.
SUBIC BAY DISTRIBUTION, INC., Respondent.
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari filed by petitioner Beatriz Siok Ping Tang seeking
to annul and set aside the Decision1 dated October 17, 2003 and the Resolution2 dated March 5,
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 74629.
The antecedent facts are as follows:
Petitioner is doing business under the name and style of Able Transport. Respondent Subic Bay
Distribution, Inc. (SBDI) entered in two Distributorship Agreements with petitioner and Able
Transport in April 2002. Under the Agreements, respondent, as seller, will sell, deliver or
procure to be delivered petroleum products, and petitioner, as distributor, will purchase, receive
and pay for its purchases from respondent. The two Agreements had a period of one year,
commencing on October 2001 to October 2002, which shall continue on an annual basis unless
terminated by either party upon thirty days written notice to the other prior to the expiration of
the original term or any extension thereof.

Section 6.3 of the Distributorship Agreement provides that respondent may require petitioner to
put up securities, real or personal, or to furnish respondent a performance bond issued by a
bonding company chosen by the latter to secure and answer for petitioner's outstanding
account, and or faithful performance of her obligations as contained or arising out of the
Agreement. Thus, petitioner applied for and was granted a credit line by the United Coconut
Planters Bank (UCPB), International Exchange Bank (IEBank), and Security Bank Corporation
(SBC). Petitioner also applied with the Asia United Bank (AUB) an irrevocable domestic standby
letter of credit in favor of respondent. All these banks separately executed several undertakings
setting the terms and conditions governing the drawing of money by respondent from these
banks.
Petitioner allegedly failed to pay her obligations to respondent despite demand, thus,
respondent tried to withdraw from these bank undertakings.
Petitioner then filed with the Regional Trial Court (RTC) of Quezon City separate
petitions3 against the banks for declaration of nullity of the several bank undertakings and
domestic letter of credit which they issued with the application for the issuance of a temporary
restraining order (TRO) and writ of preliminary injunction. The cases were later consolidated
and were assigned to Branch 101. Petitioner asked for the annulment of the bank
undertakings/letter of credit which she signed on the ground that the prevailing market rate at
the time of respondent's intended drawings with which petitioner will be charged of as interests
and penalties is oppressive, exorbitant, unreasonable and unconscionable rendering it against
public morals and policy; and that to make her automatically liable for millions of pesos on the
bank undertakings, these banks merely required the submission of a mere certification from the
company (respondent) that the customer (petitioner) has not paid its account (and its statement
of account of the client) without first verifying the truthfulness of the alleged petitioner's total
liability to the drawer thereon. Therefore, such contracts are oppressive, unreasonable and
unconscionable as they would result in her obtaining several millions of liability.
On November 28, 2002, a hearing was conducted for the issuance of the TRO and the writ of
preliminary injunction wherein the petitioner and the bank representatives were present. On
query of the respondent Judge Normandie Pizarro (Judge Pizarro) to the bank representatives
with regard to the eventual issuance of the TRO, the latter all replied that they will abide by the
sound judgment of the court. The court then issued an Order4granting the TRO and requiring
petitioner to implead respondent as an indispensable party and for the latter to submit its
position paper on the matter of the issuance of the injunction. Petitioner and respondent
submitted their respective position papers.
On December 17, 2002, the RTC rendered an Order,5 the dispositive portion of which reads:
ACCORDINGLY, let a Writ of Preliminary Injunction be issued restraining and enjoining herein
Respondent UCPB, IEB, SB and AUB from releasing any funds to SBDI, pursuant to the Bank
Undertakings and/or Domestic Standby Letter of Credit until further orders from this Court.
Consequently, Petitioner is hereby DIRECTED to post a bond in the amount of TEN MILLION
PESOS (P10,000,000.00), to answer for whatever damages respondent banks and SBDI may
suffer should this Court finally decide that petitioner was not entitled thereto. 6
The RTC found that both respondent and petitioner have reasons for the enforcement or nonenforcement of the bank undertakings, however, as to whether said reasons were justifiable or
not, in view of the attending circumstances, the RTC said that these can only be determined

after a full blown trial. It ruled that the outright denial of petitioner's prayer for the issuance of
injunction, even if the evidence warranted the reasonable probability that real injury will occur if
the relief for shall not be granted in favor of petitioner, will not serve the ends of justice.
Respondent filed with the CA a petition for certiorari with prayer for the issuance of a TRO and
writ of preliminary injunction against respondent Judge Pizarro and petitioner. Subsequently,
petitioner filed her Comment and respondent filed its Reply.
On July 4, 2003, the CA issued a Resolution7 granting the TRO prayed for by respondent after
finding that it was apparent that respondent has a legal right under the bank undertakings
issued by UCPB, SBC, and IEBank; and that until those undertakings were nullified,
respondent's rights under the same should be maintained.
On July 11, 2003, the CA issued a Supplemental Resolution8 wherein the Domestic Standby
Letter of Credit issued by AUB was ordered included among the bank undertakings, to which
respondent has a legal right.
On October 17, 2003, the CA rendered its assailed Decision, the decretal portion of which
reads:
WHEREFORE, the petition is hereby GRANTED. The Order dated December 17, 2002 is
hereby ANNULLED AND SET ASIDE. The writ of preliminary injunction issued by the lower
court is hereby LIFTED.9
In so ruling, the CA said that the grant or denial of an injunction rests on the sound discretion of
the RTC which should not be intervened, except in clear cases of abuse. Nonetheless, the CA
continued that the RTC should avoid issuing a writ of preliminary injunction which would, in
effect, dispose of the main case without trial. It found that petitioner was questioning the validity
of the bank undertakings and letter of credit for being oppressive, unreasonable and
unconscionable. However, as provided under the law, private transactions are presumed to be
fair and regular and that a person takes ordinary care of his concerns. The CA ruled that the
RTC's issuance of the injunction, which was premised on the abovementioned justification,
would be a virtual acceptance of petitioner's claim, thus, already a prejudgment of the main
case. It also said that contracts are presumed valid until they are voided by a court of justice,
thus, until such time that petitioner has presented sufficient evidence to rebut such presumption,
her legal right to the writ is doubtful.
As to petitioner's claim of respondent's non-filing of a motion for reconsideration before resorting
to a petition forcertiorari, the CA said that it is not a rigid rule, as jurisprudence had said, that
when a definite question has been properly raised, argued and submitted in the RTC and the
latter had decided the question, a motion for reconsideration is no longer necessary before filing
a petition for certiorari. The court found that both parties had fully presented their sides on the
issuance of the writ of preliminary injunction and that the RTC had squarely resolved the issues
presented by both parties. Thus, respondent could not be faulted for not filing a motion for
reconsideration.
In a Resolution dated March 5, 2004, petitioner's motion for reconsideration was denied.
Hence, this petition, wherein petitioner raises the following assignment of errors:

I. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND

REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING THE PETITION
FOR CERTIORARI FILED BY PRIVATE RESPONDENT SBDI, DESPITE THE FACT THAT
THE ORIGINAL PARTIES IN THE TRIAL COURT, WHO ARE EQUALLY MANDATED BY
THE QUESTIONED ORDER OF THE TRIAL COURT, NAMELY; UCPB, IEBANK, SBC AND
AUB, AS DEFENDANTS IN THE MAIN CASE, WERE NOT IMPLEADED AS
INDISPENSABLE PARTIES IN THE PETITION.
II. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND
REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING PRIVATE
RESPONDENT SBDI'S PETITION WHEN THE LATTER ADMITTEDLY FAILED TO FILE A
PRIOR MOTION FOR RECONSIDERATION BEFORE THE TRIAL COURT, MORESO
WHEN INDISPENSABLE PARTIES WERE NOT IMPLEADED WHICH SHOULD HAVE
RENDERED THE COURT OF APPEALS IN WANT OF JURISDICTION TO ACT.10

Petitioner claims that the CA decision is void for want of authority of the CA to act on the petition
as the banks should have been impleaded for being indispensable parties, since they are the
original party respondents in the RTC; that the filing with the CA of respondent's petition
for certiorari emanated from the RTC Order wherein the banks were the ones against whom the
questioned Order was issued; that the banks are the ones who stand to release hundred
millions of pesos which respondent sought to draw from the questioned bank undertakings and
domestic standby letter of credit through the certiorari proceedings, thus, they should be given
an opportunity to be heard. Petitioner claims that even the CA recognized the banks' substantial
interest over the subject matter of the case when, despite not being impleaded as parties in the
petition filed by respondent, the CA also notified the banks of its decision.
Petitioner argues that a petition for certiorari filed without a prior motion for reconsideration is a
premature action and such omission constitutes a fatal infirmity; that respondent explained its
omission only when petitioner already brought the same to the attention of the CA, thus, a mere
afterthought and an attempt to cure the fatal defects of its petition.
In its Comment, respondent contends that the banks which issued the bank undertakings and
letter of credit are not indispensable parties in the petition for certiorari filed in the CA.
Respondent argues that while the RTC preliminarily resolved the issue of whether or not
petitioner was entitled to an injunctive relief, and the enforcement of any decision granting such
would necessarily involve the banks, the resolution of the issue regarding the injunction does
not require the banks' participation. This is so because on one hand the entitlement or nonentitlement to an injunction is a matter squarely between petitioner and respondent, the latter
being the party that is ultimately enjoined from benefiting from the banks' undertakings. On the
other hand, respondent contends that the issue resolved by the CA was whether or not the RTC
gravely abused its discretion in granting the injunctive relief to respondent; that while the
enforcement of any decision enjoining the implementation of the injunction issued by the RTC
would affect the banks, the resolution of whether there is grave abuse of discretion committed
by the RTC does not require the banks' participation.
Respondent claims that while as a rule, a motion for reconsideration is required before filing a
petition forcertiorari, the rule admits of exceptions, which are, among others: (1) when the
issues raised in the certiorariproceedings have been duly raised and passed upon by the RTC
or are the same as those raised and passed upon in the RTC; (2) there is an urgent necessity
and time is of the essence for the resolution of the issues raised and any further delay would

prejudice the interests of the petitioner; and (3) the issue raised is one purely of law, which are
present in respondent's case.
In her Reply, petitioner claims that the decree that will compel and order the banks to release
any funds to respondent pending the resolution of her petition in the RTC will have an injurious
effect upon her rights and interest. She reiterates her arguments in her petition.
Respondent filed a Rejoinder saying that it is misleading for petitioner to allege that the decree
sought by respondent before the CA is directed against the banks; that even the dispositive
portion of the CA decision did not include any express directive to the banks; that there was
nothing in the CA decision which compelled and ordered the banks to release funds in favor of
respondent as the CA decision merely annulled the RTC Order and lifted the writ of preliminary
injunction. Respondent contends that the banks are not persons interested in sustaining the
RTC decision as this was obvious from the separate answers they filed in the RTC wherein they
uniformly maintained that the bank undertakings/letter of credit are not oppressive,
unreasonable and unconscionable. Respondent avers that petitioner is the only person
interested in upholding the injunction issued by the RTC, since it will enable her to prevent the
banks from releasing funds to respondent. Respondent insists that petitioner's petition before
the RTC and the instant petition have caused and continues to cause respondent grave and
irreparable damage.
Both parties were then required to file their respective memoranda, in which they complied.
Petitioner's insistence that the banks are indispensable parties, thus, should have been
impleaded in the petition for certiorari filed by respondent in the CA, is not persuasive.
In Arcelona v. Court of Appeals,11 we stated the nature of indispensable party, thus:
An indispensable party is a party who has such an interest in the controversy or subject matter
that a final adjudication cannot be made, in his absence, without injuring or affecting that
interest, a party who has not only an interest in the subject matter of the controversy, but also
has an interest of such nature that a final decree cannot be made without affecting his interest
or leaving the controversy in such a condition that its final determination may be wholly
inconsistent with equity and good conscience. It has also been considered that an indispensable
party is a person in whose absence there cannot be a determination between the parties
already before the court which is effective, complete, or equitable. Further, an indispensable
party is one who must be included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be directly
or injuriously affected by a decree which does complete justice between them. Also, a person is
not an indispensable party if his presence would merely permit complete relief between him and
those already parties to the action, or if he has no interest in the subject matter of the action. It
is not a sufficient reason to declare a person to be an indispensable party that his presence will
avoid multiple litigation.12
Applying the foregoing, we find that the banks are not indispensable parties in the petition
for certiorari which respondent filed in the CA assailing the RTC Order dated December 17,
2002. In fact, several circumstances would show that the banks are not parties interested in the
matter of the issuance of the writ of preliminary injunction, whether in the RTC or in the CA.

First. During the hearing of petitioner's prayer for the issuance of a TRO, the RTC, in open
court, elicited from the lawyer-representatives of the four banks their position in the event of the
issuance of the TRO, and all these representatives invariably replied that they will abide and/or
submit to the sound judgment of the court.13
Second. When the RTC issued its Order dated December 17, 2002 granting the issuance of the
writ of preliminary injunction, the banks could have challenged the same if they believe that they
were aggrieved by such issuance. However, they did not, and such actuations were in
consonance with their earlier position that they would submit to the sound judgment of the RTC.
Third. When respondent filed with the CA the petition for certiorari with prayer for the issuance
of a TRO and writ of preliminary injunction, and a TRO was subsequently issued, copies of the
resolution were also sent14 to the banks, although not impleaded, yet the latter took no action to
question their non-inclusion in the petition. Notably, the SBC filed an Urgent Motion for
Clarification15 on whether or not the issuance of the TRO has the effect of restraining the bank
from complying with the writ of preliminary injunction issued by the RTC or nullifying /rendering
ineffectual the said writ. In fact, SBC even stated that the motion was filed for no other purpose,
except to seek proper guidance on the issue at hand so that whatever action or position it may
take with respect to the CA resolution will be consistent with its term and purposes.
Fourth. When the CA rendered its assailed Decision nullifying the injunction issued by the RTC,
and copies of the decision were furnished these banks, not one of these banks ever filed any
pleading to assail their non-inclusion in the certiorari proceedings.
Indeed, the banks have no interest in the issuance of the injunction, but only the petitioner. The
banks' interests as defendants in the petition for declaration of nullity of their bank undertakings
filed against them by petitioner in the RTC are separable from the interests of petitioner for the
issuance of the injunctive relief.
Moreover, certiorari, as a special civil action, is an original action invoking the original
jurisdiction of a court to annul or modify the proceedings of a tribunal, board or officer exercising
judicial or quasi-judicial functions.16 It is an original and independent action that is not part of the
trial or the proceedings on the complaint filed before the trial court.17 Section 5, Rule 65 of the
Rules of Court provides:
Section 5. Respondents and costs in certain cases. - When the petition filed relates to the acts
or omissions of a judge, court, quasi-judicial agency, tribunal, corporation, board, officer or
person, the petitioner shall join, as private respondent or respondents with such public
respondent or respondents. the person or persons interested in sustaining the proceedings in
the court; and it shall be the duty of such private respondents to appear and defend, both in his
or their own behalf and in behalf of the public respondent or respondents affected by the
proceedings, and the costs awarded in such proceedings in favor of the petitioner shall be
against the private respondents only, and not against the judge, court, quasi-judicial agency,
tribunal, corporation, board, officer or person impleaded as public respondent or respondents.
xxxx
Clearly, in filing the petition for certiorari, respondent should join as party defendant with the
court or judge, the person interested in sustaining the proceedings in the court, and it shall be
the duty of such person to appear and defend, both in his own behalf and in behalf of the court

or judge affected by the proceedings. In this case, there is no doubt that it is only the petitioner
who is the person interested in sustaining the proceedings in court since she was the one who
sought for the issuance of the writ of preliminary injunction to enjoin the banks from releasing
funds to respondent. As earlier discussed, the banks are not parties interested in the subject
matter of the petition. Thus, it is only petitioner who should be joined as party defendant with the
judge and who should defend the judge's issuance of injunction.
Notably, the dispositive portion of the assailed CA Decision declared the annulment of the Order
dated December 17, 2002 and lifted the writ of preliminary injunction issued by the RTC. The
decision was directed against the order of the judge. There was no order for the banks to
release the funds subject of their undertakings/letter of credit although such order to lift the
injunction would ultimately result to the release of funds to respondent.
Petitioner contends that respondent filed its petition for certiorari in the CA without a prior motion
for reconsideration, thus, constitutes a fatal infirmity.
We do not agree.
Concededly, the settled rule is that a motion for reconsideration is a condition sine qua non for
the filing of a petition for certiorari.18 Its purpose is to grant an opportunity for the court to correct
any actual or perceived error attributed to it by the re-examination of the legal and factual
circumstances of the case.19 The rule is, however, circumscribed by well-defined exceptions,
such as (a) where the order is a patent nullity, as where the court a quo had no jurisdiction; (b)
where the questions raised in the certiorari proceeding have been duly raised and passed upon
by the lower court, or are the same as those raised and passed upon in the lower court; (c)
where there is an urgent necessity for the resolution of the question and any further delay would
prejudice the interests of the Government or of the petitioner or the subject matter of the action
is perishable; (d) where, under the circumstances, a motion for reconsideration would be
useless; (e) where petitioner was deprived of due process and there is extreme urgency for
relief; (f) where, in a criminal case, relief from an order of arrest is urgent and the granting of
such relief by the trial court is improbable; (g) where the proceedings in the lower court are a
nullity for lack of due process; (h) where the proceedings were ex parte, or in which the
petitioner had no opportunity to object; and (i) where the issue raised is one purely of law or
where public interest is involved.20
Respondent explained their omission of filing a motion for reconsideration before resorting to a
petition forcertiorari based on exceptions (b), (c) and (i). The CA brushed aside the filing of the
motion for reconsideration based on the ground that the questions raised in
the certiorari proceedings have been duly raised and passed upon by the lower court, or are the
same as those raised and passed upon in the lower court. We agree.
lawp++!1

Respondent had filed its position paper in the RTC stating the reasons why the injunction
prayed for by petitioner should not be granted. However, the RTC granted the injunction.
Respondent filed a petition for certiorari with the CA and presented the same arguments which
were already passed upon by the RTC. The RTC already had the opportunity to consider and
rule on the question of the propriety or impropriety of the issuance of the injunction. We found
no reversible error committed by the CA for relaxing the rule since respondent's case falls within
the exceptions.

Petitioner's reliance on Philippine National Construction Corporation v. National Labor Relations

Commission,21where we required the filing of a motion for reconsideration before the filing of a
petition for certiorarinotwithstanding petitioner's invocation of the recognized exception, i.e., the
same questions raised before the public respondent were to be raised before us, is not
applicable. In said case, we ruled that petitioner failed to convince us that his case falls under
the recognized exceptions as the basis was only petitioner's bare allegation. In this case before
us, the CA found, and to which we agree, that both parties have fully presented their respective
arguments in the RTC on petitioner's prayer for the issuance of the writ of preliminary injunction,
and that respondent's argument that petitioner is not entitled to the injunctive relief had been
squarely resolved by the RTC.
WHEREFORE, the petition is DENIED. The Decision dated October 17, 2003 and the
Resolution dated March 5, 2004 of the Court of Appeals, in CA-G.R. SP No. 74629, are
hereby AFFIRMED.
SO ORDERED.

G.R. No. 146744

March 6, 2006

ROBERT G. DE GALICIA, Petitioner,

vs.
MELY MERCADO, Respondent.
DECISION
CORONA, J.:
Petitioner Robert G. de Galicia was a business partner in RCL Enterprises. On or about
December 15, 1997, he was asked by his partner Carmen Arciaga to co-sign with her a
Philbank check for P50,000 payable to cash. Allegedly without his knowledge and consent,
Arciaga rediscounted the check with respondent Mely Mercado at 8% interest. Respondent
gave Arciaga the sum of P46,000, representing the value of the check less 8% as interest.
Later, respondent presented the check for payment but it was dishonored for insufficiency of
funds. She then filed a complaint for estafa and for violation of Batas Pambansa Blg. (BP)
221 against petitioner and Carmen Arciaga. Petitioner countered by filing in the Regional Trial
Court (RTC) of Manila, Branch 32, a case for the declaration of nullity of the agreement to pay
interest between respondent and his partner, Arciaga. He prayed that the agreement, together
with the rediscounted check, be declared void for being contrary to public policy.
After trial, the RTC, in an order dated November 21, 2000, dismissed petitioners case for lack
of jurisdiction. In another order dated January 15, 2001, it also denied his motion for

reconsideration. Treating the complaint as one for recovery of a sum of money, the trial court
ruled:
Even granting in arguendo, that the action seeks to have the agreement (?) between defendant
Mely Mercado and one Carmen Arciaga with respect to the payment of interest to be declared
null and void, this Court is in a quandary because one of the parties (Carmen Arciaga) in the socalled agreement is not a party to the present case.
Also, even considering and computing the interest rate at 8% or 5%, it is still within the rate
of P50,000 and way below the jurisdictional amount vested in the Regional Trial Court.
The present action is treated by this Court as one for the recovery of sum of money, construing
the same from the facts alleged in the complaint xxx with the present action/complaint having no
title of the action.
A reading of the instant case indicates that the principal relief sought is for the declaration of the
subject check in the amount of P50,000 a nullity. Hence, capable of pecuniary estimation, the
so-called agreement merely an incident thereto.
After going over the entire record of this case, and further considering that every court has the
power to review and amend its findings and conclusions, this Court finds no reversible error to
reconsider its assailed order (dated November 21, 2000).
WHEREFORE, the assailed Order (supra) [D]ismissing this case, [S]tands. The Motion for
Reconsideration, for lack of merit, is hereby DENIED.2
Via this petition for review under Rule 45 of the 1997 Rules of Civil Procedure, on a pure
question of law, petitioner assigns this error to the abovementioned order:
THE TRIAL COURT ERRED IN DISMISSING THE COMPLAINT FOR LACK OF
JURISDICTION OVER ITS SUBJECT MATTER SIMPLY BECAUSE THE AMOUNT INVOLVED
[WAS] ONLY P50,000.00.3
In his memorandum,4 petitioner insisted that the complaint for declaration of nullity of the
agreement between respondent and Arciaga was within the jurisdiction of the RTC. According to
petitioner, the subject matter of the complaint was not for the recovery of a sum of money but for
the nullification of the agreement to pay interest, with a prayer to also nullify the check, in which
case the action was not capable of pecuniary estimation. He argued that it was error for the trial
court to dismiss the complaint on the basis merely that the amount involved was P50,000.
Respondent, however, contends that the dismissal by the RTC of the complaint was warranted
since the action essentially involved the nullification of the check amounting to P50,000. She
insisted that the amount was outside the RTCs jurisdiction, thus, it could not possibly take
cognizance of the case. Respondent added that the RTC did not err in dismissing the complaint
because Arciaga, as an indispensable party, was not impleaded.
Under BP 129,5 the RTC shall exercise exclusive jurisdiction on the following actions:
(1) In all civil actions in which the subject of the litigation is incapable of pecuniary estimation;

(2) In all civil actions which involve the title to, or possession of, real property, or any interest
therein, where the assessed value of the property involve[d] exceeds Twenty [T]housand
[P]esos (P20,000.00) or for civil actions in Metro Manila, where such value exceeds Fifty
[T]housand [P]esos (P50,000.00) except actions for forcible entry into and unlawful detainer
of lands or buildings, original jurisdiction over which is conferred upon the Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts.
xxx xxx xxx

In determining whether or not the subject matter of an action is capable of pecuniary estimation,
the Court, in the early case of Singsong v. Isabella Sawmill,6 laid down the following criterion:
xxx this Court has adopted the criterion of first ascertaining the nature of the principal action or
remedy sought. If it is primarily for the recovery of a sum of money, the claim is
considered capable of pecuniary estimation, and whether jurisdiction is in the municipal
courts or in the courts of first instance (now RTC) would depend on the amount involved.
However, where the basic issue is something other than the right to recover a sum of
money, where the money claim is purely incidental to, or a consequence of, the principal
relief sought, this Court has considered such actions as cases where the subject of the
litigation may not be estimated in terms of money, and are cognizable by the courts of
first instance (RTC). (emphasis supplied)
Based on the foregoing criterion, the subject of the action before the trial court was indeed
incapable of pecuniary estimation and therefore cognizable by the RTC.
A perusal of the complaint7 reveals that it primarily sought to annul the agreement under which
Arciaga obligated herself to pay respondent interest on the amount of the rediscounted check.
What was being assailed was the payment of interest. Petitioner was not seeking recovery of a
sum of money as found by the trial court. The records do not show that he asked for payment of
the amount of the check. Besides, it was not for petitioner to ask for reimbursement of the
amount of the check but respondent who gave P46,000 to petitioners business partner,
Arciaga.
Nevertheless, notwithstanding the RTCs jurisdiction on the subject case, this Court sustains the
dismissal of the subject complaint for its failure to implead an indispensable party.
Under Rule 3, Section 7 of the 1997 Rules of Civil Procedure, an indispensable party is a partyin-interest without whom there can be no final determination of an action. The interests of such
indispensable party in the subject matter of the suit and the relief are so bound with those of the
other parties that his legal presence as a party to the proceeding is an absolute necessity.8 As a
rule, an indispensable partys interest in the subject matter is such that a complete and efficient
determination of the equities and rights of the parties is not possible if he is not joined.9
Here, we hold that Arciaga was an indispensable party to the suit filed by petitioner against
respondent. Her interest in the suit was intertwined with the rights and interest of both petitioner
and respondent. She was as involved in the suit as petitioner and respondent, being a cosignatory of the re-discounted check and being privy to the assailed agreement. Had the subject
complaint been resolved on the merits, any judgment made by the trial court was going to affect
not only respondent but Arciaga as well. Unfortunately, due to the failure of petitioner to implead

her in the complaint, any judgment therein could not bind her. It was as if the complaint had not
been filed at all.
In Aracelona v. Court of Appeals,10 the Court held that the joinder of all indispensable parties
must be made under any and all conditions, their presence being a sine qua non for the
exercise of the judicial power. There, we ruled that when an indispensable party is not before
the court, the action should be dismissed.11
It is interesting to note that petitioner filed the subject complaint after respondent initiated a
complaint for estafa and violation of BP 22.12 The filing of the complaint for declaration of nullity
of the agreement to pay interest and the nullity of the check appeared to be an afterthought and
an attempt to affect the outcome of the criminal complaint against him.
WHEREFORE, the petition is hereby DENIED.
No costs.
SO ORDERED.

DIONISIA MONIS LAGUNILLA and

RAFAEL MONIS,
Petitioners,

G.R. No. 169276

Present:
YNARES-SANTIAGO, J.,
Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.

- versus -

ANDREA MONIS VELASCO and

MACARIA MONIS,
Respondents.

Promulgated:
June 16, 2009

x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:

For review is the Court of Appeals (CA) Decision[1] dated July 13, 2005 in
CA-G.R. CV No. 56998 affirming with modification the Regional Trial Court
(RTC) Decision[2] dated April 24, 1997 in Civil Case No. 466 for Annulment of
Documents and Damages.

The facts, as culled from the records, are as follows:

Rev. Fr. Patricio (Patricio), Magdalena Catalina (Magdalena), Venancio, and
respondent Macaria, all surnamed Monis, as well as respondent Andrea Monis Velasco (Andrea), are siblings. Venancio is the father of petitioners Dionisia
Monis Lagunilla and Rafael Monis. During their lifetime, Patricio and Magdalena
acquired several properties which included several parcels of land in
the province of La Union and another one situated in Quezon City, with an area of
208.35 sq. m. (otherwise known as the Quezon City property).[3] The Quezon
City property was co-owned by Patricio and Magdalena, together with Andrea and
Pedro Velasco.
After the death of Patricio and Magdalena, or on February 24, 1993, Andrea
and Macaria (to the exclusion of Venancios children) executed a Deed of
Extrajudicial Settlement with Donation[4] (hereinafter referred to as the subject
Deed) involving the Quezon City property, and donated the same to Andreas son,
Pedro Monis Velasco, Jr. (Pedro). By virtue of said Deed, Transfer Certificate of
Title (TCT) No. RT-60455 (190472)[5] was cancelled and a new one (TCT No.
85837) was issued in the name of Pedro.[6]
On June 1, 1993, petitioners instituted an action for Annulment of
Documents and Damages[7] before the Regional Trial Court (RTC) of Balaoan, La
Union against respondents. The case was raffled to Branch 34 and was docketed
as Civil Case No. 466. In their complaint, petitioners sought the annulment of the
subject Deed, allegedly because of the fraudulent act committed by respondents in
executing the same. They claimed that respondents misrepresented that they were
the only surviving heirs of Patricio and Magdalena when, in fact, they (petitioners)
were also surviving heirs by virtue of their right to represent their deceased father
Venancio. In short, being Patricio and Magdalenas nephew and niece, they were
asserting their rights, as co-heirs, to the Quezon City property. Respondents
fraudulent act was, according to petitioners, a ground for the annulment of the
subject Deed. As a consequence of the nullity of the extrajudicial settlement, they
further sought the cancellation of the title and tax declarations issued pursuant
thereto, in the name of Pedro.

Respondents countered that nowhere in the subject Deed did they assert to
be the only surviving heirs of Patricio and Magdalena. Admittedly, however, they
claimed to be the only legitimate sisters of the deceased. They added that
annulment of the Deed was not tenable, considering that petitioners already
received advances on their share of the properties of the decedent; besides, there
were other properties that had not been the subject of partition from which they
could obtain reparation, if they are so entitled. Contrary to petitioners claim,
respondents insisted that there was no way that the subject Deed could be annulled
in the absence of any valid ground to rely on.[8]
No amicable settlement was reached during the pre-trial; thus, trial on the
merits ensued.
After petitioners rested their case, they moved for the amendment of the
complaint to implead additional party and to conform to the evidence
presented.[9] Petitioners averred that the resolution of the case would affect the
interest of Pedro as donee; hence, he is an indispensable party. The RTC,
however, denied the motion, as the amendment of the complaint would result in the
introduction of a different cause of action prejudicial to respondents. The court
further held that the amendment of the complaint would unduly delay the
resolution of the case.
On April 24, 1997, the RTC decided in favor of respondents, disposing, as
follows:
WHEREFORE, taken in the above light, the Court hereby orders
the case DISMISSED and further orders the plaintiffs to pay the
defendants jointly and severally the following, thus:
1)
2)
3)
4)

P100,000.00 as moral damages;

P50,000.00 as exemplary damages;
P100,000.00 as attorneys fees; and
To pay the costs of this suit.

SO ORDERED.[10]

Applying Article 887 of the Civil Code, the RTC ruled that petitioners are
not compulsory heirs; thus, they could not invoke bad faith as a ground to rescind
the subject Deed. As to respondents declaration that they were the only surviving
heirs of the decedents, the trial court said that it was, in a way, a non-recognition of
petitioners claim that they, too, are heirs. The court, likewise, gave credence to
respondents claim that petitioners had previously received advances on their share
of the inheritance. As to the remedy of rescission, the court declared that it was
not available in the instant case because of the existence of other remedies that
may be availed of by petitioners, considering that there were other properties from
which they could obtain reparation, assuming they are entitled.[11]
On appeal to the Court of Appeals, the appellate court affirmed with
modification the trial courts decision, viz.:
WHEREFORE, premises considered, the assailed decision dated
April 24, 1997 of the Regional Trial Court of Balao[a]n, La Union in
Civil Case No. 466 is hereby AFFIRMED with MODIFICATION, in
that the award of exemplary damages and attorneys fees is deleted. No
pronouncement as to costs.
SO ORDERED.[12]

The appellate court made a definitive conclusion that petitioners, together

with respondents, are heirs of Macaria and Patricio. However, considering that
petitioners are not compulsory heirs, it agreed with the RTC that they could not use
bad faith as a ground to rescind the contract as provided for in Article 1104 of
the New Civil Code. The appellate court also agreed with the trial court that bad
faith on the part of respondents was wanting. While recognizing the doctrine that
the subject Deed was not binding on petitioners because they did not participate
therein, the appellate court refused to annul the contract on the basis thereof, in
view of the existence of other properties previously received by petitioners and
those that may still be the subject of partition. The court further denied the prayer
to annul the donation made in favor of Pedro, inasmuch as it was belatedly raised
by petitioners.[13] The appellate court likewise found the deletion of the award of
exemplary damages and attorneys fees proper.[14]

Unsatisfied, petitioners come to this Court in this petition for review

on certiorari raising the following issues:
I.

WHETHER OR NOT THE COURT OF APPEALS

COMMITTED GRAVE ABUSE OF DISCRETION AND
MANIFESTLY OVERLOOKED RELEVANT FACTS NOT
DISPUTED AND WHICH IF PROPERLY CONSIDERED
WOULD JUSTIFY A DIFFERENT CONCLUSION THAT
THERE IS FRAUD OR BAD FAITH ON THE PART OF
DEFENDANTS-APPELLEES IN EXCLUDING PLAINTIFFSAPPELLANTS FROM THE DEED OF EXTRA JUDICIAL
SETTLEMENT WITH DONATION.

II.

WHETHER OR NOT THE COURT OF APPEALS

COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT THE MERE ACT OF REPUDIATING
THE INTEREST OF A CO-OWNER IS NOT SUFFICIENT TO
SUPPORT A FINDING OF BAD FAITH SINCE NO BAD
FAITH CAN BE ATTRIBUTED TO A PERSON WHO ONLY
EXERCISES A PRIVILEGE GRANTED BY LAW.

III.

WHETHER OR NOT THE COURT OF APPEALS

COMMITTED GRAVE ABUSE OF DISCRETION IN
CONCLUDING THAT THERE IS ABSENCE OF FRAUD OR
BAD FAITH ON THE PART OF DEFENDANTS-APPELLEES
IN EXCLUDING PLAINTIFFS-APPELLANTS IN THE EXTRA
JUDICIAL SETTLEMENT BASED ON AN INFERENCE
THAT IS MANIFESTLY MISTAKEN THAT PLAINTIFFSAPPELLANTS HAVE ALREADY OBTAINED THEIR
ADVANCE OF INHERITANCE FROM THE DECEDENTS.

IV.

WHETHER OR NOT THE HONORABLE COURT OF

APPEALS COMMITTED AN ERROR OF LAW AND GRAVE
ABUSE OF DISCRETION IN CONCLUDING THAT THE
ASSAILED EXTRAJUDICIAL SETTLEMENT CANNOT BE
ANNULLED SINCE THE MISREPRESENTATION IS NOT SO
GRAVE IN CHARACTER AS TO AMOUNT TO BAD FAITH
(AND) RULE 74, SECTION 1, SECOND PARAGRAPH, DOES
NOT DISCOUNT THE POSSIBILITY THAT SOME HEIRS
MAY HAVE BEEN EXCLUDED IN THE EXECUTION OF
THE EXTRAJUDICIAL SETTLEMENT.

V.

WHETHER OR NOT THE HONORABLE COURT OF

APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
TANTAMOUNT TO AN ERROR OF LAW IN CONCLUDING
THAT THE DEED OF EXTRAJUDICIAL SETTLEMENT
WITH DONATION CANNOT BE ANNULLED.

VI.

WHETHER OR NOT THE COURT OF APPEALS

COMMITTED GRAVE ABUSE OF DISCRETION IN
AWARDING MORAL DAMAGES DESPITE FINDING THAT
THE SUIT WAS MADE IN GOOD FAITH.

VII.

WHETHER OR NOT THE COURT OF APPEALS

COMMITTED GRAVE ABUSE OF DISCRETION IN
AFFIRMING THE DECISION OF THE REGIONAL TRIAL
COURT THAT THE MOTION TO AMEND COMPLAINT TO
IMPLEAD ADDITIONAL PARTY AND TO CONFORM TO
THE EVIDENCE PRESENTED FILED BY THE PLAINTIFFSAPPELLANTS IS NOT PROPER.[15]

In fine, petitioners challenge the appellate courts conclusions on the validity

of the extrajudicial settlement with donation and the denial of the motion to amend
the complaint to implead an indispensable party and conform to the evidence
presented.
Much as we would like to make a definitive conclusion on the respective
rights of all the parties and decide, once and for all, their interests over the subject
property, we are barred by a jurisdictional issue.
Jurisdiction is the power invested in courts for administering justice, that is,
to hear and decide cases. For the court to exercise the authority to dispose of the
case on the merits, it must acquire jurisdiction over the subject matter and the
parties.[16]
Courts acquire jurisdiction over a party plaintiff upon the filing of the
complaint. On the other hand, jurisdiction over the person of a party defendant is
assured upon the service of summons in the manner required by law or, otherwise,

by his voluntary appearance. As a rule, if a defendant has not been summoned, the
court acquires no jurisdiction over his person, and a personal judgment rendered
against such defendant is null and void. A decision that is null and void for want
of jurisdiction of the trial court is not a decision in contemplation of law and can
never become final and executory.[17]
Corollary to the issue of jurisdiction, and equally important, is the
mandatory rule on joinder of indispensable parties set forth in Section 7, Rule 3 of
the Rules of Court, to wit:
SEC. 7. Compulsory joinder of indispensable parties. Parties in
interest without whom no final determination can be had of an
action shall be joined either as plaintiffs or defendants.

The general rule with reference to parties to a civil action requires the
joinder of all necessary parties, where possible, and the joinder of all indispensable
parties under any and all conditions.[18] The evident intent of the Rules on the
joinder of indispensable and necessary parties is the complete determination of all
possible issues, not only between the parties themselves but also as regards other
persons who may be affected by the judgment.[19]
In this case, petitioners challenge the denial of their motion to amend the
complaint to implead Pedro who, they claim, is an indispensable party to the case.
We are, therefore, compelled to address this important question.
In Regner v. Logarta[20] and Arcelona v. CA,[21] we laid down the test to
determine if a party is an indispensable party, viz.:
An indispensable party is a party who has an interest in the
controversy or subject matter that a final adjudication cannot be made, in
his absence, without injuring or affecting that interest, a party who has
not only an interest in the subject matter of the controversy, but also has
an interest of such nature that a final decree cannot be made without
affecting his interest or leaving the controversy in such a condition that
its final determination may be wholly inconsistent with equity and good
conscience. It has also been considered that an indispensable party is a
person in whose absence there cannot be a determination between the

parties already before the court which is effective, complete or

equitable. Further, an indispensable party is one who must be included
in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in
the controversy or subject matter is separable from the interest of the
other parties, so that it will not necessarily be directly or injuriously
affected by a decree which does complete justice between them. Also, a
person is not an indispensable party if his presence would merely permit
complete relief between him and those already parties to the action, or if
he has no interest in the subject matter of the action. It is not a sufficient
reason to declare a person to be an indispensable party that his presence
will avoid multiple litigation.[22]

In upholding the denial of the motion to amend the complaint, the appellate
court concluded that the sole desire of petitioners in instituting the case was the
annulment of the extrajudicial settlement. Effectively, it separated the question of
the validity of the extrajudicial settlement from the validity of the
donation. Accordingly, the court said, the latter issue could be threshed out in a
separate proceeding later. This explains why Pedro was not considered an
indispensable party by the trial and appellate courts.
We beg to differ.
Even without having to scrutinize the records, a mere reading of the assailed
decision readily reveals that Pedro is an indispensable party. At the time of the
filing of the complaint, the title to the Quezon City property was already registered
in the name of Pedro, after TCT No. 60455 (190472) in the names of Pedro
Velasco, Andrea, Magdalena and Patricio Monis was cancelled, pursuant to the
extrajudicial settlement with donation executed by respondents. The central thrust
of the complaint was that respondents, by themselves, could not have transferred
the Quezon City property to Pedro because petitioners, as heirs of Patricio
and Magdalena, also have rights over it. Accordingly, petitioners specifically
prayed that the extrajudicial settlement with donation be annulled and the transfer
certificate of title and tax declarations (in the name of Pedro) issued pursuant
thereto be canceled. The pertinent portion of the complaint is quoted for easy
reference:

WHEREFORE, in view of the foregoing, it is respectfully prayed

that judgment be rendered as follows
1.

By ordering the annulment of Annex A hereof as well as

the cancellation of transfer certificate of title and tax
declarations issued pursuant thereto.[23]

If such prayer and thrust were to be denied (as held by the trial and appellate
courts), the problem would be less obvious, as the status quo would be
maintained. However, if they were to be upheld, Pedros title to the property
would undoubtedly be directly and injuriously affected. Even if we only resolve
the validity of the extrajudicial settlement, there would be no final adjudication of
the case without involving Pedros interest.
Verily, Pedros interest in the subject matter of the suit and in the relief
sought are so inextricably intertwined with that of the other parties. His legal
presence as a party to the proceedings is, therefore, an absolute necessity. [24] His
interest in the controversy and in the subject matter is not separable from the
interest of the other parties.
It is unfortunate that petitioners failed to implead Pedro as defendant in their
complaint. Interestingly, however, they realized such mistake, albeit belatedly,
and thus sought the amendment of the complaint to join him as a defendant, but the
RTC refused to grant the same.
Well-settled is the rule that joinder of indispensable parties is
mandatory.[25] It is a condition sine qua non to the exercise of judicial
power.[26] The absence of an indispensable party renders all subsequent actions of
the court null and void for want of authority to act, not only as to the absent parties
but even as to those present.[27] Without the presence of indispensable parties to the
suit, the judgment of the court cannot attain finality.[28] One who is not a party to a
case is not bound by any decision of the court; otherwise, he will be deprived of his
right to due process.[29] That is why the case is generally remanded to the court of
origin for further proceedings.[30]

In light of these premises, no final ruling can be had on the validity of the
extrajudicial settlement. While we wish to abide by the mandate on speedy
disposition of cases, we cannot render a premature judgment on the merits. To do
so could result in a possible violation of due process. The inclusion of Pedro is
necessary for the effective and complete resolution of the case and in order to
accord all parties the benefit of due process and fair play.[31]
Nevertheless, as enunciated in Commissioner Domingo v. Scheer,[32] Lotte
Phil. Co., Inc. v. Dela Cruz,[33] and PepsiCo, Inc. v. Emerald Pizza, Inc.,[34] the
non-joinder of indispensable parties is not a ground for the dismissal of an
action. The remedy is to implead the non-party claimed to be
indispensable. Parties may be added by order of the court on motion of the party
or on its own initiative at any stage of the action and/or at such times as are just. If
the plaintiff refuses to implead an indispensable party despite the order of the
court, then the court may dismiss the complaint for the plaintiffs failure to comply
with a lawful court order.
In light of the foregoing, a remand of the case to the trial court is imperative.
WHEREFORE, the Decision of the Court of Appeals dated July 13,
2005 in CA-G.R. CV No. 56998 is SET ASIDE. Let the case be REMANDED to
the Regional Trial Court for the inclusion of Pedro Velasco, Jr. as an indispensable
party, and for further proceedings.
SO ORDERED.

JOSEPHINE
MARMO,*NESTOR
ESGUERRA,
DANILO DEL PILAR and
MARISA DEL PILAR,
Petitioners,

G.R. No. 182585

Present:

CARPIO, J., Chairperson,

LEONARDO-DE CASTRO,
BRION,
-

versus -

DEL CASTILLO, and

ABAD, JJ.

MOISES O. ANACAY,

Promulgated:

Respondent.
November 27, 2009
x ----------------------------------------------------------------------------------------x
DECISION

BRION, J.:

Before us is the Petition for Review on Certiorari,[1] filed by the spouses

Josephine Marmo and Nestor Esguerra and the spouses Danilo del Pilar and
Marisa del Pilar (collectively, the petitioners), to reverse and set aside the
Decision[2] dated December 28, 2007 and the Resolution[3] dated April 11, 2008 of

the Former Special Eleventh Division of the Court of Appeals (CA) in CA-G.R. SP No.
94673. The assailed CA Decision dismissed the petitioners petition
for certiorari challenging the Orders dated March 14, 2006[4] and May 8, 2006[5] of
the Regional Trial Court (RTC), Branch 90, Dasmarias, Cavite in Civil Case No.
2919-03, while the assailed CA Resolution denied the petitioners motion for
reconsideration.

FACTUAL BACKGROUND

The facts of the case, as gathered from the parties pleadings, are briefly
summarized below:

On September 16, 2003, respondent Moises O. Anacay filed a case for

Annulment of Sale, Recovery of Title with Damages against the petitioners[6] and
the Register of Deeds of the Province of Cavite, docketed as Civil Case No. 291903.[7]The complaint states, among others, that: the respondent is the bona-fide coowner, together with his wife, Gloria P. Anacay (now deceased), of a 50-square
meter parcel of land and the house built thereon, located at Blk. 54, Lot 9,
Regency Homes, Brgy. Malinta, Dasmarias, Cavite, covered by Transfer Certificate
of Title (TCT) No. T-815595 of the Register of Deeds of Cavite; they authorized
petitioner Josephine to sell the subject property; petitioner Josephine sold the
subject property to petitioner Danilo for P520,000.00, payable in monthly
installments of P8,667.00 from May 2001 to June 2006; petitioner Danilo
defaulted in his installment payments from December 2002 onwards; the
respondent subsequently discovered that TCT No. 815595 had been cancelled and
TCT No. T-972424 was issued in petitioner Josephines name by virtue of a falsified
Deed of Absolute Sale dated September 20, 2001; petitioner Josephine
subsequently transferred her title to petitioner Danilo; TCT No. T-972424 was
cancelled and TCT No. T-991035 was issued in petitioner Danilos name. The
respondent sought the annulment of the Deed of Absolute Sale dated September
20, 2001 and the cancellation of TCT No. T-991035; in the alternative, he
demanded petitioner Danilos payment of the balance of P347,000.00 with
interest from December 2002, and the payment of moral damages, attorneys
fees, and cost of suit.

In her Answer, petitioner Josephine averred, among others, that the

respondents children, as co-owners of the subject property, should have been
included as plaintiffs because they are indispensable parties.[8] Petitioner Danilo
echoed petitioner Josephines submission in his Answer.[9]

Following the pre-trial conference, the petitioners filed a Motion to Dismiss

the case for the respondents failure to include his children as indispensable
parties.[10]

The respondent filed an Opposition, arguing that his children are not
indispensable parties because the issue in the case can be resolved without their
participation in the proceedings.[11]

THE RTC RULING

The RTC found the respondents argument to be well-taken and thus denied
the petitioners motion to dismiss in an Order dated March 14, 2006.[12] It also
noted that the petitioners motion was simply filed to delay the proceedings.

After the denial of their Motion for Reconsideration,[13] the petitioners

elevated their case to the CA through a Petition for Certiorari under Rule 65 of the
Rules of Court.[14] They charged the RTC with grave abuse of discretion amounting
to lack of jurisdiction for not dismissing the case after the respondent failed to
include indispensable parties.

THE CA RULING

The CA dismissed the petition[15] in a Decision promulgated on December

28, 2007. It found that the RTC did not commit any grave abuse of discretion in
denying the petitioners motion to dismiss, noting that the respondents children
are not indispensable parties.

The petitioners moved[16] but failed[17] to secure a reconsideration of the CA

Decision; hence, the present petition.

Following the submission of the respondents Comment[18] and the

petitioners Reply,[19] we gave due course to the petition and required the parties
to submit their respective memoranda.[20] Both parties complied.[21]

Meanwhile, on April 24, 2009, the petitioners filed with the RTC a Motion to
Suspend Proceedings due to the pendency of the present petition. The RTC denied
the motion to suspend as well as the motion for reconsideration that
followed. The petitioners responded to the denial by filing with us a petition for
the issuance of a temporary restraining order (TRO) to enjoin the RTC from
proceeding with the hearing of the case pending the resolution of the present
petition.

THE PETITION and

THE PARTIES SUBMISSIONS

The petitioners submit that the respondents children, who succeeded their
deceased mother as co-owners of the property, are indispensable parties because
a full determination of the case cannot be made without their presence, relying
onArcelona v. Court of Appeals,[22] Orbeta v. Sendiong,[23] and Galicia v. Manliquez
Vda. de Mindo.[24] They argue that the non-joinder of indispensable parties is a
fatal jurisdictional defect.

The respondent, on the other hand, counters that the respondents children
are not indispensable parties because the issue involved in the RTC whether the
signatures of the respondent and his wife in the Deed of Absolute Sale
datedSeptember 20, 2001 were falsified - can be resolved without the
participation of the respondents children.

THE ISSUE

The core issue is whether the respondents children are indispensable

parties in Civil Case No. 2919-03. In the context of the Rule 65 petition before the
CA, the issue is whether the CA correctly ruled that the RTC did not commit any
grave abuse of discretion in ruling that the respondents children are not
indispensable parties.

OUR RULING

We see no merit in the petition.

General Rule: The denial of a

motion to dismiss is an
interlocutory order which is
not the proper subject of an
appeal or a petition for
certiorari.

At the outset, we call attention to Section 1 of Rule 41[25] of the Revised

Rules of Court governing appeals from the RTC to the CA. This Section provides

that an appeal may be taken only from a judgment or final order that completely
disposes of the case, or of a matter therein when declared by the Rules to be
appealable. It explicitly states as well that no appeal may be taken from an
interlocutory order.

In law, the word interlocutory refers to intervening developments

between the commencement of a suit and its complete termination; hence, it is a
development that does not end the whole controversy.[26] An interlocutory
order merely rules on an incidental issue and does not terminate or finally
dispose of the case; it leaves something to be done before the case is finally
decided on the merits.[27]

An Order denying a Motion to Dismiss is interlocutory because it does not

finally dispose of the case, and, in effect, directs the case to proceed until final
adjudication by the court. Only when the court issues an order outside or in
excess of jurisdiction or with grave abuse of discretion, and the remedy of appeal
would not afford adequate and expeditious relief, will certiorari be considered an
appropriate remedy to assail an interlocutory order.[28]

In the present case, since the petitioners did not wait for the final resolution
on the merits of Civil Case No. 2919-03 from which an appeal could be taken, but
opted to immediately assail the RTC Orders dated March 14, 2006 and May 8,
2006 through a petition for certiorari before the CA, the issue for us to address is
whether the RTC, in issuing its orders, gravely abused its discretion or otherwise
acted outside or in excess of its jurisdiction.

The RTC did not commit grave

abuse of discretion in denying
the petitioners Motion to
Dismiss; the respondents co-

owners are not indispensable

parties.

The RTC grounded its Order dated March 14, 2006 denying the petitioners
motion to dismiss on the finding that the respondents children, as co-owners of
the subject property, are not indispensable parties to the resolution of the case.

We agree with the RTC.

Section 7, Rule 3 of the Revised Rules of Court[29] defines indispensable

parties as parties-in-interest without whom there can be no final determination of
an action and who, for this reason, must be joined either as plaintiffs or as
defendants. Jurisprudence further holds that a party is indispensable, not only if
he has an interest in the subject matter of the controversy, but also if his interest
is such that a final decree cannot be made without affecting this interest or
without placing the controversy in a situation where the final determination may
be wholly inconsistent with equity and good conscience. He is a person whose
absence disallows the court from making an effective, complete, or equitable
determination of the controversy between or among the contending parties. [30]

When the controversy involves a property held in common, Article 487 of

the Civil Code explicitly provides that any one of the co-owners may bring an
action in ejectment.

We have explained in Vencilao v. Camarenta[31] and in Sering v. Plazo[32] that

the term action in ejectment includes a suit for forcible entry (detentacion) or
unlawful detainer (desahucio).[33] We also noted in Sering that the term action
in ejectment
includes
also,
an accion
publiciana (recovery
of

possession) or accion reinvidicatoria[34] (recovery of ownership). Most recently

in Estreller v. Ysmael,[35] we applied Article 487 to an accion publiciana case;
in Plasabas v. Court of Appeals[36] we categorically stated that Article 487 applies
to reivindicatory actions.

We upheld in several cases the right of a co-owner to file a suit without

impleading other co-owners, pursuant to Article 487 of the Civil Code. We made
this ruling in Vencilao, where the amended complaint for forcible entry and
detainer specified that the plaintiff is one of the heirs who co-owns the disputed
properties. In Sering, and Resuena v. Court of Appeals,[37] the co-owners who filed
the ejectment case did not represent themselves as the exclusive owners of the
property. In Celino v. Heirs of Alejo and Teresa Santiago,[38] the complaint for
quieting of title was brought in behalf of the co-owners precisely to recover lots
owned in common.[39] In Plasabas, the plaintiffs alleged in their complaint for
recovery of title to property (accion reivindicatoria) that they are the sole owners
of the property in litigation, but acknowledged during the trial that the property is
co-owned with other parties, and the plaintiffs have been authorized by the coowners to pursue the case on the latters behalf.

These cases should be distinguished from Baloloy v. Hular[40] and Adlawan v.

Adlawan[41] where the actions for quieting of title and unlawful detainer,
respectively, were brought for the benefit of the plaintiff alone who claimed to be
the sole owner. We held that the action will not prosper unless the plaintiff
impleaded the other co-owners who are indispensable parties. In these cases, the
absence of an indispensable party rendered all subsequent actions of the court
null and void for want of authority to act, not only as to the absent parties but
even as to those present.

We read these cases to collectively mean that where the suit is brought by a
co-owner, without repudiating the co-ownership, then the suit is presumed to be
filed for the benefit of the other co-owners and may proceed without impleading
the other co-owners. However, where the co-owner repudiates the co-ownership
by claiming sole ownership of the property or where the suit is brought against a
co-owner, his co-owners are indispensable parties and must be impleaded as

party-defendants, as the suit affects the rights and interests of these other coowners.

In the present case, the respondent, as the plaintiff in the court below,
never disputed the existence of a co-ownership nor claimed to be the sole or
exclusive owner of the litigated lot. In fact, he recognized that he is a bonafide co-owner of the questioned property, along with his deceased wife.
Moreover and more importantly, the respondents claim in his complaint in Civil
Case No. 2919-03 is personal to him and his wife, i.e., that his and his wifes
signatures in the Deed of Absolute Sale in favor of petitioner Josephine were
falsified. The issue therefore is falsification, an issue which does not require the
participation of the respondents co-owners at the trial; it can be determined
without their presence because they are not parties to the document; their
signatures do not appear therein. Their rights and interests as co-owners are
adequately protected by their co-owner and father, respondent Moises O. Anacay,
since the complaint was made precisely to recover ownership and possession of
the properties owned in common, and, as such, will redound to the benefit of all
the co-owners.[42]

In sum, respondents children, as co-owners of the subject property, are not

indispensable parties to the resolution of the case. We held in Carandang v. Heirs
of De Guzman[43] that in cases like this, the co-owners are not even necessary
parties, for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to be filed for the benefit of all.[44] Thus,
the respondents children need not be impleaded as party-plaintiffs in Civil Case
No. 2919-03.

We cannot subscribe to the petitioners reliance on our rulings in Arcelona

v. Court of Appeals,[45] Orbeta v. Sendiong[46] and Galicia v. Manliquez Vda. de
Mindo,[47] for these cases find no application to the present case. In these cited
cases, the suits were either filed against a co-owner without impleading the other
co-owners, or filed by a party claiming sole ownership of a property that would
affect the interests of third parties.

Arcelona involved an action for security of tenure filed by a tenant without

impleading all the co-owners of a fishpond as party-defendants. We held that a
tenant, in an action to establish his status as such, must implead all the proindiviso co-owners as party-defendants since a tenant who fails to implead all the
co-owners as party-defendants cannot establish with finality his tenancy over the
entire co-owned land. Orbeta, on the other hand, involved an action for recovery
of possession, quieting of title and damages wherein the plaintiffs prayed that
they be declared absolute co-owners of the disputed property, but we found
that there were third parties whose rights will be affected by the ruling and who
should thus be impleaded as indispensable parties. In Galicia, we noted that the
complaint for recovery of possession and ownership and annulment of title
alleged that the plaintiffs predecessor-in-interest was deprived of possession and
ownership by a third party, but the complaint failed to implead all the heirs of that
third party, who were considered indispensable parties.

In light of these conclusions, no need arises to act on petitioners prayer for

a TRO to suspend the proceedings in the RTC and we find no reason to grant the
present petition.

WHEREFORE, premises considered, we hereby DENY the petition for its

failure to show any reversible error in the assailed Decision dated December 28,
2007 and Resolution dated April 11, 2008 of the Court of Appeals in CA-G.R. SP
No. 94673, both of which we hereby AFFIRM. Costs against the petitioners.

SO ORDERED.

G.R. No. 179169

March 3, 2010

LEONIS NAVIGATION CO., INC. and WORLD MARINE PANAMA, S.A., Petitioners,
vs.
CATALINO U. VILLAMATER and/or The Heirs of the Late Catalino U. Villamater,
represented herein by Sonia Mayuyu Villamater; and NATIONAL LABOR RELATIONS
COMMISSION, Respondents.
DECISION
NACHURA, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, seeking to annul
and set aside the Decision2 dated May 3, 2007 and the Resolution3 dated July 23, 2007 of the
Court of Appeals (CA) in CA-G.R. SP No. 85594, entitled "Leonis Navigation Co., Inc., et al. v.
Catalino U. Villamater, et al."
The antecedents of this case are as follows:
Private respondent Catalino U. Villamater (Villamater) was hired as Chief Engineer for the ship
MV Nord Monaco, owned by petitioner World Marine Panama, S.A., through the services of
petitioner Leonis Navigation Co., Inc. (Leonis), as the latters local manning agent. Consequent
to this employment, Villamater, on June 4, 2002, executed an employment
contract,4 incorporating the Standard Terms and Conditions Governing the Employment of
Filipino Seafarers on Board Ocean-Going Vessels as prescribed by the Philippine Overseas
Employment Administration (POEA).
Prior to his deployment, Villamater underwent the required Pre-Employment Medical
Examination (PEME). He passed the PEME and was declared "Fit to Work."5 Thereafter,
Villamater was deployed on June 26, 2002.
Sometime in October 2002, around four (4) months after his deployment, Villamater suffered
intestinal bleeding and was given a blood transfusion. Thereafter, he again felt weak, lost
considerable weight, and suffered intermittent intestinal pain. He consulted a physician in
Hamburg, Germany, who advised hospital confinement. Villamater was diagnosed with
Obstructive Adenocarcinoma of the Sigmoid, with multiple liver metastases, possibly local
peritoneal carcinosis and infiltration of the bladder, possibly lung metastasis, and anemia;
Candida Esophagitis; and Chronic Gastritis. He was advised to undergo chemotherapy and
continuous supportive treatment, such as pain-killers and blood transfusion.6
Villamater was later repatriated, under medical escort, as soon as he was deemed fit to travel.
As soon as he arrived in the Philippines, Villamater was referred to company-designated
physicians. The diagnosis and the recommended treatment abroad were confirmed. He was
advised to undergo six (6) cycles of chemotherapy. However, Dr. Kelly Siy Salvador, one of the
company-designated physicians, opined that Villamaters condition "appears to be not workrelated," but suggested a disability grading of 1.7
In the course of his chemotherapy, when no noticeable improvement occurred, Villamater filed a
complaint8before the Arbitration Branch of the National Labor Relations Commission (NLRC) for
payment of permanent and total disability benefits in the amount of US$80,000.00,
reimbursement of medical and hospitalization expenses in the amount of P11,393.65, moral

damages in the sum of P1,000,000.00, exemplary damages in the amount ofP1,000,000.00, as

well as attorneys fees.
After the submission of the required position papers, the Labor Arbiter rendered a
decision9 dated July 28, 2003 in favor of Villamater, holding that his illness was compensable,
but denying his claim for moral and exemplary damages. The Labor Arbiter disposed as
follows
WHEREFORE, foregoing premises considered, judgment is hereby rendered declaring
complainants illness to be compensable and ordering respondents LEONIS NAVIGATION CO.,
INC. and WORLD MARINE PANAMA, S.A. liable to pay, jointly and severally, complainant
CATALINO U. VILLAMATER, the amount of US$60,000.00 or its Philippine Peso equivalent at
the time of actual payment, representing the latters permanent total disability benefits plus ten
percent (10%) thereof as Attorneys Fees.
All other claims are dismissed for lack of merit.
SO ORDERED.10
Petitioners appealed to the NLRC. Villamater also filed his own appeal, questioning the award of
the Labor Arbiter and claiming that the 100% degree of disability should be compensated in the
amount of US$80,000.00, pursuant to Section 2, Article XXI of the ITF-JSU/AMOSUP Collective
Bargaining Agreement (CBA) between petitioners and Associated Marine Officers & Seamens
Union of the Philippines, which covered the employment contract of Villamater.
On February 4, 2004, the NLRC issued its resolution,11 dismissing the respective appeals of
both parties and affirming in toto the decision of the Labor Arbiter.
Petitioners filed their motion for reconsideration of the February 4, 2004 resolution, but the
NLRC denied the same in its resolution dated June 15, 2004.
Aggrieved, petitioners filed a petition for certiorari under Rule 65 of the Rules of Court before the
CA. After the filing of the required memoranda, the CA rendered its assailed May 3, 2007
Decision, dismissing the petition. The appellate court, likewise, denied petitioners motion for
reconsideration in its July 23, 2007 Resolution.
Hence, this petition based on the following grounds, to wit:
First, the Court of Appeals erroneously held that [the] Commissions Dismissal Decision does
not constitute grave abuse of discretion amounting to lack or excess of jurisdiction but mere
error of judgment, considering that the decision lacks evidentiary support and is contrary to both
evidence on record and prevailing law and jurisprudence.
Second, the Court of Appeals seriously erred in upholding the NLRCs decision to award Grade
1 Permanent and Total Disability Benefits in favor of seaman Villamater despite the lack of
factual and legal basis to support such award, and more importantly, when it disregarded
undisputed facts and substantial evidence presented by petitioners which show that seaman
Villamaters illness was not work-related and hence, not compensable, as provided by the
Standard Terms of the POEA Contract.

Third, the Court of Appeals erred in holding that non-joinder of indispensable parties warrant the
outright dismissal of the Petition for Review on Certiorari.
Fourth, the Court of Appeals erroneously held that final and executory decisions or resolutions
of the NLRC render appeals to superior courts moot and academic.
Last, the Court of Appeals seriously erred in upholding the award of attorneys fees considering
that the grant has neither factual nor legal basis.12
Before delving into the merits of this petition, we deem it fit to discuss the procedural issues
raised by petitioners.
First. It is worthy to note that the CA dismissed the petition, considering that (1) the June 15,
2004 Resolution of the NLRC had already become final and executory on June 26, 2004, and
the same was already recorded in the NLRC Book of Entries of Judgments; and that (2) the
award of the Labor Arbiter was already executed, thus, the case was closed and terminated.
According to Sections 14 and 15, Rule VII of the 2005 Revised Rules of Procedure of the
NLRC
Section 14. Finality of decision of the commission and entry of judgment. a) Finality of the
Decisions, Resolutions or Orders of the Commission. Except as provided in Section 9 of Rule
X, the decisions, resolutions or orders of the Commission shall become final and executory after
ten (10) calendar days from receipt thereof by the parties.
b) Entry of Judgment. Upon the expiration of the ten (10) calendar day period provided in
paragraph (a) of this Section, the decision, resolution, or order shall be entered in a book of
entries of judgment.
The Executive Clerk or Deputy Executive Clerk shall consider the decision, resolution or order
as final and executory after sixty (60) calendar days from date of mailing in the absence of
return cards, certifications from the post office, or other proof of service to parties.
Section 15. Motions for reconsideration. Motion for reconsideration of any decision, resolution
or order of the Commission shall not be entertained except when based on palpable or patent
errors; provided that the motion is under oath and filed within ten (10) calendar days from
receipt of decision, resolution or order, with proof of service that a copy of the same has been
furnished, within the reglementary period, the adverse party; and provided further, that only one
such motion from the same party shall be entertained.
Should a motion for reconsideration be entertained pursuant to this SECTION, the resolution
shall be executory after ten (10) calendar days from receipt thereof.13
Petitioners received the June 15, 2004 resolution of the NLRC, denying their motion for
reconsideration, on June 16, 2004. They filed their petition for certiorari before the CA only on
August 9, 2004,14 or 54 calendar days from the date of notice of the June 15, 2004 resolution.
Considering that the above-mentioned 10-day period had lapsed without petitioners filing the
appropriate appeal, the NLRC issued an Entry of Judgment dated June 28, 2004.

Moreover, by reason of the finality of the June 15, 2004 NLRC resolution, the Labor Arbiter
issued on July 29, 2004 a Writ of Execution.15 Consequently, Leonis voluntarily paid Villamaters
widow, Sonia M. Villamater (Sonia), the amount of P3,649,800.00, with Rizal Commercial and
Banking Corporation (RCBC) Managers Check No. 000000855016 dated August 12, 2004, as
evidenced by the Acknowledgment Receipt17 dated August 13, 2004, and the Cheque
Voucher18 dated August 12, 2004. Following the complete satisfaction of the judgment award,
the Labor Arbiter issued an Order19 dated September 8, 2004 that reads
There being complete satisfaction of the judgment award as shown by the record upon receipt
of the complainant of the amount of P3,649,800.00, voluntarily paid by the respondent, as full
and final satisfaction of the Writ of Execution dated July 29, 2004; and finding the same to be
not contrary to law, morals, good custom, and public policy, and pursuant to Section 14, Rule
VII of the Rules of Procedure of the National Labor Relations Commission (NLRC), this case is
hereby ordered DISMISSED with prejudice, and considered CLOSED and TERMINATED.
SO ORDERED.
Petitioners never moved for a reconsideration of this Order regarding the voluntariness of their
payment to Sonia, as well as the dismissal with prejudice and the concomitant termination of the
case.
However, petitioners argued that the finality of the case did not render the petition for certiorari
before the CA moot and academic. On this point, we agree with petitioners.
In the landmark case of St. Martin Funeral Home v. NLRC,20 we ruled that judicial review of
decisions of the NLRC is sought via a petition for certiorari under Rule 65 of the Rules of Court,
and the petition should be filed before the CA, following the strict observance of the hierarchy of
courts. Under Rule 65, Section 4,21 petitioners are allowed sixty (60) days from notice of the
assailed order or resolution within which to file the petition. Thus, although the petition was not
filed within the 10-day period, petitioners reasonably filed their petition for certiorari before the
CA within the 60-day reglementary period under Rule 65.
Further, a petition for certiorari does not normally include an inquiry into the correctness of its
evaluation of the evidence. Errors of judgment, as distinguished from errors of jurisdiction, are
not within the province of a special civil action for certiorari, which is merely confined to issues
of jurisdiction or grave abuse of discretion. It is, thus, incumbent upon petitioners to satisfactorily
establish that the NLRC acted capriciously and whimsically in order that the extraordinary writ of
certiorari will lie. By grave abuse of discretion is meant such capricious and whimsical exercise
of judgment as is equivalent to lack of jurisdiction, and it must be shown that the discretion was
exercised arbitrarily or despotically.
The CA, therefore, could grant the petition for certiorari if it finds that the NLRC, in its assailed
decision or resolution, committed grave abuse of discretion by capriciously, whimsically, or
arbitrarily disregarding evidence that is material to or decisive of the controversy; and it cannot
make this determination without looking into the evidence of the parties. Necessarily, the
appellate court can only evaluate the materiality or significance of the evidence, which is alleged
to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in relation to all
other evidence on record.22 Notably, if the CA grants the petition and nullifies the

decision or resolution of the NLRC on the ground of grave abuse of discretion amounting to
excess or lack of jurisdiction, the decision or resolution of the NLRC is, in contemplation of law,
null and void ab initio; hence, the decision or resolution never became final and executory.23
In the recent case Bago v. National Labor Relations Commission,24 we had occasion to rule that
although the CA may review the decisions or resolutions of the NLRC on jurisdictional and due
process considerations, particularly when the decisions or resolutions have already been
executed, this does not affect the statutory finality of the NLRC decisions or resolutions in view
of Rule VIII, Section 6 of the 2002 New Rules of Procedure of the NLRC, viz.:
RULE VIII
xxxx
SECTION 6. EFFECT OF FILING OF PETITION FOR CERTIORARI ON EXECUTION. A
petition for certiorari with the Court of Appeals or the Supreme Court shall not stay the execution
of the assailed decision unless a temporary restraining order is issued by the Court of Appeals
or the Supreme Court.25
Simply put, the execution of the final and executory decision or resolution of the NLRC shall
proceed despite the pendency of a petition for certiorari, unless it is restrained by the proper
court. In the present case, petitioners already paid Villamaters widow, Sonia, the amount
of P3,649,800.00, representing the total and permanent disability award plus attorneys fees,
pursuant to the Writ of Execution issued by the Labor Arbiter. Thereafter, an Order was issued
declaring the case as "closed and terminated." However, although there was no motion for
reconsideration of this last Order, Sonia was, nonetheless, estopped from claiming that the
controversy had already reached its end with the issuance of the Order closing and terminating
the case. This is because the Acknowledgment Receipt she signed when she received
petitioners payment was without prejudice to the final outcome of the petition for certiorari
pending before the CA.
Second. We also agree with petitioners in their position that the CA erred in dismissing outright
their petition for certiorari on the ground of non-joinder of indispensable parties. It should be
noted that petitioners impleaded only the then deceased Villamater26 as respondent to the
petition, excluding his heirs.
Rule 3, Section 7 of the Rules of Court defines indispensable parties as those who are parties in
interest without whom there can be no final determination of an action.27 They are those parties
who possess such an interest in the controversy that a final decree would necessarily affect
their rights, so that the courts cannot proceed without their presence.28 A party is indispensable
if his interest in the subject matter of the suit and in the relief sought is inextricably intertwined
with the other parties interest.29
Unquestionably, Villamaters widow stands as an indispensable party to this case.
Under Rule 3, Section 11 of the Rules of Court, neither misjoinder nor non-joinder of parties is a
ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on

motion of any party or on its own initiative at any stage of the action and on such terms as are
just. Any claim against a misjoined party may be severed and proceeded with separately.
The proper remedy is to implead the indispensable party at any stage of the action. The court,
either motu proprio or upon the motion of a party, may order the inclusion of the indispensable
party or give the plaintiff an opportunity to amend his complaint in order to include indispensable
parties. If the plaintiff ordered to include the indispensable party refuses to comply with the order
of the court, the complaint may be dismissed upon motion of the defendant or upon the court's
own motion. Only upon unjustified failure or refusal to obey the order to include or to amend is
the action dismissed.30
On the merits of this case, the questions to be answered are: (1) Is Villamater entitled to total
and permanent disability benefits by reason of his colon cancer? (2) If yes, would he also be
entitled to attorneys fees?
As to Villamaters entitlement to total and permanent disability benefits, petitioners argue, in
essence, that colon cancer is not among the occupational diseases listed under Section 32-A of
the POEA Standard Terms and Conditions Governing the Employment of Filipino Seafarers OnBoard Ocean Going Vessels (POEA Standard Contract), and that the risk of contracting the
same was not increased by Villamaters working conditions during his deployment. Petitioners
posit that Villamater had familial history of colon cancer; and that, although dietary
considerations may be taken, his diet -- which might have been high in fat and low in fiber and
could have thus increased his predisposition to develop colon cancer -- might only be attributed
to him, because it was he who chose what he ate on board the vessels he was assigned to.
Petitioners also cited the supposed declaration of their company-designated physicians who
attended to Villamater that his disease was not work-related.
We disagree.
It is true that under Section 32-A of the POEA Standard Contract, only two types of cancers are
listed as occupational diseases (1) Cancer of the epithelial lining of the bladder (papilloma of
the bladder); and (2) cancer, epithellematous or ulceration of the skin or of the corneal surface
of the eye due to tar, pitch, bitumen, mineral oil or paraffin, or compound products or residues of
these substances. Section 20 of the same Contract also states that those illnesses not listed
under Section 32 are disputably presumed as work-related. Section 20 should, however, be
read together with Section 32-A on the conditions to be satisfied for an illness to be
compensable,31 to wit:
For an occupational disease and the resulting disability or death to be compensable, all the
following conditions must be established:
1. The seafarers work must involve the risk described herein;
2. The disease was contracted as a result of the seafarers exposure to the described risks;
3. The disease was contracted within a period of exposure and under such other factors
necessary to contract it;
4. There was no notorious negligence on the part of the seafarer.

Colon cancer, also known as colorectal cancer or large bowel cancer, includes cancerous
growths in the colon, rectum and appendix. With 655,000 deaths worldwide per year, it is the
fifth most common form of cancer in the United States of America and the third leading cause of
cancer-related deaths in the Western World. Colorectal cancers arise from adenomatous polyps
in the colon. These mushroom-shaped growths are usually benign, but some develop into
cancer over time. Localized colon cancer is usually diagnosed through colonoscopy.32
Tumors of the colon and rectum are growths arising from the inner wall of the large intestine.
Benign tumors of the large intestine are called polyps. Malignant tumors of the large intestine
are called cancers. Benign polyps can be easily removed during colonoscopy and are not lifethreatening. If benign polyps are not removed from the large intestine, they can become
malignant (cancerous) over time. Most of the cancers of the large intestine are believed to have
developed as polyps. Colorectal cancer can invade and damage adjacent tissues and organs.
Cancer cells can also break away and spread to other parts of the body (such as liver and lung)
where new tumors form. The spread of colon cancer to distant organs is called metastasis of the
colon cancer. Once metastasis has occurred in colorectal cancer, a complete cure of the cancer
is unlikely.33
Globally, colorectal cancer is the third leading cause of cancer in males and the fourth leading
cause of cancer in females. The frequency of colorectal cancer varies around the world. It is
common in the Western world and is rare in Asia and in Africa. In countries where the people
have adopted western diets, the incidence of colorectal cancer is increasing.34
Factors that increase a persons risk of colorectal cancer include high fat intake, a family history
of colorectal cancer and polyps, the presence of polyps in the large intestine, and chronic
ulcerative colitis.35
Diets high in fat are believed to predispose humans to colorectal cancer. In countries with high
colorectal cancer rates, the fat intake by the population is much higher than in countries with low
cancer rates. It is believed that the breakdown products of fat metabolism lead to the formation
of cancer-causing chemicals (carcinogens). Diets high in vegetables and high-fiber foods may
rid the bowel of these carcinogens and help reduce the risk of cancer.36
A persons genetic background is an important factor in colon cancer risk. Among first-degree
relatives of colon-cancer patients, the lifetime risk of developing colon cancer is 18%. Even
though family history of colon cancer is an important risk factor, majority (80%) of colon cancers
occur sporadically in patients with no family history of it. Approximately 20% of cancers are
associated with a family history of colon cancer. And 5% of colon cancers are due to hereditary
colon cancer syndromes. Hereditary colon cancer syndromes are disorders where affected
family members have inherited cancer-causing genetic defects from one or both of the
parents.37
In the case of Villamater, it is manifest that the interplay of age, hereditary, and dietary factors
contributed to the development of colon cancer. By the time he signed his employment contract
on June 4, 2002, he was already 58 years old, having been born on October 5, 1943,38 an age
at which the incidence of colon cancer is more likely.39He had a familial history of colon cancer,
with a brother who succumbed to death and an uncle who underwent surgery for the same
illness.40 Both the Labor Arbiter and the NLRC found his illness to be compensable for
permanent and total disability, because they found that his dietary provisions while at sea
increased his risk of contracting colon cancer because he had no choice of what to eat on board

except those provided on the vessels and these consisted mainly of high-fat, high-cholesterol,
and low-fiber foods.
While findings of the Labor Arbiter, which were affirmed by the NLRC, are entitled to great
weight and are binding upon the courts, nonetheless, we find it also worthy to note that even
during the proceedings before the Labor Arbiter, Villamater cited that the foods provided on
board the vessels were mostly meat, high in fat and high in cholesterol. On this matter,
noticeably, petitioners were silent when they argued that Villamaters affliction was brought
about by diet and genetics. It was only after the Labor Arbiter issued his Decision, finding colon
cancer to be compensable because the risk was increased by the victuals provided on board,
that petitioners started claiming that the foods available on the vessels also consisted of fresh
fruits and vegetables, not to mention fish and poultry. It is also worth mentioning that while Dr.
Salvador declared that Villamaters cancer "appears to be not work-related," she nevertheless
suggested to petitioners Disability Grade 1, which, under the POEA Standard Contract, "shall be
considered or shall constitute total and permanent disability."41 During his confinement in
Hamburg, Germany, Villamater was diagnosed to have colon cancer and was advised to
undergo chemotherapy and medical treatment, including blood transfusions. These findings
were, in fact, confirmed by the findings of the company-designated physicians. The statement of
Dr. Salvador that Villamaters colon cancer "appears to be not work-related" remained at that,
without any medical explanation to support the same. However, this statement, not definitive as
it is, was negated by the same doctors suggestion of Disability Grade 1. Under Section 20-B of
the Philippine Overseas Employment Administration-Standard Employment Contract (POEASEC), it is the company-designated physician who must certify that the seafarer has suffered a
permanent disability, whether total or partial, due to either injury or illness, during the term of his
employment.42
On these points, we sustain the Labor Arbiter and the NLRC in granting total and permanent
disability benefits in favor of Villamater, as it was sufficiently shown that his having contracted
colon cancer was, at the very least, aggravated by his working conditions,43 taking into
consideration his dietary provisions on board, his age, and his job as Chief Engineer, who was
primarily in charge of the technical and mechanical operations of the vessels to ensure voyage
safety. Jurisprudence provides that to establish compensability of a non-occupational disease,
reasonable proof of work-connection and not direct causal relation is required. Probability, not
the ultimate degree of certainty, is the test of proof in compensation proceedings.44
The Labor Arbiter correctly awarded Villamater total and permanent disability benefits,
computed on the basis of the schedule provided under the POEA Standard Contract,
considering that the schedule of payment of benefits under the ITF-JSU/AMOSUP CBA refers
only to permanent disability as a result of an accident or injury.45
By reason of Villamaters entitlement to total and permanent disability benefits, he (or in this
case his widow Sonia) is also entitled to the award of attorneys fees, not under Article 2208(2)
of the Civil Code, "[w]hen the defendants act or omission has compelled the plaintiff to litigate
with third persons or to incur expenses to protect his interest," but under Article 2208(8) of the
same Code, involving actions for indemnity under workmens compensation and employers
liability laws.
WHEREFORE, the petition is DENIED and the assailed May 3, 2007 Decision and the July 23,
2007 Resolution of the Court of Appeals are AFFIRMED. Costs against petitioners.

SO ORDERED.

G.R. No. 189476

February 2, 2011

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
JULIAN EDWARD EMERSON COSETENG-MAGPAYO (A.K.A. JULIAN EDWARD
EMERSON MARQUEZ-LIM COSETENG), Respondent.
DECISION
CARPIO MORALES, J.:
Born in Makati on September 9, 1972, Julian Edward Emerson Coseteng
Magpayo (respondent) is the son of Fulvio M. Magpayo Jr. and Anna Dominique Marquez-Lim
Coseteng who, as respondents certificate of live birth1shows, contracted marriage on March 26,
1972.
Claiming, however, that his parents were never legally married, respondent filed on July 22,
2008 at the Regional Trial Court (RTC) of Quezon City a Petition to change his name to Julian
Edward Emerson Marquez Lim Coseteng. The petition, docketed as SPP No. Q-0863058, was
entitled "IN RE PETITION FOR CHANGE OF NAME OF JULIAN EDWARD EMERSON
COSETENG MAGPAYO TO JULIAN EDWARD EMERSON MARQUEZ-LIM COSETENG."
In support of his petition, respondent submitted a certification from the National Statistics Office
stating that his mother Anna Dominique "does not appear in [its] National Indices of
Marriage."2 Respondent also submitted his academic records from elementary up to
college3 showing that he carried the surname "Coseteng," and the birth certificate of his child
where "Coseteng" appears as his surname.4 In the 1998, 2001 and 2004 Elections, respondent
ran and was elected as Councilor of Quezon Citys 3rd District using the name "JULIAN M.L.
COSETENG."5
On order of Branch 77 of the Quezon City RTC,6 respondent amended his petition by alleging
therein compliance with the 3-year residency requirement under Section 2, Rule 103] of the
Rules of Court.7
The notice setting the petition for hearing on November 20, 2008 was published in the
newspaper Broadside in its issues of October 31-November 6, 2008, November 7-13, 2008, and
November 14-20, 2008.8 And a copy of the notice was furnished the Office of the Solicitor
General (OSG).
No opposition to the petition having been filed, an order of general default was entered by the
trial court which then allowed respondent to present evidence ex parte.9

By Decision of January 8, 2009,10 the trial court granted respondents petition and directed the
Civil Registrar ofMakati City to:
1. Delete the entry "March 26, 1972" in Item 24 for "DATE AND PLACE OF MARRIAGE OF
PARTIES" [in herein respondents Certificate of live Birth];
2. Correct the entry "MAGPAYO" in the space for the Last Name of the [respondent] to
"COSETENG";
3. Delete the entry "COSETENG" in the space for Middle Name of the [respondent]; and
4. Delete the entry "Fulvio Miranda Magpayo, Jr." in the space for FATHER of the
[respondent] (emphasis and underscoring supplied; capitalization in the original)

The Republic of the Philippines (Republic) filed a motion for reconsideration but it was denied by
the trial court by Order of July 2, 2009,11 hence, it, thru the OSG, lodged the present petition for
review to the Court on pure question of law.
The Republic assails the decision in this wise:
I. . . . THE PETITION FOR CHANGE OF NAMEINVOLVES THE CHANGE OF
[RESPONDENTS] CIVIL STATUS FROM LEGITIMATE TO ILLEGITIMATE AND,
THEREFORE, SHOULD BE MADE THROUGH APPROPRIATE ADVERSARIAL
PROCEEDINGS
II. THE TRIAL COURT EXCEEDED ITS JURISDICTION WHEN IT DIRECTED THE
DELETION OF THE NAME OF RESPONDENTS FATHER FROM HIS BIRTH
CERTIFICATE.12 (emphasis and underscoring supplied)

The Republic contends that the deletion of the entry on the date and place of marriage of
respondents parents from his birth certificate has the effect of changing his civil status from
legitimate to illegitimate, hence, any change in civil status of a person must be effected through
an appropriate adversary proceeding.13
The Republic adds that by ordering the deletion of respondents parents date of marriage and
the name of respondents father from the entries in respondents birth certificate,14 the trial court
exceeded its jurisdiction, such order not being in accord with respondents prayer reading:
WHEREFORE, premises considered, it is most respectfully prayed that the Honorable Court
issue an orderallowing the change of name of petitioner from JULIAN EDWARD EMERSON
COSETENG MAGPAYO to JULIAN EDWARD EMERSON MARQUEZ-LIM COSETENG, and
that the Honorable Court order the Local Civil Registrar and all other relevant government
agencies to reflect the said change of name in their records.
Petitioner prays for other reliefs deemed proper under the premises.15 (underscoring supplied)
Respondent counters that the proceeding before the trial court was adversarial in nature. He
cites the serving of copies of the petition and its annexes upon the Civil Registrar of Makati, the
Civil Registrar General, and the OSG; the posting of copies of the notice of hearing in at least
four public places at least ten days before the hearing; the delegation to the OSG by the City

Prosecutor of Quezon City to appear on behalf of the Republic; the publication of the notice of
hearing in a newspaper of general circulation for three consecutive weeks; and the fact that no
oppositors appeared on the scheduled hearing.16
The petition is impressed with merit.
A person can effect a change of name under Rule 103 (CHANGE OF NAME) using valid and
meritorious grounds including (a) when the name is ridiculous, dishonorable or extremely
difficult to write or pronounce; (b) when the change results as a legal consequence such as
legitimation; (c) when the change will avoid confusion; (d) when one has continuously used and
been known since childhood by a Filipino name, and was unaware of alien parentage; (e) a
sincere desire to adopt a Filipino name to erase signs of former alienage, all in good faith and
without prejudicing anybody; and (f) when the surname causes embarrassment and there is no
showing that the desired change of name was for a fraudulent purpose or that the change of
name would prejudice public interest.17 Respondents reason for changing his name cannot be
considered as one of, or analogous to, recognized grounds, however.
The present petition must be differentiated from Alfon v. Republic of the Philippines. 18 In Alfon,
the Court allowed the therein petitioner, Estrella Alfon, to use the name that she had been
known since childhood in order to avoid confusion. Alfon did not deny her legitimacy, however.
She merely sought to use the surname of her mother which she had been using since
childhood. Ruling in her favor, the Court held that she was lawfully entitled to use her mothers
surname, adding that the avoidance of confusion was justification enough to allow her to do so.
In the present case, however, respondent denies his legitimacy.
The change being sought in respondents petition goes so far as to affect his legal status in
relation to his parents. It seeks to change his legitimacy to that of illegitimacy. Rule 103 then
would not suffice to grant respondents supplication.
Labayo-Rowe v. Republic19 categorically holds that "changes which may affect the civil status
from legitimate to illegitimate . . . are substantial and controversial alterations which can only be
allowed after appropriate adversary proceedings . . ."
Since respondents desired change affects his civil status from legitimate to illegitimate, Rule
108 applies. It reads:
SECTION 1. Who may file petition.Any person interested in any act, event, order or decree
concerning the civil status of persons which has been recorded in the civil register, may file a
verified petition for the cancellation or correction of any entry relating thereto, with the [RTC] of
the province where the corresponding civil registry is located.
xxxx
SEC. 3. Parties.When cancellation or correction of an entry in the civil register is sought,
the civil registrar andall persons who have or claim any interest which would be affected thereby
shall be made parties to the proceeding.
SEC. 4. Notice and publication. Upon the filing of the petition, the court shall, by an order, fix
the time and place for the hearing of the same, and cause reasonable notice thereof to be given
to the persons named in the petition. The court shall also cause the order to be published once

a week for three (3) consecutive weeks in a newspaper of general circulation in the province.
(emphasis, italics and underscoring supplied)
Rule 108 clearly directs that a petition which concerns ones civil status should be filed in the
civil registry in which the entry is sought to be cancelled or corrected that of Makati in the
present case, and "all persons who have or claim any interest which would be affected thereby"
should be made parties to the proceeding.
As earlier stated, however, the petition of respondent was filed not in Makati where his birth
certificate was registered but in Quezon City. And as the above-mentioned title of the petition
filed by respondent before the RTC shows, neither the civil registrar of Makati nor his father and
mother were made parties thereto.
Respondent nevertheless cites Republic v. Capote20 in support of his claim that his change of
name was effected through an appropriate adversary proceeding.
Republic v. Belmonte,21 illuminates, however:
The procedure recited in Rule 103] regarding change of name and in Rule 108 concerning the
cancellation or correction of entries in the civil registry are separate and distinct. They may not
be substituted one for the other for the sole purpose of expediency. To hold otherwise would
render nugatory the provisions of the Rules of Court allowing the change of ones name or the
correction of entries in the civil registry only upon meritorious grounds. . . . (emphasis,
capitalization and underscoring supplied)
Even assuming arguendo that respondent had simultaneously availed of these two statutory
remedies, respondent cannot be said to have sufficiently complied with Rule 108. For, as
reflected above, aside fromimproper venue, he failed to implead the civil registrar
of Makati and all affected parties as respondents in the case.
Republic v. Labrador22 mandates that "a petition for a substantial correction or change of entries
in the civil registry should have as respondents the civil registrar, as well as all other persons
who have or claim to have any interest that would be affected thereby." It cannot be gainsaid
that change of status of a child in relation to his parents is a substantial correction or change of
entry in the civil registry.
Labayo-Rowe23 highlights the necessity of impleading indispensable parties in a petition which
involves substantial and controversial alterations. In that case, the therein petitioner Emperatriz
Labayo-Rowe (Emperatriz) filed a petition for the correction of entries in the birth certificates of
her children, Vicente Miclat, Jr. and Victoria Miclat, in the Civil Registry of San Fernando,
Pampanga. Emperatriz alleged that her name appearing in the birth certificates is Beatriz, which
is her nickname, but her full name is Emperatriz; and her civil status appearing in the birth
certificate of her daughter Victoria as "married" on "1953 Bulan" are erroneous because she
was not married to Vicente Miclat who was the one who furnished the data in said birth
certificate.
The trial court found merit in Emperatrizs petition and accordingly directed the local civil
registrar to change her name appearing in her childrens birth certificates from Beatriz to
Emperatriz; and to correct her civil status in Victorias birth certificate from "married" to "single"
and the date and place of marriage to "no marriage."

On petition before this Court after the Court of Appeals found that the order of the trial court
involved a question of law, the Court nullified the trial courts order directing the change of
Emperatriz civil status and the filiation of her child Victoria in light of the following observations:
x x x x Aside from the Office of the Solicitor General, all other indispensable parties should have
been maderespondents. They include not only the declared father of the child but the child as
well, together with the paternal grandparents, if any, as their hereditary rights would be
adversely affected thereby. All other persons who may be affected by the change should be
notified or represented. The truth is best ascertained under an adversary system of justice.
The right of the child Victoria to inherit from her parents would be substantially impaired if her
status would be changed from "legitimate" to "illegitimate." Moreover, she would be exposed to
humiliation and embarrassment resulting from the stigma of an illegitimate filiation that she will
bear thereafter. The fact that the notice of hearing of the petition was published in a newspaper
of general circulation and notice thereof was served upon the State will not change the nature of
the proceedings taken. Rule 108, like all the other provisions of the Rules of Court, was
promulgated by the Supreme Court pursuant to its rule-making authority under Section 13,
Article VIII of the 1973 Constitution, which directs that such rules "shall not diminish, increase or
modify substantive rights." If Rule 108 were to be extended beyond innocuous or harmless
changes or corrections of errors which are visible to the eye or obvious to the understanding, so
as to comprehend substantial and controversial alterations concerning citizenship, legitimacy of
paternity or filiation, or legitimacy of marriage, without observing the proper proceedings as
earlier mentioned, said rule would thereby become an unconstitutional exercise which would
tend to increase or modify substantive rights. This situation is not contemplated under Article
412 of the Civil Code.24 (emphasis, italics and underscoring supplied)
As for the requirement of notice and publication, Rule 108 provides:
SEC. 4. Notice and publication.Upon the filing of the petition, the court shall, by an order, fix
the time and place for the hearing of the same, and cause reasonable notice thereof to be given
to the persons named in the petition. The court shall also cause the order to be published once
a week for three (3) consecutive weeks in a newspaper of general circulation in the province.
SEC. 5. Opposition.The civil registrar and any person having or claiming any interest under
the entry whose cancellation or correction is sought may, within fifteen (15) days from notice of
the petition, or from the last date of publication of such notice, file his opposition thereto.
(emphasis and underscoring supplied)
A reading of these related provisions readily shows that Rule 108 clearly mandates two sets of
notices to different "potential oppositors." The first notice is that given to the "persons named in
the petition" and the second (which is through publication) is that given to other persons who
are not named in the petition but nonetheless may be considered interested or affected parties,
such as creditors. That two sets of notices are mandated under the above-quoted Section 4 is
validated by the subsequent Section 5, also above-quoted, which provides for two periods (for
the two types of "potential oppositors") within which to file an opposition (15 days from notice or
from the last date of publication).
This is the overriding principle laid down in Barco v. Court of Appeals.25 In that case, Nadina
Maravilla (Nadina) filed a petition for correction of entries in the birth certificate of her daughter
June from June Salvacion Maravilla to June Salvacion "Gustilo," Armando Gustilo being,

according to Nadina, her daughters real father. Gustilo in fact filed before the trial court a
"CONSTANCIA" wherein he acknowledged June as his daughter. The trial court granted the
petition.
After Gustilo died, his son Jose Vicente Gustilo filed with the Court of Appeals a petition for
annulment of the Order of the trial court granting the change of Junes family name to Gustilo.
Milagros Barco (Barco), natural guardian of her minor daughter Mary Joy Ann Gustilo, filed
before the appellate court a motion for intervention, alleging that Mary Joy had a legal interest in
the annulment of the trial courts Order as Mary Joy was, by Barcos claim, also fathered by
Gustilo.
The appellate court dismissed the petition for annulment and complaint-in-intervention.
On appeal by Barco, this Court ruled that she should have been impleaded in Nadinas petition
for correction of entries of the birth certificate of Mary Joy. But since a petitioner, like Nadina, is
not expected to exhaustively identify all the affected parties, the subsequent publication of the
notice cured the omission of Barco as a party to the case. Thus the Court explained:
Undoubtedly, Barco is among the parties referred to in Section 3 of Rule 108. Her interest was
affected by the petition for correction, as any judicial determination that June was the daughter
of Armando would affect her wards share in the estate of her father. It cannot be established
whether Nadina knew of Mary Joys existence at the time she filed the petition for correction.
Indeed, doubt may always be cast as to whether a petitioner under Rule 108 would know of all
the parties whose interests may be affected by the granting of a petition. For example, a
petitioner cannot be presumed to be aware of all the legitimate or illegitimate offsprings of
his/her spouse or paramour. x x x x.
1awphi1

xxxx
The purpose precisely of Section 4, Rule 108 is to bind the whole world to the subsequent
judgment on the petition. The sweep of the decision would cover even parties who should have
been impleaded under Section 3, Rule 108 but were inadvertently left out. x x x x.26 (emphasis,
italics and underscoring supplied)
Meanwhile, in Republic v. Kho,27 Carlito Kho (Carlito) and his siblings named the civil registrar
as the sole respondent in the petition they filed for the correction of entries in their respective
birth certificates in the civil registry of Butuan City, and correction of entries in the birth
certificates of Carlitos minor children. Carlito and his siblings requested the correction in their
birth certificates of the citizenship of their mother Epifania to "Filipino," instead of "Chinese," and
the deletion of the word "married" opposite the phrase "Date of marriage of parents" because
their parents Juan and Epifania were not married. And Carlito requested the correction in
the birth certificates of their children of his and his wifes date of marriage to reflect the actual
date of their marriage as appearing in their marriage certificate. In the course of the hearing of
the petition, Carlito also sought the correction of the name of his wife from Maribel to "Marivel."
The Khos mother Epifania took the witness stand where she declared that she was not married
to Juan who died before the filing of the Khos petition.
The trial court granted the petition.

On the issue of whether the failure to implead Marivel and the Khos parents rendered the trial
of the petition short of the required adversary proceedings and the trial courts judgment void,
this Court held that when all the procedural requirements under Rule 108 are followed, the
publication of the notice of hearing cures the failure to implead an indispensable party. In so
ruling, the Court noted that the affected parties were already notified of the proceedings in the
case since the petitioner-siblings Khos were the ones who initiated the petition respecting their
prayer for correction of their citizenship, and Carlito respecting the actual date of his marriage to
his wife; and, with respect to the Khos petition for change of their civil status from legitimate to
illegitimate, their mother Epifania herself took the witness stand declaring that she was not
married to their father.
What is clear then in Barco and Kho is the mandatory directive under Section 3 of Rule 108 to
implead the civil registrar and the parties who would naturally and legally be affected by the
grant of a petition for correction or cancellation of entries. Non-impleading, however, as partyrespondent of one who is inadvertently left out or is not established to be known by the
petitioner to be affected by the grant of the petition or actually participates in the proceeding is
notified through publication.
IN FINE, when a petition for cancellation or correction of an entry in the civil register involves
substantial and controversial alterations including those on citizenship, legitimacy of paternity or
filiation, or legitimacy of marriage, a strict compliance with the requirements of Rule 108 of the
Rules of Court is mandated.
WHEREFORE, the petition is, in light of the foregoing discussions, GRANTED. The January 8,
2009 Decision of Branch 77 of the Regional Trial Court of Quezon City in SP Proc. No. Q0863058 is NULLIFIED.
SO ORDERED.

[G.R. No. 138497. January 16, 2002]

IMELDA
RELUCIO, petitioner,
LOPEZ, respondent.
DECISION
PARDO, J.:

The Case

vs. ANGELINA

MEJIA

The case is a petition for review on certiorari seeking to set aside the
decision of the Court of Appeals that denied a petition for certiorari assailing
the trial courts order denying petitioners motion to dismiss the case against
her inclusion as party defendant therein.
[1]

[2]

The Facts
The facts, as found by the Court of Appeals, are as follows:
On September 15, 1993, herein private respondent Angelina Mejia Lopez (plaintiff
below) filed a petition for APPOINTMENT AS SOLE ADMINISTRATRIX OF
CONJUGAL PARTNERSHIP OF PROPERTIES, FORFEITURE, ETC., against
defendant Alberto Lopez and petitioner Imelda Relucio, docketed as Spec. Proc. M3630, in the Regional Trial Court of Makati, Branch 141. In the petition, privaterespondent alleged that sometime in 1968, defendant Lopez, who is legally married to
the private respondent, abandoned the latter and their four legitimate children; that he
arrogated unto himself full and exclusive control and administration of the conjugal
properties, spending and using the same for his sole gain and benefit to the total
exclusion of the private respondent and their four children; that defendant Lopez, after
abandoning his family, maintained an illicit relationship and cohabited with herein
petitioner since 1976.
It was further alleged that defendant Lopez and petitioner Relucio, during their
period of cohabitation since 1976, have amassed a fortune consisting mainly of
stockholdings in Lopez-owned or controlled corporations, residential, agricultural,
commercial lots, houses, apartments and buildings, cars and other motor vehicles,
bank accounts and jewelry. These properties, which are in the names of defendant
Lopez and petitioner Relucio singly or jointly or their dummies and proxies, have
been acquired principally if not solely through the actual contribution of money,
property and industry of defendant Lopez with minimal, if not nil, actual contribution
from petitioner Relucio.
In order to avoid defendant Lopez obligations as a father and husband, he excluded
the private respondent and their four children from sharing or benefiting from the
conjugal properties and the income or fruits there from. As such, defendant Lopez
either did not place them in his name or otherwise removed, transferred, stashed away
or concealed them from the private-respondent. He placed substantial portions of
these conjugal properties in the name of petitioner Relucio.

It was also averred that in the past twenty five years since defendant Lopez
abandoned the private-respondent, he has sold, disposed of, alienated, transferred,
assigned, canceled, removed or stashed away properties, assets and income belonging
to the conjugal partnership with the private-respondent and either spent the proceeds
thereof for his sole benefit and that of petitioner Relucio and their two illegitimate
children or permanently and fraudulently placed them beyond the reach of the privaterespondent and their four children.
On December 8, 1993, a Motion to Dismiss the Petition was filed by herein
petitioner on the ground that private respondent has no cause of action against her.
An Order dated February 10, 1994 was issued by herein respondent Judge denying
petitioner Relucios Motion to Dismiss on the ground that she is impleaded as a
necessary or indispensable party because some of the subject properties are registered
in her name and defendant Lopez, or solely in her name.
Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the
Order of the respondent Judge dated February 10, 1994 but the same was likewise
denied in the Order dated May 31, 1994.
[3]

On June 21, 1994, petitioner filed with the Court of Appeals a petition for
certiorari assailing the trial courts denial of her motion to dismiss.
[4]

On May 31, 1996, the Court of Appeals promulgated a decision denying

the petition. On June 26, 1996, petitioner filed a motion for
reconsideration. However, on April 6, 1999, the Court of Appeals denied
petitioners motion for reconsideration.
[5]

[6]

[7]

Hence, this appeal.

[8]

The Issues
1. Whether respondents petition for appointment as sole administratrix of the conjugal
property, accounting, etc. against her husband Alberto J. Lopez established a cause
of action against petitioner.
2. Whether petitioners inclusion as party defendant is essential in the proceedings for
a complete adjudication of the controversy.[9]

The Courts Ruling

We grant the petition. We resolve the issues in seriatim.

First issue: whether a cause of action exists against petitioner in the

proceedings below. A cause of action is an act or omission of one party the
defendant in violation of the legal right of the other. The elements of a cause
of action are:
[10]

(1)

a right in favor of the plaintiff by whatever means and under whatever law it
arises or is created;

(2)

an obligation on the part of the named defendant to respect or not to violate

such right; and

(3)

an act or omission on the part of such defendant in violation of the right of

the plaintiff or constituting a breach of the obligation of the defendant to the plaintiff
for which the latter may maintain an action for recovery of damages.[11]

A cause of action is sufficient if a valid judgment may be rendered thereon

if the alleged facts were admitted or proved.
[12]

In order to sustain a motion to dismiss for lack of cause of action, the

complaint must show that the claim for relief does not exist, rather than that a
claim has been merely defectively stated or is ambiguous, indefinite or
uncertain.
[13]

Hence, to determine the sufficiency of the cause of action alleged in

Special Proceedings M-3630, we assay its allegations.
In Part Two on the Nature of [the] Complaint, respondent Angelina Mejia
Lopez summarized the causes of action alleged in the complaint below.
The complaint is by an aggrieved wife against her husband.
Nowhere in the allegations does it appear that relief is sought against
petitioner. Respondents causes of action were all against her husband.
The first cause of action is for judicial appointment of respondent as
administratrix of the conjugal partnership or absolute community property
arising from her marriage to Alberto J. Lopez. Petitioner is a complete
stranger to this cause of action. Article 128 of the Family Code refers only to
spouses, to wit:
If a spouse without just cause abandons the other or fails to comply with his or her
obligations to the family, the aggrieved spouse may petition the court for receivership,
for judicial separation of property, or for authority to be the sole administrator of the
conjugal partnership property xxx
The administration of the property of the marriage is entirely between
them, to the exclusion of all other persons. Respondent alleges that Alberto J.
Lopez is her husband. Therefore, her first cause of action is against Alberto J.

Lopez. There is no right-duty relation between petitioner and respondent that

can possibly support a cause of action. In fact, none of the three elements of
a cause of action exists.
The second cause of action is for an accounting by respondent
husband. The accounting of conjugal partnership arises from or is an
incident of marriage.
[14]

Petitioner has nothing to do with the marriage between respondent Alberto

J. Lopez. Hence, no cause of action can exist against petitioner on this
ground.
Respondents alternative cause of action is for forfeiture of Alberto J.
Lopez share in the co-owned property acquired during his illicit relationship
and cohabitation with [petitioner] and for the dissolution of the conjugal
partnership of gains between him [Alberto J. Lopez] and the [respondent].
[15]

The third cause of action is essentially for forfeiture of Alberto J. Lopez

share in property co-owned by him and petitioner. It does not involve the
issue of validity of the co-ownership between Alberto J. Lopez and
petitioner. The issue is whether there is basis in law to forfeit Alberto J.
Lopez share, if any there be, in property co-owned by him with petitioner.
Respondents asserted right to forfeit extends to Alberto J. Lopez share
alone. Failure of Alberto J. Lopez to surrender such share, assuming the trial
court finds in respondents favor, results in a breach of an obligation to
respondent and gives rise to a cause of action. Such cause of action,
however, pertains to Alberto J. Lopez, not petitioner.
[16]

The respondent also sought support. Support cannot be compelled from a

stranger.
The action in Special Proceedings M-3630 is, to use respondent Angelina
M. Lopez own words, one by an aggrieved wife against her
husband. References to petitioner in the common and specific allegations of
fact in the complaint are merely incidental, to set forth facts and
circumstances that prove the causes of action alleged against Alberto J.
Lopez.
[17]

Finally, as to the moral damages, respondents claim for moral damages is

against Alberto J. Lopez, not petitioner.
To sustain a cause of action for moral damages, the complaint must have
the character of an action for interference with marital or family relations under
the Civil Code.

A real party in interest is one who stands to be benefited or injured by the

judgment of the suit. In this case, petitioner would not be affected by any
judgment in Special Proceedings M-3630.
[18]

If petitioner is not a real party in interest, she cannot be an indispensable

party. An indispensable party is one without whom there can be no final
determination of an action. Petitioners participation in Special Proceedings
M-3630 is not indispensable. Certainly, the trial court can issue a judgment
ordering Alberto J. Lopez to make an accounting of his conjugal partnership
with respondent, and give support to respondent and their children, and
dissolve Alberto J. Lopez conjugal partnership with respondent, and forfeit
Alberto J. Lopez share in property co-owned by him and petitioner. Such
judgment would be perfectly valid and enforceable against Alberto J. Lopez.
[19]

Nor can petitioner be a necessary party in Special Proceedings M3630. A necessary party as one who is not indispensable but who ought to be
joined as party if complete relief is to be accorded those already parties, or for
a complete determination or settlement of the claim subject of the action. In
the context of her petition in the lower court, respondent would be accorded
complete relief if Alberto J. Lopez were ordered to account for his alleged
conjugal partnership property with respondent, give support to respondent and
her children, turn over his share in the co-ownership with petitioner and
dissolve his conjugal partnership or absolute community property with
respondent.
[20]

The Judgment
WHEREFORE, the Court GRANTS the petition and REVERSES the
decision of the Court of Appeals. The Court DISMISSES Special
Proceedings M-3630 of the Regional Trial Court, Makati, Branch 141 as
against petitioner.
[21]

No costs.
SO ORDERED.

G.R. No. 166662

June 27, 2008

AUTOCORP GROUP and PETER Y. RODRIGUEZ, petitioner,

vs.
INTRA STRATA ASSURANCE CORPORATION and BUREAU OF CUSTOMS, respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari from the Decision1 of the Court of Appeals dated 30
June 2004 in CA-G.R. CV No. 62564 which affirmed with modification the Decision2 of the
Regional Trial Court (RTC) of Makati City, Branch 150 in Civil Case No. 95-1584 dated 16
September 1998.
The factual and procedural antecedents of this case are as follows:
On 19 August 1990, petitioner Autocorp Group, represented by its President, petitioner Peter Y.
Rodriguez, secured an ordinary re-export bond, Instrata Bond No. 5770, from private
respondent Intra Strata Assurance Corporation (ISAC) in favor of public respondent Bureau of
Customs (BOC), in the amount of P327,040.00, to guarantee the re-export of one unit of
Hyundai Excel 4-door 1.5 LS and/or to pay the taxes and duties thereon.
On 21 December 1990, petitioners obtained another ordinary re-export bond, Instrata Bond No.
7154, from ISAC in favor of the BOC, in the amount of P447,671.00, which was eventually
increased to P707,609.00 per Bond Endorsement No. BE-0912/91 dated 10 January 1991, to
guarantee the re-export of one unit of Hyundai Sonata 2.4 GLS and/or to pay the taxes and
duties thereon.
Petitioners executed and signed two Indemnity Agreements with identical stipulations in favor of
ISAC, agreeing to act as surety of the subject bonds. Petitioner Rodriguez signed the Indemnity
Agreements both as President of the Autocorp Group and in his personal capacity. Petitioners
thus agreed to the following provisions:
INDEMNITY: - The undersigned agree at all times to jointly and severally indemnify the
COMPANY and keep it indemnified and hold and save it harmless from and against any and
all damages, losses, costs, stamps, taxes, penalties, charges and expenses of whatsoever
kind and nature including counsel or attorneys fee which the COMPANY shall or may at any
time sustain or incur in consequence of having become surety upon the bond herein above
referred to or any extension, renewal, substitution or alteration thereof, made at the instance
of the undersigned or any of them, or any other bond executed on behalf of the undersigned
or any of them, and to pay; reimburse and make good to the COMPANY, its successors and
assigns, alls sums and amounts of money which it or its representatives shall pay or cause
to be paid, or become liable to pay on accounts of the undersigned or any of them, of
whatsoever kind and nature, including 25% of the amount involved in the litigation or other
matters growing out of or connected therewith, for and as attorneys fees, but in no case less
than P300.00 and which shall be payable whether or not the case be extrajudicially settled, it
being understood that demand made upon anyone of the undersigned herein is admitted as
demand made on all of the signatories hereof. It is hereby further agreed that in case of any
extension or renewal of the bond, we equally bind ourselves to the COMPANY under the
same terms and conditions as therein provided without the necessity of executing another
indemnity agreement for the purpose and that we may be granted under this indemnity
agreement.

MATURITY OF OUR OBLIGATIONS AS CONTRACTED HEREWITH AND ACCRUAL OF

ACTION: - Notwithstanding of (sic) the next preceding paragraph where the obligation
involves a liquidated amount for the payment of which the COMPANY has become legally
liable under the terms of the obligation and its suretyship undertaking, or by the demand of
the obligee or otherwise and the latter has merely allowed the COMPANYs aforesaid liability
irrespective of whether or not payment has actually been made by the COMPANY, the
COMPANY for the protection of its interest may forthwith proceed against the undersigned or
either of them by court action or otherwise to enforce payment, even prior to making
payment to the obligee which may hereafter be done by the COMPANY.
INTEREST IN CASE OF DELAY: - In the event of delay in payment of the said sum or sums
by the undersigned they will pay interest at the rate of 12% per annum or same, which
interest, if not paid, will be liquidated and accumulated to the capital quarterly, and shall earn
the same interest as the capital; all this without prejudice to the COMPANYs right to demand
judicially or extrajudicially the full payment of its claims.
INCONTESTABILITY OF PAYMENT MADE BY THE COMPANY: - Any payment or
disbursement made by the COMPANY on account of the above-mentioned Bond, its
renewals, extensions or substitutions, replacement or novation in the belief either that the
COMPANY was obligated to make such payment or that said payment was necessary in
order to avoid greater losses or obligations for which the COMPANY might be liable by virtue
of the terms of the above-mentioned Bond, its renewal, extensions or substitutions, shall be
final and will not be disputed by the undersigned, who bind themselves to jointly and
severally indemnify the COMPANY of any such payments, as stated in the preceding
clauses:
WAIVER OF VENUE OF ACTION: - We hereby agree that any question which may arise
between the COMPANY and the undersigned by reason of this document and which has to
be submitted for decision to a court of justice shall be brought before the court of competent
jurisdiction in Makati, Rizal, waiving for this purpose any other venue.
WAIVER: - The undersigned hereby waive all the rights[,] privileges and benefits that they
have or may have under Articles 2077, 2078, 2079, 2080 and 2081, of the Civil Code of the
Philippines.
The undersigned, by this instrument, grant a special power of attorney in favor of all or any of
the other undersigned so that any of the undersigned may represent all the others in all
transactions related to this Bond, its renewals, extensions, or any other agreements in
connection with this Counter-Guaranty, without the necessity of the knowledge or consent of
the others who hereby promise to accept as valid each and every act done or executed by
any of the attorneys-in-fact by virtue of the special power of attorney.
OUR LIABILITY HEREUNDER: - It shall not be necessary for the COMPANY to bring suit
against the principal upon his default or to exhaust the property of the principal, but the
liability hereunder of the undersigned indemnitors shall be jointly and severally, a primary
one, the same as that of the principal, and shall be exigible immediately upon the occurrence
of such default.
CANCELLATION OF BOND BY THE COMPANY: - The COMPANY may at any time cancel
the above-mentioned Bond, its renewals, extensions or substitutions, subject to any liability
which might have accrued prior to the date of cancellation refunding the proportionate
amount of the premium unearned on the date of cancellation.

RENEWALS, ALTERATIONS AND SUBSTITUTIONS: - The undersigned hereby empower

and authorize the COMPANY to grant or consent to the granting of any extension,
continuation, increase, modification, change, alteration and/or renewal of the original bond
herein referred to, and to execute or consent to the execution of any substitution for said
Bond with the same or different, conditions and parties, and the undersigned hereby hold
themselves jointly and severally liable to the COMPANY for the original Bond herein abovementioned or for any extension, continuation, increase, modification, change, alteration,
renewal or substitution thereof without the necessary of any new indemnity agreement being
executed until the full amount including principal, interest, premiums, costs, and other
expenses due to the COMPANY thereunder is fully paid up.
SEVERABILITY OF PROVISIONS: - It is hereby agreed that should any provision or
provisions of this agreement be declared by competent public authority to be invalid or
otherwise unenforceable, all remaining provisions herein contained shall remain in full force
and effect.
NOTIFICATION: - The undersigned hereby accept due notice of that the COMPANY has
accepted this guaranty, executed by the undersigned in favor of the COMPANY.3

In sum, ISAC issued the subject bonds to guarantee compliance by petitioners with their
undertaking with the BOC to re-export the imported vehicles within the given period and pay the
taxes and/or duties due thereon. In turn, petitioners agreed, as surety, to indemnify ISAC for the
liability the latter may incur on the said bonds.
Petitioner Autocorp Group failed to re-export the items guaranteed by the bonds and/or liquidate
the entries or cancel the bonds, and pay the taxes and duties pertaining to the said items
despite repeated demands made by the BOC, as well as by ISAC. By reason thereof, the BOC
considered the two bonds, with a total face value ofP1,034,649.00, forfeited.
Failing to secure from petitioners the payment of the face value of the two bonds, despite
several demands sent to each of them as surety under the Indemnity Agreements, ISAC filed
with the RTC on 24 October 1995 an action against petitioners to recover the sum
of P1,034,649.00, plus 25% thereof or P258,662.25 as attorneys fees. ISAC impleaded the
BOC "as a necessary party plaintiff in order that the reward of money or judgment shall be
adjudged unto the said necessary plaintiff."4 The case was docketed as Civil Case No. 95-1584.
Petitioners filed a Motion to Dismiss on 11 December 1995 on the grounds that (1) the
Complaint states no cause of action; and (2) the BOC is an improper party.
The RTC, in an Order5 dated 27 February 1996, denied petitioners Motion to Dismiss.
Petitioners thus filed their Answer to the Complaint, claiming that they sought permission from
the BOC for an extension of time to re-export the items covered by the bonds; that the BOC has
yet to issue an assessment for petitioners alleged default; and that the claim of ISAC for
payment is premature as the subject bonds are not yet due and demandable.
During the pre-trial conference, petitioners admitted the genuineness and due execution of
Instrata Bonds No. 5770 and No. 7154, but specifically denied those of the corresponding
Indemnity Agreements. The parties agreed to limit the issue to "whether or not these bonds are
now due and demandable."

On 16 September 1998, the RTC rendered its Decision ordering petitioners to pay ISAC and/or
the BOC the face value of the subject bonds in the total amount of P1,034,649.00, and to pay
ISAC P258,662.25 as attorneys fees, thus:
WHEREFORE, judgment is hereby rendered in favor of the [herein private respondent ISAC]
and as against the [herein petitioners] who are ordered to pay the [private respondent] Intra
Strata Assurance Corporation and/or the Bureau of Customs the amount of P1,034,649.00
which is the equivalent amount of the subject bonds as well as to pay the plaintiff corporation
the sum of P258,662.25 as and for attorneys fees.6

Petitioners Motion for Reconsideration was denied by the RTC in a Resolution dated 15
January 1999.7
Petitioners appealed to the Court of Appeals. On 30 June 2004, the Court of Appeals rendered
its Decision affirming the RTC Decision, only modifying the amount of the attorneys fees
awarded:
WHEREFORE, the appealed 16 September 1998 Decision is MODIFIED to reduce the
award of attorneys fees to One Hundred Three Thousand Four Hundred Sixty Four Pesos &
Ninety Centavos (P103,464.90). The rest is affirmed in toto. Costs against [herein
petitioners].8

In a Resolution dated 5 January 2005, the Court of Appeals refused to reconsider its Decision.
Petitioners thus filed the instant Petition for Review on Certiorari, assigning the following errors
allegedly committed by the Court of Appeals:
I. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RENDERING
JUDGMENT AGAINST PETITIONERS BASED ON A PREMATURE ACTION AND/OR
RULING IN FAVOR OF RESPONDENTS WHO HAVE NO CAUSE OF ACTION AGAINST
PETITIONERS.
II. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE
DECISION OF BRANCH 150, REGIONAL TRIAL COURT OF MAKATI CITY BASED ON
MISAPPREHENSION OF FACTS, UNSUPPORTED BY EVIDENCE ON RECORD &
CONTRARY TO LAW.
III. THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN NOT GIVING MERIT
TO THE ISSUE RAISED BY PETITIONERS THAT THE BUREAU OF CUSTOMS IS
IMPROPERLY IMPLEADED BY INTRA STRATA.
IV. THE HONORABLE COURT OF APPEALS GRAVELY ERRED [IN] AFFIRMING THE
PORTION OF THE DECISION HOLDING PETITIONER PETER Y. RODRIGUEZ AS
JOINTLY LIABLE WHEN AMENDMENTS WERE INTRODUCED, WITHOUT HIS CONSENT
AND APPROVAL.9

The present Petition is without merit.

Absence of actual forfeiture of the subject bonds

Petitioners contend that their obligation to ISAC is not yet due and demandable. They cannot be
made liable by ISAC in the absence of an actual forfeiture of the subject bonds by the BOC
and/or an explicit pronouncement by the same bureau that ISAC is already liable on the said
bonds. In this case, there is yet no actual forfeiture of the bonds, but merely a recommendation
of forfeiture, for no writ of execution has been issued against such bonds.10Hence, Civil Case
No. 95-1584 was prematurely filed by ISAC. Petitioners further argue that:
Secondly, it bears emphasis that as borne by the records, not only is there no writ of
forfeiture against Surety Bond No. 7154, there is likewise no evidence adduced on record to
prove that respondent Intra Strata has made legal demand against Surety Bond No.
5770 neither is there a showing that respondent BOC initiated a demand or issued notice for
its forfeiture and/or confiscation.11

The Court of Appeals, in its assailed Decision, already directly addressed petitioners arguments
by ruling that an actual forfeiture of the subject bonds is not necessary for petitioners to be
liable thereon to ISAC as surety under the Indemnity Agreements.
According to the relevant provision of the Indemnity Agreements executed between petitioner
and ISAC, which reads:
[W]here the obligation involves a liquidated amount for the payment of which [ISAC] has
become legally liable under the terms of the obligation and its suretyship undertaking or by
the demand of the [BOC] or otherwise and the latter has merely allowed the [ISACs]
aforesaid liability, irrespective of whether or not payment has actually been made by the
[ISAC], the [ISAC] for the protection of its interest may forthwith proceed against [petitioners
Autocorp Group and Rodriguez] or either of them by court action or otherwise to enforce
payment, even prior to making payment to the [BOC] which may hereafter be done by
[ISAC][,]12

petitioners obligation to indemnify ISAC became due and demandable the moment the bonds
issued by ISAC became answerable for petitioners non-compliance with its undertaking with the
BOC. Stated differently, petitioners became liable to indemnify ISAC at the same time the bonds
issued by ISAC were placed at the risk of forfeiture by the BOC for non-compliance by
petitioners with its undertaking.
The subject bonds, Instrata Bonds No. 5770 and No. 7154, became due and demandable upon
the failure of petitioner Autocorp Group to comply with a condition set forth in its undertaking
with the BOC, specifically to re-export the imported vehicles within the period of six months from
their date of entry. Since it issued the subject bonds, ISAC then also became liable to the BOC.
At this point, the Indemnity Agreements already give ISAC the right to proceed against
petitioners via court action or otherwise.
The Indemnity Agreements, therefore, give ISAC the right to recover from petitioners the face
value of the subject bonds plus attorneys fees at the time ISAC becomes liable on the said
bonds to the BOC, regardless of whether the BOC had actually forfeited the bonds, demanded
payment thereof and/or received such payment. It must be pointed out that the Indemnity
Agreements explicitly provide that petitioners shall be liable to indemnify ISAC "whether or not
payment has actually been made by the [ISAC]" and ISAC may proceed against petitioners by
court action or otherwise "even prior to making payment to the [BOC] which may hereafter be
done by [ISAC]."

Even when the BOC already admitted that it not only made a demand upon ISAC for the
payment of the bond but even filed a complaint against ISAC for such
payment,13 such demand and complaint are not necessary to hold petitioners liable to ISAC for
the amount of such bonds. Petitioners attempts to prove that there was no actual forfeiture of
the subject bonds are completely irrelevant to the case at bar.
It is worthy to note that petitioners did not impugn the validity of the stipulation in the Indemnity
Agreements allowing ISAC to proceed against petitioners the moment the subject bonds
become due and demandable, even prior to actual forfeiture or payment thereof. Even if they
did so, the Court would be constrained to uphold the validity of such a stipulation for it is but a
slightly expanded contractual expression of Article 2071 of the Civil Code which provides, inter
alia, that the guarantor may proceed against the principal debtor the moment the debt becomes
due and demandable. Article 2071 of the Civil Code provides:
Art. 2071. The guarantor, even before having paid, may proceed against the principal
debtor:
(1) When he is sued for the payment;
(2) In case of insolvency of the principal debtor;
(3) When the debtor has bound himself to relieve him from the guaranty within a specified
period, and this period has expired;
(4) When the debt has become demandable, by reason of the expiration of the period
for payment;
(5) After the lapse of ten years, when the principal obligation has no fixed period for its
maturity, unless it be of such nature that it cannot be extinguished except within a period
longer than ten years;
(6) If there are reasonable grounds to fear that the principal debtor intends to abscond;
(7) If the principal debtor is in imminent danger of becoming insolvent.
In all these cases, the action of the guarantor is to obtain release from the guaranty, or to
demand a security that shall protect him from any proceedings by the creditor and from the
danger of insolvency of the debtor. (Emphases ours.)

Petitioners also invoke the alleged lack of demand on the part of ISAC on petitioners as regards
Instrata Bond No. 5770 before it instituted Civil Case No. 95-1584. Even if proven true, such a
fact does not carry much weight considering that demand, whether judicial or extrajudicial, is not
required before an obligation becomes due and demandable. A demand is only necessary in
order to put an obligor in a due and demandable obligation in delay,14 which in turn is for the
purpose of making the obligor liable for interests or damages for the period of delay.15 Thus,
unless stipulated otherwise, an extrajudicial demand is not required before a judicial demand,
i.e., filing a civil case for collection, can be resorted to.
Inclusion of the Bureau of Customs as a party to the case

ISAC included the BOC "as a necessary party plaintiff in order that the reward of money or
judgment shall be adjudged unto the said necessary plaintiff."16
Petitioners assail this inclusion of the BOC as a party in Civil Case No. 95-1584 on the ground
that it was not properly represented by the Solicitor General. Petitioners also contend that the
inclusion of the BOC as a party in Civil Case No. 95-1584 "is highly improper and should not be
countenanced as the net result would be tantamount to collusion between Intra Strata and the
Bureau of Customs which would deny and deprive petitioners their personal defenses against
the BOC."17
In its assailed Decision, the Court of Appeals did not find merit in petitioners arguments on the
matter, holding that when the BOC forfeited the subject bonds issued by ISAC, subrogation took
place so that whatever right the BOC had against petitioners were eventually transferred to
ISAC. As ISAC merely steps into the shoes of the BOC, whatever defenses petitioners may
have against the BOC would still be available against ISAC.
The Court likewise cannot sustain petitioners position.
The misjoinder of parties does not warrant the dismissal of the action. Section 11, Rule 3 of the
Rules of Court explicitly states:
SEC. 11. Misjoinder and non-joinder of parties.Neither misjoinder nor non-joinder of
parties is ground for dismissal of an action. Parties may be dropped or added by order of
the court on motion of any party or on its own initiative at any stage of the action and on such
terms as are just. Any claim against a misjoined party may be severed and proceeded with
separately.

Consequently, the purported misjoinder of the BOC as a party cannot result in the dismissal of
Civil Case No. 95-1584. If indeed the BOC was improperly impleaded as a party in Civil Case
No. 95-1584, at most, it may be dropped by order of the court, on motion of any party or on its
own initiative, at any stage of the action and on such terms as are just.
Should the BOC then be dropped as a party to Civil Case No. 95-1584?
ISAC alleged in its Complaint18 that the BOC is being joined as a necessary party in Civil Case
No. 95-1584.
A necessary party is defined in Section 8, Rule 3 of the Rules of Court as follows:
SEC. 8. Necessary party.A necessary party is one who is not indispensable but who ought
to be joined as a party if complete relief is to be accorded as to those already parties, or for a
complete determination or settlement of the claim subject of the action.

The subject matter of Civil Case No. 95-1584 is the liability of Autocorp Group to the BOC,
which ISAC is also bound to pay as the guarantor who issued the bonds therefor. Clearly, there
would be no complete settlement of the subject matter of the case at bar the liability of
Autocorp Group to the BOC should Autocorp Group be merely ordered to pay its obligations
with the BOC to ISAC. BOC is, therefore, a necessary party in the case at bar, and should not
be dropped as a party to the present case.

It can only be conceded that there was an irregularity in the manner the BOC was joined as a
necessary party in Civil Case No. 95-1584. As the BOC, through the Solicitor General, was not
the one who initiated Civil Case No. 95-1584, and neither was its consent obtained for the filing
of the same, it may be considered an unwilling co-plaintiff of ISAC in said action. The proper
way to implead the BOC as a necessary party to Civil Case No. 95-1584 should have been in
accordance with Section 10, Rule 3 of the Rules of Court, viz:
SEC. 10. Unwilling co-plaintiff. If the consent of any party who should be joined as plaintiff
can not be obtained, he may be made a defendant and the reason therefor shall be stated in
the complaint.

Nonetheless, the irregularity in the inclusion of the BOC as a party to Civil Case No. 95-1584
would not in any way affect the disposition thereof. As the Court already found that the BOC is a
necessary party to Civil Case No. 95-1584, it would be a graver injustice to drop it as a party.
Petitioners argument that the inclusion of the BOC as a party to this case would deprive them of
their personal defenses against the BOC is utterly baseless.
First, as ruled by the Court of Appeals, petitioners defenses against the BOC are completely
available against ISAC, since the right of the latter to seek indemnity from petitioner depends on
the right of the BOC to proceed against the bonds.
The Court, however, deems it essential to qualify that ISACs right to seek indemnity from
petitioners does not constitute subrogation under the Civil Code, considering that there has
been no payment yet by ISAC to the BOC. There are indeed cases in the aforementioned
Article 2071 of the Civil Code wherein the guarantor or surety, even before having paid, may
proceed against the principal debtor, but in all these cases, Article 2071 of the Civil Code merely
grants the guarantor or surety an action "to obtain release from the guaranty, or to demand a
security that shall protect him from any proceedings by the creditor and from the danger of
insolvency of the debtor." The benefit of subrogation, an extinctive subjective novation by a
change of creditor, which "transfers to the person subrogated, the credit and all the rights
thereto appertaining, either against the debtor or against third persons,"19 is granted by the
Article 2067 of the Civil Code only to the "guarantor (or surety) who pays."20
ISAC cannot be said to have stepped into the shoes of the BOC, because the BOC still retains
said rights until it is paid. ISACs right to file Civil Case No. 95-1584 is based on the express
provision of the Indemnity Agreements making petitioners liable to ISAC at the very moment
ISACs bonds become due and demandable for the liability of Autocorp Group to the BOC,
without need for actual payment by ISAC to the BOC. But it is still correct to say that all the
defenses available to petitioners against the BOC can likewise be invoked against ISAC
because the latters contractual right to proceed against petitioners only arises when the
Autocorp Group becomes liable to the BOC for non-compliance with its undertakings. Indeed,
the arguments and evidence petitioners can present against the BOC to prove that Autocorp
Groups liability to the BOC is not yet due and demandable would also establish that petitioners
liability to ISAC under the Indemnity Agreements has not yet arisen.
Second, making the BOC a necessary party to Civil Case No. 95-1584 actually allows
petitioners to simultaneously invoke its defenses against both the BOC and ISAC. Instead of
depriving petitioners of their personal defenses against the BOC, Civil Case No. 95-1584

actually gave them the opportunity to kill two birds with one stone: to disprove its liability to the
BOC and, thus, negate its liability to ISAC.
Liability of petitioner Rodriguez
Petitioner Rodriguez posits that he is merely a guarantor, and that his liability arises only when
the person with whom he guarantees the credit, Autocorp Group in this case, fails to pay the
obligation. Petitioner Rodriguez invokes Article 2079 of the Civil Code on Extinguishment of
Guaranty, which states:
Art. 2079. An extension granted to the debtor by the creditor without the consent of the
guarantor extinguishes the guaranty. The mere failure on the part of the creditor to demand
payment after the debt has become due does not of itself constitute any extension of time
referred to herein.

Petitioner Rodriguez argues that there was an amendment as to the effectivity of the bonds, and
this constitutes a modification of the agreement without his consent, thereby exonerating him
from any liability.
We must take note at this point that petitioners have not presented any evidence of this alleged
amendment as to the effectivity of the bonds.21 Be that as it may, even if there was indeed such
an amendment, such would not cause the exoneration of petitioner Rodriguez from liability on
the bonds.
The Court of Appeals, in its assailed Decision, held that the use of the term guarantee in a
contract does not ipso facto mean that the contract is one of guaranty. It thus ruled that both
petitioners assumed liability as a regular party and obligated themselves as original
promissors, i.e., sureties, as shown in the following provisions of the Indemnity Agreement:
INDEMNITY: - The undersigned [Autocorp Group and Rodriguez] agree at all times to
jointly and severally indemnify the COMPANY [ISAC] and keep it indemnified and hold
and save it harmless from and against any and all damages, losses, costs, stamps, taxes,
penalties, charges and expenses of whatsoever kind and nature including counsel or
attorneys fee which the COMPANY [ISAC] shall or may at any time sustain or incur in
consequence of having become surety upon the bond herein above referred to x x x
xxxx
OUR LIABILITY HEREUNDER: - It shall not be necessary for the COMPANY [ISAC] to bring
suit against the principal [Autocorp Group] upon his default or to exhaust the property of the
principal [Autocorp Group],but the liability hereunder of the undersigned indemnitors
[Rodriguez] shall be jointly and severally, a primary one, the same as that of the
principal [Autocorp Group], and shall be exigible immediately upon the occurrence of
such default. (Emphases supplied.)

The Court of Appeals concluded that since petitioner Rodriguez was a surety, Article 2079 of
the Civil Code does not apply. The appellate court further noted that both petitioners authorized
ISAC to consent to the granting of an extension of the subject bonds.

The Court of Appeals committed a slight error on this point. The provisions of the Civil Code on
Guarantee, other than the benefit of excussion, are applicable and available to the surety.22 The
Court finds no reason why the provisions of Article 2079 would not apply to a surety.
This, however, would not cause a reversal of the Decision of the Court of Appeals. The Court of
Appeals was correct that even granting arguendo that there was a modification as to the
effectivity of the bonds, petitioners would still not be absolved from liability since they had
authorized ISAC to consent to the granting of any extension, modification, alteration and/or
renewal of the subject bonds, as expressly set out in the Indemnity Agreements:
RENEWALS, ALTERATIONS AND SUBSTITUTIONS: - The undersigned [Autocorp
Group and Rodriguez] hereby empower and authorize the COMPANY [ISAC] to grant
or consent to the granting of any extension, continuation, increase, modification,
change, alteration and/or renewal of the original bond herein referred to, and to
execute or consent to the execution of any substitution for said Bond with the same or
different, conditions and parties, and the undersigned [Autocorp Group and Rodriguez]
hereby hold themselves jointly and severally liable to the COMPANY [ISAC] for the
original Bond herein above-mentioned or for any extension, continuation, increase,
modification, change, alteration, renewal or substitution thereof without the necessary
of any new indemnity agreement being executed until the full amount including principal,
interest, premiums, costs, and other expenses due to the COMPANY [ISAC] thereunder is
fully paid up.23 (Emphases supplied.)

The foregoing provision in the Indemnity Agreements clearly authorized ISAC to consent to the
granting of any extension, modification, alteration and/or renewal of the subject bonds.
There is nothing illegal in such a provision. In Philippine American General Insurance Co., Inc.
v. Mutuc,24 the Court held that an agreement whereby the sureties bound themselves to be
liable in case of an extension or renewal of the bond, without the necessity of executing another
indemnity agreement for the purpose and without the necessity of being notified of such
extension or renewal, is valid; and that there is nothing in it that militates against the law, good
customs, good morals, public order or public policy.
WHEREFORE, the instant Petition for Review on Certiorari is DENIED. The Decision of the
Court of Appeals dated 30 June 2004 in CA-G.R. CV No. 62564 which affirmed with
modification the Decision of the Regional Trial Court of Makati City, in Civil Case No. 95-1584
dated 16 September 1998 is AFFIRMED in toto. Costs against petitioners.
SO ORDERED.

G.R. No. 147905

May 28, 2007

B. VAN ZUIDEN BROS., LTD., Petitioner,

vs.
GTVL MANUFACTURING INDUSTRIES, INC., Respondent.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review1 of the 18 April 2001 Decision2 of the Court of Appeals in
CA-G.R. CV No. 66236. The Court of Appeals affirmed the Order3 of the Regional Trial Court,
Branch 258, Paraaque City (trial court) dismissing the complaint for sum of money filed by B.
Van Zuiden Bros., Ltd. (petitioner) against GTVL Manufacturing Industries, Inc. (respondent).
The Facts
On 13 July 1999, petitioner filed a complaint for sum of money against respondent, docketed as
Civil Case No. 99-0249. The pertinent portions of the complaint read:
1. Plaintiff, ZUIDEN, is a corporation, incorporated under the laws of Hong Kong. x x x
ZUIDEN is not engaged in business in the Philippines, but is suing before the Philippine
Courts, for the reasons hereinafter stated.
xxxx
3. ZUIDEN is engaged in the importation and exportation of several products, including lace
products.
4. On several occasions, GTVL purchased lace products from [ZUIDEN].
5. The procedure for these purchases, as per the instructions of GTVL, was that ZUIDEN
delivers the products purchased by GTVL, to a certain Hong Kong corporation, known as
Kenzar Ltd. (KENZAR), x x x and the products are then considered as sold, upon receipt by
KENZAR of the goods purchased by GTVL.
KENZAR had the obligation to deliver the products to the Philippines and/or to follow
whatever instructions GTVL had on the matter.
Insofar as ZUIDEN is concerned, upon delivery of the goods to KENZAR in Hong Kong, the
transaction is concluded; and GTVL became obligated to pay the agreed purchase price.
xxxx
7. However, commencing October 31, 1994 up to the present, GTVL has failed and refused
to pay the agreed purchase price for several deliveries ordered by it and delivered by
ZUIDEN, as above-mentioned.
xxxx

9. In spite [sic] of said demands and in spite [sic] of promises to pay and/or admissions of
liability, GTVL has failed and refused, and continues to fail and refuse, to pay the overdue
amount of U.S.$32,088.02 [inclusive of interest].4

Instead of filing an answer, respondent filed a Motion to Dismiss5 on the ground that petitioner
has no legal capacity to sue. Respondent alleged that petitioner is doing business in the
Philippines without securing the required license. Accordingly, petitioner cannot sue before
Philippine courts.
After an exchange of several pleadings6 between the parties, the trial court issued an Order on
10 November 1999 dismissing the complaint.
On appeal, the Court of Appeals sustained the trial courts dismissal of the complaint.
Hence, this petition.
The Court of Appeals Ruling
In affirming the dismissal of the complaint, the Court of Appeals relied on Eriks Pte., Ltd. v.
Court of Appeals.7 In that case, Eriks, an unlicensed foreign corporation, sought to collect
US$41,939.63 from a Filipino businessman for goods which he purchased and received on
several occasions from January to May 1989. The transfers of goods took place in Singapore,
for the Filipinos account, F.O.B. Singapore, with a 90-day credit term. Since the transactions
involved were not isolated, this Court found Eriks to be doing business in the Philippines.
Hence, this Court upheld the dismissal of the complaint on the ground that Eriks has no capacity
to sue.
The Court of Appeals noted that in Eriks, while the deliveries of the goods were perfected in
Singapore, this Court still found Eriks to be engaged in business in the Philippines. Thus, the
Court of Appeals concluded that the place of delivery of the goods (or the place where the
transaction took place) is not material in determining whether a foreign corporation is doing
business in the Philippines. The Court of Appeals held that what is material are the proponents
to the transaction, as well as the parties to be benefited and obligated by the transaction.
In this case, the Court of Appeals found that the parties entered into a contract of sale whereby
petitioner sold lace products to respondent in a series of transactions. While petitioner delivered
the goods in Hong Kong to Kenzar, Ltd. (Kenzar), another Hong Kong company, the party with
whom petitioner transacted was actually respondent, a Philippine corporation, and not Kenzar.
The Court of Appeals believed Kenzar is merely a shipping company. The Court of Appeals
concluded that the delivery of the goods in Hong Kong did not exempt petitioner from being
considered as doing business in the Philippines.
The Issue
The sole issue in this case is whether petitioner, an unlicensed foreign corporation, has legal
capacity to sue before Philippine courts. The resolution of this issue depends on whether
petitioner is doing business in the Philippines.
The Ruling of the Court

The petition is meritorious.

Section 133 of the Corporation Code provides:
Doing business without license. No foreign corporation transacting business in the
Philippines without a license, or its successors or assigns, shall be permitted to maintain or
intervene in any action, suit or proceeding in any court or administrative agency of the
Philippines; but such corporation may be sued or proceeded against before Philippine courts or
administrative tribunals on any valid cause of action recognized under Philippine laws.
The law is clear. An unlicensed foreign corporation doing business in the Philippines cannot sue
before Philippine courts. On the other hand, an unlicensed foreign corporation not doing
business in the Philippines can sue before Philippine courts.
In the present controversy, petitioner is a foreign corporation which claims that it is not doing
business in the Philippines. As such, it needs no license to institute a collection suit against
respondent before Philippine courts.
Respondent argues otherwise. Respondent insists that petitioner is doing business in the
Philippines without the required license. Hence, petitioner has no legal capacity to sue before
Philippine courts.
Under Section 3(d) of Republic Act No. 7042 (RA 7042) or "The Foreign Investments Act of
1991," the phrase "doing business" includes:
x x x soliciting orders, service contracts, opening offices, whether called "liaison" offices or
branches; appointing representatives or distributors domiciled in the Philippines or who in any
calendar year stay in the country for a period or periods totalling one hundred eighty (180) days
or more; participating in the management, supervision or control of any domestic business, firm,
entity or corporation in the Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements, and contemplate to that extent the performance of acts
or works, or the exercise of some of the functions normally incident to, and in progressive
prosecution of, commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing business" shall not be deemed to
include mere investment as a shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such investor; nor having a nominee
director or officer to represent its interests in such corporation; nor appointing a representative
or distributor domiciled in the Philippines which transacts business in its own name and for its
own account.
The series of transactions between petitioner and respondent cannot be classified as "doing
business" in the Philippines under Section 3(d) of RA 7042. An essential condition to be
considered as "doing business" in the Philippines is the actual performance of specific
commercial acts within the territory of the Philippines for the plain reason that the Philippines
has no jurisdiction over commercial acts performed in foreign territories. Here, there is no
showing that petitioner performed within the Philippine territory the specific acts of doing
business mentioned in Section 3(d) of RA 7042. Petitioner did not also open an office here in
the Philippines, appoint a representative or distributor, or manage, supervise or control a local
business. While petitioner and respondent entered into a series of transactions implying a

continuity of commercial dealings, the perfection and consummation of these transactions were
done outside the Philippines.8
In its complaint, petitioner alleged that it is engaged in the importation and exportation of several
products, including lace products. Petitioner asserted that on several occasions, respondent
purchased lace products from it. Petitioner also claimed that respondent instructed it to deliver
the purchased goods to Kenzar, which is a Hong Kong company based in Hong Kong. Upon
Kenzars receipt of the goods, the products were considered sold. Kenzar, in turn, had the
obligation to deliver the lace products to the Philippines. In other words, the sale of lace
products was consummated in Hong Kong.
As earlier stated, the series of transactions between petitioner and respondent transpired and
were consummated in Hong Kong.9 We also find no single activity which petitioner performed
here in the Philippines pursuant to its purpose and object as a business
organization.10 Moreover, petitioners desire to do business within the Philippines is not
discernible from the allegations of the complaint or from its attachments. Therefore, there is no
basis for ruling that petitioner is doing business in the Philippines.
In Eriks, respondent therein alleged the existence of a distributorship agreement between him
and the foreign corporation. If duly established, such distributorship agreement could support
respondents claim that petitioner was indeed doing business in the Philippines. Here, there is
no such or similar agreement between petitioner and respondent.
We disagree with the Court of Appeals ruling that the proponents to the transaction determine
whether a foreign corporation is doing business in the Philippines, regardless of the place of
delivery or place where the transaction took place. To accede to such theory makes it possible
to classify, for instance, a series of transactions between a Filipino in the United States and an
American company based in the United States as "doing business in the Philippines," even
when these transactions are negotiated and consummated only within the United States.
An exporter in one country may export its products to many foreign importing countries without
performing in the importing countries specific commercial acts that would constitute doing
business in the importing countries. The mere act of exporting from ones own country, without
doing any specific commercial act within the territory of the importing country, cannot be
deemed as doing business in the importing country. The importing country does not acquire
jurisdiction over the foreign exporter who has not performed any specific commercial act within
the territory of the importing country. Without jurisdiction over the foreign exporter, the importing
country cannot compel the foreign exporter to secure a license to do business in the importing
country.
Otherwise, Philippine exporters, by the mere act alone of exporting their products, could be
considered by the importing countries to be doing business in those countries. This will require
Philippine exporters to secure a business license in every foreign country where they usually
export their products, even if they do not perform any specific commercial act within the territory
of such importing countries. Such a legal concept will have a deleterious effect not only on
Philippine exports, but also on global trade.
To be doing or "transacting business in the Philippines" for purposes of Section 133 of the
Corporation Code, the foreign corporation must actually transact business in the Philippines,
that is, perform specific business transactions within the Philippine territory on a continuing

basis in its own name and for its own account. Actual transaction of business within the
Philippine territory is an essential requisite for the Philippines to acquire jurisdiction over a
foreign corporation and thus require the foreign corporation to secure a Philippine business
license. If a foreign corporation does not transact such kind of business in the Philippines, even
if it exports its products to the Philippines, the Philippines has no jurisdiction to require such
foreign corporation to secure a Philippine business license.
Considering that petitioner is not doing business in the Philippines, it does not need a license in
order to initiate and maintain a collection suit against respondent for the unpaid balance of
respondents purchases.
WHEREFORE, we GRANT the petition. We REVERSE the Decision dated 18 April 2001 of the
Court of Appeals in CA-G.R. CV No. 66236. No costs.
SO ORDERED.

G.R. No. 152318

April 16, 2009

DEUTSCHE GESELLSCHAFT FR TECHNISCHE ZUSAMMENARBEIT, also known as

GERMAN AGENCY FOR TECHNICAL COOPERATION, (GTZ) HANS PETER PAULENZ and
ANNE NICOLAY, Petitioners,
vs.
HON. COURT OF APPEALS, HON. ARIEL CADIENTE SANTOS, Labor Arbiter of the
Arbitration Branch, National Labor Relations Commission, and BERNADETTE
CARMELLA MAGTAAS, CAROLINA DIONCO, CHRISTOPHER RAMOS, MELVIN DELA
PAZ, RANDY TAMAYO and EDGARDO RAMILLO, Respondents.
DECISION
TINGA, J.:
On 7 September 1971, the governments of the Federal Republic of Germany and the Republic
of the Philippines ratified an Agreement concerning Technical Co-operation (Agreement) in
Bonn, capital of what was then West Germany. The Agreement affirmed the countries "common
interest in promoting the technical and economic development of their States, and recogni[zed]
the benefits to be derived by both States from closer technical co-operation," and allowed for
the conclusion of "arrangements concerning individual projects of technical cooperation."1 While the Agreement provided for a limited term of effectivity of five (5) years, it
nonetheless was stated that "[t]he Agreement shall be tacitly extended for successive periods of
one year unless either of the two Contracting Parties denounces it in writing three months prior
to its expiry," and that even upon the Agreements expiry, its provisions would "continue to apply
to any projects agreed upon x x x until their completion."2

On 10 December 1999, the Philippine government, through then Foreign Affairs Secretary
Domingo Siazon, and the German government, agreed to an Arrangement in furtherance of the
1971 Agreement. This Arrangement affirmed the common commitment of both governments to
promote jointly a project called, Social Health InsuranceNetworking and Empowerment
(SHINE), which was designed to "enable Philippine familiesespecially poor onesto maintain
their health and secure health care of sustainable quality."3 It appears that SHINE had already
been in existence even prior to the effectivity of the Arrangement, though the record does not
indicate when exactly SHINE was constituted. Nonetheless, the Arrangement stated the various
obligations of the Filipino and German governments. The relevant provisions of the
Arrangement are reproduced as follows:
3. The Government of the Federal Republic of Germany shall make the following contributions
to the project.
It shall
(a) second
- one expert in health economy, insurance and health systems for up to 48
expert/months,
- one expert in system development for up to 10 expert/months
- short-term experts to deal with special tasks for a total of up to 18 expert/months,
- project assistants/guest students as required, who shall work on the project as part
of their basic and further training and assume specific project tasks under the
separately financed junior staff promotion programme of the Deutsche Gesellschaft
fr Technische Zusammenarbeit (GTZ);
(b) provide in situ
- short-term experts to deal with diverse special tasks for a total of up to 27
expert/months,
- five local experts in health economy, health insurance, community health systems,
information technology, information systems, training and community mobilization for
a total of up to 240 expert/months,
- local and auxiliary personnel for a total of up to 120 months;
(c) supply inputs, in particular
- two cross-country vehicles,
- ten computers with accessories,
- office furnishings and equipment
up to a total value of DM 310,000 (three hundred and ten thousand Deutsche Mark);

(c) meet
- the cost of accommodation for the seconded experts and their families in so far as
this cost is not met by the seconded experts themselves,
- the cost of official travel by the experts referred to in sub-paragraph (a) above within
and outside the Republic of the Philippines,
- the cost of seminars and courses,
- the cost of transport and insurance to the project site of inputs to be supplied
pursuant to sub-paragraph (c) above, excluding the charges and storage fees
referred to in paragraph 4(d) below,
- a proportion of the operating and administrative costs;
xxx

4. The Government of the Republic of the Philippines shall make the following contributions to
the project:
It shall
(a) provide the necessary Philippine experts for the project, in particular one project
coordinator in the Philippine Health Insurance Corporation (Philhealth), at least three further
experts and a sufficient number of administrative and auxiliary personnel, as well as health
personnel in the pilot provinces and in the other project partners, in particular one
responsible expert for each pilot province and for each association representing the various
target groups,
- release suitably qualified experts from their duties for attendance at the envisaged
basic and further training activities; it shall only nominate such candidates as have
given an undertaking to work on the project for at least five years after completing
their training and shall ensure that these Philippine experts receive appropriate
remuneration,
- ensure that the project field offices have sufficient expendables,
- make available the land and buildings required for the project;
(b) assume an increasing proportion of the running and operating costs of the project;
(c) afford the seconded experts any assistance they may require in carrying out the tasks
assigned to them and place at their disposal all necessary records and documents;
(d) guarantee that
- the project is provided with an itemized budget of its own in order to ensure smooth
continuation of the project.

- the necessary legal and administrative framework is created for the project,
- the project is coordinated in close cooperation with other national and international
agencies relevant to implementation,
- the inputs supplied for the project on behalf of the Government of the Federal
Republic of Germany are exempted from the cost of licenses, harbour dues, import
and export duties and other public charges and fees, as well as storage fees, or that
any costs thereof are met, and that they are cleared by customs without delay. The
aforementioned exemptions shall, at the request of the implementing agencies also
apply to inputs procured in the Republic of the Philippines,
- the tasks of the seconded experts are taken over as soon as possible by Philippine
experts,
- examinations passed by Philippine nationals pursuant to this Arrangement are
recognized in accordance with their respective standards and that the persons
concerned are afforded such opportunities with regard to careers, appointments and
advancement as are commensurate with their training.4

In the arraignment, both governments likewise named their respective implementing

organizations for SHINE. The Philippines designated the Department of Health (DOH) and the
Philippine Health Insurance Corporation (Philhealth) with the implementation of SHINE. For their
part, the German government "charge[d] the Deustche Gesellschaft fr Technische
Zusammenarbeit[5 ] (GTZ[6 ]) GmbH, Eschborn, with the implementation of its contributions."7
Private respondents were engaged as contract employees hired by GTZ to work for SHINE on
various dates between December of 1998 to September of 1999. Bernadette Carmela Magtaas
was hired as an "information systems manager and project officer of SHINE;"8 Carolina Dionco
as a "Project Assistant of SHINE;"9 Christopher Ramos as "a project assistant and liason
personnel of NHI related SHINE activities by GTZ;"10 Melvin Dela Paz and Randy Tamayo as
programmers;11 and Edgardo Ramilo as "driver, messenger and multipurpose service
man."12 The employment contracts of all six private respondents all specified Dr. Rainer
Tollkotter, identified as an adviser of GTZ, as the "employer." At the same time, all the contracts
commonly provided that "[i]t is mutually agreed and understood that [Dr. Tollkotter, as employer]
is a seconded GTZ expert who is hiring the Employee on behalf of GTZ and for a PhilippineGerman bilateral project named Social Health InsuranceNetworking and Empowerment
(SHINE) which will end at a given time."13
In September of 1999, Anne Nicolay (Nicolay), a Belgian national, assumed the post of SHINE
Project Manager. Disagreements eventually arose between Nicolay and private respondents in
matters such as proposed salary adjustments, and the course Nicolay was taking in the
implementation of SHINE different from her predecessors. The dispute culminated in a
letter14 dated 8 June 2000, signed by the private respondents, addressed to Nicolay, and copies
furnished officials of the DOH, Philheath, and the director of the Manila office of GTZ. The letter
raised several issues which private respondents claim had been brought up several times in the
past, but have not been given appropriate response. It was claimed that SHINE under Nicolay
had veered away from its original purpose to facilitate the development of social health
insurance by shoring up the national health insurance program and strengthening local
initiatives, as Nicolay had refused to support local partners and new initiatives on the premise
that community and local government unit schemes were not sustainablea philosophy that

supposedly betrayed Nicolays lack of understanding of the purpose of the project. Private
respondents further alleged that as a result of Nicolays "new thrust, resources have been used
inappropriately;" that the new management style was "not congruent with the original goals of
the project;" that Nicolay herself suffered from "cultural insensitivity" that consequently failed to
sustain healthy relations with SHINEs partners and staff.
The letter ended with these ominous words:
The issues that we [the private respondents] have stated here are very crucial to us in working
for the project. We could no longer find any reason to stay with the project unless ALL of these
issues be addressed immediately and appropriately.15
In response, Nicolay wrote each of the private respondents a letter dated 21 June 2000, all
similarly worded except for their respective addressees. She informed private respondents that
the "projects orientations and evolution" were decided in consensus with partner institutions,
Philhealth and the DOH, and thus no longer subject to modifications. More pertinently, she
stated:
You have firmly and unequivocally stated in the last paragraph of your 8th June 2000 letter that
you and the five other staff "could no longer find any reason to stay with the project unless ALL
of these issues be addressed immediately and appropriately." Under the foregoing premises
and circumstances, it is now imperative that I am to accept your resignation, which I expect to
receive as soon as possible.16
Taken aback, private respondents replied with a common letter, clarifying that their earlier letter
was not intended as a resignation letter, but one that merely intended to raise attention to what
they perceived as vital issues.17Negotiations ensued between private respondents and Nicolay,
but for naught. Each of the private respondents received a letter from Nicolay dated 11 July
2000, informing them of the pre-termination of their contracts of employment on the grounds of
"serious and gross insubordination, among others, resulting to loss of confidence and trust."18
On 21 August 2000, the private respondents filed a complaint for illegal dismissal with the
NLRC. Named as respondents therein where GTZ, the Director of its Manila office Hans Peter
Paulenz, its Assistant Project Manager Christian Jahn, and Nicolay.
On 25 October 2005, GTZ, through counsel, filed a Motion to Dismiss, on the ground that the
Labor Arbiter had no jurisdiction over the case, as its acts were undertaken in the discharge of
the governmental functions and sovereign acts of the Government of the Federal Republic of
Germany. This was opposed by private respondents with the arguments that GTZ had failed to
secure a certification that it was immune from suit from the Department of Foreign Affairs, and
that it was GTZ and not the German government which had implemented the SHINE Project
and entered into the contracts of employment.
On 27 November 2000, the Labor Arbiter issued an Order19 denying the Motion to Dismiss. The
Order cited, among others, that GTZ was a private corporation which entered into an
employment contract; and that GTZ had failed to secure from the DFA a certification as to its
diplomatic status.
On 7 February 2001, GTZ filed with the Labor Arbiter a "Reiterating Motion to Dismiss," again
praying that the Motion to Dismiss be granted on the jurisdictional ground, and reprising the

arguments for dismissal it had earlier raised.20 No action was taken by the Labor Arbiter on this
new motion. Instead, on 15 October 2001, the Labor Arbiter rendered a Decision21 granting the
complaint for illegal dismissal. The Decision concluded that respondents were dismissed without
lawful cause, there being "a total lack of due process both substantive and procedural
[sic]."22 GTZ was faulted for failing to observe the notice requirements in the labor law. The
Decision likewise proceeded from the premise that GTZ had treated the letter dated 8 June
2000 as a resignation letter, and devoted some focus in debunking this theory.
The Decision initially offered that it "need not discuss the jurisdictional aspect considering that
the same had already been lengthily discussed in the Order de[n]ying respondents Motion to
Dismiss."23 Nonetheless, it proceeded to discuss the jurisdictional aspect, in this wise:
Under pain of being repetitious, the undersigned Labor Arbiter has jurisdiction to entertain the
complaint on the following grounds:
Firstly, under the employment contract entered into between complainants and respondents,
specifically Section 10 thereof, it provides that "contract partners agree that his contract shall
be subject to the LAWS of the jurisdiction of the locality in which the service is performed."
Secondly, respondent having entered into contract, they can no longer invoke the
sovereignty of the Federal Republic of Germany.
Lastly, it is imperative to be immune from suit, respondents should have secured from the
Department of Foreign Affairs a certification of respondents diplomatic status and
entitlement to diplomatic privileges including immunity from suits. Having failed in this regard,
respondents cannot escape liability from the shelter of sovereign immunity.[sic]24
Notably, GTZ did not file a motion for reconsideration to the Labor Arbiters Decision or
elevate said decision for appeal to the NLRC. Instead, GTZ opted to assail the decision by
way of a special civil action for certiorari filed with the Court of Appeals.25 On 10 December
2001, the Court of Appeals promulgated a Resolution26 dismissing GTZs petition, finding that
"judicial recourse at this stage of the case is uncalled for[,] [t]he appropriate remedy of the
petitioners [being] an appeal to the NLRC x x x."27 A motion for reconsideration to this
Resolution proved fruitless for GTZ.28

Thus, the present petition for review under Rule 45, assailing the decision and resolutions of the
Court of Appeals and of the Labor Arbiter. GTZs arguments center on whether the Court of
Appeals could have entertained its petition for certiorari despite its not having undertaken an
appeal before the NLRC; and whether the complaint for illegal dismissal should have been
dismissed for lack of jurisdiction on account of GTZs insistence that it enjoys immunity from
suit. No special arguments are directed with respect to petitioners Hans Peter Paulenz and
Anne Nicolay, respectively the then Director and the then Project Manager of GTZ in the
Philippines; so we have to presume that the arguments raised in behalf of GTZs alleged
immunity from suit extend to them as well.
The Court required the Office of the Solicitor General (OSG) to file a Comment on the petition.
In its Comment dated 7 November 2005, the OSG took the side of GTZ, with the prayer that the
petition be granted on the ground that GTZ was immune from suit, citing in particular its
assigned functions in implementing the SHINE programa joint undertaking of the Philippine
and German governments which was neither proprietary nor commercial in nature.

The Court of Appeals had premised the dismissal of GTZs petition on its procedural misstep in
bypassing an appeal to NLRC and challenging the Labor Arbiters Decision directly with the
appellate court by way of a Rule 65 petition. In dismissing the petition, the
Court of Appeals relied on our ruling in Air Service Cooperative v. Court of Appeals.29 The
central issue in that case was whether a decision of a Labor Arbiter rendered without jurisdiction
over the subject matter may be annulled in a petition before a Regional Trial Court. That case
may be differentiated from the present case, since the Regional Trial Court does not have
original or appellate jurisdiction to review a decision rendered by a Labor Arbiter. In contrast,
there is no doubt, as affirmed by jurisprudence, that the Court of Appeals has jurisdiction to
review, by way of its original certiorari jurisdiction, decisions ruling on complaints for illegal
dismissal.
Nonetheless, the Court of Appeals is correct in pronouncing the general rule that the proper
recourse from the decision of the Labor Arbiter is to first appeal the same to the NLRC. Air
Services is in fact clearly detrimental to petitioners position in one regard. The Court therein
noted that on account of the failure to correctly appeal the decision of the Labor Arbiter to the
NLRC, such judgment consequently became final and executory.30 GTZ goes as far as to
"request" that the Court re-examine Air Services, a suggestion that is needlessly improvident
under the circumstances. Air Services affirms doctrines grounded in sound procedural rules that
have allowed for the considered and orderly disposition of labor cases.
The OSG points out, citing Heirs of Mayor Nemencio Galvez v. Court of Appeals,31 that even
when appeal is available, the Court has nonetheless allowed a writ of certiorari when the orders
of the lower court were issued either in excess of or without jurisdiction. Indeed, the Court has
ruled before that the failure to employ available intermediate recourses, such as a motion for
reconsideration, is not a fatal infirmity if the ruling assailed is a patent nullity. This approach
suggested by the OSG allows the Court to inquire directly into what is the main issuewhether
GTZ enjoys immunity from suit.
The arguments raised by GTZ and the OSG are rooted in several indisputable facts. The SHINE
project was implemented pursuant to the bilateral agreements between the Philippine and
German governments. GTZ was tasked, under the 1991 agreement, with the implementation of
the contributions of the German government. The activities performed by GTZ pertaining to the
SHINE project are governmental in nature, related as they are to the promotion of health
insurance in the Philippines. The fact that GTZ entered into employment contracts with the
private respondents did not disqualify it from invoking immunity from suit, as held in cases such
as Holy See v. Rosario, Jr.,32 which set forth what remains valid doctrine:
Certainly, the mere entering into a contract by a foreign state with a private party cannot be the
ultimate test. Such an act can only be the start of the inquiry. The logical question is whether the
foreign state is engaged in the activity in the regular course of business. If the foreign state is
not engaged regularly in a business or trade, the particular act or transaction must then be
tested by its nature. If the act is in pursuit of a sovereign activity, or an incident thereof, then it is
an act jure imperii, especially when it is not undertaken for gain or profit.33
Beyond dispute is the tenability of the comment points raised by GTZ and the OSG that GTZ
was not performing proprietary functions notwithstanding its entry into the particular employment
contracts. Yet there is an equally fundamental premise which GTZ and the OSG fail to address,
namely: Is GTZ, by conception, able to enjoy the Federal Republics immunity from suit?

The principle of state immunity from suit, whether a local state or a foreign state, is reflected in
Section 9, Article XVI of the Constitution, which states that "the State may not be sued without
its consent." Who or what consists of "the State"? For one, the doctrine is available to foreign
States insofar as they are sought to be sued in the courts of the local State,34 necessary as it is
to avoid "unduly vexing the peace of nations."
If the instant suit had been brought directly against the Federal Republic of Germany, there
would be no doubt that it is a suit brought against a State, and the only necessary inquiry is
whether said State had consented to be sued. However, the present suit was brought against
GTZ. It is necessary for us to understand what precisely are the parameters of the legal
personality of GTZ.
Counsel for GTZ characterizes GTZ as "the implementing agency of the Government of the
Federal Republic of Germany," a depiction similarly adopted by the OSG. Assuming that
characterization is correct, it does not automatically invest GTZ with the ability to invoke State
immunity from suit. The distinction lies in whether the agency is incorporated or unincorporated.
The following lucid discussion from Justice Isagani Cruz is pertinent:
Where suit is filed not against the government itself or its officials but against one of its entities,
it must be ascertained whether or not the State, as the principal that may ultimately be held
liable, has given its consent to be sued. This ascertainment will depend in the first instance on
whether the government agency impleaded is incorporated or unincorporated.
An incorporated agency has a charter of its own that invests it with a separate juridical
personality, like the Social Security System, the University of the Philippines, and the City of
Manila. By contrast, the unincorporated agency is so called because it has no separate juridical
personality but is merged in the general machinery of the government, like the Department of
Justice, the Bureau of Mines and the Government Printing Office.
If the agency is incorporated, the test of its suability is found in its charter. The simple rule is that
it is suable if its charter says so, and this is true regardless of the functions it is performing.
Municipal corporations, for example, like provinces and cities, are agencies of the State when
they are engaged in governmental functions and therefore should enjoy the sovereign immunity
from suit. Nevertheless, they are subject to suit even in the performance of such functions
because their charter provides that they can sue and be sued.35
State immunity from suit may be waived by general or special law.36 The special law can take
the form of the original charter of the incorporated government agency. Jurisprudence is replete
with examples of incorporated government agencies which were ruled not entitled to invoke
immunity from suit, owing to provisions in their
charters manifesting their consent to be sued. These include the National Irrigation
Administration,37 the former Central Bank,38 and the National Power Corporation.39 In SSS v.
Court of Appeals,40 the Court through Justice Melencio-Herrera explained that by virtue of an
express provision in its charter allowing it to sue and be sued, the Social Security System did
not enjoy immunity from suit:
We come now to the amendability of the SSS to judicial action and legal responsibility for its
acts. To our minds, there should be no question on this score considering that the SSS is a
juridical entity with a personality of its own. It has corporate powers separate and distinct from

the Government. SSS' own organic act specifically provides that it can sue and be sued in
Court. These words "sue and be sued" embrace all civil process incident to a legal action. So
that, even assuming that the SSS, as it claims, enjoys immunity from suit as an entity
performing governmental functions, by virtue of the explicit provision of the aforecited enabling
law, the Government must be deemed to have waived immunity in respect of the SSS, although
it does not thereby concede its liability. That statutory law has given to the private citizen a
remedy for the enforcement and protection of his rights. The SSS thereby has been required to
submit to the jurisdiction of the Courts, subject to its right to interpose any lawful defense.
Whether the SSS performs governmental or proprietary functions thus becomes unnecessary to
belabor. For by that waiver, a private citizen may bring a suit against it for varied objectives,
such as, in this case, to obtain compensation in damages arising from contract, and even for
tort.
A recent case squarely in point anent the principle, involving the National Power Corporation, is
that of Rayo v. Court of First Instance of Bulacan, 110 SCRA 457 (1981), wherein this Court,
speaking through Mr. Justice Vicente Abad Santos, ruled:
"It is not necessary to write an extended dissertation on whether or not the NPC performs a
governmental function with respect to the management and operation of the Angat Dam. It is
sufficient to say that the government has organized a private corporation, put money in it and
has allowed it to sue and be sued in any court under its charter. (R.A. No. 6395, Sec. 3[d]). As a
government, owned and controlled corporation, it has a personality of its own, distinct and
separate from that of the Government. Moreover, the charter provision that the NPC can 'sue
and be sued in any court' is without qualification on the cause of action and accordingly it can
include a tort claim such as the one instituted by the petitioners."41
It is useful to note that on the part of the Philippine government, it had designated two entities,
the Department of Health and the Philippine Health Insurance Corporation (PHIC), as the
implementing agencies in behalf of the Philippines. The PHIC was established under Republic
Act No. 7875, Section 16(g) of which grants the corporation the power "to sue and be sued in
court." Applying the previously cited jurisprudence, PHIC would not enjoy immunity from suit
even in the performance of its functions connected with SHINE, however, governmental in
nature as they may be.
Is GTZ an incorporated agency of the German government? There is some mystery surrounding
that question. Neither GTZ nor the OSG go beyond the claim that petitioner is "the implementing
agency of the Government of the Federal Republic of Germany." On the other hand, private
respondents asserted before the Labor Arbiter that GTZ was "a private corporation engaged in
the implementation of development projects."42 The Labor Arbiter accepted that claim in his
Order denying the Motion to Dismiss,43 though he was silent on that point in his Decision.
Nevertheless, private respondents argue in their Comment that the finding that GTZ was a
private corporation "was never controverted, and is therefore deemed admitted."44 In its Reply,
GTZ controverts that finding, saying that it is a matter of public knowledge that the status of
petitioner GTZ is that of the "implementing agency," and not that of a private corporation. 45
In truth, private respondents were unable to adduce any evidence to substantiate their claim
that GTZ was a "private corporation," and the Labor Arbiter acted rashly in accepting such claim
without explanation. But neither has GTZ supplied any evidence defining its legal nature beyond
that of the bare descriptive "implementing agency." There is no doubt that the 1991 Agreement
designated GTZ as the "implementing agency" in behalf of the German government. Yet the

catch is that such term has no precise definition that is responsive to our concerns. Inherently,
an agent acts in behalf of a principal, and the GTZ can be said to act in behalf of the German
state. But that is as far as "implementing agency" could take us. The term by itself does not
supply whether GTZ is incorporated or unincorporated, whether it is owned by the German state
or by private interests, whether it has juridical personality independent of the German
government or none at all.
GTZ itself provides a more helpful clue, inadvertently, through its own official Internet
website.46 In the "Corporate Profile" section of the English language version of its site, GTZ
describes itself as follows:
As an international cooperation enterprise for sustainable development with worldwide
operations, the federally owned Deutsche Gesellschaft fr Technische Zusammenarbeit (GTZ)
GmbH supports the German Government in achieving its development-policy objectives. It
provides viable, forward-looking solutions for political, economic, ecological and social
development in a globalised world. Working under difficult conditions, GTZ promotes complex
reforms and change processes. Its corporate objective is to improve peoples living conditions
on a sustainable basis.
GTZ is a federal enterprise based in Eschborn near Frankfurt am Main. It was founded in 1975
as a company under private law. The German Federal Ministry for Economic Cooperation and
Development (BMZ) is its major client. The company also operates on behalf of other German
ministries, the governments of other countries and international clients, such as the European
Commission, the United Nations and the World Bank, as well as on behalf of private
enterprises. GTZ works on a public-benefit basis. All surpluses generated are channeled [sic]
back into its own international cooperation projects for sustainable development.47
GTZs own website elicits that petitioner is "federally owned," a "federal enterprise," and
"founded in 1975 as a company under private law." GTZ clearly has a very meaningful
relationship with the Federal Republic of Germany, which apparently owns it. At the same time,
it appears that GTZ was actually organized not through a legislative public charter, but under
private law, in the same way that Philippine corporations can be organized under the
Corporation Code even if fully owned by the Philippine government.
This self-description of GTZ in its own official website gives further cause for pause in adopting
petitioners argument that GTZ is entitled to immunity from suit because it is "an implementing
agency." The above-quoted statement does not dispute the characterization of GTZ as an
"implementing agency of the Federal Republic of Germany," yet it bolsters the notion that as a
company organized under private law, it has a legal personality independent of that of the
Federal Republic of Germany.
The Federal Republic of Germany, in its own official website,48 also makes reference to GTZ
and describes it in this manner:
x x x Going by the principle of "sustainable development," the German Technical Cooperation
(Deutsche Gesellschaft fr Technische Zusammenarbeit GmbH, GTZ) takes on non-profit
projects in international "technical cooperation." The GTZ is a private company owned by the
Federal Republic of Germany.49

Again, we are uncertain of the corresponding legal implications under German law surrounding
"a private company owned by the Federal Republic of Germany." Yet taking the description on
face value, the apparent equivalent under Philippine law is that of a corporation organized under
the Corporation Code but owned by the Philippine government, or a government-owned or
controlled corporation without original charter. And it bears notice that Section 36 of the
Corporate Code states that "[e]very corporation incorporated under this Code has the power
and capacity x x x to sue and be sued in its corporate name."50
It is entirely possible that under German law, an entity such as GTZ or particularly GTZ itself
has not been vested or has been specifically deprived the power and capacity to sue and/or be
sued. Yet in the proceedings below and before this Court, GTZ has failed to establish that under
German law, it has not consented to be sued despite it being owned by the Federal Republic of
Germany. We adhere to the rule that in the absence of evidence to the contrary,
foreign laws on a particular subject are presumed to be the same as those of the
Philippines,51 and following the most intelligent assumption we can gather, GTZ is akin to a
governmental owned or controlled corporation without original charter which, by virtue of the
Corporation Code, has expressly consented to be sued. At the very least, like the Labor Arbiter
and the Court of Appeals, this Court has no basis in fact to conclude or presume that GTZ
enjoys immunity from suit.
This absence of basis in fact leads to another important point, alluded to by the Labor Arbiter in
his rulings. Our ruling in Holy See v. Del Rosario52 provided a template on how a foreign entity
desiring to invoke State immunity from suit could duly prove such immunity before our local
courts. The principles enunciated in that case were derived from public international law. We
stated then:
In Public International Law, when a state or international agency wishes to plead sovereign or
diplomatic immunity in a foreign court, it requests the Foreign Office of the state where it is sued
to convey to the court that said defendant is entitled to immunity.
In the United States, the procedure followed is the process of "suggestion," where the foreign
state or the international organization sued in an American court requests the Secretary of State
to make a determination as to whether it is entitled to immunity. If the Secretary of State finds
that the defendant is immune from suit, he, in turn, asks the Attorney General to submit to the
court a "suggestion" that the defendant is entitled to immunity. In England, a similar procedure is
followed, only the Foreign Office issues a certification to that effect instead of submitting a
"suggestion" (O'Connell, I International Law 130 [1965]; Note: Immunity from Suit of Foreign
Sovereign Instrumentalities and Obligations, 50 Yale Law Journal 1088 [1941]).
In the Philippines, the practice is for the foreign government or the international organization to
first secure an executive endorsement of its claim of sovereign or diplomatic immunity. But how
the Philippine Foreign Office conveys its endorsement to the courts varies. In International
Catholic Migration Commission v. Calleja, 190 SCRA 130 (1990), the Secretary of Foreign
Affairs just sent a letter directly to the Secretary of Labor and Employment, informing the latter
that the respondent-employer could not be sued because it enjoyed diplomatic immunity. In
World Health Organization v. Aquino, 48 SCRA 242 (1972), the Secretary of Foreign Affairs
sent the trial court a telegram to that effect. In Baer v. Tizon, 57 SCRA 1 (1974), the U.S.
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make, in
behalf of the Commander of the United States Naval Base at Olongapo City, Zambales, a

"suggestion" to respondent Judge. The Solicitor General embodied the "suggestion" in a

Manifestation and Memorandum as amicus curiae.53
It is to be recalled that the Labor Arbiter, in both of his rulings, noted that it was imperative for
petitioners to secure from the Department of Foreign Affairs "a certification of respondents
diplomatic status and entitlement to diplomatic privileges including immunity from suits."54 The
requirement might not necessarily be imperative. However, had GTZ obtained such certification
from the DFA, it would have provided factual basis for its claim of immunity that would, at the
very least, establish a disputable evidentiary presumption that the foreign party is indeed
immune which the opposing party will have to overcome with its own factual evidence. We do
not see why GTZ could not have secured such certification or endorsement from the DFA for
purposes of this case. Certainly, it would have been highly prudential for GTZ to obtain the
same after the Labor Arbiter had denied the motion to dismiss. Still, even at this juncture, we do
not see any evidence that the DFA, the office of the executive branch in charge of our
diplomatic relations, has indeed endorsed GTZs claim of immunity. It may be possible that GTZ
tried, but failed to secure such certification, due to the same concerns that we have discussed
herein.
Would the fact that the Solicitor General has endorsed GTZs claim of States immunity from suit
before this Court sufficiently substitute for the DFA certification? Note that the rule in public
international law quoted in Holy See referred to endorsement by the Foreign Office of the State
where the suit is filed, such foreign office in the Philippines being the Department of Foreign
Affairs. Nowhere in the Comment of the OSG is it manifested that the DFA has endorsed GTZs
claim, or that the OSG had solicited the DFAs views on the issue. The arguments raised by the
OSG are virtually the same as the arguments raised by GTZ without any indication of any
special and distinct perspective maintained by the Philippine government on the issue. The
Comment filed by the OSG does not inspire the same degree of confidence as a certification
from the DFA would have elicited.
1avv phi 1

Holy See made reference to Baer v. Tizon,55 and that in the said case, the United States
Embassy asked the Secretary of Foreign Affairs to request the Solicitor General to make a
"suggestion" to the trial court, accomplished by way of a Manifestation and Memorandum, that
the petitioner therein enjoyed immunity as the Commander of the Subic Bay Naval Base. Such
circumstance is actually not narrated in the text of Baer itself and was likely supplied in Holy
See because its author, Justice Camilio Quiason, had appeared as the Solicitor in behalf of the
OSG in Baer. Nonetheless, as narrated in Holy See, it was the Secretary of Foreign Affairs
which directed the OSG to intervene in behalf of the United States government in the Baer case,
and such fact is manifest enough of the endorsement by the Foreign Office. We do not find a
similar circumstance that bears here.
The Court is thus holds and so rules that GTZ consistently has been unable to establish with
satisfaction that it enjoys the immunity from suit generally enjoyed by its parent country, the
Federal Republic of Germany. Consequently, both the Labor Arbiter and the Court of Appeals
acted within proper bounds when they refused to acknowledge that GTZ is so immune by
dismissing the complaint against it. Our finding has additional ramifications on the failure of GTZ
to properly appeal the Labor Arbiters decision to the NLRC. As pointed out by the OSG, the
direct recourse to the Court of Appeals while bypassing the NLRC could have been sanctioned
had the Labor Arbiters decision been a "patent nullity." Since the Labor Arbiter acted properly in
deciding the complaint, notwithstanding GTZs claim of immunity, we cannot see how the
decision could have translated into a "patent nullity."

As a result, there was no basis for petitioners in foregoing the appeal to the NLRC by filing
directly with the Court of Appeals the petition for certiorari. It then follows that the Court of
Appeals acted correctly in dismissing the petition on that ground. As a further consequence,
since petitioners failed to perfect an appeal from the Labor Arbiters Decision, the same has
long become final and executory. All other questions related to this case, such as whether or not
private respondents were illegally dismissed, are no longer susceptible to review, respecting as
we do the finality of the Labor Arbiters Decision.
A final note. This decision should not be seen as deviation from the more common methodology
employed in ascertaining whether a party enjoys State immunity from suit, one which focuses
on the particular functions exercised by the party and determines whether these are proprietary
or sovereign in nature. The nature of the acts performed by the entity invoking immunity remains
the most important barometer for testing whether the privilege of State immunity from suit
should apply. At the same time, our Constitution stipulates that a State immunity from suit is
conditional on its withholding of consent; hence, the laws and circumstances pertaining to the
creation and legal personality of an instrumentality or agency invoking immunity remain
relevant. Consent to be sued, as exhibited in this decision, is often conferred by the very same
statute or general law creating the instrumentality or agency.
WHEREFORE, the petition is DENIED. No pronouncement as to costs.
SO ORDERED.

CHRISTINE CHUA
Petitioner,

- versus -

G.R. No. 151900

Present:
PUNO, J.
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO,
TINGA, and
CHICO-NAZARIO, JJ.

JORGE TORRES and

ANTONIO BELTRAN,
Respondents.
August 30, 2005
x---------------------------------------------------------------------x

DECISION

TINGA, J.:
The Court settles an issue, heretofore undecided, on whether
the absence of the signature in the required verification and
certification against forum-shopping of a party misjoined as a
plaintiff is a valid ground for the dismissal of the complaint. We rule
in the negative.
The relevant facts in this Petition for Review are culled from
the records.

On 24 October 2001, a complaint for damages was lodged

before the Regional Trial Court (RTC) of Caloocan City, Branch
126.[1] The complaint was filed by Christine Chua, herein petitioner,
impleading her brother Jonathan Chua as a necessary co-plaintiff.
Named as defendants in the suit were herein respondents Jorge
Torres and Antonio Beltran. Torres was the owner of the 9th
Avenue Caltex Service Center (Caltex Service Center), while Beltran
was an employee of the said establishment as the head of its Sales
and Collection Division.[2]
The complaint alleged that on 3 April 2000, Jonathan Chua
issued in favor of the Caltex Service Center his personal Rizal
Commercial Banking Corporation (RCBC) Check No. 0412802 in the
amount of Nine Thousand Eight Hundred Forty Nine Pesos and
Twenty Centavos (P9,849.20) in payment for purchases of diesel oil.
However, the check was dishonored by the drawee bank when
presented for payment on the ground that the account was closed.
Beltran then sent petitioner a demand letter informing her of the
dishonor of the check and demanding the payment thereof.

Petitioner ignored the demand letter on the ground that she was not
the one who issued the said check.
Without bothering to ascertain who had actually issued the
check, Beltran instituted against petitioner a criminal action for
violation of Batas Pambansa Bilang 22 (B.P. 22). Subsequently, a
criminal information was filed against petitioner with the
Metropolitan Trial Court (MTC) of Caloocan City, Branch 50.[3] The
MTC then issued a warrant of arrest against petitioner. The police
officers tasked with serving the warrant looked for her in her
residence, in the auto repair shop of her brother, and even at the
Manila Central University were she was enrolled as a medical
student, all to the alleged embarrassment and social humiliation
of petitioner.[4]
Beltrans purported negligence amounted to either malicious
prosecution or serious defamation in prosecuting petitioner
resulting from the issuance of a check she herself did not draw, and
served cause for a claim of moral damages. On the other hand,
Torres, as employer of Beltran, was alleged to have failed to observe
the diligence of a good father of the family to prevent the damage
suffered by petitioner. Exemplary damages and attorneys fees were
likewise
sought,
thus
bringing
the

aggregate total of damages claimed

(P2,000,000.00), plus costs of suit.[5]

to

Two

Million

Pesos

Significantly, while Jonathan Chua was named as a plaintiff to

the suit, it was explicitly qualified in the second paragraph of the
complaint that he was being impleaded here-in as a necessary
party-plaintiff.[6] There was no allegation in the complaint of any
damage or injury sustained by Jonathan, and the prayer therein
expressly named petitioner as the only party to whom respondents
were sought to recompense.[7] Neither did Jonathan Chua sign any
verification or certification against forum-shopping, although
petitioner did sign an attestation, wherein she identified herself as
the principal plaintiff.[8]
Upon motion of respondents, the RTC ordered the dismissal of
the complaint[9] on the ground that Jonathan Chua had not
executed
a
certification
against
forumshopping. The RTC stressed that Section 5, Rule 7 of
the Rules of Civil Procedure, the rule requiring the

certification, makes no distinction whether the plaintiff required to

execute the certification is a principal party, a nominal party or a
necessary party. Instead, the provision requires that a plaintiff or
principal party who files a complaint or initiatory pleading execute
such certification. Jonathan Chua, being a plaintiff in this case,
was obliged to execute or sign such certification.[10] Hence, his
failure to do so in violation of the mandatory rule requiring the
certification against forum-shopping constituted valid cause for the
dismissal of the petition.[11]
After the RTC denied the motion for reconsideration[12] lodged
by petitioner, the matter was elevated directly to this Court by way
of petition for review under Rule 45, raising a purely legal
question,[13] cast, if somewhat unwieldily, as whether or not a coplaintiff impleaded only as a necessary party, who however has no
claim for relief or is not asserting any claim for relief in the
complaint, should also make a certification against forum
shopping.[14]

Preliminarily, it bears noting that Jonathan Chua did not sign

as well any verification to the complaint, ostensibly in violation of
Section 7, Rule 4 of the Rules of Civil Procedure. The RTC failed to
mention such fact, as does petitioner in her present petition. In
their arguments before this Court, respondents do refer in passing
to the verification requirement[15], but do not place any particular
focus thereto. The verification requirement is separate from the
certification requirement.[16] It is noted that as a matter of practice,
the verification is usually accomplished at the same time as the
certification against forum-shopping; hence the customary

nomenclature, Verification and Certification of Non ForumShopping or its variants. For this reason, it is quite possible that
the RTC meant to assail as well the failure of Jonathan Chua to
verify the complaint.
The verification requirement is significant, as it is intended to
secure an assurance that the allegations in the pleading are true
and correct and not the product of the imagination or a matter of
speculation, and that the pleading is filed in good faith.[17] The
absence of a proper verification is cause to treat the pleading as
unsigned and dismissible.[18] It would be as well that the Court
discuss whether under the circumstances, Jonathan Chua is also
required to execute a verification in respect to petitioners
complaint.
Having established the proper parameters of the petition, we
proceed to the core issues. We find the petition has merit, although
we appreciate the situation differently from petitioner. Our decision
proceeds from the fundamental premise that Jonathan Chua was
misjoined as a party plaintiff in this case.
It is elementary that it is only in the name of a real party in
interest that a civil suit may be prosecuted.[19] Under Section 2,
Rule 3 of the Rules of Civil Procedure, a real party in interest is the
party who stands to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. "Interest" within
the meaning of the rule means material interest, an interest in issue
and to be affected by the decree, as distinguished from mere
interest in the question involved, or a mere incidental
interest.[20] One having no right or interest to protect cannot invoke
the jurisdiction of the court as a party plaintiff in an action.[21] To

qualify a person to be a real party in interest in whose name an

action must be prosecuted, he must appear to be the present real
owner of the right sought to enforced.[22]
The subject complaint does not allege any rights of Jonathan
Chua violated by respondents, present any rights of his to be
enforced, or seek in his behalf any rights to the avails of suit. In
short, Jonathan claims nothing, and for nothing, in the subject
complaint. If he alone filed the complaint, it would have been
dismissed on the ground that the complaint states no cause of
action, instituted as it was by a person who was not a real party in
interest.
But was it proper for petitioner to have even impleaded
Jonathan as a co-plaintiff in the first place? Petitioner alleged in her
complaint that Jonathan was a necessary party, and remains
consistent to that claim even before this Court. She however fails to
demonstrate how Jonathan can be considered as a necessary party,
other than by noting that he was the one who really

issued the check in controversy.[23] Such fact, if proven, may

establish the malice of respondents in filing the criminal case
against petitioner for violation of B.P. 22, but does not create the
need to require Jonathans participation as a necessary party.
Section 8, Rule 7 of the Rules of Civil Procedure defines a
necessary party as one who is not indispensable but who ought to
be joined as a party if complete relief is to be accorded as to those
already parties, or for a complete determination or settlement of the
claim subject of the action.[24] Necessary parties are those whose
presence is necessary to adjudicate the whole controversy, but
whose interests are so far separable that a final decree can be made
in their absence without affecting them.[25]
An example of a necessary party may be found in Seno v.
Mangubat.[26] Petitioner therein sold her property through a deed of
sale to three vendees. Two of the vendees then sold their shares to
the third buyer, who then sold the property to another set of
persons. Thereafter, petitioner, who claimed that the true intent of
the first sale was an equitable mortgage, filed a complaint seeking
the reformation of the deed of sale and the annulment of the second
sale. The question arose whether the two vendees who had since
disposed of their shares should be considered as indispensable
parties or necessary parties. In concluding that they were only
necessary parties, the Court reasoned:
In the present case, there are no rights of defendants Andres
Evangelista and Bienvenido Mangubat to be safeguarded if the sale
should be held to be in fact an absolute sale nor if the sale is held to
be an equitable mortgage. Defendant Marcos Mangubat became the
absolute owner of the subject property by virtue of the sale to him of
the shares of the aforementioned defendants in the property. Said
defendants no longer have any interest in the subject property.

However, being parties to the instrument sought to be reformed,

their presence is necessary in order to settle all the possible
issues of the controversy. Whether the disputed sale be declared an
absolute sale or an equitable mortgage, the rights of all the
defendants will have been amply protected. Defendants-spouses
Luzame in any event may enforce their rights against defendant
Marcos Mangubat.[27]

In Seno, the persons deemed by the Court as necessary parties

may have had already disposed of their interests in the property.
However, should the lower court therein grant the prayer for the
reformation of the deed of sale, the ruling will undoubtedly have an
effect on such parties, on matters such as the purchase price which
they may have received, and on whatever transmission of rights
that may have occurred between them and the vendor.
In contrast, Jonathan Chua does not stand to be affected
should the RTC rule either favorably or unfavorably of the
complaint. This is due to the nature of the cause of action of the
complaint, which alleges an injury personal to petitioner, and the
relief prayed for, which is to be adjudicated solely to petitioner.
There is no allegation in the complaint alleging any violation or
omission of any right of Jonathan, either arising from contract or
from law.
It may be so that Jonathan may be called to testify by his
sister, in order to prove the essential allegation that she did not
issue the check in question, and perhaps such testimony would be
vital to petitioners cause of action. But this does not mean that
Jonathan should be deemed a necessary party, as such
circumstance would merely place him in the same class as those
witnesses whose testimony would be necessary to prove the
allegations of the complaint. But the fact remains that Jonathan

would stand unaffected by the final ruling on the complaint. The

judicial confirmation or rejection of the allegations therein, or grant
or denial of the reliefs prayed for will not infringe on or augment
any of his rights under the law. If there would be any effect to
Jonathan of the RTCs ultimate decision on the complaint, it would
be merely emotional, arising from whatever ties of kinship he may
retain towards his sister, and no different from whatever effects that
may be similarly sustained on petitioners immediate family.
Since we are unconvinced by petitioners basic premise that
Jonathan was a necessary party, it is unnecessary to directly settle
the issue as couched by petitioner of whether or not a co-plaintiff
impleaded only as a necessary party, who however has no claim for
relief or is not asserting any claim for relief in the complaint, should
also make a certification against forum shopping.[28] We can note,
as the RTC did, that Section 5, Rule 7 of the 1997 Rules of Civil
Procedure makes no distinctions that would expressly exempt a
necessary party from executing the certification against forum
shopping. Nonetheless, there are dimensions to the matter,
heretofore unraised, that may unsettle a strict application of the
rule, such as if the necessary party is impleaded as a plaintiff or
counterclaimant without his knowledge or against his will.[29] But
these circumstances relevant to a necessary party are not present
in this case, and thus require no further comment upon for now.

Instead, what the Court may rule upon is whether the absence
of the signature of the person misjoined as a party-plaintiff in either
the verification page or certification against forum-shopping is

ground for the dismissal of the action. We rule that it is not so, and
that the RTC erred in dismissing the instant complaint. There is no
judicial precedent affirming or rejecting such a view, but we are
comfortable with making such a pronouncement. A misjoined party
plaintiff has no business participating in the case as a plaintiff in
the first place, and it would make little sense to require the
misjoined party in complying with all the requirements expected of
plaintiffs.
At the same time, Section 11, Rule 3 of the 1997 Rules of Civil
Procedure states:
Neither misjoinder nor non-joinder of parties is ground for
dismissal of an action. Parties may be dropped or added by order of
the court on motion of any party or on its own initiative at any stage
of the action and on such terms as are just. Any claim against a
misjoined party may be severed and proceeded with separately.[30]

Clearly, misjoinder of parties is not fatal to the complaint. The

rule prohibits dismissal of a suit on the ground of non-joinder or
misjoinder of parties.[31] Moreover, the dropping of misjoined parties
from the complaint may be done motu proprio by the court, at any
stage, without need for a motion to such effect from the adverse
party.[32] Section 11, Rule 3 indicates that the misjoinder of parties,
while erroneous, may be corrected with ease through amendment,
without further hindrance to the prosecution of the suit.
It should then follow that any act or omission committed by a
misjoined party plaintiff should not be cause for impediment to the
prosecution of the case, much less for the dismissal of the suit.
After all, such party should not have been included in the first

place, and no efficacy should be accorded to whatever act or

omission of
the party.[33] Since the misjoined party plaintiff receives no
recognition from the court as either an indispensable or necessary
party-plaintiff, it then follows that whatever action or inaction the
misjoined party may take on the verification or certification against
forum-shopping is inconsequential. Hence, it should not have
mattered to the RTC that Jonathan Chua had failed to sign the
certification against forum-shopping, since he was misjoined as a
plaintiff in the first place. The fact that Jonathan was misjoined is
clear on the face of the complaint itself, and the error of the RTC in
dismissing the complaint is not obviated by the fact that the adverse
party failed to raise this point. After all, the RTC could have motu
proprio dropped Jonathan as a plaintiff, for the reasons above-stated
which should have been evident to it upon examination of the
complaint.
There may be a school of thought that would nonetheless find
some satisfaction in petitioners woes before the RTC, as it was her
error in the first place of wrongfully impleading her brother as a
party plaintiff which ultimately served as cause for the dismissal of
the complaint. The blame may in the final analysis lie with
petitioner, yet we should not construe the rules of procedure to
quench an unnecessary thirst to punish at the expense of the
intellectual integrity of the rules. For our Rules of Court do not
regard the misjoinder of parties as an error of fatal consequence,
and the logical extension of this principle is to consider those
procedural acts or omissions of misjoined parties as of similar
import.

WHEREFORE, the Petition is GRANTED. The Orders dated 3

December 2001 and 15 January 2002 of the Regional Trial Court of
Caloocan City, Branch 126, in Civil Case No. C-19863 are SET
ASIDE, and the Complaint in the aforementioned case is
REINSTATED. The lower court is ENJOINED to hear and decide the
case with deliberate dispatch. No pronouncement as to costs.
SO ORDERED.

ANICIA VALDEZ-TALLORIN,

G.R. No. 177429

Petitioner,
Present:

- versus -

Carpio, J., Chairperson,

Leonardo-De Castro,
Brion,
Del Castillo, and
Abad, JJ.

HEIRS OF JUANITO TARONA,

Represented by CARLOS TARONA,

ROGELIO TARONA and

Promulgated:

LOURDES TARONA,
Respondents.

November 24, 2009

x ---------------------------------------------------------------------------------------- x

DECISION
ABAD, J.:

This case is about a courts annulment of a tax declaration in the names of

three persons, two of whom had not been impleaded in the case, for the reason
that the document was illegally issued to them.

The Facts and the Case

On February 9, 1998 respondents Carlos, Rogelio, and Lourdes Tarona (the

Taronas) filed an action before the Regional Trial Court (RTC) of
Balanga, Bataan,[1] against petitioner Anicia Valdez-Tallorin (Tallorin) for the
cancellation of her and two other womens tax declaration over a parcel of
land.

The Taronas alleged in their complaint that, unknown to them, in 1981, the
Assessors Office of Morong in Bataan cancelled Tax Declaration 463 in the name
of their father, Juanito Tarona (Juanito), covering 6,186 square meters of land in
Morong, Bataan. The cancellation was said to be based on an unsigned though
notarized affidavit that Juanito allegedly executed in favor of petitioner Tallorin
and two others, namely, Margarita Pastelero Vda. de Valdez and Dolores Valdez,
who were not impleaded in the action. In place of the cancelled one, the
Assessors Office issued Tax Declaration 6164 in the names of the latter three
persons. The old man Taronas affidavit had been missing and no copy could be
found among the records of the Assessors Office.[2]

The Taronas further alleged that, without their fathers affidavit on file, it
followed that his tax declaration had been illegally cancelled and a new one
illegally issued in favor of Tallorin and the others with her. The unexplained
disappearance of the affidavit from official files, the Taronas concluded, coveredup the falsification or forgery that caused the substitution.[3] The Taronas asked
the RTC to annul Tax Declaration 6164, reinstate Tax Declaration 463, and issue a
new one in the name of Juanitos heirs.

On March 6, 1998 the Taronas filed a motion to declare petitioner Tallorin

in default for failing to answer their complaint within the allowed time.[4] But,
before the RTC could act on the motion, Tallorin filed a belated answer, alleging
among others that she held a copy of the supposedly missing affidavit of Juanito
who was merely an agricultural tenant of the land covered by Tax Declaration
463. He surrendered and waived in that affidavit his occupation and tenancy
rights to Tallorin and the others in consideration of P29,240.00. Tallorin also put
up the affirmative defenses of non-compliance with the requirement of
conciliation proceedings and prescription.

On March 12, 1998 the RTC set Tallorins affirmative defenses for
hearing[5] but the Taronas sought reconsideration, pointing out that the trial court
should have instead declared Tallorin in default based on their earlier
motion.[6] On June 2, 1998 the RTC denied the Taronas motion for
reconsideration[7] for the reasons that it received Tallorins answer before it could
issue a default order and that the Taronas failed to show proof that Tallorin was
notified of the motion three days before the scheduled hearing. Although the
presiding judge inhibited himself from the case on motion of the Taronas, the
new judge to whom the case was re-raffled stood by his predecessors previous
orders.

By a special civil action for certiorari before the Court of Appeals

(CA),[8] however, the Taronas succeeded in getting the latter court to annul the
RTCs March 12 and June 2, 1998 orders.[9] The CA ruled that the RTC gravely
abused its discretion in admitting Tallorins late answer in the absence of a
motion to admit it. Even if petitioner Tallorin had already filed her late answer,
said the CA, the RTC should have heard the Taronas motion to declare Tallorin in
default.

Upon remand of the case, the RTC heard the Taronas motion to declare
Tallorin in default,[10] granted the same, and directed the Taronas to present
evidence ex parte.[11]

On January 30, 2002 the RTC rendered judgment, a) annulling the tax
declaration in the names of Tallorin, Margarita Pastelero Vda. de Valdez, and
Dolores Valdez; b) reinstating the tax declaration in the name of Juanito; and c)

ordering the issuance in its place of a new tax declaration in the names of
Juanitos heirs. The trial court also ruled that Juanitos affidavit authorizing the
transfer of the tax declaration had no binding force since he did not sign it.

Tallorin appealed the above decision to the CA,[12] pointing out 1) that the
land covered by the tax declaration in question was titled in her name and in
those of her two co-owners; 2) that Juanitos affidavit only dealt with the
surrender of his tenancy rights and did not serve as basis for canceling Tax
Declaration 463 in his name; 3) that, although Juanito did not sign the affidavit, he
thumbmarked and acknowledged the same before a notary public; and 4) that the
trial court erred in not dismissing the complaint for failure to implead Margarita
Pastelero Vda. de Valdez and Dolores Valdez who were indispensable parties in
the action to annul Juanitos affidavit and the tax declaration in their favor.[13]

On May 22, 2006 the CA rendered judgment, affirming the trial courts
decision.[14] The CA rejected all of Tallorins arguments. Since she did not assign
as error the order declaring her in default and since she took no part at the trial,
the CA pointed out that her claims were in effect mere conjectures, not based on
evidence of record.[15] Notably, the CA did not address the issue Tallorin raised
regarding the Taronas failure to implead Margarita Pastelero Vda. de Valdez and
Dolores Valdez as indispensable party-defendants, their interest in the cancelled
tax declarations having been affected by the RTC judgment.

Questions Presented

The petition presents the following questions for resolution by this Court:

1.
Whether or not the CA erred in failing to dismiss the
Taronas complaint for not impleading Margarita Pastelero Vda. de
Valdez and Dolores Valdez in whose names, like their co-owner
Tallorin, the annulled tax declaration had been issued;

2.
Whether or not the CA erred in not ruling that the
Taronas complaint was barred by prescription; and

3.
Whether or not the CA erred in affirming the RTCs
finding that Juanitos affidavit had no legal effect because it was
unsigned; when at the hearing of the motion to declare Tallorin in
default, it was shown that the affidavit bore Juanitos thumbmark.

The Courts Rulings

The first question, whether or not the CA erred in failing to dismiss the
Taronas complaint for not impleading Margarita Pastelero Vda. de Valdez and
Dolores Valdez in whose names, like their co-owner Tallorin, the annulled tax
declaration had been issued, is a telling question.

The rules mandate the joinder of indispensable parties. Thus:

Sec. 7. Compulsory joinder of indispensable parties. Parties in interest

without whom no final determination can be had of an action shall be joined either
as plaintiffs and defendants.[16]

Indispensable parties are those with such an interest in the controversy that
a final decree would necessarily affect their rights, so that the courts cannot
proceed without their presence.[17] Joining indispensable parties into an action is
mandatory, being a requirement of due process. Without their presence, the
judgment of the court cannot attain real finality.

Judgments do not bind strangers to the suit. The absence of an

indispensable party renders all subsequent actions of the court null and
void. Indeed, it would have no authority to act, not only as to the absent party,
but as to those present as well. And where does the responsibility for impleading
all indispensable parties lie? It lies in the plaintiff.[18]

Here, the Taronas sought the annulment of the tax declaration in the names
of defendant Tallorin and two others, namely, Margarita Pastelero Vda. de Valdez
and Dolores Valdez and, in its place, the reinstatement of the previous declaration
in their father Juanitos name. Further, the Taronas sought to strike down as void
the affidavit in which Juanito renounced his tenancy right in favor of the same
three persons. It is inevitable that any decision granting what the Taronas wanted
would necessarily affect the rights of such persons to the property covered by the
tax declaration.

The Court cannot discount the importance of tax declarations to the

persons in whose names they are issued. Their cancellation adversely affects the

rights and interests of such persons over the properties that the documents
cover. The reason is simple: a tax declaration is a primary evidence, if not the
source, of the right to claim title of ownership over real property, a right
enforceable against another person. The Court held in Uriarte v. People[19] that,
although not conclusive, a tax declaration is a telling evidence of the declarants
possession which could ripen into ownership.

In Director of Lands v. Court of Appeals,[20] the Court said that no one in his
right mind would pay taxes for a property that he did not have in his
possession. This honest sense of obligation proves that the holder claims title
over the property against the State and other persons, putting them on notice
that he would eventually seek the issuance of a certificate of title in his
name. Further, the tax declaration expresses his intent to contribute needed
revenues to the Government, a circumstance that strengthens his bona fide claim
to ownership.[21]

Here, the RTC and the CA annulled Tax Declaration 6164 that belonged not
only to defendant Tallorin but also to Margarita Pastelero Vda. de Valdez and
Dolores Valdez, which two persons had no opportunity to be heard as they were
never impleaded. The RTC and the CA had no authority to annul that tax
declaration without seeing to it that all three persons were impleaded in the
case.

But the Taronas action cannot be dismissed outright. As the Court held
in Plasabas v. Court of Appeals,[22] the non-joinder of indispensable parties is not a
ground for dismissal. Section 11, Rule 3 of the 1997 Rules of Civil Procedure
prohibits the dismissal of a suit on the ground of non-joinder or misjoinder of
parties and allows the amendment of the complaint at any stage of the

proceedings, through motion or on order of the court on its own initiative. Only if
plaintiff refuses to implead an indispensable party, despite the order of the court,
may it dismiss the action.

There is a need, therefore, to remand the case to the RTC with an order to
implead Margarita Pastelero Vda. de Valdez and Dolores Valdez as defendants so
they may, if they so desire, be heard.

In view of the Courts resolution of the first question, it would serve no

purpose to consider the other questions that the petition presents. The
resolution of those questions seems to depend on the complete evidence in the
case. This will not yet happen until all the indispensable party-defendants are
impleaded and heard on their evidence.

WHEREFORE, the Court GRANTS the petition and SETS ASIDE the decision of
the Regional Trial Court of Balanga, Bataan in Civil Case 6739 dated January 30,
2002 and the decision of the Court of Appeals in CA-G.R. CV 74762 dated May 22,
2006. The Court REMANDS the case to the Regional Trial Court of
Balanga, Bataan which is DIRECTED to have Margarita Pastelero Vda. de Valdez
and Dolores Valdez impleaded by the plaintiffs as party-defendants and,
afterwards, to hear the case in the manner prescribed by the rules.

SO ORDERED.

G.R. No. 164436

January 15, 2010

LITTIE SARAH A. AGDEPPA, LYNN SARAH A. AGDEPPA, LOUELLA JEANNE A.

AGDEPPA, and LALAINE LILIBETH A. AGDEPPA, Petitioners,
vs.
HEIRS OF IGNACIO BONETE, represented by DOROTEA BONETE, HIPOLITO BONETE,
MILAGROS BONETE, MAURICIO BONETE, FERNANDO BONETE, and OPHELIA
BONETE, Respondents.
DECISION
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari,1 seeking the reversal of the Court of
Appeals (CA) Decision,2 dated December 27, 2002,
which reversed and set aside the Order,3 dated May 21, 1990, issued by the Regional Trial
Court (RTC), Branch 18, of Midsayap, Cotabato.
The factual and procedural antecedents of the case are as follows:
In 1979, respondent Dorotea Bonete (Dorotea), widow of the late Ignacio Bonete and mother of
respondents Hipolito Bonete, Milagros Bonete, Mauricio Bonete, Fernando Bonete, and Ophelia
Bonete (respondents), obtained a loan in the amount of P55,000.00 from Development Bank of
the Philippines (DBP), Cotabato City Branch, in order to buy farm implements. A parcel of
agricultural land, known as Lot No. (1144) H-207865 with an area of 18.00 hectares, covered by
Transfer Certificate of Title (TCT) No. T-56923,4 issued in the name of Dorotea and situated in
Demapaco, Libungan, Cotabato (subject property), was used as collateral to secure the said
loan.
In 1982, respondents, through Dorotea, received a notice of collection from DBP. Respondents
alleged that herein petitioner and counsel, Atty. Littie Sarah A. Agdeppa (Littie Sarah),
expressed deep concern and sympathy for them. Consequently, Littie Sarah accompanied
Dorotea to DBP and obligated herself to pay the loan. Thereafter, Dorotea was allegedly made
to sign a document as Littie Sarahs security for the amount which the latter paid to DBP in
connection with the said loan. Further, respondents alleged that, since 1982, Littie Sarah and
her representatives had been gradually easing them out of the subject property and that they
were ordered to stop the cultivation of their respective ricefields. Eventually, respondents were
forcibly ejected from the subject property.
Further, Littie Sarah planted corn and put up duck-raising projects on the subject property.
On this account, respondents inquired from the Register of Deeds and found that the title to the
subject property, which was in the name of respondents' predecessor-in-interest, the late
Ignacio Bonete, had already been canceled and transferred to Littie Sarah under TCT No. T75454 by virtue of a purported deed of sale. According to Dorotea, Littie Sarah took advantage
of her by letting her sign a contract, ostensibly as security for the loan from DBP, which later
turned out to be a deed of sale. Thus, respondents filed a Complaint5 for Recovery of
Ownership and Possession and/or Annulment of Deed of Sale of the Subject Property with
Damages, docketed as Civil Case No. 484 before the RTC.

Littie Sarah filed a Motion to Dismiss6 the Complaint based on the following grounds: 1) that
respondents had no legal capacity to sue; 2) that respondents were not the real parties in
interest; 3) that the Complaint stated no cause of action; and 4) that the claim or demand set
forth in the Complaint had already been waived and extinguished.
Later, the Complaint was amended, impleading herein petitioners Lynn Sarah Agdeppa, Louella
Jeanne Agdeppa, and Lalaine Lilibeth Agdeppa, together with Littie Sarah, as defendants
(petitioners).7 Respondents also filed an Opposition to the Motion to Dismiss. 8
On May 21, 1990, the RTC issued an Order dismissing the Amended Complaint with costs
against respondents. It held that the Amended Complaint did not show the character and
representation that respondents claimed to have. TCT No. T-56923, covering the subject
property, was not in the name of the late Ignacio Bonete but in Dorotea's name. Thus, the RTC
held that respondents were not real parties in interest. Respondents filed a Motion for
Reconsideration9 which the RTC denied in its Order10 dated January 12, 1991. Therein, the RTC
held that respondents lacked the personality to sue; thus, a valid basis to grant the motion to
dismiss on the ground that the complaint did not state a cause of action.
Aggrieved, respondents went to the CA.11 On December 27, 2002, the CA reversed and set
aside the RTC Order, and remanded the case to the RTC for further proceedings because
Dorotea, being the former owner of the subject property, was a real party in interest.
Petitioners filed their Motion for Reconsideration,12 which the CA denied in its Resolution13 dated
April 28, 2004.
Hence, this Petition assigning the following errors:
THE HONORABLE COURT OF APPEALS IN REVERSING THE ORDER OF DISMISSAL ISSUED
BY THE REGIONAL TRIAL COURT, ACTED CONTRARY TO LAW AND JURISPRUDENCE;
DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS;
GRAVELY ERRED AND GRAVELY ABUSED ITS DISCRETION TANTAMOUNT TO LACK OF
JURISDICTION; AND LAID DOWN A VERY BAD PRECEDENT, AS FOLLOWS:
A. BY VIOLATING SPECIFICALLY THE PROVISIONS OF THE RULES OF COURT,
PARTICULARLY SECS. 2 AND 3 OF RULE 3 OF THE RULES OF COURT, ON PARTIESPLAINTIFFS TO CIVIL ACTIONS AND REAL PARTIES IN INTEREST;
B. BY UPHOLDING THE LEGAL CAPACITY OF THE PLAINTIFFS HEIRS OF IGNACIO
BONETE TO SUE AND TO FILE THIS CASE WHEN THE HONORABLE COURT OF
APPEALS ITSELF EVEN RIGHTFULLY FOUND THAT TCT NO. T-56923 WAS ALREADY
REGISTERED IN THE NAME OF DOROTEA BONETE, WHEN IT WAS SOLD TO HEREIN
DEFENDANTS, SUCH THAT IGNACIO BONETE OR THE HEIRS OF IGNACIO BONETE
[HAD] NOTHING TO DO WITH THE SAID PROPERTY- THUS[,] NOT THE REAL PARTY IN
INTEREST AND [HAD] NO LEGAL PERSONALITY TO SUE AND LIKEWISE [HAD] NO
CAUSE OF ACTION AGAINST DEFENDANTS (PETITIONERS HEREIN);
C. THAT THE DECISION OF THIS HONORABLE COURT OF APPEALS WAS ISSUED
CONTRARY TO LAW AND JURISPRUDENCE AND CONTRARY TO THE TRUE, ACTUAL
AND EXISTING FACTS OF THIS CASE AND EVEN TO THE VERY FINDINGS OF THE
HONORABLE COURT OF APPEALS ITSELF, BECAUSE WHILE THE HONORABLE
COURT OF APPEALS RULED THAT DOROTEA BONETE AS REGISTERED OWNER IS A

PARTY IN INTEREST, THIS CASE IS NOT PROSECUTED IN THE NAME OF DOROTEA

BONETE, BUT IN THE NAME OF THE HEIRS OF IGNACIO BONETE, AND IF EVER THE
NAME OF DOROTEA BONETE IS MENTIONED IT WAS MERELY [AND] ALLEGEDLY IN
REPRESENTATION OF THE HEIRS OF IGNACIO BONETE AND NOT IN HER OWN
PERSONAL CAPACITY; BUT WHICH REPRESENTATION IS NOT EVEN ALLEGED IN
THE COMPLAINT, THUS STILL A VIOLATION OF THE RULES OF COURT;
D. THAT THE REMANDING OF THIS CASE TO THE REGIONAL TRIAL COURT FOR
FURTHER PROCEEDINGS WITH THE PARTY PLAINTIFF "HEIRS OF IGNACIO BONETE"
NOT BEING A REAL PARTY IN INTEREST VIOLATES THE WELL ESTABLISHED
"GENERAL RULE [THAT] ONE HAVING NO RIGHT OR INTEREST TO PROTECT
CANNOT INVOKE THE JURISDICTION OF THE COURT AS A PARTY PLAINTIFF IN AN
ACTION. (Ralla v. Ralla, 199 SCRA 495 [1991])" AND "THE GENERAL RULE OF x x x
COMMON LAW x x x THAT EVERY ACTION MUST BE BROUGHT IN THE NAME OF THE
PARTY WHOSE LEGAL RIGHT HAS BEEN INVADED OR INFRINGED";
E. IT WILL CREATE A VERY BAD AND IMPROPER PRECEDENT NOT WARRANTED
UNDER THE PROVISIONS OF THE RULES OF COURT; [AND]
F. WILL UNNECESSARILY CAUSE THE PARTIES UNDUE DELAY AND EXPENSES FOR
AFTER ALL THE PARTIES-PLAINTIFFS THEREIN ARE NOT THE REAL PARTIES IN
INTEREST[.]14

The instant Petition is bereft of merit.

While it is true that respondents committed a procedural infraction before the RTC, such
infraction does not justify the dismissal of the case.
Misjoinder of parties does not warrant the dismissal of the action.15 Rule 3, Section 11 of the
Rules of Court clearly provides:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on
motion of any party or on its own initiative at any stage of the action and on such terms as are
just. Any claim against a misjoined party may be severed and proceeded with separately.
It bears stressing that TCT No. T-56923, covering the subject property, was issued in the name
of Dorotea. This is established by the record, and petitioners themselves admit this fact.
However, because TCT No. T-75454, allegedly issued in favor of Littie Sarah, and the purported
deed of sale, allegedly executed by Dorotea in favor of Littie Sarah, are not on record.
Considering the allegations in the pleadings, it is best that a trial on the merits be conducted.
1avvphi 1

We fully agree with the apt and judicious ruling of the CA, when it said:
As the former owner of the subject property, the same having been titled in her name under
TCT No. T-56923, Dorotea Cariaga Bonete, being the real party [in] interest, has the legal
capacity to file the instant case for reconveyance and annulment of deed of sale. The complaint
was filed by the [respondents] precisely to question the issuance of TCT No. T-75454 in the
name of Littie Sarah Agdeppa as the transaction allegedly contemplated was only to secure
Doroteas loan.

Why the property became the subject of the deed of sale which is being disputed by Dorotea
should be threshed out in a full-blown trial on the merits in order to afford the contending parties
their respective days in
court. As held in Del Bros. Hotel Corporation vs. Court of Appeals, 210 SCRA 33, the complaint
is not supposed to contain evidentiary matters as this will have to be done at the trial on the
merits of the case.
A final note.
A liberal construction of the Rules is apt in situations involving excusable formal errors in a
pleading, as long as the same do not subvert the essence of the proceeding, and they connote
at least a reasonable attempt at compliance with the Rules.16 The Court is not precluded from
rectifying errors of judgment, if blind and stubborn adherence to procedure would result in the
sacrifice of substantial justice for technicality. To deprive respondents, particularly Dorotea, of
their claims over the subject property on the strength of sheer technicality would be a travesty of
justice and equity.
WHEREFORE, the instant Petition is DENIED and the assailed Court of Appeals Decision is
AFFIRMED. The Regional Trial Court, Branch 18 of Midsayap, Cotabato, is hereby directed to
resolve this case on the merits with deliberate dispatch. Costs against petitioners.
SO ORDERED.

G.R. No. 147999

February 27, 2004

SUI MAN HUI CHAN and GONZALO CO, petitioners

vs.
HON. COURT OF APPEALS and OSCAR D. MEDALLA, respondents.
DECISION
QUISUMBING, J.:
For review on certiorari is the Decision1 dated May 3, 2001, of the Court of Appeals in CA-G.R.
SP No. 61889, affirming the Order2 dated January 11, 2000, of the Regional Trial Court (RTC)
of Mandaluyong City, Branch 213, in Civil Case No. MC99-666, which had denied petitioners
Motion to Dismiss the complaint filed by private respondent.
The facts, as culled from records, are as follows:
On March 30, 1999, private respondent Oscar Medalla filed a complaint before the RTC of
Mandaluyong City, docketed as Civil Case No. MC99-666, for collection of a sum of money

arising from breach of a contract of lease and damages, against petitioners Sui Man Hui Chan
and Gonzalo Co.
The complaint alleged that on November 14, 1988, Napoleon C. Medalla as lessor and Ramon
Chan as lessee entered into a Lease Contract3 over a hotel building located at No. 29 Abanao
Street, Baguio City. Chan would use the leased premises as a restaurant named "Cypress Inn".
Pertinently, the parties agreed on the following:
1. The period of lease shall be for ten (10) years or from 15 July 1988 to 15 July 1998.
2. The payment of the realty taxes due to the government on the leased premises shall be
for the account of the Lessee.
3. The agreement is binding upon the heirs and/or successors-in-interest of the Lessor and
the Lessee.

Petitioner Gonzalo Co was employed by Ramon Chan as the general manager of "Cypress Inn"
and acted as his agent in all his dealings with Napoleon Medalla.
On August 5, 1989, Ramon Chan died. He was survived by his wife, petitioner Sui Man Hui
Chan, who continued to operate the restaurant.
On July 17, 1996, Napoleon Medalla died. Among his heirs is private respondent Oscar
Medalla, who succeeded him as owner and lessor of the leased premises. The contract was
neither amended nor terminated after the death of the original parties but was continued by their
respective successors-in-interest pursuant to the terms thereof. Petitioners Chan and Co, the
latter, in his capacity as agent and general manager, continued to deal with private respondent
Medalla in all transactions pertaining to the contract.
On various occasions, petitioners failed to pay the monthly rentals due on the leased premises.
Despite several Statements of Accounts sent by Medalla, petitioners failed to pay the rentals
due but, nonetheless, continued to use and occupy the leased premises.
On February 26, 1997, Medalla sent a letter addressed to Ramon Chan, indicating that (1) the
contract of lease would expire on July 15, 1998, and (2) he was not amenable to a renewal of
said contract after its expiration.
Medalla then sent demand letters to petitioners, but the latter still failed to pay the unpaid
rentals. He also found out that petitioners had not paid the realty taxes due on the leased
premises since 1991, amounting toP610,019.11. Medalla then asked petitioners to settle the
unpaid rentals, pay the unpaid real estate taxes, and vacate the leased premises.
On January 1999, petitioners vacated the premises but without paying their unpaid rentals and
realty taxes. Aggrieved by petitioners refusal to pay the amounts owing, which had
reached P4,147,901.80 by March 1999, private respondent Medalla instituted Civil Case No.
MC99-666.
In their Answer to the Complaint, petitioners denied owing private respondent the amounts
claimed by the latter. They alleged that the late Ramon Chan had paid all the rentals due up to
March 15, 1998. Moreover, they need not pay any balance owing on the rentals as they were

required to pay two (2) months advance rentals upon signing of the contract and make a
guarantee deposit amounting to P220,000. On the matter of unpaid realty taxes, petitioners
alleged that private respondent was responsible therefor as the owner of the leased premises,
notwithstanding any contrary stipulations in the contract.
On July 19, 1999, petitioners filed a Supplemental Answer with Motion to Dismiss alleging that
they were neither parties nor privies to the Contract of Lease, hence they are not the real
parties-in-interest.
Private respondent filed a Reply and Opposition to petitioners Supplemental Answer with
Motion to Dismiss dated August 2, 1999, praying for the denial of the Motion to Dismiss for
having been belatedly filed in direct contravention of Section 1, Rule 16, of the 1997 Rules of
Civil Procedure.4 He further alleged that petitioner Chan, as the owner of the business and
petitioner Co as the agent of petitioner Chan, are clearly real parties-in-interest in the case.
Private respondent pointed to their continuous dealings with him in all transactions relating to
the contract after the death of Ramon Chan and even after the expiration of the Contract of
Lease.
On January 11, 2000, the RTC denied petitioners Motion to Dismiss, thus:
WHEREFORE, in view of the foregoing, the motion to dismiss dated July 19, 1999 filed by
defendant through counsel against plaintiff is hereby DENIED for lack of merit.
SO ORDERED.5
The trial court pointed out that petitioners continued to transact business with private
respondent after the death of Ramon Chan as shown by the communications between the
parties. It also declared that private respondents acquiescence to petitioners continued
occupation and enjoyment of the leased premises and the latters recognition of the formers
ownership of said premises reflected an oral agreement between the parties to continue the
Lease Contract.
Petitioners moved for reconsideration on the ground that any claim should be filed against the
estate of Ramon Chan in an estate proceeding pursuant to Section 5, Rule 86, of the Revised
Rules of Court6 since Ramon Chans estate is the real party-in-interest. The court denied said
motion and declared that Section 5, Rule 86 is inapplicable in the case. It pointed out that the
unpaid rentals being claimed were those for the period April 1993 to December 1998. These
were incurred by petitioners and not by the late Ramon Chan, who died on August 5, 1989.
Dissatisfied, petitioners elevated the matter to the Court of Appeals through a special civil action
of certiorari, docketed as CA-G.R. SP No. 61889. The Court of Appeals, however, affirmed the
RTC Orders, as follows:
WHEREFORE, foregoing premises considered, the petition having no merit in fact and in law is
hereby DENIED DUE COURSE and ACCORDINGLY ORDERED DISMISSED. The assailed
Orders are resultantly AFFIRMED WITH COSTS TO PETITIONERS.
SO ORDERED.7
Hence, the instant petition submitting as sole issue for our resolution:

whether or not respondent Court of Appeals committed serious error in law in affirming the RTC
Orders denying petitioners motion to dismiss and the subsequent motion for reconsideration.8
Petitioners argue that the Court of Appeals erred in affirming the RTCs Orders because they
are not the real parties-in-interest and hence, were improperly impleaded in the complaint as
defendants. Petitioners insist that they were neither parties nor were they privy to the Contract
of Lease between the late Ramon Chan and Napoleon Medalla. They vigorously assert that any
claim for unpaid rentals should be made against the estate of Ramon Chan pursuant to Section
5, Rule 86 of the Revised Rules of Court.
We find for private respondent. Prefatorily, it bears stressing that petitioners Motion to Dismiss
was filed after an Answer had already been filed. This alone warranted an outright dismissal of
the motion for having been filed in contravention of the clear and explicit mandate of Section 1,
Rule 16, of the Revised Rules of Civil Procedure. Under this section, a motion to dismiss shall
be filed within the time for but before filing the answer to the complaint or pleading asserting a
claim.9 Here, petitioners filed their Supplemental Answer with Motion to Dismiss almost two
months after filing their Answer, in clear contravention of the aforecited rule.
The Court of Appeals stated that the grant or denial of a Motion to Dismiss is an interlocutory
order, and it cannot be the proper subject of a special civil action for certiorari. The proper
remedy in such a case is to appeal after a decision has been rendered, the CA said. A writ
of certiorari is not intended to correct every controversial interlocutory ruling; it is resorted to
only to correct a grave abuse of discretion or a whimsical exercise of judgment equivalent to
lack or excess of jurisdiction. The function of a petition for certiorari is limited to keeping an
inferior court within the bounds of its jurisdiction and to relieve persons from arbitrary acts, acts
which courts or judges have no power or authority in law to perform. Certiorari is not designed to
correct erroneous findings and conclusions made by the court.10 On this score, we are in
agreement with the appellate court.
At any rate, we find no merit to petitioners contention that they are not real parties-in-interest
since they are not parties nor signatories to the contract and hence should not have been
impleaded as defendants. It is undeniable that petitioner Chan is an heir of Ramon Chan and,
together with petitioner Co, was a successor-in-interest to the restaurant business of the late
Ramon Chan. Both continued to operate the business after the death of Ramon. Thus, they are
real parties-in-interest in the case filed by private respondent, notwithstanding that they are not
signatories to the Contract of Lease.
A lease contract is not essentially personal in character. Thus, the rights and obligations therein
are transmissible to the heirs.11 The general rule, therefore, is that heirs are bound by contracts
entered into by their predecessors-in-interest except when the rights and obligations arising
therefrom are not transmissible by (1) their nature, (2) stipulation or (3) provision of law.12 In the
subject Contract of Lease, not only were there no stipulations prohibiting any transmission of
rights, but its very terms and conditions explicitly provided for the transmission of the rights of
the lessor and of the lessee to their respective heirs and successors. The contract is the law
between the parties. The death of a party does not excuse nonperformance of a contract, which
involves a property right, and the rights and obligations thereunder pass to the successors or
representatives of the deceased. Similarly, nonperformance is not excused by the death of the
party when the other party has a property interest in the subject matter of the contract. 13

Finally, as to petitioners contention that any claim should have been filed before the estate
proceeding of Ramon Chan pursuant to Section 5 of Rule 86, the trial court found that the
unpaid rentals sought to be claimed were for the period April 1993 to December 1998. Note that
Ramon Chan, the original lessee, died on August 5, 1989. In other words, as the unpaid rentals
did not accrue during the lifetime of Ramon Chan, but well after his death, his estate might not
be held liable for them. Hence, there is no indubitable basis to apply Section 5, Rule 86, of the
Revised Rules of Court as petitioners urge respondents to do.
WHEREFORE, the instant petition is DENIED and the Decision of the Court of Appeals in CAG.R. SP. No. 61889 is AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. 160347

November 29, 2006

ARCADIO and MARIA LUISA CARANDANG, Petitioners,

vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE
GUZMAN, REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN,
JR., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision1 and
Resolution affirming the Regional Trial Court (RTC) Decision rendering herein petitioners
Arcadio and Luisa Carandang [hereinafter referred to as spouses Carandang] jointly and
severally liable for their loan to Quirino A. de Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate
officers of Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent
(54%) and forty six percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased, from P500,000 to P1.5 million
and P345,000 of this increase was subscribed by [the spouses Carandang]. Thereafter, on
March 3, 1989, MBS again increased its capital stock, from P1.5 million to P3 million, [the
spouses Carandang] yet again subscribed to the increase. They subscribed to P93,750 worth of
newly issued capital stock.

[De Guzman] claims that, part of the payment for these subscriptions were paid by
him, P293,250 for the November 26, 1983 capital stock increase and P43,125 for the March 3,
1989 Capital Stock increase or a total ofP336,375. Thus, on March 31, 1992, [de Guzman] sent
a demand letter to [the spouses Carandang] for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation
agreement was executed between [Arcadio Carandang] and [de Guzman], whereby the latter
promised to pay for the stock subscriptions of the former without cost, in consideration for
[Arcadio Carandangs] technical expertise, his newly purchased equipment, and his skill in
repairing and upgrading radio/communication equipment therefore, there is no indebtedness on
their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the P336,375 together
with damages. After trial on the merits, the trial court disposed of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of [de Guzman].
Accordingly, [the spouses Carandang] are ordered to jointly and severally pay [de Guzman], to
wit:
(1) P336,375.00 representing [the spouses Carandangs] loan to de Guzman;
(2) interest on the preceding amount at the rate of twelve percent (12%) per annum from
June 5, 1992 when this complaint was filed until the principal amount shall have been fully
paid;
(3) P20,000.00 as attorneys fees;
(4) Costs of suit.

The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed
the same in the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby AFFIRMED. No
costs.2
The Motion for Reconsideration filed by the spouses Carandang was similarly denied by the
Court of Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED and our
Decision of April 22, 2003, which is based on applicable law and jurisprudence on the matter is
hereby AFFIRMED and REITERATED.3
The spouses Carandang then filed before this Court the instant Petition for Review on Certiorari,
bringing forth the following issues:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR
IN FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.

II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS
FINDING THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE,
CONTRARY TO EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE
PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING
THAT THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN
COMPLETE DISREGARD OF THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE
ERROR WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF
CIVIL PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING
THAT THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN
VIOLATION OF ARTICLE 1207 OF THE NEW CIVIL CODE.4

Whether or not the RTC Decision is void for failing to comply with Section 16, Rule 3 of the
Rules of Court
The spouses Carandang claims that the Decision of the RTC, having been rendered after the
death of Quirino de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules of
Court, which provides:
SEC. 16. Death of party; duty of counsel. Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within
thirty (30) days after such death of the fact thereof, and to give the name and address of his
legal representative or representatives. Failure of counsel to comply with this duty shall be a
ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without requiring
the appointment of an executor or administrator and the court may appoint a guardian ad litem
for the minor heirs.
The court shall forthwith order the legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the estate
of the deceased and the latter shall immediately appear for and on behalf of the deceased. The

court charges in procuring such appointment, if defrayed by the opposing party, may be
recovered as costs.
The spouses Carandang posits that such failure to comply with the above rule renders void the
decision of the RTC, in adherence to the following pronouncements in Vda. de Haberer v. Court
of Appeals5 and Ferreria v. Vda. de Gonzales6 :
Thus, it has been held that when a party dies in an action that survives and no order is issued
by the court for the appearance of the legal representative or of the heirs of the deceased in
substitution of the deceased, and as a matter of fact no substitution has ever been effected, the
trial held by the court without such legal representatives or heirs and the judgment rendered
after such trial are null and void because the court acquired no jurisdiction over the persons of
the legal representatives or of the heirs upon whom the trial and judgment would be binding.7
In the present case, there had been no court order for the legal representative of the deceased
to appear, nor had any such legal representative appeared in court to be substituted for the
deceased; neither had the complainant ever procured the appointment of such legal
representative of the deceased, including appellant, ever asked to be substituted for the
deceased. As a result, no valid substitution was effected, consequently, the court never
acquired jurisdiction over appellant for the purpose of making her a party to the case and
making the decision binding upon her, either personally or as a representative of the estate of
her deceased mother.8
However, unlike jurisdiction over the subject matter which is conferred by law and is not subject
to the discretion of the parties,9 jurisdiction over the person of the parties to the case may be
waived either expressly or impliedly.10 Implied waiver comes in the form of either voluntary
appearance or a failure to object.11
In the cases cited by the spouses Carandang, we held that there had been no valid substitution
by the heirs of the deceased party, and therefore the judgment cannot be made binding upon
them. In the case at bar, not only do the heirs of de Guzman interpose no objection to the
jurisdiction of the court over their persons; they are actually claiming and embracing such
jurisdiction. In doing so, their waiver is not even merely implied (by their participation in the
appeal of said Decision), but express (by their explicit espousal of such view in both the Court of
Appeals and in this Court). The heirs of de Guzman had no objection to being bound by the
Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which
can only be asserted by the party who can thereby waive it by silence.
It also pays to look into the spirit behind the general rule requiring a formal substitution of heirs.
The underlying principle therefor is not really because substitution of heirs is a jurisdictional
requirement, but because non-compliance therewith results in the undeniable violation of the
right to due process of those who, though not duly notified of the proceedings, are substantially
affected by the decision rendered therein.12 Such violation of due process can only be asserted
by the persons whose rights are claimed to have been violated, namely the heirs to whom the
adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People v.
Florendo,13 where we likewise held that the proceedings that took place after the death of the

party are void, we gave another reason for such nullity: "the attorneys for the offended party
ceased to be the attorneys for the deceased upon the death of the latter, the principal x x x."
Nevertheless, the case at bar had already been submitted for decision before the RTC on 4
June 1998, several months before the passing away of de Guzman on 19 February 1999.
Hence, no further proceedings requiring the appearance of de Guzmans counsel were
conducted before the promulgation of the RTC Decision. Consequently, de Guzmans counsel
cannot be said to have no authority to appear in trial, as trial had already ceased upon the death
of de Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the
Rules of Court, because of the express waiver of the heirs to the jurisdiction over their persons,
and because there had been, before the promulgation of the RTC Decision, no further
proceedings requiring the appearance of de Guzmans counsel.
Before proceeding with the substantive aspects of the case, however, there is still one more
procedural issue to tackle, the fourth issue presented by the spouses Carandang on the noninclusion in the complaint of an indispensable party.
Whether or not the RTC should have dismissed the case for failure to state a cause of action,
considering that Milagros de Guzman, allegedly an indispensable party, was not included as a
party-plaintiff
The spouses Carandang claim that, since three of the four checks used to pay their stock
subscriptions were issued in the name of Milagros de Guzman, the latter should be considered
an indispensable party. Being such, the spouses Carandang claim, the failure to join Mrs. de
Guzman as a party-plaintiff should cause the dismissal of the action because "(i)f a suit is not
brought in the name of or against the real party in interest, a motion to dismiss may be filed on
the ground that the complaint states no cause of action."14
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman from
which the four (4) checks were drawn is part of their conjugal property and under both the Civil
Code and the Family Code the husband alone may institute an action for the recovery or
protection of the spouses conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x x Under the
New Civil Code, the husband is the administrator of the conjugal partnership. In fact, he is the
sole administrator, and the wife is not entitled as a matter of right to join him in this endeavor.
The husband may defend the conjugal partnership in a suit or action without being joined by the
wife. x x x Under the Family Code, the administration of the conjugal property belongs to the
husband and the wife jointly. However, unlike an act of alienation or encumbrance where the
consent of both spouses is required, joint management or administration does not require that
the husband and wife always act together. Each spouse may validly exercise full power of
management alone, subject to the intervention of the court in proper cases as provided under
Article 124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners erroneously interchange the terms "real party in
interest" and "indispensable party." A real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party entitled to the avails of the suit. 15 On

the other hand, an indispensable party is a party in interest without whom no final determination
can be had of an action,16 in contrast to a necessary party, which is one who is not
indispensable but who ought to be joined as a party if complete relief is to be accorded as to
those already parties, or for a complete determination or settlement of the claim subject of the
action.17
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action."18However, what dismissal on this ground entails is an
examination of whether the parties presently pleaded are interested in the outcome of the
litigation, and not whether all persons interested in such outcome are actually pleaded. The
latter query is relevant in discussions concerning indispensable and necessary parties,
but not in discussions concerning real parties in interest. Both indispensable and necessary
parties are considered as real parties in interest, since both classes of parties stand to be
benefited or injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3
August 1988. As they did not execute any marriage settlement, the regime of conjugal
partnership of gains govern their property relations.19
All property acquired during the marriage, whether the acquisition appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be conjugal unless
the contrary is proved.20Credits are personal properties,21 acquired during the time the loan or
other credit transaction was executed. Therefore, credits loaned during the time of the marriage
are presumed to be conjugal property.
Consequently, assuming that the four checks created a debt for which the spouses Carandang
are liable, such credits are presumed to be conjugal property. There being no evidence to the
contrary, such presumption subsists. As such, Quirino de Guzman, being a co-owner of specific
partnership property,22 is certainly a real party in interest. Dismissal on the ground of failure to
state a cause of action, by reason that the suit was allegedly not brought by a real party in
interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary parties. When an
indispensable party is not before the court, the action should likewise be dismissed.23 The
absence of an indispensable party renders all subsequent actuations of the court void, for want
of authority to act, not only as to the absent parties but even as to those present.24 On the other
hand, the non-joinder of necessary parties do not result in the dismissal of the case. Instead,
Section 9, Rule 3 of the Rules of Court provides for the consequences of such non-joinder:
Sec. 9. Non-joinder of necessary parties to be pleaded. Whenever in any pleading in which a
claim is asserted a necessary party is not joined, the pleader shall set forth his name, if known,
and shall state why he is omitted. Should the court find the reason for the omission
unmeritorious, it may order the inclusion of the omitted necessary party if jurisdiction over his
person may be obtained.
The failure to comply with the order for his inclusion, without justifiable cause, shall be deemed
a waiver of the claim against such party.

The non-inclusion of a necessary party does not prevent the court from proceeding in the action,
and the judgment rendered therein shall be without prejudice to the rights of such necessary
party.
Non-compliance with the order for the inclusion of a necessary party would not warrant the
dismissal of the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal
of the complaint for failure to comply with an order of the court, as Section 9, Rule 3 specifically
provides for the effect of such non-inclusion: it shall not prevent the court from proceeding in the
action, and the judgment rendered therein shall be without prejudice to the rights of such
necessary party. Section 11, Rule 3 likewise provides that the non-joinder of parties is not a
ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third set of parties: the pro-forma
parties, which are those who are required to be joined as co-parties in suits by or against
another party as may be provided by the applicable substantive law or procedural rule.25 An
example is provided by Section 4, Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided
by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable nor
necessary. The third case occurs if, for example, a husband files an action to recover a property
which he claims to be part of his exclusive property. The wife may have no legal interest in such
property, but the rules nevertheless require that she be joined as a party.
In cases of pro-forma parties who are neither indispensable nor necessary, the general rule
under Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal.
Hence, in a case concerning an action to recover a sum of money, we held that the failure to
join the spouse in that case was not a jurisdictional defect.26The non-joinder of a spouse does
not warrant dismissal as it is merely a formal requirement which may be cured by amendment.27
Conversely, in the instances that the pro-forma parties are also indispensable or necessary
parties, the rules concerning indispensable or necessary parties, as the case may be, should be
applied. Thus, dismissal is warranted only if the pro-forma party not joined in the complaint is an
indispensable party.
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to the
spouses Carandang, seems to be either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is
not warranted, whether or not there was an order for her inclusion in the complaint pursuant to
Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract of partnership
in all that is not in conflict with what is expressly determined in this Chapter or by the spouses in
their marriage settlements.
This provision is practically the same as the Civil Code provision it superceded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract of partnership
in all that is not in conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with the
other partners of specific partnership property." Taken with the presumption of the conjugal
nature of the funds used to finance the four checks used to pay for petitioners stock
subscriptions, and with the presumption that the credits themselves are part of conjugal funds,
Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring
an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular28 and Adlawan v.
Adlawan,29 we held that, in a co-ownership, co-owners may bring actions for the recovery of coowned property without the necessity of joining all the other co-owners as co-plaintiffs because
the suit is presumed to have been filed for the benefit of his co-owners. In the latter case and in
that of De Guia v. Court of Appeals,30 we also held that Article 487 of the Civil Code, which
provides that any of the co-owners may bring an action for ejectment, covers all kinds of action
for the recovery of possession.31
In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may bring
an action, any kind of action, for the recovery of co-owned properties. Therefore, only one of the
co-owners, namely the co-owner who filed the suit for the recovery of the co-owned property, is
an indispensable party thereto. The other co-owners are not indispensable parties. They are not
even necessary parties, for a complete relief can be accorded in the suit even without their
participation, since the suit is presumed to have been filed for the benefit of all co-owners.32
We therefore hold that Milagros de Guzman is not an indispensable party in the action for the
recovery of the allegedly loaned money to the spouses Carandang. As such, she need not have
been impleaded in said suit, and dismissal of the suit is not warranted by her not being a party
thereto.
Whether or not respondents were able to prove the loan sought to be collected from petitioners
In the second and third issues presented by the spouses Carandang, they claim that the de
Guzmans failed to prove the alleged loan for which the spouses Carandang were held liable. As
previously stated, spouses Quirino and Milagros de Guzman paid for the stock subscriptions of
the spouses Carandang, amounting to P336,375.00. The de Guzmans claim that these
payments were in the form of loans and/or advances and it was agreed upon between the late
Quirino de Guzman, Sr. and the spouses Carandang that the latter would repay him.
Petitioners, on the other hand, argue that there was an oral pre-incorporation agreement
wherein it was agreed that Arcardio Carandang would always maintain his 46% equity
participation in the corporation even if the capital structures were increased, and that Quirino de
Guzman would personally pay the equity shares/stock subscriptions of Arcardio Carandang with
no cost to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de Guzmans] failed to prove
by preponderance of evidence, either the existence of the purported loan or the non-payment
thereof.

Simply put, preponderance of evidence means that the evidence as a whole adduced by one
side is superior to that of the other. The concept of preponderance of evidence refers to
evidence that is of greater weight, or more convincing, than that which is offered in opposition to
it; it means probability of truth.
[The spouses Carandang] admitted that it was indeed [the de Guzmans] who paid their stock
subscriptions and their reason for not reimbursing the latter is the alleged pre-incorporation
agreement, to which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his affirmative allegation. Thus, the
plaintiff or complainant has to prove his affirmative allegations in the complaints and the
defendant or respondent has to prove the affirmative allegations in his affirmative defenses and
counterclaims.33
The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself,
having presented evidence only of the payment in favor of the Carandangs. They claim:
It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. "A" decides
to pay for Mr. "Bs" obligation, that payment by Mr. "A" cannot, by any stretch of imagination,
possibly mean that there is now a loan by Mr. "B" to Mr. "A". There is a possibility that such
payment by Mr. "A" is purely out of generosity or that there is a mutual agreement between
them. As applied to the instant case, that mutual agreement is the pre-incorporation agreement
(supra) existing between Mr. de Guzman and the petitioners --- to the effect that the former shall
be responsible for paying stock subscriptions of the latter. Thus, when Mr. de Guzman paid for
the stock subscriptions of the petitioners, there was no loan to speak of, but only a compliance
with the pre-incorporation agreement.34
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr. "Bs"
obligation, the presumption is that Mr. "B" is indebted to Mr. "A" for such amount that has been
paid. This is pursuant to Articles 1236 and 1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or performance by a third person who
has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he
paid without the knowledge or against the will of the debtor, he can recover only insofar as the
payment has been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of the
latter, cannot compel the creditor to subrogate him in his rights, such as those arising from a
mortgage, guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of
payment by a third person, and even in cases where the third person paid against the will of the
debtor, such payment would produce a debt in favor of the paying third person. In fact, the only
consequences for the failure to inform or get the consent of the debtor are the following: (1) the
third person can recover only insofar as the payment has been beneficial to the debtor; and (2)
the third person is not subrogated to the rights of the creditor, such as those arising from a
mortgage, guarantee or penalty.35

We say, however, that this is merely a presumption. By virtue of the parties freedom to contract,
the parties could stipulate otherwise and thus, as suggested by the spouses Carandang, there
is indeed a possibility that such payment by Mr. "A" was purely out of generosity or that there
was a mutual agreement between them. But such mutual agreement, being an exception to
presumed course of events as laid down by Articles 1236 and 1237, must be adequately
proven.
The de Guzmans have successfully proven their payment of the spouses Carandangs stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang.
Consequently, it is now up to the spouses Carandang to prove the existence of the preincorporation agreement that was their defense to the purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched on the existence
and substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was
stricken off the record because he did not submit himself to a cross-examination of the opposing
party. On the other hand, the testimonies of Romeo Saavedra,36 Roberto S.
Carandang,37 Gertrudes Z. Esteban,38 Ceferino Basilio,39 and Ma. Luisa Carandang40touched on
matters other than the existence and substance of the pre-incorporation agreement. So aside
from the fact that these witnesses had no personal knowledge as to the alleged existence of the
pre-incorporation agreement, the testimonies of these witnesses did not even mention the
existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang even
contradicted the existence of a pre-incorporation agreement because when they were asked by
their counsel regarding the matter of the check payments made by the late Quirino A. de
Guzman, Sr. in their behalf, they said that they had already paid for it thereby negating their own
defense that there was a pre-incorporation agreement excusing themselves from paying Mr. de
Guzman the amounts he advanced or loaned to them. This basic and irrefutable fact can be
gleaned from their testimonies which the private respondents are quoting for easy reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with respect to the Complaint of the
plaintiff in this case charging you that you paid for this year and asking enough to paid (sic) your
tax?
A: We have paid already, so, we are not liable for anything payment (sic).41
b. With respect to the testimony of Arcadio Carandang
"Q: How much?
A: P40,000.00 to P50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts issued for the
payment of your shares; which receipts were marked as Exhibits "G" to "L" (Plaintiff).
Im showing to you these receipts so marked by the plaintiff as their exhibits which were issued
in the name of Ma. Luisa Carandang, your wife; and also, Arcadio M. Carandang. Will you

please go over this Official Receipt and state for the records, who made for the payment stated
in these receipts in your name?
A: I paid for those shares."42
There being no testimony or documentary evidence proving the existence of the preincorporation agreement, the spouses Carandang are forced to rely upon an alleged admission
by the original plaintiff of the existence of the pre-incorporation agreement.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the existence of the preincorporation agreement by virtue of paragraphs 13 and 14 of their Answer and paragraph 4 of
private respondents Reply.
Paragraphs 13 and 14 of petitioners Answer dated 7 July 1992 state in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant Arcadio M.
Carandang to a joint venture by pooling together their technical expertise, equipments, financial
resources and franchise. Plaintiff proposed to defendant and mutually agreed on the following:
1. That they would organize a corporation known as Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of defendant Arcadio M. Carandang and his
new equipments he bought, and his skill in repairing and modifying radio/communication
equipments into high proficiency, said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his financial resources and franchise.
3. That defendant would always maintain his 46% equity participation in the corporation even
if the capital structures are increased, and that plaintiff would personally pay the equity
shares/stock subscriptions of defendant with no cost to the latter.
4. That because of defendants expertise in the trade including the marketing aspects, he
would be the President and General Manager, and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy relations, they would maintain such relations in
the joint venture without any mental reservation for their common benefit and success of the
business.
14. Having mutually agreed on the above arrangements, the single proprietorship of plaintiff
was immediately spun-off into a corporation now known as Mabuhay Broadcasting System,
Inc. The incorporators are plaintiff and his family members/nominees controlling jointly 54%
of the stocks and defendant Arcadio M. Carandang controlling singly 46% as previously
agreed.43

Meanwhile, paragraphs 3 and 4 of private respondents Reply dated 29 July 1992 state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the plaintiff and
defendant Arcadio M. Carandang organized a corporation known as Mabuhay Broadcasting
Systems, Inc. Plaintiff specifically denies the other allegations in paragraph 13 of the Answer,
the same being devoid of any legal or factual bases. The truth of the matter is that defendant
Arcadio M. Carandang was not able to pay plaintiff the agreed amount of the lease for a number

of months forcing the plaintiff to terminate lease. Additionally, the records would show that it was
the defendant Arcadio M. Carandang who proposed a joint venture with the plaintiff.
It appears that plaintiff agreed to the formation of the corporation principally because of a
directive of then President Marcos indicating the need to broaden the ownership of radio
broadcasting stations. The plaintiff owned the franchise, the radio transmitter, the antenna
tower, the building containing the radio transmitter and other equipment. Verily, he would be
placed in a great disadvantage if he would still have to personally pay for the shares of
defendant Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph 14 of the Answer.44
In effect, the spouses Carandang are relying on the fact that Quirino de Guzman stated that he
admitted paragraph 14 of the Answer, which incidentally contained the opening clause "(h)aving
mutually agreed on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This purported admission by Quirino
de Guzman reeks of ambiguity, as the clause "(h)aving mutually agreed on the above
arrangements," seems to be a mere introduction to the statement that the single proprietorship
of Quirino de Guzman had been converted into a corporation. If Quirino de Guzman had meant
to admit paragraph 13.3, he could have easily said so, as he did the other paragraphs he
categorically admitted. Instead, Quirino de Guzman expressly stated the opposite: that
"(p)laintiff specifically denies the other allegations of paragraph 13 of the Answer."45 The Reply
furthermore states that the only portion of paragraph 13 which Quirino de Guzman had admitted
is paragraph 13.1, and only insofar as it said that Quirino de Guzman and Arcardio Carandang
organized Mabuhay Broadcasting Systems, Inc.46
All the foregoing considered, we hold that Quirino de Guzman had not admitted the alleged preincorporation agreement. As there was no admission, and as the testimony of Arcardio
Carandang was stricken off the record, we are constrained to rule that there was no preincorporation agreement rendering Quirino de Guzman liable for the spouses Carandangs
stock subscription. The payment by the spouses de Guzman of the stock subscriptions of the
spouses Carandang are therefore by way of loan which the spouses Carandang are liable to
pay.
1wphi1

Whether or not the liability of the spouses Carandang is joint and solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a solidary
liability. According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang] contend that:
"There is absolutely no evidence, testimonial or documentary, showing that the purported
obligation of [the spouses Carandang] is joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang] does not at all qualify as one
of the obligations required by law to be solidary x x x."

It is apparent from the facts of the case that [the spouses Carandang] were married way before
the effectivity of the Family Code hence; their property regime is conjugal partnership under the
Civil Code.
It must be noted that for marriages governed by the rules of conjugal partnership of gains, an
obligation entered into by the husband and wife is chargeable against their conjugal partnership
and it is the partnership, which is primarily bound for its repayment. Thus, when the spouses are
sued for the enforcement of the obligation entered into by them, they are being impleaded in
their capacity as representatives of the conjugal partnership and not as independent debtors,
such that the concept of joint and solidary liability, as between them, does not apply.47
The Court of Appeals is correct insofar as it held that when the spouses are sued for the
enforcement of the obligation entered into by them, they are being impleaded in their capacity
as representatives of the conjugal partnership and not as independent debtors. Hence, either of
them may be sued for the whole amount, similar to that of a solidary liability, although the
amount is chargeable against their conjugal partnership property. Thus, in the case cited by the
Court of Appeals, Alipio v. Court of Appeals,48 the two sets of defendant-spouses therein were
held liable for P25,300.00 each, chargeable to their respective conjugal partnerships.
WHEREFORE, the Decision of the Court of Appeals, affirming the judgment rendered against
the spouses Carandang, is hereby AFFIRMED with the following MODIFICATION: The spouses
Carandang are ORDERED to pay the following amounts from their conjugal partnership
properties:
(1) P336,375.00 representing the spouses Carandangs loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until the principal amount can be fully paid; and
(3) P20,000.00 as attorneys fees.

No costs.
SO ORDERED.

G.R. No. 149787

June 18, 2008

JUDGE ANTONIO C. SUMALJAG, petitioner,

vs.
SPOUSES DIOSDIDIT and MENENDEZ M. LITERATO; and MICHAELES MAGLASANG
RODRIGO,respondents.
DECISION

CARPIO MORALES, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision1 of the Court of Appeals ("CA") dated June 26, 2001 and its related
Resolution2 dated September 4, 2001 in CA-G.R. SP No. 59712. The assailed Decision
dismissed the petition for certiorari filed by petitioner Judge Antonio C. Sumaljag (the
"petitioner") in the interlocutory matter outlined below in Civil Cases B-1239 and B-1281 before
the trial court. The challenged Resolution denied the petitioner's motion for reconsideration.
ANTECEDENT FACTS
On November 16, 1993, Josefa D. Maglasang ("Josefa") filed with the Regional Trial Court
("RTC"), Branch 14, Baybay, Leyte a complaint3 (docketed as Civil Case No. B-1239) for the
nullity of the deed of sale of real property purportedly executed between her as vendor and the
spouses Diosdidit and Menendez Literato (the "respondent spouses") as vendees. The
complaint alleged that this deed of sale dated October 15, 1971 of Lot 1220-D is spurious.
Josefa was the sister of Menendez Maglasang Literato ("Menendez"). They were two (2) of the
six (6) heirs who inherited equal parts of a 6.3906-hectare property (Lot 1220) passed on to
them by their parents Cristito and Inecita Diano Maglasang.4 Lot 1220-D was partitioned to
Josefa, while Lot 1220-E was given to Menendez.
The respondent spouses' response to the complaint was an amended answer with
counterclaim5 denying that the deed of sale was falsified. They impleaded the petitioner with
Josefa as counterclaim defendant on the allegation that the petitioner, at the instance of Josefa,
occupied Lot 1220-D and Lot 1220-E without their (the respondent spouses') authority; Lot
1220-E is theirs by inheritance while 1220-D had been sold to them by Josefa. They also
alleged that the petitioner acted in bad faith in acquiring the two (2) lots because he prepared
and notarized on September 26, 1986 the contract of lease over the whole of Lot 1220 between
all the Maglasang heirs (but excluding Josefa) and Vicente Tolo, with the lease running from
1986 to 1991; thus, the petitioner then knew that Josefa no longer owned Lot 1220-D.
Civil Case No. 12816 is a complaint that Menendez filed on April 4, 1996 with the RTC for the
declaration of the inexistence of lease contract, recovery of possession of land, and damages
against the petitioner and Josefa after the RTC dismissed the respondent spouses'
counterclaim in Civil Case No. 1239. The complaint alleged that Josefa, who had previously
sold Lot 1220-D to Menendez, leased it, together with Lot 1220-E, to the petitioner. Menendez
further averred that the petitioner and Josefa were in bad faith in entering their contract of lease
as they both knew that Josefa did not own the leased lots. Menendez prayed, among others,
that this lease contract between Josefa and the petitioner be declared null and void.
Josefa died on May 3, 1999 during the pendency of Civil Case Nos. B-1239 and B-1281.
On August 13, 1999, Atty. Zenen A. Puray ("Atty. Puray") - the petitioner's and Josefa's
common counsel - asked the RTC in Civil Case No. 1239 that he be given an extended period
or up to September 10, 1999 within which to file a formal notice of death and substitution of
party.
The RTC granted the motion in an order dated August 13, 1999.7 On August 26, 1999, Atty.
Puray filed with the RTC a notice of death and substitution of party,8 praying that Josefa - in his
capacity as plaintiff and third party counterclaim defendant - be substituted by the petitioner.

The submission alleged that prior to Josefa's death, she executed a Quitclaim Deed9 over Lot
1220-D in favor of Remismundo D. Maglasang10 who in turn sold this property to the petitioner.
Menendez, through counsel, objected to the proposed substitution, alleging that Atty. Puray filed
the notice of death and substitution of party beyond the thirty-day period provided under Section
16, Rule 3 of the 1997 Rules of Civil Procedure, as amended. She recommended instead that
Josefa be substituted by the latter's full-blood sister, Michaeles Maglasang Rodrigo
("Michaeles").
The RTC denied Atty. Puray's motion for substitution and instead ordered the appearance of
Michaeles as representative of the deceased Josefa. This Order provides:
WHEREFORE, in view of the foregoing, the motion is hereby DENIED for lack of merit and
instead order the appearance of Mrs. Mechailes Maglasang-Rodrigo of Brgy. Binulho,
Albuera, Leyte, as representative of the deceased Josefa Maglasang.
SO ORDERED.11

The RTC subsequently denied the petitioner's motion for reconsideration in an order12 dated
May 25, 2000.
The petitioner went to the CA on a petition for certiorari (docketed as CA-G.R. SP No. 59712) to
question the above interlocutory orders. In a Decision13 dated June 26, 2001, the CA dismissed
the petition for lack of merit. The appellate court similarly denied the petitioner's motion for
reconsideration in its Resolution14 dated September 4, 2001.
The present petition essentially claims that the CA erred in dismissing CA-G.R. No. SP 59712
since: (a) the property under litigation was no longer part of Josefa's estate since she was no
longer its owner at the time of her death; (b) the petitioner had effectively been subrogated to
the rights of Josefa over the property under litigation at the time she died; (c) without an estate,
the heir who was appointed by the lower court no longer had any interest to represent; (d) the
notice of death was seasonably submitted by the counsel of Josefa to the RTC within the
extended period granted; and (e) the petitioner is a transferee pendente lite who the courts
should recognize pursuant to Rule 3, Section 20 of the Rules of Court.
THE COURT'S RULING
We resolve to deny the petition for lack of merit.

The Governing Rule.

The rule on substitution in case of death of a party is governed by Section 16, Rule 3 of the
1997 Rules of Civil Procedure, as amended, which provides:
Section 16. Death of a party; duty of counsel. -Whenever a party to a pending action dies,
and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of counsel to comply with this
duty shall be a ground for disciplinary action.

The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing
party, within a specified time, to procure the appointment of an executor or administrator for
the estate of the deceased, and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing
party, may be recovered as costs. (Emphasis ours)

The purpose behind this rule is the protection of the right to due process of every party to the
litigation who may be affected by the intervening death. The deceased litigant is herself or
himself protected as he/she continues to be properly represented in the suit through the duly
appointed legal representative of his estate.15
Application of the Governing Rule.
a. Survival of the pending action
A question preliminary to the application of the above provision is whether Civil Case Nos. B1239 and B-1281 are actions that survive the death of Josefa. We said in Gonzalez v. Pagcor:16
"The criteria for determining whether an action survives the death of a plaintiff or petitioner
was elucidated upon in Bonilla v. Barcena (71 SCRA 491 (1976). as follows:
. . . The question as to whether an action survives or not depends on the nature of
the action and the damage sued for. In the causes of action which survive, the wrong
complained [of] affects primarily and principally property and property rights, the
injuries to the person being merely incidental, while in the causes of action which do
not survive, the injury complained of is to the person, the property and rights of
property affected being incidental. . . .

Since the question involved in these cases relate to property and property rights, then we are
dealing with actions that survive so that Section 16, Rule 3 must necessarily apply.
b. Duty of Counsel under the Rule.
The duty of counsel under the aforecited provision is to inform the court within thirty (30) days
after the death of his client of the fact of death, and to give the name and address of the
deceased's legal representative or representatives. Incidentally, this is the only representation
that counsel can undertake after the death of a client as the fact of death terminated any further
lawyer-client relationship.17
In the present case, it is undisputed that the counsel for Josefa did in fact notify the lower court,
although belatedly, of the fact of her death.18 However, he did as well inform the lower court that
-

"2. That before she died she executed a QUITCLAIM DEED in favor of REMISMUNDO D.
MAGLASANG over the land in question (Lot No. 1220-D of Benolho, Albuera, Leyte),
evidenced by a QUITCLAIM DEED, copy of which is hereto attached as Annex "B" who in
turn sold it in favor of JUDGE ANTONIO SUMALJAG, evidenced by a DEED OF ABSOLUTE
SALE, copy of which is hereto attached as Annex "C"."

Further, counsel asked that "the deceased Josefa Maglasang in her capacity as plaintiff and as
Third Party Counterclaim Defendant be substituted in the case at bar by JUDGE ANTONIO
SUMALJAG whose address is 38 Osmena Street, Ormoc City" pursuant to "Section 16, Rule 3
of the 1997 Rules of Civil Procedure".
This notification, although filed late, effectively informed the lower court of the death of litigant
Josefa Maglasang so as to free her counsel of any liability for failure to make a report of death
under Section 16, Rule 3 of the Rules of Court. In our view, counsel satisfactorily explained to
the lower court the circumstances of the late reporting, and the latter in fact granted counsel an
extended period. The timeliness of the report is therefore a non-issue.
The reporting issue that goes into the core of this case is whether counsel properly gave the
court the name and address of the legal representative of the deceased that Section 16, Rule 3
specifies. We rule that he did not. The "legal representatives" that the provision speaks of,
refer to those authorized by law - the administrator, executor or guardian19 who, under the rule
on settlement of estate of deceased persons,20 is constituted to take over the estate of the
deceased. Section 16, Rule 3 likewise expressly provides that "the heirs of the deceased may
be allowed to be substituted for the deceased, without requiring the appointment of an executor
or administrator . . .". Significantly, the person - now the present petitioner - that counsel gave
as substitute was not one of those mentioned under Section 16, Rule 3. Rather, he is a
counterclaim co-defendant of the deceased whose proferred justification for the requested
substitution is the transfer to him of the interests of the deceased in the litigation prior to her
death.
Under the circumstances, both the lower court and the CA were legally correct in not giving
effect to counsel's suggested substitute.
First, the petitioner is not one of those allowed by the Rules to be a substitute. Section 16, Rule
3 speaks for itself in this respect.
Second, as already mentioned above, the reason for the Rule is to protect all concerned who
may be affected by the intervening death, particularly the deceased and her estate. We note in
this respect that the Notice that counsel filed in fact reflects a claim against the interest of the
deceased through the transfer of her remaining interest in the litigation to another party.
Interestingly, the transfer is in favor of the very same person who is suggested to the court as
the substitute. To state the obvious, the suggested substitution effectively brings to naught the
protection that the Rules intend; plain common sense tells us that the transferee who has his
own interest to protect, cannot at the same time represent and fully protect the interest of the
deceased transferor.
Third, counsel has every authority to manifest to the court changes in interest that transpire in
the course of litigation. Thus, counsel could have validly manifested to the court the transfer of
Josefa's interests in the subject matter of litigation pursuant to Section 19, Rule 3. 21 But this can
happen only while the client-transferor was alive and while the manifesting counsel was still the

effective and authorized counsel for the client-transferor, not after the death of the client when
the lawyer-client relationship has terminated. The fact that the alleged transfer may have
actually taken place is immaterial to this conclusion, if only for the reason that it is not for
counsel, after the death of his client, to make such manifestation because he then has lost the
authority to speak for and bind his client. Thus, at most, the petitioner can be said to be a
transferee pendente lite whose status is pending with the lower court.
Lastly, a close examination of the documents attached to the records disclose that the subject
matter of the Quitclaim allegedly executed by Josefa in favor of Remismundo is Lot 1220-E,
while the subject matter of the deed of sale executed by Remismundo in the petitioner's favor is
Lot 1220-D. This circumstance alone raises the possibility that there is more than meets the eye
in the transactions related to this case.
c. The Heirs as Legal Representatives.
The CA correctly harked back to the plain terms of Section 16, Rule 3 in determining who the
appropriate legal representative/s should be in the absence of an executor or administrator. The
second paragraph of the Section 16, Rule 3 of the 1997 Rules of Court, as amended, is clear the heirs of the deceased may be allowed to be substituted for the deceased, without requiring
the appointment of an executor or administrator. Our decisions on this matter have been clear
and unequivocal. In San Juan, Jr. v. Cruz, this Court held:
The pronouncement of this Court in Lawas v. Court of Appeals x x x that priority is given to
the legal representative of the deceased (the executor or administrator) and that it is only in
case of unreasonable delay in the appointment of an executor or administrator, or in cases
where the heirs resort to an extra-judicial settlement of the estate that the court may adopt
the alternative of allowing the heirs of the deceased to be substituted for the deceased, is no
longer true.22 (Emphasis ours)

We likewise said in Gochan v. Young: 23

For the protection of the interests of the decedent, this Court has in previous instances
recognized the heirs as proper representatives of the decedent, even when there is already an
administrator appointed by the court. When no administrator has been appointed, as in this
case, there is all the more reason to recognize the heirs as the proper representatives of the
deceased.
Josefa's death certificate24 shows that she was single at the time of her death. The records do
not show that she left a will. Therefore, as correctly held by the CA, in applying Section 16, Rule
3, her heirs are her surviving sisters (Michaelis, Maria, Zosima, and Consolacion) and the
children of her deceased sister, Lourdes (Manuel, Cesar, Huros and Regulo) who should be her
legal representatives. Menendez, although also a sister, should be excluded for being one of the
adverse parties in the cases before the RTC.
WHEREFORE, premises considered, we DENY the petition for lack of merit. We AFFIRM the
Court of Appeals decision that the surviving heirs of the deceased Josefa - namely Michaelis M.
Rodrigo; Maria M. Cecilio; Zosima D. Maglasang; Consolacion M. Bag-aw; and the children of
Lourdes M. Lumapas, namely Manuel Lumapas, Cesar Lumapas, Huros Lumapas and Regulo
Maquilan - should be her substitutes and are hereby so ordered to be substituted for her in Civil
Case Nos. B-1239 and B-1281.

Costs against the petitioner.

SO ORDERED.

CRISOLOGO C. DOMINGO,
Petitioner,

G.R. No. 170015

Present:
QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

- versus -

SEVERINO AND RAYMUNDO

LANDICHO,
JULIAN
ABELLO, MARTA DE SAGUN
AND EDITHA G. SARMIENTO,
Respondents.

Promulgated:
August 29, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO MORALES, J.:
Crisologo C. Domingo (Domingo) filed on April 20, 1993 with the Regional
Trial Court (RTC) of Tagaytay City an application for registration,[1] docketed as
LRC No. TG-451, of five parcels of land delineated as Lot Nos. 7513, 7515, 7516,
7517 and 7518, Cad. 355 under Approved Survey Plan AS-04-002475[2] (the lots).
The lots, which are located at Barangay Tolentino, Tagaytay, have a total
land area of 38,975 square meters.
In his application, Domingo claimed that he bought the lots
from Genoveva Manlapit (Genoveva) in 1948 and has since been in continuous,

open, public, adverse and uninterrupted possession thereof in the concept of an

owner.
Domingo further claimed that prior to his purchase of the lots, Genoveva had
been in possession thereof in the concept of an owner for more than 30 years.[3]
To Domingos application the following documents were attached:
1.
Tracing Cloth of Approved Plan AS-04-002475 (surveyed
from September 24, 1963 to February 13, 1964 and approved
on December 12, 1990).[4]
2.

3.

Photocopy of the Technical Description of Lot Nos. 7513, 7515,

7516, 7517, and 7518.[5]
Photocopy of the Geodetic Engineers Certificate.[6]

4.

Owners Copy of Tax Declaration Nos. GR-019-0893-R

(covering Lot 7513), GR-019-0894-R (covering Lot 7515), GR019-0895-R
(covering Lot 7516),
GR-019-0896-R
(covering Lot 7517), GR-019-0897-R (covering Lot 7518), all
dated January 7, 1993 and in the name of Crisologo C. Domingo.[7]

5.

Land Management Inspectors 2nd Indorsement dated October 22,

1990 recommending approval of AS-Plan.[8]

The Land Registration Authority (LRA), which filed before the RTC its
Report[9] dated September 27, 1993, stated that after plotting Plan AS-04-002475
in the Municipal Index Sheet thru its tie lines, a discrepancy was noted. The RTC
thus referred the matter to the Lands Management Sector, Region IV for
verification and correction.
Acting on the directive of the RTC, the Director of Lands filed a Report that
per records of the Lands Management Bureau in Manila, the land involved in said
case was not covered by any land patent or by public land application pending
issuance of patent. [10]

The LRA later filed a Supplementary Report[11] dated December 22,

1993 stating that:

2.

xxxx
The Regional Technical Director, Region Office IV, thru the Chief,
Surveys Division, Robert C. Pangyarihan in his letter dated
November 22, 1993, a copy is attached hereto as Annex A,
informed that per records on file in that Office, the correct adjoining
survey along line 8-9 of Lot 7516 and along lines 3-4-5 of Lot 7515
should be Lot 9237 Cad-355, covered by As-04-000091 and that the
parcel of land covered by As-04-002475 are not portions of or
identical to any previously approved isolated survey; and

3. When the above-furnished correction was applied on plan As-04002475 no more discrepancy exists.
xxxx

On
November
26,
1993,
herein
respondents Severino and Raymundo Landicho, Julian Abello, Marta de Sagun,
and Editha G. Sarmiento filed an Answer/Opposition[12] to Domingos application,
claiming that they have been in open, continuous, adverse and actual possession
and cultivation of the lots in the concept of an owner and have been paying real
estate taxes thereon;[13] and that Survey Plan AS-04-002475 was lifted from the
cadastral survey of the government which was surveyed for them and other
individual owners.[14]
During the pendency of his application or on March 9, 1996, Domingo
died. His counsel, Atty. Irineo Anarna, did not, however, inform the RTC of his
death.
By Decision[15] of December 22, 1997, the RTC approved Domingos
application for registration, the dispositive portion of which reads:
WHEREFORE, in the light of the foregoing premises and
considerations, this Court hereby renders judgment approving the instant
application for registration and thus places under the operation of Act
141, Act 496 and/or P.D. 1529, otherwise known as the Property
Registration Law, the lands described in Plan AS-04-002475 as Lots

7513, 7515, 7516, 7517 and 7518, Cad-355, Tagaytay Cadastre,

containing an area of 10,519 square meters, 3, 956 square meters, 18,
921 square meters, 3, 985 square meters and 1, 594 square meters,
respectively, as supported by their technical descriptions now forming
parts of the records of this case, in addition to other proofs adduced, in
the name of CRISOLOGO C. DOMINGO, Filipino, of legal age,
married to Corazon A. Domingo, and with residence at No. 34 Dao St.,
Project 3, Quezon City, Metro Manila.
Once this decision becomes final and executory,
corresponding decree of registration shall forthwith issue.

the

SO ORDERED.[16]

Respondents appealed to the Court of Appeals, contending that contrary to

Domingos claim that he and his predecessors-in-interest have been in actual,
continuous and uninterrupted possession of the lots, Domingo has always been a
resident of No. 34 Dao St., Project 3, Quezon City; that despite Domingos claim
that he has a caretaker overseeing the lots, he could not even give the name of the
caretaker; and that Domingo admittedly declared the lots in his name only in 1993.
By Decision[17] of June 30, 2005, the Court of Appeals reversed and set
aside the RTC decision and dismissed Domingos application for registration of
land title.
The appellate court ruled that while Domingo sought judicial confirmation
of his imperfect title under the Public Land Act and Section 14 (1) of Presidential
Decree (P.D.) No. 1529, THE PROPERTY REGISTRATION DECREE, he
failed to prove that he and his predecessors-in-interest had been in possession and
occupation of the lots under a bona fide claim of ownership since June 12, 1945 or
earlier.[18]
And the appellate court noted that Domingo failed to present the alleged
deed of sale executed by Genoveva[19] and could only prove through his Tax
Declaration No. 0298 (new) that his possession in the concept of an owner started
only in 1948 (Exhibit L, Records, p. 117).

Domingos Motion for Reconsideration having been denied by the appellate

court, the present petition was lodged, faulting the appellate court:
I
. . . x x x x WHEN IT LIMITED CONSIDERATION OF THE
MATTERS ESTABLISHED IN THE APPLICATION TO SECTION 48
(B) OF THE PUBLIC LAND ACT AND SECTION 14 (1) OF PD 1529.
II
. . . x x x WHEN IT HELD THAT PETITIONER IS NOT ENTITLED
FOR REGISTRATION OF TITLE OVER THE SUBJECT LAND,
NOTWITHSTANDING THE FACT THAT THE EVIDENCE ON
RECORD CLEARLY ESTABLISHED HIS ENTITLEMENT [TO]
REGISTRATION OF TITLE OVER THE LAND UNDER SECTION
14 (1) AND (4) OF PD 1529.[20] (Underscoring supplied)

Domingos present counsel argues that assuming that Domingo failed to

establish his possession from June 12, 1945 or earlier in accordance with Section
14(1) of P.D. No. 1529, he is still entitled to registration of title under Article
1113[21]in relation to Article 1137[22] of the Civil Code.[23]
In their Comment[24] to the present petition, respondents pray for its denial
for being substantially defective, Domingos death not having been alleged, albeit
the Verification and Certification against Forum Shopping was signed by
Domingos alleged Surviving Spouse and Heirs.[25]
To respondents Comment, Domingos counsel filed a Reply[26] stating that
there is no clearer manifestation of the death of Domingo than the statement under
oath of his surviving spouse and heirs in substitution of deceased CRISOLOGO
C. DOMINGO contained in the Verification and Certification against Forum
Shopping which forms part of the present petition.[27] Nonetheless, the counsel
presented a certified true copy of Domingos death certificate[28] showing that he
died on March 9, 1996 (during the pendency of his application before the RTC as
earlier stated).

The petition is bereft of merit.

Section 14 (1) of P.D. No. 1529 provides:
Sec. 14. Who may apply. The following persons may file in the proper
Court of First Instance an application for registration of title to land,
whether personally or through their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest
have been in open, continuous, exclusive and notorious possession
and occupation of alienable and disposable lands of the public
domain under a bona fide claim of ownership since June 12, 1945, or
earlier.[29] (Underscoring supplied)
To thus be entitled to registration of a land, the applicant must prove that (a)
the land applied for forms part of the disposable and alienable agricultural lands of
the public domain; and (b) he has been in open, continuous, exclusive, and
notorious possession and occupation of the same under a bona fide claim of
ownership either since time immemorial or since June 12, 1945.[30]

All lands not otherwise appearing to be clearly within private ownership are
presumed to belong to the State, and unless it has been shown that they have been
reclassified by the State as alienable or disposable to a private person, they remain
part of the inalienable public domain.[31]
To prove that a land is alienable, an applicant must conclusively establish
the existence of a positive act of the government, such as a presidential
proclamation or an executive order, or administrative action, investigation reports
of the Bureau of Lands investigator or a legislative act or statute.[32]
While
petitioner
presented
a
document
denominated
as
[33]
2 Indorsement issued by Land Management Inspector Amadeo Mediran that
the lots are within the alienable and disposable zone under Project No. 3 LSC3113 issued on April 5, 1978 as certified by the Director of the Forest
Development, the genuineness of the document cannot be ascertained, it being a
mere photocopy. Besides, the truth of its contents cannot be
ascertained, Mediran having failed to take the witness stand to identify and testify
thereon.
nd

In fine, Domingo failed to adduce incontrovertible evidence[34] showing that

the lots have been declared alienable. They are thus presumed to belong to the
public domain, beyond the commerce of man, and are not susceptible of private
appropriation and acquisitive prescription.
But even assuming arguendo that the lots are alienable, Domingo failed to
comply with the requirement on the period of possession. While he alleged in his
petition that he bought the lots from Genoveva in 1948, he failed, as the appellate
court correctly noted, to adduce the deed of sale executed for the purpose, or to
explain the reason behind the failure and to present sufficient evidence to prove the
fact of sale.
Again, even assuming arguendo that the lots were indeed sold to him
by Genoveva, Domingo failed to adduce proof that Genoveva, from whom he
seeks to tack his possession, acquired registrable title over them on June 12,
1945 or earlier. Under the same assumption, Domingos claim that he has been in
actual, continuous, adverse and open possession of the lots in the concept of an
owner since 1948 is a conclusion of law which must be substantiated with proof of
specific acts of ownership and factual evidence of possession.[35]
An examination of the tax receipts[36] presented by Domingo shows that they
are of recent vintage, the earliest being dated January 8, 1993.
Tax Declaration Nos. 0298, GR-019-0884, and GR-019-0885,[37] which
appear to have been issued in 1947 [sic], 1964, and 1968, respectively, contain the
declaration Filed under Presidential Decree No. 464 below the title Declaration
of Real Property. P.D. No. 464, THE REAL PROPERTY TAX CODE, took
effect, however, only on June 1, 1974. Specifically with respect to the first tax
declaration, it even shows that Domingo subscribed and swore to it on August 1,
1947 at which time he had not bought the lot yet, in 1948 by his claim.
A note on Domingos death during the pendency of his application at the
RTC. Indeed, the records do not show that his death on March 9, 1996 was
brought to the RTCs attention, which is not in accordance with Sections 16 and
17, Rule 3 of the 1994 Rules of Court, viz:

SEC. 16. Duty of attorney upon death, incapacity, or incompetency of

party. Whenever a party to a pending case dies, becomes
incapacitated or incompetent, it shall be the duty of his attorney to
inform the court promptly of such death, incapacity or incompetency,
and to give the name and residence of his executor, administrator,
guardian
or
other
legal
representative. (Italics
in
the
original; underscoring supplied)
SEC. 17. Death of party. After a party dies and the claim is not
thereby extinguished, the court shall order, upon proper notice, the legal
representative of the deceased to appear and to be substituted for the
deceased, within a period of thirty (30) days, or within such time as may
be granted. If the legal representative fails to appear within said time,
the court may order the opposing party to procure the appointment of a
legal representative of the deceased within a time to be specified by the
court, and the representative shall immediately appear for and on behalf
of the interest of the deceased. The court charges involved in procuring
such appointment, if defrayed by the opposing party, may be recovered
as costs. The heirs of the deceased may be allowed to be substituted for
the deceased, without requiring the appointment of an executor or
administrator and the court may appoint guardian ad litem for the minor
heirs. (Italics in the original; underscoring supplied)

When a party dies in an action that survives and no order is issued by the
court for the appearance of the legal representative or of the heirs of the deceased
in substitution of the deceased, and as a matter of fact no substitution has ever been
effected, the proceedings held by the court without such legal representatives or
heirs and the judgment rendered after such trial are null and void because the court
acquired no jurisdiction over the person of the legal representative or of the heirs
upon whom the trial and judgment would be binding.[38]
Unlike, however, jurisdiction over the subject matter which is conferred by
law, jurisdiction over the person of the parties to the case may, however, be waived
either expressly or impliedly.[39] In the case at bar, the surviving heirs voluntarily
submitted themselves to the jurisdiction of this Court, albeit belatedly, by
participating in the present petition.

Under the now amended Section 16, Rule 3 of the 1997 Rules of Court,
failure of a counsel to comply with the provision thereof is a ground for
disciplinary action, viz:
SEC. 16. Death of party; duty of counsel. Whenever a party to a pending action dies,
and the claim is not thereby extinguished, it shall be the duty of his counsel to inform the
court within thirty (30) days after such death of the fact thereof, and to give the name and
address of his legal representative or representatives. Failure of counsel to comply with
this duty shall be a ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased,
without requiring the appointment of an executor or administrator and the court may
appoint a guardian ad litem for the minor heirs.
The court shall forthwith order said legal representative or representatives to
appear and be substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the
one so named shall fail to appear within the specified period, the court may order the
opposing party, within a specified time, to procure the appointment of an executor or
administrator for the estate of the deceased and the latter shall immediately appear for
and on behalf of the deceased. The court charges in procuring such appointment, if
defrayed by the opposing party, may be recovered as costs. (Italics in the
original; underscoring supplied)

The failure of Domingos former counsel, Atty. Irineo A. Anarna of No.

4 Madlansacay St., Poblacion Lilang 4118 Cavite, to comply with the immediately
quoted provisions of the Rules, is compounded by his misrepresentation, before the
CA, that Domingo was well and alive when he stated in his Motion to Withdraw
Appearance as Counsel[40] dated July 8, 2004 that the motion for withdrawal
[was] conformed to by Mrs. Rosemarie Manlapit Zamora, representative of the
applicantas shown by her signature . . . and that Mrs. Rosemarie Zamora also
undertakes to personally seek the conformity of the Applicant (Underscoring
supplied); and by his retaining of the name of Domingo in the title of his pleadings
before the appellate court.
Canon 10 of the Code of Professional Responsibility provides that a lawyer
owes candor, fairness and good faith to the court. Rule 10.01 likewise provides
that a lawyer shall do no falsehood, nor consent to the doing of any in court; nor
shall he mislead, or allow the court to be mislead by any artifice. And Rule 10.03

provides that a lawyer shall observe the rules of procedure and shall not misuse
them to defeat the ends of justice.
This Court thus takes this occasion to warn Atty. Anarna that a repetition of
a similar violation of the Rules of Court and the Code of Professional
Responsibility will be dealt with strictly.
WHEREFORE,
discussion, DENIED.

the

petition

is,

in

light

of

the

foregoing

Let a copy of this Decision be furnished Atty. Irineo A. Anarna of No.

4 Madlansacay St., Poblacion Lilang, 4118 Cavite.
SO ORDERED.

G.R. No. 160426

January 31, 2008

CAPITOLINA VIVERO NAPERE, petitioner,

vs.
AMANDO BARBARONA and GERVACIA MONJAS BARBARONA, respondents.
RESOLUTION
NACHURA, J.:
Petitioner Capitolina Vivero Napere interposes this petition for review to assail the Court of
Appeals Decision1dated October 9, 2003, which upheld the validity of the Regional Trial Courts
decision despite failure to formally order the substitution of the heirs of the deceased defendant,
petitioners husband.
The case stems from the following antecedents:
Respondent Amando Barbarona is the registered owner of Lot No. 3177, situated
in Barangay San Sotero (formerly Tambis), Javier, Leyte and covered by Original Certificate of
Title (OCT) No. P-7350. Lot No. 3176, covered by OCT No. 1110 in the name of Anacleto
Napere, adjoins said lot on the northeastern side. After Anacleto died, his son, Juan Napere,
and the latters wife, herein petitioner, planted coconut trees on certain portions of the property
with the consent of his co-heirs.

In their complaint, respondents alleged that in April 1980, the spouses Napere, their relatives
and hired laborers, by means of stealth and strategy, encroached upon and occupied the
northeastern portion of Lot No. 3177; that the Naperes harvested the coconut fruits thereon,
appropriated the proceeds thereof, and, despite demands, refused to turn over possession of
the area; that in April 1992, a relocation survey was conducted which confirmed that the
respondents property was encroached upon by the Naperes; that on the basis of the relocation
survey, the respondents took possession of this encroached portion of the lot and harvested the
fruits thereon from April 1993 to December 1993; but that in January 1994, the Naperes
repeated their acts by encroaching again on the respondents property, harvesting the coconuts
and appropriating the proceeds thereof, and refusing to vacate the property on demand.
On November 10, 1995, while the case was pending, Juan Napere died. Their counsel informed
the court of Juan Naperes death, and submitted the names and addresses of Naperes heirs.
At the pre-trial, the RTC noted that the Naperes were not contesting the respondents right of
possession over the disputed portion of the property but were demanding the rights of a planter
in good faith under Articles 445 and 455 of the Civil Code.
On October 17, 1996, the RTC rendered a Decision against the estate of Juan Napere, thus:
WHEREFORE, this Court finds in favor of the plaintiff and against the defendant, hereby
declaring the following:
a) The estate of Juan Napere is liable to pay the amount of ONE HUNDRED SEVENTYNINE THOUSAND TWO HUNDRED (P179,200.00) PESOS in actual damages;
b) The estate of Juan Napere shall be liable to pay FIVE THOUSAND (P5,000.00) PESOS in
litigation expenses, and the
c) Cost[s] of suit.
SO ORDERED.2

Petitioner appealed the case to the Court of Appeals (CA), arguing, inter alia, that the judgment
of the trial court was void for lack of jurisdiction over the heirs who were not ordered substituted
as party-defendants for the deceased.
On October 9, 2003, the CA rendered a Decision affirming the RTC Decision.3 The appellate
court held that failure to substitute the heirs for the deceased defendant will not invalidate the
proceedings and the judgment in a case which survives the death of such party.
Thus, this petition for review where the only issue is whether or not the RTC decision is void for
lack of jurisdiction over the heirs of Juan Napere. Petitioner alleges that the trial court did not
acquire jurisdiction over the persons of the heirs because of its failure to order their substitution
pursuant to Section 17,4 Rule 3 of the Rule of Court; hence, the proceedings conducted and the
decision rendered by the trial court are null and void.
The petition must fail.

When a party to a pending case dies and the claim is not extinguished by such death, the Rules
require the substitution of the deceased party by his legal representative or heirs. In such case,
counsel is obliged to inform the court of the death of his client and give the name and address of
the latters legal representative.
The complaint for recovery of possession, quieting of title and damages is an action that
survives the death of the defendant. Notably, the counsel of Juan Napere complied with his duty
to inform the court of his clients death and the names and addresses of the heirs. The trial
court, however, failed to order the substitution of the heirs. Nonetheless, despite this oversight,
we hold that the proceedings conducted and the judgment rendered by the trial court are valid.
The Court has repeatedly declared that failure of the counsel to comply with his duty to inform
the court of the death of his client, such that no substitution is effected, will not invalidate the
proceedings and the judgment rendered thereon if the action survives the death of such
party.5 The trial courts jurisdiction over the case subsists despite the death of the party.
Mere failure to substitute a deceased party is not sufficient ground to nullify a trial courts
decision. The party alleging nullity must prove that there was an undeniable violation of due
process.6
Strictly speaking, the rule on substitution by heirs is not a matter of jurisdiction, but a
requirement of due process.7 The rule on substitution was crafted to protect every partys right
to due process.8 It was designed to ensure that the deceased party would continue to be
properly represented in the suit through his heirs or the duly appointed legal representative of
his estate.9 Moreover, non-compliance with the Rules results in the denial of the right to due
process for the heirs who, though not duly notified of the proceedings, would be substantially
affected by the decision rendered therein.10 Thus, it is only when there is a denial of due
process, as when the deceased is not represented by any legal representative or heir, that the
court nullifies the trial proceedings and the resulting judgment therein.11
Formal substitution by heirs is not necessary when they themselves voluntarily appear,
participate in the case, and present evidence in defense of the deceased.12 In such case, there
is really no violation of the right to due process. The essence of due process is the reasonable
opportunity to be heard and to submit any evidence available in support of ones
defense.13 When due process is not violated, as when the right of the representative or heir is
recognized and protected, noncompliance or belated formal compliance with the Rules cannot
affect the validity of a promulgated decision.14
In light of these pronouncements, we cannot nullify the proceedings before the trial court and
the judgment rendered therein because the petitioner, who was, in fact, a co-defendant of the
deceased, actively participated in the case. The records show that the counsel of Juan Napere
and petitioner continued to represent them even after Juans death. Hence, through counsel,
petitioner was able to adequately defend herself and the deceased in the proceedings below.
Due process simply demands an opportunity to be heard and this opportunity was not denied
petitioner.
Finally, the alleged denial of due process as would nullify the proceedings and the judgment
thereon can be invoked only by the heirs whose rights have been violated. Violation of due
process is a personal defense that can only be asserted by the persons whose rights have been
allegedly violated.15 Petitioner, who had every opportunity and who took advantage of such

opportunity, through counsel, to participate in the trial court proceedings, cannot claim denial of
due process.
WHEREFORE, premises considered, the petition is DENIED DUE COURSE. The Decision of
the Court of Appeals, dated October 9, 2003, in CA-G.R. CV No. 56457, is AFFIRMED.
SO ORDERED.

G.R. No. 150135

October 30, 2006

SPOUSES ANTONIO F. ALGURA and LORENCITA S.J. ALGURA, petitioners,

vs.
THE LOCAL GOVERNMENT UNIT OF THE CITY OF NAGA, ATTY. MANUEL TEOXON,
ENGR. LEON PALMIANO, NATHAN SERGIO and BENJAMIN NAVARRO, SR., respondents.

DECISION

VELASCO, JR., J.:

Anyone who has ever struggled with poverty
knows how extremely expensive it is to be poor.
James Baldwin
The Constitution affords litigantsmoneyed or poorequal access to the courts; moreover, it
specifically provides that poverty shall not bar any person from having access to the
courts.1 Accordingly, laws and rules must be formulated, interpreted, and implemented pursuant
to the intent and spirit of this constitutional provision. As such, filing fees, though one of the
essential elements in court procedures, should not be an obstacle to poor litigants' opportunity
to seek redress for their grievances before the courts.
The Case
This Petition for Review on Certiorari seeks the annulment of the September 11, 2001 Order of
the Regional Trial Court (RTC) of Naga City, Branch 27, in Civil Case No. 99-4403
entitled Spouses Antonio F. Algura and Lorencita S.J. Algura v. The Local Government Unit of
the City of Naga, et al., dismissing the case for failure of petitioners Algura spouses to pay the
required filing fees.2 Since the instant petition involves only a question of law based on facts

established from the pleadings and documents submitted by the parties,3 the Court gives due
course to the instant petition sanctioned under Section 2(c) of Rule 41 on Appeal from the
RTCs, and governed by Rule 45 of the 1997 Rules of Civil Procedure.
The Facts
On September 1, 1999, spouses Antonio F. Algura and Lorencita S.J. Algura filed a Verified
Complaint dated August 30, 19994 for damages against the Naga City Government and its
officers, arising from the alleged illegal demolition of their residence and boarding house and for
payment of lost income derived from fees paid by their boarders amounting to PhP 7,000.00
monthly.
Simultaneously, petitioners filed an Ex-Parte Motion to Litigate as Indigent Litigants,5 to which
petitioner Antonio Algura's Pay Slip No. 2457360 (Annex "A" of motion) was appended, showing
a gross monthly income of Ten Thousand Four Hundred Seventy Four Pesos (PhP 10,474.00)
and a net pay of Three Thousand Six Hundred Sixteen Pesos and Ninety Nine Centavos (PhP
3,616.99) for [the month of] July 1999.6 Also attached as Annex "B" to the motion was a July 14,
1999 Certification7 issued by the Office of the City Assessor of Naga City, which stated that
petitioners had no property declared in their name for taxation purposes.
Finding that petitioners' motion to litigate as indigent litigants was meritorious, Executive Judge
Jose T. Atienza of the Naga City RTC, in the September 1, 1999 Order,8 granted petitioners'
plea for exemption from filing fees.
Meanwhile, as a result of respondent Naga City Government's demolition of a portion of
petitioners' house, the Alguras allegedly lost a monthly income of PhP 7,000.00 from their
boarders' rentals. With the loss of the rentals, the meager income from Lorencita Algura's sarisari store and Antonio Algura's small take home pay became insufficient for the expenses of the
Algura spouses and their six (6) children for their basic needs including food, bills, clothes, and
schooling, among others.
On October 13, 1999, respondents filed an Answer with Counterclaim dated October 10,
1999,9 arguing that the defenses of the petitioners in the complaint had no cause of action, the
spouses' boarding house blocked the road right of way, and said structure was a nuisance per
se.
Praying that the counterclaim of defendants (respondents) be dismissed, petitioners then filed
their Reply withEx-Parte Request for a Pre-Trial Setting10 before the Naga City RTC on October
19, 1999. On February 3, 2000, a pre-trial was held wherein respondents asked for five (5) days
within which to file a Motion to Disqualify Petitioners as Indigent Litigants.
On March 13, 2000, respondents filed a Motion to Disqualify the Plaintiffs for Non-Payment of
Filing Fees dated March 10, 2000.11 They asserted that in addition to the more than PhP
3,000.00 net income of petitioner Antonio Algura, who is a member of the Philippine National
Police, spouse Lorencita Algura also had a mini-store and a computer shop on the ground floor
of their residence along Bayawas St., Sta. Cruz, Naga City. Also, respondents claimed that
petitioners' second floor was used as their residence and as a boarding house, from which they
earned more than PhP 3,000.00 a month. In addition, it was claimed that petitioners derived
additional income from their computer shop patronized by students and from several boarders

who paid rentals to them. Hence, respondents concluded that petitioners were not indigent
litigants.
On March 28, 2000, petitioners subsequently interposed their Opposition to the Motion12 to
respondents' motion to disqualify them for non-payment of filing fees.
On April 14, 2000, the Naga City RTC issued an Order disqualifying petitioners as indigent
litigants on the ground that they failed to substantiate their claim for exemption from payment of
legal fees and to comply with the third paragraph of Rule 141, Section 18 of the Revised Rules
of Courtdirecting them to pay the requisite filing fees.13
On April 28, 2000, petitioners filed a Motion for Reconsideration of the April 14, 2000 Order. On
May 8, 2000, respondents then filed their Comment/Objections to petitioner's Motion for
Reconsideration.
On May 5, 2000, the trial court issued an Order14 giving petitioners the opportunity to comply
with the requisites laid down in Section 18, Rule 141, for them to qualify as indigent litigants.
On May 13, 2000, petitioners submitted their Compliance15 attaching the affidavits of petitioner
Lorencita Algura16 and Erlinda Bangate,17 to comply with the requirements of then Rule 141,
Section 18 of the Rules of Court and in support of their claim to be declared as indigent litigants.
In her May 13, 2000 Affidavit, petitioner Lorencita Algura claimed that the demolition of their
small dwelling deprived her of a monthly income amounting to PhP 7,000.00. She, her husband,
and their six (6) minor children had to rely mainly on her husband's salary as a policeman which
provided them a monthly amount of PhP 3,500.00, more or less. Also, they did not own any real
property as certified by the assessor's office of Naga City. More so, according to her, the
meager net income from her small sari-sari store and the rentals of some boarders, plus the
salary of her husband, were not enough to pay the family's basic necessities.
To buttress their position as qualified indigent litigants, petitioners also submitted the affidavit of
Erlinda Bangate, who attested under oath, that she personally knew spouses Antonio Algura
and Lorencita Algura, who were her neighbors; that they derived substantial income from their
boarders; that they lost said income from their boarders' rentals when the Local Government
Unit of the City of Naga, through its officers, demolished part of their house because from that
time, only a few boarders could be accommodated; that the income from the small store, the
boarders, and the meager salary of Antonio Algura were insufficient for their basic necessities
like food and clothing, considering that the Algura spouses had six (6) children; and that she
knew that petitioners did not own any real property.
Thereafter, Naga City RTC Acting Presiding Judge Andres B. Barsaga, Jr. issued his July 17,
200018 Order denying the petitioners' Motion for Reconsideration.
Judge Barsaga ratiocinated that the pay slip of Antonio F. Algura showed that the "GROSS
INCOME or TOTAL EARNINGS of plaintiff Algura [was] 10,474.00 which amount [was] over
and above the amount mentioned in the first paragraph of Rule 141, Section 18 for pauper
litigants residing outside Metro Manila."19 Said rule provides that the gross income of the litigant
should not exceed PhP 3,000.00 a month and shall not own real estate with an assessed value
of PhP 50,000.00. The trial court found that, in Lorencita S.J. Algura's May 13, 2000 Affidavit,

nowhere was it stated that she and her immediate family did not earn a gross income of PhP
3,000.00.
The Issue
Unconvinced of the said ruling, the Alguras instituted the instant petition raising a solitary issue
for the consideration of the Court: whether petitioners should be considered as indigent litigants
who qualify for exemption from paying filing fees.
The Ruling of the Court
The petition is meritorious.
A review of the history of the Rules of Court on suits in forma pauperis (pauper litigant) is
necessary before the Court rules on the issue of the Algura spouses' claim to exemption from
paying filing fees.
When the Rules of Court took effect on January 1, 1964, the rule on pauper litigants was found
in Rule 3, Section 22 which provided that:
Section 22. Pauper litigant.Any court may authorize a litigant to prosecute his action or
defense as a pauper upon a proper showing that he has no means to that effect by affidavits,
certificate of the corresponding provincial, city or municipal treasurer, or otherwise. Such
authority[,] once given[,] shall include an exemption from payment of legal fees and from
filing appeal bond, printed record and printed brief. The legal fees shall be a lien to any
judgment rendered in the case [favorable] to the pauper, unless the court otherwise provides.

From the same Rules of Court, Rule 141 on Legal Fees, on the other hand, did not contain any
provision on pauper litigants.
On July 19, 1984, the Court, in Administrative Matter No. 83-6-389-0 (formerly G.R. No. 64274),
approved the recommendation of the Committee on the Revision of Rates and Charges of Court
Fees, through its Chairman, then Justice Felix V. Makasiar, to revise the fees in Rule 141 of the
Rules of Court to generate funds to effectively cover administrative costs for services rendered
by the courts.20 A provision on pauper litigants was inserted which reads:
Section 16. Pauper-litigants exempt from payment of court fees.Pauper-litigants include
wage earners whose gross income do not exceed P2,000.00 a month or P24,000.00 a year
for those residing in Metro Manila, and P1,500.00 a month or P18,000.00 a year for those
residing outside Metro Manila, or those who do not own real property with an assessed value
of not more than P24,000.00, or not more than P18,000.00 as the case may be.
Such exemption shall include exemption from payment of fees for filing appeal bond, printed
record and printed brief.
The legal fees shall be a lien on the monetary or property judgment rendered in favor of the
pauper-litigant.
To be entitled to the exemption herein provided, the pauper-litigant shall execute an affidavit
that he does not earn the gross income abovementioned, nor own any real property with the

assessed value afore-mentioned [sic], supported by a certification to that effect by the

provincial, city or town assessor or treasurer.

When the Rules of Court on Civil Procedure were amended by the 1997 Rules of Civil
Procedure (inclusive of Rules 1 to 71) in Supreme Court Resolution in Bar Matter No. 803 dated
April 8, 1997, which became effective on July 1, 1997, Rule 3, Section 22 of the Revised Rules
of Court was superseded by Rule 3, Section 21 of said 1997 Rules of Civil Procedure, as
follows:
Section 21. Indigent party.A party may be authorized to litigate his action, claim or
defense as an indigent if the court, upon an ex parte application and hearing, is satisfied that
the party is one who has no money or property sufficient and available for food, shelter and
basic necessities for himself and his family.
Such authority shall include an exemption from payment of docket and other lawful fees, and
of transcripts of stenographic notes which the court may order to be furnished him. The
amount of the docket and other lawful fees which the indigent was exempted from paying
shall be a lien on any judgment rendered in the case favorable to the indigent, unless the
court otherwise provides.
Any adverse party may contest the grant of such authority at any time before judgment is
rendered by the trial court. If the court should determine after hearing that the party declared
as an indigent is in fact a person with sufficient income or property, the proper docket and
other lawful fees shall be assessed and collected by the clerk of court. If payment is not
made within the time fixed by the court, execution shall issue for the payment thereof,
without prejudice to such other sanctions as the court may impose.

At the time the Rules on Civil Procedure were amended by the Court in Bar Matter No. 803,
however, there was no amendment made on Rule 141, Section 16 on pauper litigants.
On March 1, 2000, Rule 141 on Legal Fees was amended by the Court in A.M. No. 00-2-01-SC,
whereby certain fees were increased or adjusted. In this Resolution, the Court amended Section
16 of Rule 141, making it Section 18, which now reads:
Section 18. Pauper-litigants exempt from payment of legal fees.Pauper litigants (a) whose
gross income and that of their immediate family do not exceed four thousand (P4,000.00)
pesos a month if residing in Metro Manila, and three thousand (P3,000.00) pesos a month if
residing outside Metro Manila, and (b) who do not own real property with an assessed value
of more than fifty thousand (P50,000.00) pesos shall be exempt from the payment of legal
fees.
The legal fees shall be a lien on any judgment rendered in the case favorably to the pauper
litigant, unless the court otherwise provides.
To be entitled to the exemption herein provided, the litigant shall execute an affidavit that he
and his immediate family do not earn the gross income abovementioned, nor do they own
any real property with the assessed value aforementioned, supported by an affidavit of a
disinterested person attesting to the truth of the litigant's affidavit.

Any falsity in the affidavit of a litigant or disinterested person shall be sufficient cause to
strike out the pleading of that party, without prejudice to whatever criminal liability may have
been incurred.

It can be readily seen that the rule on pauper litigants was inserted in Rule 141 without
revoking or amendingSection 21 of Rule 3, which provides for the exemption of pauper
litigants from payment of filing fees. Thus, on March 1, 2000, there were two existing rules on
pauper litigants; namely, Rule 3, Section 21 and Rule 141, Section 18.
On August 16, 2004, Section 18 of Rule 141 was further amended in Administrative Matter No.
04-2-04-SC, which became effective on the same date. It then became Section 19 of Rule 141,
to wit:
Sec. 19. Indigent litigants exempt from payment of legal fees. INDIGENT LITIGANTS
(A) WHOSE GROSS INCOME AND THAT OF THEIR IMMEDIATE FAMILY DO NOT
EXCEED AN AMOUNT DOUBLE THE MONTHLY MINIMUM WAGE OF AN
EMPLOYEE AND (B) WHO DO NOT OWN REAL PROPERTY WITH A FAIR MARKET
VALUE AS STATED IN THE CURRENT TAX DECLARATION OF MORE THAN THREE
HUNDRED THOUSAND (P300,000.00) PESOS SHALL BE EXEMPT FROM PAYMENT OF
LEGAL FEES.
The legal fees shall be a lien on any judgment rendered in the case favorable to the indigent
litigant unless the court otherwise provides.
To be entitled to the exemption herein provided, the litigant shall execute an affidavit
that he and his immediate family do not earn a gross income abovementioned, and
they do not own any real property with the fair value aforementioned, supported by an
affidavit of a disinterested person attesting to the truth of the litigant's affidavit. The
current tax declaration, if any, shall be attached to the litigant's affidavit.
Any falsity in the affidavit of litigant or disinterested person shall be sufficient cause to
dismiss the complaint or action or to strike out the pleading of that party, without prejudice to
whatever criminal liability may have been incurred. (Emphasis supplied.)

Amendments to Rule 141 (including the amendment to Rule 141, Section 18) were made to
implement RA 9227 which brought about new increases in filing fees. Specifically, in the August
16, 2004 amendment, the ceiling for the gross income of litigants applying for exemption and
that of their immediate family was increased from PhP 4,000.00 a month in Metro Manila and
PhP 3,000.00 a month outside Metro Manila, to double the monthly minimum wage of an
employee; and the maximum value of the property owned by the applicant was increased from
an assessed value of PhP 50,000.00 to a maximum market value of PhP 300,000.00, to be able
to accommodate more indigent litigants and promote easier access to justice by the poor and
the marginalized in the wake of these new increases in filing fees.
Even if there was an amendment to Rule 141 on August 16, 2004, there was still no amendment
or recall of Rule 3, Section 21 on indigent litigants.
With this historical backdrop, let us now move on to the sole issuewhether petitioners are
exempt from the payment of filing fees.

It is undisputed that the Complaint (Civil Case No. 99-4403) was filed on September 1, 1999.
However, the Naga City RTC, in its April 14, 2000 and July 17, 2000 Orders, incorrectly
applied Rule 141, Section 18 on Legal Fees when the applicable rules at that time were Rule
3, Section 21 on Indigent Party which took effect on July 1, 1997 and Rule 141, Section 16
on Pauper Litigants which became effective on July 19, 1984 up to February 28, 2000.
The old Section 16, Rule 141 requires applicants to file an ex-parte motion to litigate as a
pauper litigant by submitting an affidavit that they do not have a gross income of PhP 2,000.00 a
month or PhP 24,000.00 a year for those residing in Metro Manila and PhP 1,500.00 a month or
PhP 18,000.00 a year for those residing outside Metro Manila or those who do not own real
property with an assessed value of not more than PhP 24,000.00 or not more than PhP
18,000.00 as the case may be. Thus, there are two requirements: a) income requirementthe
applicants should not have a gross monthly income of more than PhP 1,500.00, and b) property
requirementthey should not own property with an assessed value of not more than PhP
18,000.00.
In the case at bar, petitioners Alguras submitted the Affidavits of petitioner Lorencita Algura and
neighbor Erlinda Bangate, the pay slip of petitioner Antonio F. Algura showing a gross monthly
income of PhP 10,474.00,21 and a Certification of the Naga City assessor stating that petitioners
do not have property declared in their names for taxation.22 Undoubtedly, petitioners do not own
real property as shown by the Certification of the Naga City assessor and so the property
requirement is met. However with respect to the income requirement, it is clear that the gross
monthly income of PhP 10,474.00 of petitioner Antonio F. Algura and the PhP 3,000.00 income
of Lorencita Algura when combined, were above the PhP 1,500.00 monthly income threshold
prescribed by then Rule 141, Section 16 and therefore, the income requirement was not
satisfied. The trial court was therefore correct in disqualifying petitioners Alguras as indigent
litigants although the court should have applied Rule 141, Section 16 which was in effect at the
time of the filing of the application on September 1, 1999. Even if Rule 141, Section 18 (which
superseded Rule 141, Section 16 on March 1, 2000) were applied, still the application could not
have been granted as the combined PhP 13,474.00 income of petitioners was beyond the PhP
3,000.00 monthly income threshold.
Unrelenting, petitioners however argue in their Motion for Reconsideration of the April 14, 2000
Order disqualifying them as indigent litigants23 that the rules have been relaxed by relying on
Rule 3, Section 21 of the 1997 Rules of Civil procedure which authorizes parties to litigate their
action as indigents if the court is satisfied that the party is "one who has no money or property
sufficient and available for food, shelter and basic necessities for himself and his family." The
trial court did not give credence to this view of petitioners and simply applied Rule 141 but
ignored Rule 3, Section 21 on Indigent Party.
The position of petitioners on the need to use Rule 3, Section 21 on their application to litigate
as indigent litigants brings to the fore the issue on whether a trial court has to apply both Rule
141, Section 16 and Rule 3, Section 21 on such applications or should the court apply only Rule
141, Section 16 and discard Rule 3, Section 21 as having been superseded by Rule 141,
Section 16 on Legal Fees.
The Court rules that Rule 3, Section 21 and Rule 141, Section 16 (later amended as Rule 141,
Section 18 on March 1, 2000 and subsequently amended by Rule 141, Section 19 on August
16, 2003, which is now the present rule) are still valid and enforceable rules on indigent litigants.

For one, the history of the two seemingly conflicting rules readily reveals that it was not the
intent of the Court to consider the old Section 22 of Rule 3, which took effect on January 1, 1994
to have been amended and superseded by Rule 141, Section 16, which took effect on July 19,
1984 through A.M. No. 83-6-389-0. If that is the case, then the Supreme Court, upon the
recommendation of the Committee on the Revision on Rules, could have already deleted
Section 22 from Rule 3 when it amended Rules 1 to 71 and approved the 1997 Rules of Civil
Procedure, which took effect on July 1, 1997. The fact that Section 22 which became Rule 3,
Section 21 on indigent litigant was retained in the rules of procedure, even elaborating on the
meaning of an indigent party, and was also strengthened by the addition of a third paragraph on
the right to contest the grant of authority to litigate only goes to show that there was no intent at
all to consider said rule as expunged from the 1997 Rules of Civil Procedure.
Furthermore, Rule 141 on indigent litigants was amended twice: first on March 1, 2000 and the
second on August 16, 2004; and yet, despite these two amendments, there was no attempt to
delete Section 21 from said Rule 3. This clearly evinces the desire of the Court to maintain the
two (2) rules on indigent litigants to cover applications to litigate as an indigent litigant.
It may be argued that Rule 3, Section 21 has been impliedly repealed by the recent 2000 and
2004 amendments to Rule 141 on legal fees. This position is bereft of merit. Implied repeals are
frowned upon unless the intent of the framers of the rules is unequivocal. It has been
consistently ruled that:
(r)epeals by implication are not favored, and will not be decreed, unless it is manifest that the
legislature so intended. As laws are presumed to be passed with deliberation and with full
knowledge of all existing ones on the subject, it is but reasonable to conclude that in passing
a statute[,] it was not intended to interfere with or abrogate any former law relating to same
matter, unless the repugnancy between the two is not only irreconcilable, but also clear and
convincing, and flowing necessarily from the language used, unless the later act fully
embraces the subject matter of the earlier, or unless the reason for the earlier act is beyond
peradventure removed. Hence, every effort must be used to make all acts stand and if,
by any reasonable construction they can be reconciled, the later act will not operate as a
repeal of the earlier.24(Emphasis supplied).

Instead of declaring that Rule 3, Section 21 has been superseded and impliedly amended by
Section 18 and later Section 19 of Rule 141, the Court finds that the two rules can and should
be harmonized.
The Court opts to reconcile Rule 3, Section 21 and Rule 141, Section 19 because it is a settled
principle that when conflicts are seen between two provisions, all efforts must be made to
harmonize them. Hence, "every statute [or rule] must be so construed and harmonized with
other statutes [or rules] as to form a uniform system of jurisprudence."25
In Manila Jockey Club, Inc. v. Court of Appeals, this Court enunciated that in the interpretation
of seemingly conflicting laws, efforts must be made to first harmonize them. This Court thus
ruled:
Consequently, every statute should be construed in such a way that will harmonize it with
existing laws. This principle is expressed in the legal maxim 'interpretare et concordare leges
legibus est optimus interpretandi,' that is, to interpret and to do it in such a way as to
harmonize laws with laws is the best method of interpretation.26

In the light of the foregoing considerations, therefore, the two (2) rules can stand together and
are compatible with each other. When an application to litigate as an indigent litigant is filed, the
court shall scrutinize the affidavits and supporting documents submitted by the applicant to
determine if the applicant complies with the income and property standards prescribed in the
present Section 19 of Rule 141that is, the applicant's gross income and that of the applicant's
immediate family do not exceed an amount double the monthly minimum wage of an employee;
and the applicant does not own real property with a fair market value of more than Three
Hundred Thousand Pesos (PhP 300,000.00). If the trial court finds that the applicant meets the
income and property requirements, the authority to litigate as indigent litigant is automatically
granted and the grant is a matter of right.
However, if the trial court finds that one or both requirements have not been met, then it would
set a hearing to enable the applicant to prove that the applicant has "no money or property
sufficient and available for food, shelter and basic necessities for himself and his family." In that
hearing, the adverse party may adduce countervailing evidence to disprove the evidence
presented by the applicant; after which the trial court will rule on the application depending on
the evidence adduced. In addition, Section 21 of Rule 3 also provides that the adverse party
may later still contest the grant of such authority at any time before judgment is rendered by the
trial court, possibly based on newly discovered evidence not obtained at the time the application
was heard. If the court determines after hearing, that the party declared as an indigent is in fact
a person with sufficient income or property, the proper docket and other lawful fees shall be
assessed and collected by the clerk of court. If payment is not made within the time fixed by the
court, execution shall issue or the payment of prescribed fees shall be made, without prejudice
to such other sanctions as the court may impose.
The Court concedes that Rule 141, Section 19 provides specific standards while Rule 3, Section
21 does not clearly draw the limits of the entitlement to the exemption. Knowing that the litigants
may abuse the grant of authority, the trial court must use sound discretion and scrutinize
evidence strictly in granting exemptions, aware that the applicant has not hurdled the precise
standards under Rule 141. The trial court must also guard against abuse and misuse of the
privilege to litigate as an indigent litigant to prevent the filing of exorbitant claims which would
otherwise be regulated by a legal fee requirement.
Thus, the trial court should have applied Rule 3, Section 21 to the application of the Alguras
after their affidavits and supporting documents showed that petitioners did not satisfy the twin
requirements on gross monthly income and ownership of real property under Rule 141. Instead
of disqualifying the Alguras as indigent litigants, the trial court should have called a hearing as
required by Rule 3, Section 21 to enable the petitioners to adduce evidence to show that they
didn't have property and money sufficient and available for food, shelter, and basic necessities
for them and their family.27 In that hearing, the respondents would have had the right to also
present evidence to refute the allegations and evidence in support of the application of the
petitioners to litigate as indigent litigants. Since this Court is not a trier of facts, it will have to
remand the case to the trial court to determine whether petitioners can be considered as
indigent litigants using the standards set in Rule 3, Section 21.
Recapitulating the rules on indigent litigants, therefore, if the applicant for exemption meets the
salary and property requirements under Section 19 of Rule 141, then the grant of the application
is mandatory. On the other hand, when the application does not satisfy one or both
requirements, then the application should not be denied outright; instead, the court should apply

the "indigency test" under Section 21 of Rule 3 and use its sound discretion in determining the
merits of the prayer for exemption.
Access to justice by the impoverished is held sacrosanct under Article III, Section 11 of the 1987
Constitution. The Action Program for Judicial Reforms (APJR) itself, initiated by former Chief
Justice Hilario G. Davide, Jr., placed prime importance on 'easy access to justice by the poor' as
one of its six major components. Likewise, the judicial philosophy of Liberty and Prosperity of
Chief Justice Artemio V. Panganiban makes it imperative that the courts shall not only
safeguard but also enhance the rights of individualswhich are considered sacred under the
1987 Constitution. Without doubt, one of the most precious rights which must be shielded and
secured is the unhampered access to the justice system by the poor, the underprivileged, and
the marginalized.
WHEREFORE, the petition is GRANTED and the April 14, 2000 Order granting the
disqualification of petitioners, the July 17, 2000 Order denying petitioners' Motion for
Reconsideration, and the September 11, 2001 Order dismissing the case in Civil Case No.
RTC-99-4403 before the Naga City RTC, Branch 27 are ANNULLED andSET ASIDE.
Furthermore, the Naga City RTC is ordered to set the "Ex-Parte Motion to Litigate as Indigent
Litigants" for hearing and apply Rule 3, Section 21 of the 1997 Rules of Civil Procedure to
determine whether petitioners can qualify as indigent litigants.
No costs.
SO ORDERED.

G.R. No. 171456

August 9, 2007

UNIWIDE HOLDINGS, INC., petitioner,

vs.
ALEXANDER M. CRUZ, respondent.
DECISION
CARPIO MORALES, J.:
Petitioner, Uniwide Holdings, Inc. (UHI), whose principal office is located in Paraaque City,
entered into a Franchise Agreement1 (the agreement) granting respondent, Alexander M. Cruz
(Cruz), a five-year franchise to adopt and use the "Uniwide Family Store System" for the
establishment and operation of a "Uniwide Family Store" along Marcos Highway, Sta. Cruz,
Cogeo, Marikina City.
Article 10.22 of the agreement called for Cruz as franchisee to pay UHI a monthly service fee
of P50,000 or three percent of gross monthly purchases, whichever is higher, payable within five
days after the end of each month without need of formal billing or demand from UHI. In case of

any delay in the payment of the monthly service fee, Cruz would, under Article 10.33 of the
agreement, be liable to pay an interest charge of three percent per month.
It appears that Cruz had purchased goods from UHIs affiliated companies First Paragon
Corporation (FPC) and Uniwide Sales Warehouse Club, Inc. (USWCI).
In August 2002, FPC and USWCI executed Deeds of Assignment4 in favor of UHI assigning all
their rights and interests over Cruzs accounts payable to them.
As of August 13, 2002, Cruz had outstanding obligations with UHI, FPC, and USWCI in the total
amount ofP1,358,531.89, drawing UHI to send him a letter of even date for the settlement
thereof in five days. His receipt of the letter notwithstanding, Cruzs accounts remained
unsettled.
Thus UHI filed a complaint5 for collection of sum of money before the Regional Trial Court (RTC)
of Paraaque docketed as Civil Case No. 04-0278 against Cruz on the following causes of
action:
First Cause of Action
10. Being entitled to the payment of monthly service fee pursuant to the FA, which
defendant failed to pay despite demand, plaintiff suffered actual damages in the
amount of Phil. Peso: One Million Three Hundred Twenty Seven Thousand Six Hundred
Sixty Nine & 83/100 (P1,327,669.83), computed as of 05 April 2004, for which defendant
should be held liable together with legal interest thereon from the date of filing of this
Complaint, until fully paid.
Second Cause of Action
11. Being the assignee of the receivable of FPC, which receivable defendant failed to
pay despite demand, plaintiff suffered actual damages in the amount of Phil. Peso: Sixty
Four Thousand One Hundred Sixty Five & 96/100 (P64,165.96) for which defendant should
be held liable together with the legal interest thereon computed from date of receipt of
plaintiffs demand letter, or on August 16, 2002 to be exact, until fully paid.
Third Cause of Action
12. Being the assignee of the receivable of USWCI, which receivable defendant failed
to pay despite demand, plaintiff suffered actual damages in the total amount of Phil.
Peso: One Million Five Hundred Seventy Nine Thousand Sixty One & 36/100
(P1,579,061.36), computed as of 05 April 2004, inclusive of the two and a half percent
(2.5%) monthly interest, as and by way of penalty, and the three (3%) annual interest on the
unpaid amount, for which defendant should be held liable, with legal interest thereon from
the date of filing of this Complaint, until fully paid.
Fourth Cause of Action
13. By reason of defendants obstinate refusal or failure to pay his indebtedness, plaintiff was
constrained to file this Complaint and in the process incur expenses by way of attorneys
fees, which could be reasonably estimated to reach at least Phil. Peso: Two Hundred Fifty

Thousand (P250,000.00) and for which defendant should be held answerable

for.6 (Emphasis and underscoring supplied)

To the complaint Cruz filed a motion to dismiss7 on the ground of improper venue, he invoking
Article 27.5 of the agreement which reads:
27.5 Venue Stipulation The Franchisee consents to the exclusive jurisdiction of the
courts of Quezon City, the Franchisee waiving any other venue.8 (Emphasis supplied)
Branch 258 of the Paraaque RTC, by Order9 of December 12, 2005, granted Cruzs motion
to dismiss.

Hence, the present petition before this Court, raising the sole legal issue of:
WHETHER A CASE BASED ON SEVERAL CAUSES OF ACTION IS DISMISSIBLE ON
THE GROUND OF IMPROPER VENUE WHERE ONLY ONE OF THE CAUSES OF
ACTION ARISES FROM A CONTRACT WITH EXCLUSIVE VENUE
STIPULATION.10 (Underscoring supplied)

Petitioner contends that nowhere in the agreement is there a mention of FPC and USWCI, and
neither are the two parties thereto, hence, they cannot be bound to the stipulation on "exclusive
venue."
The petition is impressed with merit.
The general rule on venue of personal actions, as in petitioners complaint for collection of sum
of money, is embodied in Section 2, Rule 4 of the Rules of Court which provides:
Sec. 2. Venue of personal actions. All other actions may be commenced and tried
where the plaintiff or any of the principal plaintiffs resides, or where the defendant or
any of the principal defendants resides, or in the case of a nonresident defendant, where he
may be found, at the election of the plaintiff. (Emphasis and underscoring supplied)

The afore-quoted provision is, however, qualified by Section 4 of the same rule which allows
parties, before the filing of the action, to validly agree in writing on an exclusive venue. 11
The forging of a written agreement on an exclusive venue of an action does not, however,
preclude parties from bringing a case to other venues.
Where there is a joinder of causes of action between the same parties one of which does not
arise out of the contract where the exclusive venue was stipulated upon, the complaint, as in the
one at bar, may be brought before other venues provided that such other cause of action falls
within the jurisdiction of the court and the venue lies therein.12
Based on the allegations in petitioners complaint, the second and third causes of action are
based on the deeds of assignment executed in its favor by FPC and USWCI. The deeds bear
no exclusive venue stipulation with respect to the causes of action thereunder. Hence, the
general rule on venue applies that the complaint may be filed in the place where the plaintiff or
defendant resides.13

It bears emphasis that the causes of action on the assigned accounts are not based on a
breach of the agreement between UHI and Cruz. They are based on separate, distinct and
independent contracts-deeds of assignment in which UHI is the assignee of Cruzs obligations
to the assignors FPC and USWCI. Thus, any action arising from the deeds of assignment
cannot be subjected to the exclusive venue stipulation embodied in the agreement. So San
Miguel Corporation v. Monasterio14 enlightens:
Exclusive venue stipulation embodied in a contract restricts or confines parties
thereto when the suitrelates to breach of said contract. But where the exclusivity clause
does not make it necessarily encompassing, such that even those not related to the
enforcement of the contract should be subject to the exclusive venue, the stipulation
designating exclusive venues should be strictly confined to the specific undertaking
or agreement. Otherwise, the basic principles of freedom to contract might work to the great
disadvantage of a weak party-suitor who ought to be allowed free access to courts of
justice.15 (Emphasis and underscoring supplied)

In fine, since the other causes of action in petitioners complaint do not relate to a breach of the
agreement it forged with Cruz embodying the exclusive venue stipulation, they should not be
subjected thereto. As San Miguel further enlightens:
Restrictive stipulations are in derogation of the general policy of making it more convenient
for the parties to institute actions arising from or in relation to their agreements. Thus, the
restriction should be strictly construed as relating solely to the agreement for which the
exclusive venue stipulation is embodied. Expanding the scope of such limitation on a
contracting party will create unwarranted restrictions which the parties might find unintended
or worse, arbitrary and oppressive.16 (Underscoring supplied)

WHEREFORE, the petition is GRANTED. The December 12, 2005 Order of Regional Trial
Court of Paraaque City, Branch 258 in Civil Case No. 04-0278 is SET ASIDE. The case
is REMANDED to said court which is directed to reinstate the case to its docket and conduct
further proceedings thereon with dispatch.
SO ORDERED.

G.R. NO. 156596

August 24, 2007

ADELAIDA INFANTE, Petitioner,

vs.
ARAN BUILDERS, INC., Respondent.*
DECISION
AUSTRIA-MARTINEZ, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking
the reversal of the Decision1 of the Court of Appeals (CA) promulgated on August 12, 2002,
which upheld the Order dated September 4, 2001, issued by the Regional Trial Court of
Muntinlupa City (RTC).
The undisputed facts and issues raised in the lower courts are accurately summarized by the
CA as follows:
Before the Regional Trial Court of Muntinlupa City (or "Muntinlupa RTC"; Branch 276), presided
over by Hon. Norma C. Perello (or "respondent judge"), was an action for revival of judgment
filed on June 6, 2001 by Aran Builders, Inc. (or "private respondent") against Adelaida Infante
(or "petitioner"), docketed as Civil Case No. 01-164.
The judgment sought to be revived was rendered by the Regional Trial Court of Makati City (or
"Makati RTC"; Branch 60) in an action for specific performance and damages, docketed as Civil
Case No. 15563.
The Makati RTC judgment, which became final and executory on November 16, 1994, decreed
as follows:
26. WHEREFORE, the Court hereby renders judgment as follows:
26.1 The defendant ADELAIDA B. INFANTE is ordered to do the following within thirty (30)
days from finality hereof:
26.1.1. To deliver to the plaintiff ARAN BUILDERS, INC. the following: (a) the
complete plans (lot plan, location map and vicinity map); (b) Irrevocable Power of
Attorney; (c ) Real Estate Tax clearance; (d) tax receipts; (e) proof of up to date
payment of Subdivision Association dues referred to in the "CONTRACT TO SELL"
dated November 10, 1986 (Exh. A or Exh. 1);
26.1.2. To execute the deed of sale of Lot No. 11, Block 9, Phase 3-A1, Ayala
Alabang Subdivision covered by TCT No. 114015 for P500,000.00 in favor of the
plaintiff;
26.1.3. To pay the capital gains tax, documentary stamp taxes and other taxes which
the Bureau of Internal Revenue may assess in connection with the sale mentioned in
the preceding paragraph and to submit to the plaintiff proof of such payment;
26.1.4. To secure the written conformity of AYALA CORPORATION to the said sale
and to give such written conformity to the plaintiff;
26.1.5. To register the deed of sale with the Registry of Deeds and deliver to AYALA
CORPORATION the certificate of title issued in the name of plaintiff pursuant to such
registration;
26.2 Upon the compliance of the defendant with the preceding directives, the plaintiff must
immediately pay to the defendant the sum of P321,918.25;
26.3 The defendant is ordered to pay plaintiff P10,000.00 as attorneys fees;

26.4 The Complaint for moral and exemplary damages is DISMISSED;

26.5 The COUNTERCLAIM is DISMISSED; and
26.6 Cost is taxed against the defendant.

Petitioner filed a motion to dismiss the action (for revival of judgment) on the grounds that the
Muntinlupa RTC has no jurisdiction over the persons of the parties and that venue was
improperly laid. Private respondent opposed the motion.
On September 4, 2001, the Muntinlupa RTC issued an order which reads:
The MOTION TO DISMISS is denied.
Admittedly, the Decision was rendered by the Makati Regional Trial Court, but it must be
emphasized that at that time there was still no Regional Trial Court in Muntinlupa City, then
under the territorial jurisdiction of the Makati Courts, so that cases from this City were tried and
heard at Makati City. With the creation of the Regional Trial Courts of Muntinlupa City, matters
involving properties located in this City, and cases involving Muntinlupa City residents were all
ordered to be litigated before these Courts.
The case at bar is a revival of a judgment which declared the plaintiff as the owner of a parcel of
land located in Muntinlupa City. It is this judgment which is sought to be enforced thru this action
which necessarily involves the interest, possession, title, and ownership of the parcel of land
located in Muntinlupa city and adjudged to Plaintiff. It goes without saying that the complaint
should be filed in the latter City where the property is located, as there are now Regional Trial
Courts hereat.
Defendant may answer the complaint within the remaining period, but no less than five (5) days,
otherwise a default judgment might be taken against her.
It is SO ORDERED.
Her motion for reconsideration having been denied per order dated September 28, 2001,
petitioner came to this Court [CA] via the instant special civil action for certiorari. She ascribes
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of respondent
judge for "erroneously holding that Civil Case No. 01-164 is a revival of judgment which
declared private respondent as the owner of a parcel of land located in Muntinlupa City and
(that) the judgment rendered by the (Makati RTC) in Civil Case No. 15563 sought to be
enforced necessarily involves the interest, possession, title and ownership of the parcel of land
located in Muntinlupa City."
Petitioner asserts that the complaint for specific performance and damages before the Makati
RTC is a personal action and, therefore, the suit to revive the judgment therein is also personal
in nature; and that, consequently, the venue of the action for revival of judgment is either Makati
City or Paraaque City where private respondent and petitioner respectively reside, at the
election of private respondent.

On the other hand, private respondent maintains that the subject action for revival judgment is
"quasi in rem because it involves and affects vested or adjudged right on a real property"; and
that, consequently, venue lies in Muntinlupa City where the property is situated.2
On August 12, 2002, the CA promulgated its Decision ruling in favor of herein private
respondent. The CA held that since the judgment sought to be revived was rendered in an
action involving title to or possession of real property, or interest therein, the action for revival of
judgment is then an action in rem which should be filed with the Regional Trial Court of the
place where the real property is located. Petitioner moved for reconsideration of the CA
Decision but the motion was denied per Resolution dated January 7, 2003.
Hence, herein petition. Petitioner claims that the CA erred in finding that the complaint for
revival of judgment is an action in rem which was correctly filed with the RTC of the place where
the disputed real property is located.
The petition is unmeritorious.
Petitioner insists that the action for revival of judgment is an action in personam; therefore, the
complaint should be filed with the RTC of the place where either petitioner or private respondent
resides. Petitioner then concludes that the filing of the action for revival of judgment with the
RTC of Muntinlupa City, the place where the disputed property is located, should be dismissed
on the ground of improper venue.
Private respondent is of the opinion that the judgment it is seeking to revive involves interest
over real property. As such, the present action for revival is a real action, and venue was
properly laid with the court of the place where the realty is located.
Thus, the question that must be answered is: where is the proper venue of the present action for
revival of judgment?
Section 6, Rule 39 of the 1997 Rules of Civil Procedure provides that after the lapse of five (5)
years from entry of judgment and before it is barred by the statute of limitations, a final and
executory judgment or order may be enforced by action. The Rule does not specify in which
court the action for revival of judgment should be filed.
In Aldeguer v. Gemelo,3 the Court held that:
x x x an action upon a judgment must be brought either in the same court where said judgment
was rendered or in the place where the plaintiff or defendant resides, or in any other place
designated by the statutes which treat of the venue of actions in general. (Emphasis
supplied)4
but emphasized that other provisions in the rules of procedure which fix the venue of actions in
general must be considered.5
Under the present Rules of Court, Sections 1 and 2 of Rule 4 provide:

Section 1. Venue of real actions. - Actions affecting title to or possession of real property, or
interest therein, shall be commenced and tried in the proper court which has jurisdiction over the
area wherein the real property involved, or a portion thereof, is situated.
xxxx
Section 2. Venue of personal actions. - All other actions may be commenced and tried where
the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where he may be found,
at the election of the plaintiff.
Thus, the proper venue depends on the determination of whether the present action for revival
of judgment is a real action or a personal action. Applying the afore-quoted rules on venue, if
the action for revival of judgment affects title to or possession of real property, or interest
therein, then it is a real action that must be filed with the court of the place where the real
property is located. If such action does not fall under the category of real actions, it is then a
personal action that may be filed with the court of the place where the plaintiff or defendant
resides.
In support of her contention that the action for revival of judgment is a personal action and
should be filed in the court of the place where either the plaintiff or defendant resides, petitioner
cites the statements made by the Court in Aldeguer v. Gemelo6 and Donnelly v. Court of First
Instance of Manila7 . Petitioner, however, seriously misunderstood the Court's rulings in said
cases.
In Aldeguer, what the Court stated was that "[t]he action for the execution of a judgment
for damages is a personal one, and under section 377 [of the Code of Civil Procedure], it
should be brought in any province where the plaintiff or the defendant resides, at the election of
the plaintiff"8 (Emphasis and underscoring supplied). Petitioner apparently took such statement
to mean that any action for revival of judgment should be considered as a personal one. This
thinking is incorrect. The Court specified that the judgment sought to be revived in said case
was a judgment for damages. The judgment subject of the action for revival did not involve or
affect any title to or possession of real property or any interest therein. The complaint filed in the
revival case did not fall under the category of real actions and, thus, the action necessarily fell
under the category of personal actions.
In Donnelly, the portion of the Decision being relied upon by petitioner stated thus:
Petitioner raises before this Court two (2) issues, namely: (a) whether an action for revival of
judgment is one quasi in rem and, therefore, service of summons may be effected thru
publication; and (b) whether the second action for revival of judgment (Civil Case No. 76166)
has already prescribed. To our mind, the first is not a proper and justiciable issue in the
present proceedings x x x. Nevertheless, let it be said that an action to revive a judgment is a
personal one. (Emphasis supplied)9
The Court clearly pointed out that in said case, the issue on whether an action for revival of
judgment is quasi in rem was not yet proper and justiciable. Therefore, the foregoing
statement cannot be used as a precedent,as it was merely an obiter dictum. Moreover, as
in Aldeguer, the judgment sought to be revived in Donnellyinvolved judgment for a certain sum

of money. Again, no title or interest in real property was involved. It is then understandable that
the action for revival in said case was categorized as a personal one.
Clearly, the Court's classification in Aldeguer and Donnelly of the actions for revival of judgment
as being personal in character does not apply to the present case.
The allegations in the complaint for revival of judgment determine whether it is a real action or a
personal action.
The complaint for revival of judgment alleges that a final and executory judgment has ordered
herein petitioner to execute a deed of sale over a parcel of land in Ayala Alabang Subdivision in
favor of herein private respondent; pay all pertinent taxes in connection with said sale; register
the deed of sale with the Registry of Deeds and deliver to Ayala Corporation the certificate of
title issued in the name of private respondent. The same judgment ordered private respondent
to pay petitioner the sum of P321,918.25 upon petitioner's compliance with the aforementioned
order. It is further alleged that petitioner refused to comply with her judgment obligations despite
private respondent's repeated requests and demands, and that the latter was compelled to file
the action for revival of judgment. Private respondent then prayed that the judgment be revived
and a writ of execution be issued to enforce said judgment.
The previous judgment has conclusively declared private respondent's right to have the title
over the disputed property conveyed to it. It is, therefore, undeniable that private respondent
has an established interest over the lot in question; and to protect such right or interest, private
respondent brought suit to revive the previous judgment. The sole reason for the present action
to revive is the enforcement of private respondent's adjudged rights over a piece of realty.
Verily, the action falls under the category of a real action, for it affects private respondent's
interest over real property.
1avv phi 1

The present case for revival of judgment being a real action, the complaint should indeed be
filed with the Regional Trial Court of the place where the realty is located.
Section 18 of Batas Pambansa Bilang 129 provides:
Sec. 18. Authority to define territory appurtenant to each branch. - The Supreme Court shall
define the territory over which a branch of the Regional Trial Court shall exercise its
authority. The territory thus defined shall be deemed to be the territorial area of the
branch concerned for purposes of determining the venue of all suits, proceedings or
actions, whether civil or criminal, as well as determining the Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial Courts over which the said branch may
exercise appellate jurisdiction. The power herein granted shall be exercised with a view to
making the courts readily accessible to the people of the different parts of the region and
making the attendance of litigants and witnesses as inexpensive as possible. (Emphasis
supplied)
1av vphi1

From the foregoing, it is quite clear that a branch of the Regional Trial Court shall exercise
its authority only over a particular territory defined by the Supreme Court. Originally,
Muntinlupa City was under the territorial jurisdiction of the Makati Courts. However, Section 4 of
Republic Act No. 7154, entitled An Act to Amend Section Fourteen
of Batas Pambansa Bilang 129, Otherwise Known As The Judiciary Reorganization Act of 1981,
took effect on September 4, 1991. Said law provided for the creation of a branch of the Regional

Trial Court in Muntinlupa. Thus, it is now the Regional Trial Court in Muntinlupa City which has
territorial jurisdiction or authority to validly issue orders and processes concerning real property
within Muntinlupa City.
Thus, there was no grave abuse of discretion committed by the Regional Trial Court of
Muntinlupa City, Branch 276 when it denied petitioner's motion to dismiss; and the CA did not
commit any error in affirming the same.
WHEREFORE, the petition is DENIED. The Decision dated August 12, 2002 and Resolution
dated January 7, 2003 of the Court of Appeals are AFFIRMED.
SO ORDERED.

HI-YIELD
REALTY,
INCORPORATED,
Petitioner,

G.R. No. 168863

Present:

QUISUMBING, J., Chairperson,

- versus -

YNARES-SANTIAGO,
CHICO-NAZARIO,
LEONARDO-DE CASTRO, and

HON. COURT OF APPEALS, HON. CESAR

O. UNTALAN, in his capacity as
PRESIDING JUDGE OF RTC-MAKATI,
BRANCH 142, HONORIO TORRES &
SONS, INC., and ROBERTO H. TORRES,
Respondents.

BRION, JJ.

Promulgated:
June 23, 2009

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:
This is a special civil action for certiorari seeking to nullify and set aside the
Decision[1] dated March 10, 2005 and Resolution[2] dated May 26, 2005 of the
Court of Appeals in CA-G.R. SP. No. 83919. The appellate court had dismissed the
petition for certiorari and prohibition filed by petitioner and denied its
reconsideration.
The antecedent facts of the case are undisputed.
On July 31, 2003, Roberto H. Torres (Roberto), for and on behalf of Honorio
Torres & Sons, Inc. (HTSI), filed a Petition for Annulment of Real Estate Mortgage
and Foreclosure Sale[3] over two parcels of land located in Marikina and Quezon
City. The suit was filed against Leonora, Ma. Theresa, Glenn and Stephanie, all
surnamed Torres, the Register of Deeds of Marikina and Quezon City, and
petitioner Hi-Yield Realty, Inc. (Hi-Yield). It was docketed as Civil Case No. 03-892
with Branch 148 of the Regional Trial Court (RTC) of Makati City.
On September 15, 2003, petitioner moved to dismiss the petition on
grounds of improper venue and payment of insufficient docket fees. The RTC
denied said motion in an Order[4] dated January 22, 2004. The trial court held that
the case was, in nature, a real action in the form of a derivative suit cognizable by
a special commercial court pursuant to Administrative Matter No. 00-11-03SC.[5] Petitioner sought reconsideration, but its motion was denied in an
Order[6] dated April 27, 2004.
Thereafter, petitioner filed a petition for certiorari and prohibition before
the Court of Appeals. In a Decision dated March 10, 2005, the appellate
court agreed with the RTC that the case was a derivative suit. It further ruled that
the prayer for annulment of mortgage and foreclosure proceedings was merely
incidental to the main action. The dispositive portion of said decision reads:
WHEREFORE,
premises
considered,
this
Petition
is
hereby DISMISSED. However, public respondent is hereby DIRECTED to instruct his
Clerk of Court to compute the proper docket fees and thereafter, to order the private
respondent to pay the sameIMMEDIATELY.

SO ORDERED.

[7]

Petitioners motion for reconsideration[8] was denied in a Resolution

dated May 26, 2005.
Hence, this petition which raises the following issues:
I.
WHETHER THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN
NOT DISMISSING THE CASE AGAINST HI-YIELD FOR IMPROPER VENUE DESPITE FINDINGS
BY THE TRIAL COURT THAT THE ACTION IS A REAL ACTION.
II.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN NOT DISMISSING THE
COMPLAINT AS AGAINST HI-YIELD EVEN IF THE JOINDER OF PARTIES IN THE COMPLAINT
VIOLATED THE RULES ON VENUE.
III.
WHETHER THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
ANNULMENT OF REAL ESTATE MORTGAGE AND FORECLOSURE SALE IN THE COMPLAINT
IS MERELY INCIDENTAL [TO] THE DERIVATIVE SUIT.

[9]

The pivotal issues for resolution are as follows: (1) whether venue was
properly laid; (2) whether there was proper joinder of parties; and (3) whether
the action to annul the real estate mortgage and foreclosure sale is a mere
incident of the derivative suit.
Petitioner imputes grave abuse of discretion on the Court of Appeals for not
dismissing the case against it even as the trial court found the same to be a real
action. It explains that the rule on venue under the Rules of Court prevails over
the rule prescribing the venue for intra-corporate controversies; hence, HTSI
erred when it filed its suit only in Makati when the lands subjects of the case are
in Marikina and Quezon City. Further, petitioner argues that the appellate court
erred in ruling that the action is mainly a derivative suit and the annulment of real
estate mortgage and foreclosure sale is merely incidental thereto. It points out
that the caption of the case, substance of the allegations, and relief prayed for
revealed that the main thrust of the action is to recover the lands. Lastly,

petitioner asserts that it should be dropped as a party to the case for it has been
wrongly impleaded as a non-stockholder defendant in the intra-corporate
dispute.
On the other hand, respondents maintain that the action is primarily a
derivative suit to redress the alleged unauthorized acts of its corporate officers
and major stockholders in connection with the lands. They postulate that the
nullification of the mortgage and foreclosure sale would just be a logical
consequence of a decision adverse to said officers and stockholders.
After careful consideration, we are in agreement that the petition must be
dismissed.
A petition for certiorari is proper if a tribunal, board or officer exercising
judicial or quasi-judicial functions acted without or in excess of jurisdiction or with
grave abuse of discretion amounting to lack or excess of jurisdiction and there is
no appeal, or any plain, speedy and adequate remedy in the ordinary course of
law.[10]
Petitioner sought a review of the trial courts Orders dated January 22,
2004 and April 27, 2004 via a petition for certiorari before the Court of Appeals. In
rendering the assailed decision and resolution, the Court of Appeals was acting
under its concurrent jurisdiction to entertain petitions for certiorari under
paragraph 2,[11] Section 4 of Rule 65 of the Rules of Court. Thus, if erroneous, the
decision and resolution of the appellate court should properly be assailed by means
of a petition for review on certiorari under Rule 45 of the Rules of Court. The
distinction is clear: a petition for certiorari seeks to correct errors of jurisdiction
while a petition for review on certiorari seeks to correct errors of judgment
committed by the court a quo.[12] Indeed, this Court has often reminded members
of the bench and bar that a special civil action for certiorari under Rule 65 lies only
when there is no appeal nor plain, speedy and adequate remedy in the ordinary
course of law.[13] In the case at hand, petitioner impetuously filed a petition for
certiorari before us when a petition for review was available as a speedy and
adequate remedy. Notably, petitioner filed the present petition 58[14] days after it
received a copy of the assailed resolution dated May 26, 2005. To our mind, this
belated action evidences petitioners effort to substitute for a lost appeal this
petition for certiorari.

For the extraordinary remedy of certiorari to lie by reason of grave abuse of

discretion, the abuse of discretion must be so patent and gross as to amount to
an evasion of positive duty, or a virtual refusal to perform the duty enjoined or to
act in contemplation of law, or where the power is exercised in an arbitrary and
despotic manner by reason of passion and personal hostility.[15] We find no grave
abuse of discretion on the part of the appellate court in this case.
Simply, the resolution of the issues posed by petitioner rests on a
determination of the nature of the petition filed by respondents in the RTC. Both
the RTC and Court of Appeals ruled that the action is in the form of a derivative
suit although captioned as a petition for annulment of real estate mortgage and
foreclosure sale.
A derivative action is a suit by a shareholder to enforce a corporate cause of
action.[16] Under the Corporation Code, where a corporation is an injured party, its
power to sue is lodged with its board of directors or trustees. But an individual
stockholder may be permitted to institute a derivative suit on behalf of the
corporation 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 control of the
corporation. In such actions, the corporation is the real party-in-interest while the
suing stockholder, on behalf of the corporation, is only a nominal party.[17]
In the case of Filipinas Port Services, Inc. v. Go,[18] we enumerated the
foregoing requisites before a stockholder can file a derivative suit:
a) the party bringing suit should be a shareholder as of the time of the act or
transaction complained of, the number of his shares not being material;
b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on
the board of directors for the appropriate relief but the latter has failed or refused to
heed his plea; and
c) the cause of action actually devolves on the corporation, the wrongdoing or
harm having been, or being caused to the corporation and not to the particular
stockholder bringing the suit.

[19]

Even then, not every suit filed on behalf of the corporation is a derivative
suit. For a derivative suit to prosper, the minority stockholder suing for and on
behalf of the corporation must allege in his complaint that he is suing on a

derivative cause of action on behalf of the corporation and all other stockholders
similarly situated who may wish to join him in the suit.[20] The Court finds that
Roberto had satisfied this requirement in paragraph five (5) of his petition which
reads:
5. Individual petitioner, being a minority stockholder, is instituting the instant
proceeding by way of a derivative suit to redress wrongs done to petitioner corporation
and vindicate corporate rights due to the mismanagement and abuses committed
against it by its officers and controlling stockholders, especially by respondent Leonora
H. Torres (Leonora, for brevity) who, without authority from the Board of Directors,
arrogated upon herself the power to bind petitioner corporation from incurring loan
obligations and later allow company properties to be foreclosed as hereinafter set
forth;

[21]

Further, while it is true that the complaining stockholder must satisfactorily

show that he has exhausted all means to redress his grievances within the
corporation; such remedy is no longer necessary where the corporation itself is
under the complete control of the person against whom the suit is being
filed. The reason is obvious: a demand upon the board to institute an action and
prosecute the same effectively would have been useless and an exercise in
futility.[22]
Here, Roberto alleged in his petition that earnest efforts were made to
reach a compromise among family members/stockholders before he filed the
case. He also maintained that Leonora Torres held 55% of the outstanding shares
while Ma. Theresa, Glenn and Stephanie excluded him from the affairs of the
corporation. Even more glaring was the fact that from June 10, 1992, when the
first mortgage deed was executed until July 23, 2002, when the properties
mortgaged were foreclosed, the Board of Directors of HTSI did nothing to rectify
the alleged unauthorized transactions of Leonora. Clearly, Roberto could not
expect relief from the board.
Derivative suits are governed by a special set of rules under A.M. No. 01-204-SC[23] otherwise known as the Interim Rules of Procedure Governing IntraCorporate Controversies under Republic Act No. 8799.[24] Section 1,[25] Rule 1
thereof expressly lists derivative suits among the cases covered by it.

As regards the venue of derivative suits, Section 5, Rule 1 of A.M. No. 01-204-SC states:
SEC. 5. Venue. - All actions covered by these Rules shall be commenced and
tried in the Regional Trial Court which has jurisdiction over the principal office of the
corporation, partnership, or association concerned. Where the principal office of the
corporation, partnership or association is registered in the Securities and Exchange
Commission as Metro Manila, the action must be filed in the city or municipality where
the head office is located.

Thus, the Court of Appeals did not commit grave abuse of discretion when it
found that respondents correctly filed the derivative suit before the Makati RTC
where HTSI had its principal office.
There being no showing of any grave abuse of discretion on the part of the
Court of Appeals the other alleged errors will no longer be passed upon as mere
errors of judgment are not proper subjects of a petition for certiorari.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision
dated March 10, 2005 and the Resolution dated May 26, 2005 of the Court of
Appeals in CA-G.R. SP. No. 83919 are AFFIRMED.
No pronouncement as to costs.
SO ORDERED.

G.R. No. 154096

August 22, 2008

IRENE MARCOS-ARANETA, DANIEL RUBIO, ORLANDO G. RESLIN, and

JOSE G. RESLIN,petitioners,
vs.

COURT OF APPEALS, JULITA C. BENEDICTO, and FRANCISCA

BENEDICTO-PAULINO,respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to
nullify the Decision1 dated October 17, 2001 of the Court of Appeals (CA) in
CA-G.R. SP No. 64246 and its Resolution2 of June 20, 2002 denying
petitioners' motion for reconsideration. The assailed CA decision annulled and
set aside the Orders dated October 9, 2000, December 18, 2000, and March
15, 2001 of the Regional Trial Court (RTC), Branch 17 in Batac, Ilocos Norte
which admitted petitioners' amended complaint in Civil Case Nos. 3341-17
and 3342-17.
The Facts
Sometime in 1968 and 1972, Ambassador Roberto S. Benedicto, now
deceased, and his business associates (Benedicto Group) organized Far East
Managers and Investors, Inc. (FEMII) and Universal Equity Corporation
(UEC), respectively. As petitioner Irene Marcos-Araneta would later allege,
both corporations were organized pursuant to a contract or arrangement
whereby Benedicto, as trustor, placed in his name and in the name of his
associates, as trustees, the shares of stocks of FEMII and UEC with the
obligation to hold those shares and their fruits in trust and for the benefit of
Irene to the extent of 65% of such shares. Several years after, Irene, through
her trustee-husband, Gregorio Ma. Araneta III, demanded the reconveyance
of said 65% stockholdings, but the Benedicto Group refused to oblige.
In March 2000, Irene thereupon instituted before the RTC two similar
complaints for conveyance of shares of stock, accounting and
receivership against the Benedicto Group with prayer for the issuance of a
temporary restraining order (TRO). The first, docketed as Civil Case No.
3341-17, covered the UEC shares and named Benedicto, his daughter, and at
least 20 other individuals as defendants. The second, docketed as Civil Case
No. 3342-17, sought the recovery to the extent of 65% of FEMII shares held
by Benedicto and the other defendants named therein.

Respondent Francisca Benedicto-Paulino,3 Benedicto's daughter, filed a

Motion to Dismiss Civil Case No. 3341-17, followed later by an Amended
Motion to Dismiss. Benedicto, on the other hand, moved to dismiss4 Civil
Case No. 3342-17, adopting in toto the five (5) grounds raised by Francisca in
her amended motion to dismiss. Among these were: (1) the cases involved an
intra-corporate dispute over which the Securities and Exchange Commission,
not the RTC, has jurisdiction; (2) venue was improperly laid; and (3) the
complaint failed to state a cause of action, as there was no allegation therein
that plaintiff, as beneficiary of the purported trust, has accepted the trust
created in her favor.
To the motions to dismiss, Irene filed a Consolidated Opposition, which
Benedicto and Francisca countered with a Joint Reply to Opposition.
Upon Benedicto's motion, both cases were consolidated.
During the preliminary proceedings on their motions to dismiss, Benedicto and
Francisca, by way of bolstering their contentions on improper venue,
presented the Joint Affidavit5 of Gilmia B. Valdez, Catalino A. Bactat, and
Conchita R. Rasco who all attested being employed as household staff at the
Marcos' Mansion in Brgy. Lacub, Batac, Ilocos Norte and that Irene did not
maintain residence in said place as she in fact only visited the mansion twice
in 1999; that she did not vote in Batac in the 1998 national elections; and that
she was staying at her husband's house in Makati City.
Against the aforesaid unrebutted joint affidavit, Irene presented her PhP 5
community tax certificate6(CTC) issued on "11/07/99" in Curimao, Ilocos Norte
to support her claimed residency in Batac, Ilocos Norte.
In the meantime, on May 15, 2000, Benedicto died and was substituted by his
wife, Julita C. Benedicto, and Francisca.
On June 29, 2000, the RTC dismissed both complaints, stating that these
partly constituted "real action," and that Irene did not actually reside in Ilocos
Norte, and, therefore, venue was improperly laid. In its dismissal order,7 the
court also declared "all the other issues raised in the different Motions to
Dismiss x x x moot and academic."
From the above order, Irene interposed a Motion for Reconsideration8 which
Julita and Francisca duly opposed.

Pending resolution of her motion for reconsideration, Irene filed on July 17,
2000 a Motion (to Admit Amended Complaint),9 attaching therewith a copy of
the Amended Complaint10 dated July 14, 2000 in which the names of Daniel
Rubio, Orlando G. Reslin, and Jose G. Reslin appeared as additional
plaintiffs. As stated in the amended complaint, the added plaintiffs, all from
Ilocos Norte, were Irene's new trustees. Parenthetically, the amended
complaint stated practically the same cause of action but, as couched, sought
the reconveyance of the FEMII shares only.
During the August 25, 2000 hearing, the RTC dictated in open court an order
denying Irene's motion for reconsideration aforementioned, but deferred
action on her motion to admit amended complaint and the opposition
thereto.11
On October 9, 2000, the RTC issued an Order12 entertaining the amended
complaint, dispositively stating:
WHEREFORE, the admission of the Amended Complaint being tenable
and legal, the same is GRANTED.
Let copies of the Amended Complaint be served to the defendants who are
ordered to answer within the reglementary period provided by the rules.
The RTC predicated its order on the following premises:
(1) Pursuant to Section 2, Rule 10 of the Rules of Court,13 Irene may opt to
file, as a matter of right, an amended complaint.
(2) The inclusion of additional plaintiffs, one of whom was a Batac, an Ilocos
Norte resident, in the amended complaint setting out the same cause of action
cured the defect of improper venue.
(3) Secs. 2 and 3 of Rule 3 in relation to Sec. 2 of Rule 4 allow the filing of the
amended complaint in question in the place of residence of any of Irene's coplaintiffs.
In time, Julita and Francisca moved to dismiss the amended complaint, but
the RTC, by Order14 dated December 18, 2000, denied the motion and
reiterated its directive for the two to answer the amended complaint.
In said order, the RTC stood pat on its holding on the rule on amendments of
pleadings. And scoffing at the argument about there being no complaint to

amend in the first place as of October 9, 2000 (when the RTC granted the
motion to amend) as the original complaints were dismissed with finality
earlier, i.e., on August 25, 2000 when the court denied Irene's motion for
reconsideration of the June 29, 2000 order dismissing the original complaints,
the court stated thusly: there was actually no need to act on Irene's motion to
admit, it being her right as plaintiff to amend her complaints absent any
responsive pleading thereto. Pushing its point, the RTC added the observation
that the filing of the amended complaint on July 17, 2000 ipso
facto superseded the original complaints, the dismissal of which, per the June
29, 2000 Order, had not yet become final at the time of the filing of the
amended complaint.
Following the denial on March 15, 2001 of their motion for the RTC to
reconsider its December 18, 2000 order aforestated, Julita and Francisca, in a
bid to evade being declared in default, filed on April 10, 2001 their Answer to
the amended complaint.15 But on the same day, they went to the CA via a
petition for certiorari, docketed as CA-G.R. SP No. 64246, seeking to nullify
the following RTC orders: the first, admitting the amended complaint; the
second, denying their motion to dismiss the amended complaint; and the third,
denying their motion for reconsideration of the second issuance.
Inasmuch as the verification portion of the joint petition and the certification on
non-forum shopping bore only Francisca's signature, the CA required the joint
petitioners "to submit x x x either the written authority of Julita C. Benedicto to
Francisca B. Paulino authorizing the latter to represent her in these
proceedings, or a supplemental verification and certification duly signed by x x
x Julita C. Benedicto."16Records show the submission of the corresponding
authorizing Affidavit17 executed by Julita in favor of Francisca.
Later developments saw the CA issuing a TRO18 and then a writ of preliminary
injunction19 enjoining the RTC from conducting further proceedings on the
subject civil cases.
On October 17, 2001, the CA rendered a Decision, setting aside the assailed
RTC orders and dismissing the amended complaints in Civil Case Nos. 334117 and 3342-17. The fallo of the CA decision reads:
WHEREFORE, based on the foregoing premises, the petition is hereby
GRANTED. The assailed Orders admitting the amended complaints are
SET ASIDE for being null and void, and the amended complaints a
quo are, accordingly, DISMISSED.20

Irene and her new trustees' motion for reconsideration of the assailed decision
was denied through the equally assailed June 20, 2002 CA Resolution.
Hence, this petition for review is before us.
The Issues
Petitioners urge the setting aside and annulment of the assailed CA decision
and resolution on the following submissions that the appellate court erred in:
(1) allowing the submission of an affidavit by Julita as sufficient compliance
with the requirement on verification and certification of non-forum shopping;
(2) ruling on the merits of the trust issue which involves factual and evidentiary
determination, processes not proper in a petition for certiorari under Rule 65
of the Rules of Court; (3) ruling that the amended complaints in the lower
court should be dismissed because, at the time it was filed, there was no more
original complaint to amend; (4) ruling that the respondents did not waive
improper venue; and (5) ruling that petitioner Irene was not a resident of
Batac, Ilocos Norte and that none of the principal parties are residents of
Ilocos Norte.21
The Court's Ruling
We affirm, but not for all the reasons set out in, the CA's decision.
First Issue: Substantial Compliance with the Rule
on Verification and Certification of Non-Forum Shopping
Petitioners tag private respondents' petition in CA-G.R. SP No. 64246 as
defective for non-compliance with the requirements of Secs. 422 and 523 of
Rule 7 of the Rules of Court at least with regard to Julita, who failed to sign
the verification and certification of non-forum shopping. Petitioners thus fault
the appellate court for directing Julita's counsel to submit a written authority
for Francisca to represent Julita in the certiorari proceedings.
We are not persuaded.
Verification not Jurisdictional; May be Corrected
Verification is, under the Rules, not a jurisdictional but merely a formal
requirement which the court may motu proprio direct a party to comply with or
correct, as the case may be. As the Court articulated in Kimberly Independent
Labor Union for Solidarity, Activism and Nationalism (KILUSAN)-Organized

Labor Associations in Line Industries and Agriculture (OLALIA) v. Court

of Appeals:
V]erification is a formal, not a jurisdictional requisite, as it is mainly intended to secure an assurance that the
allegations therein made are done in good faith or are true and correct and not mere speculation. The Court
may order the correction of the pleading, if not verified, or act on the unverified pleading if the attending
circumstances are such that a strict compliance with the rule may be dispensed with in order that the ends of
justice may be served.24

Given this consideration, the CA acted within its sound discretion in ordering
the submission of proof of Francisca's authority to sign on Julita's behalf and
represent her in the proceedings before the appellate court.
Signature by Any of the Principal Petitioners is Substantial Compliance
Regarding the certificate of non-forum shopping, the general rule is that all the
petitioners or plaintiffs in a case should sign it.25 However, the Court has time
and again stressed that the rules on forum shopping, which were designed to
promote the orderly administration of justice, do not interdict substantial
compliance with its provisions under justifiable circumstances.26 As has been
ruled by the Court, the signature of any of the principal petitioners27 or
principal parties,28 as Francisca is in this case, would constitute a substantial
compliance with the rule on verification and certification of non-forum
shopping. It cannot be overemphasized that Francisca herself was a principal
party in Civil Case No. 3341-17 before the RTC and in the certiorari
proceedings before the CA. Besides being an heir of Benedicto, Francisca,
with her mother, Julita, was substituted for Benedicto in the instant case after
his demise.
And should there exist a commonality of interest among the parties, or where
the parties filed the case as a "collective," raising only one common cause of
action or presenting a common defense, then the signature of one of the
petitioners or complainants, acting as representative, is sufficient compliance.
We said so in Cavile v. Heirs of Clarita Cavile.29 Like Thomas Cavile, Sr. and
the other petitioners in Cavile, Francisca and Julita, as petitioners before the
CA, had filed their petition as a collective, sharing a common interest and
having a common single defense to protect their rights over the shares of
stocks in question.
Second Issue: Merits of the Case cannot be Resolved
on Certiorari under Rule 65

Petitioners' posture on the second issue is correct. As they aptly pointed out,
the CA, in the exercise of its certiorari jurisdiction under Rule 65, is limited to
reviewing and correcting errors of jurisdiction only. It cannot validly delve into
the issue of trust which, under the premises, cannot be judiciously resolved
without first establishing certain facts based on evidence.
Whether a determinative question is one of law or of fact depends on the
nature of the dispute. A question of law exists when the doubt or controversy
concerns the correct application of law or jurisprudence to a certain given set
of facts; or when the issue does not call for an examination of the probative
value of the evidence presented, the truth or falsehood of facts being
admitted. A question of fact obtains when the doubt or difference arises as to
the truth or falsehood of facts or when the query invites the calibration of the
whole evidence considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding circumstances, as well as
their relation to each other and to the whole, and the probability of the
situation.30
Clearly then, the CA overstepped its boundaries when, in disposing of private
respondents' petition for certiorari, it did not confine itself to determining
whether or not lack of jurisdiction or grave abuse of discretion tainted the
issuance of the assailed RTC orders, but proceeded to pass on the factual
issue of the existence and enforceability of the asserted trust. In the process,
the CA virtually resolved petitioner Irene's case for reconveyance on its
substantive merits even before evidence on the matter could be adduced.
Civil Case Nos. 3341-17 and 3342-17 in fact have not even reached the pretrial stage. To stress, the nature of the trust allegedly constituted in Irene's
favor and its enforceability, being evidentiary in nature, are best determined
by the trial court. The original complaints and the amended complaint certainly
do not even clearly indicate whether the asserted trust is implied or express.
To be sure, an express trust differs from the implied variety in terms of the
manner of proving its existence.31 Surely, the onus of factually determining
whether the trust allegedly established in favor of Irene, if one was indeed
established, was implied or express properly pertains, at the first instance, to
the trial court and not to the appellate court in a special civil action for
certiorari, as here. In the absence of evidence to prove or disprove the
constitution and necessarily the existence of the trust agreement between
Irene, on one hand, and the Benedicto Group, on the other, the appellate
court cannot intelligently pass upon the issue of trust. A pronouncement on
said issue of trust rooted on speculation and conjecture, if properly
challenged, must be struck down. So it must be here.

Third Issue: Admission of Amended Complaint Proper

As may be recalled, the CA veritably declared as reversibly erroneous the
admission of the amended complaint. The flaw in the RTC's act of admitting
the amended complaint lies, so the CA held, in the fact that the filing of the
amended complaint on July 17, 2000 came after the RTC had ordered with
finality the dismissal of the original complaints. According to petitioners,
scoring the CA for its declaration adverted to and debunking its posture on the
finality of the said RTC order, the CA failed to take stock of their motion for
reconsideration of the said dismissal order.
We agree with petitioners and turn to the governing Sec. 2 of Rule 10 of the
Rules of Court which provides:
SEC. 2. Amendments as a matter of right. -- A party may amend his
pleading once as a matter of right at any time before a responsive
pleading is served or in the case of a reply, at any time within ten (10)
days after it is served.
As the aforequoted provision makes it abundantly clear that the plaintiff may
amend his complaint once as a matter of right, i.e., without leave of court,
before any responsive pleading is filed or served. Responsive pleadings are
those which seek affirmative relief and/or set up defenses,32 like an answer. A
motion to dismiss is not a responsive pleading for purposes of Sec. 2 of Rule
10.33 Assayed against the foregoing perspective, the RTC did not err in
admitting petitioners' amended complaint, Julita and Francisca not having yet
answered the original complaints when the amended complaint was filed. At
that precise moment, Irene, by force of said Sec. 2 of Rule 10, had, as a
matter of right, the option of amending her underlying reconveyance
complaints. As aptly observed by the RTC, Irene's motion to admit amended
complaint was not even necessary. The Court notes though that the RTC has
not offered an explanation why it saw fit to grant the motion to admit in the first
place.
In Alpine Lending Investors v. Corpuz, the Court, expounding on the propriety
of admitting an amended complaint before a responsive pleading is filed,
wrote:
W]hat petitioner Alpine filed in Civil Case No. C-20124 was a motion to dismiss, not an answer. Settled is
the rule that a motion to dismiss is not a responsive pleading for purposes of Section 2, Rule 10. As no
responsive pleading had been filed, respondent could amend her complaint in Civil Case No. C-20124 as a
matter of right. Following this Court's ruling in Breslin v. Luzon Stevedoring Co. considering that

respondent has the right to amend her complaint, it is the correlative duty of the trial court to accept the
amended complaint; otherwise, mandamus would lie against it. In other words, the trial court's duty to admit
the amended complaint was purely ministerial. In fact, respondent should not have filed a motion to admit
her amended complaint.34

It may be argued that the original complaints had been dismissed through the
June 29, 2000 RTC order. It should be pointed out, however, that the finality
of such dismissal order had not set in when Irene filed the amended complaint
on July 17, 2000, she having meanwhile seasonably sought reconsideration
thereof. Irene's motion for reconsideration was only resolved on August 25,
2000. Thus, when Irene filed the amended complaint on July 17, 2000, the
order of dismissal was not yet final, implying that there was strictly no legal
impediment to her amending her original complaints.35
Fourth Issue: Private Respondents did not Waive Improper Venue
Petitioners maintain that Julita and Francisca were effectively precluded from
raising the matter of improper venue by their subsequent acts of filing
numerous pleadings. To petitioners, these pleadings, taken together, signify a
waiver of private respondents' initial objection to improper venue.
This contention is without basis and, at best, tenuous. Venue essentially
concerns a rule of procedure which, in personal actions, is fixed for the
greatest convenience possible of the plaintiff and his witnesses. The ground of
improperly laid venue must be raised seasonably, else it is deemed waived.
Where the defendant failed to either file a motion to dismiss on the ground of
improper venue or include the same as an affirmative defense, he is deemed
to have waived his right to object to improper venue.36 In the case at bench,
Benedicto and Francisca raised at the earliest time possible, meaning "within
the time for but before filing the answer to the complaint,"37 the matter of
improper venue. They would thereafter reiterate and pursue their objection on
venue, first, in their answer to the amended complaints and then in their
petition for certiorari before the CA. Any suggestion, therefore, that Francisca
and Benedicto or his substitutes abandoned along the way improper venue as
ground to defeat Irene's claim before the RTC has to be rejected.
Fifth Issue: The RTC Has No Jurisdiction
on the Ground of Improper Venue
Subject Civil Cases are Personal Actions

It is the posture of Julita and Francisca that the venue was in this case
improperly laid since the suit in question partakes of a real action involving
real properties located outside the territorial jurisdiction of the RTC in Batac.
This contention is not well-taken. In a personal action, the plaintiff seeks the
recovery of personal property, the enforcement of a contract, or the recovery
of damages.38 Real actions, on the other hand, are those affecting title to or
possession of real property, or interest therein. In accordance with the
wordings of Sec. 1 of Rule 4, the venue of real actions shall be the proper
court which has territorial jurisdiction over the area wherein the real property
involved, or a portion thereof, is situated. The venue of personal actions is the
court where the plaintiff or any of the principal plaintiffs resides, or where the
defendant or any of the principal defendants resides, or in the case of a nonresident defendant where he may be found, at the election of the plaintiff.39
In the instant case, petitioners are basically asking Benedicto and his Group,
as defendants a quo, to acknowledge holding in trust Irene's purported 65%
stockownership of UEC and FEMII, inclusive of the fruits of the trust, and to
execute in Irene's favor the necessary conveying deed over the said 65%
shareholdings. In other words, Irene seeks to compel recognition of the trust
arrangement she has with the Benedicto Group. The fact that FEMII's assets
include real properties does not materially change the nature of the action, for
the ownership interest of a stockholder over corporate assets is only inchoate
as the corporation, as a juridical person, solely owns such assets. It is only
upon the liquidation of the corporation that the stockholders, depending on the
type and nature of their stockownership, may have a real inchoate right over
the corporate assets, but then only to the extent of their stockownership.
The amended complaint is an action in personam, it being a suit against
Francisca and the late Benedicto (now represented by Julita and Francisca),
on the basis of their alleged personal liability to Irene upon an alleged trust
constituted in 1968 and/or 1972. They are not actions in rem where the
actions are against the real properties instead of against persons.40 We
particularly note that possession or title to the real properties of FEMII and
UEC is not being disputed, albeit part of the assets of the corporation happens
to be real properties.
Given the foregoing perspective, we now tackle the determinative question of
venue in the light of the inclusion of additional plaintiffs in the amended
complaint.
Interpretation of Secs. 2 and 3 of Rule 3; and Sec. 2 of Rule 4

We point out at the outset that Irene, as categorically and peremptorily found
by the RTC after a hearing, is not a resident of Batac, Ilocos Norte, as she
claimed. The Court perceives no compelling reason to disturb, in the confines
of this case, the factual determination of the trial court and the premises
holding it together. Accordingly, Irene cannot, in a personal action,
contextually opt for Batac as venue of her reconveyance complaint. As to her,
Batac, Ilocos Norte is not what Sec. 2, Rule 4 of the Rules of Court adverts to
as the place "where the plaintiff or any of the principal plaintiffs resides" at the
time she filed her amended complaint. That Irene holds CTC No.
1701945141 issued sometime in June 2000 in Batac, Ilocos Norte and in which
she indicated her address as Brgy. Lacub, Batac, Ilocos is really of no
moment. Let alone the fact that one can easily secure a basic residence
certificate practically anytime in any Bureau of Internal Revenue or treasurer's
office and dictate whatever relevant data one desires entered, Irene procured
CTC No. 17019451 and appended the same to her motion for reconsideration
following the RTC's pronouncement against her being a resident of Batac.
Petitioners, in an attempt to establish that the RTC in Batac, Ilocos Norte is
the proper court venue, asseverate that Batac, Ilocos Norte is where the
principal parties reside.
Pivotal to the resolution of the venue issue is a determination of the status of
Irene's co-plaintiffs in the context of Secs. 2 and 3 of Rule 3 in relation to Sec.
2 of Rule 4, which pertinently provide as follows:
Rule 3
PARTIES TO CIVIL ACTIONS
SEC. 2. Parties in interest. -- A real party in interest is the party who
stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit. Unless otherwise authorized by law or
these Rules, every action must be prosecuted or defended in the name
of the real party in interest.
SEC. 3. Representatives as parties. -- Where the action is allowed to be
prosecuted or defended by a representative or someone acting in a
fiduciary capacity, the beneficiary shall be included in the title of the
case and shall be deemed to be the real party in interest. A
representative may be a trustee of an express trust, a guardian, an
executor or administrator, or a party authorized by law or these Rules.
An agent acting in his own name and for the benefit of an undisclosed

principal may sue or be sued without joining the principal except when
the contract involves things belonging to the principal.
Rule 4
VENUE OF ACTIONS
SEC. 2. Venue of personal actions. -- All other actions may be
commenced and tried where the plaintiff or any of the principal plaintiffs
resides, or where the defendant or any of the principal defendants
resides, or in the case of a non-resident defendant where he may be
found, at the election of the plaintiff.
Venue is Improperly Laid
There can be no serious dispute that the real party-in-interest plaintiff is Irene.
As self-styled beneficiary of the disputed trust, she stands to be benefited or
entitled to the avails of the present suit. It is undisputed too that petitioners
Daniel Rubio, Orlando G. Reslin, and Jose G. Reslin, all from Ilocos Norte,
were included as co-plaintiffs in the amended complaint as Irene's new
designated trustees. As trustees, they can only serve as mere representatives
of Irene.
Upon the foregoing consideration, the resolution of the crucial issue of
whether or not venue had properly been laid should not be difficult.
Sec. 2 of Rule 4 indicates quite clearly that when there is more than one
plaintiff in a personal action case, the residences of the principal parties
should be the basis for determining proper venue. According to the late
Justice Jose Y. Feria, "the word 'principal' has been added [in the uniform
procedure rule] in order to prevent the plaintiff from choosing the residence of
a minor plaintiff or defendant as the venue."42 Eliminate the qualifying term
"principal" and the purpose of the Rule would, to borrow from Justice
Regalado, "be defeated where a nominal or formal party is impleaded in the
action since the latter would not have the degree of interest in the subject of
the action which would warrant and entail the desirably active participation
expected of litigants in a case."43
Before the RTC in Batac, in Civil Case Nos. 3341-17 and 3342-17, Irene
stands undisputedly as the principal plaintiff, the real party-in-interest.
Following Sec. 2 of Rule 4, the subject civil cases ought to be commenced
and prosecuted at the place where Irene resides.

Principal Plaintiff not a Resident in Venue of Action

As earlier stated, no less than the RTC in Batac declared Irene as not a
resident of Batac, Ilocos Norte. Withal, that court was an improper venue for
her conveyance action.
The Court can concede that Irene's three co-plaintiffs are all residents of
Batac, Ilocos Norte. But it ought to be stressed in this regard that not one of
the three can be considered as principal party-plaintiffs in Civil Case Nos.
3341-17 and 3342-17, included as they were in the amended complaint as
trustees of the principal plaintiff. As trustees, they may be accorded, by virtue
of Sec. 3 of Rule 3, the right to prosecute a suit, but only on behalf of the
beneficiary who must be included in the title of the case and shall be deemed
to be the real party-in-interest. In the final analysis, the residences of Irene's
co-plaintiffs cannot be made the basis in determining the venue of the subject
suit. This conclusion becomes all the more forceful considering that Irene
herself initiated and was actively prosecuting her claim against Benedicto, his
heirs, assigns, or associates, virtually rendering the impleading of the trustees
unnecessary.
And this brings us to the final point. Irene was a resident during the period
material of Forbes Park, Makati City. She was not a resident of Brgy. Lacub,
Batac, Ilocos Norte, although jurisprudence44 has it that one can have several
residences, if such were the established fact. The Court will not speculate on
the reason why petitioner Irene, for all the inconvenience and expenses she
and her adversaries would have to endure by a Batac trial, preferred that her
case be heard and decided by the RTC in Batac. On the heels of the
dismissal of the original complaints on the ground of improper venue, three
new personalities were added to the complaint doubtless to insure, but in vain
as it turned out, that the case stays with the RTC in Batac.
Litigants ought to bank on the righteousness of their causes, the superiority of
their cases, and the persuasiveness of arguments to secure a favorable
verdict. It is high time that courts, judges, and those who come to court for
redress keep this ideal in mind.
WHEREFORE, the instant petition is hereby DISMISSED. The Decision and
Resolution dated October 17, 2001 and June 20, 2002, respectively, of the CA
in CA-G.R. SP No. 64246, insofar as they nullified the assailed orders of the
RTC, Branch 17 in Batac, Ilocos Norte in Civil Case Nos. 3341-17 and 334217 on the ground of lack of jurisdiction due to improper venue, are
hereby AFFIRMED. The Orders dated October 9, 2000, December 18, 2000,

and March 15, 2001 of the RTC in Civil Case Nos. 3341-17 and 3342-17 are
accordingly ANNULLED and SET ASIDE and said civil cases
are DISMISSED.
Costs against petitioners.
SO ORDERED.

G.R. No. 104649 February 28, 1994

PHILIPPINE BANKING CORPORATION, petitioner,
vs.
HON. SALVADOR S. TENSUAN, Judge of the Regional Trial Court, National Capital Region,
Branch 146, Makati; BRINELL METAL WORKS CORP.; SPS. JOSE & NALLY ANG, respondents.
Abelardo G. Luzano for petitioner.
Samson Law Offices for private respondents.

NOCON, J.:
On the strength of the provision in the promissory notes sued upon that Manila shall be the venue of
any action which may arise out of the promissory notes, the Regional Trial Court of Makati, Metro
Manila granted the motion to dismiss the complaint in Civil Case No. 91-3366 entitled "Philippine
Banking Corporation v. Brinell Metal Works Corp., et al." for improper venue. Supported by a
plethora of decisions evincing a view contrary to that of the trial court, petitioner comes to us on a
petition for review on certiorari.
Briefly, the facts show that petitioner, Philippine Banking Corporation, filed a complaint with prayer
for preliminary attachment on December 5, 1991 against private respondents herein, Brinell Metal
Works Corporation and Spouses Jose and Nally Ang, for collection of a loan evidenced by two (2)
promissory notes.
On December 16, 1991, respondent Court issued an order granting the petitioner's prayer for the
issuance of writ of preliminary attachment.
On January 28, 1992, private respondents filed with the respondent court a motion to dismiss on the
grounds of (a) lack of jurisdiction over the persons of the defendants; and (b) improper venue. They
claim that summons was served on defendant corporation's customer who was not authorized to

receive the same for and in behalf of the corporation. They likewise object to the venue claiming that
the plaintiffs complaint is based on two promissory notes which commonly declare, among others:
I/WE HEREBY EXPRESSLY SUBMIT TO THE JURISDICTION OF
THE COURTS OF MANILA, ANY LEGAL ACTION WHICH MAY
ARISE OUT OF THIS PROMISSORY NOTE. 1
On February 28, 1992 respondent Court issued the following questioned order, to wit:
Acting on defendants' Motion to Dismiss dated January 28, 1992, on grounds of a)
lack of jurisdiction over the corporate defendant insofar as service of summons upon
it was effected on a person not authorized in law to receive the same; and b)
improper venue; and plaintiff having failed to appear for today's hearing and/or to
formally oppose the same notwithstanding a showing of receipt of the subject motion
as early as January 31, 1992.
Finding the motion to be studiously well-taken particularly in connection with the
dismissal of this action on grounds of improper venue consistent with the provisions
of Sec. 13, Rule 14 of the Rules of Court, it appearing on the face of the actionable
document sued upon that venue had been by agreement of the parties laid in Manila.
WHEREFORE, said motion to dismiss is hereby granted forthwith on grounds of
impropriety of venue. The above-entitled case is accordingly dismissed without
pronouncement as to costs.
SO ORDERED. 2
On March 2, 1992, petitioner moved for reconsideration of the aforesaid order granting the motion to
dismiss anchored on the ground that in view of the absence of qualifying or restrictive words in the
agreement which would indicate that Manila alone is the venue agreed upon by the parties, the
plaintiffs still has the choice to file the action in the place of his residence citing the case of Polytrade
Corporation v. Blanco. 3
On March 11, 1992, respondent court denied petitioner's motion for reconsideration and remained
steadfast in its position explaining that its dismissal order is predicated on the doctrinal rule
enunciated in Bautista v. Hon. Juan de Borja, et al. 4 that the proper court of Manila is the venue for an
action upon a document stipulating such "in case of any litigation herefrom, or in connection herewith," on
a rationale that neither party reserved the right to choose venue as provided for in Section 2(b), Rule 4 of
the Rules of Court, as would have been done had the parties intended to retain such right of election.

Respondent court brushed aside Polytrade v. Blanco 5 stating that Bautista and Polytrade appear not to
square with each other and that perhaps, the clear parameters on the rule vis-a-vis proper venue should
be defined.

Thus, the sole issue to be resolved in this petition is whether or not the respondent court erred in
holding that the venue of the action was improperly laid.
Under Section 1(c), Rule of the Revised Rules of Court, a motion to dismiss an action may be made
within the time for pleading on the ground that venue is improperly laid. Venue relates to the place of
trial or geographical location in which an action or proceeding should be brought and not to the
jurisdiction of the court. The matter of venue is regulated by the Rules of Court, so that the choice of
venue is not left to the caprices of plaintiff. 6

As a general rule, all personal actions may be commenced and tried where the defendant or any of
the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the
election of the plaintiff. 7 However, by written agreement of the parties, the venue of an action may be
changed or transferred from one province to another. 8 Besides when improper venue is not objected to in
a motion to dismiss it is deemed waived. 9 In other words, venue is waivable. It is procedural, not a
jurisdictional matter. It is intended to provide convenience to the parties, rather than restrict their access
to the courts. The rules on venue simply arrange for the convenient and effective transaction of business
in the courts and do not relate to their power, authority or jurisdiction over the subject matter of the action.

As early as the case of Central Azucarera de Tarlac v. De Leon, 10 this Court ruled that an agreement
in a contract fixing the venue of actions arising therefrom is a valid waiver of the venue as fixed by law.

Interpreting a stipulation in the written contracts sued upon that "in case of any litigation arising
(t)herefrom or in connection (t)herewith, the venue of action shall be in the City of Manila,
Philippines," this Court held in Bautista v. De Borja, 11 that the parties must reserve their right of
election if they want to file in a place other than the venue agreed upon, thus:

. . . We note that neither party to the contracts reserved the right to choose the venue
of action as fixed by law (i.e., where the plaintiff or defendant resides, at the election
of the plaintiff (par. [b], Section 2, Rule 4, Revised Rules of Court), as is usually done
if the parties to retain that right of election granted by the Rules. Such being the
case, it can reasonably be inferred that the parties intended to definitely fix the venue
of action, in connection with the written contracts sued upon in the proper courts of
the City of Manila only, notwithstanding that neither party is a resident of Manila. . . .
Subsequently, in Polytrade Corporation v. Blanco, 12 this Court expostulated a contrary doctrine that as
long as the stipulation does not set forth qualifying or restrictive words to indicate that the agreed place
alone and none other is the venue of the action, the parties do not lose the option of choosing the venue,
to wit:

. . . An accurate reading, however, of the stipulation. "The parties agree to sue and
be sued in the Courts of Manila," does not preclude the filing of suits in the residence
of plaintiff of defendant. The plain meaning is that the parties merely consented to be
sued in Manila. Qualifying or restrictive words which would indicate that Manila and
Manila alone is the venue are totally absent therefrom. We cannot read into that
clause that plaintiff and defendant bound themselves to file suits with respect to the
last two transactions in question only or exclusively in Manila. For, that agreement
did not change or transfer venue. It simply is permissive. The parties solely agreed to
add the courts of Manila as tribunals to which they may resort. They did not waive
their right to pursue remedy in the courts specifically mentioned in Section 2(b) of
Rule 4. Renuntiatio non praesumitur.
The latter case made reference to Engel v. Shubert Theatrical Co. 13 where an analogous stipulation
which read: "In case of dispute, both contracting parties agree to submit to the jurisdiction of the Vienna
courts" was interpreted as follows: "By the clause in question the parties do not agree to submit their
dispute to the jurisdiction of the Viennese court, and to those courts only. There is nothing exclusive in the
language used. They do agree to submit to the Viennese jurisdiction, but they say not a word in restriction
of the jurisdiction of courts elsewhere; and whatever may be said on the subject of the legality of
contracts to submit controversies to courts of certain jurisdiction exclusively, it is entirely plain that such
agreements should be strictly construed, and should not be extended by implication."

The doctrine in Polytrade was reiterated in Nicolas v. Reparations Commission 14 where the issue
posed was also whether the stipulation on venue is restrictive or merely permissive. The Court therein
held:

. . . venue in personal is fixed for the convenience of the plaintiff and his witnesses
and to promote the ends of justice. We cannot conceive how the interests of justice
may be served by confining the situs of the action to Manila, considering that the
residences or offices of all the parties, including the situs of the acts sought to be
restrained or required to be done, are all within the territorial jurisdiction of Rizal.
While the parties have agreed to submit their dispute to the jurisdiction of the Manila
courts, there is nothing in the language used in the aforecited stipulation which
clearly shows that the intention of the parties was to limit the venue of the action to
the City of Manila only. Such agreements should be construed reasonably and
should not be applied in such a manner that it would work more to the inconvenience
of the parties without promoting the ends of justice.
Without reference to Polytrade nor to Nicolas cases, this Court enunciated the same doctrine
in Tantoco v. Court of Appeals, 15 to wit:
It is elementary that venue is waivable, since it is a procedural, not a jurisdictional,
matter. The record shows that the parties agreed that the courts of Manila shall have
jurisdiction to try this case. The agreement is evidenced by sales contracts duly
presented at the ex parte hearing of March 25, 1966, whereby the parties submitted
themselves to the jurisdiction of the courts of Manila for any legal action arising out of
their transaction. In short, the parties agreed to add the courts of Manila as tribunals
to which they may resort in the event of suit, and not only to the courts either of Rizal,
of which private respondent is a resident, or of Bulacan, where petitioner resides,
pursuant to Section 2(b) of Rule 4 of the Revised Rules of Court.
On the other hand, private respondent cite the case of Hoechst Philippines, Inc. v. Torres, 16 in
support of the trial court's decision. The stipulation: "In case of litigation arising out of this agreement, the
venue of any action shall be in the competent courts of the Province of Rizal" was interpreted therein that
any action by either of the parties would have to be filed only in the competent courts of Rizal province
exclusively. Noteworthy, however, is the fact that on May 19, 1978, or the day following the promulgation
of the Hoechst case in May 18, 1978, this Court interpreted a similar stipulation on venue as
unenforceable in Sweet Lines, Inc. v. Teves. 17 Condition 14 of the shipping ticket issued by Sweet Lines,
Inc. which provides "that any and all actions arising out of the condition and provisions of this ticket,
irrespective of where it is issued, shall be filed in the competent courts in the City of Cebu" was held
subversive of public policy on transfers of venue of actions. The Court therein explained that the
philosophy underlying the provisions on transfer of venue of actions is the convenience of the plaintiffs as
well as his witnesses and to promote the end of justice. Considering the expense and trouble a
passenger residing outside of Cebu City would incur to prosecute a claim in the City of Cebu, he would
most probably decide not to file the action at all, the Court said.

The later cases of Lamis Ents. v. Lagamon; 18 Capati v. Ocampo; 19 Western Minolco v. Court of
Appeals; 20 Moles v.Intermediate Appellate
Court; 21 Hongkong and Shanghai Banking Corporation v. Sherman; 22 Nasser v. Court of Appeals; 23 and
just recently,Surigao Century Sawmill Co. v. Court of Appeals, 24 all treaded the path blazed by Polytrade.
The conclusion to be drawn from all these is that the more recent jurisprudence shall properly be deemed
modificatory of the old ones. Restating the rule, venue stipulations in a contract, while considered valid
and enforceable, do not as rule supersede the general rule set forth in Rule 4 of the Revised Rules of
Court. In the absence of qualifying or restrictive words, they should be considered merely as an

agreement on additional forum, not as limiting venue to the specified place. They are not exclusive but,
rather permissive. For, to restrict venue only to that place stipulated in the agreement is a construction
purely based on technicality which, on the contrary, should be liberally construed. Thus, we hold that the
petitioner in this case is not barred nor proscribed from filing its case against private respondents in
Makati where petitioner holds its residence, pursuant to Section 2(b) of Rule 4 of the Revised Rules of
Court.

WHEREFORE, the petition in this case is GRANTED and the orders of respondent Presiding Judge
of the Regional Trial Court Branch 146, at Makati, dated February 28, 1992 and March 11, 1992
dismissing the complaint and denying the motion for reconsideration are hereby REVERSED and
the complaint in the captioned civil case is REINSTATED.
SO ORDERED.
Narvasa, C.J., Regalado and Puno, JJ., concur.

Separate Opinions

PADILLA, J., dissenting:

Section 3, Rule 4 of the Rules of Court allows the parties to agree on the change or transfer of
venue.
The doctrine in Polytrade Corporation vs. Blanco, 30 SCRA 187 (1969) which is upheld by the
majority in this case, that the general rules on venue remain applicable in the absence of qualifying
or restrictive words in the agreement which indicate that the place specified is the only venue agreed
upon, was laid down to prevent undue hardship or inconvenience to the parties.
In my view, the issue of whether or not an agreement fixing the venue of actions prevents the
application of the general rule on venue under Sections 1 and 2 of Rule 4, Rules of Court, should be
settled by keeping the purpose of the doctrine in mind.
There is hardly any question that a stipulation in contracts of adhesion, fixing venue to a specified
place only, is void for, in such cases, there would appear to be no valid and free waiver of the venue
fixed by the Rules of Court. However, in cases where both parties freely and voluntarily agree on a
specified place to be the venue of actions, if any, between them, then the only considerations should
be whether the waiver (of the venue fixed by the Rules of Court) is against public policy and whether
the parties would suffer, by reason of such waiver, undue hardship and inconvenience; otherwise,
such waiver of venue should be upheld as binding on the parties. The waiver of venue in such cases
is sanctioned by the Rules of Court and would still be subject to and limited by the rules on
jurisdiction.

In the case at bench, there us no showing that any party would, in any way, be unduly
inconvenienced in adhering to their agreed venue; besides, the two (2) venues involved, namely
Makati and Manila, are so geographically close to each other, such that there is no perceivable
reason why there would be any substantial difference between the said two (2) venues. In such a
case, the venue agreed by the parties should control.
I therefore vote to DENY the petition and uphold the decision of the court a quo.

# Separate Opinions
PADILLA, J., dissenting:
Section 3, Rule 4 of the Rules of Court allows the parties to agree on the change or transfer of
venue.
The doctrine in Polytrade Corporation vs. Blanco, 30 SCRA 187 (1969) which is upheld by the
majority in this case, that the general rules on venue remain applicable in the absence of qualifying
or restrictive words in the agreement which indicate that the place specified is the only venue agreed
upon, was laid down to prevent undue hardship or inconvenience to the parties.
In my view, the issue of whether or not an agreement fixing the venue of actions prevents the
application of the general rule on venue under Sections 1 and 2 of Rule 4, Rules of Court, should be
settled by keeping the purpose of the doctrine in mind.
There is hardly any question that a stipulation in contracts of adhesion, fixing venue to a specified
place only, is void for, in such cases, there would appear to be no valid and free waiver of the venue
fixed by the Rules of Court. However, in cases where both parties freely and voluntarily agree on a
specified place to be the venue of actions, if any, between them, then the only considerations should
be whether the waiver (of the venue fixed by the Rules of Court) is against public policy and whether
the parties would suffer, by reason of such waiver, undue hardship and inconvenience; otherwise,
such waiver of venue should be upheld as binding on the parties. The waiver of venue in such cases
is sanctioned by the Rules of Court and would still be subject to and limited by the rules on
jurisdiction.
In the case at bench, there us no showing that any party would, in any way, be unduly
inconvenienced in adhering to their agreed venue; besides, the two (2) venues involved, namely
Makati and Manila, are so geographically close to each other, such that there is no perceivable
reason why there would be any substantial difference between the said two (2) venues. In such a
case, the venue agreed by the parties should control.
I therefore vote to DENY the petition and uphold the decision of the court a quo.

G.R. No. 160053

SPS. RENATO & ANGELINA

LANTIN,
Petitioners,

Present:
- versus QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

HON. JANE AURORA C.

LANTION, PRESIDING
JUDGE OF THE REGIONAL
TRIAL COURT OF LIPA
CITY, FOURTH JUDICIAL
REGION,
BRANCH 13,
PLANTERS DEVELOPMENT
BANK,
ELIZABETH
C.
UMALI,
ALICE
PERCE,
JELEN MOSCA, REGISTER
OF DEEDS FOR LIPA CITY,
BATANGAS, THE CLERK OF
COURT and EX-OFFICIO
SHERIFF
OF
THE
REGIONAL TRIAL COURT
OF BATANGAS,
Respondents.

Promulgated:
August 28, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, J.:
This is a petition for certiorari assailing the orders dated May 15, 2003 [1] and
September 15, 2003[2] in Civil Case No. 2002-0555 issued by public respondent,
Presiding Judge Jane Aurora C. Lantion, of the Regional Trial Court (RTC) of Lipa
City, Batangas.
The facts of the case are as follows:

Petitioners Renato and Angelina Lantin took several peso and dollar loans
from respondent Planters Development Bank and executed several real estate
mortgages and promissory notes to cover the loans. They defaulted on the
payments so respondent bank foreclosed the mortgaged lots. The foreclosed
properties, in partial satisfaction of petitioners debt, were sold at a public auction
where the respondent bank was the winning bidder. On November 8, 2003,
petitioners filed against Planters Development Bank and its officers Elizabeth
Umali, Alice Perce and Jelen Mosca (private respondents), a Complaint for
Declaration of Nullity and/or Annulment of Sale and/or Mortgage, Reconveyance,
Discharge of Mortgage, Accounting, Permanent Injunction, and Damages with the
RTC of Lipa City, Batangas. Petitioners alleged that only their peso loans were
covered by the mortgages and that these had already been fully paid, hence, the
mortgages should have been discharged. They challenged the validity of the
foreclosure on the alleged non-payment of their dollar loans as the mortgages did
not cover those loans.
Private respondents moved to dismiss the complaint on the ground of
improper venue since the loan agreements restricted the venue of any suit in Metro
Manila.
On May 15, 2003, the respondent judge dismissed the case for improper
venue.
Petitioners sought reconsideration. They argued that the trial court in effect
prejudged the validity of the loan documents because the trial court based its
dismissal on a venue stipulation provided in the agreement. The motion for
reconsideration was denied and the lower court held that the previous order did not
touch upon the validity of the loan documents but merely ruled on the procedural
issue of venue.

Petitioners now come before us alleging that:

I
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN HOLDING THAT THE VENUE STIPULATIONS

IN THE REAL ESTATE MORTGAGE AND PROMISSORY

NOTES FALL WITHIN THE PURVIEW OF SECTION 4(B) OF
RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE IN THAT IT
LIMITED THE VENUE OF ACTIONS TO A DEFINITE PLACE.
II
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN NOT FINDING THAT THE MERE USE OF THE
WORD EXCLUSIVELY DOES NOT, BY ITSELF, MEAN THAT
SUCH STIPULATIONS AUTOMATICALLY PROVIDE FOR AN
EXCLUSIVE VENUE, AS CONTEMPLATED BY SECTION 4(B)
OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE,
SPECIALLY WHEN THE TENOR OR LANGUAGE OF
THEENTIRE VENUE STIPULATION CLEARLY PROVIDES
OTHERWISE.
III
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DISREGARDING THE FACT THAT HEREIN
PETITIONERS COMPLAINT INVOLVES SEVERAL CAUSES OF
ACTION WHICH DO NOT ARISE SOLELY FROM THE REAL
ESTATE MORTGAGE AND PROMISSORY NOTES AND
WHICH OTHER CAUSES OF ACTION MAY BE FILED IN OTHER
VENUES UNDER SECTIONS 1 AND 2 OF RULE 4 OF THE 1997
RULES OF CIVIL PROCEDURE.
IV
THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DISREGARDING THE PRINCIPLE THAT THE
RULE ON VENUE OF ACTIONS IS ESTABLISHED FOR THE
CONVENIENCE OF THE PLAINTIFFS.[3]

The main issue in the present petition is whether respondent judge

committed grave abuse of discretion when she dismissed the case for improper
venue.

Petitioners contend that, since the validity of the loan documents were
squarely put in issue, necessarily this meant also that the validity of the
venue stipulation also was at issue. Moreover, according to the
petitioners, the venue stipulation in the loan documents is not an excl
usive venue stipulation under Section 4(b) of Rule 4 of the 1997 Rules of Civil
Procedure.[4] The venue in the loan agreement was not specified with
particularity. Besides, petitioners posit, the rule on venue of action was established
for the convenience of the plaintiff, herein petitioners. Further, petitioners also
contend that since the complaint involves several causes of action which did not
arise solely from or connected with the loan documents, the cited venue stipulation
should not be made to apply.
Private respondents counter that, in their complaint, petitioners did not assail
the loan documents, and the issue of validity was merely petitioners afterthought
to avoid being bound by the venue stipulation. They also aver that the venue
stipulation was not contrary to the doctrine in Unimasters,[5] which requires that a
venue stipulation employ categorical and suitably limiting language to the effect
that the parties agree that the venue of actions between them should be laid only
and exclusively at a definite place. According to private respondents, the language
of the stipulation is clearly exclusive.
At the outset, we must make clear that under Section 4 (b) of Rule 4 of the
1997 Rules of Civil Procedure, the general rules on venue of actions shall not
apply where the parties, before the filing of the action, have validly agreed in
writing on an exclusive venue. The mere stipulation on the venue of an action,
however, is not enough to preclude parties from bringing a case in other
venues. The parties must be able to show that such stipulation is exclusive.[6] In
the absence of qualifying or restrictive words, the stipulation should be deemed as
merely an agreement on an additional forum, not as limiting venue to the specified
place.[7]
The pertinent provisions of the several real estate mortgages and promissory
notes executed by the petitioner respectively read as follows:
18. In the event of suit arising out of or in connection with this mortgage
and/or the promissory note/s secured by this mortgage, the parties hereto

agree to bring their causes of auction (sic) exclusively in the proper court
of Makati, Metro Manila or at such other venue chosen by the
Mortgagee, the Mortgagor waiving for this purpose any other
venue.[8] (Emphasis supplied.)
I/We further submit that the venue of any legal action arising out of this
note shall exclusively be at the proper court of Metropolitan Manila,
Philippines or any other venue chosen by the BANK, waiving for this
purpose any other venue provided by the Rules of Court.[9] (Emphasis
supplied.)

Clearly, the words exclusively and waiving for this purpose any other venue
are restrictive and used advisedly to meet the requirements.
Petitioners claim that effecting the exclusive venue stipulation would be
tantamount to a prejudgment on the validity of the loan documents. We note
however that in their complaint, petitioners never assailed the validity of the
mortgage contracts securing their peso loans. They only assailed the terms and
coverage of the mortgage contracts. What petitioners claimed is that their peso
loans had already been paid thus the mortgages should be discharged, and that the
mortgage contracts did not include their dollar loans. In our view, since the issues
of whether the mortgages should be properly discharged and whether these also
cover the dollar loans, arose out of the said loan documents, the stipulation on
venue is also applicable thereto.
Considering all the circumstances in this controversy, we find that the
respondent judge did not commit grave abuse of discretion, as the questioned
orders were evidently in accord with law and jurisprudence.
WHEREFORE, the petition is DISMISSED. The assailed orders
dated May
15,
2003 and September
15,
2003 of
the Regional Trial Court of Lipa City, Batangas, in Civil Case No. 2002-0555
are AFFIRMED.
Costs against petitioners.
SO ORDERED.

G.R. No. 156809

March 4, 2009

ESTATE OF FELOMINA G. MACADANGDANG, represented by Court Appointed

Administrator ATTY. OSWALDO MACADANGDANG, Petitioner,
vs.
LUCIA GAVIOLA, AGAPITO ROMERO, CRISTINA QUIONES, BOY
LAURENTE,AGUSTINA TUNA, SOTERO TAPON, BUENAVENTURA MURING, SR.,
ROGELIO PASAJE, FE TUBORO, ESTANISLAO PEN, PABLO NAVALES, and JOSE
DAGATAN, Respondents.
DECISION
CARPIO, J.:
The Case
Before the Court is a petition for review assailing the 26 July 2002 Decision1 and the 10
December 2002 Resolution2 of the Court of Appeals in CA-G.R. SP No. 62002.
The Antecedent Facts
On 18 January 2000, Atty. Oswaldo Macadangdang (Atty. Macadangdang), acting as
administrator of the Estate of Felomina G. Macadangdang (petitioner), filed an action for
Unlawful Detainer with Damages against Lucia Gaviola, Agapito Romero, Cristina Quiones,
Boy Laurente, Agustina Tuna, Sotero Tapon, Buenaventura Muring, Sr., Rogelio Pasaje, Fe
Tuboro, Estanislao Pen, Pablo Navales, and Jose Dagatan (respondents). Respondents were
occupying, by mere tolerance, portions of four parcels of land in the name of the late Felomina
G. Macadangdang, covered by Transfer Certificate of Title Nos. T-6084, T-6085, T-6086, and T6087, all in the Registry of Deeds of Davao City.
In a Decision3 dated 27 June 2000, the Municipal Trial Court in Cities (MTCC), Branch 4, Davao
City, ruled in favor of petitioner, as follows:
WHEREFORE, judgment is hereby rendered ordering the defendants and all the persons
claiming rights under them to:
a) vacate their respective possession over the subject premises, and remove their structures
built therein at their expense;
b) pay plaintiff the sum of P500.00 a month, for each defendant, for the use and occupation
of the said premises commencing the date of this decision until they vacate the same;
c) pay plaintiff the sum of P5,000.00, each defendant, as attorneys fee; and
d) cost of suit.

Defendants counterclaims being compulsory are dismissed.

SO ORDERED.4

Respondents appealed from the MTCCs Decision.

The Ruling of the Trial Court
In an Order5 dated 14 September 2000, the Regional Trial Court (RTC) of Davao City dismissed
the appeal for respondents failure to file an appeal memorandum.
On petitioners motion, the RTC remanded the case to the MTCC for execution of judgment in
its Order6 dated 22 September 2000.
On 3 October 2000, respondents filed a Motion for Reconsideration/New Trial.
In an Order7 dated 16 October 2000, the MTCC ordered the issuance of a writ of execution after
payment of the execution fee.
In an Order8 dated 30 October 2000, the RTC denied respondents motion for reconsideration.
The RTC ruled that it no longer had jurisdiction over the motion after the dismissal of
respondents appeal.
Respondents filed a petition for review before the Court of Appeals assailing the RTCs 14
September 2000 Order.
The Ruling of the Court of Appeals
In its Decision promulgated on 26 July 2002, the Court of Appeals set aside the 14 September
2000 Order and remanded the case to the RTC.
The Court of Appeals ruled that as a matter of policy, the dismissal of an appeal on purely
technical grounds is frowned upon. The Court of Appeals ruled that rules of procedure are
intended to promote and not defeat substantial justice and should not be applied in a very rigid
and technical sense. The Court of Appeals further ruled that litigants should be afforded every
opportunity to establish the merits of their cases without the constraints of technicalities.
The Court of Appeals ruled that a distinction should be made between failure to file a notice of
appeal within the reglementary period and failure to file the appeal memorandum within the
period granted by the appellate court. The Court of Appeals ruled that failure to file a notice of
appeal within the reglementary period would result to failure of the appellate court to obtain
jurisdiction over the appealed decision. Thus, the assailed decision would become final and
executory upon failure to move for reconsideration. On the other hand, failure to file the appeal
memorandum within the period granted by the appellate court would only result to abandonment
of appeal, which could lead to its dismissal upon failure to move for its reconsideration. Thus,
the RTC erred in denying respondents motion for reconsideration on the ground of lack of
jurisdiction.
Finally, the Court of Appeals ruled that while the negligence of counsel binds the client, the rule
is not without exceptions such as when its application would result to outright deprivation of the
clients liberty or property, or when a client would suffer due to the counsels gross or palpable
mistake or negligence.

Petitioner moved for the reconsideration of the Decision of the Court of Appeals.
In its 10 December 2002 Resolution, the Court of Appeals denied the motion for lack of merit.
Hence, the petition before this Court.
The Issue
The sole issue in this case is whether the Court of Appeals erred in reversing the RTCs
dismissal of respondents appeal for failure to file an appeal memorandum.
The Ruling of this Court
The petition has merit.
Petitioners allege that the Court of Appeals erred when it allowed the filing of a motion for
reconsideration before the RTC. Petitioners allege that the case stemmed from an unlawful
detainer case where the Rules on Summary Procedure apply. Petitioners allege that under the
Rules on Summary Procedure, a motion for reconsideration is a prohibited pleading. Petitioners
also allege that due to the mandatory character of Section 7(b), Rule 40 of the 1997 Rules of
Civil Procedure, the RTC correctly dismissed the appeal. Petitioners also pointed out that
respondents Motion for Reconsideration/New Trial was neither verified nor accompanied by
affidavits of merit as required under Section 2, Rule 37 of the 1997 Rules of Civil Procedure.
Applicability of the Rules on Summary Procedure
Jurisdiction over forcible entry and unlawful detainer cases falls on the Metropolitan Trial Courts,
the Municipal Trial Courts in Cities, the Municipal Trial Courts, and the Municipal Circuit Trial
Courts.9 Since the case before the the MTCC was an unlawful detainer case, it was governed
by the Rules on Summary Procedure. The purpose of the Rules on Summary Procedure is to
prevent undue delays in the disposition of cases and to achieve this, the filing of certain
pleadings is prohibited,10 including the filing of a motion for reconsideration.11
However, the motion for reconsideration that petitioners allege to be a prohibited pleading was
filed before the RTC acting as an appellate court. The appeal before the RTC is no longer
covered by the Rules on Summary Procedure. The Rules on Summary Procedure apply before
the appeal to the RTC. Hence, respondents motion for reconsideration filed with the RTC is not
a prohibited pleading.
Procedure on Appeal
Section 7, Rule 40 of the 1997 Rules of Civil Procedure provides:
Sec. 7. Procedure in the Regional Trial Court. (a) Upon receipt of the complete records or the record on appeal, the clerk of court of the
Regional Trial Court shall notify the parties of such fact.

(b) Within fifteen (15) days from such notice, it shall be the duty of the appellant to submit a
memorandum which shall briefly discuss the errors imputed to the lower court, a copy of
which shall be furnished by him to the adverse party. Within fifteen (15) days from receipt of
the appellants memorandum, the appellee may file his memorandum. Failure of the
appellant to file a memorandum shall be a ground for dismissal of the appeal.
(c) Upon the filing of the memorandum of the appellee, or the expiration of the period to do
so, the case shall be considered submitted for decision. The Regional Trial Court shall
decide the case on the basis of the entire record of the proceedings had in the court of origin
and such memoranda as are filed. (Emphasis supplied)

In this case, the RTC dismissed respondents appeal for their failure to file an appeal
memorandum in accordance with Section 7(b), Rule 40 of the 1997 Rules of Civil Procedure.
The Court of Appeals reversed the RTCs dismissal of the appeal.
1avv phi 1

The Court of Appeals ruled that while the negligence of counsel binds the client, the
circumstances in this case warrant a departure from this general rule. The Court of Appeals
ruled that respondents counsel only realized his failure to submit the appeal memorandum
when he received a copy of the dismissal of the appeal. The Court of Appeals ruled that
exceptions to the general rule are recognized to accord relief to a client who suffered by reason
of the counsels gross or palpable mistake or negligence.
We do not agree with the Court of Appeals.
The general rule is that a client is bound by the acts, even mistakes, of his counsel in the realm
of procedural technique.12 There are exceptions to this rule, such as when the reckless or gross
negligence of counsel deprives the client of due process of law, or when the application of the
general rule results in the outright deprivation of ones property through a technicality. 13
In this case, respondents counsel advanced this reason for his failure to submit the appeal
memorandum:
c. That there was a delay in the filing of defendants-appellants[] appeal memorandum due to
the heavy backlog of legal paperwork piled on the table of the undersigned counsel, and he
realized his failure to submit defendants[] appeal memorandum when he received a copy of the
dismissal of the case. This is to consider that he is the only lawyer in his law office doing a
herculean task.14
We find no reason to exempt respondents from the general rule. The cause of the delay in the
filing of the appeal memorandum, as explained by respondents counsel, was not due to gross
negligence. It could have been prevented by respondents counsel if he only acted with ordinary
diligence and prudence in handling the case. For a claim of gross negligence of counsel to
prosper, nothing short of clear abandonment of the clients cause must be shown.15 In one case,
the Court ruled that failure to file appellants brief can qualify as simple negligence but it does
not amount to gross neglience to justify the annulment of the proceedings below.16
Finally, respondents were not deprived of due process of law. The right to appeal is not a
natural right or a part of due process.17 It is merely a statutory privilege and may be exercised
only in the manner and in accordance with the provisions of the law.18 The Court notes that in
their memoranda,19 respondents admitted that they signed an agreement that they would vacate

the land they occupy not later than 28 February 1998. They refused to vacate the land only
because they were not relocated as promised by the owner. Respondents claimed that the land
was later declared alienable and disposable, and the decision was affirmed by this Court.
Hence, respondents alleged that petitioner no longer had the right to drive them out of the land.
However, respondents did not even indicate the case number and title, as well as the date of
promulgation of the alleged Supreme Court decision, in their memoranda.
WHEREFORE, we GRANT the petition. We SET ASIDE the 26 July 2002 Decision and the 10
December 2002 Resolution of the Court of Appeals in CA-G.R. SP No. 62002.
SO ORDERED.

ANGELINA SORIENTE and ALL

OTHER PERSONS CLAIMING RIGHTS
UNDER HER,
Petitioners,

G.R. No. 160239

Present:
- versus CORONA, J., Chairperson,
CHICO-NAZARIO,
VELASCO, JR.,
THE ESTATE OF THE LATE ARSENIO
E. CONCEPCION, represented by
NENITA S. CONCEPCION,
Respondents.

NACHURA, and
PERALTA, JJ.

Promulgated:

November 25, 2009

x-----------------------------------------------------------------------------------------x

DECISION

PERALTA, J.:
This is a petition for review on certiorari[1] of the Order[2] dated October 3,
2003 of the Regional Trial Court of Mandaluyong City, Branch 213,
National Capital Judicial Region in Civil Case No. MC-03-407-A,
which affirmed the Decision dated April 8, 2003 of the Metropolitan Trial Court
of Mandaluyong City, Branch 59 in Civil Case No. 17973, ordering petitioner to
vacate the property, subject matter of this unlawful detainer case, and surrender the
possession thereof to respondent.
The facts, as stated by the trial court,[3] are as follows:

Respondent Nenita S. Concepcion established that she was the registered

owner of the lot occupied by petitioner Angelina Soriente at No. 637 Cavo F.
Sanchez Street, Mandaluyong City, Metro Manila. The lot, with an area of 295
square meters, is covered by Transfer Certificate of Title (TCT) No.
12892[4] issued by the Register of Deeds of Metro Manila, District II.
During the lifetime of Arsenio E. Concepcion, who acquired the lot in 1978,
he allowed and tolerated the occupancy of the lot by petitioner, who was already
staying on the property. Petitioner was allowed to stay on the lot for free, but on a
temporary basis until such time that Concepcion and/or his family needed to
develop the lot.
After Arsenio E. Concepcion died on December 27, 1989, his
family initiated steps to develop the lot, but petitioners occupancy of the
lot prevented them from pursuing their plan.
Verbal demands to vacate the lot was made on petitioner. Petitioner pleaded
for time to transfer to another place, but she never left.
In June 2000, Elizabeth Concepcion-Dela Cruz, daughter of respondent,
filed a complaint for conciliation proceedings before the barangay at the instance
of respondent. However, the parties did not reach a settlement, which resulted in
the issuance of a Certificate to File Action[5] dated February 17, 2001 by the
Barangay Captain of Barangay Hagdan Bato Itaas, Mandaluyong City.
Respondent sent petitioner a demand letter dated September 22, 2000 by
registered mail, demanding that she peacefully surrender the property and
extending financial assistance for her relocation. Despite receipt of the demand
letter, petitioner did not vacate the premises.
On April 27, 2001, respondent filed against petitioner a Complaint[6] for
unlawful detainer with the Metropolitan Trial Court of Mandaluyong City, Branch
59 (trial court). The Complaint was docketed as Civil Case No. 17973. The
Complaint alleged that respondent was the registered owner of the subject
property, while petitioner had no title to the property and her free occupancy
thereof was merely tolerated by respondent. Moreover, petitioner was occupying
the premises together with her family, and she had maintained boarders for a fee.
Respondent prayed that petitioner be ordered to vacate the lot, surrender the

possession thereof to respondent, pay monthly rent of P5,000.00 from June 2000
until she vacates the premises, and pay actual, moral and exemplary damages, as
well as litigation expenses.
It appears from the records of the case that petitioner Soriente, as a
defendant in the lower court, did not file a separate Answer, but affixed her
signature to the Answer filed by defendant Alfredo Caballero in another ejectment
case, docketed as Civil Case No. 17974, which was filed by respondent against
Caballero. Hence, respondent, through counsel, filed a Motion to Render
Judgment[7] under Section 7, Rule 70 of the 1997 Revised Rules of Civil
Procedure for Sorientes failure to file an Answer to the Complaint. Petitioner
filed an Opposition to the Motion to Render Judgment.[8]
In an Order[9] dated December 5, 2001, the trial court denied the Motion to
Render Judgment. It stated that the allegations of the Complaint in Civil Case No.
17973 and 17974 are similar, the only substantial difference being the time when
defendants occupied the subject property allegedly through the tolerance
of Arsenio Concepcion. The trial court believed that in signing the Answer filed
in Civil Case No. 17974, Soriente intended to adopt the same as her own, as both
defendants Caballero and Soriente had a common defense against plaintiffs
(respondents) separate claim against them. The trial court denied the Motion to
Render Judgment in the interest of justice and considered that the two cases,
including Civil Case No. 17932 against Severina Sadol, had been consolidated.
Pursuant to Section 7 of the 1991 Revised Rule on Summary Procedure, the
trial court set a preliminary conference on October 9, 2001 at 8:30 a.m. The
preliminary conference was reset to November 15, 2001, and then to December 18,
2001 because the Motion to Render Judgment was still pending resolution. On
December 18, 2001, the preliminary conference was reset to January 24, 2002 as
prayed for by defendants on the ground that their common counsel was absent
despite proper notice, and plaintiff (respondent) did not object to the resetting.[10]
On January 24, 2002, the scheduled preliminary conference was again reset
to March 5, 2002 because no notice was sent to defendants counsel, and plaintiff
(respondent) and her counsel were both absent despite proper notice.
On March 5, 2002, the trial court reset the preliminary conference to April
16, 2002 on the ground that there was no notice sent to defendants counsel.

In the scheduled preliminary conference held on February 18, 2003, only

plaintiffs (respondents) counsel and defendants Severina Sadol and Alfredo
Caballero were present. Plaintiffs (respondents) counsel submitted a secretarys
certificate attesting to the existence of a board resolution authorizing him to enter
into a compromise agreement. A representative of defendant (petitioner) Angelina
Soriente appeared, but failed to submit a Special Power of Attorney authorizing her
to enter into a compromise agreement. Counsel for defendants was not in court,
and there was no proof of service on her for the hearing. However, defendants
Sadol and Caballero informed the court that they informed their counsel of the
hearing scheduled that day. In view of the absence of defendant Angelina Soriente
or her authorized representative, plaintiffs (respondents) counsel moved that the
case be submitted for decision, and that he be given 15 days within which to
submit his position paper.[11]
In its Order[12] dated February 18, 2003, the trial court granted the motion of
plaintiffs (respondents) counsel and considered the case against defendant
(petitioner) Angelina Soriente submitted for decision in accordance with Section 7
of the Rules on Summary Procedure.[13]
On April 8, 2003, the trial court rendered a Decision[14] holding that
respondent established by preponderance of evidence that she was entitled to the
relief prayed for. The dispositive portion of the Decision reads:
WHEREFORE, judgment is hereby rendered ordering defendant Angelina
Soriente and all other persons claiming rights under her to:
1. Vacate the subject premises and surrender the possession thereof
to plaintiff;
2. Pay the amount of PESOS: FIVE THOUSAND (P5,000.00) per
month as reasonable compensation for use and occupation of
the premises as of June 2000 until she finally vacates the
subject premises;
3. Pay the amount [of] PESOS: THREE THOUSAND
(P3,000.00) as attorneys fees; and
[15]
4. Pay the litigation expenses and cost of suit.

Petitioner appealed the trial courts Decision to the RTC of Mandaluyong

City, Branch 213, raising the following issues:

1. The lower court erred in holding that the plaintiff was able to establish that
she is the registered owner of the lot occupied by the defendant-appellant
instead of dismissing the complaint outright for lack of legal capacity to sue.
2. The lower court erred in holding that the plaintiff was able to establish by
preponderance of evidence that she is entitled to the relief prayed for despite
lack of jurisdiction.
3. The lower court erred in holding that this instant case subject of this appeal be
[16]
decided in accordance with Section 7 of the Rules on Summary Procedure.

In an Order[17] dated October 3, 2003, the RTC affirmed the trial courts
Decision, disposing thus:
PRESCINDING FROM THE FOREGOING CONSIDERATIONS,
judgment is hereby rendered AFFIRMING IN TOTO the decision dated April 8,
[18]
2003 rendered by the Metropolitan Trial Court, Branch 59, Mandaluyong City.

The RTC held:

Case records readily disclosed that the ownership of the subject lot
belongs to the late Arsenio E. Concepcion, married to herein Plaintiff-Appellee
Nenita S. Concepcion, as evidenced by the Transfer Certificate of Title No. 12892
(Annex A in the complaint for Unlawful Detainer). This Certificate of Title
shall be received as evidence in all courts of the Philippines and shall be
conclusive as to all matters contained therein principally, the identity of the owner
of the land covered thereby except as provided in the Land Registration Act. Said
title can be attacked only for fraud within one year after the date of the issuance of
the decree of registration. Such attack must be direct and not by a collateral
proceeding. The title represented by the certificate cannot be changed, altered,
modified, enlarged or diminished in a collateral proceeding such as this instant
appeal from the decision rendered by the Metropolitan Trial Court
of Mandaluyong City in an ejectment case. As should be known by Appellant
Soriente through counsel, no title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession.
Prescription is unavailing not only against the registered owner Arsenio E.
Concepcion but also against his hereditary successors because the latter merely
steps into the shoes of the decedent by operation of law and are merely the
continuation of the personalities of their predecessors-in-interest (Barcelona v.
Barcelona, 100 Phil 251; PD 1529, Sec. 47). x x x
xxxx

Noteworthy to mention in the case at bar is the ruling laid down

in Calubayan v. Pascual, 21 SCRA 146, where the Supreme Court [held] that a
person who occupies the land of another at the latters tolerance or permission,
without any contract between them, is necessarily bound by an implied promise
that he will vacate upon demand, failing which a summary action for ejectment is
[19]
the proper remedy against [him]. x x x

Petitioner filed this petition raising the following issues:

I
THE REGIONAL TRIAL COURT ERRED IN AFFIRMING THE
DECISION OF THE LOWER COURT IN HOLDING THAT THE PLAINTIFF
WAS ABLE TO ESTABLISH THAT SHE IS THE REGISTERED OWNER OF
THE LOT OCCUPIED BY THE DEFENDANT-APPELLANT INSTEAD OF
DISMISSING THE COMPLAINT OUTRIGHT FOR LACK OF LEGAL
CAPACITY TO SUE.
II
THE REGIONAL TRIAL COURT ERRED IN AFFIRMING THE
DECISION OF THE LOWER COURT IN HOLDING THAT THE PLAINTIFF
WAS ABLE TO ESTABLISH BY PREPONDERANCE OF EVIDENCE THAT
SHE IS ENTITLED TO THE RELIEF PRAYED FOR DESPITE LACK OF
JURISDICTION.
III
THE REGIONAL TRIAL COURT ERRED IN HOLDING THAT THIS
INSTANT CASE SUBJECT OF THIS APPEAL BE DECIDED IN
ACCORDANCE WITH SECTION 7 OF THE RULES ON SUMMARY
[20]
PROCEDURE.

Petitioner appealed from the RTCs decision directly to this Court on pure
questions of law. There is a question of law in a given case when the doubt or
difference arises as to what the law is on a certain state of facts; there is a question
of fact when the doubt or difference arises as to the truth or the falsehood of
alleged facts.[21]
Moreover, Republic v. Sandiganbayan[22] ruled:

x x x A question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts; or when the issue does not
call for an examination of the probative value of the evidence presented, the truth or
falsehood of facts being admitted. A question of fact exists when the doubt or
difference arises as to the truth or falsehood of facts or when the query invites
calibration of the whole evidence considering mainly the credibility of the witnesses, the
existence and relevancy of specific surrounding circumstances as well as their relation to
each other and to the whole, and the probability of the situation.[23]

The Court notes that petitioner raised both questions of fact and law in her
petition. The Court shall resolve only the pertinent questions of law raised.

First, petitioner questioned respondent Nenita Concepcions capacity to

sue as a representative of the Estate of her husband, Arsenio Concepcion,
alleging absence of proof of the issuance of the requisite letters testamentary or
letters of administration evidencing her legal capacity to sue in behalf of the
Estate of Arsenio Concepcion in contravention of Section 4, Rule 8 of the 1997
Rules of Civil Procedure, thus:

Sec. 4. Capacity. Facts showing the capacity of a party to sue or be

sued in a representative capacity or the legal existence of an organized association
of persons that is made a party, must be averred. A party desiring to raise an issue
as to the legal existence of any party or the capacity of any party to sue or be sued
in a representative capacity, shall do so by specific denial, which shall include
such supporting particulars as are peculiarly within the pleaders knowledge.

Petitioner asserts that lack of legal capacity to sue is a ground for dismissal
under Section 1 (d) of Rule 16 of the Revised Rules of Court, and considering that
a motion to dismiss is a prohibited pleading under the summary procedure, the
trial court failed to exercise its duty to order the outright dismissal of the
complaint as mandated under Section 4[24] of the 1991 Revised Rule on Summary
Procedure.

Petitioners contention lacks merit.

Section 4, Rule 8 of the 1997 Rules of Civil Procedure provides:

Sec. 4. Capacity. x x x A party desiring to raise an issue as to the

legal existence of any party or the capacity of any party to sue or be sued in a
representative capacity, shall do so by specific denial, which shall include
such supporting particulars as are peculiarly within the pleaders
knowledge.[25]

Based on the provision cited above, the RTC correctly ruled:

The argument is not tenable. This court, upon cursory reading of the provisions
of Rule 8, Section 4 of the Rules of Court, in relation to the Rules on Summary
Procedure, finds it relevant to note x x x that although a Motion to Dismiss or a Motion
for Bill of Particulars cannot be availed of to challenge the capacity of the party under
the Rules on Summary Procedure, the DefendantAppellant should have at least
SPECIFICALLY DENIED such capacity of the party in the Answer, which should have
included such supporting particulars as are peculiarly within the pleaders
knowledge. The case records clearly disclosed that no such specific denial was made by
the appellant and this court believes that the lower court had carefully and dutifully
taken into account the applicable rules particularly Section 4 of the Revised Rules on
Summary Procedure, in relation to Section 4, Rule 8 of the Rules of Court and pertinent
jurisprudence, before rendering the assailed decision dated April 8, 2003. The
presumption of the regular performance of duties applies in this case and the same shall
prevail over mere allegations of the herein Defendant-Appellant.[26]

Further, as the successor-in-interest of the late Arsenio E. Concepcion and

co-owner of the subject property, respondent Nenita S. Concepcion is entitled to
prosecute the ejectment case not only in a representative capacity, but as a real
party-in-interest. Article 487 of the Civil Code states, Any one of the co-owners
may bring an action in ejectment. Hence, assuming that respondent failed to
submit the proper documents showing her capacity to sue in a representative
capacity for the estate of her deceased husband, the Court, in the interest

of speedy disposition of cases, may deem her capacitated to prosecute the

ejectment case as a real party-in-interest being a co-owner of the subject
property considering that the trial court has jurisdiction over the subject matter
and has also acquired jurisdiction over the parties, including respondent Nenita S.
Concepcion.

Second, petitioner questions whether respondent has established by a

preponderance of evidence that she is entitled to the relief prayed for, which is
the ejectment of petitioner from the subject property. Petitioner contends that
respondent admitted in her Complaint that her right to the subject property arose
only in 1978, when the late Arsenio E. Concepcion acquired the same. Petitioner
alleges that to the contrary, substantial evidence exists that she and her
predecessors-in-interest have continuously and openly occupied and possessed,
in the concept of owner, the subject property since time immemorial.

The Court holds that the RTC correctly affirmed the ejectment of petitioner
from the property.

To make out a case of unlawful detainer under Section 1,[27] Rule 70 of the
Rules of Court, the Complaint must allege that the defendant is unlawfully
withholding from the plaintiff the possession of certain real property after the
expiration or termination of the formers right to hold possession by virtue of a
contract, express or implied, and that the action is being brought within one year
from the time the defendants possession became unlawful.[28]

The Complaint alleged that petitioner occupied the subject property by

tolerance of the late Arsenio Concepcion. While tolerance is lawful, such
possession becomes illegal upon demand to vacate by the owner and the
possessor by tolerance refuses to comply with such demand.[29] Respondent sent
petitioner a demand letter dated September 22, 2000 to vacate the subject
property, but petitioner did not comply with the demand. A person who occupies
the land of another at the latters tolerance or permission, without any contract
between them, is necessarily bound by an implied promise that he will vacate

upon demand, failing which a summary action for ejectment is the proper remedy
against him.[30] Under Section 1, Rule 70 of the Rules of Court, the one-year
period within which a complaint for unlawful detainer can be filed should be
counted from the date of demand, because only upon the lapse of that period
does the possession become unlawful.[31]Respondent filed the ejectment case
against petitioner on April 27, 2001, which was less than a year from the date of
formal demand. Clearly, therefore, the action was filed within the one-year
period prescribed for filing an ejectment or unlawful detainer case.

The sole issue for resolution in an unlawful detainer case is physical or

material possession.[32] All that the trial court can do is to make an initial
determination of who is the owner of the property, so that it can resolve who is
entitled to its possession absent other evidence to resolve ownership.[33] Courts
in ejectment cases decide questions of ownership only it is necessary to decide
the question of possession.[34] The reason for this rule is to prevent the defendant
from trifling with the summary nature of an ejectment suit by the simple
expedient of asserting ownership over the disputed property.[35]

In this case, the trial court found that respondent owns the property on the
basis of Transfer Certificate of Title No. 12892,[36] which was issued in the name
of Arsenio E. Concepcion, x x x married to Nenita L. Songco. It is settled rule that
the person who has a Torrens title over a land is entitled to possession
thereof.[37] Hence, as the registered owner of the subject property, respondent is
preferred to possess it.[38]

The validity of respondents certificate of title cannot be attacked by

petitioner in this case for ejectment. Under Section 48 of Presidential Decree No.
1529, a certificate of title shall not be subject to collateral attack.[39] It cannot be
altered, modified or cancelled, except in a direct proceeding for that purpose in
accordance with law.[40] The issue of the validity of the title of the respondents
can only be assailed in an action expressly instituted for that purpose.[41] Whether
or not the petitioner has the right to claim ownership over the property is beyond
the power of the trial court to determine in an action for unlawful detainer.[42]

Although petitioner alleges that substantial evidence exists that she and
her predecessors-in-interest had continuously and openly occupied and
possessed, in the concept of owner, the subject property since time immemorial,
petitioner failed to present evidence to substantiate her allegation.
Whereas respondent holds a Torrens title over the subject property; hence, she is
entitled to the possession of the property.[43]
The court's adjudication of ownership in an ejectment case is merely
provisional, and affirmance of the trial courts decision would not bar or prejudice
an action between the same parties involving title to the property, if and when
such action is brought seasonably before the proper forum.[44]

Lastly, petitioner contends that the lower court erred in deciding this case
in accordance with Section 7 of the Rules on Summary Procedure, thus:
SEC. 7. Preliminary conference; appearance of parties. Not later than
thirty (30) days after the last answer is filed, a preliminary conference shall be
held. The rules on pre-trial in ordinary cases shall be applicable to the
preliminary conference unless inconsistent with the provisions of this Rule.
The failure of the plaintiff to appear in the preliminary conference shall be
a cause for the dismissal of his complaint. The defendant who appears in the
absence of the plaintiff shall be entitled to judgment on his counterclaim in
accordance with Section 6 hereof. All cross-claims shall be dismissed.
If a sole defendant shall fail to appear, the plaintiff shall be entitled to
judgment in accordance with Section 6 hereof. This Rule shall not apply
where one of two or more defendants sued under a common cause of action
who had pleaded a common defense shall appear at the preliminary
conference.[45]

Section 6 of the 1991 Revised Rules on Summary Procedure, which

is referred to by Section 7 above, states:

SEC. 6. Effect of failure to answer. Should the defendant fail to answer

the complaint within the period above provided, the court, motu proprio, or on

motion of the plaintiff, shall render judgment as may be warranted by the

facts alleged in the complaint and limited to what is prayed for therein:
Provided, however, That the court may in its discretion reduce the amount of
damages and attorneys fees claimed for being excessive or otherwise
unconscionable. This is without prejudice to the applicability of Section 4, Rule
18 of the Rules of Court, if there are two or more defendants.

Petitioner asserts that considering that the cases against her, defendants
Caballero and Sadol were consolidated, and she and defendant Caballero signed
and filed one common Answer to the Complaint, thus, pleading a common
defense, the trial court should not have rendered judgment on her case based on
Section 7 of the 1991 Revised Rules on Summary Procedure when she failed to
appear in the preliminary conference.

The contention lacks merit.

The Court notes that the ejectment case filed by respondent against
petitioner was docketed in the trial court as Civil Case No. 17973, the case against
Alfredo Caballero was docketed as Civil Case No. 17974, while the case against
Severina Sadol was docketed as Civil Case No. 17932. These cases were
consolidated by the trial court.
Under Section 7 of the 1991 Revised Rules on Summary Procedure, if a sole
defendant shall fail to appear in the preliminary conference, the plaintiff shall be
entitled to judgment in accordance with Section 6 of the Rule, that is, the court
shall render judgment as may be warranted by the facts alleged in the Complaint
and limited to what is prayed for therein. However, [t]his Rule (Sec. 7) shall not
apply where one of two or more defendants sued under a common cause of action,
who had pleaded a common defense, shall appear at the preliminary
conference. Petitioner claims that the preceding provision applies to her as a
defendant, since the ejectment cases were consolidated by the trial court, and she
and Caballero filed the same Answer to the Complaint; hence, the trial court
should not have rendered judgment against her when she failed to appear in the
preliminary conference.[46]

The Court holds that the italicized provision above does not apply in the
case of petitioner, since she and Caballero were not co-defendants in the same
case. The ejectment case filed against petitioner was distinct from that of
Caballero, even if the trial court consolidated the cases and, in the interest of
justice, considered the Answer filed by Caballero in Civil Case No. 17974 as the
Answer also of petitioner since she affixed her signature thereto.

Considering that petitioner was sued in a separate case for ejectment from
that of Caballero and Sadol, petitioners failure to appear in the preliminary
conference entitled respondent to the rendition of judgment by the trial court
on the ejectment case filed against petitioner, docketed as Civil Case No. 17973,
in accordance with Section 7 of the 1991 Revised Rules on Summary Procedure.

WHEREFORE, the petition is DENIED. The Order dated October 3, 2003 of

the Regional Trial Court of Mandaluyong City, Branch 213, National Capital
Judicial Region in Civil Case No. MC-03-407-A is AFFIRMED.

No costs.

SO ORDERED.

SPS. HEBER & CHARLITA EDILLO,

Petitioners,

G.R. No. 188360

Present:

CARPIO, J., Chairpers

- versus -

on,
BRION,
DEL CASTILLO,
ABAD, and
PEREZ, JJ.

SPS. NORBERTO & DESIDERIA DULPINA,

Respondents.
Promulgated:

January 21, 2010

x ---------------------------------------------------------------------------------------- x

DECISION
BRION, J.:

We resolve in this Decision the Petition for Review on Certiorari[1] filed by

defendants-petitioners Spouses Heber and Charlita Edillo (defendants-petitioners)
who seek to reverse and set aside the Resolutions dated January 28, 2009[2] and
June 11, 2009[3] of the Special Former Special Division of Five of the Court of
Appeals (CA) in CA-G.R. SP No. 02436-MIN. The first assailed CA Resolution
dismissed outright the defendants-petitioners Petition for Review for failure to
state the factual background of the case; the second assailed CA Resolution
denied the defendants-petitioners Motion for Reconsideration.
FACTUAL BACKGROUND
The facts of the case, gathered from the parties pleadings and annexes, are
briefly summarized below.
On February 21, 2006, plaintiffs-respondents Spouses Norberto and
Desideria Dulpina (plaintiffs-respondents) filed a Complaint for Forcible Entry
against the defendants-petitioners with the Municipal Circuit Trial Court of Del
Carmen-San Isidro-San Benito, Surigao del Norte (MCTC).[4]

The plaintiffs-respondents alleged that they purchased from Wencelito

Camingue a 235-square meter residential lot and house located in Poblacion, San
Isidro, Surigao del Norte, through a Deed of Sale[5] dated May 14, 1990. On August
8, 2005, defendant-petitioner Heber Edillo, without their consent and against
their express prohibition, suddenly fenced off and occupied a 50-square meter
portion of the western part of the disputed property while uttering threats
against plaintiffs-respondents. On January 26, 2006, they sent the defendantspetitioners a notice to vacate the disputed property, but the defendantspetitioners refused to comply.[6]

In their Answer dated March 1, 2006, the defendants-petitioners countered

that the Complaint states no cause of action because the plaintiffs-respondents
failed to allege that they were in prior physical possession of the disputed
property.[7]They also alleged that they acquired the disputed property through
three (3) separate Deeds of Absolute Sale[8] from Apolinar Saragoza,[9] Felomino
Forcadilla,[10] and Wenceslao Caunzad.[11]

THE MCTC RULING

On May 23, 2007, the MCTC rendered judgment dismissing the Complaint.
It
ordered
the
plaintiffs-respondents
to
pay
the
defendantspetitioners P10,000.00 as actual damages and another P10,000.00 as attorneys
fees.[12] The plaintiffs-respondents counsel received a copy of the MCTC
Judgment on May 31, 2007.[13]

On June 5, 2007, the plaintiffs-respondents filed a Motion for

Reconsideration[14] which the MCTC denied in its Resolution of June 8, 2007.[15]

On July 30, 2007, the plaintiffs-respondents filed a Notice of Appeal with

the MCTC, which the latter granted.
On August 15, 2007, the plaintiffs-respondents filed their Appeal
Memorandum with the Regional Trial Court, Branch 31, Dapa, Surigao del Norte
(RTC).[16]

THE RTC RULING

The RTC decided the appeal on November 7, 2007. It set aside the MCTC
judgment and ordered the defendants-petitioners to vacate the subject property

and to restore the plaintiffs-respondents to their possession. It likewise ordered

the payment of P10,000.00 as attorneys fees and the cost of suit.[17]

After the RTC denied[18] their Motion for Reconsideration,[19] the

defendants-petitioners elevated the case to the CA through a Petition for Review
under Rule 42 of the Rules of Court.[20] They argued that the plaintiffsrespondents appeal with the RTC was filed out of time since the Revised Rules of
Summary Procedure (RRSP) prohibits the filing of a motion for reconsideration.

THE CA RULING
The CA dismissed the Petition in its Resolution of January 28, 2009[21] on the
ground that it does not contain a statement of the factual background of the case,
in violation of Sections 2 and 3 of Rule 42 of the Rules of Court. A special division
of five (5) justices, with Associate Justice Ruben C. Ayson dissenting,[22] rendered
the resolution.

The defendants-petitioners moved to reconsider the dismissal, to amend

the petition, and to admit their First Amended Petition.[23] The CA denied the
motions in its Resolution of June 11, 2009, noting that the amended petition did
not correct the infirmity of the original petition.[24]

Faced with this development, the defendants-petitioners filed the present

Petition for Review on Certiorari under Rule 45 of the Rules of Court.

THE PETITION

The defendants-petitioners argue that the CAs outright dismissal of the

petition was unwarranted since the Petition for Review and the Amended Petition
(filed with the Motion for Reconsideration of the Dismissal of the Original
Petition) sufficiently recited the factual background of the case. They submit that
the annexes to the original and amended petitions, consisting of the Complaint,
the Answer, the other pleadings, and the MCTC and RTC Decisions, also contain
this factual background. They point out that a relaxation of technical rules is
justified by the merits of the case the RTC had no jurisdiction to entertain the
plaintiffs-respondents appeal because the MCTC Decision had become final and
executory; the Motion for Reconsideration the plaintiffs-respondents filed is a
prohibited pleading in summary proceedings and did not stop the running of the
period for the decisions finality.

For their part, the plaintiffs-respondents submit that the requirements set
forth in Section 2 of Rule 42 of the Revised Rules of Court are mandatory and the
defendants-petitioners have no discretion but to comply, citing Galang v. Court of
Appeals[25] and Tan v. Court of Appeals.[26]

OUR RULING

We find for the defendants-petitioners.

Procedure on Appeal; Liberal

Construction of Rules

An appeal to the CA from an RTC Decision rendered in the exercise of its

appellate jurisdiction is via a Petition for Review under Rule 42 of the Revised
Rules of Court. Section 2 of Rule 42 prescribes the following requirements:

SEC. 2. Form and contents. The petition shall be filed in seven

(7) legible copies, with the original copy intended for the court being
indicated as such by the petitioner, and shall (a) state the full names of
the parties to the case, without impleading the lower courts or judges
thereof either as petitioners or respondents; (b) indicate the specific
material dates showing that it was filed on time; (c) set forth concisely
a statement of the matters involved, the issues raised, the
specification of errors of fact or law, or both, allegedly committed by
the Regional Trial Court, and the reasons or arguments relied upon for
the allowance of the appeal; (d) be accompanied by clearly legible
duplicate originals or true copies of the judgments or final orders of
both lower courts, certified correct by the clerk of court of the Regional
Trial Court, the requisite number of plain copies thereof and of the
pleadings and other material portions of the record as would support
the allegations of the petition.

The petitioner shall also submit together with the petition a

certification under oath that he has not theretofore commenced any
other action involving the same issues in the Supreme Court, the Court
of Appeals or different divisions thereof, or any other tribunal or
agency; if there is such other action or proceeding, he must state the
status of the same; and if he should thereafter learn that a similar
action or proceeding has been filed or is pending before the Supreme
Court, the Court of Appeals, or different divisions thereof, or any other
tribunal or agency, he undertakes to promptly inform the aforesaid
courts and other tribunal or agency thereof within five (5) days
therefrom. (Emphasis supplied.)

Non-compliance with these requirements is sufficient ground for the

dismissal of the Petition, pursuant to Section 3 of the same Rule, which reads:

SEC. 3. Effect of failure to comply with requirements. The

failure of the petitioner to comply with any of the foregoing
requirements regarding the payment of the docket and other lawful
fees, the deposit for costs, proof of service of the petition, and the
contents of and the documents which should accompany the petition
shall be sufficient ground for the dismissal thereof.

In not a few cases, we have ruled that the right to appeal is neither a
natural right nor a part of due process; it is a mere statutory privilege that may be
exercised only in the manner and strictly in accordance with the provisions of law
allowing the appeal.[27] The party who seeks to appeal must comply with the
requirements of the law and the rules; failure to comply leads to the dismissal and
the loss of the right to appeal.[28]

But while we have so ruled, we recognize nonetheless that the right to

appeal is an essential part of our system of judicial processes, and courts should
proceed with caution in order not to deprive a party of the right to appeal. We
invariably made this recognition due to our overriding concern that every partylitigant be given the amplest opportunity to ventilate and secure the resolution of
his cause, free from the constraints of technicalities.[29] This line of rulings is
based, no less, on the Rules of Court which itself calls for a liberal construction of
its provisions, with the objective of securing for the parties a just, speedy and
inexpensive disposition of every action and proceeding.[30] In this line of rulings,
we have repeatedly stressed that litigation is not merely a game of
technicalities. The law and jurisprudence grant to courts in the exercise of their
discretion along the lines laid down by this Court the prerogative to relax
compliance with procedural rules of even the most mandatory character, mindful
of the duty to reconcile both the need to put an end to litigation speedily and the
parties right to an opportunity to be heard.[31]

We are aware of the plaintiffs-respondents cited cases of Galang v. Court

of Appeals[32] and Tan v. Court of Appeals,[33] but these rulings are not fully
applicable to the present case as they are not squarely in point.

Galang involved the dismissal of a petition with the CA for nonpayment of

costs within three (3) days from notice of the order. It involved a direct failure to
comply with a CA directive a matter vastly different from, and greater than, the
question of sufficiency posed in this case. Tan, on the other hand, involved a
motion for reconsideration that was considered a mere scrap of paper for lack of
a notice of hearing. This is a matter that, at its core, is a due process concern
the failure to afford the opposing party the opportunity to respond to the motion
in a duly scheduled hearing.
A commonality and the weightier reason (although not so given this
characterization) behind our rulings in these cited cases is the lack of merit of the
respective petitioners underlying cases. In both cases, we took into account the
relative merits of the parties cases and found that a liberal interpretation,
applied to the interlocutory issues before us, would be for naught because the
petitioners underlying cases clearly lacked merit. As we ruled then, so do we rule
now. We assess, albeit preliminarily, if the appeal is meritorious on its face and
relax the applicable rule of procedure only after a prima facie finding of merit.[34]
That there was substantial compliance with the Rules because the
background facts can be found within the four corners of the petition and its
incorporated annexes, is not a novel ruling for this Court. In the case of Deloso v.
Marapao[35](involving the same deficiency for lack of a specific and separate
statement of facts outlining the factual background relied upon), we said:

An examination of the petition filed with the Court of Appeals

reveals that while it does not contain a separate section on statement
of facts, the facts of the case are, in fact, integrated in the petition
particularly in the discussion/argument portion. Moreover, the decision

of the DARAB which contains the facts of the case was attached to the
petition and was even quoted by the appellate court. The petition also
sufficiently discusses the errors committed by the DARAB in its
assailed decision.

There was, therefore, substantial compliance with Sec. 6, Rule 43

of the Rules of Court. It is settled that liberal construction of the Rules
may be invoked in situations where there may be some excusable
formal deficiency or error in a pleading, provided that the same does
not subvert the essence of the proceeding and connotes at least a
reasonable attempt at compliance with the Rules. After all, rules of
procedure are not to be applied in a very rigid, technical sense; they are
used only to help secure substantial justice.[36]

Given this precedent, it only remains for us to determine if we can apply a liberal
construction of the Rules because a meaningful litigation of the case can ensue
given the Petitions prima facie merit.
The defendants-petitioners
meritorious case; a motion for
reconsideration is a prohibited
pleading in summary procedure.

Our examination of the defendants-petitioners petition preliminarily tells

us that it is not without merit, which merit would remain unventilated unless we
relax our application of the technical requirements applicable to their appeal. The
question, too, that the defendants-petitioners pose is not a minor one as it
involves a very basic question of law whether the RTC has jurisdiction to
entertain an appeal from a final and executory MCTC decision. According to the

defendants-petitioners, the plaintiffs-respondents filing of a motion for

reconsideration of the MCTC judgment did not stop the running of the period for
appeal since a motion for reconsideration is a prohibited pleading under the
RRSP.

We agree with the defendants-petitioners.

Jurisdiction over forcible entry and unlawful detainer cases belongs to the
Metropolitan Trial Courts, the Municipal Trial Courts in Cities, the Municipal Trial
Courts, and the Municipal Circuit Trial Courts.[37] The RRSP applies to prevent
undue delays in the disposition of cases; to achieve this end, the filing of certain
pleadings a motion for reconsideration, among others is prohibited.[38]
Specifically, Section 19(c) of the Rules of Summary Procedure and Section
13(c) of Rule 70 of the Rules of Court consider a motion for reconsideration of a
judgment a prohibited pleading.[39] Thus, when the plaintiffs-respondents filed
onJune 5, 2007 a Motion for Reconsideration of the MCTC Judgment, the motion
did not stop the running of the period for appeal. With the continuous running of
this period, the May 23, 2007 MCTC judgment (which the plaintiffs-respondents
received through counsel on May 31, 2007) had long lapsed to finality when the
plaintiffs-respondents filed their Notice of Appeal on July 30, 2007.

The Doctrine of Immutability

A judgment that has become final and executory is immutable and

unalterable;[40] the judgment may no longer be modified in any respect, even if
the modification is meant to correct what is perceived to be an erroneous
conclusion of fact or law, and regardless of whether the modification is attempted
to be made by the court rendering it or by the highest Court of the land. [41] While
there are recognized exceptions e.g., the correction of clerical errors, the socalled nunc pro tuncentries which cause no prejudice to any party, void

judgments, and whenever circumstances transpire after the finality of the

decision rendering its execution unjust and inequitable[42] none of these
exceptions apply to the present case.

Litigation must at some time end, even at the risk of occasional errors.
Public policy dictates that once a judgment becomes final, executory and
unappealable, the prevailing party should not be denied the fruits of his victory by
some subterfuge devised by the losing party. Unjustified delay in the enforcement
of a judgment sets at naught the role and purpose of the courts to resolve
justiciable controversies with finality.[43]

In the present case, the lapse of the period for appeal rendered the RTC
without any jurisdiction to entertain, much less grant, the plaintiffs-respondents
appeal from the final and immutable MCTC judgment. This very basic legal reality
would forever be lost if we allow the CA to dismiss the defendants-petitioners
appeal outright on the basis of a technicality that, after all, has been substantially
complied with.

WHEREFORE,
in
light
of
all
the
foregoing,
we
hereby REVERSE and SET ASIDE the Resolutions dated January 28, 2009 and June
11, 2009 of the Special Former Special Division of Five of the Court of Appeals in
CA-G.R. SP No. 02436-MIN. The Decision dated November 7, 2007 and Order
dated July 1, 2008 of the Regional Trial Court, Branch 31, Dapa, Surigao del Norte
are ANNULLED. The Judgment dated May 23, 2007 of the Municipal Circuit Trial
Court, Del Carmen-San Isidro-San Benito, Surigao del Norte is REINSTATED. Costs
against the plaintiffs-respondents.
SO ORDERED.