IN THE COMPLAINT, IN GRAVE ABUSE OF THEIR DISCRETION, AMOUNTING TO LACK
THIRD DIVISION OR EXCESS OF JURISDICTION.
[G.R. No. 144074. March 20, 2001]
MEDINA INVESTIGATION & SECURITY CORPORATION and ERNESTO Z.
MEDINA, petitioners, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS
COMMISSION and ROMEO TABURNAL, respondents.
RESOLUTION
GONZAGA-REYES, J.:
Before this Court is a Petition for Review seeking to set aside the Resolution dated June 2,
2000 dismissing the petition for being filed beyond the 60-day reglementary period and the
Resolution dated July 12, 2000 denying the motion for reconsideration, both issued by the Court of
Appeals in CA-G.R. SP No. 58968.
Respondent Romeo Taburnal was hired by petitioner corporation as security guard on
September 8, 1996 and was assigned to one of its clients, Abenson, Inc. at Sta. Lucia Grand
Mall. On September 5, 1997, the client requested that respondent Taburnal be relieved due to
violations pursuant to the Service Contract such as reporting late for duty, below standard
performance of duties, and exceeding the maximum six (6) months duty in the company. In view of
his replacement, respondent Taburnal filed a complaint for Illegal Dismissal claiming for separation
pay, non-payment of legal/special holiday and overtime pay, underpayment of 13th month pay and
cash bond and tax refund. On April 29, 1999, the Labor Arbiter rendered judgment ordering the
reinstatement of respondent Taburnal without loss of seniority rights and the payment of full
backwages and salary differentials. Petitioners appealed to the NLRC which dismissed the same
for lack of jurisdiction. The Motion for Reconsideration thereto was denied. Herein petitioners filed
a petition for certiorari with the Court of Appeals which dismissed the petition outright for having
been filed beyond the 60-day reglementary period or on the 67th day per its Resolution on June 2,
2000. The Court of Appeals ruled that the petition was filed on the sixty-seventh (67th) day since
petitioners received on November 10, 1999 the Order dated August 26, 1999 of the NLRC and the
Motion for Reconsideration thereto was filed of November 19, 1999. Copy of the order denying the
said motion was received by petitioners on April 3, 2000, while the petition was filed with the Court
of Appeals on May 31, 2000. The Court of Appeals did not discuss the merits of the
petition.Hence, the petition raising the following grounds:
THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE PETITION FOR
CERTIORARI WAS FILED BEYOND THE REGLEMENTARY PERIOD.
PUBLIC APPELLEES COMMITTED A REVERSIBLE ERROR WHEN THEY DISMISSED
THE PETITION, THEREBY AFFIRMING THE DECISION OF LABOR ARBITER FELIPE P.
PATI WHICH AWARDED MONETARY CLAIMS AND OTHER RELIEF NOT PRAYED FOR
PUBLIC APPELLEES GROSSLY ERRED AND GRAVELY ABUSED THEIR DISCRETION,
WHEN THEY HELD APPELLANT ERNESTO Z. MEDINA JOINTLY AND SEVERALLY
LIABLE WITH APPELLANT MISCOR, INSPITE OF THE FACT THAT THERE IS NO
EVIDENCE TO THAT EFFECT.
Petitioners main contention is that their petition for certiorari filed with the Court of Appeals
was within the 60-day reglementary period pursuant to Rule 65. They insist that when the assailed
Order was received on April 3, 2000, the petition filed on May 31, 2000 was the 58th day, citing
Section 1, Rule 22 of the 1997 Rules on Civil Procedure and Article 13 of the Civil Code.
In his Comment, private respondent Romeo Taburnal alleges that he is aware that Section 4,
Rule 65 of the 1997 Rules on Civil Procedure was later amended, which amendment took effect
on September 1, 2000. He insists however that the petition filed with the Court of Appeals was not
yet covered by said amendment. Private respondent further avers that Article 223 of the Labor
Code and the NLRC Rules of Procedure provide that appeal is the proper remedy for a party
aggrieved by a decision of the Labor Arbiter and the filing of a petition for certiorari with the NLRC
by petitioners is definitely a wrong remedy.
A.M. No. 00-2-03-SC amending Section 4, Rule 65 of the 1997 Rules of Civil Procedure (as
amended by the Resolution of July 21, 1998) took effect on September 1, 2000 and provides, to
wit:
SEC. 4. When and where petition filed. --- The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new
trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be
counted from notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of
Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it
is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only
by the Court of Appeals.
No extension of time to file the petition shall be granted except for compelling reason and in no
case exceeding fifteen (15) days.
Contrary to the position of respondents that such amendment should not apply in this case,
we have ruled in the cases of Systems Factors Corporation and Modesto Dean vs. NLRC, et
al., G.R. No. 143789 (promulgated on November 27, 2000) and Unity Fishing Development
Corp. and/or Antonio Dee vs. CA, et al., G.R. No. 145415 (promulgated on February 2,
2001) that the amendment under A.M. No. 00-2-03-SC wherein the sixty-day period to file a
petition for certiorari is reckoned from receipt of the resolution denying the motion for
reconsideration should be deemed applicable. We reiterate that remedial statutes or statutes
relating to remedies or modes of procedure, which do not create new or take away vested rights,
but only operate in furtherance of the remedy or confirmation of rights already existing, do not
come within the legal conception of a retroactive law, or the general rule against retroactive
operation of statutes.[1] Statutes regulating the procedure of the courts will be construed as
applicable to actions pending and undetermined at the time of their passage. Procedural laws are
retroactive in that sense and to that extent. The retroactive application of procedural laws is not
violative of any right of a person who may feel that he is adversely affected.[2] The reason is that
as a general rule, no vested right may attach to nor arise from procedural laws.[3]
The above conclusion is consonant with the provision in Section 6, Rule 1 of the 1997 Rules
of Civil Procedure that (T)hese Rules shall be liberally construed in order to promote their
objective of securing a just, speedy and inexpensive disposition of every action and proceeding.
The other issues raised by petitioners should be addressed and resolved by the court below.
WHEREFORE, the Resolutions dated June 2, 2000 and July 12, 2000 are hereby SET
ASIDE and the case is REMANDED to the Court of Appeals for further proceedings.
SO ORDERED.
 FIRST DIVISION
G.R. No. 149692 July 30, 2002
HEIRS OF SPOUSES JULIAN DELA CRUZ AND MAGDALENA TUAZON, represented by
their Attorney-in-Fact and co-heir, VIRGILIO C. ALVENDIA, petitioners,
vs.
HEIRS OF FLORENTINO QUINTOS, SR., namely, FLORENTINO QUINTOS, JR. and GLORIA
QUINTOS BUGAYONG, respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before Us is a petition for review on certiorari under Rule 45 filed by petitioners seeking to reverse
and set aside the Resolution dated May 29, 2001 of the Court of Appeals 1 which dismissed their
petition for review of the decision of the Regional Trial Court of Lingayen, Pangasinan (Branch 38)
on the ground that the petition was filed out of time; and, the Resolution dated August 29,
20012 denying their motion for reconsideration.
Sometime in 1996, petitioners filed with the Municipal Trial Court of Lingayen, Pangasinan an
action for reconveyance with damages3 against respondents alleging, among others, that they are
the children of the late Ariston dela Cruz, who was the only forced and legal heir of his deceased
parents, Julian dela Cruz and Magdalena Tuazon who died intestate; that sometime in 1897,
Magdalena Tuazon purchased from Herminigildo and Filomena Tiong a certain parcel of land
located at Heroes Street, Lingayen, Pangasinan consisting of 605 square meters and since then
respondents and their predecessors had been in continuous occupation and adverse possession
of the subject land; that sometime in 1987, private respondents’ predecessor Florentino Quintos,
Sr., filed an application for the judicial registration of a certain land which included petitioners’
land; that the land registration court granted Quintos’ application and decreed the land in
Florentino Quintos’ name and OCT No. 22665 was subsequently issued; that OCT No. 22665 was
partitioned into four separate lots and petitioners’ land was covered by TCT No. 173052; that
respondents subsequently filed a complaint (docketed as Civil Case No. 4118) for illegal detainer
against petitioners for the latter’s refusal to vacate the subject land which resulted in petitioners’
ejectment from the subject property.
Respondents filed their answer with counterclaim, alleging that the subject land had always
belonged to respondents’ late father Florentino Quintos, Sr., who in turn inherited the same from
his mother, Dolores Tuazon; that the affidavit evidencing petitioners’ ownership of the subject land
was not attached to the complaint; that respondents’ predecessors merely tolerated petitioners’
possession of the subject land; that petitioners never filed their opposition to respondents’
application for registration despite knowledge thereof; that the land registration case which was
the basis for the issuance of OCT No. 22665 in the name of the predecessor of respondents was
a proceeding in rem which bound all persons whether notified or not.
On January 29, 1999, a decision4 was rendered by the MTC declaring petitioners as the legal
owners of the land covered by TCT No. 173052 and ordering respondents to convey to petitioners
the subject land and to pay damages to petitioners. 5
Respondents filed their appeal before the Regional Trial Court, Lingayen, Pangasinan (Branch
38). On January 19, 2000, the RTC6 reversed the decision of the MTC dismissing the complaint,
declaring respondents as the absolute owners of the subject land and ordering petitioners to pay
damages to respondents.
Petitioners filed their motion for reconsideration which the trial court denied in a Resolution dated
March 8, 2000.7
On April 18, 2000, petitioners, through counsel, filed with the Court of Appeals (CA) a motion for
extension of time to file a petition for review which she subsequently filed on May 2, 2000.
Respondents filed a motion to dismiss the petition for review for being filed out of time since the
certification issued by Postmaster Elizabeth I. Torio of Dagupan City Post Office and the affidavit
of Ricardo C. Castro, Clerk III of the Regional Trial Court show that the trial court’s Resolution
dated March 8, 2000 denying petitioners motion for reconsideration was received by the secretary
of petitioners’ counsel on March 16, 2000, thus the filing of the petition was filed 28 days late.
Petitioners’ counsel filed her Comment to respondents’ motion to dismiss alleging that when she
arrived in her office on April 3, 2000, she found copies of pleadings and correspondence including
a copy of the trial court’s Resolution dated March 8, 2000 denying her motion for reconsideration;
that she thought that these pleadings and correspondence were all received on April 3, 2000; that
upon receipt of respondents’ motion to dismiss, she confronted her secretary who told her that the
envelope containing the Resolution was only opened on April 3, 2000 and her secretary could not
recall if the Resolution was among those she received on March 16, 2000.
On May 29, 2001, the CA issued the assailed Resolution dismissing petitioners’ petition for review
for being filed out of time. It found the explanation given by petitioners’ counsel unconvincing since
she failed to give the reason why the envelope was opened only on April 3, 2000; that counsel’s
secretary did not even admit that she actually received the said Resolution; that it is the counsel’s
duty to adopt and strictly maintain a system that efficiently takes into account all court notices sent
to her and she failed to instruct and remind her secretary on what should be done with respect to
such notices and processes. Petitioners’ motion for reconsideration was denied in a Resolution
dated August 29, 2001.
Hence, the present petition on the following grounds:
1) The appellate court rejected and refused to consider the valid reason submitted by the
petitioner’s counsel for the apparent delay in the filing of the petition for review with said
court; hence the dismissal of the petition was tainted with grave abuse of discretion;
2) Granting, arguendo, that there is a basis for the dismissal of the petition, the appellate
court should have applied the principle of liberal construction of the Rules pursuant to
Rule 1, Section 6 of the 1997 Rules of Civil Procedure (1997 RCP), considering the valid
and meritorious case of petitioners.
 3) In either case, it is respectfully submitted that the appellate court has departed from the
accepted and usual course of judicial proceedings in dismissing outright the petition for
review as to call for the supervision of this Honorable Court in the exercise of its equity
jurisdiction.8
We deny the petition.
Section 1, Rule 42 of the 1997 Rules on Civil Procedure, provides that the petition shall be filed
and served within 15 days from notice of the decision sought to be reviewed or of the denial of
petitioner’s motion for new trial or reconsideration filed in due time after judgment.9 In the instant
case, it has been established that the resolution denying petitioners’ motion for reconsideration of
the trial court’s decision was received by the secretary of petitioners’ former counsel on March 16,
2000, thus the last day of the 15-day period within which to file the petition for review with the
respondent court was March 31, 2000. Considering that counsel filed a motion for extension of
time to file a petition for review with the respondent court only on April 18, 2000, the judgment of
the RTC subject of the petition for review had already become final and executory. Consequently,
the CA did not err in dismissing the petition for being filed out of time since it has no more
jurisdiction to entertain the petition much less to alter a judgment.
This Court has invariably ruled that perfection of an appeal in the manner and within the period
laid down by law is not only mandatory but also jurisdictional.10 The failure to perfect an appeal as
required by the rules has the effect of defeating the right to appeal of a party and precluding the
appellate court from acquiring jurisdiction over the case.11The right to appeal is not a natural right
nor 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 the law.12 The party who seeks to avail of the
same must comply with the requirement of the rules. Failing to do so, the right to appeal is lost. 13
We agree with the CA when it found that the reason advanced by petitioners’ former counsel,
which is that she received the resolution denying her motion for reconsideration only on April 3,
2000 as she found it on her table on the same date, unacceptable. The negligence of her
secretary in failing to immediately give the trial court’s resolution denying petitioners’ motion for
reconsideration upon receipt to the counsel and the negligence of counsel to adopt and arrange
matters in order to ensure that official or judicial communications sent by mail would reach her
promptly cannot be considered excusable. The Court has also often repeated that the negligence
of the clerks which adversely affect the cases handled by lawyers, is binding upon the latter. 14 The
doctrinal rule is that the negligence of counsel binds the client because otherwise, "there would
never be an end to a suit so long as new counsel could be employed who could allege and show
that prior counsel had not be sufficiently diligent, or experienced, or learned.15
Petitioners claim that there should be a liberal construction of the rules of procedure in order to
effect substantial justice and appeal to this Court’s exercise of equity jurisdiction. We are not
persuaded. There is no showing in this case of any extraordinary circumstance which may justify a
deviation from the rule on timely filing of appeals. As held in the case of Tupas vs. CA:16
"Rules of procedure are intended to ensure the orderly administration of justice and the protection
of substantive rights in judicial and extrajudicial proceedings. It is a mistake to suppose that
substantive law and adjective law are contradictory to each other or, has often been "suggested,
that enforcement of procedural rules should never be permitted if it will result in prejudice to the
substantive rights of the litigants. This is not exactly true; the concept is much misunderstood. As a
matter of fact, the policy of the courts is to give effect to both kinds of law, as complementing each
other, in the just and speedy resolution of the dispute between the parties. Observance of both
substantive and procedural rights is equally guaranteed by due process, whatever the source of
such rights, be it the Constitution itself or only a statute or a rule of court. (Limpot vs. CA, 170
SCRA 369)
xxx xxx xxx
"For all its conceded merits, equity is available only in the absence of law and not as its
replacement. Equity is described as justice outside legality, which simply means that it cannot
supplant although it may, as often happens, supplement the law. We said in an earlier case, and
we repeat it now, that all abstract arguments based only on equity should yield to positive rules,
which pre-empt and prevail over such persuasions. Emotional appeals for justice, while they may
wring the heart of the Court, cannot justify disregard of the mandate of the law as long as it
remains in force. The applicable maxim, which goes back to the ancient days of the Roman jurists-
and is now still reverently observed- is `aequetas nunquam contravenit legis.’" (Aguila vs. CA, 160
SCRA 359)
At any rate, we find no reversible error committed by the RTC in dismissing petitioners’ complaint
for reconveyance against respondents. Petitioners’ claim of ownership was based on the affidavit
of Herminigildo and Filomena Tiong executed on November 9, 1926 which stated among others
that they were the former owners in common of the subject parcel of land which they sold to
Magdalena Tuazon (petitioners’ predecessor in interest) on or about the year 1897. However,
such affidavit was not accompanied by any instrument showing the sale between the Tiong
spouses and Magdalena Tuazon. By itself, an affidavit is not a mode of acquiring ownership, 17 thus
it cannot serve as the basis of ownership of the petitioners. Moreover, the RTC found that there
was no tax declaration or title in the name of the Tiong spouses to evidence their ownership of the
subject land. On the other hand, respondents’ ownership of the subject land was by virtue of a
land registration case where the land registration court found sufficient the well documented
evidence submitted by applicant Florentino Quintos, Sr. ( respondents’ predecessor in interest ) to
prove their ownership of 2,048 sq. meters lot which included the subject land.
In civil cases, the burden of proof is on the plaintiff to establish his case by a preponderance of
evidence.1âwphi1 If he claims a right granted or created by law, he must prove his claim by
competent evidence. He must rely on the strength of his own evidence and not on the weakness
of that of his opponent.18 The RTC had correctly ruled that petitioners failed to show sufficient
proof of ownership over the subject land covered by TCT No. 173052 so as to entitle them the
return of the same.
WHEREFORE, the petition is DENIED. The Court of Appeals’ Resolution dated May 29, 2001 and
Resolution dated August 29, 2001 are AFFIRMED. Costs against petitioners.
SO ORDERED.
 SECOND DIVISION
[G.R. No. 155736. March 31, 2005]
SPOUSES DANILO and CRISTINA DECENA, petitioners, vs. SPOUSES PEDRO and
VALERIA PIQUERO, respondents.
RESOLUTION
CALLEJO, SR., J.:
The petitioners, Spouses Danilo and Cristina Decena were the owners of a parcel of land,
with a house constructed thereon, located in Paraaque, Metro Manila (now Paraaque City)
covered by Transfer Certificate of Title (TCT) No. 134391 issued on February 24, 1998.[1]
On September 7, 1997, the petitioners and the respondents, the Spouses Pedro and Valeria
Piquero, executed a Memorandum of Agreement (MOA)[2] in which the former sold the property to
the latter for the price of P940,250.00 payable in six (6) installments via postdated checks. The
vendees forthwith took possession of the property.
It appears in the MOA that the petitioners obliged themselves to transfer the property to the
respondents upon the execution of the MOA with the condition that if two of the postdated checks
would be dishonored by the drawee bank, the latter would be obliged to reconvey the property to
the petitioners.
On May 17, 1999, the petitioners, then residents of Malolos, Bulacan, filed a
Complaint[3] against the respondents with the Regional Trial Court (RTC) of Malolos, Bulacan, for
the annulment of the sale/MOA, recovery of possession and damages. The petitioners alleged
therein that, they did not transfer the property to and in the names of the respondents as vendees
because the first two checks drawn and issued by them in payment for the purchase price of the
property were dishonored by the drawee bank, and were not replaced with cash despite demands
therefor.
The petitioners prayed that, after due proceedings, judgment be rendered in their favor, thus:
a. The sale/Memorandum of Agreement (Annex A, supra) be declared null and void, rescinded
and with no further force and effect;
b. Defendants, and all persons claiming right under them, be ordered to immediately vacate the
subject property and turnover its possession to the plaintiffs;
c. Defendants, jointly and severally, be ordered to pay the plaintiffs:
i. P10,000.00 monthly, starting 01 October 1997 until complete turnover of the subject property to
the plaintiffs, as reasonable compensation for its continued unlawful use and occupation by the
defendants;
ii. P200,000.00 moral damages;
iii. P200,000.00 exemplary damages;
iv. P250,000.00 attorneys fees and litigation related expenses; and
v. the costs of suit.
Other reliefs just and equitable are, likewise, prayed for.[4]
The petitioners declared in their complaint that the property subject of the complaint was
valued at P6,900,000.00. They appended copies of the MOA and TCT No. 134391 to their
complaint. The case was eventually raffled to Branch 13 of the RTC of Malolos, Bulacan.
The respondents filed a motion to dismiss the complaint on the ground, inter alia, of improper
venue and lack of jurisdiction over the property subject matter of the action.
On the first ground, the respondents averred that the principal action of the petitioners for the
rescission of the MOA, and the recovery of the possession of the property is a real action and not
a personal one; hence, it should have been brought in the RTC of Paraaque City, where the
property subject matter of the action was located, and not in the RTC of Malolos, Bulacan, where
the petitioners resided. The respondents posited that the said court had no jurisdiction over the
property subject matter of the action because it was located in Paraaque City.[5]
In opposition, the petitioners insisted that their action for damages and attorneys fees is a
personal action and not a real action; hence, it may be filed in the RTC of Bulacan where they
reside. They averred that while their second cause of action for the recovery of the possession of
the property is a real action, the same may, nevertheless, be joined with the rest of their causes of
action for damages, conformably with Section 5(c), Rule 2 of the Rules of Court.[6]
By way of reply, the respondents averred that Section 5(c), Rule 2 of the Rules of Court
applies only when one or more of multiple causes of action falls within the exclusive jurisdiction of
the first level courts, and the other or others are within the exclusive jurisdiction of the RTC, and
the venue lies therein.
On February 9, 2000, the trial court issued an Order[7] denying the motion for lack of merit. It
found merit in the petitioners contention that Section 5(c), Rule 2 was applicable.
Meanwhile, the case was re-raffled to Branch 10 of the RTC of Malolos, Bulacan. In a
Motion[8] dated December 20, 2000, the respondents prayed for the reconsideration of the trial
courts February 9, 2000 Order. On October 16, 2001, the court issued an Order [9] granting the
motion and ordered the dismissal of the complaint. It ruled that the principal action of the
petitioners was a real action and should have been filed in the RTC of Paraaque City where the
property subject matter of the complaint was located. However, since the case was filed in the
RTC of Bulacan where the petitioners reside, which court had no jurisdiction over the subject cause of action. The prayer may be an aid in interpreting the petition and in determining whether
matter of the action, it must be dismissed. or not more than one cause of action is pleaded.[16] If the allegations of the complaint show one
primary right and one wrong, only one cause of action is alleged even though other matters are
Hence, the present recourse. incidentally involved, and although different acts, methods, elements of injury, items of claims or
The petition has no merit. theories of recovery are set forth.[17] Where two or more primary rights and wrongs appear, there is
a joinder of causes of action.
The sole issue is whether or not venue was properly laid by the petitioners in the RTC of
Malolos, Bulacan. The resolution of this issue is, in turn, anchored on whether Section 5, Rule 2 of After due consideration of the foregoing, we find and so rule that Section 5(c), Rule 2 of the
the Rules of Court invoked by the petitioners is applicable in this case. Rules of Court does not apply. This is so because the petitioners, as plaintiffs in the court a quo,
had only one cause of action against the respondents, namely, the breach of the MOA upon the
Under the said Rule, a party may, in one pleading, assert, in the alternative or otherwise, as latters refusal to pay the first two installments in payment of the property as agreed upon, and turn
many causes of action as he may have against an opposing party subject to the conditions therein over to the petitioners the possession of the real property, as well as the house constructed
enumerated, one of which is Section 5(c) which reads: thereon occupied by the respondents. The claim for damages for reasonable compensation for the
respondents use and occupation of the property, in the interim, as well as moral and exemplary
Sec. 5. Joinder of causes of action. -- damages suffered by the petitioners on account of the aforestated breach of contract of the
respondents are merely incidental to the main cause of action, and are not independent or
(c) Where the causes of action are between the same parties but pertain to different venues or separate causes of action.[18]
jurisdiction, the joinder may be allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction of said court and the venue lies therein; The action of the petitioners for the rescission of the MOA on account of the respondents
breach thereof and the latters failure to return the premises subject of the complaint to the
petitioners, and the respondents eviction therefrom is a real action.[19] As such, the action should
Explaining the aforequoted condition, Justice Jose Y. Feria declared:
have been filed in the proper court where the property is located, namely, in Paraaque City,
conformably with Section 1, Rule 4 of the Rules of Court which reads:
(c) Under the third condition, if one cause of action falls within the jurisdiction of the Regional Trial
Court and the other falls within the jurisdiction of a Municipal Trial Court, the action should be filed
SECTION 1. Venue of real actions. Actions affecting title to or possession of real property, or
in the Regional Trial Court. If the causes of action have different venues, they may be joined in
interest therein, shall be commenced and tried in the proper court which has jurisdiction over the
any of the courts of proper venue. Hence, a real action and a personal action may be joined either
area wherein the real property involved, or a portion thereof, is situated.
in the Regional Trial Court of the place where the real property is located or where the parties
reside.[10]
Since the petitioners, who were residents of Malolos, Bulacan, filed their complaint in the said
RTC, venue was improperly laid; hence, the trial court acted conformably with Section 1(c), Rule
A cause of action is an act or omission of one party in violation of the legal right of the other
16 of the Rules of Court when it ordered the dismissal of the complaint.
which causes the latter injury. The essential elements of a cause of action are the following: (1)
the existence of a legal right of the plaintiff; (2) a correlative legal duty of the defendant to respect IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against
ones right; and (3) an act or omission of the defendant in violation of the plaintiffs right. [11] A cause the petitioners.
of action should not be confused with the remedies or reliefs prayed for. A cause of action is to be
found in the facts alleged in the complaint and not in the prayer for relief. It is the substance and SO ORDERED.
not the form that is controlling.[12] A party may have two or more causes of action against another
party.
A joinder of causes of action is the uniting of two or more demands or right of action in a
complaint. The question of the joinder of causes of action involves in particular cases a preliminary
inquiry as to whether two or more causes of action are alleged.[13] In declaring whether more than
one cause of action is alleged, the main thrust is whether more than one primary right or subject of
controversy is present. Other tests are whether recovery on one ground would bar recovery on the
other, whether the same evidence would support the other different counts and whether separate
actions could be maintained for separate relief;[14] or whether more than one distinct primary right
or subject of controversy is alleged for enforcement or adjudication.[15]
A cause of action may be single although the plaintiff seeks a variety of remedies. The mere
fact that the plaintiff prays for multiple reliefs does not indicate that he has stated more than one
 epublic of the Philippines
SUPREME COURT
SECOND DIVISION
G.R. No. 147417 July 8, 2005
SPS. VICTOR & MILAGROS PEREZ and CRISTINA AGRAVIADOR AVISO, Petitioners,
vs.
ANTONIO HERMANO, Respondent.
DECISION
CHICO-NAZARIO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the
Resolution1 of the Court of Appeals dismissing petitioners’ original action for certiorari under Rule
65 for being filed out of time. Assailed as well is the Resolution2 dismissing petitioners’ motion for
reconsideration.
The pertinent facts of the case are as follows:
On 27 April 1998, petitioners Cristina Agraviador Aviso and spouses Victor and Milagros Perez
filed a civil case for Enforcement of Contract and Damages with Prayer for the Issuance of a
Temporary Restraining Order (TRO) and/or Preliminary Injunction against Zescon Land, Inc.
and/or its President Zenie Sales-Contreras, Atty. Perlita Vitan-Ele and against respondent herein
Antonio Hermano before the Regional Trial Court (RTC) of Quezon City, Branch 224. 3 On 15 May
1998, respondent (then defendant) Hermano filed his Answer with Compulsory Counterclaim. On
17 January 2000, respondent Hermano filed a "Motion with Leave to Dismiss the Complaint or
Ordered Severed for Separate Trial" which was granted by the trial court in an Order dated 28
February 2000.
This Order was received by petitioners on 21 March 2000. On 23 March 2000, petitioners moved
for reconsideration which was denied by the trial court on 25 May 2000 and received by petitioners
on 18 June 2000. On 17 August 2000, petitioners filed an original action for certiorari before the
Court of Appeals imputing grave abuse of discretion on the part of the trial court in dismissing the
complaint against respondent Hermano.
On 19 October 2000, the Court of Appeals rendered the first assailed Resolution dismissing the
petition for certiorari "for having been filed beyond the reglementary period pursuant to Section 4,
Rule 65 of the 1997 Rules on Civil Procedure, as amended." On 02 March 2001, the second
assailed Resolution was promulgated dismissing petitioners’ motion for reconsideration, the Court
of Appeals holding that:
From the time petitioners received the assailed Order on March 21, 2000 and filed their motion for
reconsideration, four (4) days had elapsed. On June 18, 2000, petitioners received the denial of
their motion for reconsideration. When the instant petition was filed on August 17, 2000, a total of
63 days had elapsed.
A.M. No. 00-2-03-50 further amending Section 4, Rule 65 of the New Rules on Civil Procedure
states that the petition shall be filed not later than sixty (60) days from notice of the judgment,
Order or Resolution and in case a motion for reconsideration or new trial is timely filed, whether
such motion is required or not, the 60-day period shall be counted from notice of the denial of said
motion.
Viewed from its light, the assailed Orders had already attained finality, and are now beyond the
power of this Court to review.4
Aggrieved by the foregoing ruling, petitioners are now before us assigning the following –
MANIFEST AND/OR SERIOUS ERROR COMMITTED BY THE HONORABLE COURT OF
APPEALS IN THE COMPUTATION OF THE PERIOD WITHIN WHICH THE PETITIONERS
FILED THEIR PETITION FOR CERTIORARI BEFORE IT AND CONSEQUENTLY COMMITTED
GRAVE ABUSE OF DISCRETION IN THE APPRECIATION OF FACTS AND/OR
MISAPPREHENSION OF FACTS, WITH ITS FINDING OF FACT NOT BEING BORNE BY THE
RECORD OR EVIDENCE, AND THUS ITS CONCLUSION IS ENTIRELY BASELESS.5
According to petitioners, following the amendment introduced by A.M. No. 00-2-03-SC to Section
4, Rule 65 of the 1997 Rules on Civil Procedure, their petition was filed on the 60th day, thus,
within the reglementary period. Respondent insists, on the other hand, that the petition was filed
on the 61st day while the Court of Appeals had declared that the petition was filed on the 63rd
day.
We agree in the position taken by petitioners.
Admittedly, at the time petitioners filed their petition for certiorari on 17 August 2000, the rule then
prevailing was Section 4, Rule 65 of the 1997 Rules on Civil Procedure, as amended by Circular
No. 39-98 effective 01 September 1998, which provides:
Sec. 4. Where petition filed. – The petition shall be filed not later than sixty (60) days from notice of
the judgment, order or resolution sought to be assailed in the Supreme Court, or if it relates to the
acts or omissions of a lower court or of a corporation, board, officer or person in the Regional Trial
Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may also
be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in
the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-
judicial agency, and unless otherwise provided by law or these Rules, the petition shall be filed in
and cognizable only by the Court of Appeals.
If the petitioner had filed a motion for new trial or reconsideration in due time after notice of said
judgment, order, or resolution, the period herein fixed shall be interrupted. If the motion is
denied, the aggrieved party may file the petition within the remaining period, but which
shall not be less than five (5) days in any event, reckoned from notice of such denial. No
extension of time to file the petition shall be granted except for the most compelling reason and in
no case to exceed fifteen (15) days. (Emphasis supplied)
However, on 01 September 2000, during the pendency of the case before the Court of Appeals,
Section 4 was amended anew by A.M. No. 00-2-03-SC6 which now provides:
Sec. 4. When and where petition filed. – The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new
trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be
counted from notice of the denial of said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of
Appeals whether or not the same is in aid of its appellate jurisdiction, or in the Sandiganbayan if it
is in aid of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency,
unless otherwise provided by law or these rules, the petition shall be filed in and cognizable only
by the Court of Appeals.
No extension of time to file the petition shall be granted except for compelling reason and in no
case exceeding fifteen (15) days. (Emphasis supplied)
Under this amendment, the 60-day period within which to file the petition starts to run from receipt
of notice of the denial of the motion for reconsideration, if one is filed.7
In Narzoles v. National Labor Relations Commission,8 we described this latest amendment as
curative in nature as it remedied the confusion brought about by Circular No. 39-98 because,
"historically, i.e., even before the 1997 revision to the Rules of Civil Procedure, a party had a fresh
period from receipt of the order denying the motion for reconsideration to file a petition
for certiorari." Curative statutes, which are enacted to cure defects in a prior law or to validate
legal proceedings which would otherwise be void for want of conformity with certain legal
requirements, by their very essence, are retroactive.9 And, being a procedural rule, we held
in Sps. Ma. Carmen and Victor Javellana v. Hon. Presiding Judge Benito Legarda 10 that
"procedural laws are construed to be applicable to actions pending and undetermined at the time
of their passage, and are deemed retroactive in that sense and to that extent."
Consequently, petitioners had a fresh period of 60 days from the time they received the Order of
the trial court denying their motion for reconsideration on 18 June 2000. When they filed their
petition with the Court of Appeals on 17 August 2000, exactly 60 days had elapsed following the
rule that in computing a period, the first day shall be excluded and the last day included.11 Hence,
there can be no doubt that the petition was filed within the reglementary period for doing so and it
was reversible error on the part of the Court of Appeals in not giving said petition due
course. However, instead of remanding the case to the Court of Appeals which would only unduly
prolong the disposition of the substantive issue raised, we shall resolve the petition originally filed
therein.
Petitioners brought to the Court of Appeals on petition for certiorari under Rule 65 the lone issue
of:
WHETHER OR NOT THE PUBLIC RESPONDENT [Hon. Emilio L. Leachon, Jr., Presiding Judge,
RTC, Branch 224, Quezon City] HAD PLAINLY AND MANIFESTLY ACTED WITH GRAVE
ABUSE OF DISCRETION, IN EXCESS OF JURISDICTION, TANTAMOUNT TO LACK OF
JURISDICTION, IN DISMISSING THE COMPLAINT AS AGAINST RESPONDENT ANTONIO
HERMANO IN CIVIL CASE NO. Q-98-34211.12
Petitioners assert that respondent Hermano should not have been dismissed from the complaint
because: (1) He did not file a motion to dismiss under Rule 16 of the Rules of Court and, in fact,
his "Motion with Leave to Dismiss the Complaint or Ordered Severed for Separate Trial" was filed
almost two years after he filed his Answer to the complaint; (2) There was no misjoinder of causes
of action in this case; and (3) There was no misjoinder of parties.
The case filed by petitioners against respondent Hermano and the other defendants, namely
Zescon Land, Inc. and/or its President Zenie Sales-Contreras and Atty. Perlita Vitan-Ele, was one
for "Enforcement of Contract and Damages with Prayer for the Issuance of a Temporary
Restraining Order (TRO) and/or Preliminary Injunction" docketed as Civil Case No. Q-98-34211
and raffled to Branch 224.
Petitioners presented three causes of action in their complaint, the first for enforcement of contract
to sell entered into between petitioners and Zescon Land, Inc., the second for annulment or
rescission of two contracts of mortgage entered into between petitioners and respondent Hermano
and the third for damages against all defendants.
For the first cause of action, petitioners allege that sometime in November 1997, they entered into
a Contract to Sell with Zescon Land, Inc., through Zenie Sales-Contreras, for the purchase of five
(5) parcels of land in the total amount of Nineteen Million One Hundred Four Thousand Pesos
(P19,104,000.00). As part of their agreement, a portion of the purchase price would be paid to
them as down payment, another portion to be given to them as cash advance upon the execution
of the contract and another portion to be used by the buyer, Zescon Land, Inc., to pay for loans
earlier contracted by petitioners which loans were secured by mortgages.
Re-pleading the foregoing in their second cause of action, petitioners contend that "in a tricky
machination and simultaneous with the execution of the aforesaid Contract to Sell," they were
made to sign other documents, two of which were Mortgage deeds over the same five properties
in favor of respondent Hermano, whom they had never met. It was allegedly explained to them by
Sales-Contreras that the mortgage contracts would merely serve to facilitate the payment of the
price as agreed upon in their Contract to Sell. Petitioners claim that it was never their intention to
mortgage their property to respondent Hermano and that they have never received a single
centavo from mortgaging their property to him. Petitioners acknowledge, however, that respondent
Hermano was responsible for discharging their obligations under the first mortgage and for having
the titles over the subject lands released, albeit not to them but to respondent Hermano. They
seek a TRO against respondent Hermano who had informed them that he would be foreclosing
the subject properties.
In their third cause of action, petitioners pray for damages against all the defendants alleging that:
Due to the failure and refusal, without any valid justification and reason, by defendants Zescon
and Contreras to comply with their obligations under the Contract to Sell, including their failure and
refusal to pay the sums stipulated therein, and in misleading and misrepresenting the plaintiffs into
mortgaging their properties to defendant Antonio Hermano, who in turn had not paid the plaintiffs
the proceeds thereof, putting them in imminent danger of losing the same, plaintiffs had suffered,
and continue to suffer, sleepless nights ….
By reason of defendants Zescon and Contreras’s failure and refusal to pay the sums stipulated in
the Contract to Sell, and of defendant Antonio Hermano’s not having paid plaintiffs the proceeds of
the mortgage agreements, plaintiffs had been deprived of the beneficial use of the proceeds and
stood to lose, as they continue to lose, by way of unearned profits at least P1,000,000.00.13
In his Answer with (Compulsory) Counterclaim dated 15 May 1998, respondent Hermano denied
petitioners’ allegations.14 Then, on 19 February 1999, respondent Hermano filed a civil case
entitled "Judicial Foreclosure of Real Estate Mortgage" against petitioner Aviso docketed as Civil
Case No. Q-99-36914 and raffled to Branch 216 of the RTC of Quezon City. On 17 January 2000,
respondent Hermano filed a "Motion With Leave To Dismiss The Complaint Against Defendant
Antonio Hermano, Or Ordered Severed For Separate Trial" before Branch 224. In said motion,
respondent Hermano argued that there was a mis-joinder of causes of action under Rule 2,
Section 6 of the Rules of Court. To quote respondent Hermano:
3. In the instant case, the plaintiffs’ action for the Enforcement of Contract and Damages with
Prayer for The Issuance of a Temporary Restraining Order And/Or Preliminary Injunction against
Zescon Land, Inc., and/or its President Zenie Sales Contreras, may not, under Rule 2, Section 6
of the 1997 Rules of Civil Procedure, join defendant Hermano as party defendant to annul and/or
rescind the Real Estate Mortgages of subject properties. There is a misjoinder of parties
defendants under a different transaction or cause of action; that under the said Rule 2, Section 6,
upon motion of defendant Hermano in the instant case, the complaint against defendant Hermano
can be severed and tried separately; . . . .15
Over petitioners’ opposition to said motion, the same was granted by the trial court in its Order
dated 28 February 2000 on the justification that:
. . . [D]efendant having filed a special civil action for judicial foreclosure of mortgage and now
pending before RTC Branch 216, he should be dropped as one of the defendants in this case and
whatever claims plaintiffs may have against defendant Hermano, they can set it up by way of an
answer to said judicial foreclosure.16
And, in an Order dated 25 May 2000, the trial court resolved petitioners’ motion for reconsideration
by dismissing the same, to wit:
After going over the arguments of the parties, the Court believes that defendant Hermano has
nothing to do with the transaction which the plaintiffs entered into with defendant Zescon Land,
Inc. Besides, the said motion raised matters and defenses previously considered and passed
upon by the Court.17
It is these two Orders that were brought up by petitioners to the Court of Appeals on petition
for Certiorari under Rule 65. The pivotal issue to be resolved, therefore, is whether or not
respondent trial court committed grave abuse of discretion in dismissing the complaint against
respondent Hermano in Civil Case No. Q-98-34211.
As far as we can glean from the Orders of the trial court, respondent Hermano was dropped from
the complaint on the ground of misjoinder of causes of action. Petitioners, on the other hand, insist
that there was no misjoinder in this case.
To better understand the present controversy, it is vital to revisit the rules on joinder of causes of
action as exhaustively discussed in Republic v. Hernandez,18 thus:
By a joinder of actions, or more properly, a joinder of causes of action, is meant the uniting of two
or more demands or rights of action in one action; the statement of more than one cause of action
in a declaration. It is the union of two or more civil causes of action, each of which could be made
the basis of a separate suit, in the same complaint, declaration or petition. A plaintiff may under
certain circumstances join several distinct demands, controversies or rights of action in one
declaration, complaint or petition.
As can easily be inferred from the above definitions, a party is generally not required to join in one
suit several distinct causes of action. The joinder of separate causes of action, where allowable, is
permissive and not mandatory in the absence of a contrary statutory provision, even though the
causes of action arose from the same factual setting and might under applicable joinder rules be
joined. Modern statutes and rules governing joinders are intended to avoid a multiplicity of suits
and to promote the efficient administration of justice wherever this may be done without prejudice
to the rights of the litigants. To achieve these ends, they are liberally construed.
While joinder of causes of action is largely left to the option of a party litigant, Section 5, Rule 2 of
our present Rules allows causes of action to be joined in one complaint conditioned upon the
following requisites: (a) it will not violate the rules on jurisdiction, venue and joinder of parties; and
(b) the causes of action arise out of the same contract, transaction or relation between the parties,
or are for demands for money or are of the same nature and character.
The objectives of the rule or provision are to avoid a multiplicity of suits where the same parties
and subject matter are to be dealt with by effecting in one action a complete determination of all
matters in controversy and litigation between the parties involving one subject matter, and to
expedite the disposition of litigation at minimum cost. The provision should be construed so as to
avoid such multiplicity, where possible, without prejudice to the rights of the litigants. Being of a
remedial nature, the provision should be liberally construed, to the end that related controversies
between the same parties may be adjudicated at one time; and it should be made effectual as far
as practicable, with the end in view of promoting the efficient administration of justice.
The statutory intent behind the provisions on joinder of causes of action is to encourage joinder of
actions which could reasonably be said to involve kindred rights and wrongs, although the courts
have not succeeded in giving a standard definition of the terms used or in developing a rule of
universal application. The dominant idea is to permit joinder of causes of action, legal or equitable,
where there is some substantial unity between them. While the rule allows a plaintiff to join as
many separate claims as he may have, there should nevertheless be some unity in the problem
presented and a common question of law and fact involved, subject always to the restriction
thereon regarding jurisdiction, venue and joinder of parties. Unlimited joinder is not authorized.
Our rule on permissive joinder of causes of action, with the proviso subjecting it to the correlative
rules on jurisdiction, venue and joinder of parties and requiring a conceptual unity in the problems
presented, effectively disallows unlimited joinder.
Section 6, Rule 2 on misjoinder of causes of action provides:
Sec. 6. Misjoinder of causes of action. - Misjoinder of causes of action is not a ground for
dismissal of an action. A misjoined cause of action may, on motion of a party or on the initiative of
the court, be severed and proceeded with separately.
There is misjoinder of causes of action when the conditions for joinder under Section 5, Rule 2 are
not met. Section 5 provides:
Sec. 5. Joinder of causes of action. - A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the
following conditions:
(a) The party joining the causes of action shall comply with the rules on joinder of parties;
(b) The joinder shall not include special civil actions or actions governed by special rules;
(c) Where the causes of action are between the same parties but pertain to different venues or
jurisdictions, the joinder may be allowed in the Regional Trial Court provided one of the causes of
action falls within the jurisdiction of said court and the venue lies therein; and
From the above averments in the complaint, it becomes reasonably apparent that there are
questions of fact and law common to both Zescon Land, Inc., and respondent Hermano arising
from a series of transaction over the same properties. There is the question of fact, for example, of
whether or not Zescon Land, Inc., indeed misled petitioners to sign the mortgage deeds in favor of
respondent Hermano. There is also the question of which of the four contracts were validly
entered into by the parties. Note that under Article 2085 of the Civil Code, for a mortgage to be
valid, it is imperative that the mortgagor be the absolute owner of the thing mortgaged. Thus,
respondent Hermano will definitely be affected if it is subsequently declared that what was entered
into by petitioners and Zescon Land, Inc., was a Contract of Sale (as evidenced by the Deed of
Absolute Sale signed by them) because this would mean that the contracts of mortgage were void
as petitioners were no longer the absolute owners of the properties mortgaged. Finally, there is
also the question of whether or not Zescon Land, Inc., as represented by Sales-Contreras, and
respondent Hermano committed fraud against petitioners as to make them liable for damages.
Prescinding from the foregoing, and bearing in mind that the joinder of causes of action should be
liberally construed as to effect in one action a complete determination of all matters in controversy
involving one subject matter, we hold that the trial court committed grave abuse of discretion in
severing from the complaint petitioners’ cause of action against respondent Hermano.
WHEREFORE, premises considered, the Resolution of the Court of Appeals dated 19 October
2000 dismissing petitioners’ petition for certiorari and its Resolution dated 02 March 2001 denying
petitioners’ motion for reconsideration are REVERSED and SET ASIDE. The petition
for certiorari is hereby GRANTED. The Orders of the Regional Trial Court of Quezon City, Branch
224, dated 28 February 2000 and 25 May 2000 are ANNULLED and SET ASIDE. The RTC is
further ordered to reinstate respondent Antonio Hermano as one of the defendants in Civil Case
No. Q-98-34211. No costs.
SO ORDERED.

(d) Where the claims in all the causes of action are principally for recovery of money, the
aggregate amount claimed shall be the test of jurisdiction.

As far as can be gathered from the assailed Orders, it is the first condition - on joinder of parties -
that the trial court deemed to be lacking. It is well to remember that the joinder of causes of action
may involve the same parties or different parties. If the joinder involves different parties, as in this
case, there must be a question of fact or of law common to both parties joined, arising out of the
same transaction or series of transaction.19

In herein case, petitioners have adequately alleged in their complaint that after they had already
agreed to enter into a contract to sell with Zescon Land, Inc., through Sales-Contreras, the latter
also gave them other documents to sign, to wit: A Deed of Absolute Sale over the same properties
but for a lower consideration, two mortgage deeds over the same properties in favor of respondent
Hermano with accompanying notes and acknowledgment receipts for Ten Million pesos
(P10,000,000) each. Petitioners claim that Zescon Land, Inc., through Sales-Contreras, misled
them to mortgage their properties which they had already agreed to sell to the latter.
 Republic of the Philippines
SUPREME COURT
FIRST DIVISION
G.R. No. 164041. July 29, 2005
ROSENDO ALBA, minor, represented by his mother and natural guardian, Armi A. Alba,
and ARMI A. ALBA, in her personal capacity, Petitioners,
vs.
COURT OF APPEALS and ROSENDO C. HERRERA, Respondents.
DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for certiorari1 are the February 27, 2004 decision2 and the May 14, 2004
resolution3 of the Court of Appeals in CA-G.R. SP No. 61883, which dismissed petitioner’s original
action for annulment of judgment4of the Regional Trial Court of Manila, Branch 37, and denied the
motion for reconsideration, respectively.
The antecedent facts show that on October 21, 1996, private respondent Rosendo C. Herrera filed
a petition5 for cancellation of the following entries in the birth certificate of "Rosendo Alba Herrera,
Jr.", to wit: (1) the surname "Herrera" as appended to the name of said child; (2) the reference to
private respondent as the father of Rosendo Alba Herrera, Jr.; and (3) the alleged marriage of
private respondent to the child’s mother, Armi A. Alba (Armi) on August 4, 1982 in Mandaluyong
City. He claimed that the challenged entries are false and that it was only sometime in September
1996 that he learned of the existence of said birth certificate.
Private respondent alleged that he married only once, i.e., on June 28, 1965 with Ezperanza C.
Santos and never contracted marriage with Armi nor fathered Rosendo Alba Herrera, Jr. In
support thereof, he presented certifications from the Civil Registrar of Mandaluyong City 6 and the
National Statistics Office,7 both stating that they have no record of marriage between private
respondent and Armi.
On November 12, 1996, private respondent filed an amended petition,8 impleading Armi and "all
the persons who have or claim any interest in th[e] petition."9
On November 27, 1996, the trial court issued an Order setting the petition for hearing on January
24, 1997, and directed the publication and service of said order to Armi at her address appearing
in the birth certificate which is No. 418 Arquiza St., Ermita, Manila, and to the Civil Registrar of the
City of Manila and the Solicitor General. The full text of the order, reads:
In a verified Amended Petition for Correction of Entry, the Petitioner prays, inter alia, that the
following entries appearing in the subject Certificate of Live Birth be deleted:
1. All informations having reference to him as the father of the child mentioned therein;
2. The surname "Herrera" appended to the child’s name;
3. His alleged marriage with the natural mother of the child.
Finding the Petition to be sufficient in form and substance, let the Petition be set for hearing on
January 24, 1997 at nine o’clock in the morning before this Branch at Rooms 447-449, Fourth
Floor, Manila City Hall. All interested parties are hereby notified of the said hearing and are
ordered to show cause why the Petition should not be granted.
Let a copy of this Order be published at the expense of the Petitioner, once a week for three (3)
consecutive weeks, in a newspaper of general circulation in the City of Manila, and raffled
pursuant to P.D. 1079.
Furnish the Office of the Solicitor General and the Office of the Local Civil Registrar of the City of
Manila with copies of the Petition and of this Order.
Let the same be likewise furnished the Private Respondent Armi Alba Herrera at the address
indicated in the subject Certificate of Live Birth.
SO ORDERED.10
On January 13, 1997, before the scheduled January 24, 1997 hearing, the trial court issued an
Amended Order11with substantially the same contents, except that the hearing was re-scheduled
to February 26, 1997. A copy of said Amended Order was published in "Today", a newspaper of
general circulation in Manila in its January 20, 27, and February 3, 1997 issues. Copies thereof
were also sent to Armi at No. 418 Arquiza St., Ermita, Manila, on January 17, 1997, the Local Civil
Registrar of Manila and the Solicitor General.
At the scheduled hearing on February 26, 1997, the counsel from the Office of the Solicitor
General appeared but filed no opposition to the petition. Armi, on the other hand was not present.
The return of the notice sent to her had the following notation:
This is to certify that on January 17, 1997, the undersigned [process server] personally served a
copy of the Amended Order in Sp. Proc. No. 96-80512 dated January 13, 1997 to the private
respondent, Armi Alba Herrera at … 418 Arquiza St., Ermita, Manila, but failed and unavailing
for reason that (sic), private respondent is no longer residing at said given address.12
On April 1, 1997, the court a quo rendered a decision which became final and executory on June
2, 1997.13 The dispositive portion thereof, states:
ACCORDINGLY, and pursuant to Rule 108 of the Revised Rules of Court, judgment is hereby
rendered ordering the correction of the entries in the Certificate of Live Birth of Rosendo Alba
Herrera, Jr., in such a way that the entry under the name of the child, the surname Herrera, Jr.[,] is
ordered deleted, and the child shall be known as ROSENDO ALBA; and that the entry under the
date and place of marriage, the date August 4, 1982, Mandaluyong, MM is likewise ordered
deleted or cancelled.
Let a copy of this Decision be furnished the Local Civil Registrar of Manila for proper correction
and entry.
SO ORDERED.14
Private respondent filed a motion15 for amendment of the decretal portion of the decision to include
the cancellation of all entries having reference to him as the father of petitioner minor. This was
granted in the August 11, 1997 order of the trial court as follows:
ACCORDINGLY, and pursuant to Rule 108 of the Revised Rules of Court, judgment is hereby
rendered ordering the correction of the entries in the Certificate of Live Birth of Rosendo Alba
Herrera, Jr., in such a way that the entries under the name of the child, the surname Herrera,
Jr., and the name of the father Rosendo Caparas Herrera are ordered deleted, and the child shall
be known as ROSENDO ALBA; and the entry under the date and place of marriage, the date
August 4, 1982, Mandaluyong, MM is likewise ordered deleted or cancelled.
SO ORDERED.16
On November 24, 2000, Armi and petitioner minor filed a petition for annulment of judgment
before the Court of Appeals on the grounds of extrinsic fraud and lack of jurisdiction over their
person. She allegedly came to know of the decision of the trial court only on February 26, 1998,
when San Beda College, where her son was enrolled as a high school student, was furnished by
private respondent with a copy of a court order directing the change of petitioner minor’s surname
from Herrera to Alba.
Armi averred that private respondent was aware that her address is at Unit 302 Plaza Towers
Condominium, 1175 Lorenzo Guerrero St., Ermita, Manila, because such was her residence when
she and private respondent cohabited as husband and wife from 1982 to 1988; and her abode
when petitioner minor was born on March 8, 1985. Even after their separation, private respondent
continued to give support to their son until 1998; and that Unit 302 was conveyed to her by private
respondent on June 14, 1991 as part of his support to petitioner minor. According to Armi, her
address i.e., No. 418 Arquiza St., Ermita, Manila, as appearing in the birth certificate of their son,
was entered in said certificate through the erroneous information given by her sister, Corazon
Espiritu. She stressed that private respondent knew all along that No. 418 Arquiza St., is the
residence of her sister and that he deliberately caused the service of notice therein to prevent her
from opposing the petition.
In his answer, private respondent denied paternity of petitioner minor and his purported
cohabitation with Armi. He branded the allegations of the latter as "false statements coming from a
polluted source."17
On February 27, 2004, the Court of Appeals dismissed the petition holding, among others, that
petitioner failed to prove that private respondent employed fraud and purposely deprived them of
their day in court. It further held that as an illegitimate child, petitioner minor should bear the
surname of his mother.18 Petitioners filed a motion for reconsideration but was denied.
Hence, the instant petition.
Under Section 2, Rule 47 of the 1997 Revised Rules of Civil Procedure, judgments may be
annulled on the grounds of lack of jurisdiction and extrinsic fraud. 19
Whether or not the trial court acquired jurisdiction over the person of petitioner and her minor child
depends on the nature of private respondent’s action, that is, in personam, in rem or quasi in rem.
An action in personam is lodged against a person based on personal liability; an action in rem is
directed against the thing itself instead of the person; while an action quasi in rem names a person
as defendant, but its object is to subject that person’s interest in a property to a corresponding lien
or obligation.20
Hence, petitions directed against the "thing" itself or the res,21 which concerns the status of a
person,22 like a petition for adoption,23 annulment of marriage,24 or correction of entries in the birth
certificate,25 as in the instant case, are actions in rem.
In an action in personam, jurisdiction over the person of the defendant is necessary for the court to
validly try and decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person
of the defendant is not a prerequisite to confer jurisdiction on the court, provided that the latter has
jurisdiction over the res. Jurisdiction over the res is acquired either (a) by the seizure of the
property under legal process, whereby it is brought into actual custody of the law; or (b) as a result
of the institution of legal proceedings, in which the power of the court is recognized and made
effective.26 The service of summons or notice to the defendant is not for the purpose of vesting the
court with jurisdiction but merely for satisfying the due process requirements.27
In the case at bar, the filing with the trial court of the petition for cancellation vested the latter
jurisdiction over the res. Substantial corrections or cancellations of entries in civil registry records
affecting the status or legitimacy of a person may be effected through the institution of a petition
under Rule 108 of the Revised Rules of Court, with the proper Regional Trial Court. 28 Being a
proceeding in rem, acquisition of jurisdiction over the person of petitioner is therefore not required
in the present case. It is enough that the trial court is vested with jurisdiction over the subject
matter.
The service of the order at No. 418 Arquiza St., Ermita, Manila and the publication thereof in a
newspaper of general circulation in Manila, sufficiently complied with the requirement of due
process, the essence of which is an opportunity to be heard. Said address appeared in the birth
certificate of petitioner minor as the residence of Armi. Considering that the Certificate of Birth
bears her signature, the entries appearing therein are presumed to have been entered with her
approval. Moreover, the publication of the order is a notice to all indispensable parties, including
Armi and petitioner minor, which binds the whole world to the judgment that may be rendered in
the petition. An in rem proceeding is validated essentially through publication.29 The absence of
personal service of the order to Armi was therefore cured by the trial court’s compliance with
Section 4, Rule 108, which requires notice by publication, thus:
SEC. 4. Notice and publication. – Upon the filing of the petition, the court shall, by an order, fix the
time and place for the hearing of the same, and cause reasonable notice thereof to be given to the
persons named in the petition. The court shall also cause the order to be published once a week
for three (3) consecutive weeks in a newspaper of general circulation in the province.
In Barco v. Court of Appeals, the trial court granted a petition for correction/change of entries in a
minor’s birth certificate to reflect the name of the minor’s real father as well as to effect the
corresponding change of her surname. In seeking to annul said decision, the other children of the
alleged father claimed that they are indispensable parties to the petition for correction, hence, the
failure to implead them is a ground to annul the decision of the trial court. The Court of Appeals
denied the petition which was sustained by this Court on the ground, inter alia, that while petitioner
is indeed an indispensable party, the failure to implead her was cured by the publication of the
order of hearing. Thus –
Undoubtedly, Barco is among the parties referred to in Section 3 of Rule 108. Her interest was
affected by the petition for correction, as any judicial determination that June was the daughter of
Armando would affect her ward’s share in the estate of her father. It cannot be established
whether Nadina knew of Mary Joy’s existence at the time she filed the petition for correction.
Indeed, doubt may always be cast as to whether a petitioner under Rule 108 would know of all the
parties whose interests may be affected by the granting of a petition. For example, a petitioner
cannot be presumed to be aware of all the legitimate or illegitimate offsprings of his/her spouse or
paramour. The fact that Nadina amended her petition to implead Francisco and Gustilo indicates
earnest effort on her part to comply with Section 3 as quoted above.
Yet, even though Barco was not impleaded in the petition, the Court of Appeals correctly pointed
out that the defect was cured by compliance with Section 4, Rule 108, which requires notice by
publication, thus:
Section 4. Upon the filing of the petition, the court shall, by order, fix the time and place for the
hearing of the same, and cause reasonable notice thereof to be given to the persons named in the
petition. The court shall also cause the order to be published once a week for three (3)
consecutive weeks in a newspaper of general circulation in the province.
The purpose precisely of Section 4, Rule 108 is to bind the whole world to the subsequent
judgment on the petition. The sweep of the decision would cover even parties who should
have been impleaded under Section 3, Rule 108, but were inadvertently left out. The Court
of Appeals correctly noted:
The publication being ordered was in compliance with, and borne out by the Order of January 7,
1985. The actual publication of the September 22, 1983 Order, conferred jurisdiction upon the
respondent court to try and decide the case. While "nobody appeared to oppose the instant
petition" during the December 6, 1984 hearing, that did not divest the court from its jurisdiction
over the case and of its authority to continue trying the case. For, the rule is well-settled, that
jurisdiction, once acquired continues until termination of the case.
Verily, a petition for correction is an action in rem, an action against a thing and not against a
person. The decision on the petition binds not only the parties thereto but the whole world. An in
rem proceeding is validated essentially through publication. Publication is notice to the whole
world that the proceeding has for its object to bar indefinitely all who might be minded to make an
objection of any sort against the right sought to be established. It is the publication of such notice
that brings in the whole world as a party in the case and vests the court with jurisdiction to hear
and decide it.30
Furthermore, extrinsic fraud, which was private respondent’s alleged concealment of Armi’s
present address, was not proven. Extrinsic fraud exists when there is a fraudulent act committed
by the prevailing party outside of the trial of the case, whereby the defeated party was prevented
from presenting fully his side of the case by fraud or deception practiced on him by the prevailing
party. Here, Armi contended that private respondent is aware of her present address because they
lived together as husband and wife in the condominium unit from 1982 to 1988 and because
private respondent continued to give support to their son until 1998. To prove her claim, she
presented (1) private respondent’s title over the condominium unit; (2) receipts allegedly issued to
private respondent for payment of homeowner’s or association dues; (2) a photocopy of a January
14, 1991 deed of sale of the subject unit in favor of Armi; and (3) the subsequent title issued to the
latter. However, these documents only tend to prove private respondent’s previous ownership of
the unit and the subsequent transfer thereof to Armi, but not the claimed live-in relationship of the
parties. Neither does the sale prove that the conveyance of the unit was part of private
respondent’s support to petitioner minor. Indeed, intimate relationships and family relations cannot
be inferred from what appears to be an ordinary business transaction.
Although the January 14, 1991 deed of sale31 stated that Armi resides at 1175 L. Guerrero St.,
Ermita, Manila, the same is not sufficient to prove that private respondent has knowledge of Armi’s
address because the former objected to the offer of the deed for being a mere photocopy.32 The
counsel for petitioners even admitted that they do not have the original of the deed and that per
certification of the Clerk of Court, the Notary Public who notarized the deed of sale did not submit
a copy of the notarized document as required by the rules.33 The deed cannot thus be the basis of
ascribing knowledge of Armi’s address to private respondent inasmuch as the authenticity thereof
was neither admitted by private respondent nor proven by petitioners.
While Armi presented the alleged love letters/notes from private respondent, they were only
attached as annexes to the petition and not formally offered as evidence before the Court of
Appeals. More importantly, said letters/notes do not have probative value because they were mere
photocopies and never proven to be an authentic writing of private respondent. In the same vein,
the affidavits34 of Armi and her sister, Corazon Espiritu, are of no evidentiary weight. The basic
rule of evidence is that unless the affiants themselves are placed on the witness stand to testify on
their affidavits, such affidavits must be rejected for being hearsay. Stated differently, the
declarants of written statements pertaining to disputed facts must be presented at the trial for
cross-examination.35 Inasmuch as Armi and her sister were not presented before the Court of
Appeals to affirm the veracity of their affidavits, the same are considered hearsay and without
probative value.
Ei incumbit probotio qui dicit, non qui negat. He who asserts, not he who denies, must
prove.36 Armi’s claim that private respondent is aware of her present address is anchored on the
assertion of a live-in relationship and support to her son. Since the evidence presented by Armi is
not sufficient to prove the purported cohabitation and support, it follows that private respondent’s
knowledge of Armi’s address was likewise not proven. Thus, private respondent could not have
deliberately concealed from the court that which was not shown to be known to him. The Court of
Appeals therefore correctly dismissed the petition for annulment of judgment on the ground of
failure to establish extrinsic fraud.

The proper remedy of a party aggrieved by a decision of the Court of Appeals in an action to annul
a judgment of a Regional Trial Court is a petition for review on certiorari under Rule 45 of the
Revised Rules of Civil Procedure, where only questions of law may be raised. The resort of
petitioner to the instant civil action for certiorari under Rule 65 is therefore erroneous. The special
civil action of certiorari will not be allowed as a substitute for failure to timely file a petition for
review under Rule 45, which should be instituted within 15 days 37 from receipt of the assailed
decision or resolution. The wrong choice of remedy thus provides another reason to dismiss this
petition.38

Finally, petitioner failed to establish the merits of her petition to annul the trial court’s decision. In
an action for annulment of judgment, the petitioner must convince the court that something may
indeed be achieved should the assailed decision be annulled.39 Under Article 17640 of the Family
Code as amended by Republic Act (RA) No. 9255, which took effect on March 19, 2004,
illegitimate children shall use the surname of their mother, unless their father recognizes their
filiation, in which case they may bear the father’s surname. In Wang v. Cebu Civil Registrar,41 it
was held that an illegitimate child whose filiation is not recognized by the father, bears only a given
name and his mother’s surname. The name of the unrecognized illegitimate child identifies him as
such. It is only when said child is recognized that he may use his father’s surname, reflecting his
status as an acknowledged illegitimate child.

In the present case, it is clear from the allegations of Armi that petitioner minor is an illegitimate
child because she was never married to private respondent. Considering that the latter strongly
asserts that he is not the father of petitioner minor, the latter is therefore an unrecognized
illegitimate child. As such, he must bear the surname of his mother.

In sum, the substantive and procedural aspects of the instant controversy do not warrant the
annulment of the trial court’s decision.

WHEREFORE, the petition is DISMISSED. The February 27, 2004 decision and the May 14, 2004
resolution of the Court of Appeals in CA-G.R. SP No. 61883 are AFFIRMED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 175799 November 28, 2011
NM ROTHSCHILD & SONS (AUSTRALIA) LIMITED, Petitioner,
vs.
LEPANTO CONSOLIDATED MINING COMPANY, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari assailing the Decision 1 of the Court of Appeals dated
September 8, 2006 in CA-G.R. SP No. 94382 and its Resolution2 dated December 12, 2006,
denying the Motion for Reconsideration.
On August 30, 2005, respondent Lepanto Consolidated Mining Company filed with the Regional
Trial Court (RTC) of Makati City a Complaint3 against petitioner NM Rothschild & Sons (Australia)
Limited praying for a judgment declaring the loan and hedging contracts between the parties void
for being contrary to Article 20184 of the Civil Code of the Philippines and for damages. The
Complaint was docketed as Civil Case No. 05-782, and was raffled to Branch 150. Upon
respondent’s (plaintiff’s) motion, the trial court authorized respondent’s counsel to personally bring
the summons and Complaint to the Philippine Consulate General in Sydney, Australia for the latter
office to effect service of summons on petitioner (defendant).
5 being filed by a real party in interest and for lack of a proper verification and certificate of non-
On October 20, 2005, petitioner filed a Special Appearance With Motion to Dismiss praying for
the dismissal of the Complaint on the following grounds: (a) the court has not acquired jurisdiction
over the person of petitioner due to the defective and improper service of summons; (b) the
Complaint failed to state a cause of action and respondent does not have any against petitioner;
(c) the action is barred by estoppel; and (d) respondent did not come to court with clean hands.
On November 29, 2005, petitioner filed two Motions: (1) a Motion for Leave to take the deposition
of Mr. Paul Murray (Director, Risk Management of petitioner) before the Philippine Consul
General; and (2) a Motion for Leave to Serve Interrogatories on respondent.
On December 9, 2005, the trial court issued an Order6 denying the Motion to Dismiss. According
to the trial court, there was a proper service of summons through the Department of Foreign
Affairs (DFA) on account of the fact that the defendant has neither applied for a license to do
business in the Philippines, nor filed with the Securities and Exchange Commission (SEC) a
Written Power of Attorney designating some person on whom summons and other legal processes
maybe served. The trial court also held that the Complaint sufficiently stated a cause of action.
The other allegations in the Motion to Dismiss were brushed aside as matters of defense which
can best be ventilated during the trial.
On December 27, 2005, petitioner filed a Motion for Reconsideration. 7 On March 6, 2006, the trial
court issued an Order denying the December 27, 2005 Motion for Reconsideration and disallowed
the twin Motions for Leave to take deposition and serve written interrogatories.8
On April 3, 2006, petitioner sought redress via a Petition for Certiorari9 with the Court of Appeals,
alleging that the trial court committed grave abuse of discretion in denying its Motion to Dismiss.
The Petition was docketed as CA-G.R. SP No. 94382.
On September 8, 2006, the Court of Appeals rendered the assailed Decision dismissing the
Petition for Certiorari. The Court of Appeals ruled that since the denial of a Motion to Dismiss is an
interlocutory order, it cannot be the subject of a Petition for Certiorari, and may only be reviewed in
the ordinary course of law by an appeal from the judgment after trial. On December 12, 2006, the
Court of Appeals rendered the assailed Resolution denying the petitioner’s Motion for
Reconsideration.
Meanwhile, on December 28, 2006, the trial court issued an Order directing respondent to answer
some of the questions in petitioner’s Interrogatories to Plaintiff dated September 7, 2006.
Notwithstanding the foregoing, petitioner filed the present petition assailing the September 8, 2006
Decision and the December 12, 2006 Resolution of the Court of Appeals. Arguing against the
ruling of the appellate court, petitioner insists that (a) an order denying a motion to dismiss may be
the proper subject of a petition for certiorari; and (b) the trial court committed grave abuse of
discretion in not finding that it had not validly acquired jurisdiction over petitioner and that the
plaintiff had no cause of action.
Respondent, on the other hand, posits that: (a) the present Petition should be dismissed for not
forum shopping; (b) the Court of Appeals correctly ruled that certiorari was not the proper remedy;
and (c) the trial court correctly denied petitioner’s motion to dismiss.
Our discussion of the issues raised by the parties follows:
Whether petitioner is a real party in interest
Respondent argues that the present Petition should be dismissed on the ground that petitioner no
longer existed as a corporation at the time said Petition was filed on February 1, 2007.
Respondent points out that as of the date of the filing of the Petition, there is no such corporation
that goes by the name NM Rothschild and Sons (Australia) Limited. Thus, according to
respondent, the present Petition was not filed by a real party in interest, citing our ruling in Philips
Export B.V. v. Court of Appeals,10 wherein we held:
A name is peculiarly important as necessary to the very existence of a corporation (American
Steel Foundries vs. Robertson, 269 US 372, 70 L ed 317, 46 S Ct 160; Lauman vs. Lebanon
Valley R. Co., 30 Pa 42; First National Bank vs. Huntington Distilling Co., 40 W Va 530, 23 SE
792). Its name is one of its attributes, an element of its existence, and essential to its identity (6
Fletcher [Perm Ed], pp. 3-4). The general rule as to corporations is that each corporation must
have a name by which it is to sue and be sued and do all legal acts. The name of a corporation in
this respect designates the corporation in the same manner as the name of an individual
designates the person (Cincinnati Cooperage Co. vs. Bate, 96 Ky 356, 26 SW 538; Newport
Mechanics Mfg. Co. vs. Starbird, 10 NH 123); and the right to use its corporate name is as much a
part of the corporate franchise as any other privilege granted (Federal Secur. Co. vs. Federal
Secur. Corp., 129 Or 375, 276 P 1100, 66 ALR 934; Paulino vs. Portuguese Beneficial
Association, 18 RI 165, 26 A 36).11
In its Memorandum12 before this Court, petitioner started to refer to itself as Investec Australia
Limited (formerly "NM Rothschild & Sons [Australia] Limited") and captioned said Memorandum
accordingly. Petitioner claims that NM Rothschild and Sons (Australia) Limited still exists as a
corporation under the laws of Australia under said new name. It presented before us documents
evidencing the process in the Australian Securities & Investment Commission on the change of
petitioner’s company name from NM Rothschild and Sons (Australia) Limited to Investec Australia
Limited.13
We find the submissions of petitioner on the change of its corporate name satisfactory and resolve
not to dismiss the present Petition for Review on the ground of not being prosecuted under the
name of the real party in interest. While we stand by our pronouncement in Philips Export on the
importance of the corporate name to the very existence of corporations and the significance
thereof in the corporation’s right to sue, we shall not go so far as to dismiss a case filed by the
proper party using its former name when adequate identification is presented. A real party in
interest is the party who stands to be benefited or injured by the judgment in the suit, or the party
entitled to the avails of the suit.14 There is no doubt in our minds that the party who filed the
present Petition, having presented sufficient evidence of its identity and being represented by the
same counsel as that of the defendant in the case sought to be dismissed, is the entity that will be
benefited if this Court grants the dismissal prayed for.
Since the main objection of respondent to the verification and certification against forum shopping
likewise depends on the supposed inexistence of the corporation named therein, we give no credit
to said objection in light of the foregoing discussion.
Propriety of the Resort to a Petition for Certiorari with the Court of Appeals
We have held time and again that an order denying a Motion to Dismiss is an interlocutory order
which neither terminates nor finally disposes of a case as it leaves something to be done by the
court before the case is finally decided on the merits. The general rule, therefore, is that the denial
of a Motion to Dismiss cannot be questioned in a special civil action for Certiorari which is a
remedy designed to correct errors of jurisdiction and not errors of judgment. 15 However, we have
likewise held that when the denial of the Motion to Dismiss is tainted with grave abuse of
discretion, the grant of the extraordinary remedy of Certiorari may be justified. By "grave abuse of
discretion" is meant:
[S]uch capricious and whimsical exercise of judgment that is equivalent to lack of jurisdiction. The
abuse of discretion must be grave as where the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so patent and gross as to amount
to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act all in
contemplation of law.16
The resolution of the present Petition therefore entails an inquiry into whether the Court of Appeals
correctly ruled that the trial court did not commit grave abuse of discretion in its denial of
petitioner’s Motion to Dismiss. A mere error in judgment on the part of the trial court would
undeniably be inadequate for us to reverse the disposition by the Court of Appeals.
Issues more properly ventilated during the trial of the case
As previously stated, petitioner seeks the dismissal of Civil Case No. 05-782 on the following
grounds: (a) lack of jurisdiction over the person of petitioner due to the defective and improper
service of summons; (b) failure of the Complaint to state a cause of action and absence of a cause
of action; (c) the action is barred by estoppel; and (d) respondent did not come to court with clean
hands.
As correctly ruled by both the trial court and the Court of Appeals, the alleged absence of a cause
of action (as opposed to the failure to state a cause of action), the alleged estoppel on the part of
petitioner, and the argument that respondent is in pari delicto in the execution of the challenged
contracts, are not grounds in a Motion to Dismiss as enumerated in Section 1, Rule 16 17 of the
Rules of Court. Rather, such defenses raise evidentiary issues closely related to the validity and/or
existence of respondent’s alleged cause of action and should therefore be threshed out during the
trial.
As regards the allegation of failure to state a cause of action, while the same is usually available
as a ground in a Motion to Dismiss, said ground cannot be ruled upon in the present Petition
without going into the very merits of the main case.
It is basic that "[a] cause of action is the act or omission by which a party violates a right of
another."18 Its elements are the following: (1) a right existing in favor of the plaintiff, (2) a duty on
the part of the defendant to respect the plaintiff's right, and (3) an act or omission of the defendant
in violation of such right.19 We have held that to sustain a Motion to Dismiss for lack of cause of
action, the complaint must show that the claim for relief does not exist and not only that the claim
was defectively stated or is ambiguous, indefinite or uncertain.20
The trial court held that the Complaint in the case at bar contains all the three elements of a cause
of action, i.e., it alleges that: (1) plaintiff has the right to ask for the declaration of nullity of the
Hedging Contracts for being null and void and contrary to Article 2018 of the Civil Code of the
Philippines; (2) defendant has the corresponding obligation not to enforce the Hedging Contracts
because they are in the nature of wagering or gambling agreements and therefore the
transactions implementing those contracts are null and void under Philippine laws; and (3)
defendant ignored the advice and intends to enforce the Hedging Contracts by demanding
financial payments due therefrom.21
The rule is that in a Motion to Dismiss, a defendant hypothetically admits the truth of the material
allegations of the ultimate facts contained in the plaintiff's complaint. 22 However, this principle of
hypothetical admission admits of exceptions. Thus, in Tan v. Court of Appeals, 23 we held:
The flaw in this conclusion is that, while conveniently echoing the general rule that averments in
the complaint are deemed hypothetically admitted upon the filing of a motion to dismiss grounded
on the failure to state a cause of action, it did not take into account the equally established
limitations to such rule, i.e., that a motion to dismiss does not admit the truth of mere epithets of
fraud; nor allegations of legal conclusions; nor an erroneous statement of law; nor mere
inferences or conclusions from facts not stated; nor mere conclusions of law; nor allegations of
fact the falsity of which is subject to judicial notice; nor matters of evidence; nor surplusage and
irrelevant matter; nor scandalous matter inserted merely to insult the opposing party; nor to legally
impossible facts; nor to facts which appear unfounded by a record incorporated in the pleading, or
by a document referred to; and, nor to general averments contradicted by more specific
averments. A more judicious resolution of a motion to dismiss, therefore, necessitates that the
court be not restricted to the consideration of the facts alleged in the complaint and inferences
fairly deducible therefrom. Courts may consider other facts within the range of judicial notice as
well as relevant laws and jurisprudence which the courts are bound to take into account, and they
are also fairly entitled to examine records/documents duly incorporated into the complaint
by the pleader himself in ruling on the demurrer to the complaint.24 (Emphases supplied.)
In the case at bar, respondent asserts in the Complaint that the Hedging Contracts are void for
being contrary to Article 201825 of the Civil Code. Respondent claims that under the Hedging
Contracts, despite the express stipulation for deliveries of gold, the intention of the parties was
allegedly merely to compel each other to pay the difference between the value of the gold at the
forward price stated in the contract and its market price at the supposed time of delivery.
Whether such an agreement is void is a mere allegation of a conclusion of law, which therefore
cannot be hypothetically admitted. Quite properly, the relevant portions of the contracts sought to
be nullified, as well as a copy of the contract itself, are incorporated in the Complaint. The
determination of whether or not the Complaint stated a cause of action would therefore involve an
inquiry into whether or not the assailed contracts are void under Philippine laws. This is, precisely,
the very issue to be determined in Civil Case No. 05-782. Indeed, petitioner’s defense against the
charge of nullity of the Hedging Contracts is the purported intent of the parties that actual
deliveries of gold be made pursuant thereto. Such a defense requires the presentation of evidence
on the merits of the case. An issue that "requires the contravention of the allegations of the
complaint, as well as the full ventilation, in effect, of the main merits of the case, should not be
within the province of a mere Motion to Dismiss."26 The trial court, therefore, correctly denied the
Motion to Dismiss on this ground.
It is also settled in jurisprudence that allegations of estoppel and bad faith require proof. Thus, in
Parañaque Kings Enterprises, Inc. v. Court of Appeals,27 we ruled:
Having come to the conclusion that the complaint states a valid cause of action for breach of the
right of first refusal and that the trial court should thus not have dismissed the complaint, we find
no more need to pass upon the question of whether the complaint states a cause of action for
damages or whether the complaint is barred by estoppel or laches. As these matters require
presentation and/or determination of facts, they can be best resolved after trial on the
merits.28 (Emphases supplied.)
On the proposition in the Motion to Dismiss that respondent has come to court with unclean
hands, suffice it to state that the determination of whether one acted in bad faith and whether
damages may be awarded is evidentiary in nature. Thus, we have previously held that "[a]s a
matter of defense, it can be best passed upon after a full-blown trial on the merits."29
Jurisdiction over the person of petitioner
Petitioner alleges that the RTC has not acquired jurisdiction over its person on account of the
improper service of summons. Summons was served on petitioner through the DFA, with
respondent’s counsel personally bringing the summons and Complaint to the Philippine Consulate
General in Sydney, Australia.
In the pleadings filed by the parties before this Court, the parties entered into a lengthy debate as
to whether or not petitioner is doing business in the Philippines. However, such discussion is
completely irrelevant in the case at bar, for two reasons. Firstly, since the Complaint was filed on
August 30, 2005, the provisions of the 1997 Rules of Civil Procedure govern the service of
summons. Section 12, Rule 14 of said rules provides:
Sec. 12. Service upon foreign private juridical entity. – When the defendant is a foreign private
juridical entity which has transacted business in the Philippines, service may be made on its
resident agent designated in accordance with law for that purpose, or, if there be no such agent,
on the government official designated by law to that effect, or on any of its officers or agents within
the Philippines. (Emphasis supplied.)
This is a significant amendment of the former Section 14 of said rule which previously provided:
Sec. 14. Service upon private foreign corporations. — If the defendant is a foreign corporation, or
a nonresident joint stock company or association, doing business in the Philippines, service
may be made on its resident agent designated in accordance with law for that purpose, or if there
be no such agent, on the government official designated by law to that effect, or on any of its
officers or agents within the Philippines. (Emphasis supplied.)
The coverage of the present rule is thus broader.30 Secondly, the service of summons to
petitioner through the DFA by the conveyance of the summons to the Philippine Consulate
General in Sydney, Australia was clearly made not through the above-quoted Section 12, but
pursuant to Section 15 of the same rule which provides:
Sec. 15. Extraterritorial service. – When the defendant does not reside and is not found in the
Philippines, and the action affects the personal status of the plaintiff or relates to, or the subject of
which is property within the Philippines, in which the defendant has or claims a lien or interest,
actual or contingent, or in which the relief demanded consists, wholly or in part, in excluding the
defendant from any interest therein, or the property of the defendant has been attached within the
Philippines, service may, by leave of court, be effected out of the Philippines by personal service
as under section 6; or by publication in a newspaper of general circulation in such places and for
such time as the court may order, in which case a copy of the summons and order of the court
shall be sent by registered mail to the last known address of the defendant, or in any other manner
the court may deem sufficient. Any order granting such leave shall specify a reasonable time,
which shall not be less than sixty (60) days after notice, within which the defendant must answer.
31
Respondent argues that extraterritorial service of summons upon foreign private juridical entities
is not proscribed under the Rules of Court, and is in fact within the authority of the trial court to
adopt, in accordance with Section 6, Rule 135:
Sec. 6. Means to carry jurisdiction into effect. – When by law jurisdiction is conferred on a court or
judicial officer, all auxiliary writs, processes and other means necessary to carry it into effect may
be employed by such court or officer; and if the procedure to be followed in the exercise of such
jurisdiction is not specifically pointed out by law or by these rules, any suitable process or mode of
proceeding may be adopted which appears comformable to the spirit of said law or rules.
Section 15, Rule 14, however, is the specific provision dealing precisely with the service of
summons on a defendant which does not reside and is not found in the Philippines, while Rule
135 (which is in Part V of the Rules of Court entitled Legal Ethics) concerns the general powers
and duties of courts and judicial officers.
Breaking down Section 15, Rule 14, it is apparent that there are only four instances wherein a
defendant who is a non-resident and is not found in the country may be served with summons by
extraterritorial service, to wit: (1) when the action affects the personal status of the plaintiffs; (2)
when the action relates to, or the subject of which is property, within the Philippines, in which the
defendant claims a lien or an interest, actual or contingent; (3) when the relief demanded in such
action consists, wholly or in part, in excluding the defendant from any interest in property located
in the Philippines; and (4) when the defendant non-resident's property has been attached within
the Philippines. In these instances, service of summons may be effected by (a) personal service
out of the country, with leave of court; (b) publication, also with leave of court; or (c) any other
manner the court may deem sufficient.32
Proceeding from this enumeration, we held in Perkin Elmer Singapore Pte Ltd. v. Dakila Trading
Corporation33 that:
Undoubtedly, extraterritorial service of summons applies only where the action is in rem or
quasi in rem, but not if an action is in personam.
When the case instituted is an action in rem or quasi in rem, Philippine courts already have
jurisdiction to hear and decide the case because, in actions in rem and quasi in rem, jurisdiction
over the person of the defendant is not a prerequisite to confer jurisdiction on the court, provided
that the court acquires jurisdiction over the res. Thus, in such instance, extraterritorial service of
summons can be made upon the defendant. The said extraterritorial service of summons is not for
the purpose of vesting the court with jurisdiction, but for complying with the requirements of fair
play or due process, so that the defendant will be informed of the pendency of the action against
him and the possibility that property in the Philippines belonging to him or in which he has an
interest may be subjected to a judgment in favor of the plaintiff, and he can thereby take steps to
protect his interest if he is so minded. On the other hand, when the defendant or respondent
does not reside and is not found in the Philippines, and the action involved is in personam,
Philippine courts cannot try any case against him because of the impossibility of acquiring
jurisdiction over his person unless he voluntarily appears in court.34 (Emphases supplied.)
In Domagas v. Jensen,35 we held that:
[T]he aim and object of an action determine its character. Whether a proceeding is in rem, or in
personam, or quasi in rem for that matter, is determined by its nature and purpose, and by these
only. A proceeding in personam is a proceeding to enforce personal rights and obligations brought
against the person and is based on the jurisdiction of the person, although it may involve his right
to, or the exercise of ownership of, specific property, or seek to compel him to control or dispose of
it in accordance with the mandate of the court. The purpose of a proceeding in personam is to
impose, through the judgment of a court, some responsibility or liability directly upon the person of
the defendant. Of this character are suits to compel a defendant to specifically perform some act
or actions to fasten a pecuniary liability on him.36
It is likewise settled that "[a]n action in personam is lodged against a person based on personal
liability; an action in rem is directed against the thing itself instead of the person; while an action
quasi in rem names a person as defendant, but its object is to subject that person’s interest in a
property to a corresponding lien or obligation."37
The Complaint in the case at bar is an action to declare the loan and Hedging Contracts
between the parties void with a prayer for damages. It is a suit in which the plaintiff seeks to be
freed from its obligations to the defendant under a contract and to hold said defendant pecuniarily
liable to the plaintiff for entering into such contract. It is therefore an action in personam, unless
and until the plaintiff attaches a property within the Philippines belonging to the defendant, in
which case the action will be converted to one quasi in rem.
Since the action involved in the case at bar is in personam and since the defendant, petitioner
Rothschild/Investec, does not reside and is not found in the Philippines, the Philippine courts
cannot try any case against it because of the impossibility of acquiring jurisdiction over its person
unless it voluntarily appears in court.38
In this regard, respondent vigorously argues that petitioner should be held to have voluntarily
appeared before the trial court when it prayed for, and was actually afforded, specific reliefs from
the trial court.39 Respondent points out that while petitioner’s Motion to Dismiss was still pending,
petitioner prayed for and was able to avail of modes of discovery against respondent, such as
written interrogatories, requests for admission, deposition, and motions for production of
documents.40
Petitioner counters that under this Court’s ruling in the leading case of La Naval Drug Corporation
v. Court of Appeals,41 a party may file a Motion to Dismiss on the ground of lack of jurisdiction over
its person, and at the same time raise affirmative defenses and pray for affirmative relief, without
waiving its objection to the acquisition of jurisdiction over its person.42
It appears, however, that petitioner misunderstood our ruling in La Naval. A close reading of La
Naval reveals that the Court intended a distinction between the raising of affirmative defenses in
an Answer (which would not amount to acceptance of the jurisdiction of the court) and the prayer
for affirmative reliefs (which would be considered acquiescence to the jurisdiction of the court):
In the same manner that a plaintiff may assert two or more causes of action in a court suit,
a defendant is likewise expressly allowed, under Section 2, Rule 8, of the Rules of Court, to
put up his own defenses alternatively or even hypothetically. Indeed, under Section 2, Rule 9,
of the Rules of Court, defenses and objections not pleaded either in a motion to dismiss or in an
answer, except for the failure to state a cause of action, are deemed waived. We take this to mean
that a defendant may, in fact, feel enjoined to set up, along with his objection to the court's
jurisdiction over his person, all other possible defenses. It thus appears that it is not the invocation
of any of such defenses, but the failure to so raise them, that can result in waiver or estoppel. By
defenses, of course, we refer to the grounds provided for in Rule 16 of the Rules of Court
that must be asserted in a motion to dismiss or by way of affirmative defenses in an
answer.
Mindful of the foregoing, in Signetics Corporation vs. Court of Appeals and Freuhauf
Electronics Phils., Inc. (225 SCRA 737, 738), we lately ruled:
"This is not to say, however, that the petitioner's right to question the jurisdiction of the
court over its person is now to be deemed a foreclosed matter. If it is true, as Signetics
claims, that its only involvement in the Philippines was through a passive investment in Sigfil,
which it even later disposed of, and that TEAM Pacific is not its agent, then it cannot really be said
to be doing business in the Philippines. It is a defense, however, that requires the contravention of
the allegations of the complaint, as well as a full ventilation, in effect, of the main merits of the
case, which should not thus be within the province of a mere motion to dismiss. So, also, the issue
posed by the petitioner as to whether a foreign corporation which has done business in the
country, but which has ceased to do business at the time of the filing of a complaint, can still be
made to answer for a cause of action which accrued while it was doing business, is another matter
that would yet have to await the reception and admission of evidence. Since these points have
seasonably been raised by the petitioner, there should be no real cause for what may
understandably be its apprehension, i.e., that by its participation during the trial on the
merits, it may, absent an invocation of separate or independent reliefs of its own, be
considered to have voluntarily submitted itself to the court's jurisdiction."43 (Emphases
supplied.)
In order to conform to the ruling in La Naval, which was decided by this Court in 1994, the former
Section 23, Rule 1444 concerning voluntary appearance was amended to include a second
sentence in its equivalent provision in the 1997 Rules of Civil Procedure:
SEC. 20. Voluntary appearance. – The defendant's voluntary appearance in the action shall be
equivalent to service of summons. The inclusion in a motion to dismiss of other grounds
aside from lack of jurisdiction over the person of the defendant shall not be deemed a
voluntary appearance. (Emphasis supplied.)
The new second sentence, it can be observed, merely mentions other grounds in a Motion to
Dismiss aside from lack of jurisdiction over the person of the defendant. This clearly refers to
affirmative defenses, rather than affirmative reliefs.
Thus, while mindful of our ruling in La Naval and the new Section 20, Rule 20, this Court, in
several cases, ruled that seeking affirmative relief in a court is tantamount to voluntary appearance
therein.45 Thus, in Philippine Commercial International Bank v. Dy Hong Pi,46 wherein defendants
filed a "Motion for Inhibition without submitting themselves to the jurisdiction of this Honorable
Court" subsequent to their filing of a "Motion to Dismiss (for Lack of Jurisdiction)," we held:
Besides, any lingering doubts on the issue of voluntary appearance dissipate when the
respondents' motion for inhibition is considered. This motion seeks a sole relief: inhibition of Judge
Napoleon Inoturan from further hearing the case. Evidently, by seeking affirmative relief other
than dismissal of the case, respondents manifested their voluntary submission to the
court's jurisdiction. It is well-settled that the active participation of a party in the proceedings is
tantamount to an invocation of the court's jurisdiction and a willingness to abide by the resolution
of the case, and will bar said party from later on impugning the court's jurisdiction.47 (Emphasis
supplied.)1âwphi1
In view of the above, we therefore rule that petitioner, by seeking affirmative reliefs from the trial
court, is deemed to have voluntarily submitted to the jurisdiction of said court. A party cannot
invoke the jurisdiction of a court to secure affirmative relief against his opponent and after
obtaining or failing to obtain such relief, repudiate or question that same
jurisdiction.48 Consequently, the trial court cannot be considered to have committed grave abuse
of discretion amounting to lack or excess of jurisdiction in the denial of the Motion to Dismiss on
account of failure to acquire jurisdiction over the person of the defendant.
WHEREFORE, the Petition for Review on Certiorari is DENIED. The Decision of the Court of
Appeals dated September 8, 2006 and its Resolution dated December 12, 2006 in CA-G.R. SP
No. 94382 are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 97816 July 24, 1992
MERRILL LYNCH FUTURES, INC., petitioner,
vs.
HON. COURT OF APPEALS, and the SPOUSES PEDRO M. LARA and ELISA G.
LARA, respondents.
NARVASA, C.J.:
The capacity of a foreign corporation to maintain an action in the Philippines against residents
thereof, is the principal question in the appellate proceedings at bar. The issue arises from the
undisputed facts now to be briefly narrated.
On November 23, 1987, Merrill Lynch Futures, Inc. (hereafter, simply ML FUTURES) filed a
complaint with the Regional Trial Court at Quezon City against the Spouses Pedro M. Lara and
Elisa G. Lara for the recovery of a debt and interest thereon, damages, and attorney's fees. 1 In its
complaint ML FUTURES described itself as —
a) a non-resident foreign corporation, not doing business in the Philippines, duly
organized and existing under and by virtue of the laws of the state of Delaware,
U.S.A.;" as well as
b) a "futures commission merchant" duly licensed to act as such in the futures
markets and exchanges in the United States, . . essentially functioning as a
broker . . (executing) orders to buy and sell futures contracts received from its
customers on U.S. futures exchanges.
It also defined a "futures contract" as a "contractual commitment to buy and sell a standardized
quantity of a particular item at a specified future settlement date and at a price agreed upon, with
the purchase or sale being executed on a regulated futures exchange."
In its complaint ML FUTURES alleged the following:
1) that on September 28, 1983 it entered into a Futures Customer Agreement with the defendant
spouses (Account No. 138-12161), in virtue of which it agreed to act as the latter's broker for the
purchase and sale of futures contracts in the U.S.;
2) that pursuant to the contract, orders to buy and sell futures contracts were transmitted to ML
FUTURES by the Lara Spouses "through the facilities of Merrill Lynch Philippines, Inc., a
Philippine corporation and a company servicing plaintiffs customers; 2
3) that from the outset, the Lara Spouses "knew and were duly advised that Merrill Lynch
Philippines, Inc. was not a broker in futures contracts," and that it "did not have a license from the
Securities and Exchange Commission to operate as a commodity trading advisor (i.e., 'an entity
which, not being a broker, furnishes advice on commodity futures to persons who trade in futures
contracts');
4) that in line with the above mentioned agreement and through said Merrill Lynch Philippines,
Inc., the Lara Spouses actively traded in futures contracts, including "stock index futures" for four
years or so, i.e., from 1983 to October, 1987, 3 there being more or less regular accounting and
corresponding remittances of money (or crediting or debiting) made between the spouses and ML
FUTURES;
5) that because of a loss amounting to US$160,749.69 incurred in respect of three (3) transactions
involving "index futures," and after setting this off against an amount of US$75,913.42 then owing
by ML FUTURES to the Lara Spouses, said spouses became indebted to ML FUTURES for the
ensuing balance of US$84,836.27, which the latter asked them to pay;
6) that the Lara Spouses however refused to pay this balance, "alleging that the transactions were
null and void because Merrill Lynch Philippines, Inc., the Philippine company servicing accounts of
plaintiff, . . had no license to operate as a 'commodity and/or financial futures broker.'"
On the foregoing essential facts, ML FUTURES prayed (1) for a preliminary attachment against
defendant spouses' properties "up to the value of at least P2,267,139.50," and (2) for judgment,
after trial, sentencing the spouses to pay ML FUTURES:
a) the Philippine peso equivalent of $84,836.27 at the applicable exchanged rate
on date of payment, with legal interest from date of demand until full payment;
b) exemplary damages in the sum of at least P500,000.00; and
c) attorney's fees and expenses of litigation as may be proven at the trial.
Preliminary attachment issued ex parte on December 2, 1987, and the defendant spouses were
duly served with summons.
They then filed a motion to dismiss dated December 18, 1987 on the grounds that:
(1) plaintiff ML FUTURES had "no legal capacity to sue" and
(2) its "complaint states no cause of action since . . (it) is not the real party in
interest."
In that motion to dismiss, the defendant spouses averred that:
a) although not licensed to do so, ML FUTURES had been doing business in the Philippines "at
least for the last four (4) years," this being clear from the very allegations of the complaint;
consequently, ML FUTURES is prohibited by law "to maintain or intervene in any action, suit or
proceeding in any court or administrative agency of the Philippines;" and
b) they had never been informed that Merrill Lynch Philippines, Inc. was not licensed to do
business in this country; and contrary to the allegations of the complaint, all their transactions had
actually been with MERRILL LYNCH PIERCE FENNER & SMITH, INC., and not with ML
FUTURES (Merrill Lynch Futures, Inc.), in proof of which they attached to their motion to dismiss
copies of eight (8) agreements, receipts or reminders, etc., executed on standard printed forms of
said Merrill Lynch Pierce Fenner & Smith Inc. 4
ML FUTURES filed an OPPOSITION to the defendant spouses' motion to dismiss. In that motion
—
a) it drew attention to paragraph 4 of its complaint, admitted by defendants, that the latter "have
been actively trading in futures contracts . . . in U.S. futures exchanges from 1983 to 1987," and
ask, "If the trading . . . (was) made in U.S., how could plaintiff be doing business in the
Philippines?"
b) it also drew attention to a printed form of "Merrill Lynch Futures, Inc." filled out and signed by
defendant spouses when they opened an account with ML Futures, in order to supply information
about themselves, including their bank's name —
(1) in which appear the following epigraph: "Account introduced
by Merrill Lynch International, Inc.," and the following
statements, to wit:
This Commodity Trading Advisor (Merrill Lynch, Pierce, Fenner & Smith
Philippines, Inc.) is prohibited by the Philippine Securities and Exchange
Commission from accepting funds in the trading advisor's name from a client of
Merrill Lynch Futures, Inc. for trading commodity interests. All funds in this
trading program must be placed with Merrill Lynch Futures, Inc.;
and
. . . It is agreed between MERRILL LYNCH, PIERCE, FENNER & SMITH INC.,
and other account carrying MERRILL LYNCH entities and their customers that all
legal relationships between them will be governed by applicable laws in countries
outside the Philippines where sale and purchase transactions take place.
c) and it argued that —
(1) it is not permitted for defendant spouses to present "evidence" in connection
with a motion to dismiss based on failure of the complaint to state a cause of
action;
(2) even if the documents appended to the motion to dismiss be considered as
admissible "evidence," the same would be immaterial since the documents refer
to a different account number: 138-12136, the defendants' account number with
ML FUTURES being 138-12161;
(3) it is a lie for the defendant spouses to assert that they were never informed
that Merrill Lynch Philippines, Inc. had not been licensed to do business in the
Philippines; and
(4) defendant spouses should not be allowed to "invoke the aid of the court with
unclean hands.
The defendant spouses filed a REPLY reaffirming their lack of awareness that Merrill Lynch
Philippines, Inc. (formerly registered as Merrill Lynch, Pierce, Fenner & Smith Philippines,
Inc.) 5 did not have a license, claiming that they learned of this only from inquiries with the
Securities and Exchange Commission which elicited the information that it had denied said
corporation's application to operate as a commodity futures trading advisor — a denial
subsequently affirmed by the Court of Appeals (Merrill Lynch Philippines, Inc. v. Securities &
Exchange Commission,CA-G.R. No. 10821-SP, Nov. 19, 1987). The spouses also submitted
additional documents (Annexes J to R) involving transactions with Merrill Lynch Pierce Fenner &
Smith, Inc., dating back to 1980, stressing that all but one of the documents "refer to Account No.
138-12161 which is the very account that is involved in the instant complaint."
ML FUTURES filed a Rejoinder alleging it had given the spouses a disclosure statement by which
the latter were made aware that the transactions they were agreeing on would take place outside
of the Philippines, and that "all funds in the trading program must be placed with Merrill Lynch
Futures, Inc."
On January 12, 1988, the Trial Court promulgated an Order sustaining the motion to dismiss,
directing the dismissal of the case and discharging the writ of preliminary attachment. It later
denied ML FUTURES's motion for reconsideration, by Order dated February 29, 1988. ML
FUTURES appealed to the Court of Appeals. 6
In its own decision promulgated on November 27, 1990, 7 the Court of Appeals affirmed the Trial
Court's judgment. It declared that the Trial Court had seen "through the charade in the
representation of MLPI and the plaintiff that MLPI is only a trading advisor and in fact it is a conduit
in the plaintiff's business transactions in the Philippines as a basis for invoking the provisions of
Section 133 of the Corporation Code," 8 viz.:
Sec. 133. Doing business without a license. — No foreign corporation transacting
business in the Philippines without a license, or its successors or assigns, shall
be permitted to maintain or intervene in any action, suit or proceeding in any
court or administrative agency in the Philippines; but such corporation may be
 sued or proceeded against before Philippine courts or administrative tribunals on
any valid cause of action recognized under Philippine laws.
It also declared that the evidence established that plaintiff had in fact been "doing
business" in this country in legal contemplation, adverting to Mentholatum
v. Mangaliman, 72 Phil. 524, 528-530, and Section 1 of Republic Act No. 5455 reading as
follows: 9
Sec. 1. Definition and scope of this ACT . (1) As used in this Act, the term
"investment" shall mean equity participation in any enterprise formed, organized,
or existing under the laws of the Philippines; and the phrase "doing
business" shall INCLUDE soliciting orders, purchases, service contracts, opening
offices, whether called "liaison" offices or branches; appointing representatives or
distributors who are domiciled in the Philippines or who in any calendar year stay
in the Philippines for a period or periods totalling one hundred eighty days or
more; participating in the management, supervision or control of any domestic
business firm, entity or corporation in the Philippines; AND ANY OTHER ACT OR
ACTS THAT IMPLY A CONTINUITY OF COMMERCIAL DEALINGS OR
ARRANGEMENTS AND CONTEMPLATE TO THAT EXTENT THE
PERFORMANCE OF ACTS OR WORKS, OR THE EXERCISE OF SOME
FUNCTIONS NORMALLY INCIDENT TO, AND IN PROGRESSIVE
PROSECUTION OF COMMERCIAL GAIN OR OF THE PURPOSE AND
OBJECT OF THE BUSINESS ORGANIZATION.
As regards the claim that it was error for the Trial Court to place reliance on the decision of the
Court of Appeals in CA-G.R. No. 10821-SP — sustaining the finding of the Securities & Exchange
Commission that ML FUTURES was doing business in the Philippines — since that judgment was
not yet final and ML FUTURES was not a party to that proceeding, the Court of Appeals ruled that
there was no need to belabor the point considering that there was, in any event, "adequate proof
of the activities of MLPI . . . which manifestly show that the plaintiff (ML FUTURES) performed a
series of business acts, consummated contracts and undertook transactions for the period from
1983 to October 1987," "and because ML FUTURES had done so without license, it consequently
had "no legal personality to bring suit in Philippine courts."
Its motion for reconsideration having been denied, 10 ML FUTURES has appealed to this Court
on certiorari. Here, it submits the following issues for resolution:
(a) Whether or not the annexes appended by the Laras to their Motion to Dismiss
and Reply filed with the Regional Trial Court, but never authenticated or offered,
constitute admissible evidence.
(b) Whether or not in the proceedings below, ML FUTURES has been accorded
procedural due process.
(c) Whether or not the annexes, assuming them to be admissible, established
that ML FUTURES was doing business in the Philippines without a license.
As just stated, the Lara Spouse's motion to dismiss was founded on two (2) grounds: (a) that the
plaintiff has no legal capacity to sue, and (b) that the complaint states no cause of action (Sec. 1
[d], and [g], Rule 16, Rules of Court).
As regards the second ground, i.e., that the complaint states no cause of action, the settled
doctrine of course is that said ground must appear on the face of the complaint, and its existence
may be determined only by the allegations of the complaint, consideration of other facts being
proscribed, and any attempt to prove extraneous circumstances not being allowed. 11 The test of
the sufficiency of the facts alleged in a complaint as constituting a cause of action is whether or
not, admitting the facts alleged, the court might render a valid judgment upon the same in
accordance with the prayer of the complaint. 12 Indeed, it is error for a judge to conduct a
preliminary hearing and receive evidence on the affirmative defense of failure of the complaint to
state a cause of action. 13
The other ground for dismissal relied upon, i.e., that the plaintiff has no legal capacity to sue —
may be understood in two senses: one, that the plaintiff is prohibited or otherwise incapacitated by
law to institute suit in Philippine Courts, 14 or two, although not otherwise incapacitated in the
sense just stated, that it is not a real party in interest.15Now, the Lara Spouses contend that ML
Futures has no capacity to sue them because the transactions subject of the complaint were had
by them, not with the plaintiff ML FUTURES, but with Merrill Lynch Pierce Fenner & Smith, Inc.
Evidence is quite obviously needed in this situation, for it is not to be expected that said ground, or
any facts from which its existence may be inferred, will be found in the averments of the complaint.
When such a ground is asserted in a motion to dismiss, the general rule governing evidence on
motions applies. The rule is embodied in Section 7, Rule 133 of the Rules of Court.
Sec. 7. Evidence on motion. — When a motion is based on facts not appearing
of record the court may hear the matter on affidavits or depositions presented by
the respective parties, but the court may direct that the matter be heard wholly or
partly on oral testimony or depositions.
There was, to be sure, no affidavit or deposition attached to the Lara Spouses' motion to dismiss
or thereafter proffered in proof of the averments of their motion. The motion itself was not verified.
What the spouses did do was to refer in their motion to documents which purported to establish
that it was not with ML FUTURES that they had theretofore been dealing, but another, distinct
entity, Merrill Lynch, Pierce, Fenner & Smith, Inc., copies of which documents were attached to the
motion. It is significant that ML FUTURES raised no issue relative to the authenticity of the
documents thus annexed to the Laras' motion. In fact, its arguments subsumed the genuineness
thereof and even adverted to one or two of them. Its objection was centered on the propriety of
taking account of those documents as evidence, considering the established principle that no
evidence should be received in the resolution of a motion to dismiss based on an alleged failure of
the complaint to state a cause of action.
There being otherwise no question respecting the genuineness of the documents, nor of their
relevance to at least one of the grounds for dismissal — i.e., the prohibition on suits in Philippine
Courts by foreign corporations doing business in the country without license — it would have been
a superfluity for the Court to require prior proof of their authenticity, and no error may be ascribed
to the Trial Court in taking account of them in the determination of the motion on the ground, not
that the complaint fails to state a cause of action — as regards which evidence is improper and
impermissible — but that the plaintiff has no legal capacity to sue — respecting which proof may
and should be presented.
Neither may ML FUTURES argue with any degree of tenability that it had been denied due
process in the premises. As just pointed out, it was very clear from the outset that the claim of lack
of its capacity to sue was being made to rest squarely on the documents annexed thereto, and ML
FUTURES had more than ample opportunity to impugn those documents and require their
authentication, but did not do so. To sustain its theory that there should have been identification
and authentication, and formal offer, of those documents in the Trial Court pursuant to the rules of
evidence would be to give unwarranted importance to technicality and make it prevail over the
substance of the issue.
The first question then, is, as ML FUTURES formulates it, whether or not the annexes, assuming
them to be admissible, establish that (a) ML FUTURES is prohibited from suing in Philippine
Courts because doing business in the country without a license, and that (b) it is not a real party in
interest since the Lara Spouses had not been doing business with it, but with another corporation,
Merrill Lynch, Pierce, Fenner & Smith, Inc.
The Court is satisfied that the facts on record adequately establish that ML FUTURES, operating
in the United States, had indeed done business with the Lara Spouses in the Philippines over
several years, had done so at all times through Merrill Lynch Philippines, Inc. (MLPI), a
corporation organized in this country, and had executed all these transactions without ML
FUTURES being licensed to so transact business here, and without MLPI being authorized to
operate as a commodity futures trading advisor. These are the factual findings of both the Trial
Court and the Court of Appeals. These, too, are the conclusions of the Securities & Exchange
Commission which denied MLPI's application to operate as a commodity futures trading advisor, a
denial subsequently affirmed by the Court of Appeals. Prescinding from the proposition that factual
findings of the Court of Appeals are generally conclusive this Court has been cited to no
circumstance of substance to warrant reversal of said Appellate Court's findings or conclusions in
this case.
The Court is satisfied, too, that the Laras did transact business with ML FUTURES through its
agent corporation organized in the Philippines, it being unnecessary to determine whether this
domestic firm was MLPI (Merrill Lynch Philippines, Inc.) or Merrill Lynch Pierce Fenner & Smith
(MLPI's alleged predecessor). The fact is that ML FUTURES did deal with futures contracts in
exchanges in the United States in behalf and for the account of the Lara Spouses, and that on
several occasions the latter received account documents and money in connection with those
transactions.
Given these facts, if indeed the last transaction executed by ML FUTURES in the Laras's behalf
had resulted in a loss amounting to US $160,749.69; that in relation to this loss, ML FUTURES
had credited the Laras with the amount of US$75,913.42 — which it (ML FUTURES) then
admittedly owed the spouses — and thereafter sought to collect the balance, US$84,836.27, but
the Laras had refused to pay (for the reasons already above stated), the crucial question is
whether or not ML FUTURES may sue in Philippine Courts to establish and enforce its rights
against said spouses, in light of the undeniable fact that it had transacted business in this country
without being licensed to do so. In other words, if it be true that during all the time that they were
transacting with ML FUTURES, the Laras were fully aware of its lack of license to do business in
the Philippines, and in relation to those transactions had made payments to, and received money
from it for several years, the question is whether or not the Lara Spouses are now estopped to
impugn ML FUTURES' capacity to sue them in the courts of the forum.
The rule is that a party is estopped to challenge the personality of a corporation after having
acknowledged the same by entering into a contract with it. 16 And the "doctrine of estoppel to deny
corporate existence applies to foreign as well as to domestic corporations;" 17 "one who has dealt
with a corporation of foreign origin as a corporate entity is estopped to deny its corporate
existence and capacity." 18 The principle "will be applied to prevent a person contracting with a
foreign corporation from later taking advantage of its noncompliance with the statutes, chiefly in
cases where such person has received the benefits of the contract (Sherwood v. Alvis, 83 Ala 115,
3 So 307, limited and distinguished in Dudley v. Collier, 87 Ala 431, 6 So 304; Spinney v. Miller,
114 Iowa 210, 86 NW 317), where such person has acted as agent for the corporation and has
violated his fiduciary obligations as such, and where the statute does not provide that the contract
shall be void, but merely fixes a special penalty for violation of the statute. . . ." 19
The doctrine was adopted by this Court as early as 1924 in Asia Banking Corporation v. Standard
Products Co., 20in which the following pronouncement was made: 21
The general rule that in the absence of fraud of person who has contracted or
otherwise dealt with an association in such a way as to recognize and in effect
admit its legal existence as a corporate body is thereby estopped to deny its
corporate existence in any action leading out of or involving such contract or
dealing, unless its existence is attacked for causes which have arisen since
making the contract or other dealing relied on as an estoppel and this applies to
foreign as well as domestic corporations. (14 C.J .7; Chinese Chamber of
Commerce vs. Pua Te Ching, 14 Phil. 222).
There would seem to be no question that the Laras received benefits generated by their business
relations with ML FUTURES. Those business relations, according to the Laras themselves,
spanned a period of seven (7) years; and they evidently found those relations to be of such
profitability as warranted their maintaining them for that not insignificant period of time; otherwise,
it is reasonably certain that they would have terminated their dealings with ML FUTURES much,
much earlier. In fact, even as regards their last transaction, in which the Laras allegedly suffered a
loss in the sum of US$160,749.69, the Laras nonetheless still received some monetary
advantage, for ML FUTURES credited them with the amount of US$75,913.42 then due to them,
thus reducing their debt to US$84,836.27. Given these facts, and assuming that the Lara Spouses
were aware from the outset that ML FUTURES had no license to do business in this country and
MLPI, no authority to act as broker for it, it would appear quite inequitable for the Laras to evade
payment of an otherwise legitimate indebtedness due and owing to ML FUTURES upon the plea
that it should not have done business in this country in the first place, or that its agent in this
country, MLPI, had no license either to operate as a "commodity and/or financial futures broker."
Considerations of equity dictate that, at the very least, the issue of whether the Laras are in truth
liable to ML FUTURES and if so in what amount, and whether they were so far aware of the
absence of the requisite licenses on the part of ML FUTURES and its Philippine correspondent,
MLPI, as to be estopped from alleging that fact as defense to such liability, should be ventilated
and adjudicated on the merits by the proper trial court.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 16478 dated November
27, 1990 and its Resolution of March 7, 1991 are REVERSED and SET ASIDE, and the Regional
Trial Court at Quezon City, Branch 84, is ORDERED to reinstate Civil Case No. Q-52360 and
forthwith conduct a hearing to adjudicate the issues set out in the preceding paragraph on the
merits.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 102223 August 22, 1996
COMMUNICATION MATERIALS AND DESIGN, INC., ASPAC MULTI-TRADE, INC., (formerly
ASPAC-ITEC PHILIPPINES, INC.) and FRANCISCO S. AGUIRRE, petitioners,
vs.
THE COURT OF APPEALS, ITEC INTERNATIONAL, INC., and ITEC, INC., respondents.
TORRES, JR., J.:p
Business Corporations, according to Lord Coke, "have no souls." They do business
peddling goods, wares or even services across national boundaries in "souless forms" in
quest for profits albeit at times, unwelcomed in these strange lands venturing into
uncertain markets and, the risk of dealing with wily competitors.
This is one of the issues in the case at bar.
Contested in this petition for review on Certiorari is the Decision of the Court of Appeals
on June 7, 1991, sustaining the RTC Order dated February 22, 1991, denying the
petitioners' Motion to Dismiss, and directing the issuance of a writ of preliminary
injunction, and its companion Resolution of October 9, 1991, denying the petitioners'
Motion for Reconsideration.
Petitioners COMMUNICATION MATERIALS AND DESIGN, INC., (CMDI, for brevity) and
ASPAC MULTI-TRADE INC., (ASPAC, for brevity) are both domestic corporations, while
petitioner Francisco S. Aguirre is their President and majority stockholder. Private
Respondents ITEC, INC. and/or ITEC, INTERNATIONAL, INC. (ITEC, for brevity) are
corporations duly organized and existing under the laws of the State of Alabama, United
States of America. There is no dispute that ITEC is a foreign corporation not licensed to
do business in the Philippines.
On August 14, 1987, ITEC entered into a contract with petitioner ASPAC referred to as
"Representative Agreement".1 Pursuant to the contract, ITEC engaged ASPAC as its
"exclusive representative" in the Philippines for the sale of ITEC's products, in
consideration of which, ASPAC was paid a stipulated commission. The agreement was
signed by G.A. Clark and Francisco S. Aguirre, presidents of ITEC and ASPAC
respectively, for and in behalf of their companies.2 The said agreement was initially for a
term of twenty-four months. After the lapse of the agreed period, the agreement was
renewed for another twenty-four months.
Through a "License Agreement"3 entered into by the same parties on November 10,
1988, ASPAC was able to incorporate and use the name "ITEC" in its own name. Thus ,
ASPAC Multi-Trade, Inc. became legally and publicly known as ASPAC-ITEC
(Philippines).
By virtue of said contracts, ASPAC sold electronic products, exported by ITEC, to their
sole customer, the Philippine Long Distance Telephone Company, (PLDT, for brevity).
To facilitate their transactions, ASPAC, dealing under its new appellation, and PLDT
executed a document entitled "PLDT-ASPAC/ITEC PROTOCOL"4 which defined the
project details for the supply of ITEC's Interface Equipment in connection with the Fifth
Expansion Program of PLDT.
One year into the second term of the parties' Representative Agreement, ITEC decided to
terminate the same, because petitioner ASPAC allegedly violated its contractual
commitment as stipulated in their agreements.5
ITEC charges the petitioners and another Philippine Corporation, DIGITAL BASE
COMMUNICATIONS, INC. (DIGITAL, for brevity), the President of which is likewise
petitioner Aguirre, of using knowledge and information of ITEC's products specifications to
develop their own line of equipment and product support, which are similar, if not identical
to ITEC's own, and offering them to ITEC's former customer.
On January 31, 1991, the complaint6 in Civil Case No. 91-294, was filed with the Regional
Trial Court of Makati, Branch 134 by ITEC, INC. Plaintiff sought to enjoin, first,
preliminarily and then, after trial, permanently; (1) defendants DIGITAL, CMDI, and
Francisco Aguirre and their agents and business associates, to cease and desist from
selling or attempting to sell to PLDT and to any other party, products which have been
copied or manufactured "in like manner, similar or identical to the products, wares and
equipment of plaintiff," and (2) defendant ASPAC, to cease and desist from using in its
corporate name, letter heads, envelopes, sign boards and business dealings, plaintiff's
trademark, internationally known as ITEC; and the recovery from defendants in solidum,
damages of at least P500,000.00, attorney's fees and litigation expenses.
In due time, defendants filed a motion to dismiss7 the complaint on the following grounds:
(1) That plaintiff has no legal capacity to sue as it is a foreign corporation doing business
in the Philippines without the required BOI authority and SEC license, and (2) that plaintiff
is simply engaged in forum shopping which justifies the application against it of the
principle of "forum non conveniens".
On February 8, 1991, the complaint was amended by virtue of which ITEC
INTERNATIONAL, INC. was substituted as plaintiff instead of ITEC, INC.8
In their Supplemental Motion to Dismiss,9 defendants took note of the amendment of the
complaint and asked the court to consider in toto their motion to dismiss and their
supplemental motion as their answer to the amended complaint.
After conducting hearings on the prayer for preliminary injunction, the court a quo on
February 22, 1991, issued its Order: 10 (1) denying the motion to dismiss for being devoid
of legal merit with a rejection of both grounds relied upon by the defendants in their
motion to dismiss, and (2) directing the issuance of a writ of preliminary injunction on the
same day.
From the foregoing order, petitioners elevated the case to the respondent Court of
Appeals on a Petition for Certiorari and Prohibition11 under Rule 65 of the Revised Rules
of Court, assailing and seeking the nullification and the setting aside of the Order and the
Writ of Preliminary Injunction issued by the Regional Trial Court.
The respondent appellate court stated, thus:
We find no reason whether in law or from the facts of record, to disagree with the
(lower court's) ruling. We therefore are unable to find in respondent Judge's
issuance of said writ the grave abuse of discretion ascribed thereto by the
petitioners.
In fine, We find that the petition prima facie does not show that Certiorari lies in
the present case and therefore, the petition does not deserve to be given due
course.
WHEREFORE, the present petition should be, as it is hereby, denied due course
and accordingly, is hereby dismissed. Costs against the petitioners.
SO ORDERED.12
Petitioners filed a motion for reconsideration13 on June 7, 1991, which was likewise
denied by the respondent court.
WHEREFORE, the present motion for reconsideration should be, as it is hereby,
denied for lack of merit. For the same reason, the motion to have the motion for
reconsideration set for oral argument likewise should be and is hereby denied.
SO ORDERED.14
Petitioners are now before us via Petition for Review on Certiorari15 under Rule 45 of the
Revised Rules of Court.
It is the petitioners' submission that private respondents are foreign corporations actually
doing business in the Philippines without the requisite authority and license from the
Board of Investments and the Securities and Exchange Commission, and thus,
disqualified from instituting the present action in our courts. It is their contention that the
provisions of the Representative Agreement, petitioner ASPAC executed with private
respondent ITEC, are similarly "highly restrictive" in nature as those found in the
agreements which confronted the Court in the case of Top-Weld
Manufacturing, Inc. vs. ECED S.A. et al.,16 as to reduce petitioner ASPAC to a mere
conduit or extension of private respondents in the Philippines.
In that case, we ruled that respondent foreign corporations are doing business in the
Philippines because when the respondents entered into the disputed contracts with the
petitioner, they were carrying out the purposes for which they were created, i.e., to
manufacture and market welding products and equipment. The terms and conditions of
the contracts as well as the respondents' conduct indicate that they established within our
country a continuous business, and not merely one of a temporary character. The
respondents could be exempted from the requirements of Republic Act 5455 if the
petitioner is an independent entity which buys and distributes products not only of the
petitioner, but also of other manufacturers or transacts business in its name and for its
account and not in the name or for the account of the foreign principal. A reading of the
agreements between the petitioner and the respondents shows that they are highly
restrictive in nature, thus making the petitioner a mere conduit or extension of the
respondents.
It is alleged that certain provisions of the "Representative Agreement" executed by the
parties are similar to those found in the License Agreement of the parties in the Top-Weld
case which were considered as "highly restrictive" by this Court. The provisions in point
are:
2.0 Terms and Conditions of Sales.
2.1 Sale of ITEC products shall be at the purchase price set by ITEC from time to
time. Unless otherwise expressly agreed to in writing by ITEC the purchase price
is net to ITEC and does not include any transportation charges, import charges
or taxes into or within the Territory. All orders from customers are subject to
formal acceptance by ITEC at its Huntsville, Alabama U.S.A. facility.
xxx xxx xxx
3.0 Duties of Representative
3.1. REPRESENTATIVE SHALL:
3.1.1. Not represent or offer for sale within the Territory any product which
competes with an existing ITEC product or any product which ITEC has under
active development.
3.1.2. Actively solicit all potential customers within the Territory in a systematic
and business like manner.
 3.1.3. Inform ITEC of all request for proposals, requests for bids, invitations to bid
and the like within the Territory.
3.1.4. Attain the Annual Sales Goal for the Territory established by ITEC. The
Sales Goals for the first 24 months is set forth on Attachment two (2) hereto. The
Sales Goal for additional twelve month periods, if any, shall be sent to the Sales
Agent by ITEC at the beginning of each period. These Sales Goals shall be
incorporated into this Agreement and made a part hereof.
xxx xxx xxx
6.0. Representative as Independent Contractor
xxx xxx xxx
6.2. When acting under this Agreement REPRESENTATIVE is authorized to
solicit sales within the Territory on ITEC's behalf but is authorized to bind ITEC
only in its capacity as Representative and no other, and then only to specific
customers and on terms and conditions expressly authorized by ITEC in
writing.17
Aside from the abovestated provisions, petitioners point out the following matters of
record, which allegedly bear witness to the respondents' activities within the Philippines in
pursuit of their business dealings:
a. While petitioner ASPAC was the authorized exclusive representative for three
(3) years, it solicited from and closed several sales for and on behalf of private
respondents as to their products only and no other, to PLDT, worth no less than
US $ 15 Million (p. 20, tsn, Feb. 18, 1991);
b. Contract No. 1 (Exhibit for Petitioners) which covered these sales and
identified by private respondents' sole witness, Mr. Clarence Long, is not in the
name of petitioner ASPAC as such representative, but in the name of private
respondent ITEC, INC. (p. 20, tsn, Feb. 18, 1991);
c. The document denominated as "PLDT-ASPAC/ITEC PROTOCOL (Annex C of
the original and amended complaints) which defined the responsibilities of the
parties thereto as to the supply, installation and maintenance of the ITEC
equipment sold under said Contract No. 1 is, as its very title indicates, in the
names jointly of the petitioner ASPAC and private respondents;
d. To evidence receipt of the purchase price of US $ 15 Million, private
respondent ITEC, Inc. issued in its letter head, a Confirmation of payment dated
November 13, 1989 and its Invoice dated November 22, 1989 (Annexes 1 and 2
of the Motion to Dismiss and marked as Exhibits 2 and 3 for the petitioners), both
of which were identified by private respondent's sole witness, Mr. Clarence Long
(pp. 25-27, tsn, Feb. 18, 1991).18
Petitioners contend that the above acts or activities belie the supposed independence of
petitioner ASPAC from private respondents. "The unrebutted evidence on record below
for the petitioners likewise reveal the continuous character of doing business in the
Philippines by private respondents based on the standards laid down by this Court
in Wang Laboratories, Inc. vs. Hon. Rafael T . Mendoza, et al.19 and again in TOP-WELD.
(supra)" It thus appears that as the respondent Court of Appeals and the trial court's
failure to give credence on the grounds relied upon in support of their Motion to Dismiss
that petitioners ascribe grave abuse of discretion amounting to an excess of jurisdiction of
said courts.
Petitioners likewise argue that since private respondents have no capacity to bring suit
here, the Philippines is not the "most convenient forum" because the trial court is devoid
of any power to enforce its orders issued or decisions rendered in a case that could not
have been commenced to begin with, such that in insisting to assume and exercise
jurisdiction over the case below, the trial court had gravely abused its discretion and even
actually exceeded its jurisdiction.
As against petitioner's insistence that private respondent is "doing business" in the Philippines, the
latter maintains that it is not.
We can discern from a reading of Section 1 (f) (1) and 1 (f) (2) of the Rules and Regulations
Implementing the Omnibus Investments Code of 1987, the following:
(1) A foreign firm is deemed not engaged in business in the Philippines if it
transacts business through middlemen, acting in their own names, such as
indebtors, commercial bookers commercial merchants.
(2) A foreign corporation is deemed not "doing business" if its representative
domiciled in the Philippines has an independent status in that it transacts
business in its name and for its account. 20
Private respondent argues that a scrutiny of its Representative Agreement with the
Petitioners will show that although ASPAC was named as representative of ITEC.,
ASPAC actually acted in its own name and for its own account. The following provisions
are particularly mentioned:
3.1.7.1. In the event that REPRESENTATIVE imports directly from ITEC,
REPRESENTATIVE will pay for its own account; all customs duties and import
fees imposed on any ITEC products; all import expediting or handling charges
and expenses imposed on ITEC products; and any stamp tax fees imposed on
ITEC.
xxx xxx xxx
 4.1. As complete consideration and payment for acting as representative under
this Agreement, REPRESENTATIVE shall receive a sales commission equivalent
to a per centum of the FOB value of all ITEC equipment sold to customers within
the territory as a direct result of REPRESENTATIVE's sales efforts.21
More importantly, private respondent charges ASPAC of admitting its independence from
ITEC by entering and ascribing to provision No. 6 of the Representative Agreement.
6.0 Representative as Independent Contractor
6.1. When performing any of its duties under this Agreement,
REPRESENTATIVE shall act as an independent contractor and not as an
employee, worker, laborer, partner, joint venturer of ITEC as these terms are
defined by the laws, regulations, decrees or the like of any jurisdiction, including
the jurisdiction of the United States, the state of Alabama and the Territory.22
Although it admits that the Representative Agreement contains provisions which both
support and belie the independence of ASPAC, private respondent echoes the
respondent court's finding that the lower court did not commit grave abuse of discretion
nor acted in excess of jurisdiction when it found that the ground relied upon by the
petitioners in their motion to dismiss does not appear to be indubitable. 23
The issues before us now are whether or not private respondent ITEC is an unlicensed
corporation doing business in the Philippines, and if it is, whether or not this fact bars it
from invoking the injunctive authority of our courts.
Considering the above, it is necessary to state what is meant by "doing business" in the
Philippines. Section 133 of the Corporation Code, provides that "No foreign corporation,
transacting business in the Philippines without a license, or its successors or assigns,
shall be permitted to maintain or intervene in any action, suit or proceeding in any court or
administrative agency of the Philippines; but such corporation may be sued or proceeded
against before Philippine Courts or administrative tribunals on any valid cause of action
recognized under Philippine laws."24
Generally, a "foreign corporation" has no legal existence within the state in which it is
foreign. This proceeds from the principle that juridical existence of a corporation is
confined within the territory of the state under whose laws it was incorporated and
organized, and it has no legal status beyond such territory. Such foreign corporation may
be excluded by any other state from doing business within its limits, or conditions may be
imposed on the exercise of such privileges.25 Before a foreign corporation can transact
business in this country, it must first obtain a license to transact business in the
Philippines, and a certificate from the appropriate government agency. If it transacts
business in the Philippines without such a license, it shall not be permitted to maintain or
intervene in any action, suit, or proceeding in any court or administrative agency of the
Philippines, but it may be sued on any valid cause of action recognized under Philippine
laws.26
In a long line of decisions, this Court has not altogether prohibited foreign corporation not
licensed to do business in the Philippines from suing or maintaining an action in Philippine
Courts. What it seeks to prevent is a foreign corporation doing business in the Philippines
without a licensed from gaining access to Philippine Courts.27
The purpose of the law in requiring that foreign corporations doing business in the
Philippines be licensed to do so and that they appoint an agent for service of process is to
subject the foreign corporation doing business in the Philippines to the jurisdiction of its
courts. The object is not to prevent the foreign corporation from performing single acts,
but to prevent it from acquiring a domicile for the purpose of business without taking steps
necessary to render it amenable to suit in the local courts.28 The implication of the law is
that it was never the purpose of the legislature to exclude a foreign corporation which
happens to obtain an isolated order for business from the Philippines, and thus, in effect,
to permit persons to avoid their contracts made with such foreign corporations.29
There is no exact rule or governing principle as to what constitutes "doing" or "engaging"
or "transacting" business. Indeed, such case must be judged in the light of its peculiar
circumstances, upon its peculiar facts and upon the language of the statute applicable.
The true test, however, seems to be whether the foreign corporation is continuing the
body or substance of the business or enterprise for which it was organized.30
Article 44 of the Omnibus Investments Code of 1987 defines the phrase to include:
soliciting orders, purchases, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines
for a period or periods totalling one hundred eighty (180) days or more;
participating in the management, supervision or control of any domestic business
firm, entity or corporation in the Philippines, and any other act or acts that imply a
continuity or commercial dealings or arrangements and contemplate to that
extent the performance of acts or works, or the exercise of some of the functions
normally incident to, and in progressive prosecution of, commercial gain or of the
purpose and object of the business organization.
Thus, a foreign corporation with a settling agent in the Philippines which issued twelve
marine policies covering different shipments to the Philippines 31 and a foreign corporation
which had been collecting premiums on outstanding policies 32 were regarded as doing
business here.
The same rule was observed relating to a foreign corporation with an "exclusive
distributing agent" in the Philippines, and which has been selling its products here since
1929,33 and a foreign corporation engaged in the business of manufacturing and selling
computers worldwide, and had installed at least 26 different products in several
corporations in the Philippines, and allowed its registered logo and trademark to be used
and made it known that there exists a designated distributor in the Philippines.34
In Georg Grotjahn GMBH and Co. vs. Isnani,35 it was held that the uninterrupted
performance by a foreign corporation of acts pursuant to its primary purposes and
functions as a regional area headquarters for its home office, qualifies such corporation
as one doing business in the country.
These foregoing instances should be distinguished from a single or isolated transaction or
occasional, incidental, or casual transactions, which do not come within the meaning of
the law,36 for in such case, the foreign corporation is deemed not engaged in business in
the Philippines.
Where a single act or transaction, however, is not merely incidental or casual but
indicates the foreign corporation's intention to do other business in the Philippines, said
single act or transaction constitutes "doing" or "engaging in" or "transacting" business in
the Philippines.3 7
In determining whether a corporation does business in the Philippines or not, aside from
their activities within the forum, reference may be made to the contractual agreements
entered into by it with other entities in the country. Thus, in the Top-Weld case (supra),
the foreign corporation's LICENSE AND TECHNICAL AGREEMENT and DISTRIBUTOR
AGREEMENT with their local contacts were made the basis of their being regarded by
this Tribunal as corporations doing business in the country. Likewise, in Merill Lynch
Futures, Inc.vs. Court of Appeals, etc. 38 the FUTURES CONTRACT entered into by the
petitioner foreign corporation weighed heavily in the court's ruling.
With the abovestated precedents in mind, we are persuaded to conclude that private
respondent had been "engaged in" or "doing business" in the Philippines for some time
now. This is the inevitable result after a scrutiny of the different contracts and agreements
entered into by ITEC with its various business contacts in the country, particularly ASPAC
and Telephone Equipment Sales and Services, Inc. (TESSI, for brevity). The latter is a
local electronics firm engaged by ITEC to be its local technical representative, and to
create a service center for ITEC products sold locally. Its arrangements, with these
entities indicate convincingly ITEC's purpose to bring about the situation among its
customers and the general public that they are dealing directly with ITEC, and that ITEC
is actively engaging in business in the country.
In its Master Service Agreement39 with TESSI, private respondent required its local
technical representative to provide the employees of the technical and service center with
ITEC identification cards and business cards, and to correspond only on ITEC, Inc.,
letterhead. TESSI personnel are instructed to answer the telephone with "ITEC Technical
Assistance Center.", such telephone being listed in the telephone book under the heading
of ITEC Technical Assistance Center, and all calls being recorded and forwarded to ITEC
on a weekly basis.
What is more, TESSI was obliged to provide ITEC with a monthly report detailing the
failure and repair of ITEC products, and to requisition monthly the materials and
components needed to replace stock consumed in the warranty repairs of the prior
month.
A perusal of the agreements between petitioner ASPAC and the respondents shows that
there are provisions which are highly restrictive in nature, such as to reduce petitioner
ASPAC to a mere extension or instrument of the private respondent.
The "No Competing Product" provision of the Representative Agreement between ITEC
and ASPAC provides: "The Representative shall not represent or offer for sale within the
Territory any product which competes with an existing ITEC product or any product which
ITEC has under active development." Likewise pertinent is the following provision: "When
acting under this Agreement, REPRESENTATIVE is authorized to solicit sales within the
Territory on ITEC's behalf but is authorized to bind ITEC only in its capacity as
Representative and no other, and then only to specific customers and on terms and
conditions expressly authorized by ITEC in writing."
When ITEC entered into the disputed contracts with ASPAC and TESSI, they were
carrying out the purposes for which it was created, i.e., to market electronics and
communications products. The terms and conditions of the contracts as well as ITEC's
conduct indicate that they established within our country a continuous business, and not
merely one of a temporary character.40
Notwithstanding such finding that ITEC is doing business in the country, petitioner is
nonetheless estopped from raising this fact to bar ITEC from instituting this injunction
case against it.
A foreign corporation doing business in the Philippines may sue in Philippine Courts
although not authorized to do business here against a Philippine citizen or entity who had
contracted with and benefited by said corporation.41 To put it in another way, a party is
estopped to challenge the personality of a corporation after having acknowledged the
same by entering into a contract with it. And the doctrine of estoppel to deny corporate
existence applies to a foreign as well as to domestic corporations. 42 One who has dealt
with a corporation of foreign origin as a corporate entity is estopped to deny its corporate
existence and capacity: The principle will be applied to prevent a person contracting with
a foreign corporation from later taking advantage of its noncompliance with the statutes
chiefly in cases where such person has received the benefits of the contract.43
The rule is deeply rooted in the time-honored axiom of Commodum ex injuria sua non
habere debet — no person ought to derive any advantage of his own wrong. This is as it
should be for as mandated by law, "every person must in the exercise of his rights and in
the performance of his duties, act with justice, give everyone his due, and observe
honesty and good faith."44
Concededly, corporations act through agents, like directors and officers. Corporate
dealings must be characterized by utmost good faith and fairness. Corporations cannot
just feign ignorance of the legal rules as in most cases, they are manned by sophisticated
officers with tried management skills and legal experts with practiced eye on legal
problems. Each party to a corporate transaction is expected to act with utmost candor and
fairness and, thereby allow a reasonable proportion between benefits and expected
burdens. This is a norm which should be observed where one or the other is a foreign
entity venturing in a global market.
As observed by this Court in TOP-WELD (supra), viz:
The parties are charged with knowledge of the existing law at the time they enter into a
contract and at the time it is to become operative. (Twiehaus v. Rosner, 245 SW 2d 107;
Hall v. Bucher, 227 SW 2d 98). Moreover, a person is presumed to be more
knowledgeable about his own state law than his alien or foreign contemporary. In this
case, the record shows that, at least, petitioner had actual knowledge of the applicability
of R.A. No. 5455 at the time the contract was executed and at all times thereafter. This
conclusion is compelled by the fact that the same statute is now being propounded by the
petitioner to bolster its claim. We, therefore sustain the appellate court's view that "it was
incumbent upon TOP-WELD to know whether or not IRTI and ECED were properly
authorized to engage in business in the Philippines when they entered into the licensing
and distributorship agreements." The very purpose of the law was circumvented and
evaded when the petitioner entered into said agreements despite the prohibition of R.A.
No. 5455. The parties in this case being equally guilty of violating R.A. No. 5455, they are
in pari delicto, in which case it follows as a consequence that petitioner is not entitled to
the relief prayed for in this case.
The doctrine of lack of capacity to sue based on the failure to acquire a local license is
based on considerations of sound public policy. The license requirement was imposed to
subject the foreign corporation doing business in the Philippines to the jurisdiction of its
courts. It was never intended to favor domestic corporations who enter into solitary
transactions with unwary foreign firms and then repudiate their obligations simply
because the latter are not licensed to do business in this country.45
In Antam Consolidated Inc. vs. Court of Appeals, et al.46 we expressed our chagrin over
this commonly used scheme of defaulting local companies which are being sued by
unlicensed foreign companies not engaged in business in the Philippines to invoke the
lack of capacity to sue of such foreign companies. Obviously, the same ploy is resorted to
by ASPAC to prevent the injunctive action filed by ITEC to enjoin petitioner from using
knowledge possibly acquired in violation of fiduciary arrangements between the parties.
Petitioner's insistence on the dismissal of this action due to the application, or non
application, of the private international law rule of forum non conveniens defies well-
settled rules of fair play. According to petitioner, the Philippine Court has no venue to
apply its discretion whether to give cognizance or not to the present action, because it
has not acquired jurisdiction over the person of the plaintiff in the case, the latter allegedly
having no personality to sue before Philippine Courts. This argument is misplaced
because the court has already acquired jurisdiction over the plaintiff in the suit, by virtue
of his filing the original complaint. And as we have already observed, petitioner is not at
liberty to question plaintiff's standing to sue, having already acceded to the same by virtue
of its entry into the Representative Agreement referred to earlier.
Thus, having acquired jurisdiction, it is now for the Philippine Court, based on the facts of
the case, whether to give due course to the suit or dismiss it, on the principle of forum non
convenience.4 7 Hence, the Philippine Court may refuse to assume jurisdiction in spite of
its having acquired jurisdiction. Conversely, the court may assume jurisdiction over the
case if it chooses to do so; provided, that the following requisites are met: 1) That the
Philippine Court is one to which the parties may conveniently resort to; 2) That the
Philippine Court is in a position to make an intelligent decision as to the law and the facts;
and, 3) That the Philippine Court has or is likely to have power to enforce its decision.48
The aforesaid requirements having been met, and in view of the court's disposition to give
due course to the questioned action, the matter of the present forum not being the "most
convenient" as a ground for the suit's dismissal, deserves scant consideration.
IN VIEW OF THE FOREGOING PREMISES, the instant Petition is hereby DISMISSED.
The decision of the Court of Appeals dated June 7, 1991, upholding the RTC Order dated
February 22, 1991, denying the petitioners' Motion to Dismiss, and ordering the issuance
of the Writ of Preliminary Injunction, is hereby affirmed in toto.
SO ORDERED.

By entering into the "Representative Agreement" with ITEC, Petitioner is charged with
knowledge that ITEC was not licensed to engage in business activities in the country, and
is thus estopped from raising in defense such incapacity of ITEC, having chosen to ignore
or even presumptively take advantage of the same.

In Top-Weld, we ruled that a foreign corporation may be exempted from the license
requirement in order to institute an action in our courts if its representative in the country
maintained an independent status during the existence of the disputed contract. Petitioner
is deemed to have acceded to such independent character when it entered into the
Representative Agreement with ITEC, particularly, provision 6.2 (supra).
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 113074 January 22, 1997
ALFRED HAHN, petitioner,
vs.
COURT OF APPEALS and BAYERSCHE MOTOREN WERKE AKTIENGSELLSCHAFT
(BMW), respondents.
MENDOZA, J.:
This is a petition for review of the decision1 of the Court of Appeals dismissing a complaint for
specific performance which petitioner had filed against private respondent on the ground that the
Regional Trial Court of Quezon City did not acquire jurisdiction over private respondent, a
nonresident foreign corporation, and of the appellate court's order denying petitioner's motion for
reconsideration.
The following are the facts:
Petitioner Alfred Hahn is a Filipino citizen doing business under the name and style "Hahn-
Manila." On the other hand, private respondent Bayerische Motoren Werke Aktiengesellschaft
(BMW) is a nonresident foreign corporation existing under the laws of the former Federal Republic
of Germany, with principal office at Munich, Germany.
On March 7, 1967, petitioner executed in favor of private respondent a "Deed of Assignment with
Special Power of Attorney," which reads in full as follows:
WHEREAS, the ASSIGNOR is the present owner and holder of the BMW trademark and
device in the Philippines which ASSIGNOR uses and has been using on the products
manufactured by ASSIGNEE, and for which ASSIGNOR is the authorized exclusive
Dealer of the ASSIGNEE in the Philippines, the same being evidenced by certificate of
registration issued by the Director of Patents on 12 December 1963 and is referred to as
Trademark No. 10625;
WHEREAS, the ASSIGNOR has agreed to transfer and consequently record said transfer
of the said BMW trademark and device in favor of the ASSIGNEE herein with the
Philippines Patent Office;
NOW THEREFORE, in view of the foregoing and in consideration of the stipulations
hereunder stated, the ASSIGNOR hereby affirms the said assignment and transfer in
favor of the ASSIGNEE under the following terms and conditions:
1. The ASSIGNEE shall take appropriate steps against any user other than ASSIGNOR
or infringer of the BMW trademark in the Philippines; for such purpose, the ASSIGNOR
shall inform the ASSIGNEE immediately of any such use or infringement of the said
trademark which comes to his knowledge and upon such information the ASSIGNOR
shall automatically act as Attorney-In-Fact of the ASSIGNEE for such case, with full
power, authority and responsibility to prosecute unilaterally or in concert with ASSIGNEE,
any such infringer of the subject mark and for purposes hereof the ASSIGNOR is hereby
named and constituted as ASSIGNEE's Attorney-In-Fact, but any such suit without
ASSIGNEE's consent will exclusively be the responsibility and for the account of the
ASSIGNOR,
2. That the ASSIGNOR and the ASSIGNEE shall continue business relations as has been
usual in the past without a formal contract, and for that purpose, the dealership of
ASSIGNOR shall cover the ASSIGNEE's complete production program with the only
limitation that, for the present, in view of ASSIGNEE's limited production, the latter shall
not be able to supply automobiles to ASSIGNOR.
Per the agreement, the parties "continue[d] business relations as has been usual in the past
without a formal contract." But on February 16, 1993, in a meeting with a BMW representative and
the president of Columbia Motors Corporation (CMC), Jose Alvarez, petitioner was informed that
BMW was arranging to grant the exclusive dealership of BMW cars and products to CMC, which
had expressed interest in acquiring the same. On February 24, 1993, petitioner received
confirmation of the information from BMW which, in a letter, expressed dissatisfaction with various
aspects of petitioner's business, mentioning among other things, decline in sales, deteriorating
services, and inadequate showroom and warehouse facilities, and petitioner's alleged failure to
comply with the standards for an exclusive BMW dealer.2 Nonetheless, BMW expressed
willingness to continue business relations with the petitioner on the basis of a "standard BMW
importer" contract, otherwise, it said, if this was not acceptable to petitioner, BMW would have no
alternative but to terminate petitioner's exclusive dealership effective June 30, 1993.
Petitioner protested, claiming that the termination of his exclusive dealership would be a breach of
the Deed of Assignment.3 Hahn insisted that as long as the assignment of its trademark and
device subsisted, he remained BMW's exclusive dealer in the Philippines because the assignment
was made in consideration of the exclusive dealership. In the same letter petitioner explained that
the decline in sales was due to lower prices offered for BMW cars in the United States and the fact
that few customers returned for repairs and servicing because of the durability of BMW parts and
the efficiency of petitioner's service.
Because of Hahn's insistence on the former business relation, BMW withdrew on March 26, 1993
its offer of a "standard importer contract" and terminated the exclusive dealer relationship effective
June 30, 1993. 4 At a conference of BMW Regional Importers held on April 26, 1993 in Singapore,
Hahn was surprised to find Alvarez among those invited from the Asian region. On April 29, 1993,
BMW proposed that Hahn and CMC jointly import and distribute BMW cars and parts.
Hahn found the proposal unacceptable. On May 14, 1993, he filed a complaint for specific
performance and damages against BMW to compel it to continue the exclusive dealership. Later
he filed an amended complaint to include an application for temporary restraining order and for
writs of preliminary, mandatory and prohibitory injunction to enjoin BMW from terminating his
exclusive dealership. Hahn's amended complaint alleged in pertinent parts:
2. Defendant [BMW] is a foreign corporation doing business in the Philippines with
principal offices at Munich, Germany. It may be served with summons and other court
processes through the Secretary of the Department of Trade and Industry of the
Philippines. . . .
xxx xxx xxx
5. On March 7, 1967, Plaintiff executed in favor of defendant BMW a Deed of Assignment
with Special Power of Attorney covering the trademark and in consideration thereof,
under its first whereas clause, Plaintiff was duly acknowledged as the "exclusive Dealer of
the Assignee in the Philippines. . . .
xxx xxx xxx
8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the
Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without
any monetary contribution from defendant BMW, established BMW's goodwill and market
presence in the Philippines. Pursuant thereto, Plaintiff has invested a lot of money and
resources in order to single-handedly compete against other motorcycle and car
companies. . . . Moreover, Plaintiff has built buildings and other infrastructures such as
service centers and showrooms to maintain and promote the car and products of
defendant BMW.
xxx xxx xxx
10. In a letter dated February 24, 1993, defendant BMW advised Plaintiff that it was
willing to maintain with Plaintiff a relationship but only "on the basis of a standard BMW
importer contract as adjusted to reflect the particular situation in the Philippines" subject
to certain conditions, otherwise, defendant BMW would terminate Plaintiffs exclusive
dealership and any relationship for cause effective June 30, 1993. . . .
xxx xxx xxx
15. The actuations of defendant BMW are in breach of the assignment agreement
between itself and plaintiff since the consideration for the assignment of the BMW
trademark is the continuance of the exclusive dealership agreement. It thus, follows that
the exclusive dealership should continue for so long as defendant BMW enjoys the use
and ownership of the trademark assigned to it by Plaintiff.
The case was docketed as Civil Case No. Q-93-15933 and raffled to Branch 104 of the Quezon
City Regional Trial Court, which on June 14, 1993 issued a temporary restraining order. Summons
and copies of the complaint and amended complaint were thereafter served on the private
respondent through the Department of Trade and Industry, pursuant to Rule 14, §14 of the Rules
of Court. The order, summons and copies of the complaint and amended complaint were later sent
by the DTI to BMW via registered mail on June 15, 1993 5 and received by the latter on June 24,
1993.
On June 17, 1993, without proof of service on BMW, the hearing on the application for the writ of
preliminary injunction proceeded ex parte, with petitioner Hahn testifying. On June 30, 1993, the
trial court issued an order granting the writ of preliminary injunction upon the filing of a bond of
P100,000.00. On July 13, 1993, following the posting of the required bond, a writ of preliminary
injunction was issued.
On July 1, 1993, BMW moved to dismiss the case, contending that the trial court did not acquire
jurisdiction over it through the service of summons on the Department of Trade and Industry,
because it (BMW) was a foreign corporation and it was not doing business in the Philippines. It
contended that the execution of the Deed of Assignment was an isolated transaction; that Hahn
was not its agent because the latter undertook to assemble and sell BMW cars and products
without the participation of BMW and sold other products; and that Hahn was an indentor or
middleman transacting business in his own name and for his own account.
Petitioner Alfred Hahn opposed the motion. He argued that BMW was doing business in the
Philippines through him as its agent, as shown by the fact that BMW invoices and order forms
were used to document his transactions; that he gave warranties as exclusive BMW dealer; that
BMW officials periodically inspected standards of service rendered by him; and that he was
described in service booklets and international publications of BMW as a "BMW Importer" or
"BMW Trading Company" in the Philippines.
The trial court6 deferred resolution of the motion to dismiss until after trial on the merits for the
reason that the grounds advanced by BMW in its motion did not seem to be indubitable.
Without seeking reconsideration of the aforementioned order, BMW filed a petition
for certiorari with the Court of Appeals alleging that:
I. THE RESPONDENT JUDGE ACTED WITH UNDUE HASTE OR OTHERWISE
INJUDICIOUSLY IN PROCEEDINGS LEADING TOWARD THE ISSUANCE OF THE
WRIT OF PRELIMINARY INJUNCTION, AND IN PRESCRIBING THE TERMS FOR THE
ISSUANCE THEREOF.
II. THE RESPONDENT JUDGE PATENTLY ERRED IN DEFERRING RESOLUTION OF
THE MOTION TO DISMISS ON THE GROUND OF LACK OF JURISDICTION, AND
THEREBY FAILING TO IMMEDIATELY DISMISS THE CASE A QUO.
BMW asked for the immediate issuance of a temporary restraining order and, after hearing, for a
writ of preliminary injunction, to enjoin the trial court from proceeding further in Civil Case No. Q-
93-15933. Private respondent pointed out that, unless the trial court's order was set aside, it would
be forced to submit to the jurisdiction of the court by filing its answer or to accept judgment in
default, when the very question was whether the court had jurisdiction over it.
The Court of Appeals enjoined the trial court from hearing petitioner's complaint. On December 20,
1993, it rendered judgment finding the trial court guilty of grave abuse of discretion in deferring
resolution of the motion to dismiss. It stated:
Going by the pleadings already filed with the respondent court before it came out with its
questioned order of July 26, 1993, we rule and so hold that petitioner's (BMW) motion to
dismiss could be resolved then and there, and that the respondent judge's deferment of
his action thereon until after trial on the merit constitutes, to our mind, grave abuse of
discretion.
xxx xxx xxx
. . . [T]here is not much appreciable disagreement as regards the factual matters relating
to the motion to dismiss. What truly divide (sic) the parties and to which they greatly differ
is the legal conclusions they respectively draw from such facts, (sic) with Hahn
maintaining that on the basis thereof, BMW is doing business in the Philippines while the
latter asserts that it is not.
Then, after stating that any ruling which the trial court might make on the motion to dismiss would
anyway be elevated to it on appeal, the Court of Appeals itself resolved the motion. It ruled that
BMW was not doing business in the country and, therefore, jurisdiction over it could not be
acquired through service of summons on the DTI pursuant to Rule 14, §14. 'The court upheld
private respondent's contention that Hahn acted in his own name and for his own account and
independently of BMW, based on Alfred Hahn's allegations that he had invested his own money
and resources in establishing BMW's goodwill in the Philippines and on BMW's claim that Hahn
sold products other than those of BMW. It held that petitioner was a mere indentor or broker and
not an agent through whom private respondent BMW transacted business in the Philippines.
Consequently, the Court of Appeals dismissed petitioner's complaint against BMW.
Hence, this appeal. Petitioner contends that the Court of Appeals erred (1) in finding that the trial
court gravely abused its discretion in deferring action on the motion to dismiss and (2) in finding
that private respondent BMW is not doing business in the Philippines and, for this reason,
dismissing petitioner's case.
Petitioner's appeal is well taken. Rule 14, §14 provides:
§14. Service upon private foreign corporations. — If the defendant is a foreign
corporation, or a nonresident joint stock company or association, doing business in the
Philippines, service may be made on its resident agent designated in accordance with law
for that purpose, or, if there be no such agent, on the government official designated by
law to that effect, or on any of its officers or agents within the Philippines. (Emphasis
added).
What acts are considered "doing business in the Philippines" are enumerated in §3(d) of the
Foreign Investments Act of 1991 (R.A. No. 7042) as follows:7
d) the phrase "doing business" shall include soliciting orders, service contracts, opening
offices, whether called "liaison" offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year stay in the country for
a period or periods totalling one hundred eighty (180) days or more; participating in the
management, supervision or control of any domestic business, firm, entity or corporation
in the Philippines; and any other act or acts that imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance of acts or works, or the
exercise of some of the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business organization: Provided,
however, That the phrase "doing business" shall not be deemed to include mere
investment as a shareholder by a foreign entity in domestic corporations duly registered
to do business, and/or the exercise of rights as such investor; nor having a nominee
director or officer to represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which transacts business in its
own name and for its own account. (Emphasis supplied)
Thus, the phrase includes "appointing representatives or distributors in the Philippines" but not
when the representative or distributor "transacts business in its name and for its own account." In
addition, §1(f)(1) of the Rules and Regulations implementing (IRR) the Omnibus Investment Code
of 1987 (E.O. No. 226) provided:
(f) "Doing business" shall be any act or combination of acts, enumerated in Article 44 of
the Code. In particular, "doing business" includes:
(1) . . . A foreign firm which does business through middlemen acting in their own names,
such as indentors, commercial brokers or commission merchants, shall not be deemed
doing business in the Philippines. But such indentors, commercial brokers or commission
merchants shall be the ones deemed to be doing business in the Philippines.
The question is whether petitioner Alfred Hahn is the agent or distributor in the Philippines of
private respondent BMW. If he is, BMW may be considered doing business in the Philippines and
the trial court acquired jurisdiction over it (BMW) by virtue of the service of summons on the
Department of Trade and Industry. Otherwise, if Hahn is not the agent of BMW but an
independent dealer, albeit of BMW cars and products, BMW, a foreign corporation, is not
considered doing business in the Philippines within the meaning of the Foreign Investments Act of
1991 and the IRR, and the trial court did not acquire jurisdiction over it (BMW).
The Court of Appeals held that petitioner Alfred Hahn acted in his own name and for his own
account and not as agent or distributor in the Philippines of BMW on the ground that "he alone had
contacts with individuals or entities interested in acquiring BMW vehicles. Independence
characterizes Hahn's undertakings, for which reason he is to be considered, under governing
statutes, as doing business." (p. 13) In support of this conclusion, the appellate court cited the
following allegations in Hahn's amended complaint:
 8. From the time the trademark "BMW & DEVICE" was first used by the Plaintiff in the
Philippines up to the present, Plaintiff, through its firm name "HAHN MANILA" and without
any monetary contributions from defendant BMW, established BMW's goodwill and
market presence in the Philippines. Pursuant thereto, Plaintiff invested a lot of money and
resources in order to single-handedly compete against other motorcycle and car
companies. . . . Moreover, Plaintiff has built buildings and other infrastructures such as
service centers and showrooms to maintain and promote the car and products of
defendant BMW.
As the above quoted allegations of the amended complaint show, however, there is nothing to
support the appellate court's finding that Hahn solicited orders alone and for his own account and
without "interference from, let alone direction of, BMW." (p. 13) To the contrary, Hahn claimed he
took orders for BMW cars and transmitted them to BMW. Upon receipt of the orders, BMW fixed
the downpayment and pricing charges, notified Hahn of the scheduled production month for the
orders, and reconfirmed the orders by signing and returning to Hahn the acceptance sheets.
Payment was made by the buyer directly to BMW. Title to cars purchased passed directly to the
buyer and Hahn never paid for the purchase price of BMW cars sold in the Philippines. Hahn was
credited with a commission equal to 14% of the purchase price upon the invoicing of a vehicle
order by BMW. Upon confirmation in writing that the vehicles had been registered in the
Philippines and serviced by him, Hahn received an additional 3% of the full purchase price. Hahn
performed after-sale services, including warranty services, for which he received reimbursement
from BMW. All orders were on invoices and forms of BMW.8
These allegations were substantially admitted by BMW which, in its petition for certiorari before the
Court of Appeals, stated:9
9.4. As soon as the vehicles are fully manufactured and full payment of the purchase
prices are made, the vehicles are shipped to the Philippines. (The payments may be
made by the purchasers or third-persons or even by Hahn.) The bills of lading are made
up in the name of the purchasers, but Hahn-Manila is therein indicated as the person to
be notified.
9.5. It is Hahn who picks up the vehicles from the Philippine ports, for purposes of
conducting pre-delivery inspections. Thereafter, he delivers the vehicles to the
purchasers.
9.6. As soon as BMW invoices the vehicle ordered, Hahn is credited with a commission of
fourteen percent (14%) of the full purchase price thereof, and as soon as he confirms in
writing that the vehicles have been registered in the Philippines and have been serviced
by him, he will receive an additional three percent (3%) of the full purchase prices as
commission.
Contrary to the appellate court's conclusion, this arrangement shows an agency. An agent
receives a commission upon the successful conclusion of a sale. On the other hand, a broker
earns his pay merely by bringing the buyer and the seller together, even if no sale is eventually
made.
As to the service centers and showrooms which he said he had put up at his own expense, Hahn
said that he had to follow BMW specifications as exclusive dealer of BMW in the Philippines.
According to Hahn, BMW periodically inspected the service centers to see to it that BMW
standards were maintained. Indeed, it would seem from BMW's letter to Hahn that it was for
Hahn's alleged failure to maintain BMW standards that BMW was terminating Hahn's dealership.
The fact that Hahn invested his own money to put up these service centers and showrooms does
not necessarily prove that he is not an agent of BMW. For as already noted, there are facts in the
record which suggest that BMW exercised control over Hahn's activities as a dealer and made
regular inspections of Hahn's premises to enforce compliance with BMW standards and
specifications.10 For example, in its letter to Hahn dated February 23, 1996, BMW stated:
In the last years we have pointed out to you in several discussions and letters that we
have to tackle the Philippine market more professionally and that we are through your
present activities not adequately prepared to cope with the forthcoming challenges.11
In effect, BMW was holding Hahn accountable to it under the 1967 Agreement.
This case fits into the mould of Communications Materials, Inc. v. Court of Appeals,12 in which the
foreign corporation entered into a "Representative Agreement" and a "Licensing Agreement" with
a domestic corporation, by virtue of which the latter was appointed "exclusive representative" in
the Philippines for a stipulated commission. Pursuant to these contracts, the domestic corporation
sold products exported by the foreign corporation and put up a service center for the products sold
locally. This Court held that these acts constituted doing business in the Philippines. The
arrangement showed that the foreign corporation's purpose was to penetrate the Philippine market
and establish its presence in the Philippines.
In addition, BMW held out private respondent Hahn as its exclusive distributor in the Philippines,
even as it announced in the Asian region that Hahn was the "official BMW agent" in the
Philippines.13
The Court of Appeals also found that petitioner Alfred Hahn dealt in other products, and not
exclusively in BMW products, and, on this basis, ruled that Hahn was not an agent of BMW. (p.
14) This finding is based entirely on allegations of BMW in its motion to dismiss filed in the trial
court and in its petition for certiorari before the Court of Appeals.14 But this allegation was denied
by Hahn15 and therefore the Court of Appeals should not have cited it as if it were the fact.
Indeed this is not the only factual issue raised, which should have indicated to the Court of
Appeals the necessity of affirming the trial court's order deferring resolution of BMW's motion to
dismiss. Petitioner alleged that whether or not he is considered an agent of BMW, the fact is that
BMW did business in the Philippines because it sold cars directly to Philippine buyers. 16 This was
denied by BMW, which claimed that Hahn was not its agent and that, while it was true that it had
sold cars to Philippine buyers, this was done without solicitation on its part.17
It is not true then that the question whether BMW is doing business could have been resolved
simply by considering the parties' pleadings. There are genuine issues of facts which can only be
determined on the basis of evidence duly presented. BMW cannot short circuit the process on the
plea that to compel it to go to trial would be to deny its right not to submit to the jurisdiction of the
trial court which precisely it denies. Rule 16, §3 authorizes courts to defer the resolution of a
motion to dismiss until after the trial if the ground on which the motion is based does not appear to
be indubitable. Here the record of the case bristles with factual issues and it is not at all clear
whether some allegations correspond to the proof.

Anyway, private respondent need not apprehend that by responding to the summons it would be
waiving its objection to the trial court's jurisdiction. It is now settled that, for purposes of having
summons served on a foreign corporation in accordance with Rule 14, §14, it is sufficient that it be
alleged in the complaint that the foreign corporation is doing business in the Philippines. The court
need not go beyond the allegations of the complaint in order to determine whether it has
Jurisdiction.18 A determination that the foreign corporation is doing business is only tentative and is
made only for the purpose of enabling the local court to acquire jurisdiction over the foreign
corporation through service of summons pursuant to Rule 14, §14. Such determination does not
foreclose a contrary finding should evidence later show that it is not transacting business in the
country. As this Court has explained:

This is not to say, however, that the petitioner's right to question the jurisdiction of the
court over its person is now to be deemed a foreclosed matter. If it is true, as Signetics
claims, that its only involvement in the Philippines was through a passive investment in
Sigfil, which it even later disposed of, and that TEAM Pacific is not its agent, then it
cannot really be said to be doing business in the Philippines. It is a defense, however,
that requires the contravention of the allegations of the complaint, as well as a full
ventilation, in effect, of the main merits of the case, which should not thus be within the
province of a mere motion to dismiss. So, also, the issue posed by the petitioner as to
whether a foreign corporation which has done business in the country, but which has
ceased to do business at the time of the filing of a complaint, can still be made to answer
for a cause of action which accrued while it was doing business, is another matter that
would yet have to await the reception and admission of evidence. Since these points have
seasonably been raised by the petitioner, there should be no real cause for what may
understandably be its apprehension, i.e., that by its participation during the trial on the
merits, it may, absent an invocation of separate or independent reliefs of its own, be
considered to have voluntarily submitted itself to the court's jurisdiction.19

Far from committing an abuse of discretion, the trial court properly deferred resolution of the
motion to dismiss and thus avoided prematurely deciding a question which requires a factual
basis, with the same result if it had denied the motion and conditionally assumed jurisdiction. It is
the Court of Appeals which, by ruling that BMW is not doing business on the basis merely of
uncertain allegations in the pleadings, disposed of the whole case with finality and thereby
deprived petitioner of his right to be heard on his cause of action. Nor was there justification for
nullifying the writ of preliminary injunction issued by the trial court. Although the injunction was
issued ex parte, the fact is that BMW was subsequently heard on its defense by filing a motion to
dismiss.

WHEREFORE, the decision of the Court of Appeals is REVERSED and the case is REMANDED
to the trial court for further proceedings.

SO ORDERED.
 THIRD DIVISION
G.R. No. 143723 June 28, 2001
LITONJUA GROUP OF COMPANIES, EDDIE LITONJUA and DANILO LITONJUA, petitioners,
vs.
TERESITA VIGAN, respondent.
GONZAGA-REYES, J.:
In this petition for review on certiorari, petitioners seek to annul and set aside the (1) decision 1 of
the respondent Court of Appeals dated March 20, 2000 which reversed and set aside the decision
of the National Labor Relations Commission finding respondent guilty of abandonment and (2)
resolution2 dated June 19, 2000 denying petitioners’ motion for reconsideration.
The factual backdrop as found by the respondent Court of Appeals is as follows:3
"As to the factual milieu, the contending parties have diametrically opposed versions.
Vigan tells it this way; She was hired by the Litonjua Group of Companies on February 2,
1979 as telex operator. Later, she was assigned as accounting and payroll clerk under
the supervision of Danilo Litonjua. She had been performing well until 1995, when Danilo
Litonjua who was already naturally a (sic) very ill-tempered, ill-mouthed and violent
employer, became more so due to business problems. In fact, a complaint letter (Annex
"I", p. 85, rollo) was sent by the Litonjua Employees to the father and his junior regarding
the boorishness of their kin Danilo Litonjua but apparently the management just glossed
over this.1âwphi1.nêt
Danilo Litonjua became particularly angry with Vigan and threw a stapler at her when she
refused to give him money upon the instructions of Eddie Litonjua. From then on, Danilo
Litonjua had been rabid towards her – berated and bad-mouthed her, calling her a
"mental case" "psycho", "sira ulo", etc. and even threatened to hit her for some petty
matters. Danilo Litonjua even went so far as to lock her up in the comfort room and
preventing others to help her out. Not contented, Danilo Litonjua would order the security
guards to forcibly eject her or prevent her entry in the office premises whenever he was
angry. This occurred twice in July of 1995, first on the 5th then on the 7th. The incidents
prompted Vigan to write Danilo Litonjua letters asking why she was treated so and what
was her fault (Annexes "F", "G" & "K", pp. 82, 83 & 87, rollo). She suspected that Danilo
Litonjua wanted her out for he would not let her inside the office such that even while
abroad he would order the guards by phone to bar her. She pleaded for forgiveness or at
least for explanation but it fell on deaf ears.
Later, Danilo Litonjua changed tack and charged that Vigan had been hysterical,
emotional and created scenes at the office. He even required her to secure psychiatric
assistance. (Annexes "L" to "N", pp. 88-90, rollo) But despite proof that she was not
suffering from psychosis or organic brain syndrome as certified to by a Psychiatrist of
Danilo Litonjua’s choice (Annex "H", p. 84, rollo), still she was denied by the guards entry
to her work upon instructions again of Danilo Litonjua. Left with no alternative, Vigan filed
this case for illegal dismissal, alleging she was receiving a monthly salary of P8,000.00 at
the time she was unlawfully terminated.
The Litonjuas have a different version. They negate the existence of the Litonjua Group of
Companies and the connection of Eduardo Litonjua thereto. They contend that Vigan was
employed by ACT Theater, Inc., where Danilo Litonjua is a Director. They dispute the
charge of illegal dismissal for it was Vigan who ceased to report for work despite notices
and likewise contest the P8,000.00 monthly salary alleged by Vigan, claiming it was
merely P6,850.00.
They claim that Vigan was a habitual absentee specially on Tuesdays that fell within three
days before and after the "15th" day and "30th" day of every month. Her performance had
been satisfactory, but then starting March 15, 1996 she had become emotional,
hysterical, uncontrollable and created disturbances at the office with her crying and
shouting for no reason at all. The incident was repeated on April 3, 1996, May 24, 1996
and on June 4, 1996. Thus alarmed, on July 24, 1996 Vigan was required by
management to undergo medical and psychological examination at the company’s
expense and naming three doctors to attend to her. Dr. Baltazar Reyes and Dr. Tony
Perlas of the Philippine General Hospital and Dr. Lourdes Ignacio of the Medical Center
Manila. But they claim that Vigan refused to comply.
On August 2, 1996, Vigan again had another breakdown, hysterical, shouting and crying
as usual for about an hour, and then she just left the premises without a word. The next
day, August 3, 1996, Saturday, she came to the office and explained she was not feeling
well the day before. After that Vigan went AWOL and did not heed telegram notices from
her employer made on August 26, 1996 and on September 9, 1996 (Annexes "1" & "2",
pp. 108 to 109, rollo). She instead filed the instant suit for illegal dismissal."
On June 10, 1997, Labor Arbiter Ernesto S. Dinopol rendered his decision4 finding Vigan diseased
and unfit for work under Article 284 of the Labor Code5 and awarded the corresponding separation
pay as follows:6
"WHEREFORE, judgment is hereby rendered ordering respondents LITONJUA GROUP
OF COMPANIES, EDDIE K. LITONJUA and DANILO LITONJUA to jointly and severally
pay complainant TERESITA Y. VIGAN, the following amounts:
Separation pay (P4,000 x 18) years….= P72,000.00
Proportionate 13th" month pay 4,666.66
(P8,000 x 8 months over 12) …=
TOTAL AWARD………. P76,666.66
All other causes of action are DISMISSED for lack of merit."
Vigan appealed the decision to the National Labor Relations Commission which modified 7 the
arbiter’s decision by ruling that Art. 284 of the Labor Code is inapplicable in the instant case but
affirmed the legality of the termination of the complainant based on her having effectively
abandoned her job; the rest of the decision was affirmed. Vigan moved for a partial
reconsideration which was denied in a resolution dated August 7, 1998.
Dissatisfied, Vigan filed a petition for certiorari with the respondent Court of Appeals which
rendered its assailed decision dated March 20, 2000 reversing the NLRC Resolution. The
dispositive portion of the decision reads:8
"WHEREFORE, premises considered, the assailed NLRC Decision and Resolution are
hereby REVERSEDand SET ASIDE. In its stead judgment is rendered ordering the
respondents LITONJUA GROUP OF COMPANIES, EDDIE K. LITONJUA and DANILO
LITONJUA jointly and severally to:
(a) Reinstate complainant TERESITA Y. VIGAN if she so desires;
or
(b) pay her separation compensation in the sum of P8,000.00 multiplied by her
years of service counted from February 2, 1979 up to the time this Decision
becomes final; and in either case to pay Vigan;
(c) full back wages from the time she was illegally dismissed up to the date of the
finality of this Decision;
(d) moral damages in the amount of P40,000.00;
(e) exemplary damages in the amount of P15,000.00; and
(f) attorney’s fees of P10,000.00.
SO ORDERED."
Litonjuas filed their motion for reconsideration which was denied in a resolution dated June 19,
2000.
Petitioners Litonjuas filed the instant petition for review on certiorari alleging the following grounds:
I collectively the various corporations in which the Litonjua family has business interest. Considering
WHETHER OR NOT "LITONJUA GROUP OF COMPANIES", WHICH HAS NO
JURIDICAL PERSONALITY, BUT ONLY A GENERIC NAME TO DESCRIBE THE
VARIOUS COMPANIES WHICH THE LITONJUA FAMILY HAS INTERESTS, CAN BE
LEGALLY CONSTRUED AS RESPONDENT’S EMPLOYER.
II
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER
OF LAW IN HOLDING THAT RESPONDENT WAS ILLEGALLY DISMISSED FROM HER
EMPLOYMENT, INSTEAD OF AFFIRMING THE DECISION OF THE NATIONAL LABOR
RELATIONS COMMISSION THAT SHE HAD ABANDONED HER JOB OR THAT OF
LABOR ARBITER ERNESTO DINOPOL HOLDING THAT SHE SHOULD BE
SEPARATED ON THE GROUND OF DISEASE UNDER ARTICLE 284 OF THE LABOR
CODE, CONSIDERING THAT SHE HAS EXHIBITED A PATTERN OF
PSYCHOLOGICAL AND MENTAL DISTURBANCE WHICH ADMITTEDLY NO LONGER
MADE HER PHYSICALLY FIT TO WORK.
III
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER
OF LAW IN DIRECTING RESPONDENT’S REINSTATEMENT AT HER OWN CHOICE
OR PAYMENT OF SEPARATION PAY OF ONE MONTH SALARY FOR EVERY YEAR
OF SERVICE AND BACKWAGES.
IV
THE COURT OF APPEALS SERIOUSLY ERRED AS A MATTER OF LAW IN HOLDING
PETITIONERS LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S
FEES.
Anent the first assigned error, petitioners allege that the Litonjua group of companies cannot be a
party to this suit for it is not a legal entity with juridical personality but is merely a generic name
used to describe collectively the various companies in which the Litonjua family has business
interest; that the real employer of respondent Vigan was the ACT theater Incorporated where
Danilo Litonjua is a member of the Board of Directors while Eddie Litonjua was not connected in
any capacity.
Petitioners’ argument is meritorious. Only natural or juridical persons or entities authorized by law
may be parties to a civil action and every action must be prosecuted and defended in the name of
the real parties in interest.9Petitioners’ claim that Litonjua Group of Companies is not a legal entity
with juridical personality hence cannot be a party to this suit deserves consideration since
respondent failed to prove otherwise. In fact, respondent Vigan’s own allegation in her
Memorandum supported petitioners’ claim that Litonjua group of companies does not exist when
she stated therein that instead of naming each and every corporation of the Litonjua family where
she had rendered accounting and payroll works, she simply referred to these corporations as the
Litonjua group of companies, thus, respondent merely used such generic name to describe
the non-existence of the Litonjua group of companies as a juridical entity and petitioner Eddie
Litonjua’s denial of his connection in any capacity with the ACT Theater, the supposed company
where Vigan was employed, petitioner Eddie Litonjuas should also be excluded as a party in this
case since respondent Vigan failed to prove Eddie Litonjua’s participation in the instant case. It is
respondent Vigan, being the party asserting a fact, who has the burden of proof as to such
fact10 which however, she failed to discharge.
Next, petitioners claim that the complaint for illegal dismissal was prematurely filed since Vigan
was not dismissed, actual or constructive, from her employment as the records show that despite
being absent without official leave since August 5, 1996 and her receipt of two telegram notices
sent to her by petitioners on August 26, and September 9, 1996 for her to report for work, she
failed to do so and yet petitioners had not done any act to dismiss her. Petitioners deny Vigan’s
claim that she had been physically barred from entering the work premises.
Petitioners thus contend that since respondent Vigan was not illegally dismissed from
employment, the respondent court’s order reinstating the latter, awarding her separation pay
equivalent to one month salary per year of service as well as backwages, damages and attorney’s
fees have no factual and legal basis.
We are not persuaded.
The above arguments relate mainly to the correctness of the factual findings of the Court of
Appeals and the award of damages. This Court has consistently affirmed that the findings of fact
of the Court of Appeals are as a rule binding upon it, subject to certain exceptions, one of which is
when the factual findings of the Court of Appeals are contrary to those of the trial court (or
administrative body, as the case may be).11 However, it bears emphasizing that mere
disagreement between the Court of Appeals and the trial court as to the facts of a case does not
of itself warrant this Court's review of the same. It has been held that the doctrine that the findings
of fact made by the Court of Appeals, being conclusive in nature, are binding on this Court, applies
even if the Court of Appeals was in disagreement with the lower court as to the weight of evidence
with a consequent reversal of its findings of fact, so long as the findings of the Court of Appeals
are borne out by the record or based on substantial evidence.12
We have gone over the records of this case and found no cogent reason to disagree with the
respondent court’s findings that respondent Vigan did not abandon her job but was illegally
dismissed. Petitioners’ claim that despite two (2) telegram notices dated August 26 and
September 9, 1996 respectively sent to respondent Vigan to report for work, the latter did not heed
the demands and absented herself since August 5, 1996 was belied by the respondent’s
evidence, as it was upon instructions of petitioner Danilo Litonjua to the guards on duty that she
could not enter the premises of her workplace. In fact, in her letter dated August 30, 1996
addressed to petitioner Danilo Litonjua, respondent Vigan had complained of petitioner Danilo’s
inhumane treatment in barring her from entering her workplace, to wit:
"Sukdulan na po ang pang-aaping dinaranas ko sa inyo, sir. Since August 5 etc. I was
always approached by your guard Batutay and harassed by your men to vacate my
cubicle as per your strict order. Only this August 7 that you succeeded as you order the
door locked for me only. As per our agreement Aug. 27 at Jollibee (sic) gave me
assurance that I willingly undergo psychiatric test I could freely report for work without
intimidating me, you won’t anymore charge me of insubordination. You won’t disturb my
family anymore, so why do you advice to try to go back Aug. 30 but as always to be
barred by guard Batutay? Sir, with my 18 years of loyal service, all I need is a little
respect. Tao ako sir, hindi hayop. Malaki ang nawawala sa akin."
Notwithstanding the fact the she was refused entrance to her workplace, respondent Vigan, to
show her earnest desire to report for work, would sneak her way into the premises and punched
her time card but she could not resume work as the guards in the company gate would prevent
her per petitioner Danilo Litonjua’s instructions. It appears also that respondent Vigan wrote
petitioner Danilo a letter dated September 9, 1996 notifying him that per his instructions, she had
made an appointment for a psychiatric test on September 11, 1996 and requested him to make a
check payable to Dr. Lourdes Ladrido-Ignacio in the amount of P800.00 consultation fee as they
agreed upon. She underwent a psychiatric examination as a result of which Dr. Ignacio issued a
medical certificate as follows:13
"This is to certify that MISS TERESITA VIGAN has come for psychiatric evaluation on
September 11 and 17, 1996. The psychiatric interview and mental status examination did
not reveal any symptoms of psychosis or organic brain syndrome. She showed anxiety
but this was deemed a realistic reaction to her present job difficulties."
Respondent’s actuations militate against petitioners’ claim that she did not heed the notices to
return to work and abandoned her job. She had been going to her workplace to report for work but
was prevented from resuming her work upon the instructions of petitioner Danilo Litonjua. It would
be the height of injustice to allow an employee to claim as a ground for abandonment a situation
which he himself had brought about.14
We fully agree with the respondent court’s ratiocination on the illegality of Vigan’s dismissal, to
wit:15
"The basic issue is whether Vigan’s employment was terminated by illegal dismissal or by
abandonment of work, and We hold that this was a case of illegal dismissal.
Shopworn is the rule on abandonment that the immediate filing of a case for illegal
dismissal negates the same. Mark that Vigan promptly filed this suit for illegal dismissal
when her attempts to enter the premises of her workplace became futile and the efforts to
bar and eject her became unmistakable. In the more recent case of Rizada vs. NLRC
(G.R. No. 96982, September 21, 1999), the Supreme Court reiterated anew the hoary
rule that:
"To constitute abandonment two elements must concur (1) the failure to report for
work or absence without valid or justifiable reason, and (2) a clear intention to
sever the employer-employee relationship, with the second element as the more
determinative factor and being manifested by some overt acts. Abandoning one’s
job means the deliberate, unjustified refusal of the employee to resume his
employment and the burden of proof is on the employer to show a clear and
deliberate intent on the part of the employee to discontinue employment.
 Abandonment is a matter of intention and cannot be lightly inferred, much less
legally presumed from certain equivocal acts. (Shin Industrial v. National Labor
Relations Commission, 164 SCRA 8).
An employee who forthwith took steps to protest his dismissal cannot be said to
have abandoned his work." (Toogue v. National Labor Relations Commission,
238 SCRA 241), as where the employee immediately filed a complaint for illegal
dismissal to seek reinstatement (Tolong Aqua Culture Corp., et al. V. National
Labor Relations Commission, G.R. 122268, November 12, 1996) (emphasis
supplied).
Note that in the instant case Vigan was even pleading to be allowed to work but she was
prevented by the guards thereat upon the orders of Danilo Litonjua. These are disclosed
by her letters (Annexes "F", "G", "K", "Q", "R" and "U", pp. 82, 83, 87, 93, 94 & 97, rollo),
the entries in her time cards (Annexes "P", "S", "W" and "X", pp. 92, 95, 99 & 100, rollo)
and her compliance when required to see a psychiatrist (Annex "H", p. 84, rollo). On the
other hand there is complete silence from the Litonjuas on these matters, including on the
collective manifesto of several employees against Danilo Litonjua and his highhanded
ways (Annex "I", p. 85). They chose to ignore material and telling points. They even
alleged that Vigan refused to comply with their request for her to have medical
examination (Comment, pp. 164-171, rollo and Memorandum for the Respondents, pp.
215-222, rollo), an unmitigated falsity in the face of clear proofs that she complied with
their directive and was given a clean bill of mental health by a reputable psychiatrist of
their choice.
For emphasis, We shall quote with seeming triteness the dictum laid down in Mendoza
vs. NLRC (supra) regarding the unflinching rule in illegal dismissal cases:
"that the employer bears the burden of proof. To establish a case of
abandonment, the employer must prove the employees deliberate and unjustified
refusal to resume employment without any intention of returning. . .
mere absence from work, especially where the employee has been verbally told
not to report, cannot by itself constitute abandonment. To repeat, the employer
has the burden of proving overt acts on the employee’s part which demonstrate a
desire or intention to abandon her work…"
The NLRC had erred in shifting the onus probandi to Vigan in the charge of abandonment
against her, while the Litonjuas failed to discharge their burden. Though they may not
have verbally told Vigan not to report for work but the act of ordering the guards not to let
her in was just as clear a notice. Vigan’s plight was akin to that of the truck helper in the
case of Masagana Concrete Products, et al. vs. NLRC (G.R. No. 106916, September 3,
1999) who was likewise prevented from coming to work.
While there was no formal termination of his services, Mariñas, was
constructively dismissed when he was accused of tampering the "vale sheet" and
prevented from returning to work. Constructive dismissal does not always involve
forthright dismissal or diminution in rank, compensation, benefit and privileges.
For an act of clear discrimination insensibility or disdain by an employer may
become so unbearable on the part of the employee that it could foreclose any
choice by him except to forego his continued employment. In this case, Mariñas
had to resign from his job because he was prevented from returning back to work
unless he admitted his mistake in writing and he was not given any opportunity to
contest the charge against him. It is a rule often repeated that unsubstantiated
accusation without anything more are not synonymous with guilt and unless a
clear, valid, just or authorized ground for dismissing an employee is established
by the employer the dismissal shall be considered unfounded.
Similarly, Vigan was accused of having mental, emotional and physical disorders (Annex
"M", p. 89, rollo), but per medical examination it was proven that hers was pure anxiety as
a realistic reaction to her present job difficulties. She was charged of habitual
absenteeism on Tuesdays that fell within three days before and after the "15th" day and
"30th" day of every month (Litonjua’s Position Paper, pp. 101-107, rollo). This is
preposterous for how many Tuesdays in a year would fall within three days before and
after the "15th" day and "30th" day of every month? By no extrapolation can this be
habitual absenteeism."
Since respondent Vigan was illegally dismissed from her employment, she is entitled to: (1) either
reinstatement, if viable, or separation pay if reinstatement is no longer viable, and (2)
backwages.16 As correctly disposed by the respondent Court:17
"Thus finding that Vigan was illegally dismissed, she is entitled to the following:
1) Either reinstatement, if viable, or separation pay if reinstatement is no longer viable;
and 2) Backwages, Backwages and separation pay are distinct relief given to alleviate the
economic damage by an illegally dismissed employee. Hence, an award of separation
pay in lieu of reinstatement does not bar an award of backwages, computed from the time
of illegal dismissal… up to the date of the finality of the Decision... without qualification or
deduction. Separation pay, equivalent to one month’s salary for every year of service, is
awarded as an alternative to reinstatement when the latter is no longer an option.
Separation pay is computed from the commencement of employment up to the time of
termination, including the imputed service for which the employee is entitled to
backwages, with the salary rate prevailing at the end of the period of putative service
being the basis for computation (Masagana Concrete Products, et al. vs. NLRC, supra).
In case of a fraction of at least six (6) months in the length of service, the same shall be
considered as one year in computing the separation pay. With regard to backwages, it
meant literal "full backwages" that is inclusive of allowances and other benefits or their
monetary equivalent computed from the time her compensation was withheld from her up
to the time of her actual reinstatement, if it is still viable or up to the time the Decision in
her favor becomes final – without deducting from back wages the earning derived
elsewhere, if there is any, by Vigan during the period of her illegal dismissal. (Lopez vs.
NLRC, 297 SCRA 508).
In other words, Vigan is entitled to reinstatement, which perhaps is no longer viable due
to the strained relations between the parties, or separation pay of P8,000.00 for every
 year of service and backwages of another P8,000 per month reckoned from the time she
last received salary from the Litonjuas up to the date of the finality of this Decision. Mark
again that We allowed the P8,000.00 claim of Vigan as her last salary received for again
the Litonjuas failed to validly refute the same."

We likewise affirm respondent court’s award of moral and exemplary damages to the respondent.
As a rule, moral damages are recoverable only where the dismissal of the employee was attended
by bad faith or fraud or constituted an act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy. We find that bad faith attended respondent’s dismissal from
her employment. Bad faith involves a state of mind dominated by ill will or motive. It implies a
conscious and intentional design to do a wrongful act for a dishonest purpose or some moral
obliquity.18 Petitioner Danilo Litonjua showed ill will in treating respondent Vigan in a very unfair
and cruel manner which made her suffer anxieties by reason of such job difficulties. The report to
work notices sent by petitioners to respondent Vigan was just part of the ploy to make it appear
that the latter abandoned her work but in reality, Vigan was barred from entering her work
premises. We fully subscribe to respondent’s position that petitioners’ action was for the purpose
of removing her from her employment. Respondent Vigan is also entitled to exemplary damages
as her dismissal was effected in an oppressive and malevolent manner.19

We also find that there is a basis for the award of attorney’s fees. It is settled that in actions for
recovery of wages or where an employee was forced to litigate and incur expenses to protect his
rights and interest, he is entitled to an award of attorney’s fees.20

WHEREFORE, premises considered, the decision of the respondent Court of Appeals dated
March 20, 2000 is hereby AFFIRMED with the MODIFICATION that Litonjua Group of Companies
and Eddie Litonjua are dropped as parties in the instant case.1âwphi1.nêt

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 106436 December 3, 1994
VIRGILIO D. IMSON, petitioner,
vs.
HON. COURT OF APPEALS, HOLIDAY HILLS STOCK AND BREEDING FARM
CORPORATION, FNCB FINANCE CORPORATION, respondents.
Polotan Law Office for petitioner.
Felix R. Solomon for private respondents.
PUNO, J.:
The case at bench arose from a vehicular collision on December 11, 1983, involving petitioner's
Toyota Corolla and a Hino diesel truck registered under the names of private respondents FNCB
Finance Corporation and Holiday Hills Stock and Breeding Farm Corporation. The collision
seriously injured petitioner and totally wrecked his car.
On January 6, 1984, petitioner filed with the RTC Baguio City1 a Complaint for Damages2 Sued
were private respondents as registered owners of the truck; truck driver Felix B. Calip, Jr.; the
beneficial owners of the truck, Gorgonio Co Adarme, Felisa T. Co (also known as Felisa Tan), and
Cirilia Chua Siok Bieng, and the truck insurer, Western Guaranty Corporation.
The Complaint prayed that defendants be ordered to pay, jointly and severally, two hundred
seventy thousand pesos (P270,000.00) as compensatory damages, fifty thousand pesos
(P50,000.00) each as moral and exemplary damages, and attorney's fees, litigation expenses, and
cost of suit.8
Defendants driver and beneficial owners failed to answer and were declared in default. 4 On May
29, 1987, however, petitioner and defendant insurer, entered into a compromise agreement which
provided, inter alia:
1. Defendant Western Guaranty Corporation (Western Guaranty for short) admits
that its total liability under the laws and the insurance contract sued upon is
P70,000.00;
2. In full settlement of its liability under the laws and the said insurance contract,
defendant Western Guaranty shall pay plaintiff (herein petitioner) the amount of
P70,000.00 upon the signing of this compromise agreement;
3. This compromise agreement shall in no way waive nor prejudice plaintiffs
(herein petitioner's) rights to proceed against the other defendants with respect
the remainder of his claims;
4. This compromise agreement shall be a full and final settlement of the issues
between plaintiff (herein petitioner) and defendant Western Guaranty in their
complaint and answer and, from now on, they shall have no more right against
one another except the enforcement of this compromise agreement.
In consequence of the compromise agreement, the trial court dismissed the Complaint for
Damages against Western Guaranty Corporation on June 16, 1987.8 A copy of the Order of
dismissal was received by private respondent Holiday Hills Stock and Breeding Farm Corporation
on July 13, 1987. Nearly eighteen (18) months later, said private respondent moved to dismiss the
case against all the other defendants. It argued that since they are all indispensable parties under
a common cause of action, the dismissal of the case against defendant insurer must result in the
dismissal of the suit against all of them. The trial court denied the motion.
Private respondent Holiday Hills Stock and Breeding Farm Corporation assailed the denial order
through a Petition for Certiorari, Prohibition and Mandamus With Restraining Order filed with
respondent Court of Appeals. The Petition was docketed as CA-G.R. SP No. 17651. On July 10,
1992, the Court of Appeals,7 through its Special Sixth Division,8 reversed the trial court, as it ruled:
The petitioner (herein private respondent Holiday Hills Stock and Breeding Farm Corporation)
cites the doctrine laid down in Lim Tanhu v. Hon. Ramolete, 66 SCRA 425, as applied later in Co
v. Acosta, 134 SCRA 185, to support its averment that the court a quo gravely abused its
discretion in refusing to dismiss the case.
Essentially, the doctrine adverted to essays that in a common cause of action where all the
defendants are indispensable parties, the court's power to act is integral and cannot be split, such
that it cannot relieve any of them and at the same time render judgment against the rest.
We find applicability of the doctrine to the case at bar.
A cursory reading of the complaint . . . reveals that the cause of action was the alleged bad faith
and gross negligence of the defendants resulting in the injuries complained of and for which the
action for damages was filed. The inclusion of Western Guaranty Corporation was vital to the
claim, it being the insurer of the diesel truck without which, the claim could be set for naught.
Stated otherwise, it is an indispensable party as the petitioner (herein private respondent stock
and breeding farm corporation) . . . . Private respondent's (herein petitioner's argument that the
said insurance company was sued on a different cause of action, i.e., its bounden duty under the
insurance law to pay or settle claims arising under its policy coverage, is untenable, for the cited
law perceives the existence of a just cause, and according to the answer filed by the Western
Guaranty Corporation . . . the proximate cause of the accident was the fault of the plaintiff (herein
petitioner), hence it was not liable for damages. There is in fact a congruence of affirmative
defense among the answering defendants.
Moreover, it is undisputed that the injury caused is covered by the insurance company concerned.
Thus, when the said insurer settled its liability with the private respondent (petitioner herein) . . . ,
the other defendants, as the insured and indispensable parties to a common cause of action,
necessarily benefited from such settlement including the defaulted defendants, for as stated in the
aforecited cases, it is deemed that anything done by or for the answering defendant is done by or
for the ones in default since it is implicit in the rule that default is in essence a mere formality that
deprives them of no more than to take part in the trial, but if the complaint is dismissed as to the
answering defendant, it should also be dismissed as to them.9 (Citations omitted.)
Petitioner now comes to this Court with the following assignments of error:
A.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
IN RULING THAT THE DEFENDANTS IN CIVIL CASE NO. 248-R ARE
INDISPENSABLE PARTIES;
B.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
IN RULING THAT IN CIVIL CASE NO. 248-R THERE IS A COMMON CAUSE
OF ACTION AGAINST THE DEFENDANTS THEREIN;
C.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
IN RULING THAT IN CIVIL CASE NO. 248-R THE RULING OF THIS
HONORABLE COURT IN LIM TAN HU VS. RAMOLETE IS APPLICABLE;
D.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR
IN RULING THAT THE DOCTRINE OF ESTOPPEL AND LACHES ON
MATTERS OF JURISDICTION IS NOT APPLICABLE IN CIVIL CASE NO. 248-
R.
There is merit to the petition,.
In the case of Lim Tanhu v. Ramolete, 66 SCRA 425, 458-459 (1975) this court held that:
. . . (I)n all instances where a common cause of action is alleged against several
defendants, some of whom answer and the others do not, the latter or those in
default acquire a vested right not only to own the defense interposed in the
answer of their co-defendant or co-defendants not in default but also to expect a
result of the litigation totally common with them in kind and in amount whether
favorable or unfavorable. The substantive unity of the plaintiffs cause against all
the defendants is carried through to its adjective phase as ineluctably demanded
by the homogeneity and indivisibility of justice itself. . . . The integrity of the
common cause of action against all the defendants and the indispensability of all
of them in the proceedings do not permit any possibility of waiver of the plaintiffs
right only as to one or some of them, without including all of them, and so, as a
rule, withdrawal must be deemed to be a confession of weakness as to all. . . . .
Where all the defendants are indispensable parties, for which reason the
absence of any of them in the case would result in the court losing its
competency to act validly, any compromise that the plaintiff might wish to make
with any of them must, as a matter of correct procedure, have to await until after
the rendition of the judgment, at which stage the plaintiff may then treat the
matter of its execution and the satisfaction of his claim as variably as he might
please. Accordingly, in the case now before Us together with the dismissal of the
complaint against the non-defaulted defendants, the court should have ordered
also the dismissal thereof as to petitioner (referring to the defaulting defendants
in the case).
In sum, Lim Tanhu states that where a complaint alleges a common cause of action against
defendants who are all indispensable parties to the case, its dismissal against any of them by
virtue of a compromise agreement with the plaintiff necessarily results in the dismissal of the case
against the other defendants, including those in default. The ruling is rooted on the rationale that
the court's power to act in a case involving a common cause of action against indispensable
parties "is integral and cannot be split such that it cannot relieve any of them and at the same time
render judgment against the rest. 10
For Lim Tanhu to apply to the case at bench, it must be established that: (1) petitioner has
common cause of action against private respondents and the other defendants in Civil Case No.
248-R; and (2) all the defendants are indispensable parties to the case.
Cause of action has a fixed meaning in this jurisdiction. It is the delict or wrong by which the right
of the plaintiff is violated by the defendant. 11 The question as to whether a plaintiff has a cause of
action is determined by the averments in the pleadings pertaining to the acts of the defendant.
Whether such acts give him a right of action is determined by substantive law. 12
In the case at bench, it is clear that petitioner has different and separate causes of action against
the defendants in the case. The allegations in the Complaint show that petitioner seeks to recover
from the truck driver for his wrong which caused injury to petitioner and his car. The cause of
action against him is based on quasi-delict under Article 2176 of the New Civil Code. Quasi-delict,
too, is the basis of the cause of action against defendants beneficial and registered owners. But in
their case, it is Article 2180 of the same Code which governs the rights of the parties.
However, with respect to defendant Western Guaranty Corporation, petitioner's cause of action is
based on contract. He seeks to recover from the insurer on the basis of the third party liability
clause of its insurance contract with the owners of the truck. This is acknowledged by the second
paragraph of the compromise agreement between petitioner and defendant insurer, thus:

2. In full settlement of its liability under the laws and the said insurance contract,
defendant Western Guaranty shall pay plaintiff (herein petitioner) the amount of
P70,000.00 upon the signing of this compromise agreement.

Quite clearly then, Lim Tanhu will not apply to the case at bench for there is no showing
that petitioner has a common cause of action against the defendants in Civil Case No.
248-R.

But this is not all. Defendants in Civil Case No. 248-R are not all indispensable parties. An
indispensable party is one whose interest will be affected by the court's action in the litigation, and
without whom no final determination of the case can be had. The party's interest in the subject
matter of the suit and in the relief sought are so inextricably intertwined with the other parties' that
his legal presence as a party to the proceeding is an absolute necessity. 13 In his absence there
cannot be a resolution of the dispute of the parties before the court which is effective, complete, or
equitable.14

Conversely, a party is not indispensable to the suit if his interest in the controversy or subject
matter is distinct and divisible from the interest of the other parties and will not necessarily be
prejudiced by a judgment which does complete justice to the parties in court.15 He is not
indispensable if his presence would merely permit complete relief between him and those already
parties to the action, or will simply avoid multiple litigation.16

It is true that all of petitioner's claims in Civil Case No. 248-R is premised on the wrong committed
by defendant truck driver. Concededly, the truck driver is an indispensable party to the suit. The
other defendants, however, cannot be categorized as indispensable parties. They are merely
proper parties to the case. Proper parties have been described as parties whose presence is
necessary in order to adjudicate the whole controversy, but whose interests are so far separable
that a final decree can be made in their absence without affecting them. 17 It is easy to see that if
any of them had not been impleaded as defendant, the case would still proceed without
prejudicing the party not impleaded. Thus, if petitioner did not sue Western Guaranty Corporation,
the omission would not cause the dismissal of the suit against the other defendants. Even without
the insurer, the trial court would not lose its competency to act completely and validly on the
damage suit. The insurer, clearly, is not an indispensable party in Civil Case No. 248-R.

IN VIEW WHEREOF, the instant petition is GRANTED. The Decision, dated July 10, 1992, of the
Court of Appeals in CA-G.R. SP No. 17651 is REVERSED AND SET ASIDE. The Complaint in
Civil Case No. 248-R is REINSTATED and REMANDED to the trial court for further proceedings.
No costs.

SO ORDERED.
 THIRD DIVISION
[G.R. No. 110048. November 19, 1999]
SERVICEWIDE SPECIALISTS, INC. petitioner, vs. COURT OF APPEALS, HILDA TEE, &
ALBERTO M. VILLAFRANCA, respondents.
DECISION
PURISIMA, J.:
This is a petition for review on certiorari under Rule 45 of the Decision of the Court of
Appeals[1] in CA-G.R. CV No. 19571, affirming the judgment of the Regional Trial Court of Manila,
Branch XX, dismissing Civil Case No. 84-25763 for replevin and damages.
The litigation involves a motor vehicle, a Colt Galant, 4-door Sedan automobile, with Motor
No. 2E-08927, Serial No. A112A-5297, Model No. 1976.
The appellate court culled the facts that matter as follows:[2]
"On May 14, 1976, Leticia L. Laus of Quezon City purchased on credit a Colt Galant xxx from
Fortune Motors (Phils.) Corporation. On the same date, she executed a promissory note for the
amount of P56,028.00, inclusive of interest at 12% per annum, payable within a period of 48
months starting August, 1976 at a monthly installment of P1,167.25 due and demandable on the
17th day of each month (Exhibit A, pp. 144, Orig. Records,). It was agreed upon, among others,
that in case of default in the payment of any installment the total principal sum, together with the
interest, shall become immediately due and payable (Exhibit A; p. 144, Orig. Records). As a
security for the promissory note, a chattel mortgage was constituted over the said motor vehicle
(Exhibit B, ibid.), with a deed of assignment incorporated therein such that the credit and mortgage
rights were assigned by Fortune Motors Corp. in favor of Filinvest Credit Corporation with the
consent of the mortgagor-debtor Leticia Laus (Exhibits B-1 and B-2; p. 147, ibid.). The vehicle was
then registered in the name of Leticia L. Laus with the chattel mortgage annotated on said
certificate. (Exhibit "H"; p. 154, ibid.)
On September 25, 1978, Filinvest Credit Corporation in turn assigned the credit in favor of
Servicewide Specialists, Inc. (Servicewide, for brevity) transferring unto the latter all its rights
under the promissory note and the chattel mortgage (Exhibit B-3; p. 149, ibid.) with the
corresponding notice of assignment sent to the registered car owner (Exhibit C; p. 150, Ibid.).
On April 18, 1977, Leticia Laus failed to pay the monthly installment for that month. The
installments for the succeeding 17 months were not likewise fully paid, hence on September 25,
1978, pursuant to the provisions of the promissory note, Servicewide demanded payment of the
entire outstanding balance of P46,775.24 inclusive of interests (Exhibits D and E; pp. 151-
152, ibid.). Despite said formal demand, Leticia Laus failed to pay all the monthly installments due
until July 18, 1980.
On July 25, 1984, Servicewide sent a statement of account to Leticia Laus and demanded
payment of the amount of P86,613.32 representing the outstanding balance plus interests up to
July 25, 1985, attorneys fees, liquidated damages, estimated repossession expense, and bonding
fee (Exhibit F; p. 153, ibid.)
As a result of the failure of Leticia Laus to settle her obligation, or at least to surrender possession
of the motor vehicle for the purpose of foreclosure, Servicewide instituted a complaint for replevin,
impleading Hilda Tee and John Dee in whose custody the vehicle was believed to be at the time of
the filing of the suit.
In its complaint, plaintiff alleged that it had superior lien over the mortgaged vehicle; that it is
lawfully entitled to the possession of the same together with all its accessories and equipments;
(sic) that Hilda Tee was wrongfully detaining the motor vehicle for the purpose of defeating its
mortgage lien; and that a sufficient bond had been filed in court. (Complaint with Annexes, pp. 1-
13, ibid.). On July 30, 1984, the court approved the replevin bond (p. 20, ibid.)
On August 1, 1984, Alberto Villafranca filed a third party claim contending that he is the absolute
owner of the subject motor vehicle duly evidenced by the Bureau of Land Transportations
Certificate of Registration issued in his name on June 22, 1984; that he acquired the said mother
vehicle from a certain Remedios D. Yang under a Deed of Sale dated May 16, 1984; that he
acquired the same free from all lien and emcumbrances; and that on July 30, 1984, the said
automobile was taken from his residence by Deputy Sheriff Bernardo Bernabe pursuant to the
seizure order issued by the court a quo.
Upon motion of the plaintiff below, Alberto Villafranca was substituted as defendant. Summons
was served upon him. (pp. 55-56, ibid).
On March 20, 1985, Alberto Villafranca moved for the dismissal of the complaint on the ground
that there is another action pending between the same parties before the Regional Trial Court of
Makati, Branch 140, docketed as Civil Case No. 8310, involving the seizure of subject motor
vehicle and the indemnity bond posted by Servicewide (Motion to Dismiss with Annexes; pp. 57-
110, ibid.) On March 28, 1985, the court granted the aforesaid motion (p. 122, ibid.), but
subsequently the order of dismissal was reconsidered and set aside (pp. 135-136, ibid.). For
failure to file his Answer as required by the court a quo, Alberto Villafranca was declared in default
and plaintiffs evidence was received ex parte.
On December 27, 1985, the lower court rendered a decision dismissing the complaint for
insufficiency of evidence. Its motion for reconsideration of said decision having been denied, xxx.
In its appeal to the Court of Appeals, petitioner theorized that a suit for replevin aimed at the
foreclosure of a chattel is an action quasi in rem, and does not require the inclusion of the principal
obligor in the Complaint. However, the appellate court affirmed the decision of the lower Court;
ratiocinating, thus:
A cursory reading, however, of the Promissory Note dated May 14, 1976 in favor of Fortune
Motors (Phils.) Corp. in the sum of P56,028.00 (Annex A of Complaint, p. 7, Original Records) and
the Chattel Mortgage of the same date (Annex B of Complaint; pp. 8-9, ibid.) will disclose that the
maker and mortgagor respectively are one and the same person: Leticia Laus. In fact, plaintiff-
appellant admits in paragraphs (sic) nos. 2 and 3 of its Complaint that the aforesaid public
documents (Annexes A and B thereof) were executed by Leticia Laus, who, for reasons not
explained, was never impleaded. In the case under consideration, plaintiff-appellants main case is
for judicial foreclosure of the chattel mortgage against Hilda Tee and John Doe who was later
substituted by appellee Alberto Villafranca. But as there is no privity of contract, not even a causal
link, between plaintiff-appellant Servicewide Specialists, Inc. and defendant-appellee Alberto
Villafranca, the court a quo committed no reversible error when it dismissed the case for
insufficiency of evidence against Hilda Tee and Alberto Villafranca since the evidence adduced
pointed to Leticia Laus as the party liable for the obligation sued upon (p. 2, RTC Decision). [3]
Petitioner presented a Motion for Reconsideration but in its Resolution[4] of May 10, 1993, the
Court of Appeals denied the same, taking notice of another case pending between the same
parties xxx relating to the very chattel mortgage of the motor vehicle in litigation.
Hence, the present petition for review on certiorari under Rule 45. Essentially, the sole issue
here is: Whether or not a case for replevin may be pursued against the defendant, Alberto
Villafranca, without impleading the absconding debtor-mortgagor?
Rule 60 of the Revised Rules of Court requires that an applicant for replevin must show that
he is the owner of the property claimed, particularly describing it, or is entitled to the possession
thereof.[5] Where the right of the plaintiff to the possession of the specified property is so conceded
or evident, the action need only be maintained against him who so possesses the property. In rem
action est per quam rem nostram quae ab alio possidetur petimus, et semper adversus eum est
qui rem possidet.[6]
[7]
Citing Northern Motors, Inc. vs. Herrera, the Court said in the case of BA Finance (which
is of similar import with the present case):
There can be no question that persons having a special right of property in the goods the recovery
of which is sought, such as a chattel mortgagee, may maintain an action for replevin
therefor. Where the mortgage authorizes the mortgagee to take possession of the property on
default, he may maintain an action to recover possession of the mortgaged chattels from the
mortgagor or from any person in whose hands he may find them.[8]
Thus, in default of the mortgagor, the mortgagee is thereby constituted as attorney-in-fact of
the mortgagor, enabling such mortgagee to act for and in behalf of the owner. That the defendant
is not privy to the chattel mortgage should be inconsequential. By the fact that the object of
replevin is traced to his possession, one properly can be a defendant in an action for replevin. It is
here assumed that the plaintiffs right to possess the thing is not or cannot be disputed. [9] (Italics
supplied)
However, in case the right of possession on the part of the plaintiff, or his authority to claim
such possession or that of his principal, is put to great doubt (a contending party may contest the
legal bases for plaintiffs cause of action or an adverse and independent claim of ownership or right
of possession may be raised by that party), it could become essential to have other persons
involved and impleaded for a complete determination and resolution of the controversy.[10] In the
case under scrutiny, it is not disputed that there is an adverse and independent claim of ownership
by the respondent as evinced by the existence of a pending case before the Court of Appeals
involving subject motor vehicle between the same parties herein. [11] Its resolution is a factual
matter, the province of which properly lies in the lower Court and not in the Supreme Court, in the
guise of a petition for review on certiorari. For it is basic that under Rule 45, this Court only
entertains questions of law, and rare are the exceptions and the present case does not appear to
be one of them.
In a suit for replevin, a clear right of possession must be established. (Italics supplied) A
foreclosure under a chattel mortgage may properly be commenced only once there is default on
the part of the mortgagor of his obligation secured by the mortgage. The replevin in this case has
been resorted to in order to pave the way for the foreclosure of what is covered by the chattel
mortgage. The conditions essential for such foreclosure would be to show, firstly, the existence of
the chattel mortgage and, secondly, the default of the mortgagor. These requirements must be
shown because the validity of the plaintiffs exercise of the right of foreclosure is inevitably
dependent thereon.[12]
Since the mortgagees right of possession is conditioned upon the actual fact of default which
itself may be controverted, the inclusion of other parties, like the debtor or the mortgagor himself,
may be required in order to allow a full and conclusive determination of the case. When the
mortgagee seeks a replevin in order to effect the eventual foreclosure of the mortgage, it is not
only the existence of, but also the mortgagors default on, the chattel mortgage that, among other
things, can properly uphold the right to replevy the property. The burden to establish a valid
justification for such action lies with the plaintiff. An adverse possessor, who is not the mortgagor,
cannot just be deprived of his possession, let alone be bound by the terms of the chattel mortgage
contract, simply because the mortgagee brings up an action for replevin.[13]
Leticia Laus, being an indispensable party, should have been impleaded in the complaint for
replevin and damages. An indispensable party is one whose interest will be affected by the courts
action in the litigation, and without whom no final determination of the case can be had. The partys
interest in the subject matter of the suit and in the relief sought are so inextricably intertwined with
the other parties that his legal presence as a party to the proceeding is an absolute necessity. In
his absence, there cannot be a resolution of the dispute of the parties before the Court which is
effective, complete, or equitable.
Conversely, a party is not indispensable to the suit if his interest in the controversy or subject
matter is distinct and divisible from the interest of the other parties and will not necessarily be
prejudiced by a judgment which does complete justice to the parties in Court. He is not
indispensable if his presence would merely complete relief between him and those already parties
to the action or will simply avoid multiple litigation.[14]Without the presence of indispensable parties
to a suit or proceeding, a judgment of a Court cannot attain real finality.[15]
That petitioner could not locate the mortgagor, Leticia Laus, is no excuse for resorting to a
procedural short-cut. It could have properly availed of substituted service of summons under the
Revised Rules of Court.[16] If it deemed such a mode to be unavailing, it could have proceeded in
accordance with Section 14 of the same Rule.[17] Indeed, petitioner had other proper remedies, it
could have resorted to but failed to avail of. For instance, it could have properly impleaded the
mortgagor. Such failure is fatal to petitioners cause.
 With the foregoing disquisition and conclusion, the other issues raised by petitioner need not
be passed upon.
WHEREFORE, the Petition is DENIED and the Decision of the Court of Appeals in CA-G.R.
CV No. 19571 AFFIRMED. No pronouncement as to costs.
SO ORDERED.
 THIRD DIVISION
G.R. No. 140746 March 16, 2005
PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, Petitioner,
vs.
STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the Decision1 dated July 23 1999 and
Resolution2 dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453, entitled
"Standard Insurance Company, Inc., and Martina Gicale vs. PANTRANCO North Express, Inc.,
and Alexander Buncan."
In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned by
his mother Martina Gicale, respondent herein. It was then raining. While driving north bound along
the National Highway in Talavera, Nueva Ecija, a passenger bus, owned by Pantranco North
Express, Inc., petitioner, driven by Alexander Buncan, also a petitioner, was trailing behind. When
the two vehicles were negotiating a curve along the highway, the passenger bus overtook the
jeepney. In so doing, the passenger bus hit the left rear side of the jeepney and sped away.
Crispin reported the incident to the Talavera Police Station and respondent Standard Insurance
Co., Inc. (Standard), insurer of the jeepney. The total cost of the repair was P21,415.00, but
respondent Standard paid only P8,000.00. Martina Gicale shouldered the balance of P13,415.00.
Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners
Pantranco and its driver Alexander Buncan, but they refused. This prompted respondents to file
with the Regional Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.
In their answer, both petitioners specifically denied the allegations in the complaint and averred
that it is the Metropolitan Trial Court, not the RTC, which has jurisdiction over the case.
On June 5, 1992, the trial court rendered a Decision3 in favor of respondents Standard and
Martina, thus:
"WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered
in favor of the plaintiffs, Standard Insurance Company and Martina Gicale, and against
defendants Pantranco Bus Company and Alexander Buncan, ordering the latter to pay as
follows:
(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due thereon
from November 27, 1984 until fully paid;
(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due thereon from
October 22, 1984 until fully paid;
(3) to pay the sum of P10,000.00 for attorney’s fees;
(4) to pay the expenses of litigation and the cost of suit.
SO ORDERED."
On appeal, the Court of Appeals, in a Decision4 dated July 23, 1999, affirmed the trial court’s
ruling, holding that:
"The appellants argue that appellee Gicale’s claim of P13,415.00 and appellee insurance
company’s claim of P8,000.00 individually fell under the exclusive original jurisdiction of
the municipal trial court. This is not correct because under the Totality Rule provided for
under Sec. 19, Batas Pambansa Bilang 129, it is the sum of the two claims that
determines the jurisdictional amount.
xxx
In the case at bench, the total of the two claims is definitely more than P20,000.00 which
at the time of the incident in question was the jurisdictional amount of the Regional Trial
Court.
Appellants contend that there was a misjoinder of parties. Assuming that there was, under
the Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil Procedure (ditto),
the same does not affect the jurisdiction of the court nor is it a ground to dismiss the
complaint.
xxx
It does not need perspicacity in logic to see that appellees Gicale’s and insurance
company’s individual claims against appellees (sic) arose from the same vehicular
accident on October 28, 1984 involving appellant Pantranco’s bus and appellee Gicale’s
jeepney. That being the case, there was a question of fact common to all the parties:
Whose fault or negligence caused the damage to the jeepney?
Appellants submit that they were denied their day in court because the case was deemed
submitted for decision "without even declaring defendants in default or to have waived the
presentation of evidence." This is incorrect. Of course, the court did not declare
defendants in default because that is done only when the defendant fails to tender an
answer within the reglementary period. When the lower court ordered that the case is
deemed submitted for decision that meant that the defendants were deemed to have
waived their right to present evidence. If they failed to adduce their evidence, they should
blame nobody but themselves. They failed to be present during the scheduled hearing for
the reception of their evidence despite notice and without any motion or explanation. They
 did not even file any motion for reconsideration of the order considering the case
submitted for decision.
Finally, contrary to the assertion of the defendant-appellants, the evidence preponderantly
established their liability for quasi-delict under Article 2176 of the Civil Code."
Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a
Resolution dated November 4, 1999.
Hence, this petition for review on certiorari raising the following assignments of error:
"I
WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT
OF THE ACTION CONSIDERING THAT RESPONDENTS’ RESPECTIVE CAUSE OF
ACTION AGAINST PETITIONERS DID NOT ARISE OUT OF THE SAME
TRANSACTION NOR ARE THERE QUESTIONS OF LAW AND FACTS COMMON TO
BOTH PETITIONERS AND RESPONDENTS.
II
WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING
THAT BASED ON THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE
AT BAR, RESPONDENTS HAVE NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED
FOR.
III
WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE
PROCESS."
For their part, respondents contend that their individual claims arose out of the same vehicular
accident and involve a common question of fact and law. Hence, the RTC has jurisdiction over the
case.
I involved.8 The issue of whether respondents’ claims shall be lumped together is determined by
Petitioners insist that the trial court has no jurisdiction over the case since the cause of action of
each respondent did not arise from the same transaction and that there are no common questions
of law and fact common to both parties. Section 6, Rule 3 of the Revised Rules of
Court,5 provides:
"Sec. 6. Permissive joinder of parties. – All persons in whom or against whom any right to
relief in respect to or arising out of the same transaction or series of transactions is
alleged to exist, whether jointly, severally, or in the alternative, may, except as otherwise
provided in these Rules, join as plaintiffs or be joined as defendants in one complaint,
where any question of law or fact common to all such plaintiffs or to all such defendants
may arise in the action; but the court may make such orders as may be just to prevent
any plaintiff or defendant from being embarrassed or put to expense in connection with
any proceedings in which he may have no interest."
Permissive joinder of parties requires that: (a) the right to relief arises out of the same transaction
or series of transactions; (b) there is a question of law or fact common to all the plaintiffs or
defendants; and (c) such joinder is not otherwise proscribed by the provisions of the Rules on
jurisdiction and venue.6
In this case, there is a single transaction common to all, that is, Pantranco’s bus hitting the rear
side of the jeepney. There is also a common question of fact, that is, whether petitioners are
negligent. There being a single transaction common to both respondents, consequently, they have
the same cause of action against petitioners.
To determine identity of cause of action, it must be ascertained whether the same evidence which
is necessary to sustain the second cause of action would have been sufficient to authorize a
recovery in the first.7 Here, had respondents filed separate suits against petitioners, the same
evidence would have been presented to sustain the same cause of action. Thus, the filing by both
respondents of the complaint with the court below is in order. Such joinder of parties avoids
multiplicity of suit and ensures the convenient, speedy and orderly administration of justice.
Corollarily, Section 5(d), Rule 2 of the same Rules provides:
"Sec. 5. Joinder of causes of action. – A party may in one pleading assert, in the
alternative or otherwise, as many causes of action as he may have against an opposing
party, subject to the following conditions:
xxx
(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction."
The above provision presupposes that the different causes of action which are joined accrue in
favor of the same plaintiff/s and against the same defendant/s and that no misjoinder of parties is
paragraph (d) of the above provision. This paragraph embodies the "totality rule" as exemplified by
Section 33 (1) of B.P. Blg. 1299 which states, among others, that "where there are several claims
or causes of action between the same or different parties, embodied in the same complaint, the
amount of the demand shall be the totality of the claims in all the causes of action, irrespective of
whether the causes of action arose out of the same or different transactions."
As previously stated, respondents’ cause of action against petitioners arose out of the same
transaction. Thus, the amount of the demand shall be the totality of the claims.
Respondent Standard’s claim is P8,000.00, while that of respondent Martina Gicale is P13,415.00,
or a total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has "exclusive original
jurisdiction over all other cases, in which the demand, exclusive of interest and cost or the value of
the property in controversy, amounts to more than twenty thousand pesos (P20,000.00)." Clearly,
it is the RTC that has jurisdiction over the instant case. It bears emphasis that when the complaint
was filed, R.A. 7691 expanding the jurisdiction of the Metropolitan, Municipal and Municipal Circuit
Trial Courts had not yet taken effect. It became effective on April 15, 1994.

II

The finding of the trial court, affirmed by the Appellate Court, that petitioners are negligent and
thus liable to respondents, is a factual finding which is binding upon us, a rule well-established in
our jurisprudence. It has been repeatedly held that the trial court's factual findings, when affirmed
by the Appellate Court, are conclusive and binding upon this Court, if they are not tainted with
arbitrariness or oversight of some fact or circumstance of significance and influence. Petitioners
have not presented sufficient ground to warrant a deviation from this rule.10

III

There is no merit in petitioners’ contention that they were denied due process. Records show that
during the hearing, petitioner Pantranco’s counsel filed two motions for resetting of trial which were
granted by the trial court. Subsequently, said counsel filed a notice to withdraw. After respondents
had presented their evidence, the trial court, upon petitioners’ motion, reset the hearing to another
date. On this date, Pantranco failed to appear. Thus, the trial court warned Pantranco that should
it fail to appear during the next hearing, the case will be submitted for resolution on the basis of
the evidence presented. Subsequently, Pantranco’s new counsel manifested that his client is
willing to settle the case amicably and moved for another postponement. The trial court granted
the motion. On the date of the hearing, the new counsel manifested that Pantranco’s employees
are on strike and moved for another postponement. On the next hearing, said counsel still failed to
appear. Hence, the trial court considered the case submitted for decision.

We have consistently held that the essence of due process is simply an opportunity to be heard,
or an opportunity to explain one’s side or an opportunity to seek for a reconsideration of the action
or ruling complained of.11

Petitioner Pantranco filed an answer and participated during the trial and presentation of
respondents’ evidence. It was apprised of the notices of hearing issued by the trial court. Indeed, it
was afforded fair and reasonable opportunity to explain its side of the controversy. Clearly, it was
not denied of its right to due process. What is frowned upon is the absolute lack of notice and
hearing which is not present here.

WHEREFORE, the petition is DENIED. The assailed Decision dated July 23 1999 and Resolution
dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453 are hereby
AFFIRMED. Costs against petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 162575 December 15, 2010
BEATRIZ SIOK PING TANG, Petitioner,
vs.
SUBIC BAY DISTRIBUTION, INC., Respondent.
DECISION
PERALTA, J.:
Before us is a petition for review on certiorari filed by petitioner Beatriz Siok Ping Tang seeking to
annul and set aside the Decision1 dated October 17, 2003 and the Resolution2 dated March 5,
2004 of the Court of Appeals (CA) in CA-G.R. SP No. 74629.
The antecedent facts are as follows:
Petitioner is doing business under the name and style of Able Transport. Respondent Subic Bay
Distribution, Inc. (SBDI) entered in two Distributorship Agreements with petitioner and Able
Transport in April 2002. Under the Agreements, respondent, as seller, will sell, deliver or procure
to be delivered petroleum products, and petitioner, as distributor, will purchase, receive and pay
for its purchases from respondent. The two Agreements had a period of one year, commencing on
October 2001 to October 2002, which shall continue on an annual basis unless terminated by
either party upon thirty days written notice to the other prior to the expiration of the original term or
any extension thereof.
Section 6.3 of the Distributorship Agreement provides that respondent may require petitioner to
put up securities, real or personal, or to furnish respondent a performance bond issued by a
bonding company chosen by the latter to secure and answer for petitioner's outstanding account,
and or faithful performance of her obligations as contained or arising out of the Agreement. Thus,
petitioner applied for and was granted a credit line by the United Coconut Planters Bank (UCPB),
International Exchange Bank (IEBank), and Security Bank Corporation (SBC). Petitioner also
applied with the Asia United Bank (AUB) an irrevocable domestic standby letter of credit in favor of
respondent. All these banks separately executed several undertakings setting the terms and
conditions governing the drawing of money by respondent from these banks.
Petitioner allegedly failed to pay her obligations to respondent despite demand, thus, respondent
tried to withdraw from these bank undertakings.
Petitioner then filed with the Regional Trial Court (RTC) of Quezon City separate petitions 3 against
the banks for declaration of nullity of the several bank undertakings and domestic letter of credit
which they issued with the application for the issuance of a temporary restraining order (TRO) and
writ of preliminary injunction. The cases were later consolidated and were assigned to Branch 101.
Petitioner asked for the annulment of the bank undertakings/letter of credit which she signed on
the ground that the prevailing market rate at the time of respondent's intended drawings with
which petitioner will be charged of as interests and penalties is oppressive, exorbitant,
unreasonable and unconscionable rendering it against public morals and policy; and that to make
her automatically liable for millions of pesos on the bank undertakings, these banks merely
required the submission of a mere certification from the company (respondent) that the customer
(petitioner) has not paid its account (and its statement of account of the client) without first
verifying the truthfulness of the alleged petitioner's total liability to the drawer thereon. Therefore,
such contracts are oppressive, unreasonable and unconscionable as they would result in her
obtaining several millions of liability.
On November 28, 2002, a hearing was conducted for the issuance of the TRO and the writ of
preliminary injunction wherein the petitioner and the bank representatives were present. On query
of the respondent Judge Normandie Pizarro (Judge Pizarro) to the bank representatives with
regard to the eventual issuance of the TRO, the latter all replied that they will abide by the sound
judgment of the court. The court then issued an Order4 granting the TRO and requiring petitioner
to implead respondent as an indispensable party and for the latter to submit its position paper on
the matter of the issuance of the injunction. Petitioner and respondent submitted their respective
position papers.
On December 17, 2002, the RTC rendered an Order,5 the dispositive portion of which reads:
ACCORDINGLY, let a Writ of Preliminary Injunction be issued restraining and enjoining herein
Respondent UCPB, IEB, SB and AUB from releasing any funds to SBDI, pursuant to the Bank
Undertakings and/or Domestic Standby Letter of Credit until further orders from this Court.
Consequently, Petitioner is hereby DIRECTED to post a bond in the amount of TEN MILLION
PESOS (₱10,000,000.00), to answer for whatever damages respondent banks and SBDI may
suffer should this Court finally decide that petitioner was not entitled thereto. 6
The RTC found that both respondent and petitioner have reasons for the enforcement or non-
enforcement of the bank undertakings, however, as to whether said reasons were justifiable or
not, in view of the attending circumstances, the RTC said that these can only be determined after
a full blown trial. It ruled that the outright denial of petitioner's prayer for the issuance of injunction,
even if the evidence warranted the reasonable probability that real injury will occur if the relief for
shall not be granted in favor of petitioner, will not serve the ends of justice.
Respondent filed with the CA a petition for certiorari with prayer for the issuance of a TRO and writ
of preliminary injunction against respondent Judge Pizarro and petitioner. Subsequently, petitioner
filed her Comment and respondent filed its Reply.
On July 4, 2003, the CA issued a Resolution7 granting the TRO prayed for by respondent after
finding that it was apparent that respondent has a legal right under the bank undertakings issued
by UCPB, SBC, and IEBank; and that until those undertakings were nullified, respondent's rights
under the same should be maintained.
On July 11, 2003, the CA issued a Supplemental Resolution8 wherein the Domestic Standby
Letter of Credit issued by AUB was ordered included among the bank undertakings, to which
respondent has a legal right.
On October 17, 2003, the CA rendered its assailed Decision, the decretal portion of which reads:
WHEREFORE, the petition is hereby GRANTED. The Order dated December 17, 2002 is hereby
ANNULLED AND SET ASIDE. The writ of preliminary injunction issued by the lower court is
hereby LIFTED.9
In so ruling, the CA said that the grant or denial of an injunction rests on the sound discretion of
the RTC which should not be intervened, except in clear cases of abuse. Nonetheless, the CA
continued that the RTC should avoid issuing a writ of preliminary injunction which would, in effect,
dispose of the main case without trial. It found that petitioner was questioning the validity of the
bank undertakings and letter of credit for being oppressive, unreasonable and unconscionable.
However, as provided under the law, private transactions are presumed to be fair and regular and
that a person takes ordinary care of his concerns. The CA ruled that the RTC's issuance of the
injunction, which was premised on the abovementioned justification, would be a virtual acceptance
of petitioner's claim, thus, already a prejudgment of the main case. It also said that contracts are
presumed valid until they are voided by a court of justice, thus, until such time that petitioner has
presented sufficient evidence to rebut such presumption, her legal right to the writ is doubtful.
As to petitioner's claim of respondent's non-filing of a motion for reconsideration before resorting to
a petition for certiorari, the CA said that it is not a rigid rule, as jurisprudence had said, that when a
definite question has been properly raised, argued and submitted in the RTC and the latter had
decided the question, a motion for reconsideration is no longer necessary before filing a petition
for certiorari. The court found that both parties had fully presented their sides on the issuance of
the writ of preliminary injunction and that the RTC had squarely resolved the issues presented by
both parties. Thus, respondent could not be faulted for not filing a motion for reconsideration.
In a Resolution dated March 5, 2004, petitioner's motion for reconsideration was denied.
Hence, this petition, wherein petitioner raises the following assignment of errors:
I. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND
REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING THE PETITION
FOR CERTIORARI FILED BY PRIVATE RESPONDENT SBDI, DESPITE THE FACT
THAT THE ORIGINAL PARTIES IN THE TRIAL COURT, WHO ARE EQUALLY
MANDATED BY THE QUESTIONED ORDER OF THE TRIAL COURT, NAMELY; UCPB,
IEBANK, SBC AND AUB, AS DEFENDANTS IN THE MAIN CASE, WERE NOT
IMPLEADED AS INDISPENSABLE PARTIES IN THE PETITION.
II. THE HONORABLE COURT OF APPEALS A QUO COMMITTED A SERIOUS AND
REVERSIBLE ERROR IN GIVING DUE COURSE AND GRANTING PRIVATE
RESPONDENT SBDI'S PETITION WHEN THE LATTER ADMITTEDLY FAILED TO FILE
A PRIOR MOTION FOR RECONSIDERATION BEFORE THE TRIAL COURT, MORESO
WHEN INDISPENSABLE PARTIES WERE NOT IMPLEADED WHICH SHOULD HAVE
RENDERED THE COURT OF APPEALS IN WANT OF JURISDICTION TO ACT.10
Petitioner claims that the CA decision is void for want of authority of the CA to act on the petition
as the banks should have been impleaded for being indispensable parties, since they are the
original party respondents in the RTC; that the filing with the CA of respondent's petition
for certiorari emanated from the RTC Order wherein the banks were the ones against whom the
questioned Order was issued; that the banks are the ones who stand to release hundred millions
of pesos which respondent sought to draw from the questioned bank undertakings and domestic
standby letter of credit through the certiorari proceedings, thus, they should be given an
opportunity to be heard. Petitioner claims that even the CA recognized the banks' substantial
interest over the subject matter of the case when, despite not being impleaded as parties in the
petition filed by respondent, the CA also notified the banks of its decision.
Petitioner argues that a petition for certiorari filed without a prior motion for reconsideration is a
premature action and such omission constitutes a fatal infirmity; that respondent explained its
omission only when petitioner already brought the same to the attention of the CA, thus, a mere
afterthought and an attempt to cure the fatal defects of its petition.
In its Comment, respondent contends that the banks which issued the bank undertakings and
letter of credit are not indispensable parties in the petition for certiorari filed in the CA. Respondent
argues that while the RTC preliminarily resolved the issue of whether or not petitioner was entitled
to an injunctive relief, and the enforcement of any decision granting such would necessarily
involve the banks, the resolution of the issue regarding the injunction does not require the banks'
participation. This is so because on one hand the entitlement or non-entitlement to an injunction is
a matter squarely between petitioner and respondent, the latter being the party that is ultimately
enjoined from benefiting from the banks' undertakings. On the other hand, respondent contends
that the issue resolved by the CA was whether or not the RTC gravely abused its discretion in
granting the injunctive relief to respondent; that while the enforcement of any decision enjoining
the implementation of the injunction issued by the RTC would affect the banks, the resolution of
whether there is grave abuse of discretion committed by the RTC does not require the banks'
participation.
Respondent claims that while as a rule, a motion for reconsideration is required before filing a
petition for certiorari, the rule admits of exceptions, which are, among others: (1) when the issues
raised in the certiorari proceedings have been duly raised and passed upon by the RTC or are the
same as those raised and passed upon in the RTC; (2) there is an urgent necessity and time is of
the essence for the resolution of the issues raised and any further delay would prejudice the
interests of the petitioner; and (3) the issue raised is one purely of law, which are present in
respondent's case.
In her Reply, petitioner claims that the decree that will compel and order the banks to release any
funds to respondent pending the resolution of her petition in the RTC will have an injurious effect
upon her rights and interest. She reiterates her arguments in her petition.
Respondent filed a Rejoinder saying that it is misleading for petitioner to allege that the decree
sought by respondent before the CA is directed against the banks; that even the dispositive
portion of the CA decision did not include any express directive to the banks; that there was
nothing in the CA decision which compelled and ordered the banks to release funds in favor of
respondent as the CA decision merely annulled the RTC Order and lifted the writ of preliminary
injunction. Respondent contends that the banks are not persons interested in sustaining the RTC
decision as this was obvious from the separate answers they filed in the RTC wherein they
uniformly maintained that the bank undertakings/letter of credit are not oppressive, unreasonable
and unconscionable. Respondent avers that petitioner is the only person interested in upholding
the injunction issued by the RTC, since it will enable her to prevent the banks from releasing funds
to respondent. Respondent insists that petitioner's petition before the RTC and the instant petition
have caused and continues to cause respondent grave and irreparable damage.
Both parties were then required to file their respective memoranda, in which they complied.
Petitioner's insistence that the banks are indispensable parties, thus, should have been impleaded
in the petition for certiorari filed by respondent in the CA, is not persuasive.
11
In Arcelona v. Court of Appeals, we stated the nature of indispensable party, thus:
An indispensable party is a party who has such an interest in the controversy or subject matter
that a final adjudication cannot be made, in his absence, without injuring or affecting that interest,
a party who has not only an interest in the subject matter of the controversy, but also has an
interest of such nature that a final decree cannot be made without affecting his interest or leaving
the controversy in such a condition that its final determination may be wholly inconsistent with
equity and good conscience. It has also been considered that an indispensable party is a person
in whose absence there cannot be a determination between the parties already before the court
which is effective, complete, or equitable. Further, an indispensable party is one who must be
included in an action before it may properly go forward.
A person is not an indispensable party, however, if his interest in the controversy or subject matter
is separable from the interest of the other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice between them. Also, a person is not
an indispensable party if his presence would merely permit complete relief between him and those
already parties to the action, or if he has no interest in the subject matter of the action. It is not a
sufficient reason to declare a person to be an indispensable party that his presence will avoid
multiple litigation.12
Applying the foregoing, we find that the banks are not indispensable parties in the petition
for certiorari which respondent filed in the CA assailing the RTC Order dated December 17, 2002.
In fact, several circumstances would show that the banks are not parties interested in the matter of
the issuance of the writ of preliminary injunction, whether in the RTC or in the CA.
First. During the hearing of petitioner's prayer for the issuance of a TRO, the RTC, in open court,
elicited from the lawyer-representatives of the four banks their position in the event of the issuance
of the TRO, and all these representatives invariably replied that they will abide and/or submit to
the sound judgment of the court.13
Second. When the RTC issued its Order dated December 17, 2002 granting the issuance of the
writ of preliminary injunction, the banks could have challenged the same if they believe that they
were aggrieved by such issuance. However, they did not, and such actuations were in
consonance with their earlier position that they would submit to the sound judgment of the RTC.
Third. When respondent filed with the CA the petition for certiorari with prayer for the issuance of a
TRO and writ of preliminary injunction, and a TRO was subsequently issued, copies of the
resolution were also sent14 to the banks, although not impleaded, yet the latter took no action to
question their non-inclusion in the petition. Notably, the SBC filed an Urgent Motion for
Clarification15 on whether or not the issuance of the TRO has the effect of restraining the bank
from complying with the writ of preliminary injunction issued by the RTC or nullifying /rendering
ineffectual the said writ. In fact, SBC even stated that the motion was filed for no other purpose,
except to seek proper guidance on the issue at hand so that whatever action or position it may
take with respect to the CA resolution will be consistent with its term and purposes.
Fourth. When the CA rendered its assailed Decision nullifying the injunction issued by the RTC,
and copies of the decision were furnished these banks, not one of these banks ever filed any
pleading to assail their non-inclusion in the certiorari proceedings.
Indeed, the banks have no interest in the issuance of the injunction, but only the petitioner. The
banks' interests as defendants in the petition for declaration of nullity of their bank undertakings
filed against them by petitioner in the RTC are separable from the interests of petitioner for the
issuance of the injunctive relief.
Moreover, certiorari, as a special civil action, is an original action invoking the original jurisdiction
of a court to annul or modify the proceedings of a tribunal, board or officer exercising judicial or
quasi-judicial functions.16 It is an original and independent action that is not part of the trial or the
proceedings on the complaint filed before the trial court.17 Section 5, Rule 65 of the Rules of Court
provides:
Section 5. Respondents and costs in certain cases. - When the petition filed relates to the acts or
omissions of a judge, court, quasi-judicial agency, tribunal, corporation, board, officer or person,
the petitioner shall join, as private respondent or respondents with such public respondent or
respondents. the person or persons interested in sustaining the proceedings in the court; and it
shall be the duty of such private respondents to appear and defend, both in his or their own behalf
and in behalf of the public respondent or respondents affected by the proceedings, and the costs
awarded in such proceedings in favor of the petitioner shall be against the private respondents
only, and not against the judge, court, quasi-judicial agency, tribunal, corporation, board, officer or
person impleaded as public respondent or respondents.
xxxx
Clearly, in filing the petition for certiorari, respondent should join as party defendant with the court
or judge, the person interested in sustaining the proceedings in the court, and it shall be the duty
of such person to appear and defend, both in his own behalf and in behalf of the court or judge
affected by the proceedings. In this case, there is no doubt that it is only the petitioner who is the
person interested in sustaining the proceedings in court since she was the one who sought for the
issuance of the writ of preliminary injunction to enjoin the banks from releasing funds to
respondent. As earlier discussed, the banks are not parties interested in the subject matter of the
petition. Thus, it is only petitioner who should be joined as party defendant with the judge and who
should defend the judge's issuance of injunction.
Notably, the dispositive portion of the assailed CA Decision declared the annulment of the Order
dated December 17, 2002 and lifted the writ of preliminary injunction issued by the RTC. The
decision was directed against the order of the judge. There was no order for the banks to release
the funds subject of their undertakings/letter of credit although such order to lift the injunction
would ultimately result to the release of funds to respondent.
Petitioner contends that respondent filed its petition for certiorari in the CA without a prior motion
for reconsideration, thus, constitutes a fatal infirmity.
petition for certiorari notwithstanding petitioner's invocation of the recognized exception, i.e., the
same questions raised before the public respondent were to be raised before us, is not applicable.
In said case, we ruled that petitioner failed to convince us that his case falls under the recognized
exceptions as the basis was only petitioner's bare allegation. In this case before us, the CA found,
and to which we agree, that both parties have fully presented their respective arguments in the
RTC on petitioner's prayer for the issuance of the writ of preliminary injunction, and that
respondent's argument that petitioner is not entitled to the injunctive relief had been squarely
resolved by the RTC.
WHEREFORE, the petition is DENIED. The Decision dated October 17, 2003 and the Resolution
dated March 5, 2004 of the Court of Appeals, in CA-G.R. SP No. 74629, are hereby AFFIRMED.
SO ORDERED.

We do not agree.

Concededly, the settled rule is that a motion for reconsideration is a condition sine qua non for the
filing of a petition for certiorari.18 Its purpose is to grant an opportunity for the court to correct any
actual or perceived error attributed to it by the re-examination of the legal and factual
circumstances of the case.19 The rule is, however, circumscribed by well-defined exceptions, such
as (a) where the order is a patent nullity, as where the court a quo had no jurisdiction; (b) where
the questions raised in the certiorari proceeding have been duly raised and passed upon by the
lower court, or are the same as those raised and passed upon in the lower court; (c) where there
is an urgent necessity for the resolution of the question and any further delay would prejudice the
interests of the Government or of the petitioner or the subject matter of the action is perishable; (d)
where, under the circumstances, a motion for reconsideration would be useless; (e) where
petitioner was deprived of due process and there is extreme urgency for relief; (f) where, in a
criminal case, relief from an order of arrest is urgent and the granting of such relief by the trial
court is improbable; (g) where the proceedings in the lower court are a nullity for lack of due
process; (h) where the proceedings were ex parte, or in which the petitioner had no opportunity to
object; and (i) where the issue raised is one purely of law or where public interest is involved. 20

Respondent explained their omission of filing a motion for reconsideration before resorting to a
petition for certiorari based on exceptions (b), (c) and (i). The CA brushed aside the filing of the
motion for reconsideration based on the ground that the questions raised in
the certiorari proceedings have been duly raised and passed upon by the lower court, or are the
same as those raised and passed upon in the lower court.lawp++!1 We agree.

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

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

Commission,21where we required the filing of a motion for reconsideration before the filing of a
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 121510 November 23, 1995
FABIANA C. VDA. DE SALAZAR, petitioner,
vs.
COURT OF APPEALS, PRIMITIVO NEPOMUCENO and EMERENCIANA
NEPOMUCENO, respondents.
HERMOSISIMA, JR., J.:
Where the defendant in an ejectment case dies before the rendition by the trial court of its decision
therein, does the trial court's failure to effectuate a substitution of heirs before its rendition of
judgment render such judgment jurisdictionally infirm?
On July 23, 1970, both private respondents Primitive Nepomuceno and Emerenciana
Nepomuceno filed separate complaints1 with the then Court of Agrarian Relations of Malolos,
Bulacan, for ejectment on the ground of personal cultivation and conversion of land for useful non-
agricultural purposes against petitioner's deceased husband, Benjamin Salazar. After protracted
proceedings in the agrarian court and then the Regional Trial Court2 spanning from 1970 to 1993,
the trial court rendered its joint decision3 in favor of private respondents. An appeal4 therefrom was
interposed in the name of petitioner's deceased husband on the ground that private respondents
herein failed to satisfy the requirements pertaining to personal cultivation and conversion of the
landholdings into non-agricultural uses. The Court of Appeals rejected such contention upon
finding that the record was replete with evidence justifying private respondents' assertion of their
right of cultivation and conversion of their landholdings.5
Almost a year after the termination of that appeal, the same trial court decision subject thereof was
once again assailed before the Court of Appeals through a petition 6 for annulment of judgment.
Herein petitioner assailed the same trial court decision as having been rendered by a court that
did not have jurisdiction over her and the other heirs of her deceased husband because
notwithstanding the fact that her husband had already died on October 3, 1991, the trial court still
proceeded to render its decision on August 23, 1993 without effecting the substitution of heirs in
accordance with Section 17, Rule 3, of the Rules of Court thereby depriving her of her day in
court.
Petitioner, not having asserted the matter of fraud or collusion in her petition for annulment of
judgment, the Court of Appeals decided the same on the basis of the sole issue of non-jurisdiction
resulting from the alleged deprivation of petitioner's right to due process and ruled in favor of the
validity of the challenged decision.7 Petitioner filed a motion for reconsideration of the decision of
the appellate court reiterating the trial court's lack of jurisdiction over the heirs of petitioner's
deceased husband as a consequence of the failure of the trial court to effectuate a valid
substitution of heirs. Said motion was denied in a resolution promulgated on August 14, 1995.
Hence this petition.
The petition is bereft of merit.
The need for substitution of heirs is based on the right to due process accruing to every party in
any proceeding.8The rationale underlying this requirement in case a party dies during the
pendency of proceedings of a nature not extinguished by such death, is that
. . . the exercise of judicial power to hear and determine a cause implicitly
presupposes in the trial court, amongst other essentials, jurisdiction over the
persons of the parties. That jurisdiction was inevitably impaired upon the death of
the protestee pending the proceedings below such that unless and until a legal
representative is for him duly named and within the jurisdiction of the trial court,
no adjudication in the cause could have been accorded any validity or binding
effect upon any party, in representation of the deceased, without trenching upon
the fundamental right to a day in court which is the very essence of the
constitutionally enshrined guarantee of due process.9
We are not unaware of several cases10 where we have ruled that a party having died in
an action that survives, the trial held by the court without appearance of the deceased's
legal representative or substitution of heirs and the judgment rendered after such trial, are
null and void because the court acquired no jurisdiction over the persons of the legal
representatives or of the heirs upon whom the trial and the judgment would be binding.
This general rule notwithstanding, in denying petitioner's motion for reconsideration, the
Court of Appeals correctly ruled that formal substitution of heirs is not necessary when the
heirs themselves voluntarily appeared, participated in the case and presented evidence in
defense of deceased defendant. Attending the case at bench, after all, are these
particular circumstances which negate petitioner's belated and seemingly ostensible claim
of violation of her rights to due process. We should not lose sight of the principle
underlying the general rule that formal substitution of heirs must be effectuated for them
to be bound by a subsequent judgment. Such had been the general rule established not
because the rule on substitution of heirs and that on appointment of a legal representative
are jurisdictional requirements per se but because non-compliance therewith results in the
undeniable violation of the right to due process of those who, though not duly notified of
the proceedings, are substantially affected by the decision rendered therein. Viewing the
rule on substitution of heirs in this light, the Court of Appeals, in the resolution denying
petitioner's motion for reconsideration, thus expounded:
Although the jurisprudential rule is that failure to make the substitution is a
jurisdictional defect, it should be noted that the purpose of this procedural rule is
to comply with due process requirements. The original party having died, he
could not continue to defend himself in court despite the fact that the action
survived him. For the case to continue, the real party in interest must be
substituted for the deceased. The real party in interest is the one who would be
affected by the judgment. It could be the administrator or executor or the heirs. In
the instant case, the heirs are the proper substitutes. Substitution gives them the
opportunity to continue the defense for the deceased. Substitution is important
because such opportunity to defend is a requirement to comply with due process.
Such substitution consists of making the proper changes in the caption of the
case which may be called the formal aspect of it. Such substitution also includes
the process of letting the substitutes know that they shall be bound by any
judgment in the case and that they should therefore actively participate in the
defense of the deceased. This part may be called the substantive aspect. This is
the heart of the procedural rule because this substantive aspect is the one that
truly embodies and gives effect to the purpose of the rule. It is this court's view
that compliance with the substantive aspect of the rule despite failure to comply
with the formal aspect may be considered substantial compliance. Such is the
situation in the case at bench because the only inference that could be deduced
from the following facts was that there was active participation of the heirs in the
defense of the deceased after his death:
1. The original lawyer did not stop representing the deceased. It would be absurd
to think that the lawyer would continue to represent somebody if nobody is
paying him his fees. The lawyer continued to represent him in the litigation before
the trial court which lasted for about two more years. A dead party cannot pay
him any fee. With or without payment of fees, the fact remains that the said
counsel was allowed by the petitioner who was well aware of the instant litigation
to continue appearing as counsel until August 23, 1993 when the challenged
decision was rendered;
2. After the death of the defendant, his wife, who is the petitioner in the instant
case, even testified in the court and declared that her husband is already
deceased. She knew therefore that there was a litigation against her husband
and that somehow her interest and those of her children were involved;
3. This petition for annulment of judgment was filed only after the appeal was
decided against the defendant on April 3, 1995, more than one and a half year
(sic) after the decision was rendered (even if we were to give credence to
petitioner's manifestation that she was not aware that an appeal had been
made);
4. The Supreme Court has already established that there is such a thing as
jurisdiction by estoppel. This principle was established even in cases where
jurisdiction over the subject matter was being questioned. In the instant case,
only jurisdiction over the person of the heirs is in issue. Jurisdiction over the
person may be acquired by the court more easily than jurisdiction over the
subject matter. Jurisdiction over the person may be acquired by the simple
appearance of the person in court as did herein petitioner appear;
5. The case cited by the herein petitioner (Ferreria et al. vs. Manuela Ibarra vda.
de Gonzales, et al.) cannot be availed of to support the said petitioner's
contention relative to non-acquisition of jurisdiction by the court. In that case,
Manolita Gonzales was not served notice and, more importantly, she never
appeared in court, unlike herein petitioner who appeared and even testified
regarding the death of her husband.11
Consequently, we rule that, as in the case at bench, the defendant in an ejectment case
having died before the rendition by the trial court of its decision therein, its failure to
effectuate a formal substitution of heirs before its rendition of judgment, does not
invalidate such judgment where the heirs themselves appeared before the trial court,
participated in the proceedings therein, and presented evidence in defense of deceased
defendant, it undeniably being evident that the heirs themselves sought their day in court
and exercised their right to due process.
Respondent Court of Appeals also correctly ruled that ejectment, being an action involving
recovery of real property, is a real action which as such, is not extinguished by the defendant's
death.
. . . The question as to whether an action survives or not depends on the nature
of the action and the damage sued for. In the causes of action which survive, the
wrong complained affects primarily and principally property and property rights,
the injuries to the person being merely incidental, while in the causes of action
which do not survive, the injury complained of is to the person, the property and
rights of property affected being incidental.12
There is no dispute that an ejectment case survives the death of a party, which death did
not extinguish the deceased's civil personality.13 More significantly, a judgment in an
ejectment case is conclusive between the parties and their successors in interest by title
subsequent to the commencement of the action.14 Thus, we have held that:
. . . In such a case and considering that the supervening death of appellant did
not extinguish her civil personality, the appellate court was well within its
jurisdiction to proceed as it did with the case. There is no showing that the
appellate court's proceedings in the case were tainted with irregularities.
It appears that petitioners are heirs of Adela Salindon. In fact, it was because of
this relationship that the petitioners were able to transfer the title of Adela
Salindon over the subject lot to their names. . . . Considering all this, the
appellate decision is binding and enforceable against the petitioners as
successors-in-interest by title subsequent to the commencement of the action
(Section 49 [b] Rule 39, Rules of Court). Furthermore, . . . judgment in an
ejectment case may be enforced not only against defendants therein but also
against the members of their family, their relatives, or privies who derive their
right of possession from the defendants (Ariem v. De los Angeles, 49 SCRA
343). Under the circumstances of this case, the same rule should apply to the
successors-in-interest . . . .15
While it is true that a decision in an action for ejectment is enforceable not only against the
defendant himself but also against members of his family, his relatives, and his privies who
derived their right of possession from the defendant and his successors-in-interest,16 it had been
established that petitioner had, by her own acts, submitted to the jurisdiction of the trial court. She
is now estopped to deny that she had been heard in defense of her deceased husband in the
proceedings therein. As such, this petition evidently has no leg to stand on.

WHEREFORE, the instant petition is dismissed for lack of merit. Costs against petitioner.

SO ORDERED.
State investment vs ca????
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186993 August 22, 2012
THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B. ACERON, Petitioners,
vs.
SPOUSES ALAN and EM ANG, Respondents.
VELASCO, JR.,*
LEONARDO-DE CASTRO, **
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking
to annul and set aside the Decision1 dated August 28, 2008 and the Resolution2 dated February
20, 2009 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 101159. The assailed
decision annulled and set aside the Orders dated April 12, 20073 and August 27, 20074 issued by
the Regional Trial Court (RTC) of Quezon City, Branch 81 in Civil Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount of
Three Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang
(petitioners). On even date, the respondents executed a promissory note 5 in favor of the
petitioners wherein they promised to pay the latter the said amount, with interest at the rate of ten
percent (10%) per annum, upon demand. However, despite repeated demands, the respondents
failed to pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to
pay their outstanding debt which, at that time, already amounted to Seven Hundred Nineteen
Thousand, Six Hundred Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23),
inclusive of the ten percent (10%) annual interest that had accumulated over the years.
Notwithstanding the receipt of the said demand letter, the respondents still failed to settle their
loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United
States of America (USA), executed their respective Special Powers of Attorney 6 in favor of
Attorney Eldrige Marvin B. Aceron (Atty. Aceron) for the purpose of filing an action in court against
the respondents. On September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a
Complaint7 for collection of sum of money with the RTC of Quezon City against the respondents.
On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the
petitioners on the grounds of improper venue and prescription.8 Insisting that the venue of the
petitioners’ action was improperly laid, the respondents asserted that the complaint against them
may only be filed in the court of the place where either they or the petitioners reside. They averred
that they reside in Bacolod City while the petitioners reside in Los Angeles, California, USA. Thus,
the respondents maintain, the filing of the complaint against them in the RTC of Quezon City was
improper.
The RTC Orders
On April 12, 2007, the RTC of Quezon City issued an Order9 which, inter alia, denied the
respondents’ motion to dismiss. In ruling against the respondents’ claim of improper venue, the
court explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly states that plaintiff
Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly appointed attorney-in-fact to
prosecute her claim against herein defendants. Considering that the address given by Atty.
Aceron is in Quezon City, hence, being the plaintiff, venue of the action may lie where he resides
as provided in Section 2, Rule 4 of the 1997 Rules of Civil Procedure.10
The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that
there is no law which allows the filing of a complaint in the court of the place where the
representative, who was appointed as such by the plaintiffs through a Special Power of Attorney,
resides.11
The respondents’ motion for reconsideration was denied by the RTC of Quezon City in its
Order12 dated August 27, 2007.
The respondents then filed with the CA a petition for certiorari13 alleging in the main that, pursuant
to Section 2, Rule 4 of the Rules of Court, the petitioners’ complaint may only be filed in the court
of the place where they or the petitioners reside. Considering that the petitioners reside in Los
Angeles, California, USA, the respondents assert that the complaint below may only be filed in the
RTC of Bacolod City, the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners’ grant of Special Power of Attorney in favor of
Atty. Aceron notwithstanding, the said complaint may not be filed in the court of the place where
Atty. Aceron resides, i.e., RTC of Quezon City. They explained that Atty. Aceron, being merely a
representative of the petitioners, is not the real party in interest in the case below; accordingly, his
residence should not be considered in determining the proper venue of the said complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision,14 which annulled and set aside the
Orders dated April 12, 2007 and August 27, 2007 of the RTC of Quezon City and, accordingly,
directed the dismissal of the complaint filed by the petitioners. The CA held that the complaint
below should have been filed in Bacolod City and not in Quezon City. Thus:
As maybe clearly gleaned from the foregoing, the place of residence of the plaintiff’s attorney-in-
fact is of no moment when it comes to ascertaining the venue of cases filed in behalf of the
principal since what should be considered is the residence of the real parties in interest, i.e., the
plaintiff or the defendant, as the case may be. Residence is the permanent home – the place to
which, whenever absent for business or pleasure, one intends to return. Residence is vital when
dealing with venue. Plaintiffs, herein private respondents, being residents of Los Angeles,
California, U.S.A., which is beyond the territorial jurisdiction of Philippine courts, the case should
have been filed in Bacolod City where the defendants, herein petitioners, reside. Since the case
was filed in Quezon City, where the representative of the plaintiffs resides, contrary to Sec. 2 of
Rule 4 of the 1997 Rules of Court, the trial court should have dismissed the case for improper
venue.15
The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was denied
by the CA in its Resolution dated February 20, 2009.16
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue for this Court’s resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW
WHEN IT RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE GROUND THAT
VENUE WAS NOT PROPERLY LAID.17
The Court’s Ruling
The petition is denied.
Contrary to the CA’s disposition, the petitioners maintain that their complaint for collection of sum
of money against the respondents may be filed in the RTC of Quezon City. Invoking Section 3,
Rule 3 of the Rules of Court, they insist that Atty. Aceron, being their attorney-in-fact, is deemed a
real party in interest in the case below and can prosecute the same before the RTC. Such being
the case, the petitioners assert, the said complaint for collection of sum of money may be filed in
the court of the place where Atty. Aceron resides, which is the RTC of Quezon City.
On the other hand, the respondents in their Comment18 assert that the petitioners are proscribed
from filing their complaint in the RTC of Quezon City. They assert that the residence of Atty.
Aceron, being merely a representative, is immaterial to the determination of the venue of the
petitioners’ complaint.
The petitioners’ complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.
It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of
the plaintiffs and their witnesses. Equally settled, however, is the principle that choosing the venue
of an action is not left to a plaintiff’s caprice; the matter is regulated by the Rules of Court.19
The petitioners’ complaint for collection of sum of money against the respondents is a personal
action as it primarily seeks the enforcement of a contract. The Rules give the plaintiff the option of
choosing where to file his complaint. He can file it in the place (1) where he himself or any of them
resides, or (2) where the defendant or any of the defendants resides or may be found. The plaintiff
or the defendant must be residents of the place where the action has been instituted at the time
the action is commenced.20
However, if the plaintiff does not reside in the Philippines, the complaint in such case may only be
filed in the court of the place where the defendant resides. In Cohen and Cohen v. Benguet
Commercial Co., Ltd.,21 this Court held that there can be no election as to the venue of the filing of
a complaint when the plaintiff has no residence in the Philippines. In such case, the complaint may
only be filed in the court of the place where the defendant resides. Thus:
Section 377 provides that actions of this character "may be brought in any province where the
defendant or any necessary party defendant may reside or be found, or in any province where the
plaintiff or one of the plaintiffs resides, at the election of the plaintiff." The plaintiff in this action has
no residence in the Philippine Islands. Only one of the parties to the action resides here. There
can be, therefore, no election by plaintiff as to the place of trial. It must be in the province where
the defendant resides. x x x.22 (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside in
Bacolod City. Applying the foregoing principles, the petitioners’ complaint against the respondents
may only be filed in the RTC of Bacolod City – the court of the place where the respondents
reside. The petitioners, being residents of Los Angeles, California, USA, are not given the choice
as to the venue of the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the
RTC of Quezon City and consequently dismissed the petitioners’ complaint against the
respondents on the ground of improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed by
the Rules of Court to attain the greatest convenience possible to the litigants and their witnesses
by affording them maximum accessibility to the courts.23 And even as the regulation of venue is
primarily for the convenience of the plaintiff, as attested by the fact that the choice of venue is
given to him, it should not be construed to unduly deprive a resident defendant of the rights
conferred upon him by the Rules of Court.24
Atty. Aceron is not a real party in Indeed, to construe the express requirement of residence under the rules on venue as applicable
interest in the case below; thus, his to the attorney-in-fact of the plaintiff would abrogate the meaning of a "real party in interest", as
residence is immaterial to the venue defined in Section 2 of Rule 3 of the 1997 Rules of Court vis-à-vis Section 3 of the same Rule.28
of the filing of the complaint.
On this score, the CA aptly observed that:
Contrary to the petitioners’ claim, Atty. Aceron, despite being the attorney-in-fact of the petitioners,
is not a real party in interest in the case below. Section 2, Rule 3 of the Rules of Court reads: As may be unerringly gleaned from the foregoing provisions, there is nothing therein that
expressly allows, much less implies that an action may be filed in the city or municipality where
Sec. 2. Parties in interest. – A real party in interest is the party who stands to be benefited or either a representative or an attorney-in-fact of a real party in interest resides. Sec. 3 of Rule 3
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise merely provides that the name or names of the person or persons being represented must be
authorized by law or these Rules, every action must be prosecuted or defended in the name of the included in the title of the case and such person or persons shall be considered the real party in
real party in interest. (Emphasis ours) interest. In other words, the principal remains the true party to the case and not the representative.
Under the plain meaning rule, or verba legis, if a statute is clear, plain and free from ambiguity, it
Interest within the meaning of the Rules of Court means material interest or an interest in issue to must be given its literal meaning and applied without interpretation. xxx 29 (Citation omitted)
be affected by the decree or judgment of the case, as distinguished from mere curiosity about the
question involved.25 A real party in interest is the party who, by the substantive law, has the right At this juncture, it bears stressing that the rules on venue, like the other procedural rules, are
sought to be enforced.26 designed to insure a just and orderly administration of justice or the impartial and even-handed
determination of every action and proceeding. Obviously, this objective will not be attained if the
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case plaintiff is given unrestricted freedom to choose the court where he may file his complaint or
below as he does not stand to be benefited or injured by any judgment therein. He was merely petition. The choice of venue should not be left to the plaintiff's whim or caprice. He may be
appointed by the petitioners as their attorney-in-fact for the limited purpose of filing and impelled by some ulterior motivation in choosing to file a case in a particular court even if not
prosecuting the complaint against the respondents. Such appointment, however, does not mean allowed by the rules on venue.30
that he is subrogated into the rights of petitioners and ought to be considered as a real party in
interest. WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The
Decision dated August 28, 2008 and Resolution dated February 20, 2009 rendered by the Court of
Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not Appeals in CA-G.R. SP No. 101159 are AFFIRMED.
have the right to file the complaint below against the respondents. He may only do so, as what he
did, in behalf of the petitioners – the real parties in interest. To stress, the right sought to be SO ORDERED.
enforced in the case below belongs to the petitioners and not to Atty. Aceron. Clearly, an attorney-
in-fact is not a real party in interest.27

The petitioner’s reliance on Section 3, Rule 3 of the Rules of Court to support their conclusion that
Atty. Aceron is likewise a party in interest in the case below is misplaced. Section 3, Rule 3 of the
Rules of Court provides that:

Sec. 3. Representatives as parties. – Where the action is allowed to be prosecuted and defended
by a representative or someone acting in a fiduciary capacity, the beneficiary shall be included in
the title of the case and shall be deemed to be the real property in interest. A representative may
be a trustee of an expert trust, a guardian, an executor or administrator, or a party authorized by
law or these Rules. An agent acting in his own name and for the benefit of an undisclosed
principal may sue or be sued without joining the principal except when the contract involves things
belonging to the principal. (Emphasis ours)

Nowhere in the rule cited above is it stated or, at the very least implied, that the representative is
likewise deemed as the real party in interest. The said rule simply states that, in actions which are
allowed to be prosecuted or defended by a representative, the beneficiary shall be deemed the
real party in interest and, hence, should be included in the title of the case.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G. R. No. 76431 October 16, 1989
FORTUNE MOTORS, (PHILS.) INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS, METROPOLITAN BANK and TRUST
COMPANY, respondents.
Quirante & Associates Law Office for petitioner.
Bautista, Cruz & Associates Law Offices for private respondent.
PARAS, J.:
This is a petition for review on certiorari seeking the reversal of: (a) the July 30, 1986 decision of
the Court of Appeals in AC-G.R. SP No. 09255 entitled "Metropolitan Bank & Trust Co. v. Hon.
Herminio C. Mariano, et al."dismissing Civil Case No. 8533218 entitled "Fortune Motors (Phils.)
Inc. v. Metropolitan Bank & Trust Co." filed in the Regional Trial Court of Manila, Branch IV for
improper venue and (b) the resolution dated October 30, 1986 denying petitioner's motion for
reconsideration.
The undisputed facts of the case are as follows:
On March 29,1982 up to January 6,1984, private respondent Metropolitan Bank extended various
loans to petitioner Fortune Motors in the total sum of P32,500,000.00 (according to the borrower;
or P34,150,000.00 according to the Bank) which loan was secured by a real estate mortgage on
the Fortune building and lot in Makati, Rizal. (Rollo, pp. 60-62)
Due to financial difficulties and the onslaught of economic recession, the petitioner was not able to
pay the loan which became due. (Rollo, p. 62)
For failure of the petitioner to pay the loans, the respondent bank initiated extrajudicial foreclosure
proceedings. After notices were served, posted, and published, the mortgaged property was sold
at public auction for the price of P47,899,264.91 to mortgagee Bank as the highest bidder. (Rollo,
p. 11)
The sheriff's certificate of sale was registered on October 24, 1984 with the one-year redemption
period to expire on October 24,1985. (Rollo, p. 12)
On October 21, 1985, three days before the expiration of the redemption period, petitioner Fortune
Motors filed a complaint for annulment of the extrajudicial foreclosure sale alleging that the
foreclosure was premature because its obligation to the Bank was not yet due, the publication of
the notice of sale was incomplete, there was no public auction, and the price for which the
property was sold was "shockingly low". (Rollo, pp. 60-68)
Before summons could be served private respondent Bank filed a motion to dismiss the complaint
on the ground that the venue of the action was improperly laid in Manila for the realty covered by
the real estate mortgage is situated in Makati, therefore the action to annul the foreclosure sale
should be filed in the Regional Trial Court of Makati. (Rollo, pp. 67-71-A )
The motion was opposed by petitioner Fortune Motors alleging that its action "is a personal action"
and that "the issue is the validity of the extrajudicial foreclosure proceedings" so that it may have a
new one year period to redeem. (Rollo, pp. 72-73)
On January 8, 1986 an order was issued by the lower court reserving the resolution of the Bank's
motion to dismiss until after the trial on the merits as the grounds relied upon by the defendant
were not clear and indubitable. (Rollo, p. 81)
The Bank filed a motion for reconsideration of the order dated January 8, 1986 but it was denied
by the lower court in its order dated May 28, 1986. (Rollo, Annex "L" pp. 93-96; Annex "N" p. 99)
On June 11, 1986 the respondent Bank filed a petition for certiorari and prohibition in the Court of
Appeals. (Rollo, Annex "O" pp. 100-115)
And on July 30, 1986, a decision was issued by the Court of Appeals, the dispositive part of which
reads as follows:
WHEREFORE, the petition for certiorari and prohibition is granted. The complaint
in the Civil Case No. 85-33218 is dismissed without prejudice to its being filed in
the proper venue. Costs against the private respondent.
SO ORDERED. (Rollo, p. 15)
A motion for reconsideration was filed on August 11, 1986 on the said decision and on October
30, 1986 a resolution was issued denying such motion for reconsideration. (Rollo, Annex "O" pp.
121-123; Annex "S" p. 129)
Hence, the petition for review on certiorari.
On June 10, 1987 the Court gave due course to the petition, required the parties to file their
respective memoranda within twenty (20) days from the notice hereof, and pay deposit for costs in
the amount of P80.40.
Both parties have filed their respective memoranda, and the case was submitted for Court's
resolution in the resolution dated December 14, 1987. (Rollo,Metrobank's Memorandum pp. 45-
59; petitioner's memorandum pp.130-136; Res. p. 138)
The only issue in this case is whether petitioner's action for annulment of the real estate mortgage
extrajudicial foreclosure sale of Fortune Building is a personal action or a real action for venue
purposes.
sale is necessarily an action affecting the title of the property sold. It is therefore a real action
which should be commenced and tried in the province where the property or part thereof lies."
PREMISES CONSIDERED, the instant petition is DENIED for lack of merit and the assailed
decision of the respondent Court of Appeals is AFFIRMED.
SO ORDERED.

In a real action, the plaintiff seeks the recovery of real property, or as indicated in Sec. 2 (a) of
Rule 4, a real action is an action affecting title to real property, or for the recovery of possession,
or for the partition or condemnation of, or foreclosure of a mortgage on real property. (Comments
on the Rules of Court by Moran, Vol. 1, p. 122)

Real actions or actions affecting title to, or for the recovery of possession, or for the partition or
condemnation of, or foreclosure of mortgage on real property, must be instituted in the Court of
First Instance of the province where the property or any part thereof lies. (Enriquez v. Macadaeg,
84 Phil. 674,1949; Garchitorena v. Register of Deeds, 101 Phil. 1207, 1957)

Personal actions upon the other hand, may be instituted in the Court of First Instance where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff (Sec. 1, Rule 4, Revised Rules of Court).

A prayer for annulment or rescission of contract does not operate to efface the true objectives and
nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)

An action for the annulment or rescission of a sale of real property is a real action. Its prime
objective is to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760,1954)

An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a
private sale of real property. (Munoz v. Llamas, 87 Phil. 737,1950)

While it is true that petitioner does not directly seek the recovery of title or possession of the
property in question, his action for annulment of sale and his claim for damages are closely
intertwined with the issue of ownership of the building which, under the law, is considered
immovable property, the recovery of which is petitioner's primary objective. The prevalent doctrine
is that an action for the annulment or rescission of a sale of real property does not operate to
efface the fundamental and prime objective and nature of the case, which is to recover said real
property. It is a real action. Respondent Court, therefore, did not err in dismissing the case on the
ground of improper venue (Sec. 2, Rule 4) which was timely raised (Sec. 1, Rule 16). (Punzalan,
Jr. v. Vda. de Lacsamana, 121 SCRA 336, [1983]).

Thus, as aptly decided by the Court of Appeals in a decision penned by then Court of Appeals
Associate Justice now Associate Justice of the Supreme Court Carolina C. Griño-Aquino, the
pertinent portion reads: "Since an extrajudicial foreclosure of real property results in a conveyance
of the title of the property sold to the highest bidder at the sale, an action to annul the foreclosure
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22238 February 18, 1967
CLAVECILLIA RADIO SYSTEM, petitioner-appellant,
vs.
HON. AGUSTIN ANTILLON, as City Judge of the Municipal Court of Cagayan de Oro City
and NEW CAGAYAN GROCERY, respondents-appellees.
B. C. Padua for petitioner and appellant.
Pablo S. Reyes for respondents and appellees.
REGALA, J.:
This is an appeal from an order of the Court of First Instance of Misamis Oriental dismissing the
petition of the Clavecilla Radio System to prohibit the City Judge of Cagayan de Oro from taking
cognizance of Civil Case No. 1048 for damages.
It appears that on June 22, 1963, the New Cagayan Grocery filed a complaint against the
Clavecilla Radio System alleging, in effect, that on March 12, 1963, the following message,
addressed to the former, was filed at the latter's Bacolod Branch Office for transmittal thru its
branch office at Cagayan de Oro:
NECAGRO CAGAYAN DE ORO (CLAVECILLA)
REURTEL WASHED NOT AVAILABLE REFINED TWENTY FIFTY IF AGREEABLE
SHALL SHIP LATER REPLY POHANG
The Cagayan de Oro branch office having received the said message omitted, in
delivering the same to the New Cagayan Grocery, the word "NOT" between the words
"WASHED" and "AVAILABLE," thus changing entirely the contents and purport of the
same and causing the said addressee to suffer damages. After service of summons, the
Clavecilla Radio System filed a motion to dismiss the complaint on the grounds that it
states no cause of action and that the venue is improperly laid. The New Cagayan
Grocery interposed an opposition to which the Clavecilla Radio System filed its rejoinder.
Thereafter, the City Judge, on September 18, 1963, denied the motion to dismiss for lack
of merit and set the case for hearing.1äwphï1.ñët
Hence, the Clavecilla Radio System filed a petition for prohibition with preliminary injunction with
the Court of First Instance praying that the City Judge, Honorable Agustin Antillon, be enjoined
from further proceeding with the case on the ground of improper venue. The respondents filed a
motion to dismiss the petition but this was opposed by the petitioner. Later, the motion was
submitted for resolution on the pleadings.
In dismissing the case, the lower court held that the Clavecilla Radio System may be sued either
in Manila where it has its principal office or in Cagayan de Oro City where it may be served, as in
fact it was served, with summons through the Manager of its branch office in said city. In other
words, the court upheld the authority of the city court to take cognizance of the case.1äwphï1.ñët
In appealing, the Clavecilla Radio System contends that the suit against it should be filed in Manila
where it holds its principal office.
It is clear that the case for damages filed with the city court is based upon tort and not upon a
written contract. Section 1 of Rule 4 of the New Rules of Court, governing venue of actions in
inferior courts, provides in its paragraph (b) (3) that when "the action is not upon a written contract,
then in the municipality where the defendant or any of the defendants resides or may be served
with summons." (Emphasis supplied)
Settled is the principle in corporation law that the residence of a corporation is the place where its
principal office is established. Since it is not disputed that the Clavecilla Radio System has its
principal office in Manila, it follows that the suit against it may properly be filed in the City of
Manila.
The appellee maintain, however, that with the filing of the action in Cagayan de Oro City, venue
was properly laid on the principle that the appellant may also be served with summons in that city
where it maintains a branch office. This Court has already held in the case of Cohen vs. Benguet
Commercial Co., Ltd., 34 Phil. 526; that the term "may be served with summons" does not apply
when the defendant resides in the Philippines for, in such case, he may be sued only in the
municipality of his residence, regardless of the place where he may be found and served with
summons. As any other corporation, the Clavecilla Radio System maintains a residence which is
Manila in this case, and a person can have only one residence at a time (See Alcantara vs.
Secretary of the Interior, 61 Phil. 459; Evangelists vs. Santos, 86 Phil. 387). The fact that it
maintains branch offices in some parts of the country does not mean that it can be sued in any of
these places. To allow an action to be instituted in any place where a corporate entity has its
branch offices would create confusion and work untold inconvenience to the corporation.
It is important to remember, as was stated by this Court in Evangelista vs. Santos, et al., supra,
that the laying of the venue of an action is not left to plaintiff's caprice because the matter is
regulated by the Rules of Court. Applying the provision of the Rules of Court, the venue in this
case was improperly laid.
The order appealed from is therefore reversed, but without prejudice to the filing of the action in
Which the venue shall be laid properly. With costs against the respondents-appellees.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 104175 June 25, 1993
YOUNG AUTO SUPPLY CO. AND NEMESIO GARCIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS (THIRTEENTH DIVISION) AND GEORGE CHIONG
ROXAS, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioners.
Antonio Nuyles for private respondent.
QUIASON, J.:
Petitioners seek to set aside the decision of respondent Court of Appeals in CA-G.R. SP No.
25237, which reversed the Order dated February 8, 1991 issued by the Regional Trial Court,
Branch 11, Cebu City in Civil Case No. CEB 6967. The order of the trial court denied the motion to
dismiss filed by respondent George C. Roxas of the complaint for collection filed by petitioners.
It appears that sometime on October 28, 1987, Young Auto Supply Co. Inc. (YASCO) represented
by Nemesio Garcia, its president, Nelson Garcia and Vicente Sy, sold all of their shares of stock in
Consolidated Marketing & Development Corporation (CMDC) to Roxas. The purchase price was
P8,000,000.00 payable as follows: a downpayment of P4,000,000.00 and the balance of
P4,000,000.00 in four post dated checks of P1,000,000.00 each.
Immediately after the execution of the agreement, Roxas took full control of the four markets of
CMDC. However, the vendors held on to the stock certificates of CMDC as security pending full
payment of the balance of the purchase price.
The first check of P4,000,000.00, representing the down-payment, was honored by the drawee
bank but the four other checks representing the balance of P4,000,000.00 were dishonored. In the
meantime, Roxas sold one of the markets to a third party. Out of the proceeds of the sale, YASCO
received P600,000.00, leaving a balance of P3,400,000.00 (Rollo, p. 176).
Subsequently, Nelson Garcia and Vicente Sy assigned all their rights and title to the proceeds of
the sale of the CMDC shares to Nemesio Garcia.
On June 10, 1988, petitioners filed a complaint against Roxas in the Regional Trial Court, Branch
11, Cebu City, praying that Roxas be ordered to pay petitioners the sum of P3,400,00.00 or that
full control of the three markets be turned over to YASCO and Garcia. The complaint also prayed
for the forfeiture of the partial payment of P4,600,000.00 and the payment of attorney's fees and
costs (Rollo, p. 290).
Roxas filed two motions for extension of time to submit his answer. But despite said motion, he
failed to do so causing petitioners to file a motion to have him declared in default. Roxas then filed,
through a new counsel, a third motion for extension of time to submit a responsive pleading.
On August 19, 1988, the trial court declared Roxas in default. The order of default was, however,
lifted upon motion of Roxas.
On August 22, 1988, Roxas filed a motion to dismiss on the grounds that:
1. The complaint did not state a cause of action due to non-joinder of
indispensable parties;
2. The claim or demand set forth in the complaint had been waived, abandoned
or otherwise extinguished; and
3. The venue was improperly laid (Rollo, p. 299).
After a hearing, wherein testimonial and documentary evidence were presented by both parties,
the trial court in an Order dated February 8, 1991 denied Roxas' motion to dismiss. After receiving
said order, Roxas filed another motion for extension of time to submit his answer. He also filed a
motion for reconsideration, which the trial court denied in its Order dated April 10, 1991 for
being pro-forma (Rollo, p. 17). Roxas was again declared in default, on the ground that his motion
for reconsideration did not toll the running of the period to file his answer.
On May 3, 1991, Roxas filed an unverified Motion to Lift the Order of Default which was not
accompanied with the required affidavit or merit. But without waiting for the resolution of the
motion, he filed a petition for certiorari with the Court of Appeals.
The Court of Appeals sustained the findings of the trial court with regard to the first two grounds
raised in the motion to dismiss but ordered the dismissal of the complaint on the ground of
improper venue (Rollo, p. 49).
A subsequent motion for reconsideration by petitioner was to no avail.
Petitioners now come before us, alleging that the Court of Appeals
erred in:
1. holding the venue should be in Pasay City, and not in Cebu City (where both
petitioners/plaintiffs are residents;
 2. not finding that Roxas is estopped from questioning the choice of venue (Rollo, within the Philippines" (Sec. 14 [3]). The purpose of this requirement is to fix the residence of a
p. 19). corporation in a definite place, instead of allowing it to be ambulatory.

The petition is meritorious.
In holding that the venue was improperly laid in Cebu City, the Court of Appeals relied on the
address of YASCO, as appearing in the Deed of Sale dated October 28, 1987, which is "No. 1708
Dominga Street, Pasay City." This was the same address written in YASCO's letters and several
commercial documents in the possession of Roxas (Decision, p. 12; Rollo, p. 48).
In the case of Garcia, the Court of Appeals said that he gave Pasay City as his address in three
letters which he sent to Roxas' brothers and sisters (Decision, p. 12; Rollo, p. 47). The appellate
court held that Roxas was led by petitioners to believe that their residence is in Pasay City and
that he had relied upon those representations (Decision, p. 12, Rollo, p. 47).
The Court of Appeals erred in holding that the venue was improperly laid in Cebu City.
In the Regional Trial Courts, all personal actions are commenced and tried in the province or city
where the defendant or any of the defendants resides or may be found, or where the plaintiff or
any of the plaintiffs resides, at the election of the plaintiff [Sec. 2(b) Rule 4, Revised Rules of
Court].
There are two plaintiffs in the case at bench: a natural person and a domestic corporation. Both
plaintiffs aver in their complaint that they are residents of Cebu City, thus:
1.1. Plaintiff Young Auto Supply Co., Inc., ("YASCO") is a domestic corporation
duly organized and existing under Philippine laws with principal place of business
at M. J. Cuenco Avenue, Cebu City. It also has a branch office at 1708 Dominga
Street, Pasay City, Metro Manila.
In Clavencilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why actions
cannot be filed against a corporation in any place where the corporation maintains its branch
offices. The Court ruled that to allow an action to be instituted in any place where the corporation
has branch offices, would create confusion and work untold inconvenience to said entity. By the
same token, a corporation cannot be allowed to file personal actions in a place other than its
principal place of business unless such a place is also the residence of a co-plaintiff or a
defendant.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on the ground
that its principal place of business was in Cebu City, Roxas could argue that YASCO was in
estoppel because it misled Roxas to believe that Pasay City was its principal place of business.
But this is not the case before us.
With the finding that the residence of YASCO for purposes of venue is in Cebu City, where its
principal place of business is located, it becomes unnecessary to decide whether Garcia is also a
resident of Cebu City and whether Roxas was in estoppel from questioning the choice of Cebu
City as the venue.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals appealed from is
SET ASIDE and the Order dated February 8, 1991 of the Regional Trial Court is REINSTATED.
SO ORDERED.

Plaintiff Nemesio Garcia is of legal age, married, Filipino citizen and with
business address at Young Auto Supply Co., Inc., M. J. Cuenco Avenue, Cebu
City. . . . (Complaint, p. 1; Rollo, p. 81).

The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:

THIRD That the place where the principal office of the corporation is to be
established or located is at Cebu City, Philippines (as amended on December 20,
1980 and further amended on December 20, 1984) (Rollo, p. 273).

A corporation has no residence in the same sense in which this term is applied to a natural
person. But for practical purposes, a corporation is in a metaphysical sense a resident of the place
where its principal office is located as stated in the articles of incorporation (Cohen v. Benguet
Commercial Co., Ltd., 34 Phil. 256 [1916] Clavecilla Radio System v. Antillon, 19 SCRA 379
[1967]). The Corporation Code precisely requires each corporation to specify in its articles of
incorporation the "place where the principal office of the corporation is to be located which must be
 Republic of the Philippines City, which was the subject matter of a contract, between petitioner and Cacnio, made in said City.
SUPREME COURT The motion having been denied by the Court of First Instance of Rizal, Quezon City Branch, by an
Manila order of July 9, 1960, upon the ground that the action was in personam, petitioner filed with the
Court of Appeals a petition, which was docketed as Civil Case CA-G.R. No. 28013-R, praying that
EN BANC said order be set aside and that a writ of prohibition be issued commanding respondent Hon.
Hermogenes Caluag, as Judge of said Court, to desist from taking cognizance of said Civil Case
No. Q-5197. In due course, the Court of Appeals rendered a decision on October 27, 1960,
G.R. No. L-17699 March 30, 1962
dismissing said petition. Hence, this appeal by certiorari taken by petitioner herein.

DR. ANTONIO A. LIZARES, INC., petitioner,

The issue is whether or not the main case falls under section 3 of Rule 5 of the Rules of Court,
vs. reading:
HON. HERMOGENES CALUAG, as Judge of the Court of First Instance of Quezon City,
and FLAVIANO CACNIO, respondents.
"Actions affecting title to, or for recovery of possession, or for partition or condemnation
of, or foreclosure of mortgage on, real property, shall be commenced and tried in the
Ramon C. Aquino for petitioner. province where the property or any part thereof lies."
Paulino Carreon for respondents.
The Court of Appeals and the Court of First Instance of Rizal, Quezon City Branch, held that Civil
CONCEPCION, J.:
Case No. Q-5197 of the latter court is an action in personam, and that, as such, it does not fall
within the purview of said section 3, and was properly instituted in the court of first instance of the
Appeal by certiorari from a decision of the Court of Appeals dismissing the petition of Dr. Antonio province in which Cacnio, as plaintiff in said case, resided, pursuant to section 1 of said rule 5.
A. Lizares & Co., Inc., for a writ of prohibition, with costs against said petitioner.
We are unable to share such view. Although the immediate remedy sought by Cacnio is to compel
On or about June 14, 1960, Flaviano Cacnio instituted Civil Case No. Q-5197 of the Court of First petitioner to accept the tender of payment allegedly made by the former, it is obvious that this
Instance of Rizal, Quezon City Branch, against said petitioner. In his complaint, Cacnio alleged relief is merely the first step to establish Cacnio's title to the real property adverted to above.
that on April 20, 1955, he bought from petitioner, on installment, Lot 4, Block 1 of the Sinkang Moreover, Cacnio's complaint is a means resorted to by him in order that he could retain the
Subdivision in Bacolod City, making therefor a downpayment of P1,206, the balance of P10,858 to possession of said property. In short, venue in the main case was improperly laid and the Court of
be paid in ten (10) yearly installments of P1,085.80 each, with interest thereon at the rate of 6% First Instance of Rizal, Quezon City Branch, should have granted the motion to
per annum; that on March 25, 1960, Cacnio received from petitioner a letter demanding payment dismiss. 1äwphï1.ñët
of P7,324.69, representing arrears in the payment of installments up to April 20, 1960, plus
"regular and overdue" interest, as well as "land taxes up to 70% of 1960"; that the sum then due
WHEREFORE, the decision appealed from is hereby reversed and another one shall be entered
from Cacnio by way of arrears amounted only to P5,824.69, he having paid P1,500 to petitioner
directing respondent Judge to desist from taking further cognizance of Civil Case No. Q-5197 of
"sometime in 1958"; that in view of the aforementioned demand of petitioner, Cacnio sent thereto said court, with costs against respondent Flaviano Cacnio. It is so ordered.
a check for P5,824.69, dated May 26, 1960, drawn by one Antonino Bernardo in favor of said
petitioner, in payment of the amount due from Cacnio by way of arrears; that "without legal and
equitable grounds" therefor, petitioner returned said check and "refused the tender of payment"
aforementioned; that by reason of said illegal act of petitioner, Cacnio is entitled to compensatory
damages in the sum of P5,000, plus P2,000 by way of attorney's fees, Cacnio having been
constrained to engage the services of counsel and bring the action; and that petitioner "is doing
threatens, or is about to do, or is procuring or suffering to be done some act in violation of"
Cacnio's rights respecting the subject of the action, viz. the repossession of the lot bought by" the
latter, who, accordingly, prayed that petitioner be ordered "to accept the payment being made" by
him (Cacnio) and to pay him P5,000 as compensatory damages and P2,000 as attorney's fees,
and that, upon the filing of a bond to be fixed by the court, a writ of preliminary injunction enjoining
petitioner and its agents or representatives from repossessing the lot adverted to above be issued.
Said writ of preliminary injunction was issued on June 16, 1960.

On July 5, 1960, petitioner moved to dismiss the complaint upon the ground that "venue is
improperly laid," for the action affects the title to or possession of real property located in Bacolod
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-53485 February 6, 1991
PATRIA ESUERTE and HERMINIA JAYME, petitioners,
vs.
HON. COURT OF APPEALS (Eleventh Division), HON. RAFAEL T. MENDOZA, Judge,
Branch VI, Court of First Instance of Cebu and MA. BEVERLY TAN, respondents.
Romeo B. Esuerte for petitioners.
Eleno V. Andales & Sisinio M. Andales for private respondent.
MEDIALDEA, J.:
This petition for certiorari with a prayer for preliminary injunction seeks to set aside the decision of
the Court of Appeals in CA G.R. No. SP-08999-R, involving the same parties.
An action for damages was filed by private respondent Beverly Tan against herein petitioners
Patria Esuerte and Herminia Jayme with the Court of First Instance (now Regional Trial Court) of
Cebu and docketed as Civil Case No. R-17584. The claim for damages arose from an incident
involving the parties and summarized by the Court of Appeals, as follows:
. . . that on September 22, 23 and 27, 1978, private respondent Ma. Beverly Tan, a Junior
Resident Physician of Corazon Locsin-Montelibano Memorial Hospital, Bacolod City,
without any justifiable reason shouted at, humiliated and insulted the petitioner, Patria
Esuerte, Head Nurse, Medicare Department of the said hospital and as a result of the
said incident, said petitioner complained to the Chief of the Hospital, Dr. Teodoro P.
Motus, in writing. The other petitioner, Herminia Jayme, who was one of those who were
present at the time of the incident also sent a letter to the Chief of the Hospital, Dr.
Teodoro Motus, informing the latter of what she had witnessed. As a result thereof,
private respondent was advised to explain in writing by the Chief of the Hospital, but
private respondent instead of explaining only her side of the incident also complained
against the petitioners. The Discipline and Grievance Committee, Corazon Locsin-
Montelibano Memorial Hospital, conducted a fact-finding investigation and later, the Chief
of the Hospital, Dr. Teodoro P. Motus, issued a resolution dated November 8, 1978,
transmitting the records of the case to the Regional Health Office, No. 6, Jaro, Iloilo City
for appropriate action; . . . . (pp. 91-92, Rollo)
Esuerte and Jayme filed a motion to dismiss the complaint on the ground of improper venue and
for being premature for failure of Tan to exhaust administrative remedies.
On January 2, 1979, the trial court denied the motion to dismiss. The motion for reconsideration of
the denial was likewise denied by the court on February 16, 1979.
Esuerte and Jayme filed a petition for certiorari and prohibition with a prayer for preliminary
injunction with the Court of Appeals. On September 18, 1979, the petition was dismissed without
pronouncement as to costs. The motion for reconsideration of the decision was likewise denied for
lack of merit on February 18, 1980.
The following reasons were advanced by petitioners for the allowance of this petition:
1) The Court of Appeals committed gross error and grave abuse of discretion when it
dismissed the petition despite petitioners' overwhelming evidence showing that the venue
of private respondent's action (Civil Case No. R-17584) was improperly laid.
2) The Court of Appeals committed gross error and grave abuse of discretion when it
dismissed the petition despite petitioners' overwhelming evidence showing that the filing
of Civil Case No. R-17584 is premature due to non-exhaustion of administrative
remedies.
It is the contention of petitioners that the proper venue of the action filed by Tan should be
Bacolod City and not Cebu City. At the time of the filing of her action in court, Tan was actually
residing and may be found in Bacolod City. In fact, in her "Statement of Assets and Liabilities,"
submitted by Tan to her employer, the Corazon Locsin Montelibano Memorial Hospital, she
declared that she is a resident of FRAYU INTERIOR, 6th Street, Bacolod City.
Section 2(b), Rule 4 of the Rules of Court provides:
Sec. 2. Venue in Courts of First Instance. —
xxx xxx xxx
(b) Personal Actions. — All other actions may be commenced and tried where the
defendants or any of the defendants resides or may be found, or where the plaintiff or any
of the plaintiffs resides, at the election of the plaintiff.
The choice of venue for personal actions cognizable by the Regional Trial Court is given to the
plaintiff but not to the plaintiff's caprice because the matter is regulated by the Rules of Court
(see Clavecilla Radio System v. Antillon, 19 SCRA 379). The rule on venue, like other procedural
rules, are designed to insure a just and orderly administration of justice or the impartial and
evenhanded determination of every action and proceeding (Sy v. Tyson Enterprises Inc., 19
SCRA 367). The option of the plaintiff in personal actions cognizable by the Regional Trial Court is
either the place where the defendant resides or may be found or the place where the plaintiff
resides. If plaintiff opts for the latter, he is limited to that place.
"Resides" in the rules on venue on personal actions means the place of abode, whether WHEREFORE, the position is GRANTED. The questioned decision of the Court of Appeals is SET
permanent or temporary, of the plaintiff or defendants as distinguished from "domicile" which ASIDE. Civil Case No. R-17584 is DISMISSED for improper venue.
denotes a fixed permanent residence (Dangwa Transportation Co., Inc. v. Sarmiento, G.R. No. L-
22795, January 31, 1977, 75 SCRA 124). And, in Hernandez v. Rural Bank of Lucena, Inc., G.R. SO ORDERED.
No. L-29791, January 10, 1978, 81 SCRA 75), venue of personal actions should be at the place of
abode or place where plaintiffs actually reside, not in domicile or legal residence.

In Koh v. CA, L-40428, December 17, 1975, 70 SCRA 298; 305, We ruled:

Applying the foregoing observation to the present case, We are fully convinced that
private respondent Coloma's protestations of domicile in San Nicolas, Ilocos Norte, based
on his manifested intention to return there after the retirement of his wife from government
service to justify his bringing of an action for damages against petitioner in the C.F.I. of
Ilocos Norte, is entirely of no moment since what is of paramount importance is where he
actually resided or where he may be found at the time he brought the action, to comply
substantially with the requirements of Sec. 2(b) of Rule 4, Rules of Court, on venue of
personal actions. . ..

As perspicaciously observed by Justice Moreland, the purpose of procedure is not to restrict the
court's jurisdiction over the subject matter but to give it effective facility "in righteous action," "to
facilitate and promote the administration of justice" or to insure "just judgments" by means of a fair
hearing. If the objective is not achieved, then "the administration of justice becomes incomplete
and unsatisfactory and lays itself open to criticism." (Manila Railroad Co. v. Attorney General, 20
Phil. 523, 530).

There is no question that private respondent as plaintiff in the Civil Case is a legal resident of
Cebu City.1âwphi1 Her parents live there. However, it cannot also be denied that at the time of
her filing of the complaint against petitioners, she was a temporary resident of Bacolod City. She
was then employed with the Corazon Locsin Montelibano Memorial Hospital, Bacolod City, as
resident physician. Moreover, the acts complained of were committed in Bacolod City. The private
respondents were all residents of Bacolod City at the time of the bringing of the action. Though
Tan's employment was only temporary there was no showing when this employment will end.
Justice would be better served if the complaint were heard and tried in Bacolod City where all the
parties resided.

The second ground raised by petitioners is devoid of merit. The alleged need by private
respondent Tan to exhaust administrative remedies before filing the complaint for damages does
not apply to the instant case. Private respondent as plaintiff in the civil Case for damages has no
administrative remedy available to her. It is true that the same incident complained of in the
administrative case filed by petitioners against Tan is the subject of the action for damages filed by
Tan against the petitioners in the trial court. However, the cause of action in the administrative
case is different from that of the civil case for damages. While the complainant in the
administrative case may be a private person, it is the government who is the aggrieved party and
no award for damages may be granted in favor of private persons. In the civil action for damages,
the trial court's concern is whether or not damages, personal to the plaintiff, were caused by the
acts of the defendants. The civil action for damages can proceed notwithstanding the pendency of
the administrative action.
 Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-28742 April 30, 1982
VIRGILIO CAPATI, plaintiff-appellant,
vs.
DR. JESUS P. OCAMPO, defendant-appellee.
ESCOLIN, J.:
We set aside the order of the Court of First Instance of Pampanga in Civil Case No. 3188 which
dismissed the plaintiff's complaint on ground of improper venue.
Plaintiff Virgilio Capati a resident of Bacolor, Pampanga, was the contractor of the Feati Bank for
the construction of its building in Iriga, Camarines Sur. On May 23, 1967, plaintiff entered into a
sub-contract with the defendant Dr. Jesus Ocampo, a resident of Naga City, whereby the latter, in
consideration of the amount of P2,200.00, undertook to construct the vault walls, exterior walls
and columns of the said Feati building in accordance with the specifications indicated therein.
Defendant further bound himself to complete said construction on or before June 5, 1967 and, to
emphasize this time frame for the completion of the construction job, defendant affixed his
signature below the following stipulation written in bold letters in the sub-contract: "TIME IS
ESSENTIAL, TO BE FINISHED 5 JUNE' 67."
Claiming that defendant finished the construction in question only on June 20, 1967, plaintiff filed
in the Court of First Instance of Pampanga an action for recovery of consequential damages in the
sum of P85,000.00 with interest, plus attorney's fees and costs. The complaint alleged inter
alia that "due to the long unjustified delay committed by defendant, in open violation of his express
written agreement with plaintiff, the latter has suffered great irreparable loss and damage ... "
Defendant filed a motion to dismiss the complaint on the ground that venue of action was
improperly laid. The motion was premised on the stipulation printed at the back of the contract
which reads:
14. That all actions arising out, or relating to this contract may be instituted in the
Court of First Instance of the City of Naga.
Plaintiff filed an opposition to the motion, claiming that their agreement to hold the venue in the
Court of First Instance of Naga City was merely optional to both contracting parties. In support
thereof, plaintiff cited the use of the word "may " in relation with the institution of any action arising
out of the contract.
The lower court, in resolving the motion to dismiss, ruled that "there was no sense in providing the
aforequoted stipulation, pursuant to Sec. 3 of Rule 4 of the Revised Rules of Court, if after all, the
parties are given the discretion or option of filing the action in their respective residences," and
thereby ordered the dismissal of the complaint.
Hence, this appeal.
The rule on venue of personal actions cognizable by the courts of first instance is found in Section
2 (b), Rule 4 of the Rules of Court, which provides that such "actions may be commenced and
tried where the defendant or any of the defendants resides or may be found, or where the plaintiff
or any of the plaintiffs resides, at the election of the plaintiff." The said section is qualified by the
following provisions of Section 3 of the same rule:
By written agreement of the parties the venue of an action may be changed or
transferred from one province to another.
Defendant stands firm on his contention that because of the aforequoted
covenant contained in par. 14 of the contract, he cannot be sued in any court
except the Court of First Instance of Naga City. We are thus called upon to rule
on the issue as to whether the stipulation of the parties on venue is restrictive in
the sense that any litigation arising from the contract can be filed only in the court
of Naga City, or merely permissive in that the parties may submit their disputes
not only in Naga City but also in the court where the defendant or the plaintiff
resides, at the election of the plaintiff, as provided for by Section 2 (b) Rule 4 of
the Rules of Court.
It is well settled that the word "may" is merely permissive and operates to confer
discretion upon a party. Under ordinary circumstances, the term "may be"
connotes possibility; it does not connote certainty. "May" is an auxillary verb
indicating liberty, opportunity, permission or possibility. 1
In Nicolas vs. Reparations Commission 2, a case involving the interpretation of a stipulation as to
venue along lines similar to the present one, it was held that the agreement of the parties which
provided that "all legal actions arising out of this contract ... may be brought in and submitted to
the jurisdiction of the proper courts in the City of Manila," is not mandatory.
We hold that the stipulation as to venue in the contract in question is simply permissive. By the
said stipulation, the parties did not agree to file their suits solely and exclusively with the Court of
First Instance of Naga. They merely agreed to submit their disputes to the said court, without
waiving their right to seek recourse in the court specifically indicated in Section 2 (b), Rule 4 of the
Rules of Court.
Since the complaint has been filed in the Court of First Instance of Pampanga, where the plaintiff
resides, the venue of action is properly laid in accordance with Section 2 (b), Rule 4 of the Rules
of Court.
WHEREFORE, the order appealed from is hereby set aside. Let the records be returned to the
court of origin for further proceedings. Costs against defendant-appellee.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 119657 February 7, 1997
UNIMASTERS CONGLOMERATION, INC., petitioner,
vs.
COURT OF APPEALS and KUBOTA AGRI MACHINERY PHILIPPINES, INC., respondents.
NARVASA, C.J.:
The appellate proceeding at bar turns upon the interpretation of a stipulation in a contract
governing venue of actions thereunder arising.
On October 8, 1988 Kubota Agri-Machinery Philippines, Inc. (hereafter, simply KUBOTA) and
Unimasters Conglomeration, Inc. (hereafter, simply UNIMASTERS) entered into a "Dealership
Agreement for Sales and Services" of the former's products in Samar and Leyte Provinces. 1 The
contract contained, among others:
1) a stipulation reading: ". . . All suits arising out of this Agreement shall be filed with/in the proper
Courts of Quezon City," and
2) a provision binding UNIMASTERS to obtain (as it did in fact obtain) a credit line with
Metropolitan Bank and Trust Co.-Tacloban Branch in the amount of P2,000,000.00 to answer for
its obligations to KUBOTA.
Some five years later, or more precisely on December 24, 1993, UNIMASTERS filed an action in
the Regional Trial Court of Tacloban City against KUBOTA, a certain Reynaldo Go, and
Metropolitan Bank and Trust Company-Tacloban Branch (hereafter, simply METROBANK) for
damages for breach of contract, and injunction with prayer for temporary restraining order. The
action was docketed as Civil Case No. 93-12-241 and assigned to Branch 6.
On the same day the Trial Court issued a restraining order enjoining METROBANK from
"authorizing or effecting payment of any alleged obligation of . . (UNIMASTERS) to defendant . .
KUBOTA arising out of or in connection with purchases made by defendant Go against the credit
line caused to be established by . . (UNIMASTERS) for and in the amount of P2 million covered by
defendant METROBANK . . or by way of charging . . (UNIMASTERS) for any amount paid and
released to defendant . . (KUBOTA) by the Head Office of METROBANK in Makati, Metro-Manila .
. ." The Court also set the application for preliminary injunction for hearing on January 10, 1994 at
8:30 o'clock in the morning.
On January 4, 1994 KUBOTA filed-two motions. One prayed for dismissal of the case on the
ground of improper venue (said motion being set for hearing on January 11, 1994). The other
prayed for the transfer of the injunction hearing to January 11, 1994 because its counsel was not
available on January 10 due to a prior commitment before another court.
KUBOTA claims that notwithstanding that its motion to transfer hearing had been granted, the Trial
Court went ahead with the hearing on the injunction incident on January 10, 1994 during which it
received the direct testimony of UNIMASTERS' general manager, Wilford Chan; that KUBOTA's
counsel was "shocked" when he learned of this on the morning of the 11th, but was nonetheless
instructed to proceed to cross-examine the witness; that when said counsel remonstrated that this
was unfair, the Court reset the hearing to the afternoon of that same day, at which time Wilford
Chan was recalled to the stand to repeat his direct testimony. It appears that cross-examination of
Chan was then undertaken by KUBOTA's lawyer with the "express reservation that . . (KUBOTA
was) not (thereby) waiving and/or abandoning its motion to dismiss;" and that in the course of the
cross-examination, exhibits (numbered from 1 to 20) were presented by said attorney who
afterwards submitted a memorandum in lieu of testimonial evidence.2
On January 13, 1994, the Trial Court handed down an Order authorizing the issuance of the
preliminary injunction prayed for, upon a bond of P2,000,000.00.3 And on February 3, 1994, the
same Court promulgated an Order denying KUBOTA's motion to dismiss. Said the Court:
The plaintiff UNIMASTERS Conglomeration is holding its principal place of
business in the City of Tacloban while the defendant . . (KUBOTA) is holding its
principal place of business in Quezon City. The proper venue therefore pursuant
to Rules of Court would either be Quezon City or Tacloban City at the election of
the plaintiff. Quezon City and Manila (sic), as agreed upon by the parties in the
Dealership Agreement, are additional places other than the place stated in the
Rules of Court. The filing, therefore, of this complaint in the Regional Trial Court
in Tacloban City is proper.
Both orders were challenged as having been issued with grave abuse of discretion by KUBOTA in
a special civil action of certiorari and prohibition filed with the Court of Appeals, docketed as CA-
G.R. SP No. 33234. It contended, more particularly, that (1) the RTC had "no jurisdiction to take
cognizance of . . (UNIMASTERS') action considering that venue was improperly laid," (2)
UNIMASTERS had in truth "failed to prove that it is entitled to the . . writ of preliminary injunction;"
and (3) the RTC gravely erred "in denying the motion to dismiss."4
The Appellate Court agreed with KUBOTA that — in line with the Rules of Court5 and this Court's
relevant rulings6 — the stipulation respecting venue in its Dealership Agreement with
UNIMASTERS did in truth limit the venue of all suits arising thereunder only and exclusively to
"the proper courts of Quezon City."7 The Court also held that the participation of KUBOTA's
counsel at the hearing on the injunction incident did not in the premises operate as a waiver or
abandonment of its objection to venue; that assuming that KUBOTA's standard printed invoices
provided that the venue of actions thereunder should be laid at the Court of the City of Manila, this
was inconsequential since such provision would govern "suits or legal actions between petitioner
and its buyers" but not actions under the Dealership Agreement between KUBOTA and
UNIMASTERS, the venue of which was controlled by paragraph No. 7 thereof; and that no
impediment precludes issuance of a TRO or injunctive writ by the Quezon City RTC against
METROBANK-Tacloban since the same "may be served on the principal office of METROBANK in
Makati and would be binding on and enforceable against, METROBANK branch in Tacloban."
After its motion for reconsideration of that decision was turned down by the Court of Appeals,
UNIMASTERS appealed to this Court. Here, it ascribes to the Court of Appeals several errors
which it believes warrant reversal of the verdict, namely:8
1) "in concluding, contrary to decisions of this . . Court, that the agreement on venue between
petitioner (UNIMASTERS) and private respondent (KUBOTA) limited to the proper courts of
Quezon City the venue of any complaint filed arising from the dealership agreement between . .
(them);"
2) "in ignoring the rule settled in Philippine Banking Corporation vs. Tensuan,9 that 'in the absence
of qualifying or restrictive words, venue stipulations in a contract should be considered merely as
agreement on additional forum, not as limiting venue to the specified place;" and in concluding,
contrariwise, that the agreement in the case at bar "was the same as the agreement on venue in
the Gesmundo case," and therefore, the Gesmundo case was controlling; and
3) "in concluding, based solely on the self-serving narration of . . (KUBOTA that its) participation in
the hearing for the issuance of a . . preliminary injunction did not constitute waiver of its objection
to venue."
The issue last mentioned, of whether or not the participation by the lawyer of KUBOTA at the
injunction hearing operated as a waiver of its objection to venue, need not occupy the Court too
long. The record shows that when KUBOTA's counsel appeared before the Trial Court in the
morning of January 11, 1994 and was then informed that he should cross-examine UNIMASTERS'
witness, who had testified the day before, said counsel drew attention to the motion to dismiss on
the ground of improper venue and insistently attempted to argue the matter and have it ruled upon
at the time; and when the Court made known its intention (a) "to (resolve first the) issue (of) the
injunction then rule on the motion to dismiss," and (b) consequently its desire to forthwith conclude
the examination of the witness on the injunction incident, and for that purpose reset the hearing in
the afternoon of that day, the 11th, so that the matter might be resolved before the lapse of the
temporary restraining order on the 13th, KUBOTA's lawyer told the Court: "Your Honor, we are not
waiving our right to submit the Motion to Dismiss." 10 It is plain that under these circumstances, no
waiver or abandonment can be imputed to KUBOTA.
The essential question really is that posed in the first and second assigned errors, i.e., what
construction should be placed on the stipulation in the Dealership Agreement that" (a)ll suits
arising out of this Agreement shall be filed with/in the proper Courts of Quezon City."
Rule 4 of the Rules of Court sets forth the principles generally governing the venue of actions,
whether real or personal, or involving persons who neither reside nor are found in the Philippines
or otherwise. Agreements on venue are explicitly allowed. "By written agreement of the parties the
venue of an action may be changed or transferred from one province to another." 11 Parties may
by stipulation waive the legal venue and such waiver is valid and effective being merely a personal
privilege, which is not contrary to public policy or prejudicial to third persons. It is a general
principle that a person may renounce any right which the law gives unless such renunciation
would be against public policy. 12
Written stipulations as to venue may be restrictive in the sense that the suit may be filed only in
the place agreed upon, or merely permissive in that the parties may file their suit not only in the
place agreed upon but also in the places fixed by law (Rule 4, specifically). As in any other
agreement, what is essential is the ascertainment of the intention of the parties respecting the
matter.
Since convenience is the raison d'etre of the rules of venue, 13 it is easy to accept the proposition
that normally, venue stipulations should be deemed permissive merely, and that interpretation
should be adopted which most serves the parties' convenience. In other words, stipulations
designating venues other than those assigned by Rule 4 should be interpreted as designed to
make it more convenient for the parties to institute actions arising from or in relation to their
agreements; that is to say, as simply adding to or expanding the venues indicated in said Rule 4.
On the other hand, because restrictive stipulations are in derogation of this general policy, the
language of the parties must be so clear and categorical as to leave no doubt of their intention to
limit the place or places, or to fix places other than those indicated in Rule 4, for their actions. This
is easier said than done, however, as an examination of precedents involving venue covenants
will immediately disclose.
In at least thirteen (13) cases, this Court construed the venue stipulations involved as merely
permissive. These are:
1. Polytrade Corporation v. Blanco, decided in 1969. 14 In this case, the venue stipulation was as
follows:
The parties agree to sue and be sued in the Courts of Manila.
This Court ruled that such a provision "does not preclude the filing of suits in the residence of the
plaintiff or the defendant. The plain meaning is that the parties merely consented to be sued in
Manila. Qualifying or restrictive words which would indicate that Manila and Manila alone is the
venue are totally absent therefrom. It simply is permissive. The parties solely agreed to add the
courts of Manila as tribunals to which they may resort. They did not waive their right to pursue
remedy in the courts specifically mentioned in Section 2(b) of Rule 4."
The Polytrade doctrine was reiterated expressly or implicitly in subsequent cases, numbering at
least ten (10).
2. Nicolas v. Reparations Commission, decided in 1975. 15 In this case, the stipulation on venue
read:
 . . . (A)ll legal actions arising out of this contract . . may be brought in and
submitted to the jurisdiction of the proper courts in the City of Manila.
This Court declared that the stipulation does not clearly show the intention of the parties to limit
the venue of the action to the City of Manila only. "It must be noted that the venue in personal
actions is fixed for the convenience of the plaintiff and his witnesses and to promote the ends of
justice. We cannot conceive how the interest of justice may be served by confining the situs of the
action to Manila, considering that the residences or offices of all the parties, including the situs of
the acts sought to be restrained or required to be done, are all within the territorial jurisdiction of
Rizal. . . Such agreements should be construed reasonably and should not be applied in such a
manner that it would work more to the inconvenience of the parties without promoting the ends of
justice.
3. Lamis Ents. v. Lagamon, decided in 1981. 16 Here, the stipulation in the promissory note and
the chattel mortgage specified Davao City as the venue.
The Court, again citing Polytrade, stated that the provision "does not preclude the filing of suits in
the residence of plaintiff or defendant under Section 2(b), Rule 4, Rules of Court, in the absence of
qualifying or restrictive words in the agreement which would indicate that the place named is the
only venue agreed upon by the parties. The stipulation did not deprive . . (the affected party) of his
right to pursue remedy in the court specifically mentioned in Section 2(b) of Rule 4, Rules of
Court. Renuntiato non praesumitur."
4. Capati v. Ocampo, decided in 1982 17 In this case, the provision of the contract relative to venue
was as follows:
. . . (A)ll actions arising out, or relating to this contract may be instituted in the
Court of First Instance of the City of Naga.
The Court ruled that the parties "did not agree to file their suits solely and exclusively with the
Court of First Instance of Naga;" they "merely agreed to submit their disputes to the said court
without waiving their right to seek recourse in the court specifically indicated in Section 2 (b), Rule
4 of the Rules of Court."
5. Western Minolco v. Court of Appeals, decided in 1988. 18 Here, the provision governing venue
read:
The parties stipulate that the venue of the actions referred to in Section 12.01
shall be in the City of Manila.
The court restated the doctrine that a stipulation in a contract fixing a definite place for the
institution of an action arising in connection therewith, does not ordinarily supersede the general
rules set out in Rule 4, and should be construed merely as an agreement on an additional forum,
not as limiting venue to the specified place.
6. Moles v. Intermediate Appellate Court, decided in 1989. 19 In this proceeding, the Sales Invoice
of a linotype machine stated that the proper venue should be Iloilo.
This Court held that such an invoice was not the contract of sale of the linotype machine in
question; consequently the printed provisions of the invoice could not have been intended by the
parties to govern the sale of the machine, especially since said invoice was used for other types of
transactions. This Court said: "It is obvious that a venue stipulation, in order to bind the parties,
must have been intelligently and deliberately intended by them to exclude their case from the
reglementary rules on venue. Yet, even such intended variance may not necessarily be given
judicial approval, as, for instance, where there are no restrictive or qualifying words in the
agreement indicating that venue cannot be laid in any place other than that agreed upon by the
parties, and in contracts of adhesion."
7. Hongkong and Shanghai Banking Corp. v. Sherman, decided in 1989. 20 Here the stipulation on
venue read:
. . (T)his guarantee and all rights, obligations and liabilities arising hereunder
shall be construed and determined under and may be enforced in accordance
with the laws of the Republic of Singapore. We hereby agree that the Courts in
Singapore shall have jurisdiction over all disputes arising under this guarantee. . .
This Court held that due process dictates that the stipulation be liberally construed. The parties did
not thereby stipulate that only the courts of Singapore, to the exclusion of all the others, had
jurisdiction. The clause in question did not operate to divest Philippine courts of jurisdiction.
8. Nasser v. Court of Appeals, decided in 1990, 21 in which the venue stipulation in the promissory
notes in question read:
. . (A)ny action involving the enforcement of this contract shall be brought within
the City of Manila, Philippines.
The Court's verdict was that such a provision does not as a rule supersede the general rule set out
in Rule 4 of the Rules of Court, and should be construed merely as an agreement on an additional
forum, not as limiting venue to the specified place.
9. Surigao Century Sawmill Co., Inc. v. Court of Appeals, decided in 1993: 22 In this case, the
provision concerning venue was contained in a contract of lease of a barge, and read as follows:
. . . (A)ny disagreement or dispute arising out of the lease shall be settled by the
parties in the proper court in the province of Surigao del Norte.
The venue provision was invoked in an action filed in the Regional Trial Court of Manila to recover
damages arising out of marine subrogation based on a bill of lading. This Court declared that
since the action did not refer to any disagreement or dispute arising out of the contract of lease of
the barge, the venue stipulation in the latter did not apply; but that even assuming the contract of
lease to be applicable, a statement in a contract as to venue does not preclude the filing of suits at
the election of the plaintiff where no qualifying or restrictive words indicate that the agreed place
alone was the chosen venue.
10. Philippine Banking Corporation, v. Hon. Salvador Tensuan, etc., Circle Financial Corporation,
at al., decided in 1993. 23 Here, the stipulation on venue was contained in promissory notes and
read as follows:
I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela any
legal action which may arise out of this promissory note.
This Court held the stipulation to be merely permissive since it did not lay the venue in Valenzuela
exclusively or mandatorily. The plain or ordinary import of the stipulation is the grant of authority or
permission to bring suit in Valenzuela; but there is not the slightest indication of an intent to bar
suit in other competent courts. The Court stated that there is no necessary or customary
connection between the words "any legal action" and an intent strictly to limit permissible venue to
the Valenzuela courts. Moreover, since the venue stipulations include no qualifying or
exclusionary terms, express reservation of the right to elect venue under the ordinary rules was
unnecessary in the case at bar. The Court made clear that "to the extent Bautista and Hoechst
Philippines are inconsistent with Polytrade (an en banc decision later in time than Bautista) and
subsequent cases reiterating Polytrade, Bautista and Hoechst Philippines have been rendered
obsolete by the Polytrade line of cases."
11. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc., Brinell Metal Works Corp., et
al., decided in 1994: 24 In this case the subject promissory notes commonly contained a stipulation
reading:
I/we expressly submit to the jurisdiction of the courts of Manila, any legal action
which may arise out of this promissory note.
the Court restated the rule in Polytrade that venue stipulations in a contract, absent any
qualifying or restrictive words, should be considered merely as an agreement on
additional forum, not limiting venue to the specified place. They are not exclusive, but
rather, permissive. For to restrict venue only to that place stipulated in the agreement is a
construction purely based on technicality; on the contrary, the stipulation should be
liberally construed. The Court stated: "The later cases of Lamis Ents v. Lagamon [108
SCRA 1981], Capati v. Ocampo [113 SCRA 794 [1982], Western Minolco v. Court of
Appeals [167 SCRA 592 [1988], Moles v. Intermediate Appellate Court [169 SCRA 777
[1989], Hongkong and Shanghai Banking Corporation v. Sherman [176 SCRA
331], Nasser v. Court of Appeals [191 SCRA 783 [1990] and just recently, Surigao
Century Sawmill Co. v. Court of Appeals [218 SCRA 619 [1993], all treaded the path
blazed by Polytrade. The conclusion to be drawn from all these is that the more recent
jurisprudence shall properly be deemed modificatory of the old ones."
The lone dissent observed: "There is hardly any question that a stipulation of contracts of
adhesion, fixing venue to a specified place only, is void for, in such cases, there would appear to
be no valid and free waiver of the venue fixed by the Rules of Courts. However, in cases where
both parties freely and voluntarily agree on a specified place to be the venue of actions, if any,
between them, then the only considerations should be whether the waiver (of the venue fixed by
the Rules of Court) is against public policy and whether the parties would suffer, by reason of such
waiver, undue hardship and inconvenience; otherwise, such waiver of venue should be upheld as
binding on the parties. The waiver of venue in such cases is sanctioned by the rules on
jurisdiction."
Still other precedents adhered to the same principle.
12. Tantoco v. Court of Appeals, decided in 1977. 25 Here, the parties agreed in their sales
contracts that the courts of Manila shall have jurisdiction over any legal action arising out of their
transaction. This Court held that the parties agreed merely to add the courts of Manila as tribunals
to which they may resort in the event of suit, to those indicated by the law: the courts either of
Rizal, of which private respondent was a resident, or of Bulacan, where petitioner resided.
13. Sweet Lines, Inc. v. Teves, promulgated in 1987. 26 In this case, a similar stipulation on venue,
contained in the shipping ticket issued by Sweet Lines, Inc. (as Condition 14) —
. . that any and all actions arising out or the condition and provisions of this ticket,
irrespective of where it is issued, shall be filed in the competent courts in the City
of Cebu
— was declared unenforceable, being subversive of public policy. The Court explained
that the philosophy on transfer of venue of actions is the convenience of the plaintiffs as
well as his witnesses and to promote the ends of justice; and considering the expense
and trouble a passenger residing outside of Cebu City would incur to prosecute a claim in
the City of Cebu, he would most probably decide not to file the action at all.
On the other hand, in the cases hereunder mentioned, stipulations on venue were held to
be restrictive, or mandatory.
1. Bautista vs. De Borja, decided in 1966. 27 In this case, the contract provided that in case of any
litigation arising therefrom or in connection therewith, the venue of the action shall be in the City of
Manila. This Court held that without either party reserving the right to choose the venue of action
as fixed by law, it can reasonably be inferred that the parties intended to definitely fix the venue of
the action, in connection with the contract sued upon in the proper courts of the City of Manila
only, notwithstanding that neither party is a resident of Manila.
2. Gesmundo v. JRB Realty Corporation, decided in 1994. 28 Here the lease contract declared that
. . (V)enue for all suits, whether for breach hereof or damages or any cause
between the LESSOR and LESSEE, and persons claiming under each, . . (shall
be) the courts of appropriate jurisdiction in Pasay City. . .
This Court held that: "(t)he language used leaves no room for interpretation. It clearly evinces the
parties' intent to limit to the 'courts of appropriate jurisdiction of Pasay City' the venue for all suits
between the lessor and the lessee and those between parties claiming under them. This means a
waiver of their right to institute action in the courts provided for in Rule 4, sec. 2(b)."
3. Hoechst Philippines, Inc. v. Torres, 29 decided much earlier, in 1978, involved a strikingly similar
stipulation, which read:
. . (I)n case of any litigation arising out of this agreement, the venue of any action
shall be in the competent courts of the Province of Rizal.
This Court held: "No further stipulations are necessary to elicit the thought that both parties agreed
that any action by either of them would be filed only in the competent courts of Rizal province
exclusively."
30
4. Villanueva v. Mosqueda, decided in 1982. In this case, it was stipulated that if the lessor
violated the contract of lease he could be sued in Manila, while if it was the lessee who violated
the contract, the lessee could be sued in Masantol, Pampanga. This Court held that there was an
agreement concerning venue of action and the parties were bound by their agreement. "The
agreement as to venue was not permissive but mandatory."
5. Arquero v. Flojo, decided in 1988. 31 The condition respecting venue — that any action against
RCPI relative to the transmittal of a telegram must be brought in the courts of Quezon City alone
— was printed clearly in the upper front portion of the form to be filled in by the sender. This Court
held that since neither party reserved the right to choose the venue of action as fixed by Section 2
[b], Rule 4, as is usually done if the parties mean to retain the right of election so granted by Rule
4, it can reasonably be inferred that the parties intended to definitely fix the venue of action, in
connection with the written contract sued upon, in the courts of Quezon City only.
An analysis of these precedents reaffirms and emphasizes the soundness of
the Polytrade principle. Of the essence is the ascertainment of the parties' intention in their
agreement governing the venue of actions between them. That ascertainment must be done
keeping in mind that convenience is the foundation of venue regulations, and that construction
should be adopted which most conduces thereto. Hence, the invariable construction placed on
venue stipulations is that they do not negate but merely complement or add to the codal standards
of Rule 4 of the Rules of Court. In other words, unless the parties make very clear, by employing
categorical and suitably limiting language, that they wish the venue of actions between them to be
laid only and exclusively at a definite place, and to disregard the prescriptions of Rule 4,
agreements on venue are not to be regarded as mandatory or restrictive, but merely permissive,
or complementary of said rule. The fact that in their agreement the parties specify only one of the
venues mentioned in Rule 4, or fix a place for their actions different from those specified by said
rule, does not, without more, suffice to characterize the agreement as a restrictive one. There
must, to repeat, be accompanying language clearly and categorically expressing their purpose
and design that actions between them be litigated only at the place named by them, 32 regardless
of the general precepts of Rule 4; and any doubt or uncertainty as to the parties' intentions must
be resolved against giving their agreement a restrictive or mandatory aspect. Any other rule would
permit of individual, subjective judicial interpretations without stable standards, which could well
result in precedents in hopeless inconsistency.
The record of the case at bar discloses that UNIMASTERS has its principal place of business in
Tacloban City, and KUBOTA, in Quezon City. Under Rule 4, the venue of any personal action
between them is "where the defendant or any of the defendants resides or may be found, or where
the plaintiff or any of the plaintiffs resides, at the election of the plaintiff." 33 In other words, Rule 4
gives UNIMASTERS the option to sue KUBOTA for breach of contract in the Regional Trial Court
of either Tacloban City or Quezon City.
But the contract between them provides that " . . All suits arising out of this Agreement shall be
filed with / in the proper Courts of Quezon City," without mention of Tacloban City. The question is
whether this stipulation had the effect of effectively eliminating the latter as an optional venue and
limiting litigation between UNIMASTERS and KUBOTA only and exclusively to Quezon City.
In light of all the cases above surveyed, and the general postulates distilled therefrom, the
question should receive a negative answer. Absent additional words and expressions definitely
and unmistakably denoting the parties' desire and intention that actions between them should be
ventilated only at the place selected by them, Quezon City — or other contractual provisions
clearly evincing the same desire and intention — the stipulation should be construed, not as
confining suits between the parties only to that one place, Quezon City, but as allowing suits either
in Quezon City or Tacloban City, at the option of the plaintiff (UNIMASTERS in this case).
One last word, respecting KUBOTA's theory that the Regional Trial Court had "no jurisdiction to
take cognizance of . . (UNIMASTERS') action considering that venue was improperly laid." This is
not an accurate statement of legal principle. It equates venue with jurisdiction; but venue has
nothing to do with jurisdiction, except in criminal actions. This is fundamental. 34 The action at bar,
for the recovery of damages in an amount considerably in excess of P20,000,00, is assuredly
within the jurisdiction of a Regional Trial Court. 35 Assuming that venue were improperly laid in the
Court where the action was instituted, the Tacloban City RTC, that would be a procedural, not a
jurisdictional impediment — precluding ventilation of the case before that Court of wrong
venue notwitstanding that the subject matter is within its jurisdiction. However, if the objection to
venue is waived by the failure to set it up in a motion to dismiss, 36 the RTC would proceed in
perfectly regular fashion if it then tried and decided the action.
This is true also of real actions. Thus, even if a case "affecting title to, or for recovery of
possession, or for partition or condemnation of, or foreclosure of mortgage on, real
property" 37 were commenced in a province or city other than that "where the property or any part
thereof lies," 38 if no objection is seasonably made in a motion to dismiss, the objection is deemed
waived, and the Regional Trial Court would be acting entirely within its competence and authority
in proceeding to try and decide the suit. 39
WHEREFORE, the appealed judgment of the Court of Appeals is REVERSED, the Order of the
Regional Trial Court of Tacloban City, Branch 6, dated February 3, 1994, is REINSTATED and
AFFIRMED, and said Court is DIRECTED to forthwith proceed with Civil Case No. 93-12-241 in
due course.
SO ORDERED.
 Republic of the Philippines Petitioner claims that the right to question the venue of an action belongs solely to the defendant
SUPREME COURT and that the court or its magistrate does not possess the authority to confront the plaintiff and tell
Manila him that the venue was improperly laid, as venue is waivable. In other words, petitioner asserts,
without the defendant objecting that the venue was improperly laid, the trial court is powerless to
THIRD DIVISION dismiss the case motu proprio.

G.R. No. 74854 April 2, 1991 Private respondent, on the other hand, maintains that the dismissal of petitioner's complaint is
proper because the same can "readily be assessed as (a) real action." He asserts that "every
court of justice before whom a civil case is lodged is not even obliged to wait for the defendant to
JESUS DACOYCOY, petitioner,
raise that venue was improperly laid. The court can take judicial notice and motu proprio dismiss a
vs.
suit clearly denominated as real action and improperly filed before it. . . . the location of the subject
HON. INTERMEDIATE APPELLATE COURT, HON. ANTONIO V. BENEDICTO, Executive
parcel of land is controlling pursuant to Sec. 2, par. (a), Rule 4 of the New Rules of Court . . .3
Judge, Regional Trial Court, Branch LXXI, Antipolo, Rizal, and RUFINO DE
GUZMAN, respondents.
We grant the petition.
Ramon V. Sison for petitioner.
Public Attorney's Office for private respondent. The motu proprio dismissal of petitioner's complaint by respondent trial court on the ground of
improper venue is plain error, obviously attributable to its inability to distinguish between
jurisdiction and venue.

Questions or issues relating to venue of actions are basically governed by Rule 4 of the Revised
Rules of Court. It is said that the laying of venue is procedural rather than substantive. It relates to
FERNAN, C.J.:
the jurisdiction of the court over the person rather than the subject matter. Provisions relating to
venue establish a relation between the plaintiff and the defendant and not between the court and
May the trial court motu proprio dismiss a complaint on the ground of improper venue? This is the the subject matter. Venue relates to trial not to jurisdiction, touches more of the convenience of the
issue confronting the Court in the case at bar. parties rather than the substance of the case.4

On March 22, 1983, petitioner Jesus Dacoycoy, a resident of Balanti, Cainta, Rizal, filed before Jurisdiction treats of the power of the court to decide a case on the merits; while venue deals on
the Regional Trial Court, Branch LXXI, Antipolo, Rizal, a complaint against private respondent the locality, the place where the suit may be had.5
Rufino de Guzman praying for the annulment of two (2) deeds of sale involving a parcel of riceland
situated in Barrio Estanza, Lingayen, Pangasinan, the surrender of the produce thereof and
In Luna vs. Carandang,6 involving an action instituted before the then Court of First Instance of
damages for private respondent's refusal to have said deeds of sale set aside upon petitioner's
Batangas for rescission of a lease contract over a parcel of agricultural land located in Calapan,
demand.
Oriental Mindoro, which complaint said trial court dismissed for lack of jurisdiction over the leased
land, we emphasized:
On May 25, 1983, before summons could be served on private respondent as defendant therein,
the RTC Executive Judge issued an order requiring counsel for petitioner to confer with
(1) A Court of First Instance has jurisdiction over suits involving title to, or possession of,
respondent trial judge on the matter of venue. After said conference, the trial court dismissed the
real estate wherever situated in the Philippines, subject to the rules on venue of actions
complaint on the ground of improper venue. It found, based on the allegations of the complaint,
(Manila Railroad Company vs. Attorney General, etc., et al., 20 Phil. 523; Central
that petitioner's action is a real action as it sought not only the annulment of the aforestated deeds
Azucarera de Tarlac vs. De Leon, et al., 56 Phil. 169; Navarro vs. Aguila, et al., 66 Phil.
of sale but also the recovery of ownership of the subject parcel of riceland located in Estanza, 604; Lim Cay, et al. vs. Del Rosario, etc., et al., 55 Phil. 692);
Lingayen, Pangasinan, which is outside the territorial jurisdiction of the trial court.
(2) Rule 4, Section 2, of the Rules of Court requiring that an action involving real property
Petitioner appealed to the Intermediate Appellate Court, now Court of Appeals, which in its shall be brought in the Court of First Instance of the province where the land lies is a rule
decision of April 11, 1986,1 affirmed the order of dismissal of his complaint. on venue of actions, which may be waived expressly or by implication.

In this petition for review, petitioner faults the appellate court in affirming what he calls an equally
In the instant case, even granting for a moment that the action of petitioner is a real action,
erroneous finding of the trial court that the venue was improperly laid when the defendant, now
respondent trial court would still have jurisdiction over the case, it being a regional trial court
private respondent, has not even answered the complaint nor waived the venue.2
vested with the exclusive original jurisdiction over "all civil actions which involve the title to, or
possession of, real property, or any interest therein . . ." in accordance with Section 19 (2) of Batas
Pambansa Blg. 129. With respect to the parties, there is no dispute that it acquired jurisdiction
over the plaintiff Jesus Dacoycoy, now petitioner, the moment he filed his complaint for annulment
and damages. Respondent trial court could have acquired jurisdiction over the defendant, now
private respondent, either by his voluntary appearance in court and his submission to its authority,
or by the coercive power of legal process exercised over his person.7

Although petitioner contends that on April 28, 1963, he requested the City Sheriff of Olongapo City
or his deputy to serve the summons on defendant Rufino de Guzman at his residence at 117
Irving St., Tapinac, Olongapo City,8 it does not appear that said service had been properly effected
or that private respondent had appeared voluntarily in court9 or filed his answer to the
complaint.10 At this stage, respondent trial court should have required petitioner to exhaust the
various alternative modes of service of summons under Rule 14 of the Rules of Court, i.e.,
personal service under Section 7, substituted service under Section 8, or service by publication
under Section 16 when the address of the defendant is unknown and cannot be ascertained by
diligent inquiry.

Dismissing the complaint on the ground of improper venue is certainly not the appropriate course
of action at this stage of the proceeding, particularly as venue, in inferior courts as well as in the
courts of first instance (now RTC), may be waived expressly or impliedly. Where defendant fails to
challenge timely the venue in a motion to dismiss as provided by Section 4 of Rule 4 of the Rules
of Court, and allows the trial to be held and a decision to be rendered, he cannot on appeal or in a
special action be permitted to challenge belatedly the wrong venue, which is deemed waived. 11

Thus, unless and until the defendant objects to the venue in a motion to dismiss, the venue cannot
be truly said to have been improperly laid, as for all practical intents and purposes, the venue,
though technically wrong, may be acceptable to the parties for whose convenience the rules on
venue had been devised. The trial court cannot pre-empt the defendant's prerogative to object to
the improper laying of the venue by motu proprio dismissing the case.

Indeed, it was grossly erroneous for the trial court to have taken a procedural short-cut by
dismissing motu propriothe complaint on the ground of improper venue without first allowing the
procedure outlined in the Rules of Court to take its proper course. Although we are for the speedy
and expeditious resolution of cases, justice and fairness take primary importance. The ends of
justice require that respondent trial court faithfully adhere to the rules of procedure to afford not
only the defendant, but the plaintiff as well, the right to be heard on his cause.

WHEREFORE, in view of the foregoing, the decision of the Intermediate Appellate Court, now
Court of Appeals, dated April 11, 1986, is hereby nullified and set aside. The complaint filed by
petitioner before the Regional Trial Court of Antipolo, Branch LXXI is revived and reinstated.
Respondent court is enjoined to proceed therein in accordance with law.

SO ORDERED.
 SECOND DIVISION
G.R. No. 111685 August 20, 2001
DAVAO LIGHT & POWER CO., INC., petitioner,
vs.
THE HON. COURT OF APPEALS, HON. RODOLFO M. BELLAFLOR, Presiding Judge of
Branch 11, RTC-Cebu and FRANCISCO TESORERO, respondents.
DE LEON, JR., J.:
Before us is a petition for review on certiorari assailing the Decision dated August 31, 1993
rendered by the Sixteenth Division1 of the Court of Appeals in CA-G.R. SP No. 29996, the
dispositive portion of which states:
WHEREFORE, the petition for review filed by Davao Light & Power Co., Inc. is hereby
DENIED DUE COURSE and the same is DISMISSED.
IT IS SO ORDERED.
The antecedent facts are:
On April 10, 1992, petitioner Davao Light & Power Co., Inc. filed a complaint for damages 2 against
private respondent Francisco Tesorero before the Regional Trial Court of Cebu City, Branch 11.
Docketed as CEB-11578, the complaint prayed for damages in the amount of P11,000,000.00.
In lieu of an answer, private respondent filed a motion to dismiss3 claiming that: (a) the complaint
did not state a cause of action; (b) the plaintiff's claim has been extinguished or otherwise
rendered moot and academic; (c) there was non-joinder of indispensable parties; and (d) venue
was improperly laid. Of these four (4) grounds, the last mentioned is most material in this case at
bar.
On August 3, 1992, the trial court issued a Resolution4 dismissing petitioner's complaint on the
ground of improper venue. The trial court stated that:
The plaintiff being a private corporation undoubtedly Banilad, Cebu City is the plaintiff's
principal place of business as alleged in the complaint and which for purposes of venue is
considered as its residence. x x x.
However, in defendant's motion to dismiss, it is alleged and submitted that the principal
office of plaintiff is at "163-165 P. Reyes Street, Davao City as borne out by the Contract
of Lease (Annex 2 of the motion) and another Contract of Lease of Generating Equipment
(Annex 3 of the motion) executed by the plaintiff with the NAPOCOR.
The representation made by the plaintiff in the 2 aforementioned Lease Contracts stating
that its principal office is at "163-165 P. Reyes Street, Davao City" bars the plaintiff from
denying the same.
The choice of venue should not be left to plaintiff's whim or caprises [sic]. He may be
impelled by some ulterior motivation in choosing to file a case in a court even if not
allowed by the rules of venue.
Another factor considered by the Courts in deciding controversies regarding venue are
considerations of judicial economy and administration, as well as the convenience of the
parties for which the rules of procedure and venue were formulated x x x.
Considering the foregoing, the Court is of the opinion that the principal office of plaintiff is
at Davao City which for purposes of venue is the residence of plaintiff.
Hence, the case should be filed in Davao City.
The motion on the ground of improper venue is granted and the complaint DISMISSED
on that ground.
SO ORDERED.
Petitioner's motion for reconsideration5 was denied in an Order6 dated October 1, 1992.
From the aforesaid resolution and order, petitioner originally filed before this Court on November
20, 1992 a petition for review on certiorari docketed as G.R. No. 107381. 7 We declined to take
immediate cognizance of the case, and in a Resolution dated January 11, 1993, 8 referred the
same to the Court of Appeals for resolution. The petition was docketed in the appellate court as
CA-G.R. SP No. 29996.
On August 31, 1993, the Court of Appeals rendered the assailed judgment 9 denying due course
and dismissing the petition. Counsel for petitioner received a copy of the decision on September 6,
1993.10 Without filing a motion for reconsideration, petitioner filed the instant petition, assailing the
judgment of the Court of Appeals on the following grounds:
5.01. Respondent Court of Appeals denied petitioner procedural due process by failing to
resolve the third of the above-stated issues.
5.02. Petitioner's right to file its action for damages against private respondent in Cebu
City where its principal office is located, and for which it paid P55,398.50 in docket fees,
may not be negated by a supposed estoppel absent the essential elements of the false
statement having been made to private respondent and his reliance on good faith on the
truth thereof, and private respondent's action or inaction based thereon of such character
as to change his position or status to his injury, detriment or prejudice.
The principal issue in the case at bar involves a question of venue. It is to be distinguished from
jurisdiction, as follows:
Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be conferred by
consent or waiver upon a court which otherwise would have no jurisdiction over the
subject-matter of an action; but the venue of an action as fixed by statute may be
changed by the consent of the parties and an objection that the plaintiff brought his suit in
the wrong county may be waived by the failure of the defendant to make a timely
objection. In either case, the court may render a valid judgment. Rules as to jurisdiction
can never be left to the consent or agreement of the parties, whether or not a prohibition
exists against their alteration.11
It is private respondent's contention that the proper venue is Davao City, and not Cebu City where
petitioner filed Civil Case No. CEB-11578. Private respondent argues that petitioner is estopped
from claiming that its residence is in Cebu City, in view of contradictory statements made by
petitioner prior to the filing of the action for damages. First, private respondent adverts to several
contracts12 entered into by petitioner with the National Power Corporation (NAPOCOR) where in
the description of personal circumstances, the former states that its principal office is at "163-165
P. Reyes St., Davao City." According to private respondent the petitioner's address in Davao City,
as given in the contracts, is an admission which should bind petitioner.
In addition, private respondent points out that petitioner made several judicial admissions as to its
principal office in Davao City consisting principally of allegations in pleadings filed by petitioner in
a number of civil cases pending before the Regional Trial Court of Davao in which it was either a
plaintiff or a defendant.13
Practically the same issue was addressed in Young Auto Supply Co. v. Court of Appeals.14 In the
aforesaid case, the defendant therein sought the dismissal of an action filed by the plaintiff, a
corporation, before the Regional Trial Court of Cebu City, on the ground of improper venue. The
trial court denied the motion to dismiss; on certiorari before the Court of Appeals, the denial was
reversed and the case was dismissed. According to the appellate tribunal, venue was improperly
laid since the address of the plaintiff was supposedly in Pasay City, as evidenced by a contract of
sale, letters and several commercial documents sent by the plaintiff to the defendant, even though
the plaintiff's articles of incorporation stated that its principal office was in Cebu City. On appeal,
we reversed the Court of Appeals. We reasoned out thus:
In the Regional Trial Courts, all personal actions are commenced and tried in the province
or city where the defendant or any of the defendants resides or may be found, or where
the plaintiff or any of the plaintiffs resides, at the election of the plaintiff x x x.
There are two plaintiffs in the case at bench: a natural person and a domestic corporation.
Both plaintiffs aver in their complaint that they are residents of Cebu City, thus:
xxx xxx xxx
The Article of Incorporation of YASCO (SEC Reg. No. 22083) states:
"THIRD. That the place where the principal office of the corporation is to be established or
located is at Cebu City, Philippines (as amended on December 20, 1980 and further
amended on December 20, 1984)" x x x.
A corporation has no residence in the same sense in which this term is applied to a
natural person. But for practical purposes, a corporation is in a metaphysical sense a
resident of the place where its principal office is located as stated in the articles of
incorporation (Cohen v. Benguet Commercial Co., Ltd., 34 Phil. 526 [1916] Clavecilla
Radio System v. Antillo, 19 SCRA 379 [1967]). The Corporation Code precisely requires
each corporation to specify in its articles of incorporation the "place where the principal
office of the corporation is to be located which must be within the Philippines" (Sec.
14[3]). The purpose of this requirement is to fix the residence of a corporation in a definite
place, instead of allowing it to be ambulatory.
In Clavecilla Radio System v. Antillon, 19 SCRA 379 ([1967]), this Court explained why
actions cannot be filed against a corporation in any place where the corporation maintains
its branch offices. The Court ruled that to allow an action to be instituted in any place
where the corporation has branch offices, would create confusion and work untold
inconvenience to said entity. By the same token, a corporation cannot be allowed to file
personal actions in a place other than its principal place of business unless such a place
is also the residence of a co-plaintiff or a defendant.
If it was Roxas who sued YASCO in Pasay City and the latter questioned the venue on
the ground that its principal place of business was in Cebu City, Roxas could argue that
YASCO was in estoppel because it misled Roxas to believe that Pasay City was its
principal place of business. But this is not the case before us.
With the finding that the residence of YASCO for purposes of venue is in Cebu City,
where its principal place of business is located, it becomes unnecessary to decide
whether Garcia is also a resident of Cebu City and whether Roxas was in estoppel from
questioning the choice of Cebu City as the venue. [emphasis supplied]
The same considerations apply to the instant case. It cannot be disputed that petitioner's principal
office is in Cebu City, per its amended articles of incorporation15 and by-laws.16 An action for
damages being a personal action,17venue is determined pursuant to Rule 4, section 2 of the Rules
of Court, to wit:
Venue of personal actions. — All other actions may be commenced and tied where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the
principal defendants resides, or in the case of a non-resident defendant where he may be
found, at the election of the plaintiff.18
Private respondent is not a party to any of the contracts presented before us. He is a complete
stranger to the covenants executed between petitioner and NAPOCOR, despite his protestations
that he is privy thereto, on the rather flimsy ground that he is a member of the public for whose
benefit the electric generating equipment subject of the contracts were leased or acquired. We are
likewise not persuaded by his argument that the allegation or representation made by petitioner in
either the complaints or answers it filed in several civil cases that its residence is in Davao City
should estop it from filing the damage suit before the Cebu courts. Besides there is no showing
that private respondent is a party in those civil cases or that he relied on such representation by
petitioner.

WHEREFORE, the instant petition is hereby GRANTED. The appealed decision is hereby
REVERSED and SET ASIDE. The Regional Trial Court of Cebu City, Branch 11 is hereby directed
to proceed with Civil Case No. CEB-11578 with all deliberate dispatch. No pronouncement as to
costs.

WE CONCUR:

SO ORDERED.
 THIRD DIVISION
[G.R. No. 125027. August 12, 2002]
ANITA MANGILA, petitioner, vs. COURT OF APPEALS and LORETA GUINA, respondents.
DECISION
CARPIO, J.:
The Case
This is a petition fore review on certiorari under Rule 45 of the Rules of Court, seeking to set
aside the Decision[1] of the Court of Appeals affirming the Decision[2] of the Regional Trial Court,
Branch 108, Pasay City. The trial court upheld the writ of attachment and the declaration of default
on petitioner while ordering her to pay private respondent P109,376.95 plus 18 percent interest
per annum, 25 percent attorneys fees and costs of suit.
The Facts
Petitioner Anita Mangila (petitioner for brevity) is an exporter of sea foods and doing business
under the name and style of Seafoods Products. Private respondent Loreta Guina (private
respondent for brevity) is the President and General Manager of Air Swift International, a single
registered proprietorship engaged in the freight forwarding business.
Sometime in January 1988, petitioner contracted the freight forwarding services of private
respondent for shipment of petitioners products, such as crabs, prawns and assorted fishes, to
Guam (USA) where petitioner maintains an outlet. Petitioner agreed to pay private respondent
cash on delivery. Private respondents invoice stipulates a charge of 18 percent interest per annum
on all overdue accounts. In case of suit, the same invoice stipulates attorneys fees equivalent to
25 percent of the amount due plus costs of suit.[3]
On the first shipment, petitioner requested for seven days within which to pay private
respondent. However, for the next three shipments, March 17, 24 and 31, 1988, petitioner failed to
pay private respondent shipping charges amounting to P109, 376.95.[4]
Despite several demands, petitioner never paid private respondent. Thus, on June 10, 1988,
private respondent filed Civil Case No. 5875 before the Regional Trial Court of Pasay City for
collection of sum of money.
On August 1, 1988, the sheriff filed his Sheriffs Return showing that summons was not
served on petitioner. A woman found at petitioners house informed the sheriff that petitioner
transferred her residence to Sto. Nio, Guagua, Pampanga. The sheriff found out further that
petitioner had left the Philippines for Guam.[5]
Thus, on September 13, 1988, construing petitioners departure from the Philippines as done
with intent to defraud her creditors, private respondent filed a Motion for Preliminary Attachment.
On September 26, 1988, the trial court issued an Order of Preliminary Attachment[6] against
petitioner. The following day, the trial court issued a Writ of Preliminary Attachment.
The trial court granted the request of its sheriff for assistance from their counterparts in RTC,
Pampanga. Thus, on October 28, 1988, Sheriff Alfredo San Miguel of RTC Pampanga served on
petitioners household help in San Fernando, Pampanga, the Notice of Levy with the Order,
Affidavit and Bond.[7]
On November 7, 1988, petitioner filed an Urgent Motion to Discharge Attachment [8] without
submitting herself to the jurisdiction of the trial court. She pointed out that up to then, she had not
been served a copy of the Complaint and the summons. Hence, petitioner claimed the court had
not acquired jurisdiction over her person.[9]
In the hearing of the Urgent Motion to Discharge Attachment on November 11, 1988, private
respondent sought and was granted a re-setting to December 9, 1988. On that date, private
respondents counsel did not appear, so the Urgent Motion to Discharge Attachment was deemed
submitted for resolution.[10]
The trial court granted the Motion to Discharge Attachment on January 13, 1989 upon filing of
petitioners counter-bond. The trial court, however, did not rule on the question of jurisdiction and
on the validity of the writ of preliminary attachment.
On December 26, 1988, private respondent applied for an alias summons, which the trial
court issued on January 19, 1989.[11] It was only on January 26, 1989 that summons was finally
served on petitioner.[12]
On February 9, 1989, petitioner filed a Motion to Dismiss the Complaint on the ground of
improper venue. Private respondents invoice for the freight forwarding service stipulates that if
court litigation becomes necessary to enforce collection xxx the agreed venue for such action is
Makati, Metro Manila.[13] Private respondent filed an Opposition asserting that although Makati
appears as the stipulated venue, the same was merely an inadvertence by the printing press
whose general manager executed an affidavit[14] admitting such inadvertence. Moreover, private
respondent claimed that petitioner knew that private respondent was holding office in Pasay City
and not in Makati.[15] The lower court, finding credence in private respondents assertion, denied
the Motion to Dismiss and gave petitioner five days to file her Answer. Petitioner filed a Motion for
Reconsideration but this too was denied.
Petitioner filed her Answer[16] on June 16, 1989, maintaining her contention that the venue
was improperly laid.
On June 26, 1989, the trial court issued an Order setting the pre-trial for July 18, 1989 at 8:30
a.m. and requiring the parties to submit their pre-trial briefs. Meanwhile, private respondent filed a
Motion to Sell Attached Properties but the trial court denied the motion.
 On motion of petitioner, the trial court issued an Order resetting the pre-trial from July 18, The issues raised by petitioner may be re-stated as follows:
1989 to August 24, 1989 at 8:30 a.m..
I.
On August 24, 1989, the day of the pre-trial, the trial court issued an Order[17] terminating the
pre-trial and allowing the private respondent to present evidence ex-parte on September 12, 1989 WHETHER RESPONDENT COURT ERRED IN NOT HOLDING THAT THE WRIT OF
at 8:30 a.m.. The Order stated that when the case was called for pre-trial at 8:31 a.m., only the ATTACHMENT WAS IMPROPERLY ISSUED AND SERVED;
counsel for private respondent appeared. Upon the trial courts second call 20 minutes later,
petitioners counsel was still nowhere to be found. Thus, upon motion of private respondent, the
II.
pre-trial was considered terminated.
On September 12, 1989, petitioner filed her Motion for Reconsideration of the Order WHETHER THERE WAS A VALID DECLARATION OF DEFAULT;
terminating the pre-trial. Petitioner explained that her counsel arrived 5 minutes after the second
call, as shown by the transcript of stenographic notes, and was late because of heavy traffic.
III.
Petitioner claims that the lower court erred in allowing private respondent to present evidence ex-
parte since there was no Order considering the petitioner as in default. Petitioner contends that
the Order of August 24, 1989 did not state that petitioner was declared as in default but still the WHETHER THERE WAS IMPROPER VENUE.
court allowed private respondent to present evidence ex-parte.[18]
IV.
On October 6, 1989, the trial court denied the Motion for Reconsideration and scheduled the
presentation of private respondents evidence ex-parte on October 10, 1989.
WHETHER RESPONDENT COURT ERRED IN DECLARING THAT PETITIONER IS OBLIGED
On October 10, 1989, petitioner filed an Omnibus Motion stating that the presentation of TO PAY P109, 376.95, PLUS ATTORNEYS FEES.[20]
evidence ex-parte should be suspended because there was no declaration of petitioner as in
default and petitioners counsel was not absent, but merely late.
On October 18, 1989, the trial court denied the Omnibus Motion.[19] The Ruling of the Court
On November 20, 1989, the petitioner received a copy of the Decision of November 10,
1989, ordering petitioner to pay respondent P109,376.95 plus 18 percent interest per annum, 25 Improper Issuance and Service of Writ of Attachment
percent attorneys fees and costs of suit. Private respondent filed a Motion for Execution Pending
Appeal but the trial court denied the same.
Petitioner ascribes several errors to the issuance and implementation of the writ of
attachment. Among petitioners arguments are: first, there was no ground for the issuance of the
The Ruling of the Court of Appeals writ since the intent to defraud her creditors had not been established; second, the value of the
properties levied exceeded the value of private respondents claim. However, the crux of
petitioners arguments rests on the question of the validity of the writ of attachment. Because of
On December 15, 1995, the Court of Appeals rendered a decision affirming the decision of failure to serve summons on her before or simultaneously with the writs implementation, petitioner
the trial court. The Court of Appeals upheld the validity of the issuance of the writ of attachment claims that the trial court had not acquired jurisdiction over her person and thus the service of the
and sustained the filing of the action in the RTC of Pasay. The Court of Appeals also affirmed the writ is void.
declaration of default on petitioner and concluded that the trial court did not commit any reversible As a preliminary note, a distinction should be made between issuance and implementation of
error. the writ of attachment. It is necessary to distinguish between the two to determine when
Petitioner filed a Motion for Reconsideration on January 5, 1996 but the Court of Appeals jurisdiction over the person of the defendant should be acquired to validly implement the writ. This
denied the same in a Resolution dated May 20, 1996. distinction is crucial in resolving whether there is merit in petitioners argument.

Hence, this petition. This Court has long settled the issue of when jurisdiction over the person of the defendant
should be acquired in cases where a party resorts to provisional remedies. A party to a suit may,
at any time after filing the complaint, avail of the provisional remedies under the Rules of Court.
Specifically, Rule 57 on preliminary attachment speaks of the grant of the remedy at the
The Issues commencement of the action or at any time thereafter.[21] This phrase refers to the date of
filing of the complaint which is the moment that marks the commencement of the action. The
reference plainly is to a time before summons is served on the defendant, or even before
summons issues.
In Davao Light & Power Co., Inc. v. Court of Appeals,[22] this Court clarified the actual time
when jurisdiction should be had:
It goes without saying that whatever be the acts done by the Court prior to the acquisition of
jurisdiction over the person of defendant - issuance of summons, order of attachment and writ
of attachment - these do not and cannot bind and affect the defendant until and unless
jurisdiction over his person is eventually obtained by the court, either by service on him of
summons or other coercive process or his voluntary submission to the courts authority. Hence,
when the sheriff or other proper officer commences implementation of the writ of attachment, it is
essential that he serve on the defendant not only a copy of the applicants affidavit and attachment
bond, and of the order of attachment, as explicitly required by Section 5 of Rule 57, but also
the summons addressed to said defendant as well as a copy of the complaint xxx. (Emphasis
supplied.)
Furthermore, we have held that the grant of the provisional remedy of attachment involves three
stages: first, the court issues the order granting the application; second, the writ of attachment
issues pursuant to the order granting the writ; and third, the writ is implemented. For the initial
two stages, it is not necessary that jurisdiction over the person of the defendant be first
obtained.However, once the implementation of the writ commences, the court must have
acquired jurisdiction over the defendant for without such jurisdiction, the court has no power and
authority to act in any manner against the defendant. Any order issuing from the Court will not bind
the defendant.[23]
In the instant case, the Writ of Preliminary Attachment was issued on September 27, 1988
and implemented on October 28, 1988. However, the alias summons was served only on
January 26, 1989 or almost three months after the implementation of the writ of attachment.
The trial court had the authority to issue the Writ of Attachment on September 27 since a
motion for its issuance can be filed at the commencement of the action. However, on the day the
writ was implemented, the trial court should have, previously or simultaneously with the
implementation of the writ, acquired jurisdiction over the petitioner. Yet, as was shown in the
records of the case, the summons was actually served on petitioner several months after the writ
had been implemented.
Private respondent, nevertheless, claims that the prior or contemporaneous service of
summons contemplated in Section 5 of Rule 57 provides for exceptions. Among such exceptions
are where the summons could not be served personally or by substituted service despite diligent
efforts or where the defendant is a resident temporarily absent therefrom x x x. Private respondent
asserts that when she commenced this action, she tried to serve summons on petitioner but the
latter could not be located at her customary address in Kamuning, Quezon City or at her new
address in Guagua, Pampanga.[24] Furthermore, respondent claims that petitioner was not even in
Pampanga; rather, she was in Guam purportedly on a business trip.
Private respondent never showed that she effected substituted service on petitioner after her
personal service failed. Likewise, if it were true that private respondent could not ascertain the
whereabouts of petitioner after a diligent inquiry, still she had some other recourse under the
Rules of Civil Procedure.
The rules provide for certain remedies in cases where personal service could not be effected
on a party. Section 14, Rule 14 of the Rules of Court provides that whenever the defendants
whereabouts are unknown and cannot be ascertained by diligent inquiry, service may, by leave of
court, be effected upon him by publication in a newspaper of general circulation x x x. Thus, if
petitioners whereabouts could not be ascertained after the sheriff had served the summons at her
given address, then respondent could have immediately asked the court for service of summons
by publication on petitioner.[25]
Moreover, as private respondent also claims that petitioner was abroad at the time of the
service of summons, this made petitioner a resident who is temporarily out of the country. This is
the exact situation contemplated in Section 16,[26] Rule 14 of the Rules of Civil Procedure,
providing for service of summons by publication.
In conclusion, we hold that the alias summons belatedly served on petitioner cannot be
deemed to have cured the fatal defect in the enforcement of the writ. The trial court cannot enforce
such a coercive process on petitioner without first obtaining jurisdiction over her person. The
preliminary writ of attachment must be served after or simultaneous with the service of summons
on the defendant whether by personal service, substituted service or by publication as warranted
by the circumstances of the case.[27] The subsequent service of summons does not confer a
retroactive acquisition of jurisdiction over her person because the law does not allow for
retroactivity of a belated service.
Improper Venue
Petitioner assails the filing of this case in the RTC of Pasay and points to a provision in
private respondents invoice which contains the following:
3. If court litigation becomes necessary to enforce collection, an additional equivalent (sic) to 25%
of the principal amount will be charged. The agreed venue for such action is Makati, Metro Manila,
Philippines.[28]
Based on this provision, petitioner contends that the action should have been instituted in the
RTC of Makati and to do otherwise would be a ground for the dismissal of the case.
We resolve to dismiss the case on the ground of improper venue but not for the reason
stated by petitioner.
The Rules of Court provide that parties to an action may agree in writing on the venue on
which an action should be brought.[29] However, a mere stipulation on the venue of an action is not
enough to preclude parties from bringing a case in other venues.[30] The parties must be able to
show that such stipulation is exclusive. Thus, absent words that show the parties intention to
restrict the filing of a suit in a particular place, courts will allow the filing of a case in any venue, as
long as jurisdictional requirements are followed. Venue stipulations in a contract, while considered
valid and enforceable, do not as a rule supersede the general rule set forth in Rule 4 of the
Revised Rules of Court.[31] In the absence of qualifying or restrictive words, they should be
considered merely as an agreement on additional forum, not as limiting venue to the specified
place.[32]
 In the instant case, the stipulation does not limit the venue exclusively to Makati. There are
no qualifying or restrictive words in the invoice that would evince the intention of the parties that
Makati is the only or exclusive venue where the action could be instituted. We therefore agree with
private respondent that Makati is not the only venue where this case could be filed.
Nevertheless, we hold that Pasay is not the proper venue for this case.
Under the 1997 Rules of Civil Procedure, the general rule is venue in personal actions is
where the defendant or any of the defendants resides or may be found, or where the plaintiff or
any of the plaintiffs resides, at the election of the plaintiff.[33] The exception to this rule is when the
parties agree on an exclusive venue other than the places mentioned in the rules. But, as we have
discussed, this exception is not applicable in this case. Hence, following the general rule, the
instant case may be brought in the place of residence of the plaintiff or defendant, at the election
of the plaintiff (private respondent herein).
In the instant case, the residence of private respondent (plaintiff in the lower court) was not
alleged in the complaint. Rather, what was alleged was the postal address of her sole
proprietorship, Air Swift International. It was only when private respondent testified in court, after
petitioner was declared in default, that she mentioned her residence to be in Better Living
Subdivision, Paraaque City.
In the earlier case of Sy v. Tyson Enterprises, Inc.,[34] the reverse happened. The plaintiff in
that case was Tyson Enterprises, Inc., a corporation owned and managed by Dominador Ti. The
complaint, however, did not allege the office or place of business of the corporation, which was in
Binondo, Manila. What was alleged was the residence of Dominador Ti, who lived in San Juan,
Rizal. The case was filed in the Court of First Instance of Rizal, Pasig. The Court there held that
the evident purpose of alleging the address of the corporations president and manager was to
justify the filing of the suit in Rizal, Pasig instead of in Manila. Thus, the Court ruled that there was
no question that venue was improperly laid in that case and held that the place of business of
Tyson Enterpises, Inc. is considered as its residence for purposes of venue. Furthermore, the
Court held that the residence of its president is not the residence of the corporation because a
corporation has a personality separate and distinct from that of its officers and stockholders.
In the instant case, it was established in the lower court that petitioner resides in San
Fernando, Pampanga[35] while private respondent resides in Paraaque City.[36] However, this case
was brought in Pasay City, where the business of private respondent is found. This would have
been permissible had private respondents business been a corporation, just like the case in Sy v.
Tyson Enterprises, Inc. However, as admitted by private respondent in her Complaint[37] in the
lower court, her business is a sole proprietorship, and as such, does not have a separate juridical
personality that could enable it to file a suit in court.[38] In fact, there is no law authorizing sole
proprietorships to file a suit in court.[39]
A sole proprietorship does not possess a juridical personality separate and distinct from the
personality of the owner of the enterprise.[40] The law merely recognizes the existence of a sole
proprietorship as a form of business organization conducted for profit by a single individual and
requires its proprietor or owner to secure licenses and permits, register its business name, and
pay taxes to the national government.[41] The law does not vest a separate legal personality on the
sole proprietorship or empower it to file or defend an action in court.[42]
Thus, not being vested with legal personality to file this case, the sole proprietorship is not
the plaintiff in this case but rather Loreta Guina in her personal capacity. In fact, the complaint in
the lower court acknowledges in its caption that the plaintiff and defendant are Loreta Guina and
Anita Mangila, respectively. The title of the petition before us does not state, and rightly so, Anita
Mangila v. Air Swift International, but rather Anita Mangila v. Loreta Guina. Logically then, it is the
residence of private respondent Guina, the proprietor with the juridical personality, which should
be considered as one of the proper venues for this case.
All these considered, private respondent should have filed this case either in San Fernando,
Pampanga (petitioners residence) or Paraaque (private respondents residence). Since private
respondent (complainant below) filed this case in Pasay, we hold that the case should be
dismissed on the ground of improper venue.
Although petitioner filed an Urgent Motion to Discharge Attachment in the lower court,
petitioner expressly stated that she was filing the motion without submitting to the jurisdiction of
the court. At that time, petitioner had not been served the summons and a copy of the
complaint.[43] Thereafter, petitioner timely filed a Motion to Dismiss[44] on the ground of improper
venue. Rule 16, Section 1 of the Rules of Court provides that a motion to dismiss may be filed
[W]ithin the time for but before filing the answer to the complaint or pleading asserting a claim.
Petitioner even raised the issue of improper venue in his Answer[45] as a special and affirmative
defense. Petitioner also continued to raise the issue of improper venue in her Petition for
Review[46] before this Court. We thus hold that the dismissal of this case on the ground of improper
venue is warranted.
The rules on venue, like other procedural rules, are designed to insure a just and orderly
administration of justice or the impartial and evenhanded determination of every action and
proceeding. Obviously, this objective will not be attained if the plaintiff is given unrestricted
freedom to choose where to file the complaint or petition.[47]
We find no reason to rule on the other issues raised by petitioner.
WHEREFORE, the petition is GRANTED on the grounds of improper venue and invalidity of
the service of the writ of attachment. The decision of the Court of Appeals and the order of
respondent judge denying the motion to dismiss are REVERSED and SET ASIDE. Civil Case No.
5875 is hereby dismissed without prejudice to refiling it in the proper venue. The attached
properties of petitioner are ordered returned to her immediately.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
FIRST DIVISION
G.R. No. 152808 September 30, 2005
ANTONIO T. CHUA, Petitioners,
vs.
TOTAL OFFICE PRODUCTS AND SERVICES (TOPROS), INC., Respondent.
DECISION
QUISUMBING, J.:
For review on certiorari is the decision1 dated November 28, 2001 of the Court of Appeals and its
resolution2 of April 1, 2002 in CA-G.R. SP No. 62592. The assailed decision and resolution
dismissed the special civil action for certiorari against the orders of August 9, 20003 and October
6, 20004 issued by Judge Lorifel Lacap Pahimna in Civil Case No. 67736.
The pertinent facts, based on the records, are as follows:
On December 28, 1999, respondent Total Office Products and Services, Inc., (TOPROS) lodged a
complaint for annulment of contracts of loan and real estate mortgage against herein petitioner
Antonio T. Chua before the Regional Trial Court of Pasig City. The case was docketed as Civil
Case No. 67736 and was raffled to the sala of Judge Lorifel Lacap Pahimna.
The said suit sought to annul a loan contract allegedly extended by petitioner to respondent
TOPROS in the amount of ten million four hundred thousand pesos (₱10,400,000) and the
accessory real estate mortgage contract covering two parcels of land situated in Quezon City as
collateral.
It appeared on the face of the subject contracts that TOPROS was represented by its president
John Charles Chang, Jr. However, TOPROS alleged that the purported loan and real estate
mortgage contracts were fictitious, since it never authorized anybody, not even its president, to
enter into said transaction.
On February 28, 2000, petitioner filed a motion to dismiss on the ground of improper venue. He
contended that the action filed by TOPROS affects title to or possession of the parcels of land
subject of the real estate mortgage. He argued that it should thus have been filed in the Regional
Trial Court of Quezon City where the encumbered real properties are located, instead of Pasig
City where the parties reside.
On August 9, 2000, Judge Pahimna issued an order denying the motion to dismiss. She reasoned
that the action to annul the loan and mortgage contracts is a personal action and thus, the venue
was properly laid in the RTC of Pasig City where the parties reside.
Petitioner moved for a reconsideration of the said order, which Judge Pahimna denied in its order
of October 6, 2000. Hence, petitioner filed with the Court of Appeals a special civil action
for certiorari alleging:
THE RESPONDENT JUDGE COMMITTED GRAVE ABUSE OF DISCRETION IN
DISREGARDING THE RULING OF THE SUPREME COURT IN PASCUAL VS. PASCUAL
REGARDING THE RULE ON PROPER VENUE, AND CONSEQUENTLY ADJUDGING TO BE A
PERSONAL ACTION A CIVIL COMPLAINT FOR THE ANNULMENT OF AN ALLEGEDLY
FICTITIOUS CONTRACT.5
The Court of Appeals dismissed said petition in its decision dated November 28, 2001. It held that
the authorities relied upon by petitioner, namely Pascual v. Pascual6 and Banco Español-Filipino
v. Palanca,7 are inapplicable in the instant case. The appellate court instead applied Hernandez v.
Rural Bank of Lucena, Inc.8 wherein we ruled that an action for the cancellation of a real estate
mortgage is a personal action if the mortgagee has not foreclosed the mortgage and the
mortgagor is in possession of the premises, as neither the mortgagor’s title to nor possession of
the property is disputed.
Dissatisfied, petitioner filed a motion for reconsideration, which the Court of Appeals denied for
lack of merit in its resolution of April 1, 2002.
Undeterred, petitioner now comes to us on a petition for review raising the following issues:
WHETHER AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED
AS ‘FICTITIOUS’FOR BEING WITH ABSOLUTELY NO CONSIDERATION IS A PERSONAL
ACTION OR REAL ACTION?
WHETHER IN AN ACTION TO ANNUL A LOAN AND MORTGAGE CONTRACT DULY ALLEGED
AS ‘FICTITIOUS’FOR BEING WITH ABSOLUTELY NO CONSIDERATION, THE PERSON
ALLEGED TO HAVE ‘[LACKED] AUTHORITY’ TO ENTER INTO SAID CONTRACTS IS AN
INDISPENSABLE PARTY?9
Petitioner contends that Hernandez should not be applied here because in the said case: (1)
venue was improperly laid at the outset; (2) the complaint recognized the validity of the principal
contract involved; and (3) the plaintiff sought to compel acceptance by the defendant of plaintiff’s
payment of the latter’s mortgage debt. He insists that the Pascual case should be applied instead.
He invokes our pronouncement in Pascual, to wit:
… It appearing, however, that the sale is alleged to be fictitious, with absolutely no consideration,
it should be regarded as a non-existent, not merely null, contract…. And there being no contract
between the deceased and the defendants, there is in truth nothing to annul by action. The action
brought cannot thus be for annulment of contract, but is one for recovery of a fishpond, a real
action that should be, as it has been, brought in Pampanga, where the property is located…. 10
Petitioner likewise cites the Banco Español-Filipino case, thus:
Where the defendant in a mortgage foreclosure lives out of the Islands and refuses to appear or
otherwise submit himself to the authority of the court, the jurisdiction of the latter is limited to the
mortgaged property, with respect to which the jurisdiction of the court is based upon the fact that
the property is located within the district and that the court, under the provisions of law applicable
in such cases, is vested with the power to subject the property to the obligation created by the
mortgage. In such case personal jurisdiction over the nonresident defendant is nonessential and in
fact cannot be acquired.11
Petitioner also alleges that John Charles Chang, Jr., the president of TOPROS, who allegedly
entered into the questioned loan and real estate mortgage contracts, is an indispensable party
who has not been properly impleaded.
TOPROS, however, maintains that the appellate court correctly sustained the lower court’s finding
that the instant complaint for annulment of loan and real estate mortgage contracts is a personal
action. TOPROS points out that a complaint for the declaration of nullity of a loan contract for lack
of consent and consideration remains a personal action even if the said action will necessarily
affect the accessory real estate mortgage.
TOPROS argues that Pascual is inapplicable because the subject contract therein was a contract
of sale of a parcel of land where title and possession were already transferred to the defendant.
TOPROS further contends that Banco Español-Filipino is also inapplicable since the personal
action filed therein was one which affected the personal status of a nonresident defendant.
Considering the facts and the submission of the parties, we find the petition bereft of merit.
Well-settled is the rule that an action to annul a contract of loan and its accessory real estate
mortgage is a personal action. In a personal action, the plaintiff seeks the recovery of personal
property, the enforcement of a contract or the recovery of damages.12 In contrast, in a real action,
the plaintiff seeks the recovery of real property, or, as indicated in Section 2 (a), Rule 4 of the then
Rules of Court, a real action is an action affecting title to real property or for the recovery of
possession, or for partition or condemnation of, or foreclosure of mortgage on, real property.13
In the Pascual case, relied upon by petitioner, the contract of sale of the fishpond was assailed as
fictitious for lack of consideration. We held that there being no contract to begin with, there is
nothing to annul. Hence, we deemed the action for annulment of the said fictitious contract therein
as one constituting a real action for the recovery of the fishpond subject thereof.
We cannot, however, apply the foregoing doctrine to the instant case. Note that in Pascual, title to
and possession of the subject fishpond had already passed to the vendee. There was, therefore, a
need to recover the said fishpond. But in the instant case, ownership of the parcels of land subject
of the questioned real estate mortgage was never transferred to petitioner, but remained with
TOPROS. Thus, no real action for the recovery of real property is involved. This being the case,
TOPROS’ action for annulment of the contracts of loan and real estate mortgage remains a
personal action.
Petitioner’s reliance on the Banco Español-Filipino case is likewise misplaced. That case involved
a foreclosure of real estate mortgage against a nonresident. We held therein that jurisdiction is
determined by the place where the real property is located and that personal jurisdiction over the
nonresident defendant is nonessential and, in fact, cannot be acquired.
Needless to stress, the instant case bears no resemblance to the Banco Español-Filipino case. In
the first place, this is not an action involving foreclosure of real estate mortgage. In the second
place, none of the parties here is a nonresident. We find no reason to apply here our ruling
in Banco Español-Filipino.
The Court of Appeals finds that Hernandez v. Rural Bank of Lucena, Inc. provides the proper
precedent in this case. In Hernandez, appellants contended that the action of the Hernandez
spouses for the cancellation of the mortgage on their lots was a real action affecting title to real
property, which should have been filed in the place where the mortgaged lots were situated. Rule
4, Section 2 (a), of the then Rules of Court, was applied, to wit:
SEC. 2. Venue in Courts of First Instance. – (a) Real actions. – Actions affecting title to, or for
recovery of possession, or for partition or condemnation of, or foreclosure of mortgage on, real
property, shall be commenced and tried in the province where the property or any part thereof lies.
The Court pointed out in the Hernandez case that with respect to mortgage, the rule on real
actions only mentions an action for foreclosure of a real estate mortgage. It does not include an
action for the cancellation of a real estate mortgage. Exclusio unios est inclusio alterius. The latter
thus falls under the catch-all provision on personal actions under paragraph (b) of the above-cited
section, to wit:
SEC. 2 (b) Personal actions. – All other actions may be commenced and tried where the
defendant or any of the defendants resides or may be found, or where the plaintiff or any of the
plaintiffs resides, at the election of the plaintiff.
In the same vein, the action for annulment of a real estate mortgage in the present case must fall
under Section 2 of Rule 4, to wit:
SEC. 2. Venue of personal actions. – All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found, at the
election of the plaintiff.14
Thus, Pasig City, where the parties reside, is the proper venue of the action to nullify the subject
loan and real estate mortgage contracts. The Court of Appeals committed no reversible error in
upholding the orders of the Regional Trial Court denying petitioner’s motion to dismiss the case on
the ground of improper venue.
Anent the second issue, Section 7, Rule 3 of the Revised Rules of Court provides:
SEC. 7. Compulsory joinder of indispensable parties. – Parties in interest without whom no final
determination can be had of an action shall be joined either as plaintiffs or defendants. (Emphasis
ours)
The presence of indispensable parties is necessary to vest the court with jurisdiction. The absence
of an indispensable party renders all subsequent actuations of the court null and void, because of
that court’s want of authority to act, not only as to the absent parties but even as to those
present.15 Thus, whenever it appears to the court in the course of a proceeding that an
indispensable party has not been joined, it is the duty of the court to stop the trial and order the
inclusion of such party.16

A person is not an indispensable party, however, if his interest in the controversy or subject matter
is separable from the interest of the other parties, so that it will not necessarily be directly or
injuriously affected by a decree which does complete justice between them.17

Is John Charles Chang, Jr., the president of TOPROS who allegedly entered into the disputed
contracts of loan and real estate mortgage, an indispensable party in this case?

We note that although it is Chang’s signature that appears on the assailed real estate mortgage
contract, his participation is limited to being a representative of TOPROS, allegedly without
authority. The document18 which constitutes as the contract of real estate mortgage clearly points
to petitioner and TOPROS as the sole parties-in-interest to the agreement as mortgagee and
mortgagor therein, respectively. Any rights or liabilities arising from the said contract would
therefore bind only the petitioner and TOPROS as principal parties. Chang, acting as mere
representative of TOPROS, acquires no rights whatsoever, nor does he incur any liabilities, arising
from the said contract between petitioner and TOPROS. Certainly, in our view, the only
indispensable parties to the mortgage contract are petitioner and TOPROS alone.

We thus hold that John Charles Chang, Jr., is not an indispensable party in Civil Case No. 67736.
This is without prejudice to any separate action TOPROS may institute against Chang, Jr., in a
proper proceeding.

WHEREFORE, the petition is DENIED. The assailed decision dated November 28, 2001 and
resolution dated April 1, 2002 of the Court of Appeals upholding the Orders of Judge Lorifel Lacap
Pahimna are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 204444 January 14, 2015
VIRGILIO C. BRIONES, Petitioner,
vs.
COURT OF APPEALS and CASH ASIA CREDIT CORPORATION, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for certiorari1 are the Decision2 dated March 5, 2012 and the
Resolution3 dated October 4, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 117474, which
annulled the Orders dated September 20, 20104 and October 22, 20105 of the Regional Trial Court
of Manila, Branch 173 (RTC) in Civil Case No. 10-124040, denying private respondent Cash Asia
Credit Corporation's (Cash Asia) motion to dismiss on the ground of improper venue.
The Facts
The instant case arose from a Complaint6 dated August 2, 2010 filed by Virgilio C. Briones
(Briones) for Nullity of Mortgage Contract, Promissory Note, Loan Agreement, Foreclosure of
Mortgage, Cancellation of Transfer Certificate of Title (TCT) No. 290846, and Damages against
Cash Asia before the RTC.7 In his complaint, Briones alleged that he is the owner of a property
covered by TCT No. 160689 (subject property), and that, on July 15, 2010, his sister informed him
that his property had been foreclosed and a writ of possession had already been issued in favor of
Cash Asia.8 Upon investigation, Briones discovered that: (a) on December 6, 2007, he purportedly
executed a promissory note,9 loan agreement,10 and deed of real estate mortgage11 covering the
subject property (subject contracts) in favor of Cash Asia in order to obtain a loan in the amount of
₱3,500,000.00 from the latter;12 and (b) since the said loan was left unpaid, Cash Asia proceeded
to foreclose his property.13 In this relation, Briones claimed that he never contracted any loans
from Cash Asia as he has been living and working in Vietnam since October 31, 2007. He further
claimed that he only went back to the Philippines on December 28, 2007 until January 3, 2008 to
spend the holidays with his family, and that during his brief stay in the Philippines, nobody
informed him of any loan agreement entered into with Cash Asia. Essentially, Briones assailed the
validity of the foregoing contracts claiming his signature to be forged.14
15
For its part, Cash Asia filed a Motion to Dismiss dated August 25, 2010, praying for the outright
dismissal of Briones’s complaint on the ground of improper venue.16 In this regard, Cash Asia
pointed out the venue stipulation in the subject contracts stating that "all legal actions arising out of
this notice in connection with the Real Estate Mortgage subject hereof shall only be brought in or
submitted tothe jurisdiction of the proper court of Makati City."17In view thereof, it contended that
all actions arising out of the subject contracts may only be exclusively brought in the courts of
Makati City, and as such, Briones’s complaint should be dismissed for having been filed in the City
of Manila.18
In response, Briones filed an opposition,19 asserting, inter alia, that he should not be covered by
the venue stipulation in the subject contracts as he was never a party therein. He also reiterated
that his signatures on the said contracts were forgeries.20
The RTC Ruling
In an Order21 dated September 20, 2010, the RTC denied Cash Asia’s motion to dismiss for lack
of merit. In denying the motion, the RTC opined that the parties must be afforded the right to be
heard in view of the substance of Briones’s cause of action against Cash Asia as stated in the
complaint.22
Cash Asia moved for reconsideration23 which was, however, denied in an Order24 dated October
22, 2010. Aggrieved, it filed a petition for certiorari25 before the CA.
The CA Ruling
In a Decision26 dated March 5, 2012, the CA annulled the RTC Orders, and accordingly, dismissed
Briones’s complaint without prejudice to the filing of the same before the proper court in Makati
City.27 It held that the RTC gravely abused its discretion in denying Cash Asia’s motion to dismiss,
considering that the subject contracts clearly provide that actions arising therefrom should be
exclusively filed before the courts of Makati City only.28 As such, the CA concluded that Briones’s
complaint should have been dismissed outright on the ground of improper venue, 29this,
notwithstanding Briones’s claim of forgery.
Dissatisfied, Briones moved for reconsideration,30 which was, however, denied in a
Resolution31 dated October 4, 2012, hence, this petition.
The Issue Before the Court
The primordial issue for the Court’s resolution is whether or not the CA gravely abused its
discretion in ordering the outright dismissal of Briones’s complaint on the ground of improper
venue.
The Court’s Ruling
The petition is meritorious.
At the outset, the Court stresses that "[t]o justify the grant of the extraordinary remedy of certiorari,
[the petitioner] must satisfactorily show that the court or quasi-judicial authority gravely abused the
discretion conferred upon it. Grave abuse of discretion connotes judgment exercised in a
capricious and whimsical manner that is tantamount to lack of jurisdiction. To be considered
‘grave,’ discretion must be exercised in a despotic manner by reason of passion or personal
hostility, and must be so patent and gross as to amount to an evasion of positive duty or to a
virtual refusal to perform the duty enjoined by or to act at all in contemplation of law." 32 Guided by
the foregoing considerations, the Court finds that the CA gravely abused its discretion in ordering
the outright dismissal of Briones’s complaint against Cash Asia, without prejudice to its re-filing
before the proper court in Makati City.
Rule 4 of the Rules of Court governs the rules on venue of civil actions, to wit:
Rule
VENUE OF ACTIONS
SECTION 1. Venue of real actions. — Actions affecting title to or possession of real property, or
interest therein, shall be commenced and tried in the proper court which has jurisdiction over the
area wherein the real property involved, or a portion thereof, is situated.
Forcible entry and detainer actions shall be commenced and tried in the municipal trial court of the
municipality or city wherein the real property involved, or a portion thereof, is situated.
SEC. 2. Venue of personal actions. — All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a non-resident defendant where he may be found, at the
election of the plaintiff.
SEC. 3. Venue of actions against nonresidents. — If any of the defendants does not resideand is
not found in the Philippines, and the action affects the personal status of the plaintiff, or any
property of said defendant located in the Philippines,the action may be commenced and tried in
the court of the place where the plaintiff resides, or where the property or any portion thereof is
situated or found.
SEC. 4. When Rule not applicable. — This Rule shall not apply –
(a) In those cases where a specific rule or law provides otherwise; or
(b) Where the parties have validly agreed in writing before the filing of the action on the
exclusive venue thereof.
Based therefrom, the general rule is that the venue of real actions is the court which has
jurisdiction over the area wherein the real property involved, or a portion thereof, is situated; while
the venue of personal actions is the court which has jurisdiction where the plaintiff or the
defendant resides, at the election of the plaintiff. As an exception, jurisprudence in Legaspi v. Rep.
of the Phils.33 instructs that the parties, thru a written instrument, may either introduce another
venue where actions arising from such instrument may be filed, or restrict the filing of said actions
in a certain exclusive venue, viz.:
The parties, however, are not precluded from agreeing in writing on an exclusive venue, as
qualified by Section 4 of the same rule. Written stipulations as to venue may be restrictive in the
sense that the suit may be filed only in the place agreed upon, or merely permissive in that the
parties may file their suitnot only in the place agreed upon but also in the places fixed by law. As in
any other agreement, what is essential is the ascertainment of the intention of the parties
respecting the matter.
As regards restrictive stipulations on venue, jurisprudence instructs that it must be shown thatsuch
stipulation is exclusive.1âwphi1 In the absence of qualifying or restrictive words, such as
"exclusively," "waiving for this purpose any other venue," "shall only" preceding the designation of
4 venue, "to the exclusion of the other courts," or words of similar import, the stipulation should be
deemed as merely an agreement on an additional forum,not as limiting venue to the specified
place.34 (Emphases and underscoring supplied)
In this relation, case law likewise provides that in cases where the complaint assails only the
terms, conditions, and/or coverage of a written instrument and not its validity, the exclusive venue
stipulation contained therein shall still be binding on the parties, and thus, the complaint may be
properly dismissed on the ground of improper venue.35 Conversely, therefore, a complaint directly
assailing the validity of the written instrument itself should not be bound by the exclusive venue
stipulation contained therein and should be filed in accordance with the general rules on venue. To
be sure, it would be inherently consistent for a complaint of this nature to recognize the exclusive
venue stipulation when it, in fact, precisely assails the validity of the instrument in which such
stipulation is contained.
In this case, the venue stipulation found in the subject contracts is indeed restrictive in nature,
considering that it effectively limits the venue of the actions arising therefrom to the courts of
Makati City. However, it must be emphasized that Briones' s complaint directly assails the validity
of the subject contracts, claiming forgery in their execution. Given this circumstance, Briones
cannot be expected to comply with the aforesaid venue stipulation, as his compliance therewith
would mean an implicit recognition of their validity. Hence, pursuant to the general rules on venue,
Briones properly filed his complaint before a court in the City of Manila where the subject property
is located.
In conclusion, the CA patently erred and hence committed grave abuse of discretion in dismissing
Briones's complaint on the ground of improper venue.
WHEREFORE, the petition is GRANTED. Accordingly, the Decision dated March 5, 2012 and the
Resolution dated October 4, 2012 of the Court of Appeals in CA-G.R. SP No. 117474 are hereby
ANNULLED and SET ASIDE. The Orders dated September 20, 2010 and October 22, 2010 of the
Regional Trial Court of Manila, Branch 173 in Civil Case No. 10-124040 are REINSTATED.
SO ORDERED.