Branch 40, as well as CA-G.R. SP No, 66240 entitled "Jakob Van Der Sluis v.
Honorable
G.R. No. 179257, November 23, 2015 - UNITED ALLOY PHILIPPINES CORPORATION,
Petitioner, v. UNITED COCONUT PLANTERS BANK [UCPB] AND/OR PHILIPPINE DEPOSIT
INSURANCE CORPORATION [PDIC], JAKOB VAN DER SLUIS AND ROBERT T.CHUA,
Respondent.
G.R. No. 179257, November 23, 2015
UNITED ALLOY PHILIPPINES CORPORATION, Petitioner, v. UNITED COCONUT
PLANTERS BANK [UCPB] AND/OR PHILIPPINE DEPOSIT INSURANCE
CORPORATION [PDIC], JAKOB VAN DER SLUIS AND ROBERT T.CHUA, Respondent.
"[T]he dismissal of the principal action x x x [carries] with it the denial, disallowance
or revocation of all reliefs ancillary to the main remedy sought in that action."1
Challenged in this Petition for Review on Certiorari2 is the August 17, 2007 Decision3 of the
Court of Appeals, Cagayan de Oro City Station (CA CDO) in CA-G.R. SP No. 67079
dismissing petitioner United Alloy Philippines Corporation's (UniAlloy) Petition
for Certiorari and Mandamus filed therewith. In said Petition, UniAlloy sought to nullify the
Orders dated September 134 and 14,5 2001 of the Regional Trial Court (RTC), Branch 40,
Cagayan de Oro City in Civil Case No. 2001-219 that dismissed its Complaint for Annulment
and/or Reformation of Contract and Damages with Prayer for A Writ of Preliminary
Injunction or Temporary Restraining Order (TRO)6 and ordered it to surrender the
possession of the disputed premises to respondent United Coconut Planters Bank (UCPB).
Factual Antecedents
UniAlloy is a domestic corporation engaged in the business of manufacturing and trading on
wholesale basis of alloy products, such as ferrochrome, ferrosilicon and ferromanganese. It
has its principal office and business address at Phividec Industrial Area, Tagaloan, Misamis
Oriental. Respondent UCPB, on the other hand, is a banking corporation while respondent
Robert T. Chua (Chua) is one of its Vice-Presidents. Respondent Jakob Van Der Sluis is a
Dutch citizen and was the Chairman of UniAlloy. Respondent Philippine Deposit Insurance
Corporation is the assignee-in-interest of UCPB as regards the loan account of UniAlloy.
On September 10, 1999, UniAlloy and UCPB entered into a Lease Purchase
Agreement7 (LPA) wherein UniAlloy leased from UCPB several parcels of land with a total
area of 156,372 square meters located in Barangay Gracia, Tagoloan, Misamis Oriental,8 The
three-year lease commenced on August 1, 1999 to run until July 31, 2002 for a monthly
rent: of P756/700.00. The parties stipulated that upon the expiration of the lease, UniAlloy
shall purchase the leased properties for P300 million to be paid on staggered basis. UniAlloy
also obtained loans from UCPB.
On August 27, 2001, however, UniAlloy filed the aforesaid Complaint9 against respondents.
It claimed that, thru misrepresentation and manipulation, respondent Jakob Van Der Sluis
took foil control of the management and operation of UniAlloy; that respondents connived
with one another to obtain fictitious loans purportedly for UniAlloy as evidenced by
Promissory Note Nos. 8111-00-00110-6, 8111-00-20031-1, and 8111-01-20005-6 for P6
million, US$10,000.00, and US$320,000.00, respectively; that UCPB demanded payment of
said loans; and, that UCPB unilaterally rescinded the LPA. UniAlloy prayed that judgment be
issued: (i) ordering the annulment and/or reformation of the three Promissory Notes; (ii)
nullifying UCPB's unilateral rescission of the LPA; (iii) enjoining UCPB from taking possession
of the leased premises; and (iv) ordering respondents to jointly and severally pay nominal
and exemplary damages, as well as attorney's fees of P500,000.00 each. As ancillary relief,
UniAlloy prayed for the issuance of a temporary restraining order and/or writ of preliminary
injunction.
On the same day, the Executive Judge of the RTC, Cagayan de Oro City issued a 72-hour
TRO directing UCPB to cease and desist from taking possession of the disputed
premises.10 The following day, respondent Jakob Van Der Sluis filed a Motion to Dismiss and
Opposition to the Application for Injunction or TRO11 on the grounds of improper venue,
forum-shopping,12 litis pendentia, and for being a harassment suit under the Interim Rules
of Procedure for Intra-Corporate Cases. He argued that the LPA specifically provides that any
legal action aiising therefrom should be brought exclusively in the proper courts of Makati
City. The Complaint did not disclose the pendency of Civil Case No. 2001-156 entitled
"Ernesto Paraiso and United Alloy Philippines Corporation v. Jakob Van Der Sluis" before
Epifanio T. Nacaya, et al." He further averred that what UniAlloy sought to enjoin is
already fait accompli.
Respondents UCPB and Chua, on the other hand, filed a Motion to Dismiss & Motion to Recall
Temporary Restraining Order.13 In addition to the ground of improper venue, they raised the
issue of lack of authority of the person who verified the Complaint as no secretary's
certificate or a board resolution was attached thereto.
During the hearing on the writ of preliminary injunction on August 30, 2001, the RTC
directed the parties to maintain the status quo by not disturbing the possession of the
present occupants of the properties in question pending resolution of respondents' motions,
On September 13, 2001, the RTC, acting as Special Commercial Court, issued an
Order14 granting the motions to dismiss and ordering the dismissal of the case on the
grounds of improper venue, forum-shopping and for being a harassment suit. The RTC held
that venue was improperly laid considering that the Promissory Notes sought to be annulled
were issued pursuant to a Credit Agreement which, in turn, stipulates that any legal action
relating thereto shall be initiated exclusively in the proper courts of Makati City. It also
opined that UniAlloy committed forum-shopping for failing to disclose in its certificate of non-
forum-shopping the pendency of Civil Case No, 2001-156 which involves the same parties,
the same transactions and the same essential facts and circumstances. The cases, as ruled
by the RTC, have also identical causes of action, subject matter and issues. The dispositive
portion of the September 13, 2001 Order reads:chanRoblesvirtualLawlibrary
ACCORDINGLY, finding meritorious that the venue is improperly laid and the
complain[an]t engaged in forum-shopping and harassment of defendant Jakob Van der Sluis,
this case is hereby DISMISSED rendering the prayer issuance of a writ of preliminary
injunction moot and academic, and ordering plaintiff to turn over possession of the subject
premises of the properties in question at Barangay Gracia, Tagoloan, Misamis Oriental to
defendant United Coconut Planters Bank.
SO ORDERED.15ChanRoblesVirtualawlibrary
cralawlawlibrary
Upon UCPB's motion, the RTC issued another Order16 dated September 14, 2001 directing
the issuance of a writ of execution to enforce its September 13, 2001 Order. Accordingly, a
Writ of Execution17 was issued directing the Sheriff to put UCPB in possession of the disputed
premises. It was satisfied on September 17, 2001.18 The employees of UniAlloy were evicted
from the leased premises and UCPB's representatives were placed in possession thereof.
On September 25, 2001, UniAlloy received copies of the RTC Orders.19 And on October 9,
2001, it filed with the Court of Appeals, Manila Station (CA Manila) its petition in CA-G.R. SP
No. 67079 attributing grave abuse of discretion on the part of the court a quo in (i)
dismissing its petition on the grounds of improper venue, forum-shopping and harassment,
(ii) ordering the turnover of the property in question to UCPB after the dismissal of the
Complaint, and (iii) applying the Interim Rules of Procedure for Intra-corporate
Controversies.
On October 18,2001, the CA Manila issued a TRO. After hearing, the CA Manila issued a
Resolution20dated February 18, 2002 granting UniAlloy's ancillary prayer for the issuance of
a writ of preliminary injunction upon posting of a bond in the amount of P300,000.00.
UniAlloy posted the requisite bond.
However, no writ of preliminary injunction was actually issued by the CA Manila because of
this Court's March 18, 2002 Resolution21 in G.R. No. 152238 restraining it from enforcing its
February 18, 2002 Resolution. G.RNo. 152238 is a Petition for Certiorari initiated by UCPB
assailing said Resolution of CA Manila. And, in deference to this Court, the CA Manila
refrained from taking further action in CA-G.R. SP No. 67079 until G.R. No. 152238 was
resolved.22
On January 28, 2005, this Court rendered its Decision23 in G.R. No. 152238 finding no grave
abuse of discretion on the part of the CA in issuing its February 18, 2002 Resolution and,
consequently, denying UCPB's petition.
Thereafter, and since this Court's Decision in G.R. No. 152238 attained finality, UniAUoy filed
with the CA Manila a Motion to Issue and Implement Writ of Preliminary Mandatory
Injunction.24 In the meantime, the records of CA-G.R. SP No. 67079 were forwarded to CA
CDO pursuant to Republic Act No. 8246.25cralawred
On May 31, 2006, the CA CDO issued a Resolution26 denying UniAlloy's motion. It found that
UniAUoy had lost its right to remain in possession of the disputed premises because it
defaulted in the payment of lease rentals and it was duly served with a notice of extrajudicial
termination of the LPA. Said court also found that UniAUoy vacated the leased premises and
UCPB was already in actual physical possession thereof as of August 24, 2001, or three days
before UniAUoy filed its complaint with the RTC. Hence, it could no longer avail of the
remedy of preliminary injunction to regain possession of the disputed premises.
UniAUoy filed a Motion for Reconsideration,27 which was denied in the CA CDO's November
29,2006 Resolution.28
On August 17, 2007, the CA CDO issued the assailed Decision denying UniAlloy's petition
and affirming the RTC's questioned Orders. It opined inter alia that UniAUoy erred in
resorting to a Rule 65 petition because its proper recourse should have been to appeal the
questioned Orders of the RTC, viz.:chanRoblesvirtualLawlibrary
It is plain from the record, though, that Unialloy had lost its right to appeal. The time
to make use of that remedy is gone. It is glaringly obvious that Unialloy resorted to this
extraordinary remedy of certiorari and mandamus as a substitute vehicle for securing a
review and reversal of the questioned order of dismissal which it had, by its own fault,
allowed to lapse into finality. Unfortunately, none of the arguments and issues raised by
Unialloy in its petition can adequately brand the 13 September 2001 Order as void on its
face for being jurisdietionaily flawed, nor mask the fact that it became final and executory by
Unialloy's failure to file an appeal on time. And so, even if the assailed order of dismissal
might arguably not have been entirely free from some errors in substance, or lapses in
procedure or in findings of fact or of law, and which that account could have been reversed
or modified on appeal, the indelible fact, however is that it was never appealed. It had
become final and executory. It is now beyond the power of this Court to modify
it.29ChanRoblesVirtualawlibrary
cralawlawlibrary
Hence, this Petition raising the following issues for Our resolution:
1. Whether the Court of Appeals (Cagayan de Oro City) erred, or
acted without, or in excess of jurisdiction, or committed grave abuse of discretion
arnounting to lack, or excess of jurisdiction in DENYING United Alloy's Motion to Issue
and Implement Writ of Preliminary Mandatory Injunction in this case, DESPITE the
earlier resolution dated February 18, 2002 issued by the same Court of Appeals
(Manila) of coordinate and co-equal jurisdiction which granted United Alloy's Motion
for Issuance of Preliminary Injunction upon bond of P300,000.00, and DESPITE this
Honorable Court's decision dated January 28, 2005 in the certiorari case G.R. No.
152238 filed by UCPB to assail the Court of Appeals's Resolution of February 18,
2002, which decision sustained the said resolution of February 18, 2002, and DENIED
UCPB's petition in said G.R. No. 152238.
As sub-issue - Whether the Court of Appeals (Cagayan de Oro City) disregarded the
rule that every court must take cognizance of decisions the Supreme Court has
rendered, because they are proper subjects of mandatory judicial notice. The said
decisions more importantly, form part of the legal system, and failure of any court to
apply them shall constitute an abdication of its duty to resolve a dispute in accordance
with law and shall be a ground for administrative action against an inferior court
magistrate x x x
2. Whether x x x the Court of Appeals (Cagayan de Qro City) decided this
case in accord with law and the evidence, and so far departed from the accepted and
usual course of judicial proceedings as to call for an exercise of the supervisory power
of this Honorable Court, and to entitle this petition to allowance and the review sought
in this case.30
Issue
The basic issue to be resolved in this case is whether the CA CDO erred in dismissing
UniAlloy's Petition for Certiorari and Mandamus. For if the said court did not commit an error
then it would be pointless to determine whether UniAlloy is entitled to a writ of preliminary
injunction pursuant to CA Manila's February 18, 2002 Resolution which was issued as a mere
ancillary' remedy in said petition.
Our Ruling
The Petition is devoid of merit.
Before delving on the focal issue, the Court shall first pass upon some procedural matters.
UniAlloy availed of the proper remedy
in assailing the RTC's September 13, 2001
Order dismissing its Complaint
In its Comment,31 UCPB defends the CA CDO in denying due course to UniAlloy's Petition
for Certiorariand Mandamus. It posits that UniAlloy should have filed with the RTC a Notice
of Appeal from the Order dated September 13, 2001 instead of a Rule 65 petition before the
CA, Respondents Jakob Van der Sluis and Chua echo UCPB's contention that UniAlloy
resorted to a wrong mode of remedy and that the dismissal of its complaint had become
final and executory which, in turn, rendered UniAlloy's Rule 65 petition before the CA moot
and academic.32
In its Consolidated Reply,33 UniAlloy counter-argues that it filed a Rule 65 petition with the
CA because the remedy of appeal is inadequate as the RTC had already directed the
issuance of a writ of execution and that the RTC Orders are patently illegal.
UniAlloy availed of the correct remedy. Under Section 1 Rule 16 of the Rules of Court, the
following may be raised as grounds in a motion to dismiss:basa da codal
Except for cases falling under paragraphs (f), (h), or (i), the dismissal of an action based on
the above-enumerated grounds is without prejudice and does not preclude the refiling of the
same action. And, under Section l(g) of Rule 41,34 an order dismissing an action without
prejudice is not appealable. The proper remedy therefrom is a special civil action
for certiorari under Rule 65,35 But, if the reason for the dismissal is based on paragraphs (f),
(h), or (i) (i.e., res judicata, prescription, extinguishment of the claim or demand, and
unenforceability under the Statute of Frauds) the dismissal, under Section 5,36 of Rule 16,
is with prejudice and the remedy of the aggrieved party is to appeal the order granting the
motion to dismiss.
Here, the dismissal of UniAlloy's Complaint was without prejudice. The September 13, 2001
Order of the RTC dismissing UniAlloy's Complaint was based on the grounds of improper
venue, forum-shopping and for being a harassment suit, which do not fall under paragraphs
(f), (h), or (i) of Section 1, Rule 16. Stated differently, none of the grounds for the dismissal
of UniAlloy's Complaint is included in Section 5 of Rule 16 of the Rules of Court. Hence, since
the dismissal of its Complaint was without prejudice, the remedy then available to UniAlloy
was a Rule 65 petition.
CA CDO did not err in affirming the
dismissal of UniAlloy's Complaint on the
grounds of improper venue, forum-shopping
and for being a harassment suit
The RTC was correct in dismissing UniAlloy's Complaint on the ground of improper venue. In
general, personal actions must be commenced and tried (i) where the plaintiff or any of the
principal plaintiffs resides, (ii) where the defendant or any of the principal defendants
resides, or (III) in the case of a resident defendant where he may be found, at the election
of the plaintiff.37 Nevertheless, the parties may agree in writing to limit the venue of future
actions between them to a specified place.38
In the case at bench, paragraph 18 of the LPA expressly provides that "[a]ny legal action
arising out of or in connection with this Agreement shall be brought exclusively in the proper
courts of Makati City, Metro Manila."39 Hence, UniAlloy should have filed its complaint before
the RTC of Makati City, and not with the RTC of Cagayan de Oro City.
But to justify its choice of venue, UniAlloy insists that the subject matter of its Complaint in
Civil Case No. 2001-219 is not the LPA, but the fictitious loans that purportedly matured on
April 17, 2001.40
UniAlloy's insistence lacks merit. Its Complaint unequivocally sought to declare "as null and
void the unilateral rescission made by defendant UCPB of its subsisting Lease Purchase
Agreement with [UniAlloy]."41 What UCPB unilaterally rescinded is the LPA and without it
there can be no unilateral rescission to speak of. Hence, the LPA is the subject matter or at
least one of the subject matters of the Complaint. Moreover, and to paraphrase the
aforecited paragraph 18 of the LPA, as long as the controversy arises out of or is connected
therewith, any legal action should be filed exclusively before the proper courts of Makati
City. Thus, even assuming that the LPA is not the main subject matter, considering that
what is being sought to be annulled is an act connected and inseparably related thereto, the
Complaint should have been filed before the proper courts in Makati City.
With regard forum-shopping, our review of the records of this case revealed that UniAlloy did
not disclose in the Verification/Certification of the Complaint the pendency of Civil Case No.
2001-156 entitled "Ernesto Paraiso and United Alloy Philippines Corporation v. Jakob Van
Der Sluis." The trial court took judicial notice of its pendency as said case is also assigned
and pending before it. Thus, we adopt the following unrebutted finding of the
RTC:chanRoblesvirtualLawlibrary
These two civil cases have identical causes of action or issues against defendant Jakob Van
Der Sluis for having misrepresented to plaintiff and its stockholders that he can extend
financial assistance in running the operation of the corporation, such that on April 6, 2001
plaintiff adopted a Stockholders Resolution making defendant Jakob chairman of the
corporation for having the financial capability to provide the financial needs of plaintiff and
willing to finance the operational needs thereof; that a Memorandum of Agreement was
subsequently entered between the parties whereby defendant Jakob obligated to provide
sufficient financial loan to plaintiff to make it profitable; that Jakob maliciously and willfiilly
reneged [on] his financial commitments to plaintiff prompting the stockholders to call his
attention and warned him of avoiding the said agreement; that defendant who had then
complete control of plaintiffs bank account with defendant UCPB, through fraudulent
machinations and manipulations, was able to maliciously convince David C. Chua to pre-sign
several checks; that defendant Jakob facilitated several huge loans purportedly obtained by
plaintiff which defendant himself could not even account and did not even pay the debts of
the corporation but instead abused and maliciously manipulated plaintiffs account.
Forum-shopping indeed exists in this case, for both actions involve the same transactions
and same essential facts and circumstances as well as identical causes of action, subject
matter and issues, x x x42cralawlawlibrary
The dismissal of UniAlloy's main
action carries with it the dissolution of
any ancillary relief previously granted
therein.
UniAlloy argues that the CA CDO erred in denying its petition considering that this Court has
already sustained with finality the CA Manila's February 18, 2002 Resolution granting its
prayer for the issuance of a writ of preliminary mandatory injunction.
The contention is non sequitur.
"Provisional remedies [also known as ancillary or auxiliary remedies], are writs and
processes available during the pendency of the action which may be resorted to by a litigant
to preserve and protect certain rights and interests pending rendition, and for purposes of
the ultimate effects, of a final judgment in the case. They are provisional because they
constitute temporary measures availed of during the pendency of the action, and they are
ancillary because they are mere incidents in and are dependent upon the result of the main
action."43 One of the provisional remedies provided in the Rules of Court is preliminary
injunction, which may be resorted to by a litigant at any stage of an action or proceeding
prior to the judgment or final order to compel a party or a court, agency or a person to
refrain from doing a particular act or acts.44 In Bacolod City Water District v. Hon.
Labayen,45 this Court elucidated that the auxiliary remedy of preliminary injunction persists
only until it is dissolved or until the tepnination of the main action without the court issuing a
final injunction, viz.:chanRoblesvirtualLawlibrary
x x x Injunction is a judicial writ, process or proceeding whereby a party is ordered to do or
refrain from doing a certain act, It may be the main action or merely a provisional remedy
for and as an incident in the main action.
The main action for injunction is distinct from the provisional or ancillary remedy of
preliminary injunction which cannot exist except only as part or an incident of an
independent action or proceeding. As a matter of course, in an action for injunction, the
auxiliary remedy of preliminary injunction, whether prohibitory or mandatory, may issue.
Under the law, the main action for injunction seeks a judgment embodying a final injunction
which is distinct from, and should not be confused with, the provisional remedy of
preliminary injunction, the sole object of which is to preserve the status quo until the merits
can be heard. A preliminary injunction is granted at any stage of an action or proceeding
prior to the judgment or final order. It persists until it is dissolved or until the termination of
the action without the court issuing a final injunction.46cralawlawlibrary
Based on the foregoing, it is indubitably clear that the August 17, 2007 Decision of CA CDO
dismissing UniAlloy's Petition for Certiorari and Mandamus effectively superseded the
February 18, 2002 Resolution of the CA Manila granting UniAUoy's ancillary prayer for the
issuance of a writ of preliminary injunction. It wrote finis not only to the main case but also
to the ancillary relief of preliminary injunction issued in the main case.
For the same reason, there is no merit in UniAUoy's contention that the RTC grievously erred
in ordering it to turn over the possession of the subject premises to UCPB considering that
the latter never prayed for it. As borne out by the records of the case, UCPB was already in
actual possession of the litigated premises prior to the filing of the Complaint on August 27,
2001. This conforms with the finding of the CA CDO which pronounced that "an actual
turnover of the premises x x x was really effected on August 24, 2001, prior to the
institution of the complaint a quo."47 UniAlloy was able to regain possession of the disputed
premises only by virtue of the RTC's 72-hour TRO. With the issuance of the RTC's September
13, 2001 Order dismissing the Complaint of UniAlloy, however, the RTC's 72-hour TRO and
August 30, 2001 order to maintain status quo, which are mere incidents of the main action,
lost their efficacy. As discussed above, one of the inevitable consequences of the dismissal of
the main action is the dissolution of the ancillary relief granted therein. Besides, the RTC
issued the status quo order with the express caveat that the same shall remain in force until
it has resolved respondents' motions to dismiss, which it subsequently granted.
Consequently, UniAlloy has no more bases to remain in possession of the disputed premises.
It must, therefore, restitute whatever it may have possessed by virtue of the dissolved
provisional remedy, even if the opposing party did not pray for it.
The August 17, 2007 Decision neither
violated this Court's January 28, 2005
Decision in G.R. No. 152238 nor contradicted
the CA Manila's February 18, 2002 Resolution.
UniAlloy further argues that in denying its petition, CA CDO contradicted the earlier
Resolution of a coordinate court, the CA Manila, and the January 28, 2005 Decision of this
Court in G.R. No. 152238. It insists that no court can interfere with the judgment, orders or
decrees of another court of concurrent or coordinate jurisdiction.
We are not persuaded.
True, under the doctrine of judicial stability or non-interference, "no court can interfere by
injunction with the judgments or orders of another court of concurrent jurisdiction having
the power to grant the relief sought by injunction. The rationale for the rule is founded on
the concept of jurisdiction: a court that acquires jurisdiction over the case and renders
judgment therein has jurisdiction over its judgment, to the exclusion of all other coordinate
courts, for its execution and over all its incidents, and to control, in furtherance of justice,,
the conduct of ministerial officers acting in connection with this judgment."48But said
doctrine is not applicable to this case. Here, the proceeding in CA CDO is a continuation of
the proceeding conducted in CA Manila. There is only one case as what was resolved by CA
CDO is the same case, CA-G.R. SP No. 67079 earlier filed with and handled by CA Manila. It
was referred to CA CDO pursuant to Republic Act No. 8246 creating three divisions of the CA
each in Cebu and Cagayan de Qro. Section 5 thereof provides:chanRoblesvirtualLawlibrary
SECTION 5. Upon the effectivity of this Act, all pending cases, except those which have been
submitted for resolution, shall be referred to the proper division of the Court of
Appeals.cralawlawlibrary
In fine, CA CDO did not intrude into an order issued by another co-equal court in a different
case. Rather, it continued to hear the petition until its termination after the CA Manila
referred the same to it by virtue of a law.
The fact that said February 18, 2002 Resolution of CA Manila was affirmed by this Court in
its January 28, 2005 Decision in G.R. No. 152238 is likewise of no moment. Said Resolution
of CA Manila only granted UniAlloy's ancillary prayer for injunctive relief. It did not touch on
the issues of improper venue, forum-shopping, and harassment. Thus, neither did this Court
tackle said issues in its January 28, 2005 Decision. In fact, this Court cautiously limited its
discussions on the propriety of the CA's directive temporarily restraining the RTC from
placing UCPB in possession of the disputed premises and deliberately reserved to the CA the
determination of whether the RTC erred in dismissing the main case.
Thus:chanRoblesvirtualLawlibrary
The dismissal of Civil Case No. 2001-219 on the grounds of forum-shopping, improper venue
and harassment - although raised, too, by Unialloy in its Petition before the Court of Appeals
- was not passed upon in the assailed interlocutory CA Resolution. As a consequence, it
would be premature and improper for us to pass upon the RTC's dismissal of the case.
Hence, we shall limit our discussion to the assailed Resolutions temporarily stopping the trial
court's turnover of the litigated property to petitioner.49ChanRoblesVirtualawlibrary
cralawlawlibrary
WHEREFORE, the instant petition is hereby DENIED.
SO ORDERED.chanroblesvirtuallawlibrary
[G.R. No. 156067. August 11, 2004]
MADRIGAL TRANSPORT, INC., petitioner, vs. LAPANDAY HOLDINGS
CORPORATION; MACONDRAY AND COMPANY, INC.; and LUIS P. LORENZO
JR.,respondents.
The special civil action for certiorari and appeal are two different remedies that are mutually
exclusive; they are not alternative or successive. Where appeal is available, certiorari will
not prosper, even if the ground therefor is grave abuse of discretion. Basic is the rule
that certiorari is not a substitute for the lapsed remedy of appeal.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the
February 28, 2002 Decision[2] and the November 5, 2002 Resolution[3] of the Court of
Appeals (CA) in CA-GR SP No. 54861. The challenged Decision disposed as follows:
WHEREFORE, in consideration of the foregoing premises, private respondents Lapanday
and Lorenzo, Jr.s Motion for Reconsideration dated 10 February 2000 is GRANTED.
Accordingly, the Resolution dated 10 January 2000 is RECONSIDERED and SET ASIDE,
thereby dismissing the Petition for Certiorari dated 10 September 1999.[4]
The assailed Resolution denied reconsideration.
The Facts
The pertinent facts are undisputed. On February 9, 1998, Petitioner Madrigal Transport,
Inc. (Madrigal) filed a Petition for Voluntary Insolvency before the Regional Trial Court
(RTC) of Manila, Branch 49.[5] Subsequently, on February 21, 1998, petitioner filed a
Complaint for damages against Respondents Lapanday Holdings Corporation (Lapanday),
Macondray and Company, Inc. (Macondray), and Luis P. Lorenzo Jr. before the RTC of
Manila, Branch 36.[6]
In the latter action, Madrigal alleged (1) that it had entered into a joint venture agreement
with Lapanday for the primary purpose of operating vessels to service the shipping
requirements of Del Monte Philippines, Inc.;[7] (2) that it had done so on the strength of
the representations of Lorenzo, in his capacity either as chairman of the board or as
president of Del Monte, Lapanday and Macondray; (3) that Macondray had thereafter been
appointed -- allegedly upon the insistence of Lapanday -- as broker, for the purpose of
securing charter hire contracts from Del Monte; (4) that pursuant to the joint venture
agreement, Madrigal had purchased a vessel by obtaining a P10,000,000 bank loan; and
(5) that contrary to their representations and guarantees and despite demands, Lapanday
and Lorenzo had allegedly been unable to deliver those Del Monte charter hire contracts. [8]
On February 23, 1998, the insolvency court (RTC Branch 49) declared petitioner
insolvent.[9] On March 30, 1998 and April 6, 1998, Respondents Lapanday, Lorenzo and
Macondray filed their respective Motions to Dismiss the case pending before the RTC Branch
36.[10]
On December 16, 1998, Branch 36 granted the Motion, for failure of the Complaint to state
a cause of action. Applying Sections 32 and 33 of the Insolvency Law,[11] the trial court
opined that upon the filing by Madrigal of a Petition for Voluntary Insolvency, the latter lost
the right to institute the Complaint for Damages. The RTC ruled that the exclusive right to
prosecute the actions belonged to the court-appointed assignee.[12]
On January 26, 1999, petitioner filed a Motion for Reconsideration,[13] which was later
denied on July 26, 1999.[14] Subsequently, petitioner filed a Petition for Certiorari with the
Court of Appeals, seeking to set aside the December 16, 1998 and the July 26, 1999 Orders
of the trial court.[15] On September 29, 1999, the CA issued a Resolution requiring petitioner
to explain why its Petition should not be dismissed outright, on the ground that the
questioned Orders should have been elevated by ordinary appeal.[16]
On January 10, 2000, the appellate court ruled that since the main issue in the instant case
was purely legal, the Petition could be treated as one for review as an exception to the
general rule that certiorari was not proper when appeal was available.[17] Respondents
Lapanday and Lorenzo challenged this ruling through a Motion for Reconsideration dated
February 10, 2000.[18] The CA heard the Motion for Reconsideration in oral arguments on
April 7, 2000.[19]
Ruling of the Court of Appeals
On February 28, 2002, the appellate court issued the assailed Decision granting
Respondents Lapanday and Lorenzos Motion for Reconsideration and dismissing Madrigals
Petition for Certiorari. The CA opined that an order granting a motion to dismiss was final
and thus the proper subject of an appeal, not certiorari.[20]
Furthermore, even if the Petition could be treated as an appeal, it would still have to be
dismissed for lack of jurisdiction, according to the CA.[21] The appellate court held that the
issues raised by petitioner involved pure questions of law that should be brought to the
Supreme Court, pursuant to Section 2 of Rule 50 and Section 2(c) of Rule 41 of the Rules
of Court.[22]
Hence, this Petition.[23]
The Issues
In its Statement of Issues, petitioner contends:
I
The Honorable Court of Appeals committed egregious error by ruling that the order of the
lower court which granted private respondents Motions to Dismiss are not proper subjects
of a Petition for Certiorariunder Rule 65.
A. Section 5, Rule 16 does not apply in the present case since the grounds for dismissal
[were] petitioners purported lack of capacity to sue and its failure to state a cause of
action against private respondents, and not any of the three (3) grounds provided under
said provision, namely, res judicata, extinction of the claim, and Statute of Frauds.
B. Section 1 of Rule 41, which is the applicable provision in petitioners case, expressly
proscribes the taking of an appeal from an order denying a motion for reconsideration or
one which dismisses an action without prejudice, instead, the proper remedy is a special
civil action under Rule 65.
C. A petition for certiorari under Rule 65 was correctly resorted to by petitioner from the
dismissal order of the lower court, which had clearly acted with grave abuse of discretion
amounting to lack of jurisdiction.
II
The Honorable Court of Appeals committed serious error in ruling that it had no
jurisdiction to entertain the Petition for Certiorari filed by petitioner before it.
A. Section 2, Rule 50 nor Section 2(c) and Section 2(c), Rule 41 find no application in the
present case, since said rule contemplates of a case where an appeal is the proper
remedy, and not where the appropriate remedy is a petition for certiorari where questions
of facts and laws may be reviewed by the court a quo.
B. The court a quo erroneously concluded that it has no jurisdiction over the subject
matter of the petition based on the wrong premise that an appeal from the lower courts
dismissal order is the proper remedy by applying Section 2, Rule 50 and Section 2(c),
Rule 41 of the Rules of Court.[24]
The Courts Ruling
The Petition is unmeritorious.
First Issue:
Remedy Against Dismissal of Complaint
The resolution of this case hinges on the proper remedy: an appeal or a petition
for certiorari. Petitioner claims that it correctly questioned the trial courts Order through its
Petition for Certiorari. Respondents insist that an ordinary appeal was the proper remedy.
We agree with respondents.
Appeal
Under Rule 41, Rules of Court, an appeal may be taken from a judgment or final order that
completely disposes of the case, or of a particular matter therein when declared by the
Rules of Court to be appealable.[25] The manner of appealing an RTC judgment or final order
is also provided in Rule 41 as follows:
Section 2. Modes of appeal.
(a) Ordinary appeal. The appeal to the Court of Appeals in cases decided by the Regional
Trial Court in the exercise of its original jurisdiction shall be taken by filing a notice of
appeal with the court which rendered the judgment or final order appealed from and
serving a copy thereof upon the adverse party. No record on appeal shall be required
except in special proceedings and other cases of multiple or separate appeals where the
law or these Rules so require. In such cases, the record on appeal shall be filed and
served in like manner.
(b) Petition for review. The appeal to the Court of Appeals in cases decided by the
Regional Trial Court in the exercise of its appellate jurisdiction shall be by petition for
review in accordance with Rule 42.
(c) Appeal by certiorari. In all cases where only questions of law are raised or involved,
the appeal shall be to the Supreme Court by petition for review on certiorari in
accordance with Rule 45.[26]
An order or a judgment is deemed final when it finally disposes of a pending action, so that
nothing more can be done with it in the trial court. In other words, the order or judgment
ends the litigation in the lower court. Au contraire, an interlocutory order does not dispose
of the case completely, but leaves something to be done as regards the merits of the
latter.[27]
Petition for Certiorari
A petition for certiorari is governed by Rule 65, which reads:
Section 1. Petition for certiorari. When any tribunal, board or officer exercising judicial or
quasi-judicial functions has acted without or in excess of its or his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of its or his jurisdiction, and there
is no appeal, or any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that judgment be rendered annulling or modifying the
proceedings of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.
The petition shall be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent
thereto, and a sworn certification of non-forum shopping as provided in the third
paragraph of Section 3, Rule 46.[28]
A writ of certiorari may be issued only for the correction of errors of jurisdiction or grave
abuse of discretion amounting to lack or excess of jurisdiction. The writ cannot be used for
any other purpose, as its function is limited to keeping the inferior court within the bounds
of its jurisdiction.[29]
For certiorari to prosper, the following requisites must concur: (1) the writ is directed
against a tribunal, a board or any officer exercising judicial or quasi-judicial functions; (2)
such tribunal, board or officer has acted without or in excess of jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal
or any plain, speedy and adequate remedy in the ordinary course of law.[30]
Without jurisdiction means that the court acted with absolute lack of authority.[31] There is
excess of jurisdiction when the court transcends its power or acts without any statutory
authority.[32] Grave abuse of discretion implies such capricious and whimsical exercise of
judgment as to be equivalent to lack or excess of jurisdiction; in other words, power is
exercised in an arbitrary or despotic manner by reason of passion, prejudice, or personal
hostility; and such exercise is so patent or so gross as to amount to an evasion of a positive
duty or to a virtual refusal either to perform the duty enjoined or to act at all in
contemplation of law.[33]
Appeal and Certiorari Distinguished
Between an appeal and a petition for certiorari, there are substantial distinctions which shall
be explained below.
As to the Purpose. Certiorari is a remedy designed for the correction of errors of
jurisdiction, not errors of judgment.[34] In Pure Foods Corporation v. NLRC, we explained
the simple reason for the rule in this light:
When a court exercises its jurisdiction, an error committed while so engaged does not
deprive it of the jurisdiction being exercised when the error is committed. If it did, every
error committed by a court would deprive it of its jurisdiction and every erroneous
judgment would be a void judgment. This cannot be allowed. The administration of justice
would not survive such a rule. Consequently, an error of judgment that the court may
commit in the exercise of its jurisdiction is not correct[a]ble through the original civil
action of certiorari.[35]
The supervisory jurisdiction of a court over the issuance of a writ of certiorari cannot be
exercised for the purpose of reviewing the intrinsic correctness of a judgment of the lower
court -- on the basis either of the law or the facts of the case, or of the wisdom or legal
soundness of the decision.[36] Even if the findings of the court are incorrect, as long as it
has jurisdiction over the case, such correction is normally beyond the province
of certiorari.[37] Where the error is not one of jurisdiction, but of an error of law or fact -- a
mistake of judgment -- appeal is the remedy. [38]
As to the Manner of Filing. Over an appeal, the CA exercises its appellate jurisdiction
and power of review. Over a certiorari, the higher court uses its original jurisdiction in
accordance with its power of control and supervision over the proceedings of lower
courts. [39] An appeal is thus a continuation of the original suit, while a petition
for certiorari is an original and independent action that was not part of the trial that had
resulted in the rendition of the judgment or order complained of.[40] The parties to an appeal
are the original parties to the action. In contrast, the parties to a petition for certiorari are
the aggrieved party (who thereby becomes the petitioner) against the lower court or quasi-
judicial agency, and the prevailing parties (the public and the private respondents,
respectively).[41]
As to the Subject Matter. Only judgments or final orders and those that the Rules of
Court so declare are appealable.[42] Since the issue is jurisdiction, an original action
for certiorarimay be directed against an interlocutory order of the lower court prior to an
appeal from the judgment; or where there is no appeal or any plain, speedy or adequate
remedy.[43]
As to the Period of Filing. Ordinary appeals should be filed within fifteen days from the
notice of judgment or final order appealed from.[44] Where a record on appeal is required,
the appellant must file a notice of appeal and a record on appeal within thirty days from
the said notice of judgment or final order.[45] A petition for review should be filed and served
within fifteen days from the notice of denial of the decision, or of the petitioners timely filed
motion for new trial or motion for reconsideration.[46] In an appeal by certiorari, the petition
should be filed also within fifteen days from the notice of judgment or final order, or of the
denial of the petitioners motion for new trial or motion for reconsideration.[47]
On the other hand, a petition for certiorari should be filed not later than sixty days from
the notice of judgment, order, or resolution.[48] If a motion for new trial or motion for
reconsideration was timely filed, the period shall be counted from the denial of the
motion.[49]
As to the Need for a Motion for Reconsideration. A motion for reconsideration is
generally required prior to the filing of a petition for certiorari, in order to afford the tribunal
an opportunity to correct the alleged errors. Note also that this motion is a plain and
adequate remedy expressly available under the law.[50] Such motion is not required before
appealing a judgment or final order.[51]
Certiorari Not the Proper Remedy
if Appeal Is Available
Where appeal is available to the aggrieved party, the action for certiorari will not be
entertained. Remedies of appeal (including petitions for review) and certiorari are mutually
exclusive, not alternative or successive.[52] Hence, certiorari is not and cannot be a
substitute for an appeal, especially if ones own negligence or error in ones choice of remedy
occasioned such loss or lapse.[53] One of the requisites of certiorari is that there be no
available appeal or any plain, speedy and adequate remedy. [54] Where an appeal is
available, certiorari will not prosper, even if the ground therefor is grave abuse of
discretion.
Second Issue:
CA Jurisdiction
Petitioner was ascribing errors of judgment, not jurisdiction, in its Petition for Certiorari filed
with the Court of Appeals. The issue raised there was the trial courts alleged error in
dismissing the Complaint for lack of cause of action. Petitioner argues that it could still
institute the Complaint, even if it had filed a Petition for Insolvency earlier.[55] As petitioner
was challenging the trial courts interpretation of the law -- posing a question of law -- the
issue involved an error of judgment, not of jurisdiction. An error of judgment committed by
a court in the exercise of its legitimate jurisdiction is not necessarily equivalent to grave
abuse of discretion.[56]
The instant case falls squarely with Barangay Blue Ridge A of QC v. Court of Appeals.[57] In
that case, the trial court granted the Motion to Dismiss on the ground of failure to state a
cause of action. After the Motion for Reconsideration was denied, petitioner filed a Petition
for Certiorari with the CA. The appellate court denied the Petition on the ground that the
proper remedy was appeal. Holding that an error of judgment should be reviewed through
an ordinary appeal, this Court upheld the CA.
The Dismissal -- a Final Order
An order of dismissal, whether correct or not, is a final order.[58] It is not interlocutory
because the proceedings are terminated; it leaves nothing more to be done by the lower
court. Therefore the remedy of the plaintiff is to appeal the order.[59]
Petitioner avers that Section 5 of Rule 16[60] bars the filing of an appeal when the dismissal
is based on lack of cause of action. It adds that Section 5 limits the remedy of appeal only
to dismissals grounded on prior judgments or on the statute of limitations, or to claims that
have been extinguished or are unenforceable. We find this interpretation absurd.
The provision is clear. Dismissals on the aforesaid grounds constitute res
judicata. However, such dismissals are still subject to a timely appeal. For those based on
other grounds, the complaint can be refiled. Section 5, therefore, confirms that an appeal
is the remedy for the dismissal of an action.
Citing Sections 1(a) and 1(h), Rule 41,[61] petitioner further claims that it was prohibited
from filing an appeal. Section 1(a) of the said Rule prohibits the filing of an appeal from an
order denying a motion for reconsideration, because the remedy is to appeal the main
decision as petitioner could have done. In fact, under Section 9, Rule 37, the remedy
against an order denying a motion for reconsideration is to appeal the judgment or final
order. Section 1(h) does not apply, because the trial courts Order did not dismiss the action
without prejudice.[62]
Exception to the Rule
Not Established by Petitioner
We are not unaware of instances when this Court has granted certiorari despite the
availability of appeal.[63] Where the exigencies of the case are such that the ordinary
methods of appeal may not prove adequate -- either in point of promptness or
completeness, so that a partial if not a total failure of justice could result -- a writ
of certiorari may still be issued.[64]Petitioner cites some of these exceptions to justify the
remedy it has undertaken with the appellate court,[65] but these are not applicable to the
present factual milieu.
Even assuming that the Order of the RTC was erroneous, its error did not constitute grave
abuse of discretion. Petitioner asserts that the trial court should not have dismissed the
Complaint or should have at least allowed the substitution of the assignee in petitioners
stead.[66] These alleged errors of judgment, however, do not constitute a despotic,
capricious, or whimsical exercise of power. On the contrary, petitioner availed
of certiorari because the 15-day period within which to file an appeal had already lapsed.
Basic is the rule that certiorari is not a substitute for the lapsed remedy of appeal.
As previously stressed, appeal -- not certiorari -- was the correct remedy to elevate the
RTCs Order granting the Motion to Dismiss. The appeal, which would have involved a pure
question of law, should have been filed with the Supreme Court pursuant to Section 2 (c)
of Rule 41 and Section 2 of Rule 50,[67] Rules of Court.
WHEREFORE, this Petition is DENIED, and the challenged Decision and
Resolution AFFIRMED.
Costs against petitioner.
SO ORDERED.
San Pedro vs Andala
This resolves the petition for certiorari under Rule 65 of the Rules of Court, praying that
the Resolutions[1] of the Court of Appeals (CA) dated September 15, 2003 and June 1,
2004, respectively, in CA-G.R. SP No. 78978, be reversed and set aside.
The antecedent facts are as follows.
Sometime in July 2001, private respondents, heirs of spouses Apolonio and Valeriana
Dionisio, filed with the Metropolitan Trial Court (MeTC) of Quezon City, Branch 42, a
Complaint[2] against herein petitioners and Wood Crest Residents Association, Inc.,
for Accion Reivindicatoria, Quieting of Title and Damages, with Prayer for Preliminary
Mandatory Injunction. Private respondents alleged that subject property located in Batasan
Hills, Quezon City, with an assessed value of P32,100.00, was titled in the name of spouses
Apolonio and Valeriana Dionisio; but petitioners, with malice and evident bad faith, claimed
that they were the owners of a parcel of land that encompasses and covers subject
property. Private respondents had allegedly been prevented from entering, possessing and
using subject property. It was further alleged in the Complaint that petitioners Transfer
Certificate of Title over their alleged property was spurious. Private respondents then
prayed that they be declared the sole and absolute owners of the subject property; that
petitioners be ordered to surrender possession of subject property to them; that petitioners
and Wood Crest and/or its members be ordered to pay actual and moral damages, and
attorneys fees.
Petitioners, for their part, filed a Motion to Dismiss[3] said complaint on the ground that the
MeTC had no jurisdiction over the subject matter of the action, as the subject of litigation
was incapable of pecuniary estimation.
The MeTC then issued an Order[4] dated July 4, 2002 denying the motion to dismiss, ruling
that, under Batas Pambansa (B.P.) Blg. 129, as amended, the MeTC had exclusive original
jurisdiction over actions involving title to or possession of real property of small value.
Petitioners Motion for Reconsideration of said Order dated July 4, 2002 was denied.
Petitioners assailed the aforementioned Order by filing a petition for certiorari with the
Regional Trial Court (RTC) of Quezon City, Branch 87. However, in its
Decision[5] dated March 10, 2003, the RTC dismissed the petition, finding no grave abuse
of discretion on the part of the MeTC Presiding Judge. The RTC sustained the MeTC ruling,
stating that, in accordance with Section 33(3) of Republic Act (R.A.) No. 7691, amending
B.P. Blg. 129, the MeTC had jurisdiction over the complaint for Accion Reivindicatoria, as it
involves recovery of ownership and possession of real property located in Quezon City, with
an assessed value not exceeding P50,000.00. A Motion for Reconsideration[6] of the
Decision was filed by petitioners, but was denied in an Order[7] dated July 3, 2003.
Petitioners then filed with the Court of Appeals another petition for certiorari, insisting that
both the MeTC and RTC acted with grave abuse of discretion amounting to lack or excess
of jurisdiction by not ordering the dismissal of the complaint for Accion Reivindicatoria, for
lack of jurisdiction over the same. In the assailed CA Resolution dated September 15, 2003,
the CA dismissed the petition outright, holding that certiorari was not available to
petitioners as they should have availed themselves of the remedy of appeal. Petitioners
motion for reconsideration of the resolution of dismissal was denied per
Resolution[8] dated June 1, 2004.
Thus, petitioners filed the instant petition and, in support thereof, they allege that:
THE HONORABLE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR IN (SIC) EXCESS OF
JURISDICTION IN DENYING THE PETITION FOR CERTIORARI AND FOR
FAILURE TO RESOLVE THE ISSUE RAISED IN
THE CERTIORARI REGARDING THE JURISDICTION OF THE
METROPOLITAN TRIAL COURT TO TAKE COGNIZANCE OF A CASE
OF ACCION REINVINDICATORIA.
 THE HONORABLE PUBLIC RESPONDENT FATIMA GONZALES-ASDALA,
AS PRESIDING JUDGE OF RTC BRANCH 87, QUEZON CITY, ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS
OF (SIC) JURISDICTION IN DISMISSING THE PETITION
FOR CERTIORARI AND IN RESOLVING THAT A CASE OF ACCION
REINVINDICATORIA IS WITHIN THE JURISDICTION OF THE
METROPOLITAN TRIAL COURT.
THE HONORABLE PUBLIC RESPONDENT MANUEL TARO AS PRESIDING
JUDGE MeTC, BRANCH 42, QUEZON CITY, ACTED WITH GRAVE ABUSE
OF DISCRETION AMOUNTING TO LACK OR IN (SIC) EXCESS OF
JURISDICTION IN SO TAKING COGNIZANCE OF THE COMPLAINT
FOR ACCION REINVINDICATORIA IN CIVIL CASE NO. 27434 ENTITLED,
HEIRS OF SPS. APOLONIO V. DIONISIO AND VALERIANA DIONISIO,
ETC. VS. ANA DE GUIA SAN PEDRO, ET. AL.[9]
The present Petition for Certiorari is doomed and should not have been entertained from
the very beginning.
The settled rule is that appeals from judgments or final orders or resolutions of the CA
should be by a verified petition for review on certiorari, as provided for under Rule 45 of
the Revised Rules of Civil Procedure. Thus, in Pasiona, Jr. v. Court of Appeals,[10] the Court
expounded as follows:
The aggrieved party is proscribed from assailing a decision or final order
of the CA via Rule 65, because such recourse is proper only if the party
has no plain, speedy and adequate remedy in the course of law. In this
case, petitioner had an adequate remedy, namely, a petition for
review on certiorari under Rule 45 of the Rules of Court. A
petition for review on certiorari, not a special civil action
for certiorari was, therefore, the correct remedy.
Xxxx
Settled is the rule that where appeal is available to the aggrieved party,
the special civil action for certiorari will not be entertained remedies of
appeal and certiorari are mutually exclusive, not alternative or
successive. Hence, certiorari is not and cannot be a substitute for
a lost appeal, especially if ones own negligence or error in ones choice
of remedy occasioned such loss or lapse. One of the requisites
of certiorari is that there be no available appeal or any plain, speedy and
adequate remedy. Where an appeal was available, as in this
case, certiorari will not prosper, even if the ground therefor is
grave abuse of discretion. Petitioners resort to this Court by Petition
for Certiorari was a fatal procedural error, and the instant petition must,
therefore, fail.[11]
For the very same reason given above, the CA, therefore, acted properly when it dismissed
the petition for certiorari outright, on the ground that petitioners should have resorted to
the remedy of appeal instead of certiorari. Verily, the present Petition for Certiorari should
not have been given due course at all.
Moreover, since the period for petitioners to file a petition for review on certiorari had
lapsed by the time the instant petition was filed, the assailed CA Resolutions have attained
finality.
Nevertheless, just to put the matter to rest, the Court reiterates the ruling in Heirs of
Valeriano S. Concha, Sr. v. Spouses Lumocso,[12] to wit:
In a number of cases, we have held that actions for reconveyance of or
for cancellation of title to or to quiet title over real property are actions
that fall under the classification of cases that involve title to, or
possession of, real property, or any interest therein.
Xxxx
x x x Thus, under the old law, there was no substantial effect on
jurisdiction whether a case is one, the subject matter of which was
incapable of pecuniary estimation, under Section 19(1) of B.P. 129, or
one involving title to property under Section 19(2). The distinction
between the two classes became crucial with the amendment introduced
by R.A. No. 7691 in 1994, which expanded the exclusive original
jurisdiction of the first level courts to include all civil actions which
involve title to, or possession of, real property, or any interest
therein where the assessed value of the property or interest
therein does not exceed Twenty thousand pesos (P20,000.00)
or, in civil actions in Metro Manila, where such assessed value
does not exceed Fifty thousand pesos (P50,000.00) exclusive of
interest, damages of whatever kind, attorneys fees, litigation
expenses and costs. Thus, under the present law, original
jurisdiction over cases the subject matter of which involves
title to, possession of, real property or any interest therein
under Section 19(2) of B.P. 129 is divided between the first and
second level courts, with the assessed value of the real property
involved as the benchmark. This amendment was introduced to
unclog the overloaded dockets of the RTCs which would result in the
speedier administration of justice.[13]
Clearly, the RTC and the CA ruled correctly that the MeTC had jurisdiction over private
respondents complaint for Accion Reivindicatoria.
IN VIEW OF THE FOREGOING, the petition is DISMISSED for utter lack of merit. The
Resolutions of the Court of Appeals in CA-G.R. SP No. 78978, dated September 15,
2003 and June 1, 2004, are AFFIRMED.
SO ORDERED.
[G.R. No. 160384. April 29, 2005]
CESAR T. HILARIO, for himself and as Attorney-in-Fact of IBARRA,
NESTOR, LINA and PRESCILLA, all surnamed HILARIO, petitioners, vs.
ALLAN T. SALVADOR, respondent.
HEIRS OF SALUSTIANO SALVADOR, namely, REGIDOR M. SALVADOR and
VIRGINIA SALVADOR-LIM, respondents-intervenors.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court of the
Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 63737 as well as its
Resolution[2]denying the motion for the reconsideration of the said decision.
The Antecedents
On September 3, 1996, petitioners Cesar, Ibarra, Nestor, Lina and Prescilla, all surnamed
Hilario, filed a complaint with the Regional Trial Court (RTC) of Romblon, Romblon, Branch
71, against private respondent Allan T. Salvador. They alleged therein, inter alia, as follows:
2. That, the plaintiffs are co-owners by inheritance from Concepcion Mazo
Salvador of a parcel of land designated as Cad. Lot No. 3113-part, located at
Sawang, Romblon, Romblon, which property was [adjudged] as the hereditary
share of their father, Brigido M. Hilario, Jr. when their father was still single,
and which adjudication was known by the plaintiffs[] fathers co-heirs;
3. That, sometime in 1989, defendant constructed his dwelling unit of mixed
materials on the property of the plaintiffs father without the knowledge of the
herein plaintiffs or their predecessors-in-interest;
4. That, demands have been made of the defendant to vacate the premises
but the latter manifested that he have (sic) asked the prior consent of their
grandmother, Concepcion Mazo Salvador;
5. That, to reach a possible amicable settlement, the plaintiffs brought the
matter to the Lupon of Barangay Sawang, to no avail, evidenced by the
CERTIFICATE TO FILE ACTION hereto attached as ANNEX B;
6. That, the unjustified refusal of the defendant to vacate the property has
caused the plaintiffs to suffer shame, humiliation, wounded feelings, anxiety
and sleepless nights;
 7. That, to protect their rights and interest, plaintiffs were constrained to
engage the services of a lawyer.[3]
The petitioners prayed that, after due proceedings, judgment be rendered in their favor,
thus:
WHEREFORE, it is prayed of this Honorable Court that after due process (sic), an order be
issued for the defendant to vacate and peacefully turn over to the plaintiffs the occupied
property and that defendant be made to pay plaintiffs:
a. actual damages, as follows:
a.1. transportation expenses in connection with the projected
settlement of the case amounting to P1,500.00 and for the
subsequent attendance to the hearing of this case at P1,500.00
each schedule;
a.2. attorneys fees in the amount of P20,000.00 and P500.00 for
every court appearance;
b. moral and exemplary damages in such amount incumbent upon the
Honorable Court to determine; and
c. such other relief and remedies just and equitable under the premises.[4]
The private respondent filed a motion to dismiss the complaint on the ground of lack of
jurisdiction over the nature of the action, citing Section 33 of Batas Pambansa (B.P.) Blg.
129, as amended by Section 3(3) of Republic Act (R.A.) No. 7691.[5] He averred that
(1) the complaint failed to state the assessed value of the land in dispute;
(2) the complaint does not sufficiently identify and/or describe the parcel of land referred
to as the subject-matter of this action;
both of which are essential requisites for determining the jurisdiction of the Court where
the case is filed. In this case, however, the assessed value of the land in question is
totally absent in the allegations of the complaint and there is nothing in the relief prayed
for which can be picked-up for determining the Courts jurisdiction as provided by law.
In the face of this predicament, it can nevertheless be surmised by reading between the
lines, that the assessed value of the land in question cannot exceed P20,000.00 and, as
such, it falls within the jurisdiction of the Municipal Trial Court of Romblon and should
have been filed before said Court rather than before the RTC. [6]
The petitioners opposed the motion.[7] They contended that the RTC had jurisdiction over
the action since the court can take judicial notice of the market value of the property in
question, which was P200.00 per square meter and considering that the property was
14,797 square meters, more or less, the total value thereof is P3,500,000.00. Besides,
according to the petitioners, the motion to dismiss was premature and the proper time to
interpose it is when the [petitioners] introduced evidence that the land is of such value.
On November 7, 1996, the RTC issued an Order[8] denying the motion to dismiss, holding
that the action was incapable of pecuniary estimation, and therefore, cognizable by the RTC
as provided in Section 19(1) of B.P. Blg. 129, as amended.
After the denial of the motion to dismiss, the private respondent filed his answer with
counterclaim.[9] Traversing the material allegations of the complaint, he contended that the
petitioners had no cause of action against him since the property in dispute was the conjugal
property of his grandparents, the spouses Salustiano Salvador and Concepcion Mazo-
Salvador.
On April 8, 1997, Regidor and Virginia Salvador filed their Answer-in-
Intervention[10] making common cause with the private respondent. On her own motion,
however, Virginia Salvador was dropped as intervenor.[11]
During trial, the petitioners adduced in evidence Tax Declaration No. 8590-A showing that
in 1991 the property had an assessed value of P5,950.00.[12]
On June 3, 1999, the trial court rendered judgment finding in favor of the petitioners. The
dispositive portion of the decision reads:
WHEREFORE, as prayed for, judgment is rendered:
Ordering the defendant to vacate and peacefully turn over to the plaintiffs the occupied
property; and
Dismissing defendants counterclaim.
SO ORDERED.[13]
Aggrieved, the private respondent and respondent-intervenor Regidor Salvador appealed
the decision to the CA, which rendered judgment on May 23, 2003 reversing the ruling of
the RTC and dismissing the complaint for want of jurisdiction. The fallo of the decision is as
follows:
IN VIEW OF THE FOREGOING, the appealed decision is REVERSED, and the case
DISMISSED, without prejudice to its refilling in the proper court.
SO ORDERED.[14]
The CA declared that the action of the petitioners was one for the recovery of ownership
and possession of real property. Absent any allegation in the complaint of the assessed
value of the property, the Municipal Trial Court (MTC) had exclusive jurisdiction over the
action, conformably to Section 33[15] of R.A. No. 7691.
The petitioners filed a motion for reconsideration of the said decision, which the appellate
court denied.[16] Hence, they filed the instant petition, with the following assignment of
errors:
I
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR IN
HOLDING THAT THE INSTANT CASE, ACCION REINVINDICATORIA, FALLS WITHIN THE
EXCLUSIVE ORIGINAL JURISDICTION OF THE MUNICIPAL TRIAL COURT OF ROMBLON,
AND NOT WITH THE REGIONAL TRIAL COURT OF ROMBLON.
II
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN
ORDERING THE REFILING OF THE CASE IN THE [PROPER] COURT, INSTEAD OF
DECIDING THE CASE ON THE MERITS BASED ON THE COMPLETE RECORDS ELEVATED
BEFORE SAID APPELLATE COURT AND IN NOT AFFIRMING IN TOTO THE DECISION OF
THE TRIAL COURT.[17]
The Ruling of the Court
The lone issue for our resolution is whether the RTC had jurisdiction over the action of the
petitioners, the plaintiffs in the RTC, against the private respondent, who was the defendant
therein.
The petitioners maintain that the RTC has jurisdiction since their action is an accion
reinvindicatoria, an action incapable of pecuniary estimation; thus, regardless of the
assessed value of the subject property, exclusive jurisdiction falls within the said court.
Besides, according to the petitioners, in their opposition to respondents motion to dismiss,
they made mention of the increase in the assessed value of the land in question in the
amount of P3.5 million. Moreover, the petitioners maintain that their action is also one for
damages exceeding P20,000.00, over which the RTC has exclusive jurisdiction under R.A.
No. 7691.
The petition has no merit.
It bears stressing that the nature of the action and which court has original and exclusive
jurisdiction over the same is determined by the material allegations of the complaint, the
type of relief prayed for by the plaintiff and the law in effect when the action is filed,
irrespective of whether the plaintiffs are entitled to some or all of the claims asserted
therein.[18] The caption of the complaint is not determinative of the nature of the action.
Nor does the jurisdiction of the court depend upon the answer of the defendant or
agreement of the parties or to the waiver or acquiescence of the parties.
We do not agree with the contention of the petitioners and the ruling of the CA that the
action of the petitioners in the RTC was an accion reinvindicatoria. We find and so rule that
the action of the petitioners was an accion publiciana, or one for the recovery of possession
of the real property subject matter thereof. An accion reinvindicatoria is a suit which has
for its object the recovery of possession over the real property as owner. It involves
recovery of ownership and possession based on the said ownership. On the other hand,
an accion publicianais one for the recovery of possession of the right to possess. It is also
referred to as an ejectment suit filed after the expiration of one year after the occurrence
of the cause of action or from the unlawful withholding of possession of the realty.[19]
The action of the petitioners filed on September 3, 1996 does not involve a claim of
ownership over the property. They allege that they are co-owners thereof, and as such,
entitled to its possession, and that the private respondent, who was the defendant,
constructed his house thereon in 1989 without their knowledge and refused to vacate the
property despite demands for him to do so. They prayed that the private respondent vacate
the property and restore possession thereof to them.
When the petitioners filed their complaint on September 3, 1996, R.A. No. 7691 was already
in effect. Section 33(3) of the law provides:
Sec. 33. Jurisdiction of Metropolitan Trial Courts, Municipal Trial Courts and Municipal
Circuit Trial Courts in Civil Cases. Metropolitan Trial Courts, Municipal Trial Courts and
Municipal Circuit Trial Courts shall exercise:
(3) Exclusive original jurisdiction in all civil actions which involve title to, or possession of,
real property, or any interest therein where the assessed value of the property or interest
therein does not exceed Twenty Thousand Pesos (P20,000.00) or, in civil actions in Metro
Manila, where such assessed value does not exceed Fifty Thousand Pesos (P50,000.00)
exclusive of interest, damages of whatever kind, attorneys fees, litigation expenses and
costs: Provided, That in cases of land not declared for taxation purposes, the value of
such property shall be determined by the assessed value of the adjacent lots.
Section 19(2) of the law, likewise, provides that:
Sec. 19. Jurisdiction in civil cases. The Regional Trial Court shall exercise exclusive
original jurisdiction:
(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 involved exceeds Twenty
Thousand Pesos (P20,000.00) or, for civil actions in Metro Manila, where such value
exceeds Fifty Thousand Pesos (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.
The jurisdiction of the court over an action involving title to or possession of land is now
determined by the assessed value of the said property and not the market value thereof.
The assessed value of real property is the fair market value of the real property multiplied
by the assessment level. It is synonymous to taxable value.[20] The fair market value is the
price at which a property may be sold by a seller, who is not compelled to sell, and bought
by a buyer, who is not compelled to buy.
Even a cursory reading of the complaint will show that it does not contain an allegation
stating the assessed value of the property subject of the complaint. [21] The court cannot
take judicial notice of the assessed or market value of lands.[22] Absent any allegation in
the complaint of the assessed value of the property, it cannot thus be determined whether
the RTC or the MTC had original and exclusive jurisdiction over the petitioners action.
We note that during the trial, the petitioners adduced in evidence Tax Declaration No. 8590-
A, showing that the assessed value of the property in 1991 was P5,950.00. The petitioners,
however, did not bother to adduce in evidence the tax declaration containing the assessed
value of the property when they filed their complaint in 1996. Even assuming that the
assessed value of the property in 1991 was the same in 1995 or 1996, the MTC, and not
the RTC had jurisdiction over the action of the petitioners since the case involved title to or
possession of real property with an assessed value of less than P20,000.00.[23]
We quote with approval, in this connection, the Cas disquisition:
The determining jurisdictional element for the accion reinvindicatoria is, as RA 7691
discloses, the assessed value of the property in question. For properties in the provinces,
the RTC has jurisdiction if the assessed value exceeds P20,000, and the MTC, if the value
is P20,000 or below. An assessed value can have reference only to the tax rolls in the
municipality where the property is located, and is contained in the tax declaration. In the
case at bench, the most recent tax declaration secured and presented by the plaintiffs-
appellees is Exhibit B. The loose remark made by them that the property was worth 3.5
million pesos, not to mention that there is absolutely no evidence for this, is irrelevant in
the light of the fact that there is an assessed value. It is the amount in the tax declaration
that should be consulted and no other kind of value, and as appearing in Exhibit B, this
is P5,950. The case, therefore, falls within the exclusive original jurisdiction of the
Municipal Trial Court of Romblon which has jurisdiction over the territory where the
property is located, and not the court a quo.[24]
It is elementary that the tax declaration indicating the assessed value of the property enjoys
the presumption of regularity as it has been issued by the proper government agency.[25]
Unavailing also is the petitioners argumentation that since the complaint, likewise, seeks
the recovery of damages exceeding P20,000.00, then the RTC had original jurisdiction over
their actions. Section 33(3) of B.P. Blg. 129, as amended, quoted earlier, explicitly excludes
from the determination of the jurisdictional amount the demand for interest, damages of
whatever kind, attorneys fees, litigation expenses, and costs. This Court issued
Administrative Circular No. 09-94 setting the guidelines in the implementation of R.A. No.
7691, and paragraph 2 thereof states that
8. The exclusion of the term damages of whatever kind in determining
the jurisdictional amount under Section 19(8) and Section 33(1) of B.P. Blg.
129, as amended by R.A. 7691, applies to cases where the damages are merely
incidental to or a consequence of the main cause of action. However, in cases
where the claim for damages is the main cause of action, or one of the causes of
action, the amount of such claim shall be considered in determining the
jurisdiction of the court.
Neither may the petitioners find comfort and solace in Section 19(8) of B.P. Blg. 129, as
amended, which states:
SEC. 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise exclusive original
jurisdiction:
(8) In all other cases in which the demand, exclusive of interest, damages of whatever
kind, attorneys fees, litigation expenses, and costs or the value of the property in
controversy exceeds One Hundred Thousand Pesos (P100,000.00) or, in such other cases
in Metro Manila, where the demand, exclusive of the above-mentioned items exceeds Two
Hundred Thousand Pesos (P200,000.00).
The said provision is applicable only to all other cases other than an action involving title
to, or possession of real property in which the assessed value is the controlling factor in
determining the courts jurisdiction. The said damages are merely incidental to, or a
consequence of, the main cause of action for recovery of possession of real property.[26]
Since the RTC had no jurisdiction over the action of the petitioners, all the proceedings
therein, including the decision of the RTC, are null and void. The complaint should perforce
be dismissed.[27]
WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 63737 are AFFIRMED. Costs against the petitioners.
SO ORDERED.
Vitangcol vs new vista
The Case
In this Petition for Review under Rule 45 of the Rules of Court, petitioners Alice Vitangcol
and Norberto Vitangcol (collectively, Vitangcol) assail the August 14, 2006 Decision[1] and
December 19, 2006 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CV No. 84205
which reversed the December 21, 2004 Order[3] of the Regional Trial Court (RTC), Branch
35, in Calamba City, Laguna, in Civil Case No. 3195-2001-C for Quieting of Title
entitled New Vista Properties, Inc. v. Alice E. Vitangcol, Norberto A. Vitangcol, Maria L. Alipit
and Register of Deeds of Calamba, Laguna.
The Facts
Subject of the instant controversy is Lot No. 1702 covered by Transfer Certificate of Title
(TCT) No. (25311) 2528 of the Calamba, Laguna Registry in the name of Maria A. Alipit and
Clemente A. Alipit, married to Milagros.
On June 18, 1989, Maria and Clemente A. Alipit, with the marital consent of the latters wife,
executed a Special Power of Attorney[4] (SPA) constituting Milagros A. De Guzman as their
attorney-in-fact to sell their property described in the SPA as located at Bo. Latian,
Calamba, Laguna covered by TCT No. (25311) 2538 with Lot No. 1735 consisting of
242,540 square meters more or less. Pursuant to her authority under the SPA, De Guzman
executed on August 9, 1989 a Deed of Absolute Sale[5] conveying to New Vista Properties,
Inc. (New Vista) a parcel of land with an area of 242,540 square meters situated in
Calamba, Laguna. In the deed, however, the lot thus sold was described as:
a parcel of land (Lot No. 1702 of the Calamba Estate, GLRO Rec. No.
8418) situated in the Calamba, Province of Laguna, x x x containing an
area of [250,007 square meters], more or less. x x x That a portion of
the above-described parcel of land was traversed by the South
Expressway such that its original area of [250,007] SQUARE METERS
was reduced to [242,540] SQUARE METERS, which is the subject of the
sale.[6]
Following the sale, New Vista immediately entered the subject lot, fenced it with cement
posts and barbed wires, and posted a security guard to deter trespassers.
We interpose at this point the observation that the property delivered to and occupied by
New Vista was denominated in the SPA as Lot No. 1735 covered by TCT No.
(25311) 2538, while in the deed of absolute sale in favor of New Vista the object of the
purchase is described as Lot No. 1702 covered by TCT No. (25311) 2528.
The controversy arose more than a decade later when respondent New Vista learned that
the parcel of land it paid for and occupied, i.e., Lot No. 1702, was being claimed by
petitioners Vitangcol on the strength of a Deed of Absolute Sale for Lot No. 1702 under TCT
No. (25311) 2528 entered into on August 14, 2001 by and between Vitangcol and Maria
Alipit. Consequent to the Vitangcol-Maria Alipit sale, TCT No. (25311) 2528 was canceled
and TCT No. T-482731 issued in its stead in favor of Vitangcol on August 15, 2001.
Alarmed by the foregoing turn of events, New Vista lost no time in protecting its rights by,
first, filing a notice of adverse claim over TCT No. T-482731, followed by commencing a
suit for quieting of title before the RTC. Its complaint[7] was docketed as Civil Case No.
3195-2001-C before the RTC, Branch 92 in Calamba City. Therein, New Vista alleged
paying, after its purchase of the subject lot in 1989, the requisite transfer and related taxes
therefor, and thereafter the real estate taxes due on the land. New Vista also averred that
its efforts to have the Torrens title transferred to its name proved unsuccessful owing to
the on-going process of reclassification of the subject lot from agricultural to
commercial/industrial. New Vista prayed, among others, for the cancellation of Vitangcols
TCT No. T-482731 and that it be declared the absolute owner of the subject lot.
On December 11, 2001, Vitangcol moved to dismiss[8] the complaint which New Vista duly
opposed. An exchange of pleadings then ensued.
On June 27, 2003, or before Maria Alipit and Vitangcol, as defendants a quo, could answer,
New Vista filed an amended complaint,[9] appending thereto a copy of the 1989 deed of
absolute sale De Guzman, as agent authorized agent of the Alipits, executed in its
favor. Thereafter, Vitangcol filed a motion to dismiss, followed by a similar motion
dated August 29, 2003 interposed by Maria Alipit which New Vista countered with an
opposition.
Unlike in its original complaint, New Vistas amended complaint did not have, as attachment,
the June 18, 1989 SPA. It, however, averred that Clemente and Maria Alipit had ratified
and validated the sale of Lot No. 1702 covered by TCT No. (25311) 2528 by their having
delivered possession of said lot to New Vista after receiving and retaining the purchase
price therefor.
Ruling of the RTC
The Initial RTC Order
By Order of November 25, 2003, the trial court denied Vitangcols and Maria Alipits separate
motions to dismiss the amended complaint. As there held by the RTC, the amended
complaint[10] sufficiently stated a cause of action as shown therein that after the purchase
and compliance with its legal obligations relative thereto, New Vista was immediately placed
in possession of the subject lot, but which Maria Alipit, by herself, later sold to Vitangcol to
New Vistas prejudice.
The December 21, 2004 RTC Order
From the above order, Vitangcol sought reconsideration,[11] attaching to the motion a copy
of the June 18, 1989 SPA which, in the hearing on June 7, 2004, was accepted as evidence
pursuant to Sec. 8, Rule 10 of the Rules of Court.[12] By Order dated July 14, 2004, the RTC
granted reconsideration and dismissed the amended complaint, disposing as follows:
In view of the foregoing, the court hereby set aside its Order dated
November 25, 2003 and by virtue of this order, hereby finds that the
Amended Complaint states no cause of action and that the claim of the
plaintiff in the present action is unenforceable under the provisions of
the statue [sic] of frauds, hence, the Amended Complaint is hereby
ordered DISMISSED, pursuant to Rule 16, Section 1, paragraph g and i.
SO ORDERED.[13]
In reversing itself, the RTC made much of the fact that New Vista did not attach the SPA to
the amended complaint. To the RTC, this omission is fatal to New Vistas cause of action for
quieting of title, citing in this regard the pertinent rule when an action is based on a
document.[14]
The RTC also stated the observation that New Vistas act of not directly mentioning the SPA
and the non-attachment of a copy thereof in the amended complaint constituted an attempt
to hide the fact that Milagros Alipit-de Guzman is only authorized to sell a parcel of land
denominated as Lot No. 1735 of the Calamba Estate, and not Lot No. 1702 of the Calamba
Estate, which is the subject matter of the Deed of Absolute Sale (Annex B of the Amended
Complaint).[15] According to the RTC, what the agent (De Guzman) sold to New Vista
was Lot No. 1702 which she was not authorized to sell.
Aggrieved, New Vista interposed an appeal before the CA, its recourse docketed as CA-G.R.
CV No. 84205.
Ruling of the CA
On August 14, 2006, the appellate court rendered the assailed Decision reversing the
December 21, 2004 RTC Order, reinstating New Vistas amended complaint for quieting of
title, and directing Vitangcol and Maria Alipit to file their respective answers thereto. The
decretal portion of the CAs decision reads:
WHEREFORE, premises considered, the 21 December 2004 Order of the
court a quo is hereby REVERSED and SET ASIDE, and the Amended
Complaint is hereby REINSTATED.The defendants-appellees are hereby
directed to file their respective answers/responsive pleadings within the
time prescribed under the Rules of Court.
SO ORDERED.[16]
The CA faulted the RTC for dismissing the amended complaint, observing that it was absurd
for the RTC to require a copy of the SPA which was not even mentioned in the amended
complaint. Pushing this observation further, the CA held that the amended complaint, filed
as it were before responsive pleadings could be filed by the defendants below, superseded
the original complaint. As thus superseded, the original complaint and all documents
appended thereto, such as the SPA, may no longer be taken cognizance of in determining
whether the amended complaint sufficiently states a cause of action. It, thus, concluded
that the RTC erred in looking beyond the four corners of the amended complaint in resolving
the motion to dismiss on the ground of its failing to state a cause of action.
And citing jurisprudence,[17] the CA ruled that even if the SPA were considered, still the
discrepancy thereof relative to the deed of absolute salein terms of lot and title numbersis
evidentiary in nature and is simply a matter of defense, and not a ground to dismiss the
amended complaint.
Finally, the CA held that the real question in the case boiled down as to whose title is
genuine or spurious, which is obviously a triable issue of fact which can only be threshed
out in a trial on the merits.
Through the equally assailed December 19, 2006 Resolution, the CA denied Vitangcols
motion for reconsideration.
Hence, the instant petition.
The Issue
Petitioners Vitangcol raise as ground for review the sole assignment of error in that:
THE DECISION AND THE RESOLUTION OF THE TWELFTH DIVISION OF
THE COURT OF APPEALS UNDER CHALLENGE ARE CONTRARY TO LAW[18]

The Courts Ruling
The petition is bereft of merit.
The sole issue tendered for consideration is whether the Amended Complaint, with the June
18, 1989 SPAsubmitted by petitioners Vitangcolduly considered, sufficiently states a cause
of action. It is Vitangcols posture that it does not sufficiently state a cause of
action. New Vista is of course of a different view.
Amended Complaint Sufficiently States a Cause of Action
The Rules of Court defines cause of action as the act or omission by which a party violates
a right of another. It contains three elements: (1) a right existing in favor of the plaintiff;
(2) a correlative duty on the part of the defendant to respect that right; and (3) a breach
of the defendants duty.[19] It is, thus, only upon the occurrence of the last element that a
cause of action arises, giving the plaintiff a right to file an action in court for recovery of
damages or other relief.[20]
Lack of cause of action is, however, not a ground for a dismissal of the complaint through
a motion to dismiss under Rule 16 of the Rules of Court, for the determination of a lack of
cause of action can only be made during and/or after trial. What is dismissible via that
mode is failure of the complaint to state a cause of action. Sec. 1(g) of Rule 16 of the Rules
of Court provides that a motion may be made on the ground that the pleading asserting
the claim states no cause of action.
The rule is that in a motion to dismiss, a defendant hypothetically admits the truth of the
material allegations of the ultimate facts contained in the plaintiffs complaint. [21]When a
motion to dismiss is grounded on the failure to state a cause of action, a ruling thereon
should, as rule, be based only on the facts alleged in the complaint. [22] However, this
principle of hypothetical admission admits of exceptions. Among others, there is no
hypothetical admission of conclusions or interpretations of law which are false; legally
impossible facts; facts inadmissible in evidence; facts which appear by record or document
included in the pleadings to be unfounded;[23] allegations which the court will take judicial
notice are not true;[24] and where the motion to dismiss was heard with submission of
evidence which discloses facts sufficient to defeat the claim.[25]
New Vistas threshold contention that De Guzmans SPA to sell should not be considered for
not having been incorporated as part of its amended complaint is incorrect since Vitangcol
duly submitted that piece of document in court in the course of the June 7, 2004 hearing
on the motion to dismiss. Thus, the trial court acted within its discretion in considering said
SPA relative to the motion to dismiss the amended complaint.
The trial court, however, erred in ruling that, taking said SPA into account, the amended
complaint stated no cause of action. Indeed, upon a consideration of the amended
complaint, its annexes, with the June 18, 1989 SPA thus submitted, the Court is inclined,
in the main, to agree with the appellate court that the amended complaint sufficiently states
a cause of action.
Hypothetical Admission Supports Statement of Cause of Action
Thus, the next query is: Assuming hypothetically the veracity of the material allegations in
the amended complaint, but taking into consideration the SPA, would New Vista still have
a cause of action against Vitangcol and Maria Alipit sufficient to support its claim for relief
consisting primarily of quieting of title?
The poser should hypothetically be answered in the affirmative.
In a motion to dismiss for failure to state a cause of action, the focus is on the sufficiency,
not the veracity, of the material allegations.[26] The test of sufficiency of facts alleged in the
complaint constituting a cause of action lies on whether or not the court, admitting the facts
alleged, could render a valid verdict in accordance with the prayer of the complaint.[27] And
to sustain a motion to dismiss for lack of cause of action, it must be shown that the claim
for relief in the complaint does not exist, rather than that a claim has been defectively
stated, or is ambiguous, indefinite, or uncertain.[28]
Ratification Would Cure Defect in the SPA
There can be quibbling about the lot covered by the deed of absolute sale De Guzman
executed in New Vistas favor being different from that referred to in her enabling power of
attorney to sell in terms of lot number and lot title number. The flaw stemmed from the
faulty preparation of the SPA. Notwithstanding the variance in lot descriptions, as indicated
above, the amended complaint contained, as it were, a clear statement of New Vistas cause
of action. New Vista, in fact, alleged that the intended sale of Lot No. 1702 effected by De
Guzman had been ratified by her principals, lot owners Clemente and Maria Alipit. Consider
the ensuing clear stipulations in the August 9, 1989 Deed of Absolute Sale:
That on March 27, 1989, the SELLERS [the Alipits] entered into a
Contract to Sell with the BUYER [New Vista], after they had previously
received on February 11, 1989 an earnest money of TEN THOUSAND
PESOS (P10,000.00), wherein they (Sellers) agreed to sell to the BUYER
the above-described parcel of land (in the reduced area of 242,540
square meters) for P60.00 per square meter or for a total price
consideration of FOURTEEN MILLION FIVE HUNDRED FIFTY TWO
THOUSAND FOUR HUNDRED PESOS (P14,552,400.00) under the other
terms and conditions stipulated therein;
That on April 4, 1989, the BUYER had advanced the amount of SEVEN
MILLION FIVE HUNDRED EIGHTEEN THOUSAND SIX HUNDRED PESOS
(7,518,600.00) and paid the Philippine Veterans Bank [PVB] in the same
amount by way of redemption of the above-described property from its
mortgage, all in accordance with the stipulation in the Contract to Sell
dated March 27, 1989, making the advances made by the BUYER to the
SELLERS namely: P10,000.00 Earnest Money; P500,000.00 Advances;
and P7,518,600.00 Redemption Money; in the total amount of EIGHT
MILLION TWENTY EIGHT THOUSAND SIX HUNDRED PESOS
(P8,028,600.00) which per agreement has formed part of the payment
of the purchase price of P14,550,000.00 thereby leaving a balance of
SIX MILLION FIVE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED PESOS (P6,523,800.00);
That in line with the Resolution dated June 1, 1989 of the Honorable
Supreme Court in GR. No. L-______ the Honorable [RTC], National
Capital Judicial Region, Branch 39, Manila, issued an Order on June 30,
1989 in Civil Case No. 85-32311 entitled, IN RE: IN THE MATTER OF
THE PETITION FOR LIQUIDATION OF THE PHILIPPINE VETERANS BANK,
CENTRAL BANK OF THE PHILIPPINES, Petitioner, the dispositive portion
of which reads as follows:
WHEREFORE, the petitioner Central Bank of
the Philippines, the Acting Liquidator of the Philippine
Veterans Bank is hereby ordered to release to the
movants-claimants, Spouses Clemente and Milagros
Alipit and Maria Alipit the latters Certificate of Title,
TCT No. (T-25311) 2528 within three (3) days from
receipt hereof.
SO ORDERED.
thus, paving the way for the execution of the foregoing Final Deed of
Sale.
NOW, THEREFORE, in view of the foregoing facts and circumstances,
and for and in consideration of the sum of [P14,552,400.00] of which
had been previously paid by the BUYER to the SELLERS in the manner
 stated above, and the remaining sum of x x x (P6,523,800.00), likewise
Philippine Currency, to the SELLERS now in hand paid and receipt
whereof is hereby acknowledged and expressed to their entire
satisfaction from the BUYER THEREBY completing payment of the entire
price consideration of this sale, the SELLERS do hereby sell, transfer and
convey, in the manner absolute and irrevocable, unto the BUYER, its
successors, administrators and assigns, the above-described parcel of
land in its reduced area of 242,540 square meters, more or less, free
from all liens and encumbrances.[29]
As may clearly be noted, the transfer of the lot covered by TCT No. (25311) 2528 or, in
fine Lot No. 1702 of the Calamba Estate, in favor of New Vista, came not as the result of
simple, single transaction involving a piece of land with a clean title where the vendor, for
a sum certain received, delivers ownership of the property upon contract signing. As things
stand, the execution of the deed of absolute sale completed a negotiated contractual
package, the culmination of a series of side but closely interrelated transactions involving
several payments and remittances of what turned out to be the total purchase price for the
lot envisaged to be purchased and sold, to wit: PhP 10,000 earnest money payment on
February 11, 1989; an advance of half a million (no date provided); settlement of a
mortgage loan with Philippine Veterans Bank (PVB) of over PhP 7.5 million on April 4, 1989;
and the final payment of the balance of the total purchase price amounting to over PhP 6.5
million on August 9, 1989the date of the execution of the Deed of Absolute Sale. For proper
perspective, it may be mentioned that the Alipits and New Vista executed the Contract to
Sell on March 27, 1989 after the payment of the earnest money and before the settlement
of the mortgage loan with the PVB; and the SPA executed by Clemente and Maria Alipit on
June 18, 1989 or more than a month before the execution of the Deed of Absolute Sale.
Taking the foregoing events set forth in the 1989 deed of absolute sale, as hypothetically
admitted, it is fairly evident that the property the Alipits intended to sell and in fact sold
was the lot covered by TCT No. (25311) 2528, which, doubtless, is Lot No. 1702. As aptly
argued by New Vista, the purchase of the parcel of land in question was mainly dictated by
its actual location and its metes and bounds and not by mere lot number assigned to it in
the certificate of title. This is not to say that the TCT covering the property is of little
importance. But what can be gleaned is that New Vista paid and acquired Lot No. 1702
which it redeemed, for the Alipits, by paying their mortgage obligations with the PVB. It
could not have bought and the Alipits could not have sold another property.
No Showing of Existence of Lot Subject of the SPA
As to how the SPA mentioned a lot, i.e., Lot No. 1735 covered by TCT No. (25311) 2538,
different from what is stated, i.e., Lot No. 1702, in the 1989 deed of absolute sale in
question, is not sufficiently explained by the parties. But what can be gathered from the
records is that what were denominated as Lot No. 1735 and Lot No. 1702 have the same
area and location: 242,540 square meters in Calamba. Moreover, if indeed the SPA
authorized De Guzman to sell Lot No. 1735 covered by TCT No. (25311) 2538 and not the
subject Lot No. 1702, the question begging for an answer is how come Maria Alipit never
presented a copy of TCT No. (25311) 2538 covering Lot No. 1735 with an area of 242,540
square meters to prove her being a co-owner thereof? We note that Maria Alipits motion to
dismiss merely adopted the grounds raised in the parallel motion filed by Vitangcol.
Moreover, the sequence of coinciding events, starting from the payment by New Vista of
the earnest money, to the execution of the final deed of sale and the delivery of the subject
lot to New Vista would readily show the following: that Clemente and Maria Alipit executed
the SPA for de Guzman to sell and to formalize, in a deed of absolute sale, the sale of the
subject lot following the fulfillment of the terms and conditions envisaged in the Contract
to Sell earlier entered into, and not some lot they co-owned, if there be any. Maria Alipits
utter failure to show in her motion to dismiss that she co-owns with her brother Clemente
a similarly-sized 242,540-square-meter lot, denominated as Lot No. 1735 of the Calamba
Estate and covered by TCT No. (25311) 2538, strongly suggests that no such separate
property exists and that there is contextually only one propertyLot No. 1702. This reality
would veritably make the lot and TCT designation and description entries in the SPA as a
case of typographical errors.
Ratification: Delivery and Not Questioning Deed of Absolute Sale
Nonetheless, even if the SPA, vis--vis the deed of absolute in question, described a different
lot and indicated a dissimilar TCT number, still, the hypothetically admitted allegation of
New Vista that lot owners Clemente and Maria Alipit ratified the sale would cure the defect
on New Vistas claim for relief under its amended complaint. Stated a bit differently, the
ratificatory acts of the Alipits would work to strengthen New Vistas cause of action impaired
by what may be taken as typographical errors in the SPA. As deduced from the stipulations
in the deed of absolute, lot owners Clemente and Maria Alipit doubtless benefited from the
transaction. And most importantly, they turned possession of Lot No. 1702 over to New
Vista in 1989. Since then, New Vista enjoyed undisturbed right of ownership over the
property until the Vitangcol entered the picture.
The delivery of the subject Lot No. 1702 to New Vista clearly evinces the intent to sell said
lot and is ample proof of receipt of full payment therefor as indicated in the deed of absolute
sale. For a span of more than 10 years after the execution of the contract of sale, neither
Clemente nor Maria Alipit came forward to assail the conveyance they authorized De
Guzman to effect, if they considered the same as suffering from some vitiating defect. What
is more, if their intention were indeed to authorize De Guzman to sell a property other than
Lot No. 1702, is it not but logical to surrender that other property to New Vista? And if New
Vista employed illegal means to gain possession of subject property, a relatively valuable
piece of real estate, why did Clemente and Maria Alipit, and their successors in interest, not
institute any proceedings to oust or eject New Vista therefrom?
Clemente and Maria Alipits long inaction adverted to argues against the notion that what
they sold to New Vista was a property other than Lot No. 1702 of the Calamba Estate.
Two Versions of TCT Covering Subject Lot Show Fraud
Lest it be overlooked, the purported sale of Lot 1702 to Vitangcol was made by Maria Alipit
alone, ostensibly utilizing another certificate of title bearing number TCT No. (25311) 2528
with Maria Alipit appearing on its face as the sole owner. New Vista holds the original
duplicate owners copy of TCT No. (25311) 2528 in the names of Clemente and Maria Alipit.
Evidently, two versions of same TCT bearing the same number and covering the subject
property exist. This aberration doubtless is a triable factual issue. To be sure, one title is
authentic and the other spurious.
It is worth to mention at this juncture that the deed of absolute sale in favor of New Vista
recited the following event: that the RTC, Branch 39 in Manila issued on June 30, 1989 in
Civil Case No. 85-32311 (in re: liquidation PVB) an Order to release TCT No. (T-25311)
2528 in the names of Clemente Alipit, married to Milagros Alipit, and Maria Alipit. If this
recital is true and there is no reason why it is not, then TCT No. (T-25311) 2528 in the
name of Maria Alipit alone must, perforce, be a fake instrument. Accordingly, the
subsequent sale of Lot No. 1702 to Vitangcol on August 14, 2001 by Maria Alipit with a
bogus TCT would be ineffective and certainly fraudulent. Not lost on the Court, as badge of
fraud, is, as New Vista points out, the issuance of a new TCT on August 15, 2001 or a day
after the subject lot was purportedly sold to Vitangcol.
As found by the RTC in its initial November 25, 2003 order, virtually all the material
allegations in the amended complaint are triable issues of facts, a reality indicating that it
sufficiently states a cause or causes of action. If the allegations in the complaint furnish
sufficient basis on which it can be maintained, it should not be dismissed regardless of the
defense that may be presented by the defendants.[30]
On July 15, 2009, the parties filed a Joint Motion to Dismiss informing the Court that they
have amicably settled their differences and have filed a Joint Motion for Judgment Based
on Compromise Agreement before the RTC, Branch 35 in Calamba City, Laguna, in Civil
Case No. 3195-2001-C. A judgment on said compromise would have preempted the
resolution of the instant petition.

WHEREFORE, this petition is hereby DENIED for lack of merit. The records of the case
are immediately remanded to the RTC, Branch 35 in Calamba City, Laguna for appropriate
action on the Compromise Agreement submitted by the parties.
Let the entry of judgment be made. No costs.
SO ORDERED.
G.R. No. L-58028 April 18, 1989
CHIANG KAI SHEK SCHOOL, petitioner,
vs.
COURT OF APPEALS and FAUSTINA FRANCO OH, respondents.
An unpleasant surprise awaited Fausta F. Oh when she reported for work at the Chiang
Kai Shek School in Sorsogon on the first week of July, 1968. She was told she had no
assignment for the next semester. Oh was shocked. She had been teaching in the school
since 1932 for a continuous period of almost 33 years. And now, out of the blue, and for
no apparent or given reason, this abrupt dismissal.
Oh sued. She demanded separation pay, social security benefits, salary differentials,
maternity benefits and moral and exemplary damages. 1 The original defendant was the
Chiang Kai Shek School but when it filed a motion to dismiss on the ground that it could
not be sued, the complaint was amended. 2 Certain officials of the school were also
impleaded to make them solidarily liable with the school.
The Court of First Instance of Sorsogon dismissed the complaint. 3 On appeal, its decision
was set aside by the respondent court, which held the school suable and liable while
absolving the other defendants. 4 The motion for reconsideration having been
denied, 5 the school then came to this Court in this petition for review on certiorari.
The issues raised in the petition are:
1. Whether or not a school that has not been incorporated may be sued by reason alone
of its long continued existence and recognition by the government,
2. Whether or not a complaint filed against persons associated under a common name will
justify a judgment against the association itself and not its individual members.
3. Whether or not the collection of tuition fees and book rentals will make a school profit-
making and not charitable.
4. Whether or not the Termination Pay Law then in force was available to the private
respondent who was employed on a year-to-year basis.
5. Whether or not the awards made by the respondent court were warranted.
We hold against the petitioner on the first question. It is true that Rule 3, Section 1, of
the Rules of Court clearly provides that "only natural or juridical persons may be parties
in a civil action." It is also not denied that the school has not been incorporated. However,
this omission should not prejudice the private respondent in the assertion of her claims
against the school.
As a school, the petitioner was governed by Act No. 2706 as amended by C.A. No. 180,
which provided as follows:
Unless exempted for special reasons by the Secretary of Public
Instruction, any private school or college recognized by the
government shall be incorporated under the provisions of Act No. 1459
known as the Corporation Law, within 90 days after the date of
recognition, and shall file with the Secretary of Public Instruction a
copy of its incorporation papers and by-laws.
Having been recognized by the government, it was under obligation to incorporate under
the Corporation Law within 90 days from such recognition. It appears that it had not done
so at the time the complaint was filed notwithstanding that it had been in existence even
earlier than 1932. The petitioner cannot now invoke its own non-compliance with the law
to immunize it from the private respondent's complaint.
There should also be no question that having contracted with the private respondent
every year for thirty two years and thus represented itself as possessed of juridical
personality to do so, the petitioner is now estopped from denying such personality to
defeat her claim against it. According to Article 1431 of the Civil Code, "through estoppel
an admission or representation is rendered conclusive upon the person making it and
cannot be denied or disproved as against the person relying on it."
As the school itself may be sued in its own name, there is no need to apply Rule 3,
Section 15, under which the persons joined in an association without any juridical
personality may be sued with such association. Besides, it has been shown that the
individual members of the board of trustees are not liable, having been appointed only
after the private respondent's dismissal. 6
It is clear now that a charitable institution is covered by the labor laws 7 although the
question was still unsettled when this case arose in 1968. At any rate, there was no law
even then exempting such institutions from the operation of the labor laws (although they
were exempted by the Constitution from ad valorem taxes). Hence, even assuming that
the petitioner was a charitable institution as it claims, the private respondent was
nonetheless still entitled to the protection of the Termination Pay Law, which was then in
force.
While it may be that the petitioner was engaged in charitable works, it would not
necessarily follow that those in its employ were as generously motivated. Obviously, most
of them would not have the means for such charity. The private respondent herself was
only a humble school teacher receiving a meager salary of Pl80. 00 per month.
At that, it has not been established that the petitioner is a charitable institution,
considering especially that it charges tuition fees and collects book rentals from its
students. 8 While this alone may not indicate that it is profit-making, it does weaken its
claim that it is a non-profit entity.
The petitioner says the private respondent had not been illegally dismissed because her
teaching contract was on a yearly basis and the school was not required to rehire her in
1968. The argument is that her services were terminable at the end of each year at the
discretion of the school. Significantly, no explanation was given by the petitioner, and no
advance notice either, of her relief after teaching year in and year out for all of thirty-two
years, the private respondent was simply told she could not teach any more.
The Court holds, after considering the particular circumstance of Oh's employment, that
she had become a permanent employee of the school and entitled to security of tenure at
the time of her dismissal. Since no cause was shown and established at an appropriate
hearing, and the notice then required by law had not been given, such dismissal was
invalid.
The private respondent's position is no different from that of the rank-and-file employees
involved in Gregorio Araneta University Foundation v. NLRC, 9 of whom the Court had the
following to say:
Undoubtedly, the private respondents' positions as deans and
department heads of the petitioner university are necessary in its
usual business. Moreover, all the private respondents have been
serving the university from 18 to 28 years. All of them rose from the
ranks starting as instructors until they became deans and department
heads of the university. A person who has served the University for 28
years and who occupies a high administrative position in addition to
teaching duties could not possibly be a temporary employee or a
casual.
The applicable law is the Termination Pay Law, which provided:
SECTION 1. In cases of employment, without a definite period, in a
commercial, industrial, or agricultural establishment or enterprise, the
employer or the employee may terminate at any time the employment
with just cause; or without just cause in the case of an employee by
serving written notice on the employer at least one month in advance,
or in the case of an employer, by serving such notice to the employee
at least one month in advance or one-half month for every year of
service of the employee, whichever, is longer, a fraction of at least six
months being considered as one whole year.
The employer, upon whom no such notice was served in case of
termination of employment without just cause may hold the employee
liable for damages.
The employee, upon whom no such notice was served in case of
termination of employment without just cause shall be entitled to
compensation from the date of termination of his employment in an I
amount equivalent to his salaries or wages correspond to the required
period of notice. ... .
The respondent court erred, however, in awarding her one month pay instead of only
one-half month salary for every year of service. The law is quite clear on this matter.
Accordingly, the separation pay should be computed at P90.00 times 32 months, for a
total of P2,880.00.
Parenthetically, R.A. No. 4670, otherwise known as the Magna Carta for Public School
Teachers, confers security of tenure on the teacher upon appointment as long as he
possesses the required qualification. 10 And under the present policy of the Department
of Education, Culture and Sports, a teacher becomes permanent and automatically
acquires security of tenure upon completion of three years in the service. 11
While admittedly not applicable to the case at bar, these I rules nevertheless reflect the
attitude of the government on the protection of the worker's security of tenure, which is
now guaranteed by no less than the Constitution itself.12
We find that the private respondent was arbitrarily treated by the petitioner, which has
shown no cause for her removal nor had it given her the notice required by the
Termination Pay Law. As the respondent court said, the contention that she could not
report one week before the start of classes is a flimsy justification for replacing
her. 13 She had been in its employ for all of thirty-two years. Her record was apparently
unblemished. There is no showing of any previous strained relations between her and the
petitioner. Oh had every reason to assume, as she had done in previous years, that she
would continue teaching as usual.
It is easy to imagine the astonishment and hurt she felt when she was flatly and without
warning told she was dismissed. There was not even the amenity of a formal notice of her
replacement, with perhaps a graceful expression of thanks for her past services. She was
simply informed she was no longer in the teaching staff. To put it bluntly, she was fired.
For the wrongful act of the petitioner, the private respondent is entitled to moral
damages. 14 As a proximate result of her illegal dismissal, she suffered mental anguish,
serious anxiety, wounded feelings and even besmirched reputation as an experienced
teacher for more than three decades. We also find that the respondent court did not err in
awarding her exemplary damages because the petitioner acted in a wanton and
oppressive manner when it dismissed her. 15
The Court takes this opportunity to pay a sincere tribute to the grade school teachers,
who are always at the forefront in the battle against illiteracy and ignorance. If only
because it is they who open the minds of their pupils to an unexplored world awash with
the magic of letters and numbers, which is an extraordinary feat indeed, these humble
mentors deserve all our respect and appreciation.
WHEREFORE, the petition is DENIED. The appealed decision is AFFIRMED except for the
award of separation pay, which is reduced to P2,880.00. All the other awards are
approved. Costs against the petitioner.
This decision is immediately executory.
SO ORDERED.
[G.R. No. 147724. June 8, 2004]
LORENZO SHIPPING CORP., petitioner, vs. CHUBB and SONS, Inc.,
GEARBULK, Ltd. and PHILIPPINE TRANSMARINE CARRIERS,
INC., respondents.
On appeal is the Court of Appeals August 14, 2000 Decision[1] in CA-G.R. CV No. 61334 and
March 28, 2001 Resolution[2] affirming the March 19, 1998 Decision[3] of the Regional Trial
Court of Manila which found petitioner liable to pay respondent Chubb and Sons, Inc.
attorney's fees and costs of suit.
Petitioner Lorenzo Shipping Corporation (Lorenzo Shipping, for short), a domestic
corporation engaged in coastwise shipping, was the carrier of 581 bundles of black steel
pipes, the subject shipment, from Manila to Davao City. From Davao City, respondent
Gearbulk, Ltd., a foreign corporation licensed as a common carrier under the laws of Norway
and doing business in the Philippines through its agent, respondent Philippine Transmarine
Carriers, Inc. (Transmarine Carriers, for short), a domestic corporation, carried the goods
on board its vessel M/V San Mateo Victory to the United States, for the account of Sumitomo
Corporation. The latter, the consignee, is a foreign corporation organized under the laws of
the United States of America. It insured the shipment with respondent Chubb and Sons,
Inc., a foreign corporation organized and licensed to engage in insurance business under
the laws of the United States of America.
The facts are as follows:
On November 21, 1987, Mayer Steel Pipe Corporation of Binondo, Manila, loaded 581
bundles of ERW black steel pipes worth US$137,912.84[4] on board the vessel M/V Lorcon
IV, owned by petitioner Lorenzo Shipping, for shipment to Davao City. Petitioner Lorenzo
Shipping issued a clean bill of lading designated as Bill of Lading No. T-3[5] for the account
of the consignee, Sumitomo Corporation of San Francisco, California, USA, which in turn,
insured the goods with respondent Chubb and Sons, Inc.[6]
The M/V Lorcon IV arrived at the Sasa Wharf in Davao City on December 2,
1987. Respondent Transmarine Carriers received the subject shipment which was
discharged on December 4, 1987, evidenced by Delivery Cargo Receipt No. 115090.[7] It
discovered seawater in the hatch of M/V Lorcon IV, and found the steel pipes submerged
in it. The consignee Sumitomo then hired the services of R.J. Del Pan Surveyors to inspect
the shipment prior to and subsequent to discharge. Del Pans Survey Report[8] dated
December 4, 1987 showed that the subject shipment was no longer in good condition, as
in fact, the pipes were found with rust formation on top and/or at the sides. Moreover, the
surveyor noted that the cargo hold of the M/V Lorcon IV was flooded with seawater, and
the tank top was rusty, thinning, and with several holes at different places. The rusty
condition of the cargo was noted on the mates receipts and the checker of M/V Lorcon IV
signed his conforme thereon.[9]
After the survey, respondent Gearbulk loaded the shipment on board its vessel M/V San
Mateo Victory, for carriage to the United States. It issued Bills of Lading Nos. DAV/OAK 1
to 7,[10] covering 364 bundles of steel pipes to be discharged at Oakland, U.S.A., and Bills
of Lading Nos. DAV/SEA 1 to 6,[11] covering 217 bundles of steel pipes to be discharged
at Vancouver,Washington, U.S.A. All bills of lading were marked ALL UNITS HEAVILY
RUSTED.
While the cargo was in transit from Davao City to the U.S.A., consignee Sumitomo sent a
letter[12] of intent dated December 7, 1987, to petitioner Lorenzo Shipping, which the latter
received on December 9, 1987. Sumitomo informed petitioner Lorenzo Shipping that it will
be filing a claim based on the damaged cargo once such damage had been ascertained. The
letter reads:
Please be advised that the merchandise herein below noted has been landed in bad order
ex-Manila voyage No. 87-19 under B/L No. T-3 which arrived at the port
of Davao City on December 2, 1987.
The extent of the loss and/or damage has not yet been determined but apparently all
bundles are corroded. We reserve the right to claim as soon as the amount of claim is
determined and the necessary supporting documents are available.
Please find herewith a copy of the survey report which we had arranged for after
unloading of our cargo from your vessel in Davao.
We trust that you shall make everything in order.
On January 17, 1988, M/V San Mateo Victory arrived at Oakland, California, U.S.A., where
it unloaded 364 bundles of the subject steel pipes. It then sailed
to Vancouver, Washingtonon January 23, 1988 where it unloaded the remaining 217
bundles. Toplis and Harding, Inc. of San Franciso, California, surveyed the steel pipes, and
also discovered the latter heavily rusted. When the steel pipes were tested with a silver
nitrate solution, Toplis and Harding found that they had come in contact with salt water. The
survey report,[13] dated January 28, 1988states:
xxx
We entered the hold for a close examination of the pipe, which revealed moderate to
heavy amounts of patchy and streaked dark red/orange rust on all lifts which were
visible. Samples of the shipment were tested with a solution of silver nitrate revealing
both positive and occasional negative chloride reactions, indicating pipe had come in
contact with salt water. In addition, all tension applied metal straps were very heavily
rusted, and also exhibited chloride reactions on testing with silver nitrate.
xxx
It should be noted that subject bills of lading bore the following remarks as to conditions
of goods: ALL UNITS HEAVILY RUSTED. Attached herein is a copy of a survey report
issued by Del Pan Surveyors of Davao City, Philippines dated, December 4,
1987 at Davao City, Philippines, which describes conditions of the cargo as sighted aboard
the vessel LORCON IV, prior to and subsequent to discharge at Davao City. Evidently, the
aforementioned rust damages were apparently sustained while the shipment was in the
custody of the vessel LORCON IV, prior to being laden on board the vessel SAN MATEO
VICTORY in Davao.
Due to its heavily rusted condition, the consignee Sumitomo rejected the damaged steel
pipes and declared them unfit for the purpose they were intended.[14] It then filed a marine
insurance claim with respondent Chubb and Sons, Inc. which the latter settled in the
amount of US$104,151.00.[15]
On December 2, 1988, respondent Chubb and Sons, Inc. filed a complaint[16] for collection
of a sum of money, docketed as Civil Case No. 88-47096, against respondents Lorenzo
Shipping, Gearbulk, and Transmarine. Respondent Chubb and Sons, Inc. alleged that it is
not doing business in the Philippines, and that it is suing under an isolated transaction.
On February 21, 1989, respondents Gearbulk and Transmarine filed their answer[17] with
counterclaim and cross-claim against petitioner Lorenzo Shipping denying liability on the
following grounds: (a) respondent Chubb and Sons, Inc. has no capacity to sue before
Philippine courts; (b) the action should be dismissed on the ground of forum non
conveniens; (c) damage to the steel pipes was due to the inherent nature of the goods or
to the insufficiency of packing thereof; (d) damage to the steel pipes was not due to their
fault or negligence; and, (e) the law of the country of destination, U.S.A., governs the
contract of carriage.
Petitioner Lorenzo Shipping filed its answer with counterclaim on February 28, 1989, and
amended it on May 24, 1989. It denied liability, alleging, among others: (a) that rust easily
forms on steel by mere exposure to air, moisture and other marine elements; (b) that it
made a disclaimer in the bill of lading; (c) that the goods were improperly packed; and, (d)
prescription, laches, and extinguishment of obligations and actions had set in.
The Regional Trial Court ruled in favor of the respondent Chubb and Sons, Inc., finding
that: (1) respondent Chubb and Sons, Inc. has the right to institute this action; and, (2)
petitioner Lorenzo Shipping was negligent in the performance of its obligations as a
carrier. The dispositive portion of its Decision states:
WHEREFORE, the judgment is hereby rendered ordering Defendant Lorenzo Shipping
Corporation to pay the plaintiff the sum of US$104,151.00 or its equivalent in Philippine
peso at the current rate of exchange with interest thereon at the legal rate from the date
of the institution of this case until fully paid, the attorneys fees in the sum of P50,000.00,
plus the costs of the suit, and dismissing the plaintiffs complaint against defendants
Gearbulk, Ltd. and Philippine Transmarine Carriers, Inc., for lack of merit, and the two
defendants counterclaim, there being no showing that the plaintiff had filed this case
against said defendants in bad faith, as well as the two defendants cross-claim against
Defendant Lorenzo Shipping Corporation, for lack of factual basis.[18]
Petitioner Lorenzo Shipping appealed to the Court of Appeals insisting that: (a) respondent
Chubb and Sons does not have capacity to sue before Philippine courts; and, (b) petitioner
Lorenzo Shipping was not negligent in the performance of its obligations as carrier of the
goods. The appellate court denied the petition and affirmed the decision of the trial court.
The Court of Appeals likewise denied petitioner Lorenzo Shippings Motion for
Reconsideration[19] dated September 3, 2000, in a Resolution[20] promulgated on March 28,
2001.
Hence, this petition. Petitioner Lorenzo Shipping submits the following issues for resolution:
(1) Whether or not the prohibition provided under Art. 133 of the
Corporation Code applies to respondent Chubb, it being a mere subrogee or
assignee of the rights of Sumitomo Corporation, likewise a foreign
corporation admittedly doing business in the Philippines without a license;
(2) Whether or not Sumitomo, Chubbs predecessor-in-interest, validly made
a claim for damages against Lorenzo Shipping within the period prescribed
by the Code of Commerce;
(3) Whether or not a delivery cargo receipt without a notation on it of
damages or defects in the shipment, which created a prima facie
presumption that the carrier received the shipment in good condition, has
been overcome by convincing evidence;
(4) Assuming that Lorenzo Shipping was guilty of some lapses in
transporting the steel pipes, whether or not Gearbulk and Transmarine, as
common carriers, are to share liability for their separate negligence in
handling the cargo.[21]
In brief, we resolve the following issues:
(1) whether respondent Chubb and Sons has capacity to sue before the Philippine courts;
and,
(2) whether petitioner Lorenzo Shipping is negligent in carrying the subject cargo.
Petitioner argues that respondent Chubb and Sons is a foreign corporation not licensed to
do business in the Philippines, and is not suing on an isolated transaction. It contends that
because the respondent Chubb and Sons is an insurance company, it was merely
subrogated to the rights of its insured, the consignee Sumitomo, after paying the latters
policy claim.Sumitomo, however, is a foreign corporation doing business in
the Philippines without a license and does not have capacity to sue before Philippine
courts. Since Sumitomo does not have capacity to sue, petitioner then concludes that,
neither the subrogee-respondent Chubb and Sons could sue before Philippine courts.
We disagree with petitioner.
In the first place, petitioner failed to raise the defense that Sumitomo is a foreign
corporation doing business in the Philippines without a license. It is therefore estopped
from litigating the issue on appeal especially because it involves a question of fact which
this Court cannot resolve. Secondly, assuming arguendo that Sumitomo cannot sue in
the Philippines, it does not follow that respondent, as subrogee, has also no capacity to sue
in our jurisdiction.
Subrogation is the substitution of one person in the place of another with reference to a
lawful claim or right, so that he who is substituted succeeds to the rights of the other in
relation to a debt or claim, including its remedies or securities.[22] The principle covers the
situation under which an insurer that has paid a loss under an insurance policy is entitled
to all the rights and remedies belonging to the insured against a third party with respect to
any loss covered by the policy.[23] It contemplates full substitution such that it places the
party subrogated in the shoes of the creditor, and he may use all means which the creditor
could employ to enforce payment.[24]
The rights to which the subrogee succeeds are the same as, but not greater than, those of
the person for whom he is substituted he cannot acquire any claim, security, or remedy the
subrogor did not have.[25] In other words, a subrogee cannot succeed to a right not
possessed by the subrogor.[26] A subrogee in effect steps into the shoes of the insured
and can recover only if insured likewise could have recovered.
However, when the insurer succeeds to the rights of the insured, he does so only in relation
to the debt. The person substituted (the insurer) will succeed to all the rights of the creditor
(the insured), having reference to the debt due the latter.[27] In the instant case, the rights
inherited by the insurer, respondent Chubb and Sons, pertain only to the payment it made
to the insured Sumitomo as stipulated in the insurance contract between them, and which
amount it now seeks to recover from petitioner Lorenzo Shipping which caused the loss
sustained by the insured Sumitomo. The capacity to sue of respondent Chubb and Sons
could not perchance belong to the group of rights, remedies or securities pertaining to the
payment respondent insurer made for the loss which was sustained by the insured
Sumitomo and covered by the contract of insurance. Capacity to sue is a right personal to
its holder. It is conferred by law and not by the parties. Lack of legal capacity to sue means
that the plaintiff is not in the exercise of his civil rights, or does not have the necessary
qualification to appear in the case, or does not have the character or representation he
claims. It refers to a plaintiffs general disability to sue, such as on account of minority,
insanity, incompetence, lack of juridical personality, or any other disqualifications of a
party.[28] Respondent Chubb and Sons who was plaintiff in the trial court does not possess
any of these disabilities. On the contrary, respondent Chubb and Sons has satisfactorily
proven its capacity to sue, after having shown that it is not doing business in the Philippines,
but is suing only under an isolated transaction, i.e., under the one (1) marine insurance
policy issued in favor of the consignee Sumitomo covering the damaged steel pipes.
The law on corporations is clear in depriving foreign corporations which are doing business
in the Philippines without a license from bringing or maintaining actions before, or
intervening in Philippine courts. Art. 133 of the Corporation Code states:
Doing business without a 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 does not prohibit foreign corporations from performing single acts of business. A
foreign corporation needs no license to sue before Philippine courts on an isolated
transaction.[29] As held by this Court in the case of Marshall-Wells Company vs. Elser &
Company:[30]
The object of the statute (Secs. 68 and 69, Corporation Law) was not to prevent the
foreign corporation from performing single acts, but to prevent it from acquiring a
domicile for the purpose of business without taking the steps necessary to render it
amenable to suit in the local courts . . . the implication of the law (being) that it was
never the purpose of the legislature to exclude a foreign corporation which happens to
obtain an isolated order for business for the Philippines, from seeking redress in the
Philippine courts.
Likewise, this Court ruled in Universal Shipping Lines, Inc. vs. Intermediate Appellate
Court[31] that:
. . . The private respondent may sue in the Philippine courts upon the marine insurance
policies issued by it abroad to cover international-bound cargoes shipped by a Philippine
carrier, even if it has no license to do business in this country, for it is not the lack of the
prescribed license (to do business in the Philippines) but doing business without such
license, which bars a foreign corporation from access to our courts.
We reject the claim of petitioner Lorenzo Shipping that respondent Chubb and Sons is not
suing under an isolated transaction because the steel pipes, subject of this case, are
covered by two (2) bills of lading; hence, two transactions. The stubborn fact remains that
these two (2) bills of lading spawned from the single marine insurance policy that
respondent Chubb and Sons issued in favor of the consignee Sumitomo, covering the
damaged steel pipes. The execution of the policy is a single act, an isolated
transaction. This Court has not construed the term isolated transaction to literally mean
one or a mere single act. In Eriks Pte. Ltd. vs. Court of Appeals, this Court held that:[32]
. . . What is determinative of "doing business" is not really the number or the quantity of
the transactions, but more importantly, the intention of an entity to continue the body of
its business in the country. The number and quantity are merely evidence of such
intention. The phrase "isolated transaction" has a definite and fixed meaning, i.e. a
transaction or series of transactions set apart from the common business of a foreign
enterprise in the sense that there is no intention to engage in a progressive pursuit of the
purpose and object of the business organization. Whether a foreign corporation is "doing
business" does not necessarily depend upon the frequency of its transactions, but more
upon the nature and character of the transactions. [Emphasis supplied.]
In the case of Gonzales vs. Raquiza, et al.,[33] three contracts, hence three transactions
were challenged as void on the ground that the three American corporations which are
parties to the contracts are not licensed to do business in the Philippines. This Court held
that one single or isolated business transaction does not constitute doing business within
the meaning of the law. Transactions which are occasional, incidental, and casual not of a
character to indicate a purpose to engage in business do not constitute the doing or
engaging in business as contemplated by law. Where the three transactions indicate no
intent by the foreign corporation to engage in a continuity of transactions, they do not
constitute doing business in the Philippines.
Furthermore, respondent insurer Chubb and Sons, by virtue of the right of subrogation
provided for in the policy of insurance,[34] is the real party in interest in the action for
damages before the court a quo against the carrier Lorenzo Shipping to recover for the loss
sustained by its insured. Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a
real party in interest as one who is entitled to the avails of any judgment rendered in a suit,
or who stands to be benefited or injured by it. Where an insurance company as subrogee
pays the insured of the entire loss it suffered, the insurer-subrogee is the only real party in
interest and must sue in its own name[35] to enforce its right of subrogation against the
third party which caused the loss. This is because the insurer in such case having fully
compensated its insured, which payment covers the loss in full, is subrogated to the
insureds claims arising from such loss. The subrogated insurer becomes the owner of the
claim and, thus entitled to the entire fruits of the action. [36] It then, thus possesses the
right to enforce the claim and the significant interest in the litigation. [37] In the case at bar,
it is clear that respondent insurer was suing on its own behalf in order to enforce its right
of subrogation.
On the second issue, we affirm the findings of the lower courts that petitioner Lorenzo
Shipping was negligent in its care and custody of the consignees goods.
The steel pipes, subject of this case, were in good condition when they were loaded at the
port of origin (Manila) on board petitioner Lorenzo Shippings M/V Lorcon IV en route
to DavaoCity. Petitioner Lorenzo Shipping issued clean bills of lading covering the subject
shipment. A bill of lading, aside from being a contract[38] and a receipt,[39] is also a
symbol[40] of the goods covered by it. A bill of lading which has no notation of any defect
or damage in the goods is called a clean bill of lading.[41] A clean bill of lading constitutes
prima facie evidence of the receipt by the carrier of the goods as therein described.[42]
The case law teaches us that mere proof of delivery of goods in good order to a carrier and
the subsequent arrival in damaged condition at the place of destination raises a prima facie
case against the carrier.[43] In the case at bar, M/V Lorcon IV of petitioner Lorenzo Shipping
received the steel pipes in good order and condition, evidenced by the clean bills of lading
it issued. When the cargo was unloaded from petitioner Lorenzo Shippings vessel at
the Sasa Wharf in Davao City, the steel pipes were rusted all over. M/V San Mateo Victory
of respondent Gearbulk, Ltd, which received the cargo, issued Bills of Lading Nos. DAV/OAK
1 to 7 and Nos. DAV/SEA 1 to 6 covering the entire shipment, all of which were marked
ALL UNITS HEAVILY RUSTED. R.J. Del Pan Surveyors found that the cargo hold of the M/V
Lorcon IV was flooded with seawater, and the tank top was rusty, thinning and perforated,
thereby exposing the cargo to sea water. There can be no other conclusion than that the
cargo was damaged while on board the vessel of petitioner Lorenzo Shipping, and that the
damage was due to the latters negligence. In the case at bar, not only did the legal
presumption of negligence attach to petitioner Lorenzo Shipping upon the occurrence of
damage to the cargo.[44] More so, the negligence of petitioner was sufficiently
established. Petitioner Lorenzo Shipping failed to keep its vessel in seaworthy
condition. R.J. Del Pan Surveyors found the tank top of M/V Lorcon IV to be rusty, thinning,
and with several holes at different places. Witness Captain Pablo Fernan, Operations
Manager of respondent Transmarine Carriers, likewise observed the presence of holes at
the deck of M/V Lorcon IV.[45] The unpatched holes allowed seawater, reaching up to three
(3) inches deep, to enter the flooring of the hatch of the vessel where the steel pipes were
stowed, submerging the latter in sea water.[46] The contact with sea water caused the steel
pipes to rust. The silver nitrate test, which Toplis and Harding employed, further verified
this conclusion.[47] Significantly, petitioner Lorenzo Shipping did not even attempt to
present any contrary evidence. Neither did it offer any proof to establish any of the causes
that would exempt it from liability for such damage.[48] It merely alleged that the: (1)
packaging of the goods was defective; and (2) claim for damages has prescribed.
To be sure, there is evidence that the goods were packed in a superior condition. John M.
Graff, marine surveyor of Toplis and Harding, examined the condition of the cargo on board
the vessel San Mateo Victory. He testified that the shipment had superior packing because
the ends were covered with plastic, woven plastic. Whereas typically they would not go to
that bother ... Typically, they come in with no plastic on the ends. They might just be
banded, no plastic on the ends ...[49]
On the issue of prescription of respondent Chubb and Sons claim for damages, we rule that
it has not yet prescribed at the time it was made.
Art. 366 of the Code of Commerce states:
Within the twenty-four hours following the receipt of the merchandise, the claim against
the carrier for damage or average, which may be found therein upon the opening of the
packages, may be made, provided that the indications of the damage or average which
gives rise to the claim cannot be ascertained from the outside part of such package, in
which case the claim shall be admitted only at the time of the receipt.
After the periods mentioned have elapsed, or transportation charges have been paid, no
claim shall be admitted against the carrier with regard to the condition in which the goods
transported were delivered.
A somewhat similar provision is embodied in the Bill of Lading No. T-3 which reads:[50]
NOTE: No claim for damage or loss shall be honored twenty-four (24) hours after
delivery.
(Ref. Art. 366 C Com.)
The twenty-four-hour period prescribed by Art. 366 of the Code of Commerce within which
claims must be presented does not begin to run until the consignee has received such
possession of the merchandise that he may exercise over it the ordinary control pertinent
to ownership.[51] In other words, there must be delivery of the cargo by the carrier to the
consignee at the place of destination.[52] In the case at bar, consignee Sumitomo has not
received possession of the cargo, and has not physically inspected the same at the time
the shipment was discharged from M/V Lorcon IV in Davao City. Petitioner Lorenzo
Shipping failed to establish that an authorized agent of the consignee Sumitomo received
the cargo at Sasa Wharf in Davao City. Respondent Transmarine Carriers as agent of
respondent Gearbulk, Ltd., which carried the goods from Davao City to the United States,
and the principal, respondent Gearbulk, Ltd. itself, are not the authorized agents as
contemplated by law. What is clear from the evidence is that the consignee received and
took possession of the entire shipment only when the latter reached the United
States shore. Only then was delivery made and completed. And only then did the 24-hour
prescriptive period start to run.
Finally, we find no merit to the contention of respondents Gearbulk and Transmarine that
American law governs the contract of carriage because the U.S.A. is the country of
destination.Petitioner Lorenzo Shipping, through its M/V Lorcon IV, carried the goods
from Manila to Davao City. Thus, as against petitioner Lorenzo Shipping, the place of
destination is Davao City.Hence, Philippine law applies.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-
G.R. CV No. 61334 dated August 14, 2000 and its Resolution dated March 28, 2001 are
hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
Steelcase vs design international
This is a petition for review on certiorari under Rule 45 assailing the March 31, 2005
Decision[1] of the Court of Appeals (CA) which affirmed the May 29, 2000 Order[2]of the
Regional Trial Court, Branch 60, Makati City (RTC), dismissing the complaint for sum of
money in Civil Case No. 99-122 entitled Steelcase, Inc. v. Design International Selections,
Inc.
The Facts
Petitioner Steelcase, Inc. (Steelcase) is a foreign corporation existing under the laws
of Michigan, United States of America (U.S.A.), and engaged in the manufacture of office
furniture with dealers worldwide.[3] Respondent Design International Selections,
Inc. (DISI) is a corporation existing under Philippine Laws and engaged in the furniture
business, including the distribution of furniture.[4]
Sometime in 1986 or 1987, Steelcase and DISI orally entered into a dealership agreement
whereby Steelcase granted DISI the right to market, sell, distribute, install, and service its
products to end-user customers within the Philippines. The business relationship continued
smoothly until it was terminated sometime in January 1999 after the agreement was
breached with neither party admitting any fault.[5]
On January 18, 1999, Steelcase filed a complaint[6] for sum of money against DISI alleging,
among others, that DISI had an unpaid account of US$600,000.00. Steelcase prayed that
DISI be ordered to pay actual or compensatory damages, exemplary damages, attorneys
fees, and costs of suit.
In its Answer with Compulsory Counterclaims[7] dated February 4, 1999, DISI sought the
following: (1) the issuance of a temporary restraining order (TRO) and a writ of preliminary
injunction to enjoin Steelcase from selling its products in the Philippines except through
DISI; (2) the dismissal of the complaint for lack of merit; and (3) the payment of actual,
moral and exemplary damages together with attorneys fees and expenses of litigation. DISI
alleged that the complaint failed to state a cause of action and to contain the required
allegations on Steelcases capacity to sue in the Philippines despite the fact that it
(Steelcase) was doing business in the Philippines without the required license to do
so. Consequently, it posited that the complaint should be dismissed because of Steelcases
lack of legal capacity to sue in Philippine courts.
On March 3, 1999, Steelcase filed its Motion to Admit Amended Complaint[8] which was
granted by the RTC, through then Acting Presiding Judge Roberto C. Diokno, in its
Order[9] dated April 26, 1999. However, Steelcase sought to further amend its complaint
by filing a Motion to Admit Second Amended Complaint[10] on March 13, 1999.
In his Order[11] dated November 15, 1999, Acting Presiding Judge Bonifacio Sanz Maceda
dismissed the complaint, granted the TRO prayed for by DISI, set aside the April 26, 1999
Order of the RTC admitting the Amended Complaint, and denied Steelcases Motion to Admit
Second Amended Complaint. The RTC stated that in requiring DISI to meet the Dealer
Performance Expectation and in terminating the dealership agreement with DISI based on
its failure to improve its performance in the areas of business planning, organizational
structure, operational effectiveness, and efficiency, Steelcase unwittingly revealed that it
participated in the operations of DISI. It then concluded that Steelcase was doing business
in the Philippines, as contemplated by Republic Act (R.A.) No. 7042 (The Foreign
Investments Act of 1991), and since it did not have the license to do business in the country,
it was barred from seeking redress from our courts until it obtained the requisite license to
do so. Its determination was further bolstered by the appointment by Steelcase of a
representative in the Philippines. Finally, despite a showing that DISI transacted with the
local customers in its own name and for its own account, it was of the opinion that any
doubt in the factual environment should be resolved in favor of a pronouncement that a
foreign corporation was doing business in the Philippines, considering the twelve-year
period that DISI had been distributing Steelcase products in the Philippines.
Steelcase moved for the reconsideration of the questioned Order but the motion was denied
by the RTC in its May 29, 2000 Order.[12]
Aggrieved, Steelcase elevated the case to the CA by way of appeal, assailing the November
15, 1999 and May 29, 2000 Orders of the RTC. On March 31, 2005, the CA rendered its
Decision affirming the RTC orders, ruling that Steelcase was a foreign corporation doing or
transacting business in the Philippines without a license. The CA stated that the following
acts of Steelcase showed its intention to pursue and continue the conduct of its business in
the Philippines: (1) sending a letter to Phinma, informing the latter that the distribution
rights for its products would be established in the near future and directing other questions
about orders for Steelcase products to Steelcase International; (2) cancelling orders from
DISIs customers, particularly Visteon, Phils., Inc. (Visteon); (3) continuing to send its
products to the Philippines through Modernform Group Company Limited (Modernform), as
evidenced by an Ocean Bill of Lading; and (4) going beyond the mere appointment of DISI
as a dealer by making several impositions on management and operations of DISI. Thus,
the CA ruled that Steelcase was barred from access to our courts for being a foreign
corporation doing business here without the requisite license to do so.
Steelcase filed a motion for reconsideration but it was denied by the CA in its Resolution
dated March 23, 2006.[13]
Hence, this petition.
The Issues
Steelcase filed the present petition relying on the following grounds:
I
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN
IT FOUND THAT STEELCASE HAD BEEN DOING BUSINESS IN
THE PHILIPPINES WITHOUT A LICENSE.
II
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN
NOT FINDING THAT RESPONDENT WAS ESTOPPED FROM
CHALLENGING STEELCASES LEGAL CAPACITY TO SUE, AS AN
AFFIRMATIVE DEFENSE IN ITS ANSWER.
The issues to be resolved in this case are:
(1) Whether or not Steelcase is doing business in the Philippines without a license; and
(2) Whether or not DISI is estopped from challenging the Steelcases legal capacity to sue.
The Courts Ruling
The Court rules in favor of the petitioner.
Steelcase is an unlicensed
foreign corporation NOT doing
business in the Philippines

Anent the first issue, Steelcase argues that Section 3(d) of R.A. No. 7042 or the Foreign
Investments Act of 1991 (FIA) expressly states that the phrase doing business excludes
the appointment by a foreign corporation of a local distributor domiciled in the Philippines
which transacts business in its own name and for its own account. Steelcase claims that it
was not doing business in the Philippines when it entered into a dealership agreement with
DISI where the latter, acting as the formers appointed local distributor, transacted business
in its own name and for its own account. Specifically, Steelcase contends that it was DISI
that sold Steelcases furniture directly to the end-users or customers who, in turn, directly
paid DISI for the furniture they bought. Steelcase further claims that DISI, as a non-
exclusive dealer in the Philippines, had the right to market, sell, distribute and service
Steelcase products in its own name and for its own account. Hence, DISI was an
independent distributor of Steelcase products, and not a mere agent or conduit of
Steelcase.
On the other hand, DISI argues that it was appointed by Steelcase as the latters exclusive
distributor of Steelcase products. DISI likewise asserts that it was not allowed by Steelcase
to transact business in its own name and for its own account as Steelcase dictated the
manner by which it was to conduct its business, including the management and solicitation
of orders from customers, thereby assuming control of its operations. DISI further insists
that Steelcase treated and considered DISI as a mere conduit, as evidenced by the fact
that Steelcase itself directly sold its products to customers located in the Philippines who
were classified as part of their global accounts. DISI cited other established circumstances
which prove that Steelcase was doing business in the Philippines including the following:
(1) the sale and delivery by Steelcase of furniture to Regus, a Philippine client, through
Modernform, a Thai corporation allegedly controlled by Steelcase; (2) the imposition by
Steelcase of certain requirements over the management and operations of DISI; (3) the
representations made by Steven Husak as Country Manager of Steelcase; (4) the
cancellation by Steelcase of orders placed by Philippine clients; and (5) the expression by
Steelcase of its desire to maintain its business in the Philippines. Thus, Steelcase has no
legal capacity to sue in Philippine Courts because it was doing business in
the Philippines without a license to do so.
The Court agrees with the petitioner.
The rule that an unlicensed foreign corporations doing business in the Philippine do not
have the capacity to sue before the local courts is well-established. Section 133 of the
Corporation Code of the Philippines explicitly states:
Sec. 133. Doing business without a 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 phrase doing business is clearly defined in Section 3(d) of R.A. No. 7042 (Foreign
Investments Act of 1991), to wit:
d) The phrase doing business shall include 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; (Emphases supplied)
This definition is supplemented by its Implementing Rules and Regulations, Rule I, Section
1(f) which elaborates on the meaning of the same phrase:
f. Doing business shall include soliciting orders, service contracts,
opening offices, whether liaison offices or branches; appointing
representatives or distributors, operating under full control of the
foreign corporation, domiciled in the Philippines or who in any calendar
year stay in the country for a period 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.
The following acts shall not be deemed doing business in
the Philippines:
1. 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;
2. Having a nominee director or officer to represent its interest in such
corporation;
3. Appointing a representative or distributor domiciled in
the Philippines which transacts business in the representative's
or distributor's own name and account;
4. The publication of a general advertisement through any print or
broadcast media;
5. Maintaining a stock of goods in the Philippines solely for the purpose
of having the same processed by another entity in the Philippines;
6. Consignment by a foreign entity of equipment with a local company
to be used in the processing of products for export;
7. Collecting information in the Philippines; and
8. Performing services auxiliary to an existing isolated contract of sale
which are not on a continuing basis, such as installing in the Philippines
machinery it has manufactured or exported to the Philippines, servicing
the same, training domestic workers to operate it, and similar incidental
services. (Emphases supplied)
From the preceding citations, the appointment of a distributor in the Philippines is not
sufficient to constitute doing business unless it is under the full control of the foreign
corporation. On the other hand, if the distributor is an independent entity which buys and
distributes products, other than those of the foreign corporation, for its own name and its
own account, the latter cannot be considered to be doing business in the Philippines.[14] It
should be kept in mind that the determination of whether a foreign corporation is doing
business in the Philippines must be judged in light of the attendant circumstances.[15]
In the case at bench, it is undisputed that DISI was founded in 1979 and is independently
owned and managed by the spouses Leandro and Josephine Bantug.[16] In addition to
Steelcase products, DISI also distributed products of other companies including carpet tiles,
relocatable walls and theater settings.[17] The dealership agreement between Steelcase and
DISI had been described by the owner himself as:
xxx basically a buy and sell arrangement whereby we would inform
Steelcase of the volume of the products needed for a particular project
and Steelcase would, in turn, give special quotations or discounts after
considering the value of the entire package. In making the bid of the
project, we would then add out profit margin over Steelcases
prices.After the approval of the bid by the client, we would thereafter
place the orders to Steelcase. The latter, upon our payment, would then
ship the goods to the Philippines, with us shouldering the freight charges
and taxes.[18] [Emphasis supplied]
This clearly belies DISIs assertion that it was a mere conduit through which Steelcase
conducted its business in the country. From the preceding facts, the only reasonable
conclusion that can be reached is that DISI was an independent contractor, distributing
various products of Steelcase and of other companies, acting in its own name and for its
own account.
The CA, in finding Steelcase to be unlawfully engaged in business in the Philippines, took
into consideration the delivery by Steelcase of a letter to Phinma informing the latter that
the distribution rights for its products would be established in the near future, and also its
cancellation of orders placed by Visteon. The foregoing acts were apparently misinterpreted
by the CA. Instead of supporting the claim that Steelcase was doing business in the country,
the said acts prove otherwise. It should be pointed out that no sale was concluded as a
result of these communications. Had Steelcase indeed been doing business in
the Philippines, it would have readily accepted and serviced the orders from the
abovementioned Philippine companies. Its decision to voluntarily cease to sell its products
in the absence of a local distributor indicates its refusal to engage in activities which might
be construed as doing business.
Another point being raised by DISI is the delivery and sale of Steelcase products to a
Philippine client by Modernform allegedly an agent of Steelcase. Basic is the rule in
corporation law that a corporation has a separate and distinct personality from its
stockholders and from other corporations with which it may be connected.[19] Thus, despite
the admission by Steelcase that it owns 25% of Modernform, with the remaining 75% being
owned and controlled by Thai stockholders,[20] it is grossly insufficient to justify piercing the
veil of corporate fiction and declare that Modernform acted as the alter ego of Steelcase to
enable it to improperly conduct business in the Philippines. The records are bereft of any
evidence which might lend even a hint of credence to DISIs assertions. As such, Steelcase
cannot be deemed to have been doing business in the Philippinesthrough Modernform.
Finally, both the CA and DISI rely heavily on the Dealer Performance Expectation required
by Steelcase of its distributors to prove that DISI was not functioning independently from
Steelcase because the same imposed certain conditions pertaining to business planning,
organizational structure, operational effectiveness and efficiency, and financial stability. It
is actually logical to expect that Steelcase, being one of the major manufacturers of office
systems furniture, would require its dealers to meet several conditions for the grant and
continuation of a distributorship agreement. The imposition of minimum standards
concerning sales, marketing, finance and operations is nothing more than an exercise of
sound business practice to increase sales and maximize profits for the benefit of both
Steelcase and its distributors. For as long as these requirements do not impinge on a
distributors independence, then there is nothing wrong with placing reasonable
expectations on them.
All things considered, it has been sufficiently demonstrated that DISI was an independent
contractor which sold Steelcase products in its own name and for its own account. As a
result, Steelcase cannot be considered to be doing business in the Philippines by its act of
appointing a distributor as it falls under one of the exceptions under R.A. No. 7042.
DISI is estopped
from challenging
Steelcases legal
capacity to sue
Regarding the second issue, Steelcase argues that assuming arguendo that it had been
doing business in the Philippines without a license, DISI was nonetheless estopped from
challenging Steelcases capacity to sue in the Philippines. Steelcase claims that since DISI
was aware that it was doing business in the Philippines without a license and had benefited
from such business, then DISI should be estopped from raising the defense that Steelcase
lacks the capacity to sue in the Philippines by reason of its doing business without a license.
On the other hand, DISI argues that the doctrine of estoppel cannot give Steelcase the
license to do business in the Philippines or permission to file suit in the Philippines. DISI
claims that when Steelcase entered into a dealership agreement with DISI in 1986, it was
not doing business in the Philippines. It was after such dealership was put in place that it
started to do business without first obtaining the necessary license. Hence, estoppel cannot
work against it. Moreover, DISI claims that it suffered as a result of Steelcases doing
business and that it never benefited from the dealership and, as such, it cannot be estopped
from raising the issue of lack of capacity to sue on the part of Steelcase.
The argument of Steelcase is meritorious.
If indeed Steelcase had been doing business in the Philippines without a license, DISI would
nonetheless be estopped from challenging the formers legal capacity to sue.
It cannot be denied that DISI entered into a dealership agreement with Steelcase and
profited from it for 12 years from 1987 until 1999. DISI admits that it complied with its
obligations under the dealership agreement by exerting more effort and making substantial
investments in the promotion of Steelcase products. It also claims that it was able to
establish a very good reputation and goodwill for Steelcase and its products, resulting in
the establishment and development of a strong market for Steelcase products in
the Philippines. Because of this, DISI was very proud to be awarded the Steelcase
International Performance Award for meeting sales objectives, satisfying customer needs,
managing an effective company and making a profit.[21]
Unquestionably, entering into a dealership agreement with Steelcase charged DISI with the
knowledge that Steelcase was not licensed to engage in business activities in
the Philippines. This Court has carefully combed the records and found no proof that, from
the inception of the dealership agreement in 1986 until September 1998, DISI even brought
to Steelcases attention that it was improperly doing business in the Philippines without a
license. It was only towards the latter part of 1998 that DISI deemed it necessary to inform
Steelcase of the impropriety of the conduct of its business without the requisite Philippine
license. It should, however, be noted that DISI only raised the issue of the absence of a
license with Steelcase after it was informed that it owed the latter US$600,000.00 for the
sale and delivery of its products under their special credit arrangement.
By acknowledging the corporate entity of Steelcase and entering into a dealership
agreement with it and even benefiting from it, DISI is estopped from questioning Steelcases
existence and capacity to sue. This is consistent with the Courts ruling in Communication
Materials and Design, Inc. v. Court of Appeals[22] where it was written:
Notwithstanding such finding that ITEC is doing business in the country,
petitioner is nonetheless estopped from raising this fact to bar ITEC from
instituting this injunction case against it.
A foreign corporation doing business in the Philippines may sue
in Philippine Courts although not authorized to do business here
 against a Philippine citizen or entity who had contracted with
and benefited by said corporation. To put it in another way, a
party is estopped to challenge the personality of a corporation
after having acknowledged the same by entering into a contract
with it. And the doctrine of estoppel to deny corporate existence applies
to a foreign as well as to domestic corporations. One who has dealt with
a corporation of foreign origin as a corporate entity is estopped to deny
its corporate existence and capacity: The principle will be applied to
prevent a person contracting with a foreign corporation from later taking
advantage of its noncompliance with the statutes chiefly in cases where
such person has received the benefits of the contract.
The rule is deeply rooted in the time-honored axiom of
Commodum ex injuria sua non habere debet no person ought to
derive any advantage of his own wrong. This is as it should be
for as mandated by law, every person must in the exercise of his
rights and in the performance of his duties, act with justice, give
everyone his due, and observe honesty and good faith.
Concededly, corporations act through agents, like directors and officers.
Corporate dealings must be characterized by utmost good faith and
fairness. Corporations cannot just feign ignorance of the legal rules as
in most cases, they are manned by sophisticated officers with tried
management skills and legal experts with practiced eye on legal
problems. Each party to a corporate transaction is expected to act with
utmost candor and fairness and, thereby allow a reasonable proportion
between benefits and expected burdens. This is a norm which should be
observed where one or the other is a foreign entity venturing in a global
market.
xxx
By entering into the "Representative Agreement" with ITEC, petitioner
is charged with knowledge that ITEC was not licensed to engage in
business activities in the country, and is thus estopped from raising in
defense such incapacity of ITEC, having chosen to ignore or even
presumptively take advantage of the same.[23] (Emphases supplied)
The case of Rimbunan Hijau Group of Companies v. Oriental Wood Processing
Corporation[24] is likewise instructive:
Respondents unequivocal admission of the transaction which gave rise
to the complaint establishes the applicability of estoppel against it. Rule
129, Section 4 of the Rules on Evidence provides that a written
admission made by a party in the course of the proceedings in the same
case does not require proof. We held in the case of Elayda v. Court of
Appeals, that an admission made in the pleadings cannot be
controverted by the party making such admission and are conclusive as
to him. Thus, our consistent pronouncement, as held in cases such
as Merril Lynch Futures v. Court of Appeals, is apropos:
The rule is that a party is estopped to challenge the
personality of a corporation after having acknowledged
the same by entering into a contract with it. And the
doctrine of estoppel to deny corporate existence applies
to foreign as well as to domestic corporations; one who
has dealt with a corporation of foreign origin as a
corporate entity is estopped to deny its existence and
capacity. The principle will be applied to prevent a
person contracting with a foreign corporation from later
taking advantage of its noncompliance with the
statutes, chiefly in cases where such person has
received the benefits of the contract . . .
All things considered, respondent can no longer invoke petitioners lack
of capacity to sue in this jurisdiction. Considerations of fair play dictate
that after having contracted and benefitted from its business transaction
with Rimbunan, respondent should be barred from questioning the
latters lack of license to transact business in the Philippines.
In the case of Antam Consolidated, Inc. v. CA, this Court noted that it
is a common ploy of defaulting local companies which are sued by
unlicensed foreign corporations not engaged in business in
the Philippines to invoke the latters lack of capacity to sue. This practice
of domestic corporations is particularly reprehensible considering that in
requiring a license, the law never intended to prevent foreign
corporations from performing single or isolated acts in this country, or
to favor domestic corporations who renege on their obligations to foreign
firms unwary enough to engage in solitary transactions with them.
Rather, the law was intended to bar foreign corporations from acquiring
a domicile for the purpose of business without first taking the steps
necessary to render them amenable to suits in the local courts. It was
to prevent the foreign companies from enjoying the good while
disregarding the bad.
As a matter of principle, this Court will not step in to shield
defaulting local companies from the repercussions of their
business dealings. While the doctrine of lack of capacity to sue
based on failure to first acquire a local license may be resorted
to in meritorious cases, it is not a magic incantation. It cannot
be called upon when no evidence exists to support its invocation
or the facts do not warrant its application. In this case, that the
respondent is estopped from challenging the petitioners capacity to sue
has been conclusively established, and the forthcoming trial before the
lower court should weigh instead on the other defenses raised by the
respondent.[25] (Emphases supplied)
As shown in the previously cited cases, this Court has time and again upheld the principle
that a foreign corporation doing business in the Philippines without a license may still sue
before the Philippine courts a Filipino or a Philippine entity that had derived some benefit
from their contractual arrangement because the latter is considered to be estopped from
challenging the personality of a corporation after it had acknowledged the said corporation
by entering into a contract with it.[26]
In Antam Consolidated, Inc. v. Court of Appeals,[27] this Court had the occasion to draw
attention to the common ploy of invoking the incapacity to sue of an unlicensed foreign
corporation utilized by defaulting domestic companies which seek to avoid the suit by the
former. The Court cannot allow this to continue by always ruling in favor of local companies,
despite the injustice to the overseas corporation which is left with no available remedy.
During this period of financial difficulty, our nation greatly needs to attract more foreign
investments and encourage trade between the Philippines and other countries in order to
rebuild and strengthen our economy. While it is essential to uphold the sound public policy
behind the rule that denies unlicensed foreign corporations doing business in
the Philippines access to our courts, it must never be used to frustrate the ends of justice
by becoming an all-encompassing shield to protect unscrupulous domestic enterprises from
foreign entities seeking redress in our country. To do otherwise could seriously jeopardize
the desirability of the Philippines as an investment site and would possibly have the
deleterious effect of hindering trade between Philippine companies and international
corporations.
WHEREFORE, the March 31, 2005 Decision of the Court of Appeals and its March 23,
2006 Resolution are hereby REVERSED and SET ASIDE. The dismissal order of the
Regional Trial Court dated November 15, 1999 is hereby set aside. Steelcases Amended
Complaint is hereby ordered REINSTATED and the case is REMANDED to the RTC for
appropriate action.
SO ORDERED.
Sps algura vs municipality of naga
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
2didnt 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, 1999[4] 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 Alguras 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 Certification[7] 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 Governments 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 21avour income from Lorencita
Alguras sari-sari store and Antonio Alguras 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 with Ex-Parte Request for a Pre-Trial Setting[10] 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
Motion[12] 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
petitioners Motion for Reconsideration.
On May 5, 2000, the trial court issued an Order[14] 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 Compliance[15] attaching the affidavits of
petitioner Lorencita Algura[16] 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 husbands 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 assessors office of Naga City. More
so, according to her, the 21avour net income from her small sari-saristore and the rentals
of some boarders, plus the salary of her husband, were not enough to pay the familys 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 21avour 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,
2000[18] 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.
Alguras 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
[22avoured2222] 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 22avoured2222 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 22avoured2222 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
litigants 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 amending Section 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 23avoured2323 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 litigants affidavit. The current tax declaration, if any, shall
be attached to the litigants 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 23avoured23 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 litigants[23] 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:
didntepeals by implication are not 24avoured, 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 applicants gross income and
that of the applicants 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 didnt 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 and SET
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.
De ungria vs ca
Assailed in this petition for review on certiorari are the Decision[1] dated May 26, 2004 and
the Resolution[2] dated September 17, 2004 of the Court of Appeals (CA) in CA-G.R. SP No.
60764.
On August 26, 1999, respondents Rosario Dideles Vda. de Castor (Rosario), Nepthalie
Castor Itucas, Ferolyn Castor Facurib (Ferolyn), Rachel De Castor, Lea Castor Dollolosa and
Rosalie Castor Benedicto, filed with the Regional Trial Court (RTC) of General Santos City a
Complaint[3] for ownership, possession and damages, and alternative causes of action
either to declare two documents as patent nullities, and/or for recovery of Rosario's
conjugal share with damages or redemption of the subject land against petitioner Ceferina
de Ungria, defendants Avelino Gumban, Dolores Cagaitan, Zacasio Poutan, PO1 Jonas
Montales, Ignacio Olarte and alias Dory. Respondent Rosario is the surviving wife of the
late Fernando Castor, while the rest of the respondents are their legitimate children. The
documents they sought to annul are (1) the Deed of Transfer of Rights and Interest
including Improvements thereon dated October 3, 1960 allegedly executed by Fernando in
favor of Eugenio de Ungria, petitioner's father; and (2) the Affidavit of Relinquishment dated
November 23, 1960 executed by Eugenio in favor of petitioner.
Petitioner Ceferina filed a Motion to Dismiss[4] (Ex-Abundante Ad Cautelam) on the following
grounds: (1) the claim or demand has been extinguished by virtue of the valid sale of Lot
No. 1615 to Eugenio; (2) the action is barred by extraordinary acquisitive prescription; (3)
the action is barred by laches; and (4) plaintiff failed to state a cause of action, or filed the
case prematurely for failure to resort to prior barangay conciliation proceedings.
Petitioner also filed an Addendum to the Motion to Dismiss[5] raising the following additional
grounds: (1) plaintiffs have no legal capacity to sue; and (2) the court has no jurisdiction
over the case for failure of plaintiffs to pay the filing fee in full. Respondents filed their
Opposition thereto.
On November 19, 1999, the RTC issued an Order[6] denying the motion to dismiss, to wit:
After the motion to dismiss and its addendum have been received, it is
now ripe for resolution. One of the grounds alleged in the complaint is
for the recovery of conjugal share on Lot No. 1615, of Pls-209 D with
damages.
It is alleged that the late Fernando Castor and Rosario Dideles Vda. de
Castor were married on September 15, 1952, and the application to the
land was dated January 17, 1952 and the patent was issued by the
President on November 19, 1954.
The said land was sold to the defendant on October 3, 1960 (Annex C)
and an Affidavit of Relinquishment dated November 23, 1960 which was
made a part thereof as Annex D. Considering the marriage of September
15, 1992, the said land became conjugal as of the date of the marriage
and, therefore, thereof belongs to the wife, Rosario Dideles Vda. de
Castor.
Thus, considering the above, the motion to dismiss is
DENIED.[7]
Petitioner Ceferina filed a Motion for Reconsideration,[8] which the RTC denied in an
Order[9] dated February 4, 2000.
Petitioner filed an Omnibus Motion[10] asking the RTC to resolve the issues of (1) whether
or not the complaint should be dismissed or expunged from the records pursuant to
Supreme Court (SC) Circular No. 7; (2) reconsidering the findings contained in the Order
dated February 4, 2000; and (3) holding in abeyance the submission of the answer to the
complaint.
Pending resolution of the motion, respondents filed a Motion to Allow [11] them to continue
prosecuting this case as indigent litigants.
On March 8, 2000, the RTC resolved the Omnibus Motion in an Order[12] that read in this
wise:
On the omnibus motion regarding filing fees, the plaintiffs asserted in its
motion that they are charging defendant actual and compensatory
damages such as are proved during the hearing of this case. So also are
attorneys fees and moral damages, all to be proved during the hearing
of this case.
Since there was no hearing yet, they are not in a possession (sic) to
determine how much is to be charged.
At any rate, if after hearing the Clerk of Court determine that the filing
fees is still insufficient, considering the total amount of the claim, the
Clerk of Court should determine and, thereafter, if any amount is found
due, he must require the private respondent to pay the same x x x.
As to the second issue, the same has already been decided in its order
dated February 4, 2000.
WHEREFORE, premises considered, the omnibus motion is DENIED.
The defendant shall file their answer within fifteen (15) days from receipt
of this order.[13]
From this Order, petitioner filed a motion for reconsideration and clarification on whether
plaintiffs should be allowed to continue prosecuting the case as indigent litigants.
On March 30, 2000, the RTC issued a Clarificatory Order[14] reading as follows:
As has been said, the plaintiff asserted in its motion that they are
charging defendants actual and compensatory damages as has been
proved during the hearing of this case. So also are attorney's fees and
moral damages all to be proved during the hearing of this case.
Since there was no hearing yet, they are not in a possession (sic) to
determine how much is to be charged.
At any rate, after hearing, the Clerk of Court determines that the filing
fee is still insufficient, the same shall be considered as lien on the
judgment that may be entered.
As to the motion seeking from the Honorable Court allowance to allow
plaintiff to continue prosecuting this case as indigent litigants, suffice it
to say that the same is already provided for in this order.
WHEREFORE, the defendants shall file their answer within fifteen (15)
days from receipt of this Order.[15]
In an Order dated May 31, 2000, the RTC again denied petitioner's motion for
reconsideration.
Petitioner filed with the CA a petition for certiorari and prohibition with prayer for the
issuance of a temporary restraining order and/or writ of preliminary injunction. Petitioner
sought the nullification of the Order dated November 19, 1999 and the subsequent
orders issued by the RTC thereto for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction. Respondents filed their Comment thereto.
In a Decision dated May 26, 2004, the CA dismissed the petition. The CA found that SC
Circular No. 7 would not apply where the amount of damages or value of the property was
immaterial; that the Circular could be applied only in cases where the amount claimed or
the value of the personal property was determinative of the court's jurisdiction citing the
case of Tacay v. RTC of Tagum, Davao del Norte.[16] The CA found that respondents had
paid the corresponding docket fees upon the filing of the complaint, thus, the RTC had
acquired jurisdiction over the case despite the failure to state the amount of damages
claimed in the body of the complaint or in the prayer thereof. The CA found that the RTC
did not commit grave abuse of discretion amounting to lack of jurisdiction when it denied
petitioner's motion to dismiss. It noted that the RTC's Clarificatory Order dated March 30,
2000, which stated that if after hearing the Clerk of Court determines that the filing fee is
still insufficient, the same shall be considered as lien on the judgment that may be entered
was in accordance with the rule laid down in Sun Insurance Office, Ltd. v. Asuncion.[17] The
CA proceeded to state that a judicious examination of the complaint pointed to a
determination of the respective rights and interests of the parties over the property based
on the issues presented therein which could only be determined in a full-blown trial on the
merits of the case.
Petitioner filed a Motion for Reconsideration, which the CA denied in a Resolution dated
September 17, 2004. The CA ruled, among others, that the defenses of acquisitive
prescription and laches were likewise unavailing. It found that the subject property is
covered by a Torrens title (OCT No. V-19556); thus, it is axiomatic that adverse, notorious
and continuous possession under a claim of ownership for the period fixed by law is
ineffective against a Torrens title; that unless there are intervening rights of third persons
which may be affected or prejudiced by a decision directing the return of the lot to
petitioner, the equitable defense of laches will not apply as against the registered owner.
Hence, this petition for review on certiorari where petitioner raises the following assignment
of errors:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT
TRIAL COURT COMMITTED GRAVE ABUSE OF DISCRETION IN DENYING
PETITIONER'S MOTION TO DISMISS DESPITE RESPONDENTS' NON-
PAYMENT OF THE CORRECT DOCKET FEES.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE ACTION OF
PRIVATE RESPONDENTS IS BARRED BY LACHES AND EXTRAORDINARY
ACQUISITIVE PRESCRIPTION.[18]
We find the petition without merit.
Preliminarily, although not raised as an issue in this petition, we find it necessary to discuss
the issue of jurisdiction over the subject matter of this case. Respondents' complaint was
filed in 1999, at the time Batas Pambansa Blg. (BP) 129, the Judiciary Reorganization Act
of 1980, was already amended by Republic Act (RA) No. 7691, An Act Expanding the
Jurisdiction of the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit
Trial Courts, amending for the purpose BP Blg. 129.[19] Section 1 of RA 7691, amending BP
Blg. 129, provides that the RTC shall exercise exclusive original jurisdiction on the following
actions:
Section 1. Section 19 of Batas Pambansa Blg. 129, otherwise known as
the "Judiciary Reorganization Act of 1980," is hereby amended to read
as follows:
Sec. 19. Jurisdiction in civil cases. Regional Trial
Courts shall exercise exclusive original jurisdiction:
(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 involved
exceeds Twenty Thousand Pesos (P20,000.00) or for
civil actions in Metro Manila, where such value
exceeds Fifty Thousand Pesos (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; x x x
Section 3 of RA No. 7691 expanded the exclusive original jurisdiction of the first level courts,
thus:
Section 3. Section 33 of the same law (BP Blg. 129) is hereby amended
to read as follows:
Sec. 33. Jurisdiction of Metropolitan Trial Courts,
Municipal Trial Courts and Municipal Circuit Trial
Courts in Civil Cases. Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial
Courts shall exercise:
xxxx
(3) Exclusive original jurisdiction
in all civil actions which involve
title to, or possession of, real
property, or any interest therein
where the assessed value of the
property or interest therein does
not exceed Twenty Thousand
Pesos (P20,000.00) or, in civil
actions in Metro Manila, where
such assessed value does not
exceed Fifty Thousand Pesos
(P50,000.00) exclusive of
interest, damages of whatever
kind, attorney's fees, litigation
expenses and costs: Provided,
That in cases of land not declared
for taxation purposes, the value
of such property shall be
determined by the assessed value
of the adjacent lots.
Respondents filed their Complaint with the RTC; hence, we would first determine whether
the RTC has jurisdiction over the subject matter of this case based on the above-quoted
provisions.
The Complaint filed by respondents in the RTC was for ownership, possession and damages,
and alternative causes of action either to declare two documents as patent nullities and/or
for recovery of conjugal share on the subject land with damages or redemption of the
subject land. In their Complaint, respondents claimed that Rosario and Fernando are the
registered owners of the subject land with an assessed value of P12,780.00; that the couple
left the cultivation and enjoyment of the usufruct of the subject land to Fernando's mother
and her second family to augment their means of livelihood; that respondent Rosario and
Fernando thought that when the latter's mother died in 1980, the subject land was in the
enjoyment of the second family of his mother, but later learned that the subject land was
leased by petitioner Ceferina; that sometime in August 1999, respondents learned of the
existence of the Deed of Transfer of Rights and Interest including Improvements thereon
dated October 3, 1960, where Fernando had allegedly transferred his rights and interests
on the subject land in favor of Eugenio, petitioner Ceferina's father, as well as an Affidavit
of Relinquishment dated November 23, 1960 executed by Eugenio in favor of petitioner
Ceferina; that Fernando's signature in the Deed of Transfer was not his but a forgery; and
the Affidavit of Relinquishment was also void as it was a direct result of a simulated Deed
of Transfer.
Respondents prayed that they be declared as absolute and lawful owners of the subject
land and to order petitioner and the other defendants to vacate the premises and restore
respondents to its possession and enjoyment therefore. On their second cause of action,
they prayed that the Deed of Transfer of Rights and Interest Including Improvements
Thereon be declared as a forgery, purely simulated and without any consideration; hence,
inexistent, void ab initio and/or a patent nullity, as well as the Affidavitof Relinquishment
which was the direct result of the Deed of Transfer. Respondents also prayed in the
alternative that if the Deed be finally upheld as valid, to order petitioner to reconvey to
respondent Rosario the undivided one-half portion of the subject land as conjugal owner
thereof and to account and reimburse her of its usufruct; and/or to allow them to redeem
the subject land.
It would appear that the first cause of action involves the issue of recovery of possession
and interest of the parties over the subject land which is a real action. Respondents alleged
that the assessed value of the subject land was P12,780.00 based on Tax Declaration No.
15272. Thus, since it is a real action with an assessed value of less than P20,000.00, the
case would fall under the jurisdiction of the MTC as provided under the above-quoted
Section 33 (3) of BP 129, as amended.
Notably, however, respondents in the same Complaint filed alternative causes of action
assailing the validity of the Deed of Transfer of Rights and Interest executed by Fernando
in favor of petitioner's father. Respondents also sought for the reconveyance to respondent
Rosario of the undivided one-half portion of the subject land as conjugal owner thereof in
case the Deed of Transfer of Rights and Interest will be upheld as valid; and/or for
redemption of the subject land. Clearly, this is a case of joinder of causes of action which
comprehends more than the issue of possession of, or any interest in the real property
under contention, but includes an action to annul contracts and reconveyance which are
incapable of pecuniary estimation and, thus, properly within the jurisdiction of the RTC.[20]
In Singson v. Isabela Sawmill,[21] we held that:
In determining whether an action is one the subject matter of which is
not capable of pecuniary estimation 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 would depend
on the amount of the claim. 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
exclusively by courts of first instance (now Regional Trial Courts).[22]
Thus, respondents correctly filed their Complaint with the RTC.
It is a settled rule in this jurisdiction that when an action is filed in court, the complaint
must be accompanied by the payment of the requisite docket and filing fees.[23] It is not
simply the filing of the complaint or appropriate initiatory pleading, but the payment of the
prescribed docket fee, that vests a trial court with jurisdiction over the subject matter or
nature of the action.[24]
Section 7(b)(1) of Rule 141 of the Rules of Court provides:
SEC. 7. Clerks of Regional Trial Courts. - (a) For filing an action or a
permissive counter-claim or money claim against an estate not based
on judgment, or for filing with leave of court a third-party, fourth-party,
etc. complaint, or a complaint-in-intervention, and for all clerical
services in the same, if the total-sum claimed, exclusive of interest, or
the stated value of the property in litigation, is:
xxxx
(b) For filing:
1. Actions where the value of the subject matter
cannot be estimated ........ P400.00
2. x x x
In a real action, the assessed value of the property,
or if there is none, the estimated value thereof shall
be alleged by the claimant and shall be the basis in
computing the fees.[25]
Since we find that the case involved the annulment of contract which is not susceptible of
pecuniary estimation, thus, falling within the jurisdiction of the RTC, the docket fees should
not be based on the assessed value of the subject land as claimed by petitioner in their
memorandum, but should be based on Section 7(b)(1) of Rule 141. A perusal of the entries
in the Legal Fees Form attached to the records would reflect that the amount of P400.00
was paid to the Clerk of Court, together with the other fees, as assessed by the Clerk of
Court. Thus, upon respondents' proof of payment of the assessed fees, the RTC has
properly acquired jurisdiction over the complaint. Jurisdiction once acquired is never lost,
it continues until the case is terminated. [26]
Notably, petitioners claim that the RTC did not acquire jurisdiction in this case is premised
on her contention that respondents violated SC Circular No. 7 issued on March 24, 1998
requiring that all complaints must specify the amount of damages sought not only in the
body of the pleadings but also in the prayer to be accepted and admitted for filing. Petitioner
argues that respondents alleged in paragraph 13 of their Complaint that:
(T)he reasonable rental for the use of the [subject] land is P2,000.00
per hectare, every crop time, once every four months, or P6,000.00 a
year per hectare; that defendants in proportion and length of time of
their respective occupancy is and/or are jointly and severally liable to
plaintiffs of the produce thereby in the following proportions, viz: (a) for
defendant Ceferina de Ungria for a period of time claimed by her as
such; (b) for defendants Dolores Cagautan, a certain alias Dory, and
PO1 Jonas Montales, of an undetermined area, the latter having entered
the areasometime in 1998 and defendant alias Dory, only just few
months ago; that defendant Ignacio Olarte and Zacasio Puutan of
occupying about one-half hectare each.[27]
and in their prayer asked:
x x x Ordering the defendants, jointly and severally, in proportion to the
length and area of their respective occupancy, to pay reasonable rentals
to the plaintiffs in the proportion and amount assessed in paragraph 13
of the First Cause of Action.
xxxx
(a) Ordering the defendants, jointly and severally, to pay plaintiffs
actual and compensatory damages such as are proved during the
hearing of this case;
(b) Ordering the defendants, jointly and severally, to pay plaintiffs
attorneys' fees and moral damages, all to be proved during the hearing
of this case.[28]
Thus, the RTC should have dismissed the case, since respondents did not specify the
amount of damages in their prayer.
We are not persuaded.
SC Circular No. 7 was brought about by our ruling in Manchester Development Corporation
v. Court of Appeals,[29] where we held that a pleading which does not specify in the prayer
the amount of damages being asked for shall not be accepted or admitted, or shall
otherwise be expunged from the record; and that the Court acquires jurisdiction over any
case only upon the payment of the prescribed docket fee.
However, in Sun Insurance Office, Ltd. v. Asuncion,[30] we laid down the following
guidelines in the payment of docket fees, to wit:
1. It is not simply the filing of the complaint or appropriate initiatory
pleading, but the payment of the prescribed docket fee, that vests a trial
court with jurisdiction over the subject matter or nature of the action.
Where the filing of the initiatory pleading is not accompanied by payment
of the docket fee, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive or
reglementary period.
 2. The same rule applies to permissive counterclaims, third-party
claims and similar pleadings, which shall not be considered filed until
and unless the filing fee prescribed therefor is paid. The court may also
allow payment of said fee within a reasonable time but also in no case
beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing
of the appropriate pleading and payment of the prescribed filing fee but,
subsequently, the judgment awards a claim not specified in the pleading,
or if specified the same has been left for determination by the court, the
additional filing fee therefor shall constitute a lien on the judgment. It
shall be the responsibility of the Clerk of Court or his duly-authorized
deputy to enforce said lien and assess and collect the additional fee.
Subsequently, in Heirs of Bertuldo Hinog v. Melicor,[31] we said:
Furthermore, the fact that private respondents prayed for payment of
damages "in amounts justified by the evidence" does not call for the
dismissal of the complaint for violation of SC Circular No. 7, dated March
24, 1988 which required that all complaints must specify the amount of
damages sought not only in the body of the pleadings but also in the
prayer in order to be accepted and admitted for filing. Sun
Insurance effectively modified SC Circular No. 7 by providing that filing
fees for damages and awards that cannot be estimated constitute liens
on the awards finally granted by the trial court.
x x x judgment awards which were left for determination by the court or
as may be proven during trial would still be subject to additional filing
fees which shall constitute a lien on the judgment. It would then be the
responsibility of the Clerk of Court of the trial court or his duly-
authorized deputy to enforce said lien and assess and collect the
additional fees.[32]
A reading of the allegations in the complaint would show that the amount of the rental due
can only be determined after a final judgment, since there is a need to show supporting
evidence when the petitioner and the other defendants started to possess the subject land.
Thus, we find no reversible error committed by the CA when it ruled that there was no
grave abuse of discretion committed by the RTC in issuing its Order dated March 30, 2000,
where the RTC stated that since there was no hearing yet, respondents are not in a position
to determine how much is to be charged and that after hearing, the Clerk of Court
determines that the filing fee is still insufficient, the same shall be considered as lien on the
judgment that may be entered.
Petitioner claims that the action is barred by extraordinary acquisitive prescription and
laches. Petitioner contends that she took possession of the land in the concept of an owner,
open, exclusive, notorious and continuous since 1952 through her predecessor-in-interest,
Eugenio, and by herself up to the present; that the late Fernando and private respondents
had never taken possession of the land at any single moment; and that, granting without
admitting that the transfer of rights between Fernando and Eugenio was null and void for
any reason whatsoever, petitioner's possession of the land had already ripened into
ownership after the lapse of 30 years from August 1952 by virtue of the extraordinary
acquisitive prescription.
We are not persuaded.
It is a well-entrenched rule in this jurisdiction that no title to registered land in derogation
of the rights of the registered owner shall be acquired by prescription or adverse
possession.[33] Prescription is unavailing not only against the registered owner but also
against his hereditary successors.[34] In this case, the parcel of land subject of this case is a
titled property, i.e., titled in the name of the late Fernando Castor, married to Rosario
Dideles.
Petitioner claims that respondent had impliedly admitted the fact of sale by Fernando to
Eugenio in August 1952, but only according to respondents, the sale was null and void
because it violated the provisions of the Public Land Act. Petitioner argues that the
application of Fernando, dated January 17, 1952, was not the homestead application
referred to in Sections 118 and 124 of the Public Land Act; and that Fernando's application
was only as settler, or for the allocation of the subject land to him vice the original settler
Cadiente.
Such argument does not persuade.
The trial in this case has not yet started as in fact no answer has yet been filed. We find
that these issues are factual which must be resolved at the trial of this case on the merits
wherein both parties will be given ample opportunity to prove their respective claims and
defenses.
Anent petitioner's defense of laches, the same is evidentiary in nature and cannot be
established by mere allegations in the pleadings. Without solid evidentiary basis, laches
cannot be a valid ground to dismiss respondents' complaint.[35] Notably, the allegations of
respondents in their petition filed before the RTC which alleged among others:
7. That sometime between the years 1965 to 1970, defendant Ceferina
de Ungria, accompanied by Miss Angela Jagna-an, appeared in the
residence of plaintiff Rosario Dideles Vda. de Castor in Bo.1, Banga,
South Cotabato, and requested her to sign a folded document with her
name only appearing thereon, telling her that it has something to do
with the land above-described, of which she refused telling her that she
better return it to the person who requested her to do so (referring to
her mother-in-law), more so that her husband was out at that time;
8. That when the matter was brought home to Fernando Castor, the
latter just commented that [his] mother desires the land above-
described to be sold to defendant Ceferina de Ungria which however he
was opposed to do so even as they occasionally come into heated
arguments everytime this insistence on the same subject propped up;
9. That even after the death of the mother of the late Fernando Castor
in Bo. Bula, City of General Santos, sometime in 1980, the latter and his
surviving wife thought all the while that the land above-described was
in the enjoyment of his late mother's family with his 2nd husband; that
it was only after sometime when plaintiff Rosario Dideles Vda. de Castor
heard that the land above-described had even been leased by defendant
Ceferina de Ungria with the Stanfilco and Checkered farm;
10. That sometime in 1997, defendant Ceferina de Ungria sent overtures
to plaintiffs through Ester Orejana, who is the half sister-in-law of
plaintiff Rosario Dideles Vda. de Castor that she desires to settle with
them relating to the land above-described; that the overtures developed
into defendant Ceferina de Ungria meeting for the purpose plaintiff
Ferolyn Castor Facurib where the negotiation continued with Lolita Javier
as attorney-in-fact after defendant Ceferina de Ungria left to reside in
Manila and which resulted later to the attorney-in-fact offering the
plaintiffs P100,000.00 to quitclaim on their rights over the said land,
which offer, however, was refused by plaintiffs as so [insignificant] as
compared to the actual value of the same land; that in that negotiation,
defendant Ceferina de Ungria was challenged to show any pertinent
document to support her claim on the land in question and where she
meekly answered by saying at the time that she does not have any of
such document;
x x x x[36]
would not conclusively establish laches. Thus, it is necessary for petitioners to proceed to
trial and present controverting evidence to prove the elements of laches.

WHEREFORE, the petition for review is DENIED.

SO ORDERED.