Manacop vs Equitable PCI Bank
insurance companies alleged that as of August 1, 1998, Lavines obligations to Equitable Bank
Respondent Lavine Loungewear Manufacturing, Inc. (Lavine) insured its buildings and supplies
against fire with Philippine Fire and Marine Insurance Corporation (PhilFire), Rizal Surety and
Insurance Company (Rizal Surety), Tabacalera Insurance Company (TICO), First Lepanto-Taisho
Insurance Corporation (First Lepanto), Equitable Insurance Corporation (Equitable Insurance), and
Reliance Insurance Corporation (Reliance Insurance). Except for Policy No. 13798 issued by First
Lepanto, all the policies provide that:
Loss, if any, under this policy is payable to Equitable Banking Corporation-
Greenhills Branch, as their interest may appear subject to the terms, conditions,
clauses and warranties under this policy. (Underscoring supplied)
On August 1, 1998, a fire gutted Lavines buildings and their contents thus claims were made
against the policies. As found by the Office of the Insurance Commission, the insurance proceeds
payable to Lavine is P112,245,324.34.[1]
Lavine was then represented by Harish C. Ramnani (Harish) but his authority was withdrawn
on March 17, 2000 by the Board of Directors due to his alleged failure to account for the insurance
proceeds. Chandru C. Ramnani (Chandru) was appointed in his stead and was designated,
together with Atty. Mario A. Aguinaldo, as Lavines representatives in negotiating with the
insurance companies.
Prior to the release of the proceeds, the insurance companies required Lavine to sign a Sworn
Statement in Proof of Loss and Subrogation Agreement[2] whereby the former would be absolved
from their liabilities upon payment of the proceeds to Equitable Bank. Only Harish signed the
document while the rest of Lavines directors refused to sign.
Notwithstanding Chandrus request that payments be made first to Lavine who shall thereafter pay
Equitable Bank as the latters interest may appear, certain insurance companies released the
proceeds directly to Equitable Bank thus Chandru filed, in behalf of Lavine, a Petition for the
Issuance of a Writ of Preliminary Injunction with Prayer for a Temporary Restraining Order[3] before
the Regional Trial Court (RTC) of Pasig City, against PhilFire, Rizal Surety, TICO, First Lepanto
and Equitable Bank. The case was docketed as Civil Case No. 68287 and raffled to Branch 71
presided by Judge Celso D. Lavia.
Harish, Jose F. Manacop, Chandru P. Pessumal, Maureen M. Ramnani and Salvador
Cortez, moved to intervene[4] claiming they were Lavines incumbent directors and that Harish was
Lavines authorized representative.[5] They disclaimed Chandrus designation as president of Lavine
as well as his and Atty. Aguinaldos authority to file the action. They also denied having refused to
sign the Sworn Statement in Proof of Loss and Subrogation Agreement.[6]
On February 14, 2001, the trial court granted the motion for intervention [7] and thereafter
denied Lavines motion for reconsideration.[8]
In their respective Answer with Compulsory Counterclaim, Rizal Surety stated its
willingness to pay the insurance proceeds but only to the rightful claimant, [9] while Equitable Bank
alleged it had sufficiently established the amount of its claim and as beneficiary of the insurance
policies, it was entitled to collect the proceeds.[10]
The intervenors in their Amended Answer-in-Intervention[11] with cross-claim against the
amounted to P71,000,000.00 and since Equitable Insurance and Reliance Insurance have already
paid the bank more than this amount, respondent insurance companies should be ordered to
immediately deliver to Lavine the remaining insurance proceeds through the intervenors and to
pay interests thereon from the time of submission of proof of loss.
In its Answer[12] dated May 22, 2001 to Lavines complaint and the intervenors cross-claim,
First Lepanto alleged that its share in the combined proceeds was P16,145,760.11, of which
P6,000,000.00 had already been paid to Equitable Bank. It withheld payment of the balance since
it could not determine to whom it should be made. It further alleged that the intervenors had no
personality to intervene and prayed for the outright dismissal of their cross-claim against the
insurance companies.
This was refuted by the intervenors who alleged that since Lavine and petitioners were
already litigating, it was too late for First Lepanto to file an action for interpleader. They stressed
that the latter must now deliver the balance of the insurance proceeds to either Equitable Bank or
Lavine, through the intervenors.[13]
On June 18, 2001, PhilFire filed its Answer[14] admitting liability in the amount of
P12,916,608.09, of which P4,288,329.52 had been paid to Equitable Bank but withheld paying the
balance until the rightful claimant has been determined. TICO did not file an answer to Lavines
complaint and was declared in default.[15]
After pre-trial, the intervenors filed a Second Amended Answer-in-Intervention[16] alleging
that Lavines liabilities to Equitable Bank were extinguished since it received proceeds exceeding
the amount of Lavines obligations. Thus, the real estate mortgages given as security therefor be
released and the excess amount returned to Lavine.
Equitable Bank denied that Lavines obligations were fully paid, and averred that the loans were
secured not only by the insurance policies and the real estate mortgages but also by several
surety agreements executed by Harish and Maureen Ramnani. The bank prayed that: (a) the
insurance companies be ordered to deliver to it the proceeds of the policies and/or for Lavine to be
directed to pay the outstanding loans; (b) the spouses Harish and Maureen Ramnani be held
solidarily liable for the payment of the outstanding obligations of Lavine; and (c) the mortgaged
properties be foreclosed in case of failure of Lavine, the insurers and sureties to fully satisfy the
loan obligations.[17]
In a Reply,[18] the intervenors denied that Lavine acquired further loans from the bank for the years
1998 and 1999. The promissory notes allegedly pertaining to these loans were obtained prior to
1998 and the surety agreements signed by Harish and Maureen Ramnani were consolidated in a
Surety Agreement dated January 27, 1997[19] and that the loan covered by PN No. TL-GH-97-0292
had been fully paid.
In the meantime, Equitable Bank and First Lepanto manifested in open court that another
pre-trial should be conducted on the intervenors cross-claim under the Second Amended Answer-
in-Intervention but the trial court denied the same and proceeded with the hearing of the case.[20]
On April 2, 2002, the trial court rendered a decision, the dispositive part of which reads:
WHEREFORE, judgment is hereby rendered:
 1. DISMISSING the Complaint dated January 22, 2001, for lack of merit,
with costs against Chandru C. Ramnani.
2. ORDERING the defendant Bank to refund to plaintiff through the
Intervenors the amount of P65,819,936.05 representing the overpayment as
actual or compensatory damages, with legal rate of interest at six (6%) per cent
per annum from the date of this decision until full payment.
3. ORDERING:
a. Defendant Philippine Fire and Marine Insurance Corporation
to pay plaintiff through Intervenors the total amount of P15,111,670.48
representing unpaid insurance proceeds as actual or compensatory
damages, with twenty-nine (29%) per cent interest per annum from
October 1, 1998 until full payment.
b. Defendant Rizal Surety and Insurance Company to pay
plaintiff through Intervenors the amount of P17,100,000.00 representing
unpaid insurance proceeds as actual or compensatory damages, with
twenty-nine (29%) per cent interest per annum from October 1,
1998 until full payment.
c. Defendant First Lepanto-Taisho Insurance Corporation to pay
plaintiff through Intervenors the total amount of P18,250,000.00
representing unpaid insurance proceeds as actual or compensatory
damages, with twenty-nine (29%) per cent interest per annum from
October 1, 1998 until full payment.
d. Defendant Tabacalera Insurance Company to pay plaintiff
through Intervenors the amount of P25,690,000.00 representing unpaid
insurance proceeds as actual or compensatory damages, with twenty-
nine (29%) per cent interest per annum from October 1, 1998 until full
payment.
4. ORDERING all defendants to pay, jointly and severally, plaintiff
through Intervenors the amount equivalent to ten (10%) per cent of the actual
damages due and demandable as and by way of attorneys fees.
5. CANCELLING the loan mortgage annotations and RETURNING to
plaintiff through Intervenors TCT No. 23906, CCT Nos. PT-17871, PT-17872 and
PT-17873.
6. Costs of suit.
Counterclaims filed by plaintiff against intervenors and cross-claims filed
by all defendants against intervenors and counterclaims are hereby DISMISSED
for lack of merit.
SO ORDERED.[21]
On April 3, 2002, the intervenors filed a Motion for Execution Pending Appeal [22] on the
following grounds: (a) TICO was on the brink of insolvency; (b) Lavine was in imminent danger of
extinction; and (c) any appeal from the trial courts judgment would be merely dilatory.
Meanwhile, Rizal Surety, First Lepanto, Equitable Bank and Lavine separately filed a
Notice of Appeal.[23] PhilFire likewise filed a Notice of Appeal,[24] a Motion for Reconsideration (Ad
Cautelam),[25] and a Motion to Dismiss.[26] PhilFires Motion for Reconsideration and Motion to
Dismiss were denied by the trial court on May 14, 2002.[27]
Without filing a motion for reconsideration from the decision of the trial court and even
before the latter could rule on the motion for execution pending appeal, Equitable Bank filed on
April 24, 2002 a Petition for Certiorari, Prohibition and Mandamus (with Prayer for Temporary
Restraining Order and Preliminary Injunction)[28] before the Court of Appeals docketed as CA-G.R.
SP No. 70298. Lavine also filed a Petition for Certiorari with Prayer for Temporary Restraining
Order (TRO) and Writ of Preliminary Injunction[29] docketed as CA-G.R. SP No. 70292, after it
withdrew its Notice of Appeal. Both claimed that appeal was not a plain, speedy and adequate
remedy under the circumstances.
Judge Lavia granted intervenors motion for execution pending appeal [30] and issued a writ
of execution on May 20, 2002[31] which was implemented the following day. Personal properties of
PhilFire and First Lepanto were seized; the latters bank deposits garnished while real properties
belonging to Equitable Bank were levied upon. The writ was not enforced against Rizal Surety
because its corporate name and operations were transferred to QBE Insurance (Phils.)
Incorporation (QBE Insurance).[32]
First Lepanto assailed the trial courts order granting execution pending appeal and the
writ of execution in a Petition for Certiorari[33] before the Court of Appeals docketed as CA-G.R. SP
No. 70844. It allegedly did not file a motion for reconsideration of the trial courts order due to
extreme urgency, as the ongoing execution of the appealed judgment was threatening to paralyze
its operations. Before long, PhilFire also filed a Petition for Certiorari With Prayer for Temporary
Restraining Order and Writ of Preliminary Injunction docketed as CA-G.R. SP No. 70799, against
the same order and writ of execution.[34]
Rizal Surety, for its part, did not file a petition under Rule 65 of the Revised Rules of Civil
Procedure but maintained its ordinary appeal from the April 2, 2002 decision of the trial court.
However, acting on the report that Rizal Surety was now re-organized as QBE Insurance (Phils.)
Inc., Judge Lavia issued an Order dated May 27, 2002 directing the implementation of the Writ of
Execution against QBE Insurance.[35]
Subsequently, the certiorari petitions were consolidated before the Tenth Division of the
Court of Appeals, which thereupon granted Lavines prayer for the issuance of a writ of preliminary
injunction upon posting a P50M bond.[36]
In view of the issuance of the writ of execution by the trial court, Equitable Bank filed an
Amended and/or Supplemental Petition for Certiorari, Prohibition and Mandamus [37] in CA-G.R. SP
No. 70298 on June 11, 2002, assailing the trial courts order granting execution pending appeal as
well as the issuance of the writ of execution. In due course, the Court of Appeals promulgated a
consolidated decision, the dispositive part of which reads:
 WHEREFORE, premises considered, judgment is hereby rendered:
(1) SETTING ASIDE the decision dated April 2, 2001;
(2) declaring NULL and VOID the Special Order dated May 17, 2002 and
the Writ of Execution dated May 20, 2002;
(3) remanding the case to the lower court for the conduct of pre-trial
conference on the Second Amended Answer-in-Intervention and the subsequent
pleadings filed in relation thereto; and
(4) in the event that the lower court decides that Lavine is the one
entitled to the proceeds of the insurance policies, payment thereof should be
withheld, subject to the outcome of the decision on the issue on the rightful
members of the Board of Directors of Lavine which is pending before the intra-
corporate court.
SO ORDERED.[38]
On March 17, 2004, the appellate court issued a resolution amending its earlier decision
as follows:
WHEREFORE, premises considered, this Court hereby resolves to:
1. CORRECT paragraph 1 of the dispositive portion of the Consolidated
Decision dated May 29, 2003 to reflect the correct date of the questioned
decision of the court a quo which is April 2, 2002 and not April 2, 2001;
2. CLARIFY paragraph 3 of the Consolidated Decision in the sense that
the case is remanded to the lower court to enable to (sic) the parties to amend
their respective pleadings and issues, as may be necessary and conduct pre-trial
anew and other proceedings to the exclusion of the intervenors in view of the
ruling that the latter should not have been allowed to intervene in the case;
3. a) LIFT the order of levy and garnishment on the real and personal
properties and bank deposits of Equitable PCIBank; b) LIFT the garnishment on
the bank accounts of Philippine Fire and Marine Insurance Corporation which
were made pursuant to the Special Order dated May 17, 2002 and the Writ of
Execution dated May 20, 2002 which were declared null and void in this Courts
Consolidated Decision; and
5. DENY Equitable PCIBanks motion to disqualify respondent Judge
Celso Lavia from hearing the case upon its remand to the lower court.
SO ORDERED.[39]
Upon proper motion, the Court of Appeals also subsequently ordered the lifting of the
order of levy and notice of garnishment on the real properties and bank deposits of First Lepanto
in a resolution dated April 20, 2004.
Equitable Bank then filed a petition for review before this Court docketed as G.R. Nos.
162842-45 assailing the appellate courts resolution insofar as it denied the banks motion to
disqualify Judge Lavia. However, the Third Division of this Court denied the petition[40] and its
subsequent motion for reconsideration.[41]
On the other hand, the intervenors now petitioners took this recourse under Rule 45
alleging that:
I. THE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO THE
PETITION FOR CERTIORARI OF EQUITABLE PCIBANK IN CA-G.R.
SP NO. 70298 AND THE PETITION FOR CERTIORARI OF LAVINE IN
CA-G.R. SP NO. 70292 NOTWITHSTANDING THAT THE ORDINARY
MODE OF APPEAL UNDER SECTION 2, RULE 41 OF THE REVISED
RULES OF COURT HAD ALREADY BEEN AVAILED OF BY THEM.
II. THE COURT OF APPEALS COMMITTED AN ERROR IN VOIDING THE
DECISION OF THE TRIAL COURT DATED APRIL 2, 2002 FOR LACK
OF PRE-TRIAL ON THE PETITIONERS AMENDED ANSWER-IN-
INTERVENTION NOTWITHSTANDING THAT A PRE-TRIAL WAS
ALREADY CONCLUDED AND THE PARTIES HAVE ALREADY
ADDUCED THEIR RESPECTIVE EVIDENCES IN THE TRIAL.
III. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
PETITIONERS WHO ARE THE RIGHTFUL MEMBERS OF THE
BOARD OF DIRECTORS CANNOT INTERVENE TO PROSECUTE
THE ACTION FILED BY LAVINE THROUGH A MINORITY
STOCKHOLDER WHO HAS NO AUTHORITY THEREFOR.
IV. THE COURT OF APPEALS ERRED IN SETTING ASIDE THE DECISION OF
THE TRIAL COURT AND FRUSTRATE THE FINDINGS THAT
EQUITABLE PCIBANK IS NOT ENTITLED TO CLAIM THE
INSURANCE PROCEEDS SINCE THE LOAN OF LAVINE TO IT HAD
ALREADY BEEN FULLY PAID AS IN FACT THERE WAS AN
OVERPAYMENT WHICH MUST BE RETURNED TO LAVINE.
V. THE COURT OF APPEALS COMMITTED AN ERROR IN VOIDING THE
WRIT OF EXECUTION PENDING APPEAL NOTWITHSTANDING
THAT THE JUDGMENT LIABILITY IS ADMITTED BUT ITS
SATISFACTION IS WITHHELD BY VIRTUE OF THE FLIMSY
APPEAL.[42]
The petition is partly meritorious.
On the first assigned error, we agree that the Court of Appeals should have dismissed CA-G.R.
SP Nos. 70292 and 70298. A perusal of these petitions show that Equitable Bank and Lavine
inappropriately filed the petitions for certiorari when appeal was clearly a plain, speedy and
adequate remedy from the decision of the trial court. In fact, both filed their respective notices of
appeal from the trial courts decision, although Lavine later withdrew its notice of appeal. They
therefore cannot be allowed to question the same decision on the merits and also invoke the
extraordinary remedy of certiorari.
 Simultaneous filing of a petition for certiorari under Rule 65 and an ordinary appeal under
Rule 41 of the Revised Rules of Civil Procedure cannot be allowed since one remedy would
necessarily cancel out the other. The existence and availability of the right of appeal proscribes
resort to certiorari because one of the requirements for availment of the latter is precisely that
there should be no appeal.[43] It is elementary that for certiorari to prosper, it is not enough that the
trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction; the
requirement that there is no appeal, nor any plain, speedy and adequate remedy in the ordinary
course of law must likewise be satisfied.[44]
In the instant case, Equitable Bank and Lavine assailed the trial courts decision
through certiorari by alleging that Judge Lavia was biased. According to Equitable Bank, Judge
Lavias partiality was evident in his refusal to issue and serve summons on Jethmal Inc. and in
conducting pre-trial on petitioners Second Amended Answer-in-Intervention. On the other hand,
Lavine alleged that Judge Lavia disregarded mandatory provisions of the Rules of Court when he
allowed petitioners to intervene; that he also resolved the issue of corporate representation
between the two groups of directors of Lavine when he had no jurisdiction over the subject matter.
Clearly, the foregoing allegations are proper under Rule 41. It should be pointed out that
when Equitable Bank and Lavine filed their respective petitions before the Court of Appeals on
April 24, 2002, the trial court had already rendered on April 2, 2002 a judgment on the merits. Both
had notice of said final judgment as they even filed notices of appeal with the trial court. This only
goes to show that Equitable Bank and Lavine unwittingly recognized ordinary appeal as the proper
remedy in seeking reversal of the assailed decision.
It is well-settled that the remedy to obtain reversal or modification of the judgment on the
merits is appeal. This is true even if the error, or one of the errors, ascribed to the trial court
rendering the judgment is its lack of jurisdiction over the subject matter, or the exercise of power in
excess thereof, or grave abuse of discretion in the findings of fact or of law set out in the
decision.[45]Thus, while it may be true that a final order or judgment was rendered under
circumstances that would otherwise justify resort to a special civil action under Rule 65, the latter
would nonetheless be unavailing if there is an appeal or any other plain, speedy and adequate
remedy in the ordinary course of law.
Equitable Bank, however, posits that in certain exceptional cases, certiorari may be
allowed even with the availability of an appeal, such as where valid and compelling considerations
would warrant the same or where rigid application of the rules would result in a manifest failure or
miscarriage of justice, as in this case.
Equitable Banks reliance on Estate of Salud Jimenez v. Philippine Export Processing
Zone[46] is misplaced. In that case, resort by the respondent to a special civil action was justified,
even as the reglementary period for the proper remedy of appeal had already lapsed, because the
assailed order of the trial court set aside an expropriation order that had long become final and
executory. The Court declared therein that the trial court clearly acted beyond its jurisdiction for it
cannot modify a final and executory order. The questioned order of the trial court in that case was
a patent nullity.
In contrast, Equitable Bank has not shown any valid or extraordinary circumstance that
would justify immediate resort to certiorari. It simply alleged grave abuse of discretion on the part
of the trial judge as purportedly shown by a pattern of questionable rulings in favor of petitioners.
However, these rulings may not be corrected by certiorari no matter how irregular or erroneous
they might be. If the court has jurisdiction over the subject matter and of the person, its rulings
upon all questions involved are within its jurisdiction and may be corrected only by an appeal from
the final decision.[47]
Another compelling reason for dismissing CA-G.R. Nos. 70292 and 70298 is that
Equitable Bank and Lavine actually engaged in forum-shopping. As pointed out by petitioners,
there is indeed parallelism between the instant case and Chemphil Export & Import Corp. v. CA.[48]
In Chemphil, PCIBank filed a special civil action for certiorari against final orders of the
trial court, even as its co-parties likewise brought an ordinary appeal from the same final orders.
Although PCIBank did not join its co-parties in the latters appeal and instead separately filed its
own petition under Rule 65, the Court nonetheless found PCIBanks acts as constituting forum-
shopping:
We view with skepticism PCIBs contention that it did not join the
consortium because it honestly believed that certiorari was the more efficacious
and speedy relief available under the circumstances. Rule 65 of the Revised
Rules of Court is not difficult to understand. Certiorari is available only if there is
no appeal or other plain, speedy and adequate remedy in the ordinary course of
law. Hence, in instituting a separate petition for certiorari, PCIB has deliberately
resorted to forum-shopping.
...
It alarms us to realize that we have to constantly repeat our warning against
forum-shopping. We cannot over-emphasize its ill-effects, one of which is aptly
demonstrated in the case at bench where we are confronted with two divisions of
the Court of Appeals issuing contradictory decisions . . .
Forum-shopping or the act of a party against whom an adverse judgment
has been rendered in one forum, of seeking another (and possibly favorable)
opinion in another forum (other than by appeal or the special civil action of
certiorari), or the institution of two (2) or more actions or proceedings grounded
on the same cause on the supposition that one or the other court would make a
favorable dispositionhas been characterized as an act of malpractice that is
prohibited and condemned as trifling with the Courts and abusing their
processes. It constitutes improper conduct which tends to degrade the
administration of justice. It has also been aptly described as deplorable because
it adds to the congestion of the already heavily burdened dockets of the courts.
(Underscoring supplied)[49]
Thus, if we allow the instant petitions of Equitable Bank and Lavine to prosper, this Court
would be confronted with the spectacle of two (2) appellate court decisions (one on the special
civil actions brought by Equitable Bank and Lavine, and another on the ordinary appeals taken by
Rizal Surety, Equitable Bank and the other respondents) dealing with the same subject matter,
issues, and parties. Needless to say, this is exactly the pernicious effect that the rules against
forum-shopping seek to avoid. Consequently, the certiorari petitions of Equitable Bank and Lavine
must be struck down for being anathema to the orderly administration of justice.
 In view of the preceding discussion, we find it no longer necessary to discuss petitioners
second to fourth assigned errors. The propriety of the intervention, the lack of pre-trial and the
extent of Equitable Banks interests in the insurance proceeds, among others, are issues that must
properly be resolved in the ordinary appeals. Except for Lavine which apparently withdrew its
notice of appeal, all the other respondents appealed the decision of the trial court under Rule 41.
These appeals must consequently be allowed to proceed.
Anent petitioners fifth assigned error, we find that the Court of Appeals did not err in giving due
course and in granting the petitions in CA-G.R. SP Nos. 70799 and 70844.
These certiorari petitions initiated by PhilFire and First Lepanto were directed against the trial
courts orders granting execution pending appeal and the concomitant issuance of a writ of
execution. The proper recourse to be taken from these orders is a special civil action
for certiorari under Rule 65, pursuant to Section 1, Rule 41 of the Revised Rules of Civil
Procedure.[50]
Certiorari lies against an order granting execution pending appeal where the same is not founded
upon good reasons. The fact that the losing party had also appealed from the judgment does not
bar the certiorari proceedings, as the appeal could not be an adequate remedy from such
premature execution. Additionally, there is no forum-shopping where in one petition a party
questions the order granting the motion for execution pending appeal and at the same time
questions the decision on the merits in a regular appeal before the appellate court. After all, the
merits of the main case are not to be determined in a petition questioning execution pending
appeal and vice versa.[51]
also three parties claiming the insurance proceeds, namely: petitioners, Equitable Bank, and
Lavine as represented by the group of Chandru.
Besides, that the appeal is merely dilatory is not a good reason for granting execution
pending appeal. As held in BF Corporation v. Edsa Shangri-la Hotel:[56]
... it is not for the trial judge to determine the merit of a decision he rendered as
this is the role of the appellate court. Hence, it is not within competence of the
trial court, in resolving a motion for execution pending appeal, to rule that the
appeal is patently dilatory and rely on the same as basis for finding good reasons
to grant the motion. Only an appellate court can appreciate the dilatory intent of
an appeal as an additional good reason in upholding an order for execution
pending appeal...[57]
Lastly, petitioners assert that Lavines financial distress is sufficient reason to order
execution pending appeal. Citing Borja v. Court of Appeals,[58] they claim that execution pending
appeal may be granted if the prevailing party is already of advanced age and in danger of
extinction.
Borja is not applicable to the case at bar because its factual milieu is different. In Borja,
the prevailing party was a natural person who, at 76 years of age, may no longer enjoy the fruit of
the judgment before he finally passes away.[59] Lavine, on the other hand, is a juridical entity
whose existence cannot be likened to a natural person. Its precarious financial condition is not by
itself a compelling circumstance warranting immediate execution and does not outweigh the long
standing general policy of enforcing only final and executory judgments.[60]

The general rule is that only judgments which have become final and executory may be WHEREFORE, the petition is PARTIALLY GRANTED. CA-G.R. SP Nos. 70292 and
executed.[52] However, discretionary execution of appealed judgments may be allowed under 70298 are DISMISSED. The assailed decision of the Court of Appeals dated May 29, 2003
Section 2 (a) of Rule 39 of the Revised Rules of Civil Procedure upon concurrence of the following is AFFIRMED insofar as it declared null and void the Special Order dated May 17, 2002 and the
requisites: (a) there must be a motion by the prevailing party with notice to the adverse party; (b) Writ of Execution dated May 20, 2002 of the Regional Trial Court-Pasig City, Branch 71, in Civil
there must be a good reason for execution pending appeal; and (c) the good reason must be Case No. 68287.
stated in a special order.[53] The yardstick remains the presence or the absence of good reasons
consisting of exceptional circumstances of such urgency as to outweigh the injury or damage that
the losing party may suffer, should the appealed judgment be reversed later.[54] Since the
execution of a judgment pending appeal is an exception to the general rule, the existence of good
reasons is essential.[55]

In the case at bar, petitioners insist that execution pending appeal is justified because
respondent insurance companies admitted their liabilities under the insurance contracts and thus
have no reason to withhold payment.

We are not persuaded. The fact that the insurance companies admit their liabilities is not
a compelling or superior circumstance that would warrant execution pending appeal. On the
contrary, admission of their liabilities and willingness to deliver the proceeds to the proper party
militate against execution pending appeal since there is little or no danger that the judgment will
become illusory.
There is likewise no merit in petitioners contention that the appeals are merely dilatory
because, while the insurance companies admitted their liabilities, the matter of how much is owing
from each of them and who is entitled to the same remain unsettled. It should be noted that
respondent insurance companies are questioning the amounts awarded by the trial court for being
over and above the amount ascertained by the Office of the Insurance Commission. There are
HEIRS OF TEOFILO GAUDIANO, Namely: HONORIA GAUDIANO, ERLINDA G. SANDE,
PHILIP GAUDIANO, JAMES GAUDIANO, EDISON GAUDIANO and TERESITA GAUDIANO-
APORA, Petitioners,
vs.
CONSTANCIO BENEMERITO, MELECIO LOQUINARIO, DOMINGO CORONEL and MACARIO
ESCULTOR,Respondents.
DECISION
YNARES-SANTIAGO, J.:
1 2
This Petition for Review on Certiorari assails the April 17, 2006 Order of the Regional Trial Court
(RTC) of Cebu City, Branch 21 in Civil Case No. CEB-1151 denying petitioners’ Motion for
Extension of Time to File a Notice of Appeal and declaring its October 7, 2005 Decision 3 final and
executory.
The respondents filed before the Regional Trial Court of Cebu an action for redemption against the
petitioners. On October 7, 2005, the lower court rendered its Decision4 allowing the respondents to
redeem their respective areas of cultivation from the petitioners and directing them to execute the
documents necessary to effect the redemption.
Petitioners received a copy of the Decision on December 21, 2005 but instead of filing a Notice of
Appeal, they filed a Motion for Extension of Time to File a Notice of Appeal on January 4, 2006
without the assistance of counsel.5They prayed for a 15-day extension claiming that their counsel,
Atty. Antonio Villaflor, suffered a stroke sometime in the middle of 2005, and that they needed to
engage the services of another counsel who can represent them. On January 13, 2006, they filed
a Notice of Appeal6 through their new counsel, Atty. Virgilius Santiago.
On April 17, 2006, the Regional Trial Court of Cebu, Branch 21 issued the assailed Order denying
the motion, to wit:
This treats of the defendants’ Motion for Extension of Time to File a Notice of Appeal, submitted
on 04 January 2006.
Under Section 3, Rule 41 of the Rules of Civil Procedure, said motion is not allowed.
WHEREFORE, premises considered, the Motion for Extension prayed for is hereby denied, and
defendants having been unable to file their Notice of Appeal within the required reglementary
period, in effect, renders the decision final and executory.
SO ORDERED. 7
Hence, this Petition for Review on Certiorari raising the following issues: 1) whether the
petitioners’ belated filing of their notice of appeal is justifiable; and 2) whether the court a quo
correctly denied petitioners’ Motion for an Extension of Time to File Notice of Appeal and in
declaring the RTC Decision dated October 7, 2005 final and executory.8
Petitioners claim that their former counsel suffered a stroke which incapacitated him from filing a
notice of appeal. Thus, while looking for a new counsel to engage, they decided to file a motion for
extension to file a notice of appeal. They argue that respondents would not be prejudiced if their
notice of appeal is given due course despite its late filing. They also allege that under Section 3,
Rule 41 of the Rules of Court, the filing of a motion for extension to file a notice of appeal is not
prohibited and that this Court is vested with power to relax its rules in the interest of justice and
equity.
The petition lacks merit.
In Lacsamana v. Second Special Cases Division of the Intermediate Appellate Court,9 the
Supreme Court ruled that in ordinary appeals by mere notice of appeal, as in the instant case, no
extension to file a notice of appeal is allowed. It was stated:
<In an ordinary appeal from the final judgment or order of a metropolitan or municipal trial court to
the regional trial court, and from the regional trial court to the Court of Appeals in actions or
proceedings originally filed in the regional trial court, the fifteen-day period for appeal provided by
Section 39 of BP No. 129 and Section 19(a) of the Interim Rules is interrupted or suspended by a
motion for new trial or reconsideration, unless such motion fails to satisfy the requirements of Rule
37 (Section 3 of Rule 41). If the motion for new trial or reconsideration is denied, the moving party
has only the remaining period from notice of denial within which to file a notice of appeal, which is
the only requirement for taking an appeal under the present rules. Obviously, no extension of time
to file such a notice of appeal is needed, much less allowed.>10
The perfection of an appeal within the period and in the manner prescribed by law is jurisdictional
and non-compliance with such legal requirements is fatal and has the effect of rendering the
judgment final and executory.11The limitation on the period of appeal is not without reason. They
must be strictly followed as they are considered indispensable to forestall or avoid unreasonable
delays in the administration of justice, to ensure an orderly discharge of judicial business, and to
put an end to controversies.12 Though as a general rule, rules of procedures are liberally
construed, the provisions with respect to the rules on the manner and periods for perfecting
appeals are strictly applied and are only relaxed in very exceptional circumstances on equitable
considerations,13 which are not present in the instant case.
Being a prohibited pleading, a motion for extension of time to file a notice of appeal is a mere
scrap of paper and its filing does not toll the running of the period to appeal.14 Petitioners filed their
Notice of Appeal within the period prayed for in their motion for extension but beyond the period to
appeal. Sections 2(a) and 3 of Rule 41 clearly provide that decisions of Regional Trial Courts may
be appealed by filing a notice of appeal within 15 days from date of receipt of notice of judgment.
The filing of a notice of appeal within the reglementary period is mandatory; no extension is
allowed. Since the motion for extension did not toll the running of the period to appeal, it follows
that the Notice of Appeal filed after the lapse of 15 days was filed out of time and the trial court
properly dismissed the appeal pursuant to Section 13, Rule 41, which reads:
<SEC. 13. Dismissal of appeal.— Prior to the transmittal of the original record or the record on
appeal to the appellate court, the trial court may, motu proprio or on motion, dismiss the appeal for
having been taken out of time or for non-payment of the docket and other lawful fees within the
reglementary period.>
When no timely appeal is taken, the judgment becomes final and the court loses jurisdiction over
the case, and it has no alternative but to order the execution of the final judgment. The trial court,
therefore, commits no error in denying the motion for extension and declaring that its October 7,
2005 Decision has become final and executory.
Petitioners’ reliance on this Court’s power to relax and disregard the application of technical rules
of procedure in the interest of substantial justice is misplaced. The liberal application of rules of
procedure for perfecting appeals is still the exception, and not the rule; and it is only allowed in
exceptional circumstances to better serve the interest of justice. In Neypes v. Court of
Appeals,15 the Court declared:
In setting aside technical infirmities and thereby giving due course to tardy appeals, we have not
been oblivious to or unmindful of the extraordinary situations that merit liberal application of the
Rules. In those situations where technicalities were dispensed with, our decisions were not meant
to undermine the force and effectivity of the periods set by law. But we hasten to add that in those
rare cases where procedural rules were not stringently applied, there always existed a clear need
to prevent the commission of a grave injustice. Our judicial system and the courts have always
tried to maintain a healthy balance between the strict enforcement of procedural laws and the
guarantee that every litigant be given the full opportunity for the just and proper disposition of his
cause.16(Emphasis added)
The circumstances surrounding this case do not warrant the relaxation of the rules. <Petitioners
alleged in their motion for extension of time that their previous counsel suffered a stroke sometime
in the middle of the year 2005 and they still need to engage another counsel who can ably
represent them.>17 1awphi1.net
We do not find these circumstances extraordinary that would warrant a liberal application of the
rules. The allegation of stroke was not proven or supported with a medical certificate. 18 There is
likewise no evidence showing that their counsel was unable to assist them in filing the notice of
appeal. Interestingly, on January 10, 2006, or five days after the period to appeal had lapsed, Atty.
Villaflor filed before the trial court his withdrawal as counsel for petitioners. This only shows the
falsity in petitioners’ allegation as to the counsel’s incapacity to file the notice of appeal.
Petitioners likewise allege that respondents have nothing to lose should their notice of appeal be
given due course.19 However, it is worthy to note that the action for redemption filed by
respondents dated as far back as August 30, 1983.20 Respondents had waited for more than two
decades to have their case resolved. As we held in Videogram Regulatory Board v. Court of
Appeals,21 "(j)ust as a losing party has the right to file an appeal within the prescribed period, the
winning party also has the correlative right to enjoy the finality of the resolution of his/her case."
Section 1, Rule 41 of the Rules of Court provides that no appeal may be taken from an order
disallowing or dismissing an appeal. The denial of petitioners’ motion for extension and the
declaration that the Decision has become final and executory, is tantamount to a
disallowance/dismissal of an appeal. As such, the remedy of appeal is not available. Even on the
assumption that an appeal is available, petitioners should not have directly filed the same before
the Supreme Court since only questions of law may be raised in appeals by certiorari from a
judgment, final order or resolution of Regional Trial Courts.
Even if we treat this petition as one for a petition for certiorari under Rule 65, it is still dismissible
for violation of the hierarchy of courts. Although the Supreme Court has concurrent jurisdiction with
the Regional Trial Courts and the Court of Appeals to issue writs of certiorari, this should not to be
taken as granting parties seeking any of the writs an absolute and unrestrained freedom of choice
of the court to which an application will be directed. It is an established policy that a direct
invocation of the Supreme Court’s original jurisdiction to issue these writs should be allowed only
when there are special, important and compelling reasons, clearly and specifically spelled out in
the petition,22 which are not present in this case.
The right to appeal is not a natural right or a part of due process; it is merely a statutory privilege
and may be exercised only in the manner and in accordance with the provisions of law. Thus, one
who seeks to avail of the right to appeal must strictly comply with the requirements of the rules,
and failure to do so leads to the loss of the right to appeal.23
WHEREFORE, the petition is DENIED. The Order dated April 17, 2006 of the Regional Trial Court
of Cebu, Branch 21, denying petitioners’ Motion for Extension of Time to File a Notice of Appeal
and declaring its October 7, 2005 final and executory, is AFFIRMED.
Sime Darby Employees Association vs. NLRC, G.R. No. 148021, Dec. 6, 2006
For the Court’s adjudication is a petition for review under Rule 45, seeking to set aside the
Decision of the Court of Appeals in CA-G.R. SP No. 54424, which affirmed the 30 April 1999
Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR-CNS. 00-09-
06571-95, 00-11-07577-95, 00-01-00284-96, CA No. 017268-98.1
The facts of the case, as culled from the findings of the Court of appeals follow.
Sometime in October 1995, Sime Darby Employees Association (the Union) submitted its proposal
to Sime Darby Pilipinas, Inc. (the Company) for the remaining two (2) years of their then existing
Collective Bargaining Agreement (CBA). The company gave its counter-proposal, but the parties
failed to reach a mutual settlement. Thus, in a letter to the union president, the company declared
a deadlock in the negotiations. Subsequently, the company sought the intervention of the
Department of Labor and Employment (DOLE) by filing a Notice of CBA Deadlock and Request for
Preventive Mediation.2 Such action did not sit well with the union, which objected to the deadlock.
It also filed its opposition to the Assumption of Jurisdiction/Certification to Arbitration.
The company filed a Notice of Lockout on 21 June 1995, on the ground of deadlock in the
collective bargaining negotiations, docketed as NCMB-NCR-NL-06-013-95, and sent a Notice of
Lock Out Vote3 dated 24 July 1995 to the National Conciliation and Mediation Board (NCMB). On
the other hand, the union conducted its strike vote referendum on 23 June 1995, and filed its
Strike Vote Result Report 4to NCMB also on 24 July 1995, and docketed as NCMB-NCR-NS-Case
No. 06-265-95.
On 06 August 1995, the company declared and implemented a lockout against all the hourly
employees of its tire factory on the ground of sabotage5 and work slowdown. On September 1995,
the Union filed a complaint for illegal lockout before the DOLE-NLRC, docketed as NLRC NCR
Case No. 00-09-06517-95.
Meanwhile, on 19 October 1995, the stockholders of the company approved the sale of the
company’s tire manufacturing assets and business operation. The company issued a
memorandum dated 20 October 1995 informing all its employees of the plan to sell the tire
manufacturing assets and operations. Consequently, on 27 October 1995, the company filed with
the DOLE a Closure and Sale of Tire Manufacturing Operation.
On 15 November 1995, the company individually served notices of termination to all the
employees, including the individual petitioners.6
On account of the lockout, the employees were barred from entering company premises, and were
only allowed to enter to get their personal belongings and their earned benefits on 21-22
November 1995. During said dates, the employees likewise received their separation pay
equivalent to 150% of the base rate for every year of credited service; they also signed and
executed individual quitclaims and releases. On 24 November 1995, the company filed with the
DOLE a Notice of Termination of Employees dated 17 November 1995, covering all its employees
in the tire manufacturing and support operations effective 15 December 1995.7
In November 1995, petitioners filed a complaint for Illegal Dismissal before the DOLE, docketed as
NLRC NCR Case No. 00-11-07577-95.8 In January of the following year, petitioners filed a
complaint for Unfair Labor Practice (ULP), docketed as NLRC-NCR Case No. 00-01-00284-96.
The cases for illegal dismissal, illegal lockout and unfair labor practice were then consolidated and
eventually assigned to Labor Arbiter Enrico Portillo.
On 24 April 1996, the company sold its tire manufacturing plant and facilities to Goodyear
Philippines, Inc. (Goodyear) under a Memorandum of Agreement of even date.
On 20 August 1996, the company and its officers filed a motion to conduct ocular inspection of the
tire factory premises to establish that it was sold to Goodyear.9 The motion was opposed by the
union.
On 14 July 1998, the company filed a motion for the return of the separation pay received by the
complainants, pending the resolution of the case.
On 25 August 1998, Labor Arbiter Enrico Angelo C. Portillo issued an Order,10 the dispositive
portion of which reads:
WHEREFORE, premises considered, the respondents’ instant motion 11 shall be treated in
the resolution of the above-caption cases on the merits. In lieu of the continuation of the
trial, the parties are hereby given the opportunity to submit their respective memorandum
within ten (10) days from receipt hereof, and thereafter the instant cases shall be deemed
submitted for resolution without further notice.
SO ORDERED.12
On 26 October 1998, the Union, without filing the memorandum as ordered by the labor arbiter,
filed an Appeal Memorandum with a petition for injunction and/or a temporary restraining order
before the NLRC.
On 29 October 1998, the labor arbiter rendered his Decision in the consolidated cases, dismissing
for lack of merit petitioners’ complaints against the company for illegal lockout, illegal dismissal
and unfair labor practice. The labor arbiter found the lockout valid and legal, and justified by the
incidents of continued work slowdown, mass absences, and consistent low production output, high
rate of waste and scrap tires and machine breakdown. Likewise, the consequent mass termination
of all the employees was declared to be a valid and authorized termination of employment due to
closure of the establishment, the company having complied with the requirements laid down by
Article 283 of the Labor Code, i.e., written notice of termination to the employees concerned, a
report to the DOLE, and payment of the prescribed separation pay. He added that the company’s
decision to sell all of its assets was a valid and legitimate exercise of its management prerogative.
Anent the claim of unfair labor practice, the labor arbiter found no evidence to substantiate the
same, and that the records merely showed that the closure of and eventual cessation from
business was justified by the circumstances in order to protect the company’s investments and
assets. Furthermore, the labor arbiter ruled that the quitclaims and receipts signed by petitioners
were voluntarily signed, indicating that the settlement reached by petitioners and the company was
just and reasonable. Finally, the labor arbiter declared that the motions for ocular inspection and
return of separation pay field by the company are rendered moot and academic in view of said
Decision.13
The labor arbiter thus adjudicated:
WHEREFORE, foregoing premises considered, the consolidated complaints for illegal
lockout, illegal dismissal and unfair labor practice are hereby DISMISSED for lack of
merit. The complaint against respondent SD Retread System, is likewise ordered
dismissed for failure of the complainants to sufficiently establish and substantiate their
claim that the latter and respondent Sime Darby are one and the same company, and for
lack of employer-employee relationship.
SO ORDERED.14
Petitioners appealed the labor arbiter’s Decision to the NLRC on 01 December 1998.15 Said
appeal, however, was dismissed on 30 April 1999 for lack of merit.16 The NLRC affirmed en
toto the labor arbiter’s Decision. In addition, it ruled that that the labor arbiter could not have lost
jurisdiction over the case when petitioners appealed his 25 August 1998 Order since the Order
was interlocutory in nature and cannot be appealed separately. Thus, the labor arbiter still had
jurisdiction over the consolidated complaints when he issued his Decision. Petitioners’ prayer for
damages and attorney’s fees was also struck down by the NLRC, holding that petitioners are not
entitled thereto considering that it was not shown that the dismissal was done in a wanton and
oppressive manner.17 Petitioners’ motion for reconsideration was also denied, prompting them to
file a petition for certiorari with the Court of Appeals, claiming grave abuse of discretion on the part
of the NLRC.
The Court of Appeals denied the petition for lack of merit and affirmed the Decision of the
NLRC.18 The appellate court declared that the labor arbiter’s was not divested of its jurisdiction
over the consolidated cases when petitioners filed their appeal memorandum on 26 October 1998
since the Order dated 25 August 1998 which they sought to appeal is interlocutory in nature. Thus,
the labor arbiter’s Decision. Thus, the labor arbiter’s Decision has the force and effect of a valid
judgment.19 Finding that said Decision was supported by substantial evidence, the appellate court
affirmed the dismissal of the complaints against SD Retread System for failure of the petitioners to
substantiate the claim of the existence of employer-employee relationship.20 Petitioners’ sought
reconsideration of the Court of Appeal’s Decision, but their motion was denied for lack of merit. 21
In the instant petition, petitioners reiterate that they were denied due process when they were
dismissed right on the day they were handed down their termination letters, without the benefit of
the thirty (30)-day notice as required by law, and invoke the Court’s ruling in Serrano v.
NLRC22 They deny having executed quitclaims in favor of the company. Furthermore, petitioners
insist that the labor arbiter had lost jurisdictional competence to issue his 29 October 1998
Decision since they have already perfected their appeal on 26 October 1998, making said
Decision void ab initio. They likewise claim that the labor arbiter erred when it failed to consider as
admitted the matters contained in their Request for Admission after respondents failed to file a
sworn answer thereto. Finally, they allege that the decisions of the Court of Appeals and the NLRC
lacked evidentiary support.
On the other hand, the company asserts that it complied with the 30-day notice requirement under
Art. 283 of the Labor Code when it notified the employees on 15 November 1995 that their
termination was to take effect on 15 December 1995. In any case, the alleged violation of the thirty
(30) day notice requirement was never raised in the proceedings below, except in petitioners’
supplemental motion for reconsideration of the Court of Appeals’ Decision. This being the case,
the issue of failure to abide by the 30-day notice rule can no longer be raised for the first time on
appeal.23 The company points out that the ruling in Serrano24 does not apply to this case
since Serrano involved the retrenchment of only one employee, Ruben Serrano, from an
establishment which remained and continued in business, while in the present scenario, the
company’s business operation ceased for good, and the employees were furnished individual
termination notices thirty (30) days before the actual date of separation.25
The company maintains that the 25 August 1995 Order, being in the nature of an interlocutory
order, is unappealable hence, the labor arbiter retained its jurisdiction over the cases even after
the Order was "appealed" to the NLRC. It maintains that the decisions of the labor arbiter and the
NLRC and the Court of Appeals are supported by substantial evidence. Furthermore, it insists on
the legality of the lockout and termination of employment, and denies having committed an unfair
labor practice.26
For its part, respondent SD Retread Systems, Inc. argues that it has a separate and distinct entity
from Sime Darby Pilipinas, Inc., and hence, denies the existence of an employer-employee
relationship with petitioners.27
The petition is bereft of merit.
Despite petitioners’ attempt to phrase its issues to show apparent questions of law, it is obvious
that the petition raises mostly factual issues, which are not proper in a petition for review. Rule 45
of the Rules of Court limits the function of the Court to the review or revision of errors of law and
not to a second analysis of the evidence. The Court observes that petitioners come to this Court
with the same arguments it presented in the proceedings below, which have been competently
discussed and disposed of by the appellate court and the labor tribunals.
However, the petition presents two (2) questions of law which need to be addressed, to wit: (i) the
alleged loss of jurisdictional competence on the part of the labor arbiter to issue his Decision after
petitioners appealed his 25 August 1995 Order, and (ii) that petitioners’ Request for Admission
should have been granted and the evidence included therein should have been admitted since
respondents’ reply/objection thereto were not made under oath.28
The 25 August 1998 Order of the labor arbiter partakes the nature of an interlocutory order, or one
which refers to something between the commencement and end of the suit which decides some
point or matter but it is not the final decision of the whole controversy.29 An interlocutory order is
not appealable until after the rendition of the judgment on the merits for a contrary rule would
delay the administration of justice and unduly burden the courts.30 The 25 August 1998 Order
merely terminated formal trial of the consolidated cases, declared that the motion for inspection
will be dealt with in the resolution of the case, and ordered the submission of the parties’
respective memoranda after which the case shall be submitted for resolution. It did not put an end
to the issues of illegal lockout, ULP, and illegal dismissal.
Being interlocutory in nature, the 25 August 1998 Order could not have been validly appealed
such that it would divest the labor arbiter of his jurisdiction over the consolidated cases. This being
the case, the labor arbiter still had jurisdiction when he rendered his Decision.
Even if petitioners filed a special civil action for certiorari, which would have been the proper
remedy, the same would still fail. The Court finds that the labor arbiter did not commit any grave
abuse of discretion when he issued the 25 August 1998 Order. For one, the holding of an
adversarial trial is discretionary on the labor arbiter and the parties cannot demand it as a matter
of right.31 Section 4, Rule V of the New Rules of Procedure of the NLRC32grants a labor arbiter
wide latitude to determine, after the submission by the parties of their position papers/memoranda,
whether there is need for a formal trial or hearing.33 As this court has so often held, a formal type
or trial-type hearing is not at all times and in all instances essential to due process the
requirements of which are satisfied where the parties are afforded fair and reasonable opportunity
to explain their side of controversy.34 In one case, this Court held that a party has no vested right
to a formal hearing simply and merely because the labor arbiter granted its motion and set the
case for hearing.35
Related to the issue of jurisdiction is the allegation that the decisions of the Court of Appeals, the
NLRC and the labor arbiter are without evidentiary support since the respondent was not able to
present a single evidence due to the 25 August 1998 Order of the labor arbiter terminating the trial
of the cases and requiring submission of the parties’ memoranda, and ordaining at the end of the
memorandum period the submission of the cases for decision.
Petitioners’ argument that had the labor arbiter allowed respondents to present their evidence
during the formal trial, the Decision would have been different, cannot be sustained. As previously
stated, the labor arbiter enjoys wide discretion in determining whether there is a need for a formal
hearing in a given case, and he or she may use all reasonable means to ascertain the facts of
each case without regard to technicalities. With or without a formal hearing, the labor arbiter may
still adequately decide the case since he can resolve the issues on the basis of the pleadings and
other documentary evidence previously submitted. When the parties submitted their position
papers and other pertinent pleadings to the labor arbiter, it is understood/given/deemed that they
have included therein all the pieces of evidence needed to establish their respective cases. The
rationale for this rule is explained by the Court in one case, thus:
(P)etitioner believes that had there been a formal hearing, the arbiter’s alleged mistaken
reliance on some of the documentary evidence submitted by parties would have been
cured and remedied by them, presumably through the presentation of controverting
evidence. Evidently, this postulate is not in consonance with the need for speedy
disposition of labor cases, for the parties may then willfully withhold their evidence and
disclose the same only during the formal hearing, thus creating surprises which could
merely complicate the issues and prolong the trial. There is a dire need to lessen
technicalities in the process of settling labor disputes."36
Elementary is the principle that this court is not a trier of facts. Judicial review of labor cases does
not go beyond the evaluation of the sufficiency of the evidence upon which its labor officials’
findings rest.37 As such, the findings of facts and conclusion of the NLRC are generally accorded
not only great weight and respect but even clothed with finality and deemed binding on this Court
as long as they are supported by substantial evidence. In the instant case, the Court finds that the
labor arbiter’s decision, which was affirmed by both the NLRC and the Court of Appeals cite as
basis thereof the evidence presented by both the petitioners and respondents in their pleadings. It
is no longer the Court’s function to assess and evaluate all over again the evidence, testimonial
and documentary, adduced by the parties to an appeal, particularly where the findings of both the
labor arbiter, the NLRC and the appellate court trial court on the matter coincide, as in this case at
bar.38
The submission that petitioners’ Request for Admission should have been deemed admitted in
their favor after respondents had failed to file a sworn reply or objection thereto cannot be
sustained.
A request for admission is a remedy provided by Rule 26 of the Rules of Court, which allows a
party to file and serve upon any other party a written request for the admission of : (i) the
genuineness of any material and relevant document described in and exhibited with the request;
or (ii) the truth of any material and relevant matter of fact set forth in the request. Said request
must be answered under oath within the period indicated in the request, otherwise the matters of
which admission were requested should be deemed admitted. Petitioners claim that respondents,
instead of filing an answer under oath, filed an unsworn reply/objection thereto. Thus, the
admissions should be deemed admitted in their favor.
Petitioners’ Request for Admission does not fall under Rule 26 of the Rules of Court. A review of
said Request for Admission shows that it contained matters which are precisely the issues in the
consolidated cases, and/or irrelevant matters; for example, the reasons behind the lockout, the
company’s motive in the CBA negotiations, lack of notice of dismissal, the validity of the release
and quitclaim, etc.39 Rule 26 as a mode of discovery contemplates of interrogatories
that would clarify and tend to shed light on the truth or falsity of the allegations in a pleading. That
is its primary function. It does not refer to a mere reiteration of what has already been alleged in
the pleadings.40
Otherwise stated, petitioner's request constitutes "an utter redundancy and a useless, pointless
process which the respondent should not be subjected to." The rule on admission as a mode of
discovery is intended "to expedite trial and to relieve parties of the costs of proving facts which will
not be disputed on trial and the truth of which can be ascertained by reasonable inquiry." Thus, if
the request for admission only serves to delay the proceedings by abetting redundancy in the
pleadings, the intended purpose for the rule will certainly be defeated.41
More importantly, well-settled is the rule that hearings and resolutions of labor disputes are not
governed by the strict and technical rules of evidence and procedure observed in the regular
courts of law. Technical rules of procedure are not applicable in labor cases, but may apply only
by analogy or in a suppletory character, for instance, when there is a need to attain substantial
justice and an expeditious, practical and convenient solution to a labor problem. 42 In view of the
nature of the matters requested for admission by the petitioners, their request for admission would
have only served to delay the proceedings.
One final note.
Petitioners claim that the alleged failure of the company to notify them of their termination renders
their dismissal illegal, and thus they should be reinstated and paid with full backwages or given
separation pay, following the Court’s ruling in Serrano v. Court of Appeals. The argument does not
hold. The ruling in Serrano has
already been superseded by the case of Agabon v. National Labor Relation
Commission.43 The Agabon enunciates the new doctrine that if the dismissal is for just cause but
statutory due process was not observed, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be
held liable for non-compliance with the procedural requirements of due process.44 But in any case,
the issue of illegal dismissal had already been resolved by the NLRC and the Court of Appeals,
which both found that the company had an authorized cause and had complied with the
requirements of due process when it dismissed petitioners.
WHEREFORE, the petition is DENIED and the Decision dated 31 July 2000 in CA-G.R. SP No.
54424 is AFFIRMED.
COMMISIONER OF INTERNAL REVENUE vs. MIGRANT PABILAO CORP.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review[2] under Rule 45 of the 1997 Rules of Civil Procedure
assailing the Decision,[3] dated 30 July 2003, of the Court of Appeals in CA-G.R. SP No. 60783,
which affirmed in toto the Decision,[4] dated 11 July 2000, of the Court of Tax Appeals (CTA) in
CTA Case No. 5658. The CTA partially granted the claim of herein
respondent Mirant PagbilaoCorporation (MPC) for the refund of the input Value Added Tax (VAT)
on its purchase of capital goods and services for the period 1 April 1996 to 31 December 1996,
and ordered herein petitioner Commissioner of the Bureau of Internal Revenue (BIR) to issue a tax
credit certificate in the amount of P28,744,626.95.
There is no dispute as to the following facts that gave rise to the claim for refund of MPC, as found
by the CTA[5]
[MPC] is a domestic corporation duly organized and existing under and
by virtue of the laws of the Philippines with principal office address
in Pagbilao Grande Island, Pagbilao, Quezon. It is licensed by the Securities and
Exchange Commission to principally engage in the business of power generation
and subsequent sale thereof (Exh. A). It is registered with the Bureau of Internal
Revenue as a VAT registered entity with Certificate of Registration bearing RDO
Control No. 96-600-002498, dated January 26, 1996.
For the period April 1, 1996 to December 31, 1996, [MPC] seasonably
filed its Quarterly VAT Returns reflecting an (sic) accumulated input taxes in the
amount of P39,330,500.85 (Exhs. B, C, and D). These input taxes were allegedly
paid by [MPC] to the suppliers of capital goods and services for the construction
and development of the power generating plant and other related facilities
in Pagbilao, Quezon (TSN, November 16, 1998, p. 11).
Pursuant to the procedures prescribed under Revenue Regulations No.
7-95, as amended, [MPC] filed on June 30, 1998, an application for tax credit or
refund of the aforementioned unutilized VAT paid on capital goods (Exhibit E).
Without waiting for an answer from the [BIR Commissioner], [MPC] filed
the instant petition for review on July 10, 1998, in order to toll the running of the
two-year prescriptive period for claiming a refund under the law.
In answer to the Petition, [the BIR Commissioner] advanced as special
and affirmative defenses that [MPC]s claim for refund is still pending investigation
and consideration before the office of [the BIR Commissioner] accordingly, the
filing of the present petition is premature; well-settled is the doctrine that
provisions in tax refund and credit are construed strictly against the taxpayer as
they are in the nature of a tax exemption; in an action for refund or tax credit, the
taxpayer has the burden to show that the taxes paid were erroneously or illegally
paid and failure to sustain the said burden is fatal to the action for refund; it is
incumbent upon [MPC] to show that the claim for tax credit has been filed within
the prescriptive period under the Tax Code; and the taxes allegedly paid by
[MPC] are presumed to have been collected and received in accordance with law
and revenue regulations.[]
On July 14, 1998, while the case was pending trial, Revenue Officer,
Rosemarie M. Vitto, was assigned by Revenue District Officer,
Ma. Nimfa Penalosa-Asensi, of Revenue District No. 60 to investigate [MPC]s
application for tax credit or refund of input taxes (Exhs. 1 and 1-a). As a result, a
memorandum report, dated August 27, 1998, was submitted recommending a
favorable action but in a reduced amount of P49,616.40 representing unapplied
input taxes on capital goods. (Exhs. 2, 2-a, 3, and 3-a).
[MPC], due to the voluminous nature of evidence to be presented,
availed of the services of an independent Certified Public Accountant pursuant to
CTA Circular No. 1-95, as amended. As a consequence, Mr. Ruben R. Rubio,
Partner of SGV & Company, was commissioned to verify the accuracy of [MPC]s
summary of input taxes (TSN, October 15, 1998, pp. 3-5). A report, dated March
8, 1999, was presented stating the audit procedures performed and the finding
that out of the total claimed input taxes of P39,330,500.85, only the sum of
P28,745,502.40 was properly supported by valid invoices and/or official receipts
(Exh. G; see also TSN, March 3, 1999, p. 12).
The CTA ruled in favor of MPC, and declared that MPC had overwhelmingly proved, through the
VAT invoices and official receipts it had presented, that its purchases of goods and services were
necessary in the construction of power plant facilities which it used in its business of power
generation and sale. The tax court, however, reduced the amount of refund to which MPC was
entitled, in accordance with the following computation
Total amount of the claim for refund P39,330,500.85
Less: Disallowances
a. Per independent auditor P10,584,998.45
b. Per CTAs examination 875.45 10,585,873.90
P28,744,626.95[6]
Thus, the dispositive portion of the CTA Decision,[7] dated 11 July 2000, reads -
WHEREFORE, in view of the foregoing, [MPC]s claim for refund is
hereby partially GRANTED. [The BIR Commissioner] is ORDERED to ISSUE A
TAX CREDIT CERTIFICATE in the amount of P28,744,626.95 representing input
taxes paid on capital goods for the period April 1, 1996 to December 31, 1996.
The CTA subsequently denied the BIR Commissioners Motion for Reconsideration in a
Resolution,[8] dated 31 August 2001.
Aggrieved, the BIR Commissioner filed with the Court of Appeals a Petition for Review [9] of the
foregoing Decision, dated 11 July 2000, and Resolution, dated 31 August 2001, of the
CTA. Notably, the BIR Commissioner identified and discussed as grounds [10] for its Petition
arguments that were totally new and were never raised before the CTA, to wit
1. RESPONDENT BEING AN ELECTRIC UTILITY, IT IS SUBJECT TO
FRANCHISE TAX UNDER THEN SECTION 117 (NOW SECTION 119) OF THE
TAX CODE AND NOT TO VALUE ADDED TAX (VAT).
2. SINCE RESPONDENT IS EXEMPT FROM VAT, IT IS NOT
ENTITLED TO THE REFUND OF INPUT VAT PURSUANT TO SECTION 4.103-
1 OF REVENUE REGULATIONS NO. 7-95.
The Court of Appeals found no merit in the BIR Commissioners Petition, and in its Decision, dated
30 July 2003, it pronounced that: (1) The BIR Commissioner cannot validly change his theory of
the case on appeal; (2) The MPC is not a public utility within the contemplation of law; (3) The sale
by MPC of its generated power to the National Power Corporation (NAPOCOR) is subject to VAT
at zero percent rate; and (4) The MPC, as a VAT-registered taxpayer, may apply for tax
credit. Accordingly, the decretalportion of the said Decision[11] reads as follows
WHEREFORE, premises considered, the Petition is DISMISSED for lack
of merit and the assailed 11 July 2000 Decision of respondent Court in CTA Case
No. 5658 is hereby AFFIRMED in toto. No costs.
Refusing to give up his cause, the BIR Commissioner filed the present Petition before this Court
on the ground that the Court of Appeals committed reversible error in affirming the Decision of the
CTA holding respondent entitled to the refund of the amount of P28,744,626.95, allegedly
representing input VAT on capital goods and services for the period 1 April 1996 to 31 December
1996.He argues that (1) The observance of procedural rules may be relaxed considering that
technicalities are not ends in themselves but exist to protect and promote the substantive rights of
the parties; and (2) A tax refund is in the nature of a tax exemption which must be construed
strictly against the taxpayer. He reiterates his position before the Court of Appeals that MPC, as a
public utility, is exempt from VAT, subject instead to franchise tax and, thus, not entitled to a
refund of input VAT on its purchase of capital goods and services.
This Court finds no merit in the Petition at bar.
I. The general rule is that a party
cannot change his theory of the
case on appeal.
To recall, the BIR Commissioner raised in its Answer[12] before the CTA the following special and
affirmative defenses
3. [MPC]s claim for refund is still pending investigation and consideration before
the office of [the BIR Commissioner]. Accordingly, the present petition is
premature;
4. Well-settled is the doctrine that provisions in tax refund and credit are
construed strictly against the taxpayer as they are in the nature of a tax
exemption;
5. In an action for refund or tax credit, the taxpayer has the burden to show that
the taxes paid were erroneously or illegally paid and failure to sustain the said
burden is fatal to the action for refund;
6. It is incumbent upon [MPC] to show that the claim for tax credit has been filed
within the prescriptive period under the tax code;
7. The taxes allegedly paid by [MPC] are presumed to have been collected and
received in accordance with law and revenue regulations.
These appear to be general and standard arguments used by the BIR to oppose any claim by a
taxpayer for refund. The Answer did not posit any allegation or contention that would defeat the
particular claim for refund of MPC. Trial proper ensued before the CTA, during which the MPC
presented evidence of its entitlement to the refund and in negation of the afore-cited defenses of
the BIR Commissioner. It was only after the CTA promulgated its Decision on 11 July 2000, which
was favorable to MPC and adverse to the BIR Commissioner, that the latter filed his Petition for
Review before the Court of Appeals on 4 October 2000, averring, for the very first time, that
MPC was a public utility, subject to franchise tax and not VAT; and since it was not paying VAT, it
could not claim the refund of input VAT on its purchase of capital goods and services.
There is a palpable shift in the BIR Commissioners defense against the claim for refund of
MPC and an evident change of theory. Before the CTA, the BIR Commissioner admitted that the
MPC is a VAT-registered taxpayer, but charged it with the burden of proving its entitlement to
refund. However, before the Court of Appeals, the BIR Commissioner, in effect denied that the
MPC is subject to VAT, making an affirmative allegation that it is a public utility liable, instead, for
franchise tax. Irrefragably, the BIR Commissioner raised for the first time on appeal questions of
both fact and law not taken up before the tax court, an actuality which the BIR Commissioner
himself does not deny, but he argues that he should be allowed to do so as an exception to the
technical rules of procedure and in the interest of substantial justice.
It is already well-settled in this jurisdiction that a party may not change his theory of the case on
appeal.[13] Such a rule has been expressly adopted in Rule 44, Section 15 of the 1997 Rules of
Civil Procedure, which provides
SEC. 15. Questions that may be raised on appeal. Whether or not the
appellant has filed a motion for new trial in the court below, he may include in his
assignment of errors any question of law or fact that has been raised in the court
below and which is within the issues framed by the parties.
Thus, in Carantes v. Court of Appeals,[14] this Court emphasized that
The settled rule is that defenses not pleaded in the answer may not be
raised for the first time on appeal. A party cannot, on appeal, change
fundamentally the nature of the issue in the case. When a party deliberately
adopts a certain theory and the case is decided upon that theory in the court
below, he will not be permitted to change the same on appeal, because to permit
him to do so would be unfair to the adverse party.
In the more recent case of Mon v. Court of Appeals,[15] this Court again pronounced that,
in this jurisdiction, the settled rule is that a party cannot change his theory of the case or his cause
of action on appeal.< It affirms that courts of justice have no jurisdiction or power to decide a
question not in issue. Thus, a judgment that goes beyond the issues and purports to adjudicate
something on which the court did not hear the parties, is not only irregular but also extrajudicial
and invalid. The rule rests on the fundamental tenets of fair play.>
The BIR Commissioner pleads with this Court not to apply the foregoing rule to the instant case,
for a rule on technicality should not defeat substantive justice. The BIR Commissioner apparently
forgets that there are specific reasons why technical or procedural rules are imposed upon the
courts, and that compliance with these rules, should still be the general course of action. Hence,
this Court has expounded that
Procedural rules, we must stress, should be treated with utmost respect
and due regard since they are designed to facilitate the adjudication of cases to
remedy the worsening problem of delay in the resolution of rival claims and in the
administration of justice. The requirement is in pursuance to the bill of rights
inscribed in the Constitution which guarantees that all persons shall have a right
to the speedy disposition of their cases before all judicial, quasi-judicial
and administrative bodies. The adjudicatory bodies and the parties to a case are
thus enjoined to abide strictly by the rules. While it is true that a litigation is not a
game of technicalities, it is equally true that every case must be prosecuted in
accordance with the prescribed procedure to ensure an orderly and speedy
administration of justice. There have been some instances wherein this Court
allowed a relaxation in the application of the rules, but this flexibility was never
intended to forge a bastion for erring litigants to violate the rules with impunity. A
liberal interpretation and application of the rules of procedure can be resorted to
only in proper cases and under justifiable causes and circumstances.[16]
<The courts have the power to relax or suspend technical or procedural rules or to except a case
from their operation when compelling reasons so warrant or when the purpose of justice requires
it. What constitutes good and sufficient cause that would merit suspension of the rules is
discretionary upon the courts>.[17]
In his Petition and Memorandum before this Court, the BIR Commissioner made no attempt to
provide reasonable explanation for his failure to raise before the CTA the issue of MPC being a
public utility subject to franchise tax rather than VAT. The BIR Commissioner argues, in a singular
paragraph in his Petition,[18] subsequently reproduced in his Memorandum,[19] that the Court of
Appeals should have taken cognizance of the said issue, although it was raised for the first time
on appeal, entirely on the basis of this Courts ruling in Sy v. Court of Appeals.[20] He contends that
The submission fails to take into account that although this Honorable Court has
repeatedly ruled that litigants cannot raise an issue for the first time on appeal, as
this would contravene the basic rules of justice and fair play, the observance of
procedural rules may be relaxed, noting that technicalities are not ends in
themselves but exist to protect and promote the substantive rights of the litigants
(Sy v. Court of Appeals, 330 SCRA 570 [2000]).
This Court is unconvinced. There is no sufficient cause to warrant the relaxation of
technical or procedural rules in the instant case. The general rules of procedure still apply and the
BIR Commissioner cannot be allowed to raise an issue for the first time on appeal.
It should be emphasized that the BIR Commissioner is invoking a suspension of the
general rules of procedure or an exception thereto, thus, it is incumbent upon him to present
sufficient cause or justifiable circumstance that would qualify his case for such a suspension or
exception. That this Court had previously allowed in another case such suspension of or exception
to technical or procedural rules does not necessarily mean that the same shall also be allowed in
the present case. The BIR Commissioner has the burden of persuading this Court that the same
causes or circumstances that justified the suspension of or exception to the technical or
procedural rules in the other case are also present in the case at bar.
The Sy case, on which the BIR Commissioner fully anchored his claim for suspension of
or exception to the technical or procedural rules, is not even on all fours with his case. It involves a
petition for declaration of nullity of marriage instituted by the therein petitioner Filipina Sy before
the Regional Trial Court (RTC) on the basis of the alleged psychological incapacity of her
husband, Fernando Sy. Her petition was denied by the RTC because it found that Fernandos acts
did not constitute psychological incapacity, a finding later affirmed by the Court of Appeals. In an
appeal by certiorari before this Court, Filipina raised the issue that her marriage to Fernando was
void from the very beginning for lack of a marriage license at the time of the ceremony. This Court
took cognizance of the said issue, reversed the RTC and the Court of Appeals, and ruled in favor
of Filipina. Its ratiocination on the matter is reproduced in full below
Petitioner, for the first time, raises the issue of the marriage being void
for lack of a valid marriage license at the time of its celebration. It appears that,
according to her, the date of the actual celebration of their marriage and the date
of issuance of their marriage certificate and marriage license are different and
incongruous.
Although we have repeatedly ruled that litigants cannot raise an issue for
the first time on appeal, as this would contravene the basic rules of fair play and
justice, in a number of instances, we have relaxed observance of procedural
rules, noting that technicalities are not ends in themselves but exist to protect and
promote substantive rights of litigants. We said that certain rules ought not to be
applied with severity and rigidity if by so doing, the very reason for their existence
would be defeated. Hence, when substantial justice plainly requires, exempting a
particular case from the operation of technicalities should not be subject to
 cavil. In our view, the case at bar requires that we address the issue of the
validity of the marriage between Filipina and Fernando which petitioner claims is
void from the beginning for lack of a marriage license, in order to arrive at a just
resolution of a deeply seated and violent conflict between the parties. Note,
however, that here the pertinent facts are not disputed; and what is
required now is a declaration of their effects according to existing
law.[21] [Emphasis supplied.]
In the instant case, the conflict between the MPC and the BIR Commissioner could be
hardly described as deeply seated and violent, it remaining on a professional level.
Moreover, this Court pointed out in the Sy case that the pertinent facts, i.e., the dates of
actual celebration of the marriage, issuance of the marriage certificate, and issuance of the
marriage license, were undisputed. The same cannot be said in the case at bar. That MPC is a
public utility is not an undisputed fact; on the contrary, the determination thereof gives rise to a
multitude of other questions of fact and law. It is a mere deduction on the part of the BIR
Commissioner that since the MPC is engaged in the generation of power, it is a public utility. The
MPC contests this arguing that it is not a public utility because it sells its generated power to
NAPOCOR exclusively, and not to the general public. It asserts that it is subject to VAT and that
its sale of generated electricity to NAPOCOR is subject to zero-rated VAT.
Substantial justice, in such a case, requires not the allowance of issues raised for the first
time on appeal, but that the issue of whether MPC is a public utility, and the correlated issue of
whether MPC is subject to VAT or franchise tax, be raised and threshed out in the first opportunity
before the CTA so that either party would have fully presented its evidence and legal arguments in
support of its position and to contravene or rebut those of the opposing party.
In Atlas Consolidated Mining & Development Corp. v. Commissioner of Internal
Revenue,[22] this Court held that it was too late for the BIR Commissioner to raise an issue of fact
of payment for the first time in his memorandum in the CTA and in his appeal to this Court. If
raised earlier, the matter ought to have been seriously delved into by the CTA. On this ground, this
Court was of the opinion that under all the attendant circumstances of the case, substantial justice
would be served if the BIR Commissioner be held as precluded from attempting to raise the issue
at this stage. Failure to assert a question within a reasonable time warrants a presumption that the
party entitled to assert it either has abandoned or declined to assert it.
Therefore, the Court of Appeals correctly refused to consider the issues raised by the BIR
Commissioner for the first time on appeal. Its discussion on whether the MPC is a public utility and
whether it is subject to VAT or franchise tax is nothing more than obiter dictum. It is best not at all
to discuss these issues for they do not simply involve questions of law, but also closely-related
questions of fact[23] which neither the Court of Appeals nor this Court could presume or garner
from the evidence on record.
II. Input VAT on capital goods and
services may be the subject of a
claim for refund.
The MPC bases its claim for refund of its input VAT on Section 106(b) of the Tax Code of 1986, as
amended by Republic Act No. 7716,[24] which provides
Sec. 106. Refunds or tax credits of creditable input tax.
xxxx
(b) Capital goods. - A VAT-registered person may apply for the issuance
of a tax credit certificate or refund of input taxes paid on capital goods imported
or locally purchased, to the extent that such input taxes have not been applied
against output taxes. The application may be made only within two (2) years,
after the close of the taxable quarter when the importation or purchase was
made.
Capital goods or properties, as defined in Revenue Regulations No. 7-95, the implementing rules
on VAT, are goods and properties with estimated useful life greater than one year and which are
treated as depreciable assets under Section 29(f), used directly or indirectly in the production or
sale of taxable goods or services.[25]
Contrary to the argument of the BIR Commissioner, input VAT on capital goods is among
those expressly recognized as creditable input tax by Section 104(a) of the Tax Code of 1986, as
amended by Rep. Act No. 7716,[26] to wit
Sec. 104. Tax Credits. - (a) Creditable input tax. - Any input tax
evidenced by a VAT invoice or official receipt issued in accordance with Section
108 hereof on the following transactions shall be creditable against the output
tax:
(1) Purchase or importation of goods:
(A) For sale; or
(B) For conversion into or intended to form part of a finished product for
sale including packing materials; or
(C) For use as supplies in the course of business; or
(D) For use as materials supplied in the sale of service; or
(E) For use in trade or business for which deduction for
depreciation or amortization is allowed under this Code, except
automobiles, aircraft and yachts. [Emphasis supplied.]
Thus, goods and properties used by the taxpayer in its VAT-taxable business, subject to
depreciation or amortization in accordance with the Tax Code, are considered capital goods. Input
VAT on the purchase of such capital goods is creditable against the taxpayers output VAT. The
taxpayer is further given the option, under Section 106(b) of the Tax Code of 1986, as amended
by Republic Act No. 7716, to claim refund of the input VAT on its capital goods, but only to the
extent that the said input VAT has not been applied to its output VAT.
This Court, likewise, will not give credence to the BIR Commissioners contention that the claim for
refund of input VAT on capital goods by the MPC should be denied for the latters failure to comply
with the requirements for the refund of input VAT credits on zero-rated sales provided in Section
16 of Revenue Regulations No. 5-87, as amended by Revenue Regulations No. 3-88. The BIR
Commissioner is apparently confused. MPC is claiming refund of the input VAT it has paid on the
purchase of capital goods, it is not claiming refund of its input VAT credits attributable to its zero-
rated sales. These are two different input VAT credits, arising from distinct transactions, although
both may be the subject of claims for refund by the taxpayer.[27] Indeed, the very same regulation
invoked by the BIR Commissioner, Revenue Regulations No. 5-87, as amended, distinguishes
between these two refundable input VAT credits and discusses them in two separate paragraphs:
Section 16(a) on zero-rated sales of goods and services, and Section 16(b) on capital goods. It is
also worth noting that Revenue Regulations No. 7-95, issued on 9 December 1995, which
consolidated all VAT regulations, already superseded Revenue Regulations No. 5-87. Still,
Revenue Regulations No. 7-95 maintains the distinction between these two input VAT credits,
discussing the zero-rated sales of goods or properties or services in Section 4.106-1(a), and
capital goods in Section 4.106-1(b).
Hence, the present claim for refund of input VAT on capital goods filed by MPC need not
comply with the requirements for refund of input VAT attributable to zero-rated sales.
III. There is no reason for this Court
to disturb the findings of fact of the
CTA, as affirmed by the Court of
Appeals.
While it is true, as the BIR Commissioner alleges, that the MPC has the burden of proving
that it is entitled to the refund it is claiming for, both the CTA and Court of Appeals had ruled that
the MPC presented substantial evidence to support its claim for refund of its input VAT on capital
goods and services in the amount of P28,744,626.95.
The CTA found that MPC is registered as a VAT-taxpayer, as evidenced by its Certificate
of Registration, issued by the BIR Revenue District Office (RDO) No. 60, on 26 January 1996. The
BIR Commissioner does not contest this fact, and does not offer any explanation as to why the
BIR RDO had approved the registration of MPC as a VAT-taxpayer when, as the BIR
Commissioner is now asserting, the MPC is not subject to VAT but to franchise tax. The MPC had
been filing its VAT Quarterly Returns, including those for the period covered by its claim for refund,
1 April 1996 to 31 December 1996, reporting and reflecting therein the input VAT it had paid on its
purchase of capital goods and services. These capital goods and services were necessary in the
construction of the power plant facilities used by MPC in electric power generation.
The VAT invoices and receipts submitted by MPC, in support of its claim for refund, had
been examined and evaluated by an independent auditor, as well as by the CTA itself. Thus, from
the original amount of P39,330,500.85 claimed by MPC for refund, the independent auditor, SGV
& Co., found only the sum of P28,745,502.40 sufficiently supported by valid invoices and/or official
receipts. Following its own examination and evaluation of the evidence submitted, the CTA further
reduced the amount refundable to P28,744,626.95 after disallowing the input VAT on the purchase
of xerox and office supplies which cannot be capitalized and not necessary in the construction of
power plant facilities.[28]
It is worth noting that the foregoing findings by the CTA were affirmed in totality by the Court of
Appeals. Likewise, this Court finds no reason to disturb the foregoing findings of the tax court.
Another well-settled principle in this jurisdiction is that this Court is bound by the findings of fact of
the CTA. Only errors of law, and not rulings on the weight of evidence, are reviewable by this
Court. Findings of fact of the CTA are not to be disturbed unless clearly shown to be unsupported
by substantial evidence.[29] Quite the reverse, the claim of MPC for refund of input VAT on its
purchase of capital goods and services in the present case is found to be supported by substantial
evidence, not just by the CTA, but also by the Court of Appeals. The BIR Commissioner failed to
convince this Court otherwise.
IV. The BIR should seriously study
and consider each and every
application for claim for refund
pending before it.
As a final point, this Court would like to call the attention of the BIR Commissioner, as well as the
responsible BIR officers, to seriously study and consider each and every application for claim for
refund filed before their office. It is very obvious to this Court that the Answer filed by the BIR
Commissioner before the Court of Appeals, which it essentially reproduced as its Memorandum
before the same court, presented general and pro forma arguments. The BIR Commissioner only
raised belatedly before the Court of Appeals the issues of whether MPC is a public utility and
whether it is subject to franchise tax and not VAT. Even then, his Petition for Review before the
appellate court, numbering only six pages, with only one page devoted to a discussion of the
merits of his Petition, left much to be desired and would hardly persuade any court. Since he
represents the interest of the government in tax cases, the BIR Commissioner should exert more
effort and exercise more diligence in preparing his pleadings before any court; he should not wait
to do so only upon appeal of his case to the higher court. This Court may not always be inclined to
allow him to remedy his past laxity.
IN VIEW OF THE FOREGOING, the instant Petition is hereby DENIED. The Decision, dated 30
July 2003, of the Court of Appeals in CA-G.R. SP No. 60783, which affirmed in toto the Decision,
dated 11 July 2000, of the CTA in CTA Case No. 5658, is hereby AFFIRMED. The BIR
Commissioner is hereby ORDERED to issue in favor of MPC a tax credit certificate in the amount
of P28,744,626.95 representing input VAT paid on capital goods and services for the period of 1
April 1996 to 31 December 1996. No pronouncement as to costs.
SO ORDERED.
CU-UNIJENG vs. CA
DECISION
GARCIA, J.:
By this petition for review on certiorari, petitioner Charles Cu-Unjieng seeks the reversal
of the following issuances of the Court of Appeals (CA) in CA-G.R. CV No. 8177-B-
UDK, entitled Charles Cu-Unjieng, plaintiff-appellant vs. Union Bank of the Philippines, et al.,
defendants-appellees, to wit:
1. Resolution[1] dated May 10,1999, dismissing, for non-
payment of docket and other lawful fees, petitioners appeal from an
earlier decision of the Regional Trial Court at Malolos, Bulacan which
dismissed his complaint for specific performance and damages against
respondent Union Bank of the Philippines and others; and
2. Resolution[2] dated July 30, 1999 which denied petitioners
Motion for Reconsideration and ordered expunged the appeal brief
thereto attached.
The facts:
Respondent Union Bank of the Philippines (UBP) is the owner of a parcel of agricultural
land with an area of 218,769 square meters situated in Barangay Sta. Maria, San Miguel, Bulacan
and registered in its name under Transfer Certificate of Title (TCT) No. TC-1062 of the Registry of
Deeds of Bulacan.
Sometime in January 1994, UBP caused the posting on the bulletin boards of its branch
offices of a three-page list of acquired realty assets available for sale to interested parties.
Included in said list was the aforementioned parcel of land, offered to be sold for P2,200,000.00.
Petitioner, through a letter[3] dated April 11, 1994 and addressed to Joselito P. Valera,
manager of UBPs Acquired Assets Department, offered to buy the subject property for a lesser
amount of P2,078,305.50, payable as follows: 50% as down payment with the balance to be paid
in equal monthly installments over a period of two (2) years. Petitioner explained that his offer for
an amount lesser than UBPs asking price was on account of five (5) tenants occupying the subject
land who were allegedly demanding P500,000.00 to voluntarily vacate the same.
As proof of his interest to buy the property, petitioner tendered PCIB Check No. 565827
for P103,915.27, purportedly representing 10% of the 50% down payment as earnest money or
deposit. UBP acknowledged receipt thereof by way of Union Bank Receipt No. 495081 dated April
11, 1994.
On August 30, 1994, petitioner wrote a follow-up letter to UBP inquiring on the status of
his offer to buy the subject premises.[4]
Via a reply-letter dated August 31, 1994, the manager of UBPs Acquired Assets Department
advised petitioner that his offer to purchase is yet to be acted upon because the bank was still
awaiting the opinion of its legal division regarding the sale of CARPable agricultural assets
acquired by the bank.[5]
As it turned out, UBP rejected petitioners offer as shown by the fact that in another letter [6] dated
December 19, 1994, the bank informed petitioner that his offer could not be favorably acted upon
on account of the legal divisions opinion that sales of lands covered by the Comprehensive
Agrarian Reform Law without prior Department of Agrarian Reform (DAR) approval are considered
null and void. Accordingly, UBP advised petitioner to pick up the refund of his P103,915.27
earnest money at the banks disbursing unit.
Unable to accept UBPs rejection of his offer, petitioner, through counsel, made a formal
demand[7] for the bank to comply with its obligation to transfer and deliver the title of the subject
property to him by executing the proper deed of conveyance, under the terms and conditions set
forth in his April 11, 1994 offer.
Responding thereto, UBP, thru its counsel, Atty. Luzano, in a letter[8] dated July 19, 1995,
reiterated the banks rejection of petitioners offer as the land being carpable could only be
disposed of by the bank either thru Voluntary Offer to Sell (VOS) or compulsory acquisition, the
procedure of which is outlined in Sec. 16 of Republic Act (RA) No. 6657.
It was against the foregoing backdrop of events that, on February 6, 1997, in the Regional
Trial Court (RTC) at Malolos, Bulacan, petitioner filed his complaint[9] in this case for Specific
Performance and Damages against UBP, impleading as co-defendant in the suit the Register of
Deeds of Bulacan. Docketed as Civil Case No. 80-M-97 and raffled to Branch 9 of the court, the
complaint principally sought UBPs compliance with an alleged perfected contract of sale between
it and petitioner relative to the parcel of land in question. More specifically, the complaint prays for
a judgment ordering UBP to:
a) accept payments from the plaintiff [petitioner] for the sale of the Property in
accordance with the terms and conditions of the letter dated 11 April
1994;
b) execute a Deed of Absolute Sale over the Property covered by TCT No. TC
1062 of the Registry of Deeds of the Province of Bulacan upon the
plaintiffs full payment of the amount of Two Million Seventy Eight
Thousand Three Hundred Five & 50/100 (P2,078,305.50), failing in
which, the deputy sheriff should be ordered to execute such deed and
the Registry of Deeds to cancel the title of the Bank and issue a new one
in favor of the plaintiff;
c) pay plaintiff the sum of Five Hundred Thousand Pesos (P500,000.00) as moral
damages;
d) pay plaintiff the sum of Five Hundred Thousand Pesos (P500,000.00) as
exemplary damages;
 e) pay plaintiff the sum of Four Hundred Thousand Pesos (P400,000.00) as
attorneys fees; and
f) pay the costs of the suit.
Other reliefs, just and equitable under the premises, are likewise
respectfully prayed for.
After due proceedings, the trial court, in a decision dated September 1, 1998,[10] upon a
finding that no perfected contract of sale transpired between the parties, dismissed petitioners
complaint for lack of sufficient cause of action, thus:
WHEREFORE, on the basis of the evidence adduced and the
laws/jurisprudence applicable thereon, judgment is hereby rendered
DISMISSING the complaint in the above entitled case for want of sufficient cause
of action as well as the defendants counterclaim for damages and attorneys fees
for lack of proof to warrant the same.
However, defendant Union Bank of the Philippines is ordered to
reimburse plaintiff Charles Cu-Unjieng the amount of P103,915.27 representing
the face value of PCIBank Check No. 565827 tendered by the latter to the former
as purported earnest money, with interest thereon at the prevailing rates of
interest periodically bestowed by UBP to its savings depositors from April 11,
1994, through the succeeding years, and until the full amount thereof shall have
been delivered to the plaintiff.
No pronouncement as to costs.
SO ORDERED.
With his motion for reconsideration having been denied, petitioner filed with the trial court a Notice
of Appeal[11]therein making known that he is taking an appeal from the adverse decision to the CA.
Acting thereon, the trial court issued an Order[12] directing the elevation of the records of the case
to the CA, whereat petitioners appeal was docketed as CA-G.R. CV No. 8177-B-UDK.
As things would have it, in the herein first assailed Resolution dated May 10, 1999, the CA
dismissed petitioners appeal for nonpayment of the required docket and other lawful appeal fees,
to wit:
For failure of the appellant [petitioner] to pay the docket and other lawful
fees (Sec. 4, Rule 41, 1997 Rules of Civil Procedure), the Court Resolved to
DISMISS the appeal pursuant to Sec. 1(c), Rule 50 of the same Rule.
SO ORDERED.[13]
Petitioner filed a Motion for Reconsideration, attaching thereto his appellants brief.
However, in a subsequent Resolution dated July 30, 1999,[14] the appellate court denied the
motion and even expunged from the record the appellants brief thereto attached:
Acting on the motion of the plaintiff-appellant [petitioner] for a
reconsideration of the Resolution of May 10, 1999, which dismissed the appeal
for the reason stated therein, and considering the opposition interposed thereto
by defendant-appellee [respondent] Union Bank of the Philippines and it
appearing that the filing of the notice of appeal of November 5, 1988, was not
accompanied by the full and correct payment of the corresponding appellate
court docket and other lawful fees, and for such tardiness of more than four (4)
months, the Court resolved to DENY the motion for reconsideration and the
attached brief thereto ordered EXPUNGED.
In Pedrosa vs. Hill, 257 SCRA 373, the Supreme Court, citing Rodillas
vs. Commission on Elections (245 SCRA 702 aptly said:
xxx the mere filing of the notice of appeal was not
enough. It should be accompanied by the payment of the
correct amount of appeal fee. In other words, the payment of
the full amount of the docket fee is an indispensable step for the
perfection of an appeal. In both original and appellate cases, the
court acquires jurisdiction over the case only upon the payment
of the prescribed docket fees. Well-rooted is the principle that
perfection of an appeal within the statutory or reglementary
period is not only mandatory but also jurisdictional and failure to
do so renders the questioned decision final and executory, and
deprives the appellate court or body of jurisdiction to alter the
final judgment much less to entertain the appeal. This requirement
of an appeal fee is by no means a mere technicality of law or
procedure. It is an essential requirement without which the decision
appealed from would become final and executory, as if no appeal
was filed at all.
SO ORDERED.
Undaunted, petitioner is now with us via the present recourse seeking a relaxation of
procedural rules and ultimately the reversal and setting aside of the assailed twin resolutions of the
appellate court.
Petitioner would have the Court view his failure to pay the appeal docket fees on time as a
non-fatal lapse, or a non-jurisdictional defect which the CA should have ignored in order to attain
substantial justice. Further, petitioner passes the blame to the RTC clerk of court who allegedly made
the erroneous computation of docket fees.
We are not persuaded.
Doctrinally entrenched is the pronouncement that the right to appeal is merely statutory and a
party seeking to avail of that right must comply with the statute or rules. [15]
 Rule 41, Section 4, of the 1997 Rules of Civil Procedure provides:
SEC. 4. Appellate court docket and other lawful fees. Within the period for
taking an appeal, the appellant shall pay to the clerk of the court which rendered the
judgment or final order appealed from, the full amount of the appellate court docket
and other lawful fees. Proof of payment of said fees shall be transmitted to the
appellate court together with the original record or the record on appeal.
Well-settled is the rule that payment of the docket and other legal fees within the prescribed
period is both mandatory and jurisdictional,[16] noncompliance with which is fatal to an appeal. For, to
stress, appeal is not a matter of right, but a mere statutory privilege.[17]
An ordinary appeal from a decision or final order of the RTC to the CA must be made within
fifteen (15) days from notice.[18] And within this period, the full amount of the appellate court docket and
other lawful fees must be paid to the clerk of the court which rendered the judgment or final order
appealed from.
petitioner only after four (4) months following the expiration of the reglementary period to take an
appeal.
With the reality obtaining in this case that payment of the appellate docket fees was belatedly
made four (4) months after the lapse of the period for appeal, it appears clear to us that the CA did not
acquire jurisdiction over petitioners appeal except to order its dismissal, [23] as it rightfully did. Thus, the
September 1, 1998 decision of the RTC has passed to the realm of finality and became executory by
operation of law.
We must emphasize that invocation of substantial justice is not a magical incantation that will
automatically compel this Court to suspend procedural rules. Rules of procedure are not to be belittled
or dismissed simply because their non-observance may have resulted in prejudice to a partys
substantive rights. Like all rules, they are required to be followed. So it must be here.

Time and again, this Court has consistently held that full payment of docket fees within the WHEREFORE, petition is DENIED and the assailed resolutions dated May 10,1999 and July
prescribed period is mandatory for the perfection of an appeal. Without such payment, the appeal is not 30, 1999 of the Court of Appeals AFFIRMED.
perfected and the appellate court does not acquire jurisdiction to entertain the appeal, thereby rendering
the decision sought to be appealed final and executory.[19]

For sure, nonpayment of the appellate court docket and other lawful fees within the
reglementary period as provided under Section 4, Rule 41, supra, is a ground for the dismissal of an
appeal under Section 1(c) of Rule 50, to wit:
SECTION 1. Grounds for dismissal of appeal.- An appeal may be dismissed
by the Court of Appeals, on its own motion or on that of the appellee, on the following
grounds:

xxx xxx xxx

c. Failure of the appellant to pay the docket and other lawful fees as
provided in section 4 of Rule 41; xxx

This Court has invariably sustained the CAs dismissal on technical grounds under the
aforequoted provision unless considerations of equity and substantial justice present cogent reasons to
hold otherwise. True, the rules may be relaxed but only for persuasive and weighty reasons, to relieve a
litigant of an injustice commensurate with his failure to comply with the prescribed procedure. [20] So it is
that in La Salette College vs. Victor Pilotin,[21] we held:
Notwithstanding the mandatory nature of the requirement of payment of
appellate docket fees, we also recognize that its strict application is qualified by the
following: first, failure to pay those fees within the reglementary period allows only
discretionary, not automatic, dismissal; second, such power should be used by the
court in conjunction with its exercise of sound discretion in accordance with the tenets
of justice and fair play, as well as with a great deal of circumspection in consideration
of all attendant circumstances

Then, too, in Mactan Cebu International Airport Authority (MCIAA) vs. Mangubat,[22] we held
that late payment of docket fees may be admitted when the party showed willingness to abide by the
Rules by immediately paying the required fees. Mactan, however, cannot be a source of comfort for
herein petitioner. For there, the appellate docket fees were paid six (6) days after the timely filing of the
notice of appeal. Unlike in Mactan, payment of the appellate docket fees in this case was effected by
BANK OF COMMERCE V SERRANO
For our review on certiorari is the civil aspect of the Court of Appeals Decision,[1] dated
September 28, 2001, in CA-G.R. CR No. 24570 as well as its Resolution,[2] dated January 17,
2002, denying petitioners motion for reconsideration. The Court of Appeals set aside the
Decision[3] dated May 31, 2000, of the Regional Trial Court (RTC) Branch 105 of Quezon City.
The facts are as follows:
Petitioner Bank of Commerce (formerly Boston Bank of the Philippines) is a private domestic
banking institution. Respondent Teresita S. Serrano is the General Manager and Treasurer of Via
Moda International, Inc., a domestic business entity primarily engaged in the import and export of
textile materials and fabrics.
Via Moda International, represented by respondent, obtained an export packing loan from
petitioner, Bank of Commerce (BOC)-Diliman, Quezon City Branch, in the amount of US$50,000
(P1,382,250), secured by a Deed of Assignment over Irrevocable Transferable Letter of Credit No.
100072119. Respondent Serrano executed in favor of BOC Promissory Note No. 94/086 for
US$50,000 dated May 6, 1994 with maturity date on July 14, 1994. Via Moda then opened a
deposit account for the proceeds of the said loan.[4]
On March 15, 1994, BOC issued to Via Moda, Irrevocable Letter of Credit No. BCZ-940051,
in the amount of US$56,735, for the purchase and importation of fabric and textile products from
Tiger Ear Fabric Co. Ltd. of Taiwan. To secure the release of the goods covered, respondent, in
representation of Via Moda, executed Trust Receipt No. 94-22221 dated April 21, 1994 with due
date on July 20, 1994 for US$55,944.73 (P1,554,424.32).[5]
Under the terms of the trust receipt, Via Moda agreed to hold the goods in trust for petitioner
as the latters property and to sell the same for the latters account. In case of sale, the proceeds
are to be remitted to the bank as soon as it is received, but not later than the maturity date. Said
proceeds are to be applied to the relative acceptances, with interest at the rate of 26% per annum,
with a penalty of 36% per annum of the total amount due until fully paid in case of non-payment of
the trust receipt and relative acceptance at maturity date or, in the alternative, to return the goods
in case of non-sale.[6]
The goods covered by the trust receipt were shipped by Via Moda to its consignee in New
Jersey, USA, who sent an Export Letter of Credit issued by the Bank of New York, in favor of
BOC. The Regional Operations Officer of BOC signed the export declarations to show consent to
the shipment. The total value of the entrusted goods which were shipped per export declaration
was US$81,987 (P2,246,443.80). The proceeds of the entrusted goods sold were not credited to
the trust receipt but, were applied by the bank to the principal, penalties and interest of the export
packing loan. The excess P472,114.85 was applied to the trust receipt, leaving a balance
of P1,444,802.28 as of November 15, 1994.[7]
On November 16, 1994, petitioner sent a demand letter to Via Moda to pay the said amount
plus interest and penalty charges, or to return the goods covered by Trust Receipt No. 94-22221
within 5 days from receipt. The demand was not heeded. As of December 15, 1998, the
outstanding balance of Via Moda was P4,783,487.15.[8]
On March 8, 1998, respondent was charged with the crime of estafa under Article 315 (b) of
the Revised Penal Code in relation to Presidential Decree No. 115.[9]
On May 31, 2000, the trial court rendered judgment and the dispositive portion of which
reads:
WHEREFORE, in the light of the foregoing, the Court finds accused Teresita S. Serrano GUILTY
beyond reasonable doubt of the crime charged in the Information filed in this case and sentences
her to serve the indeterminate penalty of imprisonment from EIGHT (8) YEARS AND ONE (1)
DAY OF PRISION MAYOR, AS MINIMUM, TO TWENTY (20) YEARS OF RECLUSION
TEMPORAL, AS MAXIMUM, including the accessory penalties. She is ordered to pay her civil
liability to Bank of Commerce in the amount of P4,783,487.15, with interest until fully paid, and the
costs of this suit.
SO ORDERED.[10]
Respondent appealed to the Court of Appeals which rendered a decision dated September
28, 2001, reversing the trial courts decision. The Court of Appeals held that the element of
misappropriation or conversion in violation of P.D. No. 115, in relation to the crime of estafa, was
absent in this case, thereby acquitting the respondent and deleting her civil liability. The decretal
portion of the decision reads as follows:
WHEREFORE, premises considered, the appealed decision is hereby REVERSED, and the
accused-appellant ACQUITTED of the crime charged. The civil liability adjudged by the court a
quo is hereby deleted, there being no showing that accused-appellant bound herself personally
liable with respect to the loan secured by the trust receipt.
SO ORDERED.[11]
Petitioner filed a Motion for Reconsideration which was denied. Petitioner now comes to this
Court submitting the following issues for our resolution:
I. WHETHER RESPONDENT IS JOINTLY AND SEVERALLY LIABLE WITH VIA MODA
UNDER THE GUARANTEE CLAUSE OF LC NO. [BCZ-940051] (EXHIBIT A)
SECURED BY TRUST RECEIPT NO. [94-22221] (EXHIBIT C).[12]
II. WHETHER THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN
DELETING THE CIVIL LIABILITY OF RESPONDENT SERRANO IN ITS DECISION
DATED SEPTEMBER 28, 2001.[13]
On the first issue, petitioner contends that the Court of Appeals made a manifestly mistaken
inference from its findings or a misapprehension of facts and overlooked a vital piece of evidence
on record, particularly, the Guarantee Clause of the Letter of Credit secured by the Trust Receipt.
Petitioner further alleges that the said Guarantee Clause provides that the liability of respondent is
joint and solidary; hence, she should be held liable on the obligation.
A letter of credit is a separate document from a trust receipt. While the trust receipt may have
been executed as a security on the letter of credit, still the two documents involve different
undertakings and obligations. A letter of credit is an engagement by a bank or other person made
at the request of a customer that the issuer will honor drafts or other demands for payment upon conclusive, even in this Court.[20] In this case, we find no cogent reason to disturb the foregoing
compliance with the conditions specified in the credit. Through a letter of credit, the bank merely factual findings of the Court of Appeals.
substitutes its own promise to pay for the promise to pay of one of its customers who in return
promises to pay the bank the amount of funds mentioned in the letter of credit plus credit or At any rate, petitioner BOC is not precluded from filing a separate civil action against the
commitment fees mutually agreed upon.[14] By contrast, a trust receipt transaction is one where the responsible party where the abovementioned issues could be properly resolved or determined.
entruster, who holds an absolute title or security interests over certain goods, documents or The issues raised by herein petitioner involve a determination of facts and require the admission
instruments, released the same to the entrustee, who executes a trust receipt binding himself to and examination of additional evidence for its resolution. That cannot be done in a petition for
hold the goods, documents or instruments in trust for the entruster and to sell or otherwise dispose review on certiorari by merely appealing the civil aspect of an acquittal in a criminal case.
of the goods, documents and instruments with the obligation to turn over to the entruster the WHEREFORE, the petition is DENIED for lack of merit. The Decision dated September 28,
proceeds thereof to the extent of the amount owing to the entruster, or as appears in the trust 2001 and the Resolution dated January 17, 2002, of the Court of Appeals in CA-G.R. CR No.
receipt, or return the goods, documents or instruments themselves if they are unsold, or not 24570, are AFFIRMED.
otherwise disposed of, in accordance with the terms and conditions specified in the trust receipt.[15]
However, the question of the liability of respondent based on the Guarantee Clause of the
Letter of Credit, was not raised either at the trial court or before the Court of Appeals. A question
that was never raised in the courts below cannot be allowed to be raised for the first time on
appeal without offending basic rules of fair play, justice and due process. Such an issue was not
brought to the fore either in the trial court or the appellate court, and would have been disregarded
by the latter tribunal for the reasons previously stated. With more reason, the same does not
deserve consideration by this Court.[16]
On the second issue, the Court of Appeals held that respondent Serrano cannot be held
civilly liable under the trust receipt since she was not made personally liable nor was she a
guarantor therein. The parties stipulated during the pre-trial that respondent Serrano executed the
trust receipt in representation of Via Moda, Inc., which has a separate personality from Serrano,
and petitioner BOC failed to show sufficient reason to justify the piercing of the veil of corporate
fiction. It thus ruled that this was not Serranos personal obligation but that of Via Moda and there
was no basis of finding her solidarily liable with Via Moda. [17]
Worthy of mention at this point is the Court of Appeals finding that there was no
misappropriation or conversion by the respondent of the proceeds of the sale in the goods, subject
of the trust receipt since the proceeds were actually received by petitioner but the latter applied the
same to Via Modas other obligations under the export packing loan. It further stated that such
application of payment to another obligation was done by petitioner on its own and should not
create a criminal liability on the part of respondent who did not take part nor had any knowledge
thereof. It is on this premise that the respondent was acquitted of the crime charged.[18]
Incidentally, petitioner urged this Court to review the factual findings of the case due to
contradictory findings of the trial court and the Court of Appeals arising from misappreciation of
facts by the Court of Appeals. Such plea must be rejected. It is a well established rule that in an
appeal via certiorari, only questions of law may be raised,[19] and we find petitioners averments
insufficient to disregard this well-entrenched rule. This Court does not, of itself, automatically delve
into the record of a case to determine the facts anew where there is disagreement between the
findings of fact by the trial court and by the Court of Appeals. When the disagreement is merely on
the probative value of the evidence, i.e., which is more credible of two versions, we limit our review
to only ascertaining if the findings of the Court of Appeals are supported by the records. So long
as the findings of the appellate court are consistent with and not palpably contrary to the evidence
on record, we shall decline to make a review on the probative value of such evidence. The findings
of fact of the Court of Appeals, and not those of the trial court, will be considered final and
BALUYOT vs. POBLETE
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking
to reverse the Decision[1] of the Court of Appeals (CA) dated December 21, 1999 and its
Resolution[2] of August 4, 2000 in CA-G.R. CV No. 51534. The assailed CA Decision affirmed the
Decision of the Regional Trial Court (RTC) of Pasig, Branch 167 which dismissed herein
petitioners Complaint in Civil Case No. 52268, while the questioned Resolution denied petitioners
Motion for Reconsideration.
The facts of the case are as follows:
On July 20, 1981, herein petitioner, Guillermina Baluyut (Baluyut), loaned from the spouses
Eulogio and Salud Poblete the sum of P850,000.00. As evidence of her indebtedness, Baluyut
signed, on even date, a promissory note for the amount borrowed[3]. Under the promissory note,
the loan shall mature in one month. To secure the payment of her obligation, she conveyed to the
Poblete spouses, by way of a real estate mortgage contract, a house and lot she owns, covered
by Transfer Certificate of Title (TCT) No. 137129 and located in Barrio Mapuntod, then
Municipality of Mandaluyong, Province of Rizal.[4] Upon maturity of the loan, Baluyut failed to pay
her indebtedness. The Poblete spouses subsequently decided to extrajudicially foreclose the real
estate mortgage. On August 27, 1982, the mortgaged property was sold on auction by the
Provincial Sheriff of Rizal to the Poblete spouses who were the highest bidders, as evidenced by a
Certificate of Sale issued pursuant thereto.[5] Baluyut failed to redeem the subject property within
the period required by law prompting Eulogio Poblete to execute an Affidavit of Consolidation of
Title.[6]Subsequently, TCT No. 43445 was issued in the name of Eulogio and the heirs of Salud,
who in the meantime, died.[7] However, Baluyut remained in possession of the subject property
and refused to vacate the same. Hence, Eulogio and the heirs of Salud filed a Petition for the
issuance of a writ of possession with the RTC of Pasig. The case was docketed as Case No. R-
3457. Subsequently, the trial court issued an order granting the writ of possession. However,
before Eulogio and the heirs of Salud could take possession of the property, Baluyut filed an
action for annulment of mortgage, extrajudicial foreclosure and sale of the subject property, as well
as cancellation of the title issued in the name of Eulogio and the heirs of Salud, plus damages.
The case was docketed as Civil Case No. 52268 and was subsequently consolidated with Case
No. R-3457. In the meantime, Eulogio died and was substituted by his heirs. After trial on the
merits, the trial court issued a Decision on September 13, 1995 dismissing Baluyuts complaint.[8]
Aggrieved by the trial courts Decision, herein petitioner filed an appeal with the CA.
On December 21, 1999, the CA promulgated the presently assailed Decision affirming the
judgment of the trial court.[9]
Petitioner filed a Motion for Reconsideration but the same was denied in a Resolution
issued by the CA on August 4, 2000.[10]
Hence, the present petition with the following assignment of errors:
I
The decision and the resolution are both palpably infirm in holding that
no prior demand to pay is necessary for a loan to mature when there is
conflict between the date of maturity of the loan as stated in the Deed of
Real Estate Mortgage and the Promissory Note on the one hand and the
real date of its maturity on the other.
II
The decision and the resolution are both palpably infirm in holding that
the sheriff who conducted the foreclosure proceedings should be
presumed to have regularly performed his duty in conducting the
foreclosure proceedings despite the inability of the Office of the
Provincial Sheriff who had been ordered by the trial court to produce the
records of the foreclosure in question and show that there was
compliance with the required posting of notices in three public places
and with the required publication for three consecutive weeks in a
newspaper of general circulation.
III
That the Decision and Resolution are legally infirm in holding that
because the Petitioner-Appellant failed to invoke her right to be sent an
Assessment Notice by the highest bidder thirty days before the
expiration of the right of legal redemption during the trial and on appeal,
it should be deemed that she had waived her right to this benefit under
the law despite a clear showing that the said mandatory requirement
should have been strictly observed before title could be consolidated in
favor of the highest bidder as provided for in the certificate of sale issued
by the sheriff.[11]
In her first assigned error, petitioner contends that herein private
respondents witness, a certain Atty. Edwina Mendoza, is a competent witness and
that her testimony, that the maturity of the loan is one year, is acceptable proof of
the existence of collateral agreements which were entered into by the parties who
executed the Promissory Note and the Real Estate Mortgage prior,
contemporaneous and subsequent to the execution of these documents. Petitioner
also argues that the issue of the real date of the maturity of the loan can be settled
only by a formal letter of demand indicating the sum due and the specific date of
payment which is the duty of the private respondents to give; that absent said letter
of demand, the loan may not be considered to have matured; that, as a
consequence, the property given as a collateral may not be foreclosed and the
subsequent consolidation of title over the subject property should be annulled.
Petitioner further contends that even if the issue on the term of the loan was first
brought up in petitioners Addendum to the Motion for Reconsideration filed with
the CA, the appellate court may still properly consider this issue in the interest of
justice and equity considering that this is a matter of record and has some bearing
on the other issues submitted for resolution.

Anent her second assignment of error, petitioner contends that the CA erred in
relying on the rule on presumption of regularity in the sheriffs performance of his duties
relative to the foreclosure of the questioned property absent any evidence presented by
petitioner to prove that the sheriff failed to comply with the legal requirements in the sale of
the foreclosed properties. Petitioner argues that under the law, the sheriff is required to
submit an Affidavit of Posting of Notices to the clerk of court and to the judge before he is
allowed to schedule an auction sale. However, per letter from the Office of the Clerk of
Court, there are no records of the foreclosure proceedings involving the subject property.
Based on this premise, petitioner concludes that since the existence of these documents is
supposed to be in the custody of the sheriffs office and that the private respondents are
supposed to have copies of these documents, being the ones who prosecuted the
foreclosure proceedings, petitioners contention that there was non-compliance with the
legal requirements for the validity of the foreclosure proceedings partakes of a negative
allegation which she need not prove. Petitioner argues that in the absence of documents
evidencing the foreclosure proceedings over the subject property, the lower court should
have acted judiciously by annulling the foreclosure and ordering the repeat of the
proceedings.
As to her third assigned error, petitioner asserts that despite the fact that she is entitled
under the law to an Assessment Notice or Notice of Redemption coming from the highest bidder
30 days before the expiration of the period to redeem apprising her of the principal amount, the
interest, taxes and other lawful fees due in case she opts to exercise her right of redemption, she
did not receive any notice of this kind. Petitioner contends that her right to this notice is not subject
to waiver and that her failure to invoke the same during trial and on appeal does not preclude her
from invoking such right in her motion for reconsideration filed with the CA and in the present
petition.
In their Motion to Dismiss, which the Court treated as their comment on the petition,
private respondents contend that the petition should be dismissed on the ground that no question
of law was raised therein. Private respondents argue that the issue as to the supposed conflict
between the date of maturity of the loan as stated in the Deed of Real Estate Mortgage and the
Promissory Note, on one hand, and the real date of maturity as agreed upon by the parties, on the
other, as well as the question of whether or not the sheriff who conducted the foreclosure
proceedings involving the subject property complied with the legal requirements of posting and
publication are questions of fact which are not proper subjects of a petition for review on certiorari.
Furthermore, private respondents also assert in their Memorandum that the questions of fact being
raised by petitioner had already been ruled upon by the RTC and the CA in favor of private
respondents; that the findings of fact of the RTC and the CA are binding on this Court.
The Court finds the petition without merit.
Petitioner admits that the issue regarding the date of maturity of the loan which she
incurred from the Poblete spouses was first brought up only in her Addendum to the Motion for
Reconsideration filed before the CA. In an effort to clothe her argument with merit, petitioner
contends that the CA should have properly considered this issue in the interest of justice and
equity. The Court is not persuaded. It is settled that an issue not raised during trial could not be
raised for the first time on appeal as to do so would be offensive to the basic rules of fair play,
justice, and due process.[12] Contrary to petitioners contention, it would be the height of injustice if
the CA allowed her to raise an issue at a very late stage of the proceedings. It would be unfair to
the adverse party who would have no opportunity to present evidence in contra to the new theory,
which it could have done had it been aware of it at the time of the hearing before the trial
court.[13] It is true that this rule admits of exceptions as in cases of lack of jurisdiction, where the
lower court committed plain error, where there are jurisprudential developments affecting the
issues, or when the issues raised present a matter of public policy.[14] However, the Court finds
that none of these exceptions are present in the instant case.
In addition, the issue regarding the date of maturity of the loan is factual and settled is the
rule that only questions of law may be raised in a petition for review on certiorari under Rule 45 of
the Rules of Court, as the Supreme Court is not a trier of facts.[15]It is not the function of this Court
to review, examine and evaluate or weigh the probative value of the evidence presented. [16]While
there are also exceptions to this rule such as when the factual findings of the trial court and the CA
are contradictory; when the inference made by the CA is manifestly mistaken or absurd; when the
judgment of the CA is premised on its misapprehension of facts; and, when the CA failed to
resolve relevant facts which, if properly considered, would justify a modification or reversal of the
decision of the appellate court,[17] this Court finds that the present case does not fall under any of
these exceptions.
Even if petitioner had properly raised the issue regarding the real date of maturity of the
loan, it is a long-held cardinal rule that when the terms of an agreement are reduced to writing, it is
deemed to contain all the terms agreed upon and no evidence of such terms can be admitted
other than the contents of the agreement itself.[18] In the present case, the promissory note and the
real estate mortgage are the law between petitioner and private respondents. It is not disputed that
under the Promissory Note dated July 20, 1981, the loan shall mature in one month from date of
the said Promissory Note.
Petitioner makes much of the testimony of Atty. Edwina Mendoza that the maturity of the
loan which petitioner incurred is one year. However, evidence of a prior or contemporaneous
verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid
contract.[19] While parol evidence is admissible to explain the meaning of written contracts, it
cannot serve the purpose of incorporating into the contract additional contemporaneous conditions
which are not mentioned at all in writing, unless there has been fraud or mistake.[20] In the instant
case, aside from the testimony of Atty. Mendoza, no other evidence was presented to prove that
the real date of maturity of the loan is one year. In fact there was not even any allegation in the
Complaint and in the Memorandum filed by petitioner with the trial court to the effect that there has
been fraud or mistake as to the date of the loans maturity as contained in the Promissory Note
of July 20, 1981.
Moreover, during her cross-examination, petitioner herself never claimed that the loan
shall mature in one year despite being questioned regarding its maturity. She testified thus:
Q You said that you borrowed P850,000.00 to [sic] Mrs. Poblete, is that
correct?
A Yes sir.
Q In fact, you signed a Real Estate Mortgage marked as Exhibit B?
 A Yes sir.
Q When you signed this Deed of Real Estate Mortgage, you also signed
a Promisory [sic] Note, is that correct?
RECORD: Witness did not answer.
Q Did you sign or not a Promisory [sic] note in relation to this Real
Estate Mortgage.
A I dont remember sir.
Q You dont remember. I am showing to you a Promisory Note with your
signature, did you not sign this dated July 20, 1981?
A Yes sir.
Q Now, according to this Promisory [sic] Note, the loan is for one (1)
month from July 20, 1981, did you pay for that loan on its
maturity date?
A I did not sir.
Q Up to now, you have not paid that loan?
A I have not sir.
Q What happen [sic] to the mortgage when you did not paid [sic] that
loan from one (1) month after July 20, 1981?
A None sir.[21]
In sum, petitioner failed to present clear and convincing evidence to prove her allegation that the
real agreement of the parties is for the loan to mature in one year.
As to the second assigned error, the prevailing jurisprudence is that foreclosure
proceedings have in their favor the presumption of regularity and the burden of evidence to rebut
the same is on the petitioner.[22] Moreover, the Court agrees with the CA that a mortgagor who
alleges absence of a requisite has the burden of establishing that fact.[23] Petitioner failed in this
respect as she did not present any evidence to prove her allegations.
Moreover, the fact that the records of the foreclosure proceedings involving the subject
property could not be found does not necessarily mean that the legal requirements of posting and
publication had not been complied with. Private respondents were able to present the Affidavit of
Publication[24] executed by the publisher of Nuevo Horizonte, a newspaper of general circulation,
together with a clipping[25] of the published notice attached thereto, to prove that notices of the sale
of the subject property were validly published in accordance with law. The affidavit of publication
executed by the publisher of a newspaper stating therein that said newspaper is of general
circulation and that the requisite notice of foreclosure sale was published in said paper in
accordance with law constitutes prima facie evidence of compliance with the required
publication.[26]
As to the alleged lack of posting of the notices of sale in at least three public places,
herein petitioner failed to discharge her burden of proving by convincing evidence her allegation
that there was actually no compliance with the posting requirement. Hence, in the absence of
contrary evidence, the presumption prevails that the sheriff performed his official duty of posting
the notices of sale.[27]
The Courts ruling in Olizon v. Court of Appeals,[28] insofar as posting and publication
requirements in mortgage foreclosure sales are concerned, is instructive:
We take judicial notice of the fact that newspaper publications have
more far-reaching effects than posting on bulletin boards in public places. There
is a greater probability that an announcement or notice published in a newspaper
of general circulation, which is distributed nationwide, shall have a readership of
more people than that posted in a public bulletin board, no matter how strategic
its location may be, which caters only to a limited few. Hence, the publication of
the notice of sale in [a] newspaper of general circulation alone is more than
sufficient compliance with the notice-posting requirement of the law. By
such publication, a reasonably wide publicity had been effected such that those
interested might attend the public sale, and the purpose of the law had been
thereby subserved.
The object of a notice of sale is to inform the public of the nature and
condition of the property to be sold, and of the time, place and terms of the sale.
Notices are given for the purpose of securing bidders and to prevent a sacrifice of
the property. If these objects are attained, immaterial errors and mistakes will not
affect the sufficiency of the notice; but if mistakes or omissions occur in the
notices of sale, which are calculated to deter or mislead bidders, to depreciate
the value of the property, or to prevent it from bringing a fair price, such mistakes
or omissions will be fatal to the validity of the notice, and also to the sale made
pursuant thereto.
In the instant case, the aforesaid objective was attained since there
was sufficient publicity of the sale through the newspaper publication.
There is completely no showing that the property was sold for a price far
below its value as to insinuate any bad faith, nor was there any showing or
even an intimation of collusion between the sheriff who conducted the sale
and respondent bank. This being so, the alleged non-compliance with the
posting requirement, even if true, will not justify the setting aside of the
sale.[29]
In the present case, there was sufficient evidence to prove that notices of the foreclosure sale of
the subject property were published in accordance with law and that there was no allegation, much
less proof, that the property was sold for a price which is considerably lower than its value as to
show collusion between the sheriff and herein private respondents. Hence, even granting that the
sheriff failed to post the notices of foreclosure in at least three public places, such failure, pursuant
to Olizon, is not a sufficient basis in nullifying the auction sale and the subsequent issuance of title
in favor of private respondents.
As to petitioners argument that the sheriff in charge of the auction sale is required to
execute an affidavit of posting of notices, the Court agrees with private respondents contention
that petitioners reliance on the provisions of Section 5, Republic Act (R.A.) No. 720, as amended
by R.A. No. 5939[30], as well as on the cases of Roxas v. Court of Appeals,[31] Pulido v. Court of
Appeals[32] and Tambunting v. Court of Appeals,[33] is misplaced as the said provision of law refers
specifically and exclusively to the foreclosure of mortgages covering loans granted by rural banks.
In the present case, the contracts of loan and mortgage are between private individuals. The
governing law, insofar as the extrajudicial foreclosure proceedings are concerned, is Act No. 3135,
as amended by Act No. 4118.[34] Section 3 of the said law reads as follows:
Sec. 3. Notice shall be given by posting notices of the sale for not less
than twenty days in at least three public places of the municipality or city where
the property is situated and if such property is worth more than four hundred
pesos, such notice shall also be published once a week for at least three
consecutive weeks in a newspaper of general circulation in the municipality or
city.
Unlike in the amended provisions of Section 5, R.A. No. 720, nowhere in the above-quoted
provision of Act No. 3135, as amended, or in any Section thereof, is it required that the sheriff
must execute an affidavit to prove that he published notices of foreclosure in accordance with the
requirements of law.
As to the last assigned error, suffice it to say that the Court agrees with the findings of the
CA that the issue regarding petitioners right to receive an Assessment Notice or Notice of
Redemption from private respondents as the highest bidders during the auction sale was raised
only in her Addendum to Motion for Reconsideration of the Decision of the CA. The Court
reiterates the rule that points of law, theories, issues and arguments not brought to the attention
of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these
cannot be raised for the first time on appeal.[35]
Moreover, like the issue regarding the date of maturity of the loan, the question of whether
or not petitioner received a copy of an Assessment Notice or Notice of Redemption from private
respondents is also factual. As earlier explained, questions of fact are not proper subjects of
appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to
questions of law.[36]
Besides, there is nothing under Act No. 3135 which requires the highest bidder or
purchaser to furnish the mortgagor or redemptioner an Assessment Notice or Notice of
Redemption prior to the expiration of the period of redemption. Even the pertinent provisions of
Section 30, Rule 39[37] of the old Rules of Court, which are the rules applicable in the present case,
do not require that the mortgagor or redemptioner be furnished by the purchaser notice of any
assessments or taxes which the latter may have paid after the purchase of the auctioned property,
thus:
Sec. 30. Time and manner of, and amounts payable on, successive
redemptions, notice to be given and filed. The judgment debtor or redemptioner may
redeem the property from the purchaser at any time within twelve (12) months after
the sale, on paying the purchaser the amount of his purchase with
one per centum per month interest thereon in addition, up to the time of redemption,
together with the amount of any assessments or taxes which the purchaser may have
paid thereon after purchase and interest on such last named amount at the same
rate; and if the purchaser be also a creditor having a prior lien to that of the
redemptioner, other than the judgment under which such purchase was made, and
the amount of such other lien, with interest. Property so redeemed may again be
redeemed within sixty (60) days after the last redemption upon payment of the sum
paid on the last redemption, with two per centum thereon in addition, and the amount
of any assessments or taxes which the last redemptioner may have paid thereon after
redemption by him, with interest of such last-named amount, and in addition, the
amount of any liens held by said last redemptioner prior to his own, with interest. The
property may be again, and as often as a redemptioner is so disposed, redeemed
from any previous redemptioner within sixty (60) days after the last redemption, on
paying the sum paid on the last previous redemption, with two per centum thereon in
addition, and the amounts of any assessments or taxes which the last previous
redemptioner paid after the redemption thereon, with interest thereon, and the amount
of any liens held by the last redemptioner prior to his own, with interest.
Written notice of any redemption must be given to the officer who
made the sale and a duplicate filed with the Registrar of Deeds of the province,
and if any assessment of taxes are paid by the redemptioner or if he has or
acquires any lien other than that upon which the redemption was made, notice
thereof must in like manner be given to the officer and filed with the Registrar
of Deeds; if such notice be not filed, the property may be redeemed without
paying such assessments, taxes, or liens. (emphasis supplied)
Hence, even granting, for the sake of argument, that private respondents failed to comply with
the directive in the Certificate of Sale issued by the Ex-Officio Provincial Sheriff of Rizal and the Deputy
Sheriff In-Charge by giving a copy of statements of the amount of assessments or taxes which they may
have paid on account of the purchase of the subject property, such failure would not invalidate the
auction sale and the subsequent transfer of title over the subject property in their favor.
It bears to note that the purpose for requiring the purchaser to furnish copies of the amounts of
assessments or taxes which he may have paid is to inform the mortgagor or redemptioner of the actual
amount which he should pay in case he chooses to exercise his right of redemption. If no such notice is
given, the only effect is that the property may be redeemed without paying such assessments or
taxes.[38] In fact, it would have been beneficial on the part of herein petitioner if private respondents
failed to submit to the office of the sheriff and furnish her a copy of the statements of the taxes and
assessments they paid because in such a case petitioner would have been excused from reimbursing
such assessments and taxes if she redeemed the property. The fact remains, however, that petitioner
failed to redeem the subject property.
WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the
Court of Appeals are AFFIRMED in toto.
PINEDA vs. HEIRS OF ELISEO GUEVARA
DECISION
TINGA, J.:
On appeal by way of certiorari under Rule 45 of the 1997 Rules of Civil Procedure are the
Decision[1] and Resolution of the Court of Appeals in CA-G.R. CV No. 54074. The Decision
reversed the order of dismissal of the Regional Trial Court (RTC), Branch 273, Marikina, and
directed the court a quo to conduct trial on the merits, while the Resolution denied petitioner
Pinedas motion for reconsideration.
As borne out by the records, the following are the factual antecedents.
On 7 September 1995, respondents Eliseo Guevara, Jr., Zenaida G. Sapalicio, Dante G. Guevara
and Isagani S. Guevara, collectively referred hereinafter as the Guevara heirs, filed an action for
the nullification of the certificates of title of a parcel of land measuring approximately 2,304
hectares situated in Marikina.
Named defendants were the estate of the late Pedro Gonzales, Virginia Perez, Crisanta
Perez, Jose Perez, Roy Guadalupe, Lino Bucad and Florentino Pineda. The complaint, docketed
as Civil Case No. 95-171-MK, was raffled to Branch 273 of the RTC of Marikina.
The Guevara heirs alleged in the complaint that they were the co-owners of a property originally
covered by Original Certificate of Title (OCT) No. 386 issued on 7 December 1910 in favor of the
spouses Emiliano Guevara and Matilde Crimen. The couples son, and the Guevara heirs
predecessor-in-interest, Eliseo Guevara, allegedly purchased the property on 1 January 1932 and
had exercised ownership over the property since then by selling and donating portions thereof to
third persons.2 The Guevara heirs averred that the sale of the property to Eliseo Guevara was
annotated at the back of OCT No. 386.
According to the Guevara heirs, the defendants illegally claimed ownership and
possession over a certain portion of the property, particularly that area covered by Transfer
Certificate of Title (TCT) No. 223361 issued to the estate of Pedro C. Gonzales. TCT No. 223361
was derived from OCT No. 629, which the Guevara heirs described as fake, having been issued
only on 26 January 1912 or subsequent to the issuance of OCT No. 386. Hence, the Guevara
heirs prayed that OCT No. 629 and its derivative titles, to wit, TCT Nos. 223361, 244447, 244448,
244449 be cancelled, that the Guevara heirs be declared owners of the property and that a new
certificate of title be issued in their names.
Defendant Pineda filed an answer with counterclaim, raising the defenses of lack of cause
of action, prescription, laches and estoppel. He averred that he was a buyer in good faith and had
been in actual possession of the land since 1970 initially as a lessor and subsequently as an
owner. He registered the property in his name and was issued TCT No. 257272.
Defendants Virginia, Crisanta, and Jose, all surnamed Perez, filed an answer with
compulsory counterclaim and averred that their father, Marcos Perez, purchased the property from
the late Pedro Gonzales and had it declared in Perezs name for taxation purposes. According to
them, they had been in actual possession of a lot measuring 375 square meters before 1958 and
had been regularly paying the property taxes thereon.
The rest of the defendants, including the estate of Pedro Gonzales, also filed an answer
with counterclaim, raising the same defenses of laches and prescription and res judicata. They
claimed that OCT No. 629 was issued to the Municipality of Marikina in 1912 and that the late
Pedro Gonzales and his family started occupying the property as early as 1950 as lessees
thereon. The late Pedro Gonzales allegedly bought the property from the Municipality of Marikina
in a public bidding on 25 April 1966 and had allowed defendants to occupy the property. They
asserted that the Guevara heirs never actually occupied the property.
On 4 December 1995, the RTC set the case for hearing as if a motion to dismiss had
been filed. During the hearing, the parties presented oral arguments and were directed to file their
memoranda.
After submission of memoranda, the RTC issued an Order dated 7 May 1996, dismissing
the action on the ground of laches. The Guevara heirs appealed the order of dismissal, claiming
the denial of their right to due process.
On 23 August 1999, the Court of Appeals promulgated the assailed Decision, which set
aside the RTCs order of dismissal and directed the reinstatement of Civil Case No. 95-171-MK.
The appellate court ruled that a complaint cannot be dismissed under Rule 16, Section 1[2] of the
Rules of Court based on laches since laches is not one of the grounds enumerated under said
provision. Although the RTC order of dismissal did not rule on the other affirmative defenses
raised by petitioners in the answer, such as lack of cause of action, prescription and res judicata,
the Court of Appeals discussed them and ruled that none of these affirmative defenses raised
were present to warrant the dismissal of the action.
Only Pineda sought reconsideration. In its 3 May 2000 Resolution, the Court of Appeals
denied Pinedas motion. Hence, the instant petition, attributing the following errors to the Court of
Appeals:
THE COURT OF APPEALS ERRED IN TAKING COGNIZANCE OF
THE APPEAL OF RESPONDENTS WHICH RAISED ONLY PURELY
QUESTIONS OF LAW; AND, THEREFORE, IT ACTED WITHOUT
JURISDICTION IN HEARING AND DECIDING THE SAID APPEALED CASE.
THE COURT OF APPEALS ERRED IN NOT CONSIDERING THE
AFFIRMATIVE DEFENSE OF LACHES AS ANALOGOUS TO PRESCRIPTION.
THE COURT OF APPEALS ERRED IN HOLDING THAT THE TRIAL
COURTS DISMISSAL OF THE RESPONDENTS COMPLAINT IS ERRONEOUS
FOR THE REASON THAT THE AFFIRMATIVE DEFENSE OF LACHES IS NOT
AMONG THE GROUNDS FOR A MOTION TO DISMISS UNDER THE RULES,
WHICH MAY BE ALLEGED AS AFFIRMATIVE DEFENSE TO BE PROVED
DURING THE TRIAL.

AS A COROLLARY TO THE THIRD ASSIGNED ERROR ABOVE, THE
COURT OF APPEALS ERRED IN NOT TREATING THE ASSAILED ORDER OF
DISMISSAL OF RESPONDENTS COMPLAINT BY THE TRIAL COURT AS A
SUMMARY JUDGMENT, TO AVOID PROTRACTED LITIGATION.
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT WHILE
PRESCRIPTION IN DEROGATION OF THE TITLE TO REGISTERED OWNERS
WILL NOT LIE, LACHES WILL.[3]
Counsel for the estate of Pedro Gonzales filed a Comment/Manifestation, [4] stating that
her clients have adopted and joined Pinedas petition praying for the reinstatement of the trial
courts order of dismissal.
At bottom, the petition raises two main issues, to wit: (1) whether or not the appeal of the
heirs of Guevara was improperly elevated to the Court of Appeals since, according to them, it
raised a pure question of law; and (2) whether or not the trial court correctly dismissed the action
on the ground of laches without conducting trial on the merits.
Petitioner Pineda had ample opportunity to raise before the Court of Appeals the objection
on the improper mode of appeal taken by the heirs of Guevara. This, he failed to do. The issue of
improper appeal was raised only in Pinedas motion for reconsideration of the Court of Appeals
Decision. Hence, this Court cannot now, for the first time on appeal, pass upon this issue.For an
issue cannot be raised for the first time on appeal.[5] In any case, the appeal by the heirs of
Guevara also raised the issue regarding the existence of laches on the part of petitioners as
defendants, which is factual in nature as discussed below.
Now, did the trial court correctly order the dismissal of the complaint based on laches
without conducting trial on the merits? The Court of Appeals disagreed, holding that under Rule
16, Section 1[6] of the Rules of Court, laches is not enumerated under said provision, hence, it
must be proved during trial. On the other hand, petitioner Pineda asserts that laches is analogous
to prescription and, therefore, can be a ground of dismissing a complaint as though a motion to
dismiss is filed.
Well-settled is the rule that the elements of laches must be proved positively. Laches is
evidentiary in nature which could not be established by mere allegations in the pleadings and can
not be resolved in a motion to dismiss. At this stage therefore, the dismissal of the complaint on
the ground of laches is premature.[7] Those issues must be resolved at the trial of the case on the
merits wherein both parties will be given ample opportunity to prove their respective claims and
defenses.[8]
The elements of laches are: (1) conduct on the part of the defendant, or of one under
whom he claims, giving rise to the situation of which the complaint seeks a remedy; (2) delay in
asserting the complainants rights, the complainant having had knowledge or notice of the
defendants conduct as having been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the complainant would assert the right in
which he bases his suit; and (4) injury or prejudice to the defendant in the event relief is accorded
to the complainant, or the suit is not held barred.[9]
Whether or not the elements of laches are present is a question involving a factual
determination by the trial court. There is no absolute rule as to what constitutes laches or
staleness of demand; each case is to be determined according to its particular
circumstances.[10] Laches is not concerned with the mere lapse of time, rather, the party must have
been afforded an opportunity to pursue his claim in order that the delay may sufficiently constitute
laches.[11] Without prejudging the instant case, an apparent delay in the enforcement of ones claim
does not automatically constitute laches. The party charged with negligence or omission in
invoking his right must be afforded the opportunity to raise his defenses, which can be
accommodated only in a contentious proceeding.
In reversing the RTCs order of dismissal, the Court of Appeals held that laches could not
be a ground to dismiss the complaint as it is not enumerated under Rule 16, Section 1. [12] This is
not entirely correct. Under paragraph (h) thereof, where a claim or demand set forth in the plaintiffs
pleading has been paid, waived, abandoned, or otherwise extinguished, the same may be raised
in a motion to dismiss. The language of the rule, particularly on the relation of the words
abandoned and otherwise extinguished to the phrase claim or demand deemed set forth in the
plaintiffs pleading is broad enough to include within its ambit the defense of bar by
laches. However, when a party moves for the dismissal of the complaint based on laches, the trial
court must set a hearing on the motion where the parties shall submit not only their arguments on
the questions of law but also their evidence on the questions of fact involved.[13] Thus, being
factual in nature, the elements of laches must be proved or disproved through the presentation of
evidence by the parties. As discussed above, an apparent delay in the filing of a complaint as
shown in a pleading does not automatically warrant the dismissal of the complaint on the ground
of laches.
In the case at bar, while the trial court correctly set the case for hearing as though a
motion to dismiss had been filed, the records do not reveal that it extended to the parties the
opportunity to present evidence. For instance, counsel for the heirs of Guevara filed and served
written interrogatories[14] on one of the defendants but the trial court held in abeyance the
resolution of the motion to order the defendant to submit answers to the written
interrogatories.[15] The trial court likewise denied the Ex Parte Motion To Set Trial filed by the heirs
of Guevara.[16] These were the instances which would have enabled the trial court to receive
evidence on which to anchor its factual findings. Although the trial court heard oral arguments and
required the parties to submit their respective memoranda, the presentation of evidence on the
defenses which are grounds for a motion to dismiss was not held at all. Otherwise, the oral
arguments and memoranda submitted by the parties would have enabled this Court to review the
trial courts factual finding of laches instead of remanding the case for trial on the merits. A perusal
of the records precludes this Court from making a categorical declaration on whether the heirs of
Guevara were guilty of laches.
Neither does the affirmative defense of prescription alleged in an answer automatically
warrant the dismissal of the complaint under Rule 16. An allegation of prescription can effectively
be used in a motion to dismiss only when the complaint on its face shows that indeed the action
has already prescribed.[17] Otherwise, the issue of prescription is one involving evidentiary matters
requiring a full-blown trial on the merits and cannot be determined in a mere motion to
dismiss.[18] Pinedas theory that the defense of laches should be treated as an affirmative defense
of prescription warranting the dismissal of the complaint is erroneous.

There is also no basis in procedural law to treat the RTCs order of dismissal as a
summary judgment. The trial court cannot motu proprio decide that summary judgment on an
action is in order. Under the applicable provisions of Rule 35, the defending party or the claimant,
as the case may be, must invoke the rule on summary judgment by filing a motion. [19] The adverse
party must be notified of the motion for summary judgment[20] and furnished with supporting
affidavits, depositions or admissions before hearing is conducted. [21] More importantly, a summary
judgment is permitted only if there is no genuine issue as to any material fact and a moving party
is entitled to a judgment as a matter of law.[22]

Based on the parties allegations in the complaint and answer, the issues in the case at
bar are far from settled. For instance, both petitioner and respondents claim their ownership rights
over the same property based on two different original certificates of title. Respondents charge
petitioner of illegal occupation while the latter invokes good faith in the acquisition of the property.
Clearly, these are factual matters which can be best ventilated in a full-blown proceeding before
the trial court, especially when what are involved appear to be sizeable parcels of land covered by
two certificates of title.

Except for Pineda, the other defendants did not elevate the Court of Appeals Decision to
this Court. With respect to them, the appellate courts Decision has already become final and
conclusive, notwithstanding their adoption[23] of Pinedas petition.

WHEREFORE, the instant petition for review on certiorari is DENIED and the Decision
and Resolution of the Court of Appeals in CA-G.R. CV No. 54074 are AFFIRMED. Let the records
of the case be remanded for further proceedings to the Regional Trial Court of Marikina City,
which is hereby ORDERED to try and decide the case with deliberate speed.
DUMO vs. ESPINAS
Before us is a petition for review on certiorari under Rule 45 of the Rules of Court
assailing the Decision[1] of the Court of Appeals (CA) dated October 14, 1999 in CA-G.R. SP No.
50239, which set aside the Decision of the Regional Trial Court (RTC) of Bauang, La Union,
Branch 33, and reinstated with modification the judgment of the Municipal Trial Court (MTC) of the
same town and province; and its Resolution[2] of February 18, 2000, denying petitioners motion for
reconsideration.
The present case arose from a complaint for forcible entry with prayer for the issuance of
a temporary restraining order and/or preliminary injunction filed by spouses Danilo and Suprema
Dumo (petitioners) against Erlinda Espinas, Jhean Pacio, Phol Pacio, Manny Jubinal, Carlito
Campos and Severa Espinas (respondents) with the MTC of Bauang, La Union. The case was
docketed as Civil Case No. 881. In their complaint, petitioners alleged:
2. That plaintiffs are the owners-possessors of a parcel of sandy land
with all the improvements standing thereon, located in Paringao, Bauang, La
Union, with an area of 1, 514 square meters, covered by Tax Declaration No.
22839, a photocopy of the said tax declaration is hereto attached as Annex A;
3. That on November 17, 1995, defendant Severa J. Espinas filed a civil
complaint before this same court, docketed as civil case no. 857, entitled
Quieting of Title and/or Ownership and Possession against spouses Sandy and
Presnida Saldana, subject matter of the case being the same real property
mentioned in paragraph 2 above, for which plaintiffs seeks (sic) that the
Honorable Court takes judicial notice of the same;
4. That although a decision has been rendered against the defendants in
civil case no. 857, the same was not enforced as per Sheriffs return dated
November 4, 1996, attached to the records of civil case no. 857;
5. That on October 30, 1996, at about 1:45 P.M., all defendants acting
for the interest of Severa Espinas, apparently disgruntled with the refusal of the
sheriff to put them in possession over the questioned real property, and in open
defiance with the official action taken by the sheriff, took it upon themselves,
employing force, intimidation, and threat, to enter the said question (sic) real
property, and despite protestations made by plaintiffs, who were there then
present and visibly outnumbered by defendants and their agents who were
armed with sticks, bolos, hammers, and other deadly weapons, successfully
drove out plaintiffs, and took over the premises; that arrogantly, the defendants
were boasting aloud that they were under instructions by the judge to do just that
to forcibly enter and take over the premises; that defendants while inside the
premises, demolished and totally tore down all the improvements standing
thereon, consisting of, but not limited to shed structures intended for rent to the
public;
6. That defendants are still in the premises to date, and have even
started putting and continuously putting up structures thereon;
7. That the plaintiff being the rightful owner of the disputed property and
not being a party in civil case no. 857, can never be bound by the proceedings
thereon; that the acts of defendants in forcibly entering the property of plaintiff,
and taking over the same without no lawful basis is patently a violation of her
proprietary rights, the commission and the continuance of the unlawful acts
aforementioned of defendants verily works injustice to plaintiffs;[3]
Petitioners prayed for the payment of actual damages in the amount of P75,000.00, lost earnings
of P5,000.00 per day, moral damages of P100,000.00 and attorneys fees in the amount
of P50,000.00.[4]
On November 12, 1996, the MTC issued a temporary restraining order directing the
defendants to cease and desist from destroying or demolishing the improvements found on the
subject land and from putting up structures thereon.[5] In its Order of January 15, 1997, the MTC
issued a writ of preliminary injunction.[6]
In their Answer, respondents contended as part of their Special and Affirmative Defenses:
1. That Sps. Marcelino and Severa Espinas purchased the questioned
parcel of land from Carlos Calica in 1943;
2. That said parcel of land has been declared for taxation purposes
under their name and the real estate taxes have [been] religiously paid;
3. That said parcel of land has been surveyed, which Plan Psu-202273
is duly approved by the Director of Land, with an area of 1,065 sq. m. more or
less;
4. That to remove and clear all doubts and cloud over the ownership of
said parcel of land, Civil Case No. 857 was filed and after hearing, decision was
rendered declaring herein defendants the lawful owners of said parcel of land;
5. That under and by virtue of said Decision, defendants entered,
occupied and possessed said land, and in the exercise of their right of ownership,
cleaned the same of illegally constructed structures which were done without the
knowledge and consent of herein defendants;[7]
After trial, the MTC rendered judgment holding that petitioners were able to prove their
right of possession over the subject property. The dispositive portion of the MTC Decision reads
as follows:
WHEREFORE, in view of the foregoing considerations, judgment is
rendered in favor of the plaintiffs spouses Danilo and Suprema Dumo and
 against all the defendants and therefore, the Court declares the plaintiffs the
priority of possession or physical possession de-facto of the land subject matter
of the suit. The preliminary mandatory injunction heretofore issued by this Court
is hereby made permanent and if the defendants and their agents or any person
acting in their behalf are still in the premises are ordered to vacate said property.
The defendants are likewise ordered to pay jointly and severally the plaintiffs the
amount of P30,000.00 as actual damages plus P500.00 a day as lost earning of
the premises from October 30, 1996 up to the time defendants vacate the
premises; P30,000.00 as moral damages; P10,000.00 as exemplary damages;
and P30,000.00 as attorneys fee and to pay double cost.
SO ORDERED.[8]
Aggrieved by the decision of the MTC, respondents appealed the case to the RTC of
Bauang, La Union.[9] It was docketed as Civil Case No. 1099-BG.
In a letter filed with this Court dated July 24, 1998, RTC Judge Rose Mary R. Molina-Alim
who handles Civil Case No. 1099-BG, requested that she be allowed to inhibit herself from further
sitting in said case on the ground that the petitioners have filed an administrative complaint against
her for partiality, and by reason of such complaint she honestly feels that she can no longer
continue deciding Civil Case No. 1099-BG without bias and unnecessary pressure.[10] However, in
this Courts Resolution of September 15, 1998, Judge Molina-Alims request was denied on the
ground that the mere filing of an administrative complaint does not preclude a judge from deciding
a case submitted to him/her for resolution.[11] Hence, Judge Molina-Alim proceeded in deciding the
case.
In its Decision dated December 18, 1998, the RTC reversed and set aside the Decision of
the MTC and dismissed the case filed by the petitioners.[12] The RTC ruled:
Prescinding from the above factual antecedents, as between defendant
Severa Espinas who acquired the property on October 18, 1943through purchase
(Exhibit 1) and plaintiffs who allegedly possessed it on May 23, 1987 by virtue of
the deed of partition with absolute sale (Exhibit A), the former had a possession
antedating that of the latter. Even if the possession of plaintiffs predecessors-in-
interest, Sps. Pedro and Bernardo Trinidad since 1951, were to be considered,
still, defendant Severa Espinas enjoys the priority of possession long before the
filing of the instant case on October 30, 1996. Under these circumstances,
priority in time should be the pivotal cog in resolving the issue of possession.
What is more, defendant Severa Espinas was never divested of her
possession except in 1987 when the plaintiffs put up the retaining seawall on the
western portion and cyclone wire on the southern portion of the property without
her (Severa) consent. Despite the latters protestations, plaintiffs continued to
introduce these improvements and challenged her to file a suit in Court. (Minutes
of the ocular inspection, April 23, 1997). And lately, in Civil Case No. 857 (Exhibit
3), when defendants Saldy and Fresnida Saldaa tried to encroach on the
property claiming ownership thereof. What is more, the possession of defendant
Severa Espinas since 1943 was bolstered by the decision rendered in the land
registration case (Exhibit U), as well as in the civil case (Exhibit E), wherein she
was declared the owner of the property in question.
Hence, the MTC erred in finding plaintiffs to have priority of possession.
On the contrary, defendants (sic) evidence is very clear that defendant Severa
Espinas and her husband had been in actual, open, continuous, adverse in the
concept of owner, possession of the land since 1943. In addition, the evidence of
possession presented in the land registration and quieting of title cases (Exhibits
U and E) surely dispels any iota of doubt that may exist in regard to the
possession of defendant Severa Espinas over the subject property.
As regards the issue on the award of damages:
The rule is settled that in forcible entry or unlawful
detainer cases, the only damage that can be recovered is the
fair rental value or the reasonable compensation for the use and
occupation of the leased property. The reason for this is that in
such cases, the only issue raised in ejectment cases is that of
rightful possession; hence, the damages which could be
recovered are those which the plaintiff could have sustained as
a mere possessor, or those caused by the loss of the use and
occupation of the property, and not the damages which he may
have suffered but which have no direct relation to his loss of
material possession (Araos vs. Court of Appeals, 232 SCRA
770).
Then too, under Section 17 of Rule 70 of the 1997 Rules of Civil
Procedure, in forcible entry and unlawful detainer, the monetary award is limited
to the sum justly due as arrears of rent or as reasonable compensation for the
use and occupation of the premises, attorneys fees and costs. In this case, the
MTC erred in awarding P30,000.00 as actual damages plus P500.00 a day as
loss earnings, P30,000.00 as moral damages, P10,000.00 as exemplary
damages. These damages are not the reasonable compensation for the use and
occupation of the property. Rather, these are damages which may have been
suffered by plaintiffs which have no direct relation to the use of material
possession, hence, should not have been awarded (Araos vs. C.A., supra).
Besides, the award of P30,000.00 as actual damages plus P500.00 a
day as loss earnings has no factual and legal basis, hence, should have been
disallowed.
True, the aforecited rule now allows attorneys fees to be awarded, but
the grant of the same must be in accordance with Article 2208 of the Civil Code,
thus:
Article 2208. In the absence of stipulation, attorneys fees cannot
be recovered except
 1) In any other cases (sic) where the court deems it just and
equitable
In all cases must be reasonable.
The award of attorneys fees by the MTC lacks basis. The body of the
appealed decision indeed does not show justification for the award. Hence, there
is no basis for such award, which, consequently, should have been removed. The
power of the Court to award attorneys fees under the above cited article,
demands factual, legal and equitable justification. Its basis cannot be left to
speculation and gesture (Morales vs. C.A. G.R. No. 117228, June 19, 1997).[13]
Petitioners then filed a petition for review with the CA. On October 14, 1999, the CA
promulgated the presently assailed Decision setting aside the judgment of the RTC and reinstating
with modification the decision of the MTC, by deleting the awards for actual, moral and exemplary
damages.[14] The CA held that the MTC correctly found that the petitioners were in possession of
the subject land prior to the time when respondents allegedly forcibly entered the property; that it
is error for the RTC to reach all the way back to 1943 to determine priority in possession
considering that prior possession means possession immediately prior to the act of disturbance;
that Civil Case No. 857, which was an action to quiet title filed by respondent Severa Espinas
against spouses Sandy and Presnida Saldana, is not binding on petitioners; and, that the alleged
difference in the identities of the lands of petitioners and respondents was not raised as a defense
in the Answer of respondents. As regards the award of damages, the CA agreed with the ruling of
the RTC that in forcible entry and unlawful detainer cases, the only damage that can be recovered
is the fair rental value or the reasonable compensation for the use and occupation of the property
concerned; nonetheless, it sustained the award of attorneys fees by the MTC.
Petitioners filed a Motion for Partial Reconsideration but the same was denied by the CA
in its Resolution dated February 18, 2000.[15]
Hence, the present petition with the following assignment of errors:
1. THAT THE COURT OF APPEALS, UNDER THE INSTANT
DECISION AND RESOLUTION, ANNEXES A AND B HEREOF, COMMITTED A
REVERSIBLE ERROR IN NOT DECLARING THE DECISION OF RTC JUDGE
ROSE MARY MOLINA ALIM AS NULL AND VOID FOR BEING VIOLATIVE OF
PETITIONERS CONSTITUTIONAL RIGHT TO DUE PROCESS IN VIEW OF
HER ADMITTED BIAS IN DECIDING THE CASE.
2. MOREOVER, THE COURT OF APPEALS, UNDER THE SAID
DECISION AND RESOLUTION, ANNEXES A AND B HEREOF, COMMITTED A
REVERSIBLE ERROR IN DELETING THE AWARDS OF ACTUAL, MORAL
AND EXEMPLARY DAMAGES MADE BY THE MUNICIPAL TRIAL COURT,
CONSIDERING THAT THE SAID AWARDS ARE ALREADY RES JUDICATA
BECAUSE:
(a) THAT, AS AFORESAID, THE DECISION OF
JUDGE ALIM WHICH INCLUDED THE DELETION OF THE
SAID DAMAGES IS NULL AND VOID, AND DID NOT AFFECT
THE MTC DECISION, AND,
(b) THAT, IN ANY EVENT, THE
HEREIN RESPONDENTS DID NOT QUESTION THE
AMOUNTS OF SAID AWARD IN THEIR APPEAL FROM THE
DECISION OF THE MUNICIPAL TRIAL COURT TO THE
REGIONAL TRIAL COURT THEREBY RENDERING SAID
AWARDS, FINAL AND RES JUDICATA.[16]
In their first assignment of error, petitioners contend that the Decision rendered by
the RTC dated December 18, 1998 is null and void because it violates petitioners constitutional
right to due process considering that Judge Rose Mary R. Molina-Alim who sat during the trial and
penned the questioned RTC decision had previously admitted her bias against petitioners.
We do not agree.
In Gochan vs. Gochan,[17] we have sufficiently discussed the matter of a judges inhibition
from hearing a case vis--vis the right of a party to due process, to wit:
A critical component of due process is a hearing before a tribunal that is
impartial and disinterested. Every litigant is indeed entitled to nothing less than
the cold neutrality of an impartial judge. All the other elements of due process,
like notice and hearing, would be meaningless if the ultimate decision were to
come from a biased judge. Section 1 of Rule 137 of the Rules of Court provides:
SECTION 1. Disqualification of judges. - No judge or
judicial officer shall sit in any case in which he, or his wife or
child, is pecuniarily interested as heir, legatee, creditor or
otherwise, or in which he is related to either party within the
sixth degree of consanguinity or affinity, or to counsel within the
fourth degree, computed according to the rules of the civil law,
or in which he has been executor, administrator, guardian,
trustee or counsel, or in which he has presided in any inferior
court when his ruling or decision is the subject of review, without
the written consent of all parties in interest, signed by them and
entered upon the record.
A judge may, in the exercise of his sound discretion,
disqualify himself from sitting in a case, for just or valid reasons
other than those mentioned above.
The Rules contemplate two kinds of inhibition: compulsory and
voluntary. The instances mentioned in the first paragraph of the cited Rule
conclusively presume that judges cannot actively and impartially sit in a case.
The second paragraph, which embodies voluntary inhibition, leaves to the
discretion of the judges concerned whether to sit in a case for other just and valid
reasons, with only their conscience as guide.
 To be sure, judges may not be legally prohibited from sitting in a
litigation. But when circumstances reasonably arouse suspicions, and out of such
suspicions a suggestion is made of record that they might be induced to act with
prejudice for or against a litigant, they should conduct a careful self-examination.
Under the second paragraph of the cited Section of the Rules of Court, parties
have the right to seek the inhibition or the disqualification of judges who do not
appear to be wholly free, disinterested, impartial or independent in handling a
case. Whether judges should inhibit themselves therefrom rests on their own
sound discretion. That discretion is a matter of conscience and is addressed
primarily to their sense of fairness and justice.
However, judges are exhorted to exercise their discretion in a way
that the peoples faith in the courts of justice would not be impaired. A
salutary norm for them to observe is to reflect on the possibility that the
losing parties might nurture at the back of their minds the thought that the
former have unmeritoriously tilted the scales of justice against them. Of
course, the judges right must be weighed against their duty to decide
cases without fear of repression.
Verily, the second paragraph of Section 1 of Rule 137 does not give
judges the unfettered discretion to decide whether to desist from hearing a
case. The inhibition must be for just and valid causes. The mere imputation
of bias or partiality is not enough ground for them to inhibit, especially
when the charge is without basis. This Court has to be shown acts or
conduct clearly indicative of arbitrariness or prejudice before it can brand
them with the stigma of bias or partiality.
In a string of cases, the Supreme Court has said that bias and prejudice,
to be considered valid reasons for the voluntary inhibition of judges, must be
proved with clear and convincing evidence. Bare allegations of their partiality will
not suffice. It cannot be presumed, especially if weighed against the sacred oaths
of office of magistrates, requiring them to administer justice fairly and equitably --
both to the poor and the rich, the weak and the strong, the lonely and the well-
connected.
Equally important is the established doctrine that bias and
prejudice must be shown to have resulted in an opinion on the merits on
the basis of an extrajudicial source, not on what the judge learned from
participating in the case. As long as opinions formed in the course of judicial
proceedings are based on the evidence presented and the conduct observed by
the magistrate, such opinion -- even if later found to be erroneous -- will not prove
personal bias or prejudice on the part of the judge. While palpable error may be
inferred from the decision or the order itself, extrinsic evidence is required to
establish bias, bad faith, malice or corrupt purpose. At bottom, to disqualify a
judge, the movant must prove bias and prejudice by clear and convincing
evidence.[18] (Emphasis ours)
What makes the present case different from the usual cases passed upon by this Court is
the fact that, as stated earlier, Judge Molina-Alim herself manifested in her letter-request for
inhibition that in view of the administrative case filed by herein petitioners charging her with
partiality, she honestly feels that she can no longer continue deciding the appealed case free from
bias and unnecessary pressure.[19] Petitioners contend that Judge Molina-Alims manifestation is
an admission of bias. Hence, by reason of such admission, there is no longer any need for them to
prove the same. However, it must be emphasized that the Court denied Judge Molina- Alims
request for inhibition holding that the mere filing of an administrative complaint does not preclude a
judge from deciding a case submitted to him/her for resolution for there are judicial remedies
available to the parties should there be an adverse decision.[20] It is clear from the Resolution that
the Court was not persuaded by the reason put forth by Judge Molina-Alim in her request for
inhibition. It should be clearly understood from the above-cited Resolution that the Court found no
sufficient basis to allow Judge Molina-Alim to inhibit herself from hearing Civil Case No. 1099-BG.
The Court ruled that the mere fact that an administrative case for alleged partiality was filed
against her by herein petitioners does not justify her recusal. Indeed, a careful reading of the
letter-request of Judge Molina-Alim shows that her request for inhibition stems solely from the fact
that herein petitioners had filed an administrative case against her for partiality. There is no other
statement in said letter-request, categorical or implied, which would show that her purported bias
resulted from any other source. Notwithstanding Judge Molina-Alims statements in her request for
inhibition, we find that petitioners allegations of bias and partiality remain unsubstantiated. Indeed,
bare allegations of partiality and prejudgment will not suffice in the absence of clear and
convincing evidence to overcome the presumption that the judge will undertake his noble role to
dispense justice according to law and evidence and without fear or favor.[21] There should be
adequate evidence to prove the allegations, and there must be showing that the judge had an
interest, personal or otherwise, in the prosecution of the case.[22]
To reiterate, the mere filing of an administrative case against a judge is not a ground for
disqualifying him from hearing the case, for if on every occasion the party apparently aggrieved
would be allowed to either stop the proceedings in order to await the final decision on the desired
disqualification, or demand the immediate inhibition of the judge on the basis alone of his being so
charged, many cases would have to be kept pending or perhaps there would not be enough
judges to handle all the cases pending in all the courts.[23] This Court has to be shown acts or
conduct of the judge clearly indicative of arbitrariness or prejudice before the latter can be branded
the stigma of being biased or partial.[24] Moreover, while judges are given wide latitude of
discretion in determining if it is indeed proper for them to hear or sit in a particular case, it should
be emphasized that this choice is not absolute and must be based on a just and valid cause and
on a rational and logical assessment of the circumstances prevailing in the case brought before
him.[25] The option given to a judge to choose whether or not to handle a particular case should be
counter-balanced by the judges sworn duty to administer justice without fear of repression.
In any case, petitioners contention that they have been deprived of due process is denied
by the fact that they were able to appeal the questioned RTC Decision to the CA via a petition for
review and, subsequently, file a motion for reconsideration of the CA Decision. The essence of
due process is found in the reasonable opportunity to be heard and submit any evidence one may
have in support of one's defense.[26] What the law proscribes is the lack of opportunity to be
heard.[27] As long as a party is given the opportunity to defend his interests in due course, he
would have no reason to complain, for it is this opportunity to be heard that makes up the essence
of due process.[28]
In their second assignment of error, <petitioners point out that in their petition for review
filed with the CA, they did not raise as an issue the award of damages made by the MTC.
Similarly, respondents did not specifically assign as error the award of damages by the MTC when
they appealed the case to the RTC; neither did they file an appeal with the CA questioning the
award of damages by the MTC.> On this basis, petitioners conclude that the award for damages
not having been appealed, the same had become final and executory. Hence, the RTC had no
authority to reverse the judgment of the MTC respecting the award of damages. In the same way,
petitioners contend that the CA did not have jurisdiction to rule on the matter of damages because
this issue was not raised in the appeal filed before it.
We are not persuaded.

We have held that an appellate court is clothed with ample authority to review rulings
even if they are not assigned as errors.[29] This is especially so if the court finds that their
consideration is necessary in arriving at a just decision of the case before it.[30]We have
consistently held that an unassigned error closely related to an error properly assigned, or upon
which a determination of the question raised by the error properly assigned is dependent, will be
considered by the appellate court notwithstanding the failure to assign it as an error. [31] Petitioners
admit in the present petition that herein respondents, in their appeal with the RTC, raised the
question of whether or not the prevailing party may be awarded damages. Since this issue had
been seasonably raised, it became open to further evaluation. It was only logical and natural for
the RTC to deal with the question of whether petitioners are indeed entitled to the damages
awarded by the MTC.

Moreover, even if the issue on damages was not raised by herein respondents in their
appeal with the RTC, it is not erroneous on the part of the RTC to delete the award of damages in
the MTC decision considering that the RTC judgment reversed the decision of the MTC. It would
be the height of inconsistency if the RTC sustained the award of damages in favor of herein
petitioners when, in the same decision, it reversed the MTC judgment and dismissed the complaint
of petitioners.

Lastly, we agree with the CA and the RTC that there is no basis for the MTC to award
actual, moral and exemplary damages in view of the settled rule that in ejectment cases, the only
damage that can be recovered is the fair rental value or the reasonable compensation for the use
and occupation of the property.[32] Considering that the only issue raised in ejectment is that of
rightful possession, damages which could be recovered are those which the plaintiff could have
sustained as a mere possessor, or those caused by the loss of the use and occupation of the
property, and not the damages which he may have suffered but which have no direct relation to
his loss of material possession.[33] Although the MTCs order for the reimbursement to petitioners of
their alleged lost earnings over the subject premises, which is a beach resort, could have been
considered as compensation for their loss of the use and occupation of the property while it was in
the possession of the respondents, records do not show any evidence to sustain the same. Thus,
we find no error in the ruling of the RTC that the award for lost earnings has no evidentiary or
factual basis; and in the decision of the CA affirming the same.

WHEREFORE, the instant petition is DENIED. The assailed Decision and Resolution of
the Court of Appeals dated October 14, 1999 and February 18, 2000, respectively,
are AFFIRMED.
BOSTON BANK OF THE PHILS vs. MANALO
Before us is a Petition for Review on Certiorari of the Decision[1] of the Court of Appeals (CA) in
CA-G.R. CV No. 47458 affirming, on appeal, the Decision[2] of the Regional Trial Court (RTC)
of Quezon City, Branch 98, in Civil Case No. Q-89-3905.
The Antecedents
The Xavierville Estate, Inc. (XEI) was the owner of parcels of land in Quezon City, known as the
Xavierville Estate Subdivision, with an area of 42 hectares. XEI caused the subdivision of the
property into residential lots, which was then offered for sale to individual lot buyers.[3]
On September 8, 1967, XEI, through its General Manager, Antonio Ramos, as vendor,
and The Overseas Bank of Manila (OBM), as vendee, executed a Deed of Sale of Real Estate
over some residential lots in the subdivision, including Lot 1, Block 2, with an area of 907.5 square
meters, and Lot 2, Block 2, with an area of 832.80 square meters. The transaction was subject to
the approval of the Board of Directors of OBM, and was covered by real estate mortgages in favor
of the Philippine National Bank as security for its account amounting to P5,187,000.00, and the
Central Bank of the Philippines as security for advances amounting
to P22,185,193.74.[4] Nevertheless, XEI continued selling the residential lots in the subdivision as
agent of OBM.[5]
Sometime in 1972, then XEI president Emerito Ramos, Jr. contracted the services of
Engr. Carlos Manalo, Jr. who was in business of drilling deep water wells and installing pumps
under the business name Hurricane Commercial, Inc. For P34,887.66, Manalo, Jr. installed a
water pump at Ramos residence at the corner of Aurora Boulevard and Katipunan
Avenue, Quezon City. Manalo, Jr. then proposed to XEI, through Ramos, to purchase a lot in the
Xavierville subdivision, and offered as part of the downpayment the P34,887.66 Ramos owed
him. XEI, through Ramos, agreed. In a letter dated February 8, 1972, Ramos requested Manalo,
Jr. to choose which lots he wanted to buy so that the price of the lots and the terms of payment
could be fixed and incorporated in the conditional sale.[6] Manalo, Jr. met with Ramos and
informed him that he and his wife Perla had chosen Lots 1 and 2 of Block 2 with a total area of
1,740.3 square meters.
In a letter dated August 22, 1972 to Perla Manalo, Ramos confirmed the reservation of
the lots. He also pegged the price of the lots at P200.00 per square meter, or a total
of P348,060.00, with a 20% down payment of the purchase price amounting to P69,612.00 less
the P34,887.66 owing from Ramos, payable on or before December 31, 1972; the corresponding
Contract of Conditional Sale would then be signed on or before the same date, but if the selling
operations of XEI resumed after December 31, 1972, the balance of the downpayment would fall
due then, and the spouses would sign the aforesaid contract within five (5) days from receipt of the
notice of resumption of such selling operations. It was also stated in the letter that, in the
meantime, the spouses may introduce improvements thereon subject to the rules and regulations
imposed by XEI in the subdivision. Perla Manalo conformed to the letter agreement.[7]
The spouses Manalo took possession of the property on September 2, 1972, constructed
a house thereon, and installed a fence around the perimeter of the lots.
<In the meantime, many of the lot buyers refused to pay their monthly installments until
they were assured that they would be issued Torrens titles over the lots they had purchased.[8] The
spouses Manalo were notified of the resumption of the selling operations of XEI. [9] However, they
did not pay the balance of the downpayment on the lots because Ramos failed to prepare a
contract of conditional sale and transmit the same to Manalo for their signature. On August 14,
1973, Perla Manalo went to the XEI office and requested that the payment of the amount
representing the balance of the downpayment be deferred, which, however, XEI rejected.> On
August 10,
1973, XEI furnished her with a statement of their account as of July 31, 1973, showing that they
had a balance of P34,724.34 on the downpayment of the two lots after deducting the account of
Ramos, plus P3,819.68[10] interest thereon from September 1, 1972 to July 31, 1973, and that the
interests on the unpaid balance of the purchase price of P278,448.00 from September 1, 1972 to
July 31, 1973 amounted to P30,629.28.[11] The spouses were informed that they were being billed
for said unpaid interests.[12]
On January 25, 1974, the spouses Manalo received another statement of account from
XEI, inclusive of interests on the purchase price of the lots. [13] In a letter dated April 6, 1974 to XEI,
Manalo, Jr. stated they had not yet received the notice of resumption of Leis selling operations,
and that there had been no arrangement on the payment of interests; hence, they should not be
charged with interest on the balance of the downpayment on the property.[14] Further, they
demanded that a deed of conditional sale over the two lots be transmitted to them for their
signatures. However, XEI ignored the demands. Consequently, the spouses refused to pay the
balance of the downpayment of the purchase price.[15]
Sometime in June 1976, Manalo, Jr. constructed a business sign in the sidewalk near his
house. In a letter dated June 17, 1976, XEI informed Manalo, Jr. that business signs were not
allowed along the sidewalk. It demanded that he remove the same, on the ground, among others,
that the sidewalk was not part of the land which he had purchased on installment basis from
XEI.[16]Manalo, Jr. did not respond. XEI reiterated its demand on September 15, 1977.[17]
Subsequently, XEI turned over its selling operations to OBM, including the receivables for
lots already contracted and those yet to be sold.[18] On December 8, 1977, OBM warned Manalo,
Jr., that putting up of a business sign is specifically prohibited by their contract of conditional sale
and that his failure to comply with its demand would impel it to avail of the remedies as provided in
their contract of conditional sale.[19]
Meanwhile, on December 5, 1979, the Register of Deeds issued Transfer Certificate of
Title (TCT) No. T-265822 over Lot 1, Block 2, and TCT No. T-265823 over Lot 2, Block 2, in favor
of the OBM.[20] The lien in favor of the Central Bank of the Philippines was annotated at the dorsal
portion of said title, which was later cancelled on August 4, 1980.[21]
Subsequently, the Commercial Bank of Manila (CBM) acquired the Xavierville Estate from
OBM. CBM wrote Edilberto Ng, the president of Xavierville Homeowners Association that, as
of January 31, 1983, Manalo, Jr. was one of the lot buyers in the subdivision.[22] CBM reiterated in
its letter to Ng that, as of January 24, 1984, Manalo was a homeowner in the subdivision.[23]
In a letter dated August 5, 1986, the CBM requested Perla Manalo to stop any on-going
construction on the property since it (CBM) was the owner of the lot and she had no permission for
such construction.[24] She agreed to have a conference meeting with CBM officers where she
informed them that her husband had a contract with OBM, through XEI, to purchase the property.
When asked to prove her claim, she promised to send the documents to CBM. However, she
failed to do so.[25] On September 5, 1986, CBM reiterated its demand that it be furnished with the
documents promised,[26] but Perla Manalo did not respond.
On July 27, 1987, CBM filed a complaint[27] for unlawful detainer against the spouses with
the Metropolitan Trial Court of Quezon City. The case was docketed as Civil Case No.
51618. CBM claimed that the spouses had been unlawfully occupying the property without its
consent and that despite its demands, they refused to vacate the property. The latter alleged that
they, as vendors, and XEI, as vendee, had a contract of sale over the lots which had not yet been
rescinded.[28]
While the case was pending, the spouses Manalo wrote CBM to offer an amicable
settlement, promising to abide by the purchase price of the property (P313,172.34), per agreement
with XEI, through Ramos. However, on July 28, 1988, CBM wrote the spouses, through counsel,
proposing that the price of P1,500.00 per square meter of the property was a reasonable starting
point for negotiation of the settlement.[29] The spouses rejected the counter
proposal,[30] emphasizing that they would abide by their original agreement with XEI. CBM moved
to withdraw its complaint[31] because of the issues raised.[32]
In the meantime, the CBM was renamed the Boston Bank of the Philippines. After CBM
filed its complaint against the spouses Manalo, the latter filed a complaint for specific performance
and damages against the bank before the Regional Trial Court (RTC) of Quezon City on October
31, 1989.
The plaintiffs alleged therein that they had always been ready, able and willing to pay the
installments on the lots sold to them by the defendants remote predecessor-in-interest, as might
be or stipulated in the contract of sale, but no contract was forthcoming; they constructed their
house worth P2,000,000.00 on the property in good faith; Manalo, Jr., informed the defendant,
through its counsel, on October 15, 1988 that he would abide by the terms and conditions of his
original agreement with the defendants predecessor-in-interest; during the hearing of the
ejectment case on October 16, 1988, they offered to pay P313,172.34 representing the balance on
the purchase price of said lots; such tender of payment was rejected, so that the subject lots could
be sold at considerably higher prices to third parties.
Plaintiffs further alleged that upon payment of the P313,172.34, they were entitled to the
execution and delivery of a Deed of Absolute Sale covering the subject lots, sufficient in form and
substance to transfer title thereto free and clear of any and all liens and encumbrances of
whatever kind and nature.[33] The plaintiffs prayed that, after due hearing, judgment be rendered in
their favor, to wit:
WHEREFORE, it is respectfully prayed that after due hearing:
(a) The defendant should be ordered to execute and deliver a Deed of
Absolute Sale over subject lots in favor of the plaintiffs after payment of the sum
of P313,172.34, sufficient in form and substance to transfer to them titles thereto
free and clear of any and all liens and encumbrances of whatever kind or nature;
(b) The defendant should be held liable for moral and exemplary
damages in the amounts of P300,000.00 and P30,000.00, respectively, for not
promptly executing and delivering to plaintiff the necessary Contract of Sale,
notwithstanding repeated demands therefor and for having been constrained to
engage the services of undersigned counsel for which they agreed to pay
attorneys fees in the sum of P50,000.00 to enforce their rights in the premises
and appearance fee of P500.00;
(c) And for such other and further relief as may be just and equitable in
the premises.[34]
In its Answer to the complaint, the defendant interposed the following affirmative
defenses: (a) plaintiffs had no cause of action against it because the August 22, 1972 letter
agreement between XEI and the plaintiffs was not binding on it; and (b) it had no record of any
contract to sell executed by it or its predecessor, or of any statement of accounts from its
predecessors, or records of payments of the plaintiffs or of any documents which entitled them to
the possession of the lots.[35] The defendant, likewise, interposed counterclaims for damages and
attorneys fees and prayed for the eviction of the plaintiffs from the property.[36]
Meanwhile, in a letter dated January 25, 1993, plaintiffs, through counsel, proposed an
amicable settlement of the case by paying P942,648.70, representing the balance of the purchase
price of the two lots based on the current market value.[37] However, the defendant rejected the
same and insisted that for the smaller lot, they pay P4,500,000.00, the current market value of the
property.[38] The defendant insisted that it owned the property since there was no contract or
agreement between it and the plaintiffs relative thereto.
During the trial, the plaintiffs adduced in evidence the separate Contracts of Conditional
Sale executed between XEI and Alberto Soller;[39] Alfredo Aguila,[40] and Dra. Elena Santos-
Roque[41] to prove that XEI continued selling residential lots in the subdivision as agent of OBM
after the latter had acquired the said lots.
For its part, defendant presented in evidence the letter dated August 22, 1972, where XEI
proposed to sell the two lots subject to two suspensive conditions: the payment of the balance of
the downpayment of the property, and the execution of the corresponding contract of conditional
sale. Since plaintiffs failed to pay, OBM consequently refused to execute the corresponding
contract of conditional sale and forfeited the P34,877.66 downpayment for the two lots, but did not
notify them of said forfeiture.[42] It alleged that OBM considered the lots unsold because the titles
thereto bore no annotation that they had been sold under a contract of conditional sale, and the
plaintiffs were not notified of XEIs resumption of its selling operations.
On May 2, 1994, the RTC rendered judgment in favor of the plaintiffs and against the
defendant. The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and
against the defendant
(a) Ordering the latter to execute and deliver a Deed of Absolute Sale
over Lot 1 and 2, Block 2 of the Xavierville Estate Subdivision after payment of
 the sum of P942,978.70 sufficient in form and substance to transfer to them titles
thereto free from any and all liens and encumbrances of whatever kind and
nature.
(b) Ordering the defendant to pay moral and exemplary damages in the
amount of P150,000.00; and
(c) To pay attorneys fees in the sum of P50,000.00 and to pay the costs.
SO ORDERED.[43]
The trial court ruled that under the August 22, 1972 letter agreement of XEI and the plaintiffs,
the parties had a complete contract to sell over the lots, and that they had already partially
consummated the same. It declared that the failure of the defendant to notify the plaintiffs of the
resumption of its selling operations and to execute a deed of conditional sale did not prevent the
defendants obligation to convey titles to the lots from acquiring binding effect. Consequently, the
plaintiffs had a cause of action to compel the defendant to execute a deed of sale over the lots in
their favor.
Boston Bank appealed the decision to the CA, alleging that the lower court erred in (a) not
concluding that the letter of XEI to the spouses Manalo, was at most a mere contract to sell
subject to suspensive conditions, i.e., the payment of the balance of the downpayment on the
property and the execution of a deed of conditional sale (which were not complied with); and (b) in
awarding moral and exemplary damages to the spouses Manalo despite the absence of testimony
providing facts to justify such awards.[44]
On September 30, 2002, the CA rendered a decision affirming that of the RTC with
modification. The fallo reads:
WHEREFORE, the appealed decision is AFFIRMED with
MODIFICATIONS that (a) the figure P942,978.70 appearing [in] par. (a) of the
dispositive portion thereof is changed to P313,172.34 plus interest thereon at the
rate of 12% per annum from September 1, 1972 until fully paid and (b) the award
of moral and exemplary damages and attorneys fees in favor of plaintiffs-
appellees is DELETED.
SO ORDERED.[45]
The appellate court sustained the ruling of the RTC that the appellant and the appellees
had executed a Contract to Sell over the two lots but declared that the balance of the purchase
price of the property amounting to P278,448.00 was payable in fixed amounts, inclusive of pre-
computed interests, from delivery of the possession of the property to the appellees on a monthly
basis for 120 months, based on the deeds of conditional sale executed by XEI in favor of other lot
buyers.[46] The CA also declared that, while XEI must have resumed its selling operations before
the end of 1972 and the downpayment on the property remained unpaid as of December 31, 1972,
absent a written notice of cancellation of the contract to sell from the bank or notarial demand
therefor as required by Republic Act No. 6552, the spouses had, at the very least, a 60-day grace
period from January 1, 1973 within which to pay the same.
Boston Bank filed a motion for the reconsideration of the decision alleging that there was
no perfected contract to sell the two lots, as there was no agreement between XEI and the
respondents on the manner of payment as well as the other terms and conditions of the sale. It
further averred that its claim for recovery of possession of the aforesaid lots in its Memorandum
dated February 28, 1994 filed before the trial court constituted a judicial demand for rescission that
satisfied the requirements of the New Civil Code. However, the appellate court denied the motion.
Boston Bank, now petitioner, filed the instant petition for review on certiorari assailing the
CA rulings. It maintains that, as held by the CA, the records do not reflect any schedule of
payment of the 80% balance of the purchase price, or P278,448.00. Petitioner insists that unless
the parties had agreed on the manner of payment of the principal amount, including the other
terms and conditions of the contract, there would be no existing contract of sale or contract to
sell.[47] Petitioner avers that the letter agreement to respondent spouses dated August 22, 1972
merely confirmed their reservation for the purchase of Lot Nos. 1 and 2, consisting of 1,740.3
square meters, more or less, at the price of P200.00 per square meter (or P348,060.00), the
amount of the downpayment thereon and the application of the P34,887.00 due from Ramos as
part of such downpayment.
Petitioner asserts that there is no factual basis for the CA ruling that the terms and
conditions relating to the payment of the balance of the purchase price of the property (as agreed
upon by XEI and other lot buyers in the same subdivision) were also applicable to the contract
entered into between the petitioner and the respondents. It insists that such a ruling is contrary to
law, as it is tantamount to compelling the parties to agree to something that was not even
discussed, thus, violating their freedom to contract. Besides, the situation of the respondents
cannot be equated with those of the other lot buyers, as, for one thing, the respondents made a
partial payment on the downpayment for the two lots even before the execution of any contract of
conditional sale.
Petitioner posits that, even on the assumption that there was a perfected contract to sell
between the parties, nevertheless, it cannot be compelled to convey the property to the
respondents because the latter failed to pay the balance of the downpayment of the property, as
well as the balance of 80% of the purchase price, thus resulting in the extinction of its obligation to
convey title to the lots to the respondents.
Another egregious error of the CA, petitioner avers, is the application of Republic Act No.
6552. It insists that such law applies only to a perfected agreement or perfected contract to sell,
not in this case where the downpayment on the purchase price of the property was not completely
paid, and no installment payments were made by the buyers.
Petitioner also faults the CA for declaring that petitioner failed to serve a notice on the
respondents of cancellation or rescission of the contract to sell, or notarial demand
therefor. Petitioner insists that its August 5, 1986 letter requiring respondents to vacate the
property and its complaint for ejectment in Civil Case No. 51618 filed in the Metropolitan Trial
Court amounted to the requisite demand for a rescission of the contract to sell. Moreover, the
action of the respondents below was barred by laches because despite demands, they failed to
pay the balance of the purchase price of the lots (let alone the downpayment) for a considerable
number of years.
For their part, respondents assert that as long as there is a meeting of the minds of the
parties to a contract of sale as to the price, the contract is valid despite the parties failure to agree
on the manner of payment. In such a situation, the balance of the purchase price would be
payable on demand, conformably to Article 1169 of the New Civil Code. They insist that the law
does not require a party to agree on the manner of payment of the purchase price as a
prerequisite to a valid contract to sell. The respondents cite the ruling of this Court
in Buenaventura v. Court of Appeals[48] to support their submission.
They argue that even if the manner and timeline for the payment of the balance of the
purchase price of the property is an essential requisite of a contract to sell, nevertheless, as
shown by their letter agreement of August 22, 1972 with the OBM, through XEI and the other
letters to them, an agreement was reached as to the manner of payment of the balance of the
purchase price. They point out that such letters referred to the terms of the
terms of the deeds of conditional sale executed by XEI in favor of the other lot buyers in the
subdivision, which contained uniform terms of 120 equal monthly installments (excluding the
downpayment, but inclusive of pre-computed interests). The respondents assert that XEI was a
real estate broker and knew that the contracts involving residential lots in the subdivision
contained uniform terms as to the manner and timeline of the payment of the purchase price of
said lots.
Respondents further posit that the terms and conditions to be incorporated in the
corresponding contract of conditional sale to be executed by the parties would be the same as
those contained in the contracts of conditional sale executed by lot buyers in the subdivision. After
all, they maintain, the contents of the corresponding contract of conditional sale referred to in
the August 22, 1972 letter agreement envisaged those contained in the contracts of conditional
sale that XEI and other lot buyers executed. Respondents cite the ruling of this Court in Mitsui
Bussan Kaisha v. Manila E.R.R. & L. Co.[49]
The respondents aver that the issues raised by the petitioner are factual, inappropriate in
a petition for review on certiorari under Rule 45 of the Rules of Court. They assert that petitioner
adopted a theory in litigating the case in the trial court, but changed the same on appeal before the
CA, and again in this Court. They argue that the petitioner is estopped from adopting a new theory
contrary to those it had adopted in the trial and appellate courts. Moreover, the existence of a
contract of conditional sale was admitted in the letters of XEI and OBM. They aver that they
became owners of the lots upon delivery to them by XEI.
The issues for resolution are the following: (1) whether the factual issues raised by the
petitioner are proper; (2) whether petitioner or its predecessors-in-interest, the XEI or the OBM, as
seller, and the respondents, as buyers, forged a perfect contract to sell over the property; (3)
whether
petitioner is estopped from contending that no such contract was forged by the parties; and (4)
whether respondents has a cause of action against the petitioner for specific performance.
The rule is that before this Court, only legal issues may be raised in a petition for review
on certiorari. The reason is that this Court is not a trier of facts, and is not to review and calibrate
the evidence on record. Moreover, the findings of facts of the trial court, as affirmed on appeal by
the Court of Appeals, are conclusive on this Court unless the case falls under any of the following
exceptions:
(1) when the conclusion is a finding grounded entirely on speculations,
surmises and conjectures; (2) when the inference made is manifestly mistaken,
absurd or impossible; (3) where there is a grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of fact
are conflicting; (6) when the Court of Appeals, in making its findings went beyond
the issues of the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings of fact are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as
well as in the petitioners main and reply briefs are not disputed by the
respondents; and (10) when the findings of fact of the Court of Appeals are
premised on the supposed absence of evidence and contradicted by the
evidence on record.[50]
We have reviewed the records and we find that, indeed, the ruling of the appellate court
dismissing petitioners appeal is contrary to law and is not supported by evidence. A careful
examination of the factual backdrop of the case, as well as the antecedental proceedings
constrains us to hold that petitioner is not barred from asserting that XEI or OBM, on one hand,
and the respondents, on the other, failed to forge a perfected contract to sell the subject lots.
It must be stressed that the Court may consider an issue not raised during the trial when
there is plain error.[51] Although a factual issue was not raised in the trial court, such issue may still
be considered and resolved by the Court in the interest of substantial justice, if it finds that to do so
is necessary to arrive at a just decision,[52] or when an issue is closely related to an issue raised in
the trial court and the Court of Appeals and is necessary for a just and complete resolution of the
case.[53] When the trial court decides a case in favor of a party on certain grounds, the Court may
base its decision upon some other points, which the trial court or appellate court ignored or
erroneously decided in favor of a party.[54]
In this case, the issue of whether XEI had agreed to allow the respondents to pay the
purchase price of the property was raised by the parties. The trial court ruled that the parties had
perfected a contract to sell, as against petitioners claim that no such contract existed. However, in
resolving the issue of whether the petitioner was obliged to sell the property to the respondents,
while the CA declared that XEI or OBM and the respondents failed to agree on the schedule of
payment of the balance of the purchase price of the property, it ruled that XEI and the respondents
had forged a contract to sell; hence, petitioner is entitled to ventilate the issue before this Court.
We agree with petitioners contention that, for a perfected contract of sale or contract to
sell to exist in law, there must be an agreement of the parties, not only on the price of the property
sold, but also on the manner the price is to be paid by the vendee.
Under Article 1458 of the New Civil Code, in a contract of sale, whether absolute or
conditional, one of the contracting parties obliges himself to transfer the ownership of and deliver a
determinate thing, and the other to pay therefor a price certain in money or its equivalent. A
contract of sale is perfected at the moment there is a meeting of the minds upon the thing which is
the object of the contract and the price. From the averment of perfection, the parties are bound,
not only to the fulfillment of what has been sale, inclusive of the terms of payment of the balance of the purchase price and the other
expressly stipulated, but also to all the consequences which, according to their nature, may be in substantial terms and conditions in the corresponding contract of conditional sale, to be later
keeping with good faith, usage and law.[55] On the other hand, when the contract of sale or to sell signed by the parties, simultaneously with respondents settlement of the balance of the
is not perfected, it cannot, as an independent source of obligation, serve as a binding juridical downpayment.
relation between the parties.[56]
The February 8, 1972 letter of XEI reads:
A definite agreement as to the price is an essential element of a binding agreement to sell Mr. Carlos T. Manalo, Jr.
personal or real property because it seriously affects the rights and obligations of the parties. Price Hurricane Rotary Well Drilling
is an essential element in the formation of a binding and enforceable contract of sale. The fixing of Rizal Avenue Ext.,Caloocan City
the price can never be left to the decision of one of the contracting parties. But a price fixed by one
of the contracting parties, if accepted by the other, gives rise to a perfected sale.[57] Dear Mr. Manalo:

It is not enough for the parties to agree on the price of the property. The parties must also We agree with your verbal offer to exchange the proceeds of your
agree on the manner of payment of the price of the property to give rise to a binding and contract with us to form as a down payment for a lot in our Xavierville Estate
enforceable contract of sale or contract to sell. This is so because the agreement as to the manner Subdivision.
of payment goes into the price, such that a disagreement on the manner of payment is tantamount
to a failure to agree on the price.[58] Please let us know your choice lot so that we can fix the price and terms
In a contract to sell property by installments, it is not enough that the parties agree on the price as of payment in our conditional sale.
well as the amount of downpayment. The parties must, likewise, agree on the manner of payment Sincerely yours,
of the balance of the purchase price and on the other terms and conditions relative to the
sale. Even if the buyer makes a downpayment or portion thereof, such payment cannot be XAVIERVILLE ESTATE, INC.
considered as sufficient proof of the perfection of any purchase and sale between the
parties. Indeed, this Court ruled in Velasco v. Court of Appeals[59] that: (Signed)
EMERITO B. RAMOS, JR.
It is not difficult to glean from the aforequoted averments that the President
petitioners themselves admit that they and the respondent still had to meet and
agree on how and when the down-payment and the installment payments were to CONFORME:
be paid. Such being the situation, it cannot, therefore, be said that a definite and
firm sales agreement between the parties had been perfected over the lot in (Signed)
question. Indeed, this Court has already ruled before that a definite agreement on CARLOS T. MANALO, JR.
the manner of payment of the purchase price is an essential element in the Hurricane Rotary Well Drilling[62]
formation of a binding and enforceable contract of sale. The fact, therefore, that
the petitioners delivered to the respondent the sum of P10,000.00 as part of the
downpayment that they had to pay cannot be considered as sufficient proof of the The August 22, 1972 letter agreement of XEI and the respondents reads:
perfection of any purchase and sale agreement between the parties herein under
article 1482 of the New Civil Code, as the petitioners themselves admit that some Mrs. Perla P. Manalo
essential matter the terms of payment still had to be mutually covenanted.[60] 1548 Rizal Avenue Extension
Caloocan City

We agree with the contention of the petitioner that, as held by the CA, there is no
showing, in the records, of the schedule of payment of the balance of the purchase price on the
property amounting to P278,448.00. We have meticulously reviewed the records, including Ramos
February 8, 1972 and August 22, 1972 letters to respondents,[61] and find that said parties confined
themselves to agreeing on the price of the property (P348,060.00), the 20% downpayment of the
purchase price (P69,612.00), and credited respondents for the P34,887.00 owing from Ramos as
part of the 20% downpayment. The timeline for the payment of the balance of the downpayment
(P34,724.34) was also agreed upon, that is, on or before XEI resumed its selling operations, on or
before December 31, 1972, or within five (5) days from written notice of such resumption of selling
operations. The parties had also agreed to incorporate all the terms and conditions relating to the
Dear Mrs. Manalo:
This is to confirm your reservation of Lot Nos. 1 and 2; Block 2 of our
consolidation-subdivision plan as amended, consisting of 1,740.3 square meters
more or less, at the price of P200.00 per square meter or a total price
of P348,060.00.
It is agreed that as soon as we resume selling operations, you must pay a down
payment of 20% of the purchase price of the said lots and sign the corresponding
Contract of Conditional Sale, on or before December 31, 1972, provided,
 however, that if we resume selling after December 31, 1972, then you must pay
the aforementioned down payment and sign the aforesaid contract within five (5)
days from your receipt of our notice of resumption of selling operations.
In the meanwhile, you may introduce such improvements on the said lots as you
may desire, subject to the rules and regulations of the subdivision.
If the above terms and conditions are acceptable to you, please signify your
conformity by signing on the space herein below provided.
Thank you.
Very truly yours,
XAVIERVILLE ESTATE, INC. CONFORME:
By:
(Signed) (Signed)
EMERITO B. RAMOS, JR. PERLA P. MANALO
President Buyer[63]
Based on these two letters, the determination of the terms of payment of
the P278,448.00 had yet to be agreed upon on or before December 31, 1972, or even afterwards,
when the parties sign the corresponding contract of conditional sale.
Jurisprudence is that if a material element of a contemplated contract is left for future
negotiations, the same is too indefinite to be enforceable. [64] And when an essential element of a
contract is reserved for future agreement of the parties, no legal obligation arises until such future
agreement is concluded.[65]
So long as an essential element entering into the proposed obligation of either of the
parties remains to be determined by an agreement which they are to make, the contract is
incomplete and unenforceable.[66] The reason is that such a contract is lacking in the necessary
qualities of definiteness, certainty and mutuality.[67]
There is no evidence on record to prove that XEI or OBM and the respondents had
agreed, after December 31, 1972, on the terms of payment of the balance of the purchase price of
the property and the other substantial terms and conditions relative to the sale. Indeed, the parties
are in agreement that there had been no contract of conditional sale ever executed by XEI, OBM
or petitioner, as vendor, and the respondents, as vendees.[68]
The ruling of this Court in Buenaventura v. Court of Appeals has no bearing in this case
because the issue of the manner of payment of the purchase price of the property was not raised
therein.
We reject the submission of respondents that they and Ramos had intended to
incorporate the terms of payment contained in the three contracts of conditional sale executed by
XEI and other lot buyers in the corresponding contract of conditional sale, which would later be
signed by them.[69] We have meticulously reviewed the respondents complaint and find no such
allegation therein.[70] Indeed, respondents merely alleged in their complaint that they were bound
to pay the balance of the purchase price of the property in installments. When respondent Manalo,
Jr. testified, he was never asked, on direct examination or even on cross-examination, whether the
terms of payment of the balance of the purchase price of the lots under the contracts of conditional
sale executed by XEI and other lot buyers would form part of the corresponding contract of
conditional sale to be signed by them simultaneously with the payment of the balance of the
downpayment on the purchase price.
We note that, in its letter to the respondents dated June 17, 1976, or almost three years
from the execution by the parties of their August 22, 1972 letter agreement, XEI stated, in part,
that respondents had purchased the property on installment basis.[71]However, in the said letter,
XEI failed to state a specific amount for each installment, and whether such payments were to be
made monthly, semi-annually, or annually. Also, respondents, as plaintiffs below, failed to adduce
a shred of evidence to prove that they were obliged to pay the P278,448.00 monthly, semi-
annually or annually. The allegation that the payment of the P278,448.00 was to be paid in
installments is, thus, vague and indefinite. Case law is that, for a contract to be enforceable, its
terms must be certain and explicit, not vague or indefinite.[72]
There is no factual and legal basis for the CA ruling that, based on the terms of payment
of the balance of the purchase price of the lots under the contracts of conditional sale executed by
XEI and the other lot buyers, respondents were obliged to pay the P278,448.00 with pre-computed
interest of 12% per annum in 120-month installments. As gleaned from the ruling of the appellate
court, it failed to justify its use of the terms of payment under the three contracts of conditional sale
as basis for such ruling, to wit:
On the other hand, the records do not disclose the schedule of payment
of the purchase price, net of the downpayment. Considering, however, the
Contracts of Conditional Sale (Exhs. N, O and P) entered into by XEI with other
lot buyers, it would appear that the subdivision lots sold by XEI, under contracts
to sell, were payable in 120 equal monthly installments (exclusive of the
downpayment but including pre-computed interests) commencing on delivery of
the lot to the buyer.[73]
By its ruling, the CA unilaterally supplied an essential element to the letter agreement of
XEI and the respondents. Courts should not undertake to make a contract for the parties, nor can
it enforce one, the terms of which are in doubt.[74] Indeed, the Court emphasized in Chua v. Court
of Appeals[75] that it is not the province of a court to alter a contract by construction or to make a
new contract for the parties; its duty is confined to the interpretation of the one which they have
made for themselves, without regard to its wisdom or folly, as the court cannot supply material
stipulations or read into contract words which it does not contain.
Respondents, as plaintiffs below, failed to allege in their complaint that the terms of
payment of the P278,448.00 to be incorporated in the corresponding contract of conditional sale
were those contained in the contracts of conditional sale executed by XEI and Soller, Aguila and
Roque.[76] They likewise failed to prove such allegation in this Court.
 The bare fact that other lot buyers were allowed to pay the balance of the purchase price of
lots purchased by them in 120 or 180 monthly installments does not constitute evidence that XEI also
agreed to give the respondents the same mode and timeline of payment of the P278,448.00.
Under Section 34, Rule 130 of the Revised Rules of Court, evidence that one did a certain
thing at one time is not admissible to prove that he did the same or similar thing at another time,
although such evidence may be received to prove habit, usage, pattern of conduct or the intent of the
parties.
Similar acts as evidence. Evidence that one did or did not do a certain thing
at one time is not admissible to prove that he did or did not do the same or a similar
thing at another time; but it may be received to prove a specific intent or knowledge,
identity, plan, system, scheme, habit, custom or usage, and the like.
However, respondents failed to allege and prove, in the trial court, that, as a matter of business
usage, habit or pattern of conduct, XEI granted all lot buyers the right to pay the balance of the
purchase price in installments of 120 months of fixed amounts with pre-computed interests, and that XEI
and the respondents had intended to adopt such terms of payment relative to the sale of the two lots in
question. Indeed, respondents adduced in evidence the three contracts of conditional sale executed by
XEI and other lot buyers merely to prove that XEI continued to sell lots in the subdivision as sales agent
of OBM after it acquired said lots, not to prove usage, habit or pattern of conduct on the part of XEI to
require all lot buyers in the subdivision to pay the balance of the purchase price of said lots in 120
months. It further failed to prive that the trial court admitted the said deeds [77] as part of the testimony of
respondent Manalo, Jr.[78]
Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must
contend with the caveat that, before they admit evidence of usage, of habit or pattern of conduct, the
offering party must establish the degree of specificity and frequency of uniform response that ensures
more than a mere tendency to act in a given manner but rather, conduct that is semi-automatic in
nature. The offering party must allege and prove specific, repetitive conduct that might constitute
evidence of habit.The examples offered in evidence to prove habit, or pattern of evidence must be
numerous enough to base on inference of systematic conduct. Mere similarity of contracts does not
present the kind of sufficiently similar circumstances to outweigh the danger of prejudice and confusion.
In determining whether the examples are numerous enough, and sufficiently regular, the key
criteria are adequacy of sampling and uniformity of response. After all, habit means a course of
behavior of a person regularly represented in like circumstances.[79] It is only when examples offered to
establish pattern of conduct or habit are numerous enough to lose an inference of systematic conduct
that examples are admissible. The key criteria are adequacy of sampling and uniformity of response or
ratio of reaction to situations.[80]
There are cases where the course of dealings to be followed is defined by the usage of a
particular trade or market or profession. As expostulated by Justice Benjamin Cardozo of the United
States Supreme Court: Life casts the moulds of conduct, which will someday become fixed as law. Law
preserves the moulds which have taken form and shape from life. [81] Usage furnishes a standard for the
measurement of many of the rights and acts of men.[82] It is also well-settled that parties who contract on
a subject matter concerning which known usage prevail, incorporate such usage by implication into their
agreement, if nothing is said to be contrary.[83]
However, the respondents inexplicably failed to adduce sufficient competent evidence to prove
usage, habit or pattern of conduct of XEI to justify the use of the terms of payment in the contracts of the
other lot buyers, and thus grant respondents the right to pay the P278,448.00 in 120 months,
presumably because of respondents belief that the manner of payment of the said amount is not an
essential element of a contract to sell. There is no evidence that XEI or OBM and all the lot buyers in
the subdivision, including lot buyers who pay part of the downpayment of the property purchased by
them in the form of service, had executed contracts of conditional sale containing uniform terms and
conditions. Moreover, under the terms of the contracts of conditional sale executed by XEI and three lot
buyers in the subdivision, XEI agreed to grant 120 months within which to pay the balance of the
purchase price to two of them, but granted one 180 months to do so. [84] There is no evidence on record
that XEI granted the same right to buyers of two or more lots.
Irrefragably, under Article 1469 of the New Civil Code, the price of the property sold may be
considered certain if it be so with reference to another thing certain. It is sufficient if it can be determined
by the stipulations of the contract made by the parties thereto [85] or by reference to an agreement
incorporated in the contract of sale or contract to sell or if it is capable of being ascertained with
certainty in said contract;[86] or if the contract contains express or implied provisions by which it may be
rendered certain;[87] or if it provides some method or criterion by which it can be definitely
ascertained.[88] As this Court held in Villaraza v. Court of Appeals,[89] the price is considered certain if, by
its terms, the contract furnishes a basis or measure for ascertaining the amount agreed upon.
We have carefully reviewed the August 22, 1972 letter agreement of the parties and find no
direct or implied reference to the manner and schedule of payment of the balance of the purchase price
of the lots covered by the deeds of conditional sale executed by XEI and that of the other lot
buyers[90] as basis for or mode of determination of the schedule of the payment by the respondents of
the P278,448.00.
The ruling of this Court in Mitsui Bussan Kaisha v. Manila Electric Railroad and Light
Company[91] is not applicable in this case because the basic price fixed in the contract was P9.45 per
long ton, but it was stipulated that the price was subject to modification in proportion to variations in
calories and ash content, and not otherwise. In this case, the parties did not fix in their letters-
agreement, any method or mode of determining the terms of payment of the balance of the purchase
price of the property amounting to P278,448.00.
It bears stressing that the respondents failed and refused to pay the balance of the
downpayment and of the purchase price of the property amounting to P278,448.00 despite notice to
them of the resumption by XEI of its selling operations. The respondents enjoyed possession of the
property without paying a centavo. On the other hand, XEI and OBM failed and refused to transmit a
contract of conditional sale to the respondents. The respondents could have at least consigned the
balance of the downpayment after notice of the resumption of the selling operations of XEI and filed an
action to compel XEI or OBM to transmit to them the said contract; however, they failed to do so.
As a consequence, respondents and XEI (or OBM for that matter) failed to forge a perfected
contract to sell the two lots; hence, respondents have no cause of action for specific performance
against petitioner. Republic Act No. 6552 applies only to a perfected contract to sell and not to a
contract with no binding and enforceable effect.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. CV No. 47458 is REVERSED and SET ASIDE. The Regional Trial Court of Quezon
City, Branch 98 is ordered to dismiss the complaint. Costs against the respondents.
REPUBLIC OF THE PHILIPPINES (represented by the Philippine Orthopedic Center) and
VICTOR S. CLAVEL, Petitioners,
vs.
SPOUSES JOSE and AMELIA LURIZ, Respondents.
DECISION
VELASCO, JR., J.:
An appeal is a statutory right that must be exercised only in the manner and in accordance with
the provisions of law. Having satisfactorily shown that they have complied with the rules on
appeal, petitioners are entitled to the proper and just disposition of their cause.
The Case
This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks the annulment of
the July 10, 2003 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 65073. The
dispositive portion of the assailed Decision is as follows:
WHEREFORE, the instant appeal is hereby DENIED. The Decision dated December 7, 2000 of
the Regional Trial Court of Quezon City, Branch 80 denying the Petitioner-Appellant’s Petition for
Certiorari, Prohibition and Mandamus is hereby accordingly AFFIRMED.2
The Facts
The instant case arose from an ejectment Complaint filed by respondents at the Quezon City
Metropolitan Trial Court (MeTC), Branch 37, against Petitioner Victor S. Clavel, as occupant of Lot
Nos. 8 and 10, Block 260, located at No. 68 Maria Clara St., Quezon City. In their complaint
docketed as Civil Case No. 37-17388, respondents alleged that they were the owners of the
disputed lots on the basis of Transfer Certificate of Title (TCT) No. 1297 issued in the name of
Yoichi Urakami and two deeds of sale. The first deed of sale dated February 12, 1948 conveyed
the transfer of the contested lots from Yoichi Urakami to Tomas Balingit. The second deed dated
January 31, 1975 contained the transfer of the lots from Balingit to Amelia Luriz.
In his Answer, Clavel averred that the lots in question were owned and possessed by the
Philippine Orthopedic Center (POC), a government medical facility, which had built four (4)
cottages on said lots and had been in possession of the said lots since 1953. He alleged that the
POC had authorized its administrative officers, including Clavel, to use the cottages as their
residences. He also averred that respondents could not rely upon TCT No. 1297 as the basis of
their claim because its original copy had allegedly been burned during the fire in the office of the
Register of Deeds of Quezon City in 1998. He said that said title was deemed non-existent unless
reconstituted. Moreover, he stressed that the deeds of sale relied upon by the respondents were
not registered and hence, were of questionable character until duly proven. He then prayed that
the case be dismissed.
On September 15, 1997, after trial on the merits, the Quezon City MeTC rendered a Decision in
favor respondents, thus:
From the foregoing, this Court finds that [respondents’] claim has been duly established by
satisfactory evidence, and therefore hereby renders judgment in favor of the [respondents] and
against the [petitioner] Victor S. Clavel, ordering him and all persons claiming rights under him, or
whoever is found in possession of subject properties;
a) to immediately vacate Lots 8 and 10 of Block 260 located at No. 68-A Maria Clara
Street, Quezon City, and restore peaceful possession thereof to herein [respondents];
b) to pay [respondents] the sum of P10,000.00 per month as reasonable compensation
for the use and occupancy of subject parcels of land to be computed from February 14,
1997 and every month thereafter until subject properties shall have been finally vacated;
c) to pay respondents the sum of P20,000 for and attorney’s fees; and
d) to pay the costs of suit.
SO ORDERED.3
Thereafter, on October 9, 1997, respondents moved for the immediate execution of the MeTC
Judgment. Further, through the Office of the Solicitor General, Clavel filed a Notice of Appeal on
October 13, 1997.
On October 20, 1997, the MeTC granted the motion for execution and ordered the issuance of a
writ of execution in favor of respondents. On October 24, 1997, Clavel subsequently filed an
Opposition to the Motion for Execution and moved ad cautelam for the fixing of the supersedeas
bond. On October 27, 1997, he moved for reconsideration and suspension of the implementation
of the Writ of Execution.
On October 28, 1997, the MeTC dismissed petitioners’ Notice of Appeal for failure to file the
required appeal fee and denied their Motion to Fix Supersedeas Bond. Thereafter, on October 29,
1997, the MeTC denied petitioners’ Motion for Reconsideration and Motion to Suspend
Implementation of Writ of Execution.
On October 30, 1997, Deputy Sheriff Efren P. Luna, accompanied by policemen, took possession
of the disputed lots, ejected all POC personnel from these lots, and padlocked the cottages on
them.
On November 5, 1997, Clavel filed another Motion for Reconsideration questioning the dismissal
of his Notice of Appeal, but the motion was consequently denied on November 11, 1997.
On November 13, 1997, Clavel filed with the Quezon City Regional Trial Court (RTC) a special
civil action for certiorari, mandamus, and prohibition, docketed as Civil Case No. Q-97-32370, to
annul the Order and Writ of Execution and subsequent orders of the MeTC.
On November 21, 1997, petitioner Republic filed its Motion for Intervention with the trial court,
alleging ownership of the disputed lots by virtue of Proclamation Nos. 438 (series of 1953) and
732 (series of 1961) praying that it be allowed to adopt Clavel’s petition as its petition-in-
intervention, and for the issuance of a temporary restraining order to enjoin respondents from
disposing, alienating, or encumbering the properties in question.
On December 7, 2000, the RTC denied the petition for certiorari, mandamus, and prohibition for
lack of factual and legal basis; and petitioners eventually appealed the RTC Decision to the CA on
December 22, 2000.
The Ruling of the Court of Appeals
Affirming the December 7, 2000 RTC Decision, the CA held that petitioners belatedly filed the
appeal fees. It noted that petitioners admitted to have received the September 15, 1997 Decision
of the MeTC on October 10, 1997. However, they paid the appeal fee only on October 28, 1997 or
three (3) days beyond the reglementary period for filing an appeal. Thus, the appeal was not
perfected and the assailed MeTC Decision had become final and executory. Consequently, it was
ministerial upon the MeTC judge to issue a writ of execution.
Moreover, the CA observed that petitioners erred when they failed to oppose respondents’ motion
for execution. Agreeing with the RTC, it sanctioned petitioners for not attending the hearing for the
Motion for Execution although they were notified a day before the hearing. Also, it observed that
the writ of execution could not be stayed because petitioners failed to post the required
supersedeas bond.
The Issues
Petitioners submit the following issues for our consideration:
I 40 of the Rules of Court provides:
Whether or not the issuance by the [MeTC] Quezon City, Branch 37 of the following:
(1) Order dated October 20, 1997 (Granting the Motion for Immediate Execution);
(2) Writ of Execution dated October 20, 1997;
(3) Order dated October 28, 1997 (dismissing the notice of appeal filed by petitioner
Clavel);
(4) Order dated October 29, 1997 (denying the "Motion for Reconsideration [of the
October 20, 1997 Order] and Motion to Suspend Implementation of Writ of Execution")
and
(5) Order dated November 11, 1997 (denying the Motion for Reconsideration [of the
October 28, 1997 Order] filed by Petitioner Clavel)
were erroneous and improper and in grave abuse of the [MeTC] Judge’s discretion amounting to
lack or excess of jurisdiction; and
II
Whether or not the Court of Appeals acted with grave abuse of discretion amounting to lack or
excess of jurisdiction when it rendered the Decision dated July 10, 2003 (denying petitioners’
appeal and affirming the Decision of the RTC-Quezon City, Branch 80 (which denied petitioners’
Petition for Certiorari, Mandamus and Prohibition).4
In gist, the petition revolves on the following issues: (1) the timeliness of the payment of the docket
fees; and (2) the propriety of the issuance of the Writ of Execution.
The Ruling of the Court
The petition has merit.
Timeliness of the Payment of Docket Fees
Appeal is an essential part of our judicial process. As such, courts should proceed with caution so
as not to deprive a party of the right to appeal,5 particularly if the appeal is meritorious. However,
the right to appeal is merely a statutory right. For this reason, it should be exercised only in the
manner and in accordance with the provisions of the law.6
In an appeal from a judgment or final order of a municipal trial court to the regional trial court, Rule
Sec. 2. When to appeal.—An appeal may be taken within fifteen (15) days after notice to the
appellant of the judgment or final order appealed from. x x x
xxxx
Sec. 3. How to appeal.—The appeal is taken by filing a notice of appeal with the court that
rendered the judgment or final order appealed from. x x x
xxxx
Sec. 5. Appellate court docket and other lawful fees.—Within the period for taking an appeal, the
appellant shall pay to the clerk of the court which rendered the judgment or final order appealed
from the full amount of the appellate court docket and other lawful fees. Proof of payment thereof
shall be transmitted to the appellate court together with the original record or the record on appeal,
as the case may be.
Accordingly, in order to perfect an appeal, the following must be complied with: first, a notice of
appeal must be filed within 15 days from the notice of final judgment or final order appealed
from; second, such notice of appeal must be filed with the court which rendered the judgment or
final order, and served upon the adverse party; third, within the same period, payment of the full
amount of appellate court docket and other legal fees to the clerk of the court which rendered the
judgment or final order.
Notably, full payment of the appellate docket fees within the prescribed period is mandatory, even
jurisdictional. Otherwise, the appeal is deemed not perfected and the decision sought to be
appealed from becomes final and executory.7
In the instant case, petitioners do not deny that they paid the appellate docket fees on October 18,
1997.8 However, they maintain good faith, averring that such payment was seasonably filed. They
clarified that what was stated in their Notice of Appeal as the date of receipt of the MeTC Decision
was a mere inadvertence. They aver that it was petitioner Clavel who received the Decision on
October 10, 1997. However, he forwarded said Decision through fax message to their
counsel.9 The latter, upon receipt of the message, immediately prepared a Notice of Appeal and
mistakenly stated that they received the MeTC Decision on October 10, 1997. They alleged that
as shown in the stamp receipt on their counsel’s copy of the MeTC Decision, it was only on
October 13, 1997 that the latter officially received said Decision. They explained that as soon as
their counsel received the Decision, on the same day, the latter filed the prepared Notice of Appeal
without correcting the date of receipt of the MeTC Decision, as already stated in said notice. Thus,
relying on their counsel’s date of receipt of the Decision, they paid the appellate docket fees on
October 28, 1997.
We find that petitioners seasonably paid the appellate docket fees.
It is a hornbook doctrine that when a party is represented by counsel, notice to the client and to
any other lawyer, not the counsel of record, is not a notice in law.10 The only exception, as
provided in Section 2 of Rule 13 of the 1997 Rules of Civil Procedure, is when service upon the
parties themselves is ordered by the court. Indisputably, in their Motion for Reconsideration of the
Order denying their Notice of Appeal, petitioners submitted a photocopy of the notice of decision
which the trial court served on their counsel. The said copy had an October 13, 1997 stamped
receipt. Unfortunately, the trial court offhandedly dismissed the petitioners’ explanation without
taking into account the said proof.
Relying on the date when the counsel of petitioners received the notice of judgment, the period to
commence appeal should be reckoned on October 13, 1997. Accordingly, they had fifteen (15)
days to perfect their appeal. Having paid the appellate docket fees on October 28, 1997,
petitioners had validly perfected their appeal.
Liberal Construction of the Rule on Nonpayment of Docket Fees
Even assuming that petitioners belatedly filed the appellate docket fees, the circumstances of the
case would have warranted a liberal construction of the rule on nonpayment of docket fees.
In the exercise of its impartial jurisdiction, the Court allows a liberal construction of the rules on the
manner and periods for perfecting appeals in order to serve the demands of substantial justice.
Specifically, on the payment of docket fees, the Court in Buenaflor v. CA qualifies that:
The established rule is that the payment in full of the docket fees within the prescribed period is
mandatory. Nevertheless, this rule must be qualified, to wit: First, the failure to pay appellate court
docket fee within the reglementary period allows only discretionary dismissal, not automatic
dismissal, of the appeal; Second, such power should be used in the exercise of the Court’s sound
discretion "in accordance with the tenets of justice and fair play and with great deal of
circumspection considering all attendant circumstances.11
In Mactan Cebu International Airport Authority v. Mangubat,12 the payment of the docket fees was
delayed by six days but the Court excused the late payment because the party showed willingness
to abide by the Rules by immediately paying the docket fees. Also, we ruled in Yambao v. Court of
Appeals that "the appellate court may extend the time for the payment of the docket fees if
appellant is able to show that there is a justifiable reason for x x x failure to pay the correct amount
of docket fees within the prescribed period, like fraud, accident, mistake, excusable negligence, or
a similar supervening casualty, without fault on the part of the appellant."13
In the same manner, the Court in Sacdalan v. Court of Appeals affirmed the reinstatement of an
appeal previously dismissed for failure to pay the docket fees. It held that the appeal was
dismissed not because the appellant lacked interest in the case, but because of lack of proper
notice. Thus, it considered the reinstatement of the appeal as just and proper because the
"interest of substantial justice far outweighs whatever negligence"14 was committed.
Although the CA found that the docket fees were belatedly paid, it should have taken cognizance
of the persuasive reasons attendant in this case that merit a relaxation of the rules. Notably, the
Notice of Appeal was immediately prepared and filed before the expiration of the period to file said
notice. It would seem thus, that the alleged three-day delay in the payment of appellate fees was
not a result of petitioners’ inexcusable lethargy to pursue the case.
More importantly, petitioners should not be denied of their right to the proper and just disposition of
their cause. The gravamen of the complaint at the MeTC is the rightful possession of the disputed
land. Petitioner POC had been in peaceful possession of said land by virtue of a law long before
the claims of ownership of respondents. On the other hand, relying on a certificate of ownership
and deeds of sale, respondents suddenly alleged that they merely tolerated the occupation of
petitioners on the disputed land.15
An ejectment case, based on the allegation of possession by tolerance, falls under the category of
unlawful detainer. Unlawful detainer involves the person’s withholding from another of the
possession of real property to which the latter is entitled, after the expiration or termination of the
former’s right to hold possession under a contract, either expressed or implied.16 Where the
plaintiff allows the defendant to use his/her property by tolerance without any contract, the
defendant is necessarily bound by an implied promise that s/he will vacate on demand, failing
which, an action for unlawful detainer will lie.17
The assailed MeTC Decision gave credence to the certificate of title of respondents. However,
considering that petitioners had prior possession of the land, it is important to squarely rule on
whether such prior possession was merely by virtue of an implied agreement, and whether such
tolerance had already ceased. A reading of the MeTC Decision, on the contrary, reveals that no
such findings were made. Hence, it appears that a thorough review of the case is merited.
appeal in Civil Case No. 37-17388 and approve the amount of supersedeas bond as required in
Section 19 of Rule 70 of the Rules of Court. Likewise, the Writ of Execution issued by the
Metropolitan Trial Court on October 20, 1997 is hereby SET ASIDE.

Propriety of the Issuance of the Writ of Execution

Petitioners assail the issuance of the Writ of Execution on the ground that it was hastily issued
without affording them the right to oppose respondents’ motion for execution. 18 They aver that
contrary to the prescribed rule, the execution of the MeTC judgment was ordered even before the
period to file an appeal had lapsed.

We agree. It should be noted that the appellate court relied on Rule 39 of the 1997 Rules on Civil
Procedure in affirming the trial court’s issuance of the writ of execution. However, the applicable
rule in cases of forcible entry and unlawful detainer is Rule 70, which states, thus:

Sec. 19. Immediate execution of judgment; how to stay same.—If judgment is rendered against
the defendant, execution shall issue immediately upon motion, unless appeal has been perfected
and the defendant to stay execution files a sufficient supersedeas bond, approved by the
Municipal Trial Court and executed in favor of the plaintiff to pay the rents, damages, and costs
accruing down to the time of the judgment appealed from, and unless during the pendency of the
appeal, he deposits with the appellate court the amount of rent due from time to time under the
contract, if any, as determined by the judgment of the Municipal Trial Court. x x x

The foregoing rule provides that a judgment in favor of the plaintiffs shall be immediately
executory. It can be stayed by the defendant only by perfecting an appeal, filing a supersedeas
bond, and making a periodic deposit of the rental or the reasonable compensation for the use and
occupancy of the property during the pendency of the appeal. These requisites are mandatory and
concurrent.19 Thus, if not complied with, execution will issue as a matter of right.

In this case, the appellate court held that petitioners’ failure to perfect the appeal and to file a
supersedeas bond warranted the immediate execution of the MeTC judgment. However, a review
of the records reveals that even before petitioners had the opportunity to perfect their appeal and
file a supersedeas bond, the writ of execution had already been issued. Petitioners received the
MeTC Decision on October 13, 1997; thus, they had until October 28, 1997 to perfect their appeal.
Petitioners’ Notice of Appeal filed on October 13, 1997 should have cautioned the trial court to
await the expiration of the reglementary period for filing an appeal before issuing the questioned
writ. However, the writ of execution was issued as early as October 20, 1997.

Public policy dictates that ejectment cases must be resolved with the least possible delay, and
judgments rendered in favor of plaintiff be immediately executed.20 However, the rules of
procedure prescribe trial courts to strike a balance between the plaintiffs’ and defendants’ right to
relief.

WHEREFORE, the petition is GRANTED and the July 10, 2003 Decision of the Court of Appeals is
REVERSED and SET ASIDE. The Municipal Trial Court is directed to give due course to the
PAG-ASA STEEL WORKS, INC., Petitioner, 13. PAEZ REYNALDO 02.27.97. 235.00
vs.
COURT OF APPEALS, FORMER SIXTH DIVISION and PAG-ASA STEEL WORKERS UNION 14. HERNANDEZ ALFREDO 03.23.96 246.00
(PSWU), Respondent. 15. BANIA LUIS JR. 12.08.95 246.00

DECISION 16. MAGBOO VICTOR 05.25.96 246.00

17. NINORA BONIFACIO 03.22.96 246.00
CALLEJO, SR., J.:
18. ALANCADO RODERICK 11.10.95 246.00

This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. 19. PUTONG PASCUAL 06.23.96 246.00
SP No. 65171 ordering Pag-Asa Steel Works, Inc. to pay the members of Pag-Asa Steel Workers 20. PAR EULOGIO JR. 08.16.95 246.00
Union (Union) the wage increase prescribed under Wage Order No. NCR-08. Also assailed in this
petition is the CA Resolution denying the corporation’s motion for reconsideration. 21. SALON FONDADOR 11.16.95 246.00
22. RODA GEORGE 10.11.95 246.00
Petitioner Pag-Asa Steel Works, Inc. is a corporation duly organized and existing under Philippine
laws and is engaged in the manufacture of steel bars and wire rods. Pag-Asa Steel Workers Union 23. RIOJA JOSEPH 12.28.95 246.00
is the duly authorized bargaining agent of the rank-and-file employees of petitioner. 24. RAYMUNDO ANTONIO 06.05.96 246.00
25. BUGTAI ROBERTO 04.10.96 246.00
On January 8, 1998, the Regional Tripartite Wages and Productivity Board (Wage Board) of the
National Capital Region (NCR) issued Wage Order No. NCR-06.2 It provided for an increase 26. RELATO RAMON 07.07.96 265.00
of P13.00 per day in the salaries of employees receiving the minimum wage, and a consequent
27. REGACHUELO DENNIS 11.30.95 265.00
increase in the minimum wage rate to P198.00 per day. Petitioner and the Union negotiated on
how to go about the wage adjustments. Petitioner forwarded a letter3 dated March 10, 1998 to the 28. ORNOPIA REYNALDO 08.09.94 268.00
Union with the list of the salary adjustments of the rank-and-file employees after the
implementation of Wage Order No. NCR-06, and the notation that said "adjustments [were] in 29. PULPULAAN JAIME 01.18.96 275.00
accordance with the formula [they] have discussed and [were] designed so as no distortion shall 30. PANLAAN FERDINAND 01.18.96 275.00
result from the implementation of Wage Order No. NCR-06."
31.BAGASBAS EULOGIO JR. 01.18.96 275.00

NAME DATE REGULAR PRESENT RATE 32. ALEJANDRO

ADJUST OLIVER
EFF NEW RATE 12.03.95 275.00
2/6/98
33. PRIELA DANILO 11.30.95 280.00
1. PEPINO EMMANUEL 08.01.97 191.00 13.0034. NOBELJAS204.00
EDGAR 07.10.95 283.00
2. SEVANDRA RODOLFO 01.17.98 192.00 13.0035. SAJOT RONNIE
205.00 10.02.93 288.00
3. BERNABE ALFREDO 10.24.97 200.00 13.0036. WHITING JOEL
213.00 09.30.93 288.00
4. UMBAL ADOLFO 08.18.97 215.00 12.0037. SURINGA FRANKLIN
227.00 12.19.93 288.00
5. AQUINO JONAS 08.25.97 215.00 12.0038. SIBOL MICHAEL
227.00 12.11.93 288.00
6. AGCAOILI JAIME 01.08.98 220.00 11.0039. SOLO JOSE231.00 02.20.94 288.00
7. BERMEJO JIMMY JR. 04.01.97 221.00 11.0040. TIZON JOEL
232.00 12.23.93 288.00
8. EDRADAN ELDEMAR P. 04.17.97 221.00 11.0041. SABATIN GILBERT
232.00 04.19.94 288.00
9. REBOTON RONILO 05.14.97 221.00 11.0042. REYES RONALDO
232.00 04.14.94 288.00
10. TABAOG ALBERT 04.10.97 221.00 11.0043. AMANIA WILFREDO
232.00 01.06.94 288.00
11. SALEN EDILBERTO 02.10.97 221.00 11.00 232.00
44. QUIDATO ARISTON 12.12.93 288.00 10.0075. RONCALES298.00
DIOSDADO 04.30.90 340.00
45. LAROGA CLAUDIO JR. 10.13.93 288.00 10.0076. DISCAYA EDILBERTO
298.00 09.06.89 340.00
46. MORALES LUIS 09.30.93 288.00 10.0077. SUAREZ LUISTO
298.00 06.10.92 347.00
47. ANTOLO DANILO 12.26.93 288.00 10.0078. CASTRO PEDRO
298.00 10.30.92 348.00
48. EXMUNDO HERCULES 05.13.94 288.00 10.0079. CLAVECILLA
298.00
AMBROSIO 09.09.88 351.00
49. AMPER VALENTINO 08.02.93 288.00 10.0080. YSON ROMEO
298.00 09.11.88 351.00
50. BAYO-ANG ALDEN JR. 07.14.93 288.00 10.0081. JUMAWAN 298.00
URBANO JR. 12.20.87 354.00
51. BASCONES NELSON 02.26.94 288.00 10.0082. MARASIGAN
298.00
GRACIANO 05.20.88 354.00
52. DECENA LAURO 09.18.93 288.00 10.0083. MAGLENTE298.00
ROLANDO 09.03.87 354.00
53. CHUA MARLONITO 10.20.93 288.00 10.0084. NEBRIA CALIX
298.00 02.25.88 354.00
54. CATACUTAN JUNE 03.02.94 288.00 10.0085. BARBIN DANIEL
298.00 09.03.87 354.00
55.DE LOS SANTOS REYNALDO 12.23.93 288.00 10.0086. CAMAING CARLITO
298.00 12.22.87 354.00
56. REYES EFREN 10.23.93 288.00 10.0087. BUBAN JONATHAN
298.00 10.22.87 354.00
57. CAGOMOC DANILO 01.13.94 288.00 10.0088. GUEVARRA298.00
ARNOLD 10.04.87 354.00
58. DOROL ERWIN 09.16.93 288.00 10.0089. MALAPO MARCOS
298.00 JR. 08.04.87 354.00
59. CURAMBAO TIRSO 09.23.93 288.00 10.0090. ZUNIEGA CARLOS
298.00 02.19.88 354.00
60. VENTURA FERDINAND 09.20.94 292.00 10.0091. SABORNIDO
302.00
JULITO 12.20.87 354.00
61. ALBANO JESUS 01.06.94 297.00 10.0092. DALUYO LOTERIO
307.00 04.02.88 354.00
62. CALLEJA JOSEPH 05.10.93 303.00 10.0093. AGUILLON 313.00
GRACIANO 05.27.87 359.00
63. PEREZ DANILO 03.01.93 303.00 10.0094. CRISTY EMETERIO
313.00 04.06.87 359.50
64. BATOY ERNIE 06.15.93 305.00 10.0095. FULGUERAS
315.00
DOMINGO 01.25.87 362.00
65. SAMPAGA EDGARDO 06.07.93 307.00 10.0096. ZIPAGAN NELSON
317.00 02.07.84 370.00
66. SOLON ROBINSON 05.10.94 315.00 10.0097. LAURIO JESUS
325.00 06.01.82 371.00
67. ELEDA FULGENIO 06.07.93 322.00 10.0098. ACASIO PEDRO
332.00 11.21.79 372.00
68. CASCARA RODRIGO 06.07.93 322.00 10.0099. MACALISANG
332.00
EPIFANIO 02.01.88 372.00
69. ROMANOS ARNULFO 06.07.93 322.00 10.00100. OFILAN ANTONIO
332.00 03.12.79 374.50
70. LUMANSOC MARIANO 06.07.93 322.00 10.00101. SEVANDRA
332.00
ALFREDO 05.02.69 374.50
71. RAMOS GRACIANO 06.07.93 322.00 10.00102. VILLAMER332.00
JOEY 11.04.81 374.50
72. MAZON NESTOR 07.24.90 330.00 10.00103. GRIPON GIL
340.00 01.17.76 374.75
73. BRIN LUCENIO 07.26.90 330.00 10.00104. CARLON HERMINIGILDO,
340.00 JR. 04.17.87 375.00
74. SE FREDIE 03.25.90 340.00 10.00105. MANLABAO
350.00
HEROHITO 04.14.81 375.00
 106. VILLANUEVA DOMINGO 12.01.77 375.50 For 10.00
the first year of the CBA’s effectivity, the salaries of Union members were increased as
385.50
follows:
107. APITAN NAZARIO 09.04.79 376.00 10.00 386.00
108. SALAMEDA EDUARDO 02.13.79 NAME377.00 10.00 WAGE
387.00 NAME WAGE
109. ARNALDO LOPE 05.02.69 1. Pedro Acasio
378.50 10.00 P427.00
388.50 53. Nestor Mazon P385.0
2. Roderick Alancado 301.00 54. Luis Morales 343.00
110. SURIGAO HERNANDO 12.29.79 379.00
3. Jesus Albano 10.00 389.00
352.00 55. Calix Nebria 409.00
111. DE LA CRUZ CHARLIE 07.14.76 4. Oliver Alejandro
379.00 10.00 330.00
389.00 56. Bonifacio Ninora Jr. 301.00
5. Welfredo Amania 343.00 57. Edgar Noblejas 338.00
112. ROSAURO JUAN 07.15.76 379.50 10.00 389.50
6. Valentino Amper 343.00 58. Antonio Ofilan 429.50
113 HILOTIN ARLEN 10.10.77 383.00
7. Danilo Antolo 10.00 393.004
343.00 59. Reynaldo Ornopia 323.00
8. Nazario Apitan 431.00 60. Reynaldo Paez 291.00
On September 23, 1999, petitioner and the Union entered into a Collective Bargaining 9. Agreement
Jonas Aquino 272.00 61. Ferdinand Panlaan 330.00
(CBA), effective July 1, 1999 until July 1, 2004. Section 1, Article VI (Salaries and Wage) of said
10. Eulogio Bagasbas, Jr. 330.00 62. Eulogio Par Jr. 301.00
CBA provides: 11. Luis Bania, Jr. 301.00 63. Marvin Peco 223.00
12. Daniel Barbin 409.00 64. Emmanuel Pepino 249.00
Section 1. WAGE ADJUSTMENT - The COMPANY agrees to grant all the workers, who are
13. Nelson Bascones 343.00 65. Danilo Perez 358.00
already regular and covered by this AGREEMENT at the effectivity of this AGREEMENT, a
14. Alden Bayo-ang, Jr. 343.00 66. Jaime Pulpulaan 330.00
general wage increase as follows:
15. Jimmy Bermejo 277.00 67. Ariston Quidato 343.00
16. Alfredo Bernabe 258.00 68. Graciano Ramos Jr. 377.00
July 1, 1999 . . . . . . . . . . . P15.00 per day per employee
17. Lucenio Brin 385.00 69. Antonio Raymundo 301.00
18. Jonathan Buban 409.00 70. Ronilo Reboton 277.00
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee
19. Roberto Bugtai 301.00 71. Ramon Relato 320.00
20. Danilo Cagomoc 343.00 72. Efren Reyes 343.00
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee
21. Joseph Calleja 358.00 73. Ronaldo Reyes 343.00
22. Carlito Camaing 409.00 74. Joseph Rioja 301.00
The aforesaid wage increase shall be implemented across the board. Any Wage23. Order to be
Hermenigildo Carlon, Jr. 430.00 75. George Roda 301.00
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
24. June Catacutan 343.00 76. Diosdado Roncales 395.00
wage increase adverted to above. However, if no wage increase is given by the Wage Board
within six (6) months from the signing of this AGREEMENT, the Management is willing 25.toMarlonito
give the Chua 343.00 77. Gilbert Sabatin 343.00
following increases, to wit: 26. Ambrocio Clavecilla 406.00 78. Julito Sabornido 409.00
27. Emeterio Cristy 414.50 79. Ronnie Sajot 343.00
July 1, 1999 . . . . . . . . . . . P20.00 per day per employee 28. Tirso Curambao 343.00 80. Eduardo Salameda 432.00
29. Loterio Daluyo 409.00 81. Edilberto Salen 277.00
July 1, 2000 . . . . . . . . . . . P25.00 per day per employee 30. Lauro Decena 343.00 82. Fundador Salon 301.00
31. Charlie dela Cruz 434.00 83. Edgar Sampaga 362.00
July 1, 2001 . . . . . . . . . . . P30.00 per day per employee 32. Raynaldo delos Santos 343.00 84. Fredie Se 395.00
33. Edilberto Discaya 395.00 85. Rodolfo Sevandra 250.00
The difference of the first year adjustment to retroact to July 1, 1999. 34. Erwin Dorol 343.00 86. Jose Solo 343.00
35. Eldemar Edradan 277.00 87. Robinson Solon 370.00
The across-the-board wage increase for the 4th and 5th year of this AGREEMENT 36. Fulgencio
shall be Eleda 377.00 88. Luisito Suarez 402.00
subject for a re-opening or renegotiation as provided for by Republic Act No. 6715.5 37. Hercules Exmundo 343.00 89. Jeriel Suico 223.00
38. Domingo Fulgueras 417.00 90. Hernando Surigao 434.00
39. Federico Garcia 277.00 91. Franklin Suringa 343.00
n 429.75 92. Albert Tabaog 277.00distortion, or whether Union members’ salaries were above the minimum wage rate. Wage Order
uevarra 409.00 93. Joel Tizon 343.00No. NCR-06, where rank-and-file employees were given different wage increases ranging
otin 438.00 94. Alfredo Umbal 272.00from P10.00 to P13.00, was an exception since the adjustments were the result of the formula
agreed upon by the Union and the employer after negotiations. The Union averred that all of their
umawan, Jr. 409.00 95. Ferdinand Ventura 347.00
CBAs with petitioner had a "collateral agreement" where petitioner was mandated to pay the
candoze 265.00 96. Joey Villamer 429.50equivalent of the wage orders across-the-board, or at least to negotiate how much will be paid. It
aroga, Jr. 343.00 97.Domingo Villanueva 430.50pointed out that an established practice cannot be discontinued without running afoul of Article 100
urio 426.00 98. Joel Whiting 343.00of the Labor Code on non-diminution of benefits.13
Lumansoc 377.00 99. Romeo Yson 406.00
gboo 301.00 100. Carlos Zuniega 409.00For its part, petitioner alleged that there is no such company practice and that it complied with the
Maglente 409.00 101. Nelson Zipagan 425.00previous wage orders (Wage Order Nos. NCR-01-05) because some of its employees were
Malapo Jr. 409.00 102. Michael Sibol 343.00receiving wages below the minimum prescribed under said orders. As for Wage Order No. NCR-
Manlabao 430.00 103. Renante Tangian 223.0007, petitioner alleged that its compliance was in accordance with its verbal commitment to the
Union during the CBA negotiations that it would implement any wage order issued in 1999.
Marasigan 409.00 104. Rodrigo Cascara 377.006
Petitioner further averred that it applied the wage distortion formula prescribed under Wage Order
Nos. NCR-06 and NCR-07 because an actual distortion occurred as a result of their
On October 14, 1999, Wage Order No. NCR-077 was issued, and on October 26, 1999, its implementation. It asserted that at present, all its employees enjoy regular status and that none
Implementing Rules and Regulations. It provided for a P25.50 per day increase in the salary of receives a daily wage lower than the P250.00 minimum wage rate prescribed under Wage Order
employees receiving the minimum wage and increased the minimum wage to P223.50 per day. No. NCR-08.14
Petitioner paid the P25.50 per day increase to all of its rank-and-file employees.
In reply to the Union’s position paper, petitioner contended that the full implementation of the
On July 1, 2000, the rank-and-file employees were granted the second year increase provided in previous wage orders did not give rise to a company practice as it was not given to the workers
the CBA in the amount of P25.00 per day.8 within the bargaining unit on a silver platter, but only per request of the Union and after a series of
negotiations. In fact, during CBA negotiations, it steadfastly rejected the following proposal of the
On November 1, 2000, Wage Order No. NCR-089 took effect. Section 1 thereof provides: Union’s counsel, Atty. Florente Yambot, to include an across-the-board implementation of the
wage orders:15
Section 1. Upon the effectivity of this Wage Order, private sector workers and employees in the
National Capital Region receiving the prescribed daily minimum wage rate of P223.50 shall x x x To supplement the above wage increases, the parties agree that additional wage increases
receive an increase of TWENTY SIX PESOS and FIFTY CENTAVOS (P26.50) per day, thereby equal to the wage orders shall be paid across-the-board whenever the Regional Tripartite Wage
setting the new minimum wage rate in the National Capital Region at TWO HUNDRED FIFTY and Productivity Board issues wage orders. It is understood that these additional wage increases
PESOS (P250.00) per day.10 will be paid not as wage orders but as agreed additional salary increases using the wage orders
merely as a device to fix or determine how much the additional wage increases shall be paid. 16
Then Union president Lucenio Brin requested petitioner to implement the increase under Wage
Order No. NCR-08 in favor of the company’s rank-and-file employees. Petitioner rejected the The Union, however, insisted that there was such a company practice. It pointed out that despite
request, claiming that since none of the employees were receiving a daily salary rate lower the fact that all the employees were already receiving salaries above the minimum wage, the CBA
than P250.00 and there was no wage distortion, it was not obliged to grant the wage increase. still provided for the payment of a wage increase using wage orders as the yardstick. It claimed
that the parties intended that petitioner-employer would pay the additional increases apart from
The Union elevated the matter to the National Conciliation and Mediation Board. When the parties those in the CBA.17 The Union further asserted that the CBA did not include all the agreements of
failed to settle, they agreed to refer the case to voluntary arbitration. In the Submission the parties; hence, to determine the true intention of the parties, parol evidence should be resorted
Agreement, the parties agreed that the sole issue is "[w]hether or not the management is obliged to. Thus, Atty. Yambot’s version of the wage adjustment provision should be considered. 18
to grant wage increase under Wage Order No. NCR #8 as a matter of practice," 11 and that the
award of the Voluntary Arbitrator (VA) shall be final and binding.12 On June 6, 2001, the VA rendered judgment in favor of the company and ordered the case
dismissed.19 It held that there was no company practice of granting a wage order increase to
In its Position Paper, the Union alleged that it has been the company’s practice to grant a wage employees across-the-board, and that there is no provision in the CBA that would oblige petitioner
increase under a government-issued wage order, aside from the yearly wage increases in the to grant the wage increase under Wage Order No. NCR–08 across-the-board.20
CBA. It averred that petitioner paid the salary increases provided under the previous wage orders
in full (aside from the yearly CBA increases), regardless of whether there was a resulting wage
The Union filed a petition for review with the CA under Rule 43 of the Rules of Court. It defined the
issue for resolution as follows:
The principal issue in the present petition is whether or not the wage increase of P26.50 under
Wage Order No. NCR-08 must be paid to the union members as a matter of practice and whether
or not parol evidence can be resorted to in proving or explaining or elucidating the existence of a
collateral agreement/company practice for the payment of the wage increase under the wage
order despite that the employees were already receiving wages way above the minimum wage
of P250.00/day as prescribed by Wage Order No. NCR-08 and irrespective of whether wage
distortion exists.21
On September 23, 2004, the CA rendered judgment in favor of the Union and reversed that of the
VA. The fallo of the decision reads:
WHEREFORE, the assailed Decision dated June 6, 2001 of public respondent Voluntary Arbitrator
is REVERSED and SET ASIDE. Private respondent Pag-Asa Steel Works, Inc. is ordered to pay
the members of the petitioner union the P26.50 daily wage by applying the wage increase
prescribed under Wage Order No. NCR-08. Costs against private respondent.
SO ORDERED.22
The CA stressed that the CBA constitutes the law between the employer and the Union. It held
that the CBA is plain and clear, and leaves no doubt as to the intention of the parties, that is, to
grant a wage increase that may be ordered by the Wage Board in addition to the CBA-mandated
salary increases regardless of whether the employees are already receiving wages way above the
minimum wage. The appellate court further held that the employer has no valid reason not to
implement the wage increase mandated by Wage Order No. NCR-08 because prior thereto, it had
been paying the wage increase provided for in the CBA even though the employees concerned
were already receiving wages way above the applicable minimum wage. 23 Petitioner filed a motion
for reconsideration which the CA denied for lack of merit on January 11, 2005.24
Petitioner then filed the instant petition in which it raises the following issues:
I. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR UNDER WAGE ORDER
NO. 8 CANNOT BE DEMANDED AS A MATTER OF RIGHT BY THE RESPONDENT UNDER
THE 1999 CBA, in that:
a) Issue not averred in the complaint nor raised during the trial cannot be raised
for the first time on appeal; and
b) The Rules of Statutory Construction, in relation to Article 1370 and 1374 of the
New Civil Code, as well as Section 11 of the Rules of Court, requires that
contract must be read in its entirety and the various stipulations in a contract
must be read together to give effect to all.
II. WHETHER THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE
ERROR IN NOT FINDING THAT THE INCREASES PROVIDED FOR UNDER WAGE ORDER
NO. 8 CANNOT BE DEMANDED BY THE RESPONDENT UNION AS A MATTER OF
PRACTICE.25
Petitioner points out that the only issue agreed upon during the voluntary arbitration proceedings
was whether or not the company was obliged to grant the wage increase under Wage Order No.
NCR-08 as a matter of practice. It posits that the respondent did not anchor its claim for such
wage increase on the CBA but on an alleged company practice of granting the increase pursuant
to a wage order. According to petitioner, respondent Union changed its theory on appeal when it
claimed before the CA that the CBA is ambiguous.26 Petitioner contends that respondent Union
was precluded from raising this issue as it was not raised during the voluntary arbitration. It insists
that an issue cannot be raised for the first time on appeal.27
Petitioner further argues that there is no ambiguity in the CBA. It avers that Section 1, Article VI of
the CBA should be read in its entirety.28 From the said provision, it is clear that the CBA
contemplated only the implementation of a wage order issued within six months from the
execution of the CBA, and not every wage order issued during its effectivity. Hence, petitioner
complied with Wage Order No. NCR-07 which was issued 28 days from the execution of the CBA.
Petitioner emphasizes that this was implemented not because it was a matter of practice but
because it was agreed upon in the CBA.29 It alleges that respondent Union in fact realized that it
could not invoke the provisions of the CBA to enforce Wage Order No. NCR-08, which is why it
agreed to limit the issue for voluntary arbitration to whether respondent Union is entitled to the
wage increase as a matter of practice. The fact that the "Yambot proposals" were left out in the
final document simply means that the parties never agreed to them.30
In any case, petitioner avers that respondent Union is not entitled to the wage increase provided
under Wage Order No. NCR-08 as a matter of practice. There is no company practice of granting
a wage-order-mandated increase in addition to the CBA-mandated wage increase. It points out
that, as admitted by respondent Union, the previous wage orders were not automatically
implemented and were made applicable only after negotiations. Petitioner argues that the previous
wage orders were implemented because at that time, some employees were receiving salaries
below the minimum wage and the resulting wage distortion had to be remedied.31
For its part, respondent Union avers that the provision "[a]ny Wage Order to be implemented by
the Regional Tripartite Wage and Productivity Board shall be in addition to the wage increase
adverted to above" referred to a company practice of paying a wage increase whenever the
government issues a wage order even if the employees’ salaries were above the minimum wage
and there is no resulting wage distortion. According to respondent, the CBA contemplated all the
salary increases that may be mandated by wage orders to be issued in the future. Since the wage
order was only a device to determine exactly how much and when the increase would be given,
these increases are, in effect, CBA-mandated and not wage order increases. 32 Respondent
further avers that the ambiguity in the wage adjustment provision of the CBA can be clarified by
resorting to parol evidence, that is, Atty. Yambot’s version of said provision.33
The petition is meritorious. We rule that petitioner is not obliged to grant the wage increase under
Wage Order No. NCR-08 either by virtue of the CBA, or as a matter of company practice.
On the procedural issue, well-settled is the rule, also applicable in labor cases, that issues not
raised below cannot be raised for the first time on appeal.34 Points of law, theories, issues and
arguments not brought to the attention of the lower court need not be, and ordinarily will not be,
considered by the reviewing court, as they cannot be raised for the first time at that late stage.
Basic considerations of due process impel this rule.35
We agree with petitioner’s contention that the issue on the ambiguity of the CBA and its failure to
express the true intention of the parties has not been expressly raised before the voluntary
arbitration proceedings. The parties specifically confined the issue for resolution by the VA to
whether or not the petitioner is obliged to grant an increase to its employees as a matter of
practice. Respondent did not anchor its claim for an across-the-board wage increase under Wage
Order No. NCR-08 on the CBA. However, we note that it raised before the CA two issues,
namely:
x x x whether or not the wage increase of P26.50 under Wage Order No. NCR-08 must be paid to
the union members as a matter of practice and whether or not parol evidence can be resorted to in
proving or explaining or elucidating the existence of a collateral agreement/company practice for
the payment of the wage increase under the wage order despite that the employees were already
receiving wages way above the minimum wage of P250.00/day as prescribed by Wage Order No.
NCR-08 and irrespective of whether wage distortion exists.36
Petitioner, in its Comment on the petition, delved into these issues and elaborated on its
contentions. By so doing, it thereby agreed for the CA to take cognizance of such issues as
defined by respondent (petitioner therein). Moreover, a perusal of the records shows that the issue
of whether or not the CBA is ambiguous and does not reflect the true agreement of the parties
was, in fact, raised before the voluntary arbitration proceedings. Despite the submission
agreement confining the issue to whether petitioner was obliged to grant an increase pursuant to
Wage Order No. NCR-08 as a matter of practice, respondent Union nevertheless raised the same
issues in its pleadings. In its Position Paper, it asserted that the CBA consistently contained a
collateral agreement to pay the equivalent of the wage orders across-the-board; in its Reply, it
claimed that such provision clearly provided that petitioner would pay the additional increases
apart from the CBA and that the wage order serves only as a measure of said increase. These
assertions indicate that respondent Union also relied on the CBA to support its claim for the wage
increase.
Central to the substantial issue is Article VI, Section I, of the CBA of the parties, dated September
23, 1999, viz:
SALARIES AND WAGE
Section 1. WAGE ADJUSTMENT – The COMPANY agrees to grant to all workers who are already
regular and covered by this AGREEMENT at the effectivity of this AGREEMENT a general wage
increase as follows:
July 1, 1999 ……. P15.00 per day per employee
July 1, 2000 ……. P25.00 per day per employee
July 1, 2001 ……. P 30.00 per day per employee
The aforesaid wage increase shall be implemented across the board. Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted to above. However, if no wage increase is given by the Wage Board
within six (6) months from the signing of this AGREEMENT, the Management is willing to give the
following increases, to wit:
July 1, 1999 ……. P 20.00 per day per employee
July 1, 2000 ……. P 25.00 per day per employee
July 1, 2001 …… P 30.00 per day per employee
The difference of the first year adjustment to retroact to July 1, 1999.
The across-the-board wage increase for the 4th and 5th year of this AGREEMENT shall be
subject for a reopening or renegotiation as provided for by Republic Act No. 6715. 37
On the other hand, Wage Order No. NCR-08 specifically provides that only those in the private
sector in the NCR receiving the prescribed daily minimum wage rate of P223.00 per day would
receive an increase of P26.50 a day, thereby setting the new minimum wage rate in said region
to P250.00 per day. There is no dispute that, when the order was issued, the lowest paid
employee of petitioner was receiving a wage higher than P250.00 a day. As such, its employees
had no right to demand for an increase under said order. As correctly ruled by the VA:
We now come to the core of this case. Is [petitioner] under an obligation to grant wage increase to
its workers under W.O. No. NCR-08 as a matter of practice? It is submitted that employers (unless
exempt) in Metro Manila (including the [petitioner]) are mandated to implement the said wage
order but limited to those entitled thereto. There is no legal basis to implement the same across-
the-board. A perusal of the record shows that the lowest paid employee before the implementation
of Wage Order #8 is P250.00/day and none was receiving below P223.50 minimum. This could
only mean that the union can no longer demand for any wage distortion adjustment. Neither could
they insist for an adjustment of P26.50 increase under Wage Order #8. The provision of wage
order #8 and its implementing rules are very clear as to who are entitled to the P26.50/day
increase, i.e., "private sector workers and employees in the National Capital Region receiving the
prescribed daily minimum wage rate of P223.50 shall receive an increase of Twenty-Six Pesos
and Fifty Centavos (P26.50) per day," and since the lowest paid is P250.00/day the company is
not obliged to adjust the wages of the workers.
With the above narration of facts and with the union not having effectively controverted the same,
we find no merit to the complainant’s assertion of such a company practice in the grant of wage
order increase applied across-the-board. The fact that it was shown the increases granted under
the Wage Orders were obtained thru request and negotiations because of the existence of wage
distortion and not as company practice as what the union would want.
Neither do we find merit in the argument that under the CBA, such increase should be
implemented across-the-board. The provision in the CBA that "Any Wage Order to be
implemented by the Regional Tripartite Wage and Productivity Board shall be in addition to the
wage increase adverted above" cannot be interpreted in support of an across-the-board increase.
If such were the intentions of this provision, then the company could have simply accepted the
original demand of the union for such across-the-board implementation, as set forth in their
original proposal (Annex "2" union[‘]s counsel proposal). The fact that the company rejected this
proposal can only mean that it was never its intention to agree, to such across-the-board
implementation. Thus, the union will have to be contented with the increase of P30.00 under the
CBA which is due on July 31, 2001 barely a month from now.38
The error of the CA lies in its considering only the CBA in interpreting the wage adjustment
provision, without taking into account Wage Order No. NCR-08, and the fact that the members of
respondent Union were already receiving salaries higher than P250.00 a day when it was issued.
The CBA cannot be considered independently of the wage order which respondent Union relied on
for its claim.
Wage Order No. NCR-08 clearly states that only those employees receiving salaries below the
prescribed minimum wage are entitled to the wage increase provided therein, and not all
employees across-the-board as respondent Union would want petitioner to do. Considering
therefore that none of the members of respondent Union are receiving salaries below the P250.00
minimum wage, petitioner is not obliged to grant the wage increase to them.
The ruling of the Court in Capitol Wireless, Inc. v. Bate39 is instructive on how to construe a CBA
vis-à-vis a wage order. In that case, the company and the Union signed a CBA with a similar
provision: "[s]hould there be any government mandated wage increases and/or allowances, the
same shall be over and above the benefits herein granted."40 Thereafter, the Wage Board of the
NCR issued several wage orders providing for an across-the-board increase in the minimum wage
of all employees in the private sector. The company implemented the wage increases only to
those employees covered by the wage orders - those receiving not more than the minimum wage.
The Union protested, contending that, pursuant to said provision, any and all government-
mandated increases in salaries and allowance should be granted to all employees across-the-
board. The Court held as follows:
x x x The wage orders did not grant across-the-board increases to all employees in the National
Capital Region but limited such increases only to those already receiving wage rates not more
than P125.00 per day under Wage Order Nos. NCR-01 and NCR-01-A and P142.00 per day under
Wage Order No. NCR-02. Since the wage orders specified who among the employees are entitled
to the statutory wage increases, then the increases applied only to those mentioned therein. The
provisions of the CBA should be read in harmony with the wage orders, whose benefits should be
given only to those employees covered thereby. (Emphasis added)41
In this case, as gleaned from the pleadings of the parties, respondent Union relied on a collateral
agreement between it and petitioner, an agreement extrinsic of the CBA based on an alleged
established practice of the latter as employer. The VA rejected this claim:
Complainant Pag-Asa Steel Workers Union additionally advances the arguments that "there exist
a collateral agreement to pay the equivalent of wage orders across the board or at least to
negotiate how much will be paid" and that "parol evidence is now applicable to show or explain
what the unclean provisions of the CBA means regarding wage adjustment." The respondent cites
Article XXVII of the CBA in effect, as follows:
"The parties acknowledged that during the negotiation which resulted in this AGREEMENT, each
had the unlimited right & opportunity to make demands, claims and proposals of every kind and
nature with respect to any subject or matter not removed by law from the Collective Bargaining
and the understanding and agreements arrived at by the parties after the exercise of that right &
opportunity are set forth in this AGREEMENT. Therefore, the COMPANY and the UNION, for the
life of this AGREEMENT, agrees that neither party shall not be obligated to bargain collectively
with respect to any subject matter not specifically referred to or covered in this AGREEMENT, and
furthermore, that each party voluntarily & unqualifiedly waives such right even though such subject
may not have been within the knowledge or contemplation of either or both of the parties at the
time they signed this AGREEMENT."
From the said CBA provision and upon an appreciation of the entire CBA, we find it to have more
than amply covered all aspects of the collective bargaining. To allow alleged collateral agreements
or parol/oral agreements would be violative of the CBA provision afore-quoted.42
We agree with petitioner’s contention that the rule excluding parol evidence to vary or contradict a
written agreement, does not extend so far as to preclude the admission of extrinsic evidence, to
show prior or contemporaneous collateral parol agreements between the parties. Such evidence
may be received regardless of whether or not the written agreement contains reference to such
collateral agreement.43 As the Court ruled in United Kimberly-Clark Employees Union, et al. v.
Kimberly-Clark Philippines, Inc.:44
A CBA is more than a contract; it is a generalized code to govern a myriad of cases which the
draftsmen cannot wholly anticipate. It covers the whole employment relationship and prescribes
the rights and duties of the parties. It is a system of industrial self-government with the grievance
machinery at the very heart of the system. The parties solve their problems by molding a system
of private law for all the problems which may arise and to provide for their solution in a way which
will generally accord with the variant needs and desires of the parties.
If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties, the
literal meaning of its stipulation shall prevail. However, if, in a CBA, the parties stipulate that the
hirees must be presumed of employment qualification standards but fail to state such qualification
standards in said CBA, the VA may resort to evidence extrinsic of the CBA to determine the full
agreement intended by the parties. When a CBA may be expected to speak on a matter, but does
not, its sentence imports ambiguity on that subject. The VA is not merely to rely on the cold and
cryptic words on the face of the CBA but is mandated to discover the intention of the parties.
Recognizing the inability of the parties to anticipate or address all future problems, gaps may be
left to be filled in by reference to the practices of the industry, and the step which is equally a part
of the CBA although not expressed in it. In order to ascertain the intention of the contracting
parties, their contemporaneous and subsequent acts shall be principally considered. The VA may
also consider and rely upon negotiating and contractual history of the parties, evidence of past
practices interpreting ambiguous provisions. The VA has to examine such practices to determine
the scope of their agreement, as where the provision of the CBA has been loosely formulated.
Moreover, the CBA must be construed liberally rather than narrowly and technically and the Court
must place a practical and realistic construction upon it.45
However, just like any other fact, habits, customs, usage or patterns of conduct must be proved.
Thus was the ruling of the Court in Bank of Commerce v. Manalo, et al.:46
Habit, custom, usage or pattern of conduct must be proved like any other facts. Courts must
contend with the caveat that, before they admit evidence of usage, of habit or pattern of conduct,
the offering party must establish the degree of specificity and frequency of uniform response that
ensures more than a mere tendency to act in a given manner but rather, conduct that is semi-
automatic in nature. The offering party must allege and prove specific, repetitive conduct that
might constitute evidence of habit. The examples offered in evidence to prove habit, or pattern of
evidence must be numerous enough to base on inference of systematic conduct. Mere similarity of
contracts does not present the kind of sufficiently similar circumstances to outweigh the danger of
prejudice and confusion.
In determining whether the examples are numerous enough, and sufficiently regular, the key
criteria are adequacy of sampling and uniformity of response. After all, habit means a course of
behavior of a person regularly represented in like circumstances. It is only when examples offered
to establish pattern of conduct or habit are numerous enough to lose an inference of systematic
conduct that examples are admissible. The key criteria are adequacy of sampling and uniformity of
response or ratio of reaction to situations.
The only instance when petitioner admittedly implemented a wage order despite the fact that the
employees were not receiving salaries below the minimum wage was under Wage Order No.
NCR-07. Petitioner, however, explains that it did so because it was agreed upon in the CBA that
should a wage increase be ordered within six months from its signing, petitioner would give the
increase to the employees in addition to the CBA-mandated increases. Respondent’s isolated act
could hardly be classified as a "company practice" or company usage that may be considered an
enforceable obligation.
Moreover, to ripen into a company practice that is demandable as a matter of right, the giving of
the increase should not be by reason of a strict legal or contractual obligation, but by reason of an
act of liberality on the part of the employer. Hence, even if the company continuously grants a
wage increase as mandated by a wage order or pursuant to a CBA, the same would not
automatically ripen into a company practice. In this case, petitioner granted the increase under
Wage Order No. NCR-07 on its belief that it was obliged to do so under the CBA.
WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of
Appeals in CA-G.R. SP No. 65171 and Resolution dated January 11, 2005 are REVERSED and
SET ASIDE. The Decision of the Voluntary Arbitrator is REINSTATED. No costs.

We have reviewed the records meticulously and find no evidence to prove that the grant of a
wage-order-mandated increase to all the employees regardless of their salary rates on an
agreement collateral to the CBA had ripened into company practice before the effectivity of Wage
Order No. NCR-08. Respondent Union failed to adduce proof on the salaries of the employees
prior to the issuance of each wage order to establish its allegation that, even if the employees
were receiving salaries above the minimum wage and there was no wage distortion, they were still
granted salary increase. Only the following lists of salaries of respondent Union’s members were
presented in evidence: (1) before Wage Order No. NCR-06 was issued; (2) after Wage Order No.
NCR-06 was implemented; (3) after the grant of the first year increase under the CBA; (4) after
Wage Order No. NCR-07 was implemented; and (5) after the second year increase in the CBA
was implemented.

The list of the employees’ salaries before Wage Order No. NCR-06 was implemented belie
respondent Union’s claim that the wage-order-mandated increases were given to employees
despite the fact that they were receiving salaries above the minimum wage. This list proves that
some employees were in fact receiving salaries below the P198.00 minimum wage rate prescribed
by the wage order — two rank-and-file employees in particular. As petitioner explains, a wage
distortion occurred as a result of granting the increase to those employees who were receiving
salaries below the prescribed minimum wage. The wage distortion necessitated the upward
adjustment of the salaries of the other employees and not because it was a matter of company
practice or usage. The situation of the employees before Wage Order No. NCR-08, however, was
different. Not one of the members of respondent Union was then receiving less than P250.00 per
day, the minimum wage requirement in said wage order.