G.R. No.

207970, January 20, 2016

FERNANDO MEDICAL ENTERPRISES, INC., Petitioner, v. WESLEYAN UNIVERSITY PHILIPPINES,

INC., Respondent.

DECISION

BERSAMIN, J.:

The trial court may render a judgment on the pleadings upon motion of the claiming party when the defending party's
answer fails to tender an issue, or otherwise admits the material allegations of the adverse party's pleading. For that
purpose, only the pleadings of the parties in the action are considered. It is error for the trial court to deny the motion
for judgment on the pleadings because the defending party's pleading in another case supposedly tendered an issue
of fact.chanRoblesvirtualLawlibrary

The Case

The petitioner appeals the decision promulgated on July 2, 2013, 1 whereby the Court of Appeals (CA) affirmed the
order issued on November 23, 2011 by the Regional Trial Court (RTC), Branch 1, in Manila, denying its motion for
judgment on the pleadings in Civil Case No. 09-122116 entitled Fernando Medical Enterprises, Inc. v. Wesleyan
University-Philippines.2chanRoblesvirtualLawlibrary

Antecedents

From January 9, 2006 until February 2, 2007, the petitioner, a domestic corporation dealing with medical equipment
and supplies, delivered to and installed medical equipment and supplies at the respondent's hospital under the
following contracts:

a. Memorandum of Agreement dated January 9, 2006 for the supply ol' medical equipment in the total amount
of P18,625,000.00;3chanroblesvirtuallawlibrary

b. Deed of Undertaking dated July 5, 2006 for the installation of medical gas pipeline system valued at
P8,500,000.00;4chanroblesvirtuallawlibrary

c. Deed of Undertaking dated July 27, 2006 for the supply of one unit of Diamond Select Slice CT and one unit
of Diamond Select CV-P costing P65,000,000.00;5 and

d. Deed of Undertaking dated February 2, 2007 for the supply of furnishings and equipment worth
P32,926,650.00.6

According to the petitioner, the respondent paid only P67,3 57,683.23 of its total obligation of P123,901,650.00,
leaving unpaid the sum of P54,654,195.54.7 However, on February 11, 2009, the petitioner and the respondent,
respectively represented by Rafael P. Fernando and Guillermo T. Maglaya, Sr., entered into an agreement, 8 whereby
the former agreed to reduce its claim to only P50,400,000.00, and allowed the latter to pay the adjusted obligation on
installment basis within 36 months.9chanroblesvirtuallawlibrary

In the letter dated May 27, 2009,10 the respondent notified the petitioner that its new administration had reviewed their
contracts and had found the contracts defective and rescissible due to economic prejudice or lesion; and that it was
consequently declining to recognize the February 11, 2009 agreement because of the lack of approval by its Board of
Trustees and for having been signed by Maglaya whose term of office had expired.

On June 24, 2009, the petitioner sent a demand letter to the respondent. 11chanroblesvirtuallawlibrary

Due to the respondent's failure to pay as demanded, the petitioner filed its complaint for sum of money in the
RTC,12 averring as follows:

xxxx

Page 1 of 68
2. On January 9, 2006, plaintiff supplied defendant with hospital medical equipment for an in consideration of
P18,625,000.00 payable in the following manner: (2.1) For nos. 1 to 9 of items to be sourced from Fernando Medical
Equipment, Inc. (FMEI) - 30% down payment of P17,475,000 or P5,242,500 with the balance of PI2,232,500 or 70%
payable in 24 equal monthly instalments of P509,687.50 and (2.2.) cash transaction amounting to P1,150,000.00
(2.3) or an initial cash payment of P6,392,500.00 with the remaining balance payable in 24 equal monthly
installments every 20th day of each month until paid, as stated in the Memorandum of Agreement, copy of which is
hereto attached as Annex "A";

3. On July 5, 2006, plaintiff installed defendants medical gas pipeline system in the latter's hospital building complex
for and in consideration of P8,500,000.00 payable upon installation thereof under a Deed of Undertaking, copy of
which is hereto attached as Annex "B";

4. On July 27, 2006, plaintiff supplied defendant one (1) unit Diamond Select Slice CT and one (1) unit Diamond
Select CV-9 for and in consideration of P65,000,000.00 thirty percent (30%) of which shall be paid as down payment
and the balance in 30 equal monthly instalments as provided in that Deed of Undertaking, copy of which is hereto
attached as Annex "C";

5. On February 2, 2007, plaintiff supplied defendants hospital furnishings and equipment for an in consideration of
P32,926,650.00 twenty percent (20%) of which was to be paid as downpayment and the balance in 30 months under
a Deed of Undertaking, copy of which is hereto attached as Annex "D";

6. Defendant's total obligation to plaintiff was P123,901,650.00 as of February 15, 2009, but defendant was able to
pay plaintiff the sum of P67,357,683.23 thus leaving a balance P54,654,195.54 which has become overdue and
demandable;

7. On February 11, 2009, plaintiff agreed to reduce its claim to only P50,400,000.00 and extended its payment for 36
months provided defendants shall pay the same within 36 months and to issue 36 postdated checks therefor in the
amount of P1,400,000.00 each to which defendant agreed under an Agreement, copy of which is hereto attached
as Annex "E";

8. Accordingly, defendant issued in favor of plaintiff 36 postdated checks each in the [a]mount of P1,400,000.00 but
after four (4) of the said checks in the sum of P5,600,000.00 were honored defendant stopped their payment thus
making the entire obligation of defendant due and demandable under the February 11, 2009 agreement;

9. In a letter dated May 27, 2009, defendant claimed that all of the first four (4) agreements may be rescissible and
one of them is unenforceable while the Agreement dated February 11, 2009 was without the requisite board approval
as it was signed by an agent whose term of office already expired, copy of which letter is hereto attached as Annex
"F";

10. Consequently, plaintiff told defendant that if it does not want to honor the February 11, 2009 contract then plaintiff
will insists [sic] on its original claim which is P54,654,195.54 and made a demand for the payment thereof within 10
days from receipt of its letter copy of which is hereto attached as Annex "G";

11. Defendant received the aforesaid letter on July 6, 2009 but to date it has not paid plaintiff any amount, either in
the first four contracts nor in the February 11, 2009 agreement, hence, the latter was constrained to institute the
instant suit and thus incurred attorney's fee equivalent to 10% of the overdue account but only after endeavouring to
resolve the dispute amicable and in a spirit of friendship[;]

12. Under the February 11, 2009 agreement the parties agreed to bring all actions or proceedings thereunder or
characterized therewith in the City of Manila to the exclusion of other courts and for defendant to pay plaintiff 3% per
months of delay without need of demand;13chanroblesvirtuallawlibrary

xxxx

The respondent moved to dismiss the complaint upon the following grounds, 14 namely: (a) lack of jurisdiction over the
person of the defendant; (b) improper venue; (c) litis pendentia; and (d) forum shopping. In support of the ground
of litis pendentia, it stated that it had earlier filed a complaint for the rescission of the four contracts and of the
February 11, 2009 agreement in the RTC in Cabanatuan City; and that the resolution of that case would be
determinative of the petitioner's action for collection.15chanroblesvirtuallawlibrary

After the RTC denied the motion to dismiss on July 19, 2009, 16 the respondent filed its answer (ad
cautelam),17 averring thusly:

Page 2 of 68
xxxx

2. The allegations in Paragraphs Nos. 2, 3, 4, and 5 of the complaint are ADMITTED subject to the special and
affirmative defenses hereafter pleaded;

3. The allegations in Paragraphs Nos. 6, 7 and 8 of the complaint are DENIED for lack of knowledge or information
sufficient to form a belief as to the truth or falsity thereof, inasmuch as the alleged transactions were undertaken
during the term of office of the past officers of defendant Wesleyan University-Philippines. At any rate, these
allegations are subject to the special and affirmative defenses hereafter pleaded;

4. The allegations in Paragraphs Nos. 9 and 10 of the complaint are ADMITTED subject to the special and affirmative
defenses hereafter pleaded;

5. The allegations in Paragraphs Nos. 11 and 12 of the complaint are DENIED for being conclusions of
law.18chanroblesvirtuallawlibrary

xxxx

The petitioner filed its reply to the answer.19chanroblesvirtuallawlibrary

On September 28, 2011, the petitioner filed its Motion for Judgment Based on the Pleadings,20 stating that the
respondent had admitted the material allegations of its complaint and thus did not tender any issue as to such
allegations.

The respondent opposed the Motion for Judgment Based on the Pleadings, arguing that it had specifically denied the
material allegations in the complaint, particularly paragraphs 6, 7, 8, 11 and 12. 21chanroblesvirtuallawlibrary

On November 23, 2011, the RTC issued the order denying the Motion for Judgment Based on the Pleadings of the
petitioner, to wit:

At the hearing of the "Motion for Judgment Based on the Pleadings" filed by the plaintiff thru counsel, Atty. Jose
Mañacop on September 28, 2011, the court issued an Order dated October 27, 2011 which read in part as follows:x x
xx

Considering that the allegations stated on the Motion for Judgment Based on the Pleadings, are evidentiary in nature,
the Court, instead of acting on the same, hereby sets this case for pre-trial, considering that with the Answer and the
Reply, issues have been joined.

xxxx

In view therefore of the Order of the Court dated October 27, 2011. let the Motion for Judgment Based on the
Pleadings be hereby ordered DENIED on reasons as abovestated and hereto reiterated.

xxxx

SO ORDERED.22chanroblesvirtuallawlibrary

The petitioner moved for reconsideration,23 but its motion was denied on December 29,
2011.24chanroblesvirtuallawlibrary

The petitioner assailed the denial in the CA on certiorari.25cralawred

Judgment of the CA

On July 2, 2013, the CA promulgated its decision. Although observing that the respondent had admitted the contracts
as well as the February 11, 2009 agreement, viz.:

It must be remembered that Private Respondent admitted the existence of the subject contracts, including Petitioner's
fulfilment of its obligations under the same, but subjected the said admission to the "special and affirmative defenses"
earlier raised in its Motion to Dismiss.

Page 3 of 68
xxxx

Obviously, Private Respondent's special and affirmative defenses are not of such character as to avoid Petitioner's
claim. The same special and affirmative defenses have been passed upon by the RTC in its Order dated July 19,
2010 when it denied Private Respondent's Motion to Dismiss. As correctly found by the RTC, Private Respondent's
special and affirmative defences of lack of jurisdiction over its person, improper venue, litis pendentia and wilful and
deliberate forum shopping are not meritorious and cannot operate to dismiss Petitioner's Complaint. Hence, when
Private Respondent subjected its admission to the said defenses, it is as though it raised no defense at all.

Not even is Private Respondent's contention that the rescission case must take precedence over Petitioner's
Complaint for Sum of Money tenable. To begin with. Private Respondent had not yet proven that the subject
contracts are rescissible. And even if the subject contracts are indeed rescissible, it is well-settled that rescissible
contracts are valid contracts until they are rescinded. Since the subject contracts have not yet been rescinded, they
are deemed valid contracts which may be enforced in legal contemplation.

In effect, Private Respondent admitted that it entered into the subject contracts and that Petitioner had performed its
obligations under the same.

As regards Private Respondent's denial by disavowal of knowledge of the Agreement dated February 11, 2009, We
agree with Petitioner that such denial was made in bad faith because such allegations are plainly and necessarily
within its knowledge.

In its letter dated May 27, 2009, Private Respondent made reference to the Agreement dated February 11,
2009, viz.:ChanRoblesVirtualawlibrary
"The Agreement dated 11 February 2009, in particular, was entered into by an Agent of the University without the
requisite authority from the Board of Trustees, and executed when said agent's term of office had already expired.
Consequently, such contract is, being an unenforceable contract."
Also, Private Respondent averred in page 5 of its Complaint for Rescission, which it attached to its Motion to Dismiss,
that:

"13. On 6 February 2009, when the terms of office of plaintiffs Board of Trustess chaired by Dominador Cabasal, as
well as of Atty. Guillermo C. Maglaya as President, had already expired, thereby rendering them on a hold-over
capacity, the said Board once again authorized Atty. Maglaya to enter into another contract with defendant FMEI,
whereby the plaintiff was obligated to pay and deliver to defendant FMEI the amount of Fifty Million Four Hundred
Thousand Pesos (Php50,400,000.00) in thirty five (35) monthly instalments of One Million Four Hundred Thousand
Pesos (Phpl,400,000.00), representing the balance of the payment for the medical equipment supplied under the
afore-cited rescissible contracts. This side agreement, executed five (5) days later, or on 11 February 2009, and
denominated as "AGREEMENT", had no object as a contract, but was entered into solely for the purpose of getting
the plaintiff locked-in to the payment of the balance price under the rescissible contracts; x x x"
From the above averments, Private Respondent cannot deny knowledge of the Agreement dated February 11, 2009.
In one case, it was held that when a respondent makes a "specific denial" of a material allegation of the petition
without setting forth the substance of the matters relied upon to support its general denial, when such matters where
plainly within its knowledge and the defendant could not logically pretend ignorance as to the same, said defendant
fails to properly tender an issue."26chanroblesvirtuallawlibrary

the CA ruled that a judgment on the pleadings would be improper because the outstanding balance due to the
petitioner remained to be an issue in the face of the allegations of the respondent in its complaint for rescission in the
RTC in Cabanatuan City, to wit:

However, Private Respondent's disavowal of knowledge of its outstanding balance is well-taken. Paragraph 6 of
Petitioner's Complaint states that Private Respondent was able to pay only the amount of P67,357,683.23. Taken
together with paragraph 8, which states that Private Respondent was only able to make good four (4) check
payments worth P1,400,000.00 or a total of P5,600,000.00, Private Respondent's total payments would be, in
Petitioner's view, P72,957,683.23. However, in its Complaint for Rescission, attached to its Motion to Dismiss
Petitioner's Complaint for Sum of Money, Private Respondent alleged that:ChanRoblesVirtualawlibrary
"16. To date, plaintiff had already paid defendant the amount of Seventy Eight Million Four Hundred One Thousand
Six Hundred Fifty Pesos (P78,401,650.00)"
It is apparent that Private Respondent's computation and Petitioner's computation of the total payments made by
Private Respondent are different. Thus, Private Respondent tendered an issue as to the amount of the balance due
to Petitioner under the subject contracts.27chanrobleslaw

Page 4 of 68
Hence, this appeal.chanRoblesvirtualLawlibrary

Issue

The petitioner posits that the CA erred in going outside of the respondent's answer by relying on the allegations
contained in the latter's complaint for rescission; and insists that the CA should have confined itself to the
respondent's answer in the action in order to resolve the petitioner's motion for judgment based on the pleadings.

In contrast, the respondent contends that it had specifically denied the material allegations of the petitioner's
complaint, including the amount claimed; and that the CA only affirmed the previous ruling of the RTC that the
pleadings submitted by the parties tendered an issue as to the balance owing to the petitioner.

Did the CA commit reversible error in affirming the RTC's denial of the petitioner's motion for judgment on the
pleadings?chanRoblesvirtualLawlibra

ry

Ruling of the Court

The appeal is meritorious.

The rule on judgment based on the pleadings is Section 1, Rule 34 of the Rules of Court, which provides thus:

Section 1. Judgment on the pleadings. - Where an answer fails to tender an issue, or otherwise admits the material
allegations of the adverse party's pleading, the court may, on motion of that party, direct judgment on such pleading,
xxx

The essential query in resolving a motion for judgment on the pleadings is whether or not there are issues of fact
generated by the pleadings.28 Whether issues of fact exist in a case or not depends on how the defending party's
answer has dealt with the ultimate facts alleged in the complaint. The defending party's answer either admits or
denies the allegations of ultimate facts in the complaint or other initiatory pleading. The allegations of ultimate facts
the answer admit, being undisputed, will not require evidence to establish the truth of such facts, but the allegations
of ultimate facts the answer properly denies, being disputed, will require evidence.

The answer admits the material allegations of ultimate facts of the adverse party's pleadings not only when it
expressly confesses the truth of such allegations but also when it omits to deal with them at all. 29The controversion of
the ultimate facts must only be by specific denial. Section 10, Rule 8 of the Rules of Court recognizes only three
modes by which the denial in the answer raises an issue of fact. The first is by the defending party specifying each
material allegation of fact the truth of which he does not admit and, whenever practicable, setting forth the substance
of the matters upon which he relies to support his denial. The second applies to the defending party who desires to
deny only a part of an averment, and the denial is done by the defending party specifying so much of the material
allegation of ultimate facts as is true and material and denying only the remainder. The third is done by the defending
party who is without knowledge or information sufficient to form a belief as to the truth of a material averment made in
the complaint by stating so in the answer. Any material averment in the complaint not so specifically denied are
deemed admitted except an averment of the amount of unliquidated damages. 30chanroblesvirtuallawlibrary

In the case of a written instrument or document upon which an action or defense is based, which is also known as the
actionable document, the pleader of such document is required either to set forth the substance of such instrument or
document in the pleading, and to attach the original or a copy thereof to the pleading as an exhibit, which shall then
be deemed to be a part of the pleading, or to set forth a copy in the pleading. 31 The adverse party is deemed to admit
the genuineness and due execution of the actionable document unless he specifically denies them under oath, and
sets forth what he claims to be the facts, but the requirement of an oath does not apply when the adverse party does
not appear to be a party to the instrument or when compliance with an order for an inspection of the original
instrument is refused.32chanroblesvirtuallawlibrary

In Civil Case No. 09-122116, the respondent expressly admitted paragraphs no. 2, 3, 4, 5, 9 and 10 of the complaint.
The admission related to the petitioner's allegations on: (a) the four transactions for the delivery and installation of
various hospital equipment; (b) the total liability of the respondent; (c) the payments made by the respondents; (d) the
balance still due to the petitioner; and (e) the execution of the February 11, 2009 agreement. The admission of the
various agreements, especially the February 11, 2009 agreement, significantly admitted the petitioner's complaint. To

Page 5 of 68
recall, the petitioner's cause of action was based on the February 1 1, 2009 agreement, which was the actionable
document in the case. The complaint properly alleged the substance of the February 11, 2009 agreement, and
contained a copy thereof as an annex. Upon the express admission of the genuineness and due execution of the
February 11, 2009 agreement, judgment on the pleadings became proper. 33 As held in Santos v.
Alcazar:34chanroblesvirtuallawlibrary

There is no need for proof of execution and authenticity with respect to documents the genuineness and due
execution of which are admitted by the adverse party. With the consequent admission engendered by petitioners'
failure to properly deny the Acknowledgment in their Answer, coupled with its proper authentication, identification and
offer by the respondent, not to mention petitioners' admissions in paragraphs 4 to 6 of their Answer that they are
indeed indebted to respondent, the Court believes that judgment may be had solely on the document, and there is no
need to present receipts and other documents to prove the claimed indebtedness. The Acknowledgment, just as an
ordinary acknowledgment receipt, is valid and binding between the parties who executed it, as a document
evidencing the loan agreement they had entered into. The absence of rebutting evidence occasioned by petitioners'
waiver of their right to present evidence renders the Acknowledgment as the best evidence of the transactions
between the parties and the consequential indebtedness incurred. Indeed, the effect of the admission is such that
a prima facie case is made for the plaintiff which dispenses with the necessity of evidence on his part and entitled him
to a judgment on the pleadings unless a special defense of new matter, such as payment, is interposed by the
defendant.35 (citations omitted)

The respondent denied paragraphs no. 6, 7 and 8 of the complaint "for lack of knowledge or information sufficient to
form a belief as to the truth or falsity thereof, inasmuch as the alleged transactions were undertaken during the term
of office of the past officers of defendant Wesleyan University-Philippines." Was the manner of denial effective as a
specific denial?

We answer the query in the negative. Paragraph no. 6 alleged that the respondent's total obligation as of February
15, 2009 was P123,901,650.00, but its balance thereafter became only P54,654,195.54 because it had since then
paid P67,357,683.23 to the petitioner. Paragraph no. 7 stated that the petitioner had agreed with the respondent on
February 11, 2009 to reduce the balance to only P50,400,000.00, which the respondent would pay in 36 months
through 36 postdated checks of P1,400,000.00 each, which the respondent then issued for the purpose. Paragraph
no. 8 averred that after four of the checks totalling P5,600,000.00 were paid the respondent stopped payment of the
rest, rendering the entire obligation due and demandable pursuant to the February 11, 2009 agreement. Considering
that paragraphs no. 6, 7 and 8 of the complaint averred matters that the respondent ought to know or could have
easily known, the answer did not specifically deny such material averments. It is settled that denials based on lack of
knowledge or information of matters clearly known to the pleader, or ought to be known to it, or could have easily
been known by it are insufficient, and constitute ineffective36 or sham denials.37chanroblesvirtuallawlibrary

That the respondent qualified its admissions and denials by subjecting them to its special and affirmative defenses of
lack of jurisdiction over its person, improper venue, litis pendentia and forum shopping was of no consequence
because the affirmative defenses, by their nature, involved matters extrinsic to the merits of the petitioner's claim, and
thus did not negate the material averments of the complaint.

Lastly, we should emphasize that in order to resolve the petitioner's Motion for Judgment Based on the Pleadings, the
trial court could rely only on the answer of the respondent filed in Civil Case No. 09-122116. Under Section 1, Rule 34
of the Rules of Court, the answer was the sole basis for ascertaining whether the complaint's material allegations
were admitted or properly denied. As such, the respondent's averment of payment of the total of P78,401,650.00 to
the petitioner made in its complaint for rescission had no relevance to the resolution of the Motion for Judgment
Based on the Pleadings. The CA thus wrongly held that a factual issue on the total liability of the respondent
remained to be settled through trial on the merits. It should have openly wondered why the respondent's answer in
Civil Case No. 09-122116 did not allege the supposed payment of the P78,401,650.00, if the payment was true, if
only to buttress the specific denial of its alleged liability. The omission exposed the respondent's denial of liability as
insincere.

WHEREFORE, the Court REVERSES and SETS ASIDE the decision promulgated on July 2, 2013; DIRECTS the
Regional Trial Court, Branch 1, in Manila to resume its proceedings in Civil Case No. 09-122116 entitled Fernando
Medical Enterprises, Inc. v. Wesleyan University-Philippines, and to forthwith act on and grant the Motion for
Judgment Based on the Pleadings by rendering the proper judgment on the pleadings; and ORDERS the respondent
to pay the costs of suit.

SO ORDERED.cralawlawlibrary

Page 6 of 68
 G.R. No. 187487, June 29, 2015

GO TONG ELECTRICAL SUPPLY CO., INC. AND GEORGE C. GO, Petitioners, v. BPI FAMILY SAVINGS BANK,
INC., SUBSTITUTED BY PHILIPPINE INVESTMENT ONE [SPV-AMC], INC.,*Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated February 17, 2009 and the Resolution3 dated
April 13, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 86749 which affirmed the Decision4 dated September
6, 2005 of the Regional Trial Court of Makati City, Branch 143 (RTC) in Civil Case No. 02-1203, an action for
collection of sum of money, rendered in favor of respondent BPI Family Savings Bank, Inc. (respondent).

The Facts

On October 4, 2002, respondent filed a complaint5 against petitioners Go Tong Electrical Supply Co., Inc. (Go Tong
Electrical) and its President, George C. Go (Go; collectively petitioners), docketed as Civil Case No. 02-1203, seeking
that the latter be held jointly and severally liable to it for the payment of their loan obligation in the aggregate amount
of P87,086,398.71, inclusive of the principal sum, interests, and penalties as of May 28, 2002, as well as attorney's
fees, litigation expenses, and costs of suit.6 As alleged by respondent, as early as 1996, Go Tong Electrical had
applied for and was granted financial assistance by the then Bank of South East Asia (BSA). Subsequently,
DBS7 Bank of the Philippines, Inc. (DBS) became the successor-in-interest of BSA. The application for financial
assistance was renewed on January 6, 1999 through a Credit Agreement.8 On even date, Go Tong Electrical,
represented by Go, among others, obtained a loan from DBS in the principal amount of P40,491,051.65, for which Go
Tong Electrical executed Promissory Note No. 82-91 -00176-79 (PN) for the same amount in favor of DBS, maturing
on February 5, 2000.10 Under the PN's terms, Go Tong Electrical bound itself to pay a default penalty interest at the
rate of one percent (1%) per month in addition to the current interest rate, 11 as well as attorney's fees equivalent to
twenty-five percent (25%) of the amount sought to be recovered. 12 As additional security, Go executed a
Comprehensive Surety Agreement13 (CSA) covering any and all obligations undertaken by Go Tong Electrical,
including the aforesaid loan.14 Upon default of petitioners, DBS - and later, its successor-in-interest, herein
respondent15 - demanded payment from petitioners,16but to no avail,17 hence, the aforesaid complaint.

In their Answer with Counterclaim18 (Answer), petitioners merely stated that they "specifically deny"19the allegations
under the complaint. Of particular note is their denial of the execution of the loan agreement, the PN, and the CSA
"for being self-serving and pure conclusions intended to suit [respondent's] purposes." 20 By way of special and
affirmative defenses, petitioners argued, among others, that: (a) the real party-in-interest should be DBS and not
respondent; (b) no demand was made upon them; and (c) Go cannot be held liable under the CSA since there was
supposedly no solidarity of debtors.21 Petitioners further interposed counterclaims for the payment of moral and
exemplary damages, as well as litigation and attorney's fees in the total amount of
P1,250,000.00.22ChanRoblesVirtualawlibrary

During trial, respondent presented Ricardo O. Suñio23 (Suñio), the Account Officer handling petitioners' loan
accounts, as its witness. Suñio attested to the existence of petitioners' loan obligation in favor of respondent, 24 and
identified a Statement of Account25 which shows the amount due as of June 16, 2004 as follows:
SUMMARY
PRINCIPAL P 40,491,051.65
PAST DUE
P 31,437,800.28
INTEREST
PENALTY P 47,473,042.27
SUB-TOTAL P119,401,894.20
PLUS
UNPAID
P 1,805,507.21
INTEREST
UNPAID PENALTY P 1,776,022.80
SUB-TOTAL P122,983,424.21
LESS: PAYMENTS - 1,877,286.08
P121,106.138.1326
On cross-examination, Suñio nonetheless admitted that he had no knowledge of how the PN was prepared,
executed, and signed, nor did he witness its signing.27ChanRoblesVirtualawlibrary

Page 7 of 68
For their part, petitioners presented Go Tong Electrical's Finance Officer, Jocelyn Antonette Lim, who testified that Go
Tong Electrical was able to pay its loan, albeit partially. However, she admitted that she does not know how much
payments were made, nor does she have a rough estimate thereof, as these were allegedly paid for in
dollars.28ChanRoblesVirtualawlibrary

The RTC Ruling

In a Decision29 dated September 6, 2005, the RTC ruled in favor of respondent, thereby ordering petitioners to jointly
and severally pay the former: (a) the principal sum of P40,491,051.65, with legal interest to be reckoned from the
filing of the Complaint; (b) penalty interest of one percent (1%) per month until the obligation is fully paid; and (c)
attorney's fees in the sum of P50,000.00.30ChanRoblesVirtualawlibrary

It found that respondent had amply demonstrated by competent evidence that it was entitled to the reliefs it prayed
for. Particularly, respondent's documentary evidence - the authenticity of which the RTC observed to be undisputed -
showed the existence of petitioners' valid and demandable obligation. On the other hand, petitioners failed to
discharge the burden of proving that they had already paid the same, even partially. 31 Further, the RTC debunked
petitioners' denial of the demands made by respondent since, ultimately, the Credit Agreement, PN, and CSA clearly
stated that no demand was needed to render them in default.32 Likewise, the argument that Go could not be held
solidarity liable was not sustained since he bound himself as a surety under the CSA, which was executed precisely
to induce respondent's predecessor-in-interest, DBS, to grant the loan.33 Separately, the RTC found the penalty
interest at three percent (3%) per month sought by respondent to be patently iniquitous and unconscionable and thus,
was reduced to twelve percent (12%) per annum, or one percent (1%) per month. Attorney's fees were also tempered
to the reasonable amount of P50,000.00.34ChanRoblesVirtualawlibrary

Unconvinced, petitioners appealed35 to the CA.

The CA Ruling

In a Decision36 dated February 17, 2009, the CA sustained the RTC's ruling in toto, finding the following facts to be
beyond cavil: (a) that Go Tong Electrical applied for and was granted a loan accommodation from DBS in the amount
of P40,491,051.65 after the execution of the Credit Agreement and the PN dated January 6, 1999, maturing on
February 5, 2000; (b) that as additional security, Go executed the CSA binding himself jointly and severally to pay the
obligation of Go Tong Electrical; and (c) that petitioners failed to pay the loan obligation upon maturity, despite written
demands from then DBS, now, herein respondent.37 In this relation, the CA discredited petitioners' argument that
respondent's sole witness, Sufiio, was incompetent to testify on the documentary evidence presented as he had no
personal knowledge of the loan documents' execution,38 given that petitioners, in their Answer, did not deny under
oath the genuineness and due execution of the PN and CSA and, hence, are deemed admitted under Section 8, Rule
8 of the Rules of Court (Rules).39 Besides, the CA observed that, despite the aforesaid admission, respondent still
presented the testimony of Suñio who, having informed the court that the loan documents were in his legal custody
as the designated Account Officer when DBS merged with herein respondent, had personal knowledge of the
existence of the loan documents.40 It added that, although he was not privy to the execution of the same, it does not
significantly matter as their genuineness and due execution were already admitted. 41ChanRoblesVirtualawlibrary

Petitioners filed a motion for reconsideration,42 which was, however, denied in a Resolution43 dated April 13, 2009,
hence, this petition.

The Issue Before The Court

The issue for the Court's resolution is whether or not the CA erred in upholding the RTC's ruling.

The Court's Ruling

The petition lacks merit.

The Court concurs with the CA Decision holding that the genuineness and due execution of the loan documents in
this case were deemed admitted by petitioners under the parameters of Section 8, Rule 8 of the Rules which
provides:
chanRoblesvirtualLawlibrary
SEC. 8. How to contest such documents. — When an action or defense is founded upon a written instrument, copied
in or attached to the corresponding pleading as provided in the preceding Section, the genuineness and due
execution of the instrument shall be deemed admitted unless the adverse party, under oath, specifically denies

Page 8 of 68
them, and sets forth what he claims to be the facts; but the requirement of an oath does not apply when the
adverse party does not appear to be a party to the instrument or when compliance with an order for an inspection of
the original instrument is refused. (Emphasis supplied)
chanroblesvirtuallawlibrary
A reading of the Answer shows that petitioners failed to specifically deny the execution of the Credit Agreement, PN,
and CSA under the auspices of the above-quoted rule. The mere statement in paragraph 4 of their Answer, i.e., that
they "specifically deny" the pertinent allegations of the Complaint "for being self-serving and pure conclusions
intended to suit plaintiffs purposes,"44 does not constitute an effective specific denial as contemplated by law.45 Verily,
a denial is not specific simply because it is so qualified by the defendant. Stated otherwise, a general denial does not
become specific by the use of the word "specifically." 46 Neither does it become so by the simple expedient of coupling
the same with a broad conclusion of law that the allegations contested are "self-serving" or are intended "to suit
plaintiffs purposes."

In Permanent Savings & Loan Bank v. Velarde47 (Permanent Savings & Loan Bank), citing the earlier case of Songco
v. Sellner,48 the Court expounded on how to deny the genuineness and due execution of an actionable
document, viz.:
chanRoblesvirtualLawlibrary
This means that the defendant must declare under oath that he did not sign the document or that it is
otherwise false or fabricated. Neither does the statement of the answer to the effect that the instrument was
procured by fraudulent representation raise any issue as to its genuineness or due execution. On the contrary such a
plea is an admission both of the genuineness and due execution thereof, since it seeks to avoid the instrument upon
a ground not affecting either.49 (Emphasis supplied)
chanroblesvirtuallawlibrary
To add, Section 8, Rule 8 of the Rules further requires that the defendant "sets forth what he claims to be the
facts," which requirement, likewise, remains absent from the Answer in this case.

Thus, with said pleading failing to comply with the "specific denial under oath" requirement under Section 8, Rule 8 of
the Rules, the proper conclusion, as arrived at by the CA, is that petitioners had impliedly admitted the due execution
and genuineness of the documents evidencing their loan obligation to respondent.

To this, case law enlightens that "[t]he admission of the genuineness and due execution of a document means that
the party whose signature it bears admits that he voluntarily signed the document or it was signed by another for him
and with his authority; that at the time it was signed it was in words and figures exactly as set out in the pleading of
the party relying upon it; that the document was delivered; and that any formalities required by law, such as a seal, an
acknowledgment, or revenue stamp, which it lacks, are waived by him. Also, it effectively eliminated any defense
relating to the authenticity and due execution of the document, e.g., that the document was spurious,
counterfeit, or of different import on its face as the one executed by the parties; or that the signatures appearing
thereon were forgeries; or that the signatures were unauthorized."50ChanRoblesVirtualawlibrary

Accordingly, with petitioners' admission of the genuineness and due execution of the loan documents as above-
discussed, the competence of respondent's witness Suñio to testify in order to authenticate the same is therefore of
no moment. As the Court similarly pointed out in Permanent Savings & Loan Bank, "[w]hile Section [20],51 Rule 132
of the [Rules] requires that private documents be proved of their due execution and authenticity before they can be
received in evidence, i.e., presentation and examination of witnesses to testify on this fact; in the present case, there
is no need for proof of execution and authenticity with respect to the loan documents because of
respondent's implied admission thereof."52ChanRoblesVirtualawlibrary

The Court clarifies that while the "[f]ailure to deny the genuineness and due execution of an actionable document
does not preclude a party from arguing against it by evidence of fraud, mistake, compromise, payment, statute of
limitations, estoppel and want of consideration [nor] bar a party from raising the defense in his answer or reply and
prove at the trial that there is a mistake or imperfection in the writing, or that it does not express the true agreement of
the parties, or that the agreement is invalid or that there is an intrinsic ambiguity in the writing," 53 none of these
defenses were adequately argued or proven during the proceedings of this case.

Of particular note is the affirmative defense of payment raised during the proceedings a quo. While petitioners
insisted that they had paid, albeit partially, their loan obligation to respondent, the fact of such payment was never
established by petitioners in this case. Jurisprudence abounds that, in civil cases, one who pleads payment has the
burden of proving it; the burden rests on the defendant, i.e., petitioners, to prove payment, rather than on the
plaintiff, i.e., respondent, to prove non-payment. When the creditor is in possession of the document of credit, proof of
non-payment is not needed for it is presumed.54 Here, respondent's possession of the Credit Agreement, PN, and
CSA, especially with their genuineness and due execution already having been admitted, cements its claim that the
obligation of petitioners has not been extinguished. Instructive too is the Court's disquisition in Jison v. CA55 on the

Page 9 of 68
evidentiary burdens attendant in a civil proceeding, to wit:
chanRoblesvirtualLawlibrary
Simply put, he who alleges the affirmative of the issue has the burden of proof, and upon the plaintiff in a civil case,
the burden of proof never parts. However, in the course of trial in a civil case, once plaintiff makes out a prima
facie case in his favor, the duty or the burden of evidence shifts to defendant to controvert plaintiffs prima facie case,
otherwise, a verdict must be returned in favor of plaintiff. Moreover, in civil cases, the party having the burden of proof
must produce a preponderance of evidence thereon, with plaintiff having to rely on the strength of his own evidence
and not upon the weakness of the defendant's. The concept of "preponderance of evidence" refers to evidence which
is of greater weight, or more convincing, that which is offered in opposition to it; at bottom, it means probability of
truth.56
chanroblesvirtuallawlibrary
Finally, the Court finds as untenable petitioners' theory on Go's supposed non-liability. As established through the
CSA, Go had clearly bound himself as a surety to Go Tong Electrical's loan obligation. Thus, there is no question that
Go's liability thereto is solidary with the former. As provided in Article 204757 of the Civil Code, "the surety undertakes
to be bound solidarity with the principal obligor. That undertaking makes a surety agreement an ancillary contract as it
presupposes the existence of a principal contract. Although the contract of a surety is in essence secondary only to a
valid principal obligation, the surety becomes liable for the debt or duty of another although it possesses no direct or
personal interest over the obligations nor does it receive any benefit therefrom. Let it be stressed that notwithstanding
the fact that the surety contract is secondary to the principal obligation, the surety assumes liability as a regular party
to the undertaking,"58 as Go in this case.

However, while petitioners' liability has been upheld in this case, the Court finds it proper to modify the RTC's ruling,
as affirmed by the CA, with respect to the following:

First, the partial payment made by Go Tong Electrical on June 16, 2004 in the amount of P1,877,286.08, as admitted
by respondent through a Statement of Account,59 formally offered as Exhibit "G" and duly identified by Suñio during
trial, should be deducted from the principal amount of P40,491,051.65 due respondent.

Second, with respect to the interests and penalties:

(a) petitioners should be held liable for the twenty percent (20%) per annum stipulated interest rate reckoned 31 days
from January 6, 1999, as agreed upon in the PN,60 until its maturity date on February 5, 2000, which period is
regarded as the initial period in said PN. Said interest rate should be upheld as this was stipulated by the parties, and
the rate cannot be considered unconscionable.61 The same shall be computed based on the entire principal amount
due, i.e., P40,491,051.65, since the records disclose that the admitted partial payment of P1,877,286.08 was still
unpaid before the complaint was filed on October 4, 2002, 62 or before the February 5, 2000 maturity date; and

(b) the reduced interest rate of one percent (1%) per month and penalty rate of one percent (1%) per month are
upheld,63 but should accrue from the PN's February 5, 2000 maturity date64 until June 16, 2004, or the date when the
partial payment of P1,877,286.08 has been made by Go Tong Electrical, and computed based on the entire principal
amount of P40,491,051.65. Interest and penalty, at the same reduced rate, due thereafter (i.e., from June 17, 2004
until full payment) shall be computed based on the net amount of P38,613,765.57 (i.e., the amount arrived at after
deducting the partial payment of P1,877,286.08 from the principal amount of P40,491,051.65).

WHEREFORE, the petition is DENIED. The Decision dated February 17, 2009 and the Resolution dated April 13,
2009 of the Court of Appeals in CA-G.R. CV No. 86749 are hereby AFFIRMED with the above-
stated MODIFICATIONS.

SO ORDERED.cralawlawlibrary

Page 10 of 68
 [G.R. No. 117434. February 9, 2001]

BENGUET EXPLORATION, INC., petitioner, vs. COURT OF APPEALS, SWITZERLAND GENERAL

INSURANCE, CO., LTD., and SEAWOOD SHIPPING, INC., respondents.

DECISION
MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated June 30, 1994, and resolution, dated September
29, 1994, of the Court of Appeals[1] which affirmed the decision of the Regional Trial Court, Branch 149, Makati,
dismissing the complaints filed by petitioner against herein private respondents, and denied petitioners motion for
reconsideration, respectively.
The background of this case is as follows:
On November 29, 1985, petitioner Benguet Exploration, Inc. (Benguet) filed a complaint for damages against
Seawood Shipping, Inc. (Seawood Shipping) with the Regional Trial Court of Makati, which was docketed as Civil
Case No. 12394 and assigned to Branch 149.[2] On March 4, 1986, petitioner Benguet filed another complaint for
damages against respondent Switzerland General Insurance, Co., Ltd. (Switzerland Insurance), which was docketed
as Civil Case No. 13085[3] and assigned to Branch 148 of the court.
The two cases were consolidated. Switzerland Insurance filed a third-party complaint against Seawood
Shipping, praying that the latter be ordered to indemnify it for whatever might be adjudged against it in favor of
petitioner.[4] Thereafter, the cases were jointly tried, during which petitioner Benguet presented its employees, Rogelio
Lumibao and Ernesto Cayabyab, as witnesses.
Rogelio Lumibao, marketing assistant of Benguet, was in charge of exportation. His responsibilities included the
documentation of export products, presentations with banks, and other duties connected with the export of
products. He explained that private respondent Seawood Shipping was chartered by petitioner Benguet to transport
copper concentrates. The bill of lading (Exh. A) stated that the cargo, consisting of 2,243.496 wet metric tons of
copper concentrates, was loaded on board Sangkulirang No. 3 at Poro Point, San Fernando, La Union. It was insured
by Switzerland Insurance (marine insurance policy was marked Exh. C). When the cargo was unloaded in Japan,
however, Rogelio Lumibao received a report (Exh. B), dated August 19, 1985, from a surveyor in Japan stating that
the cargo was 355 metric tons short of the amount stated in the bill of lading. For this reason, petitioner Benguet
made a claim of the loss to Seawood Shipping and Switzerland Insurance. In its letter, dated August 21, 1985 (Exh.
D), petitioner Benguet made a formal demand for the value of the alleged shortage. As both Seawood Shipping and
Switzerland Insurance refused the demand, petitioner Benguet brought these cases against Seawood Shipping and
Switzerland Insurance.[5]
On cross-examination, Lumibao admitted that he did not see the actual loading of the cargo at Poro Point and
that his knowledge was limited to what was contained in the bill of lading which he received about two days after the
loading. Lumibao testified that at Camp 6, Kennon Road, Baguio, the copper concentrates were weighed prior to
being transported to Poro Point, where they were once more weighed before being loaded on the vessel. But again
he admitted that he had not seen the actual weighing and loading of the copper concentrates because he was not the
one in charge of the operation. Nor was he in Japan when the cargo was unloaded. He also did not know how to
perform the procedure for weighing cargo. Thus, he could not determine the truth or falsity of the contents of the draft
survey. He only knew that there was in fact a shortage based on his reading of the draft report. [6] Further, Lumibao
testified that, although he prepared the export declaration, he did not prepare the bill of lading. The bill of lading was
made on the basis of the draft survey conducted by the Overseas Merchandise Inspection Co., Ltd. or OMIC.[7] Some
other person undertook the weighing of the cargo, and Lumibao was only informed by telephone of the cargos weight
during its loading and unloading.
Lumibao had nothing to do with the preparation of the bill of lading, the weighing of the copper concentrates,
and the shipment of the cargo. He did not accompany the trucks which transferred the cargo from Baguio to Poro
Point. He was not on the ship when the cargo was loaded at Poro Point. Nor did he know if spillage occurred during
the loading or unloading of the copper concentrates.
Lumibao said that the buyer of the copper concentrates was the Brandeis Intsel Co., Inc. Upon receipt of the
cargo, Brandeis Intsel Co., Inc. paid for the cargo based on its weight in dry metric tons, or 90 percent more or less of

Page 11 of 68
the price of 2,243.496 tons, the weight of the cargo in wet metric tons. With regard to the insurance policy, he testified
that petitioner Benguet made no objection to any of the terms stated on the face of the policy. [8]
Ernesto Cayabyab next testified for petitioner. He had been with Benguet for 13 years and, at the time of his
testimony, he was secretary of Nil Alejandre, manager of Benguet. According to Cayabyab, on July 28, 1985, he was
sent to the warehouse (bodega) at Poro Point, La Union to assist in the loading of the copper concentrates. These
copper concentrates were to be loaded on the ship Sangkulirang No. 3. Cayabyab said he was present when the
cargo was loaded on the ship, as evidenced by the Certificate of Loading (Exh. E), Certificate of Weight (Exh. F), and
the Mates Receipt (Exh. G), all dated July 28, 1985. According to Cayabyab, the Marine Surveyor and the Chief Mate
would go around the boat to determine how much was loaded on the ship. Cayabyab stated that he saw petitioner
Benguets representative and his immediate superior, Mr. Alejandre, and the Inspector of Customs, Mr. Cardenas,
sign the Certificate of Weight. Cayabyab also witnessed the ship captain sign the Certificate of Weight, [9] which stated
therein that 2,243.496 wet metric tons of copper concentrates were loaded on the ship. [10] Cayabyab likewise
confirmed the authenticity of the Mates Receipt, saying that he witnessed the Chief Mate sign the document. [11]
When cross-examined, Cayabyab said that, as a secretary, his duties included computing the companys daily
main production in the mine site and accompanying his superior, Mr. Alejandre, during shipments. He explained that
the copper concentrates were transported by dump trucks from the mining site to Poro Point for over a month,
possibly even three to six months. Cayabyab went to Poro Point on July 27, 1985 to witness the loading of the copper
concentrates on the vessel Sangkulirang No. 3. But the copper concentrates had already been delivered and stored
in a bodega when he arrived. These concentrates were placed on the cemented ground inside the bodega after their
weight was recorded. Describing the procedure for weighing, he said that the trucks, without the copper concentrates,
were weighed. Then, after they had been loaded with copper concentrates, the trucks were placed in the bodega and
weighed again. To determine the weight of the copper concentrates, the weight of the trucks was deducted from the
weight of the trucks loaded with copper concentrates. The copper concentrates were then loaded on the ship by
means of a conveyor at the average rate of 400 tons an hour. Cayabyab did not know, however, how many trucks
were used to load the entire cargo of the copper concentrates nor did he know exactly how many hours were spent
loading the copper concentrates to the ship. He could only remember that he reported for work in the morning and
that he worked overtime because he had to wait until the loading of the cargo was finished before he could
leave. During the loading, he moved from place to place, and his attention was sometimes distracted. Thus, he could
not tell with certainty that no spillage took place during the loading. The figure of 2,243.496 wet metric tons was
computed by the Marine Surveyor and the Chief Mate.[12]
Respondent Switzerland Insurance then presented its evidence. Three witnesses, Eduardo Pantoja, Anastacio
Fabian, and Edgardo Dio, testified for it.
Eduardo Pantoja, assistant branch manager of respondent Switzerland Insurance in the Philippines, testified
that he prepared the data and conditions of the marine insurance policy of petitioner Benguet using information
furnished by the latter, although some of the conditions attached to the policy were conditions Switzerland Insurance
attached to all the marine policies issued by it. Pantoja stated that the figure of 2,243.496 wet metric tons contained in
the policy of Benguet was taken from the latters declaration. Switzerland Insurance relied on the value of the cargo
declared by the insured on the basis of the principle of uberrimae fidei, i.e., the insured must act in the utmost good
faith.[13] One of the conditions set forth in the marine policy (Exh. 8) was that the [w]arranted vessel is equipped with
steel centerline bulk head. According to Pantoja, this condition was specifically included in the policy because the
nature of the cargo warranted the same, and Switzerland Insurance would not have accepted the policy had such
condition not been attached. The purpose of the centerline bulkhead was to prevent the copper concentrates from
shifting while being transported on the ship. Upon verification by Certified Adjusters, Inc., adjusters of Switzerland
Insurance, it was found that the vessel Sangkulirang No. 3 did not have a steel centerline bulkhead. Pantoja identified
a letter, dated February 13, 1986, sent by his company to petitioner Benguet canceling its insurance contract
because the carrying vessel was not equipped with a steel centerline bulkhead as warranted under the policy (Exh. 7-
a). Enclosed was Check No. HSBC 419463 for P98,174.43 representing the refund by Switzerland Insurance of the
premium payments, documentary stamps, and premium taxes paid by petitioner Benguet (Exh. 7). He testified that
Switzerland Insurance paid its legal counsel P40,000.00 as attorneys fees plus appearance fees.[14]
On cross-examination, Pantoja explained that the company had its own system of determining various rates of
insurance. Several factors were taken into consideration, such as the nature of the goods, the manner by which they
were packed, and the destination of the cargo. For example, Switzerland Insurance would anticipate pilferages if the
cargo involved household goods or, in the case of chemicals, it would consider the possibility of spillage. Pantoja,
however, stated that he did not make any investigation in this case but used only his previous experience and project
knowledge in dealing with similar cases. He admitted that Switzerland Insurance checked whether the ship had a
steel centerline bulkhead only after a claim had been made by petitioner Benguet. He explained, however, that it was
impossible for them to make the investigation before the execution of the marine policy because they had only one
day to check whether the ship had a steel centerline bulkhead and the ship at that time was not in Manila but in Poro
Point. He reiterated that good faith dealing with the insured included relying on the truth of the latters

Page 12 of 68
representations. There was little risk involved in relying on the insureds representations because the company would
not have accepted the risk if it found that the conditions in the policy had not been complied with. Switzerland
Insurance refused Benguets demand because non-compliance with the condition that the ship be equipped with a
steel centerline bulkhead rendered the marine insurance policy null and void from the beginning. This is why
Switzerland Insurance refunded the premium paid by petitioner Benguet. Pantoja stated that petitioner Benguet did
not claim that the loss was caused by the shipping of the cargo because it did not know the cause of the shortage.[15]
Another witness for Switzerland Insurance was Anastacio Fabian, the marine manager of Certified Adjusters,
Inc. He testified that he went to Poro Point where the shipment was loaded for transport to Japan. It took him almost
two months to finish his investigation and to come up with a written report (Exh. 12). He prepared a letter, dated
January 31, 1986, seeking a certification from Capt. Jae Jang of Sangkulirang No. 3 on whether the ship was
equipped with a steel centerline bulkhead (Exh. 5). In response thereto, respondent Seawood Shipping sent a letter,
dated February 1, 1986, stating therein that the vessel was not equipped with a steel centerline bulkhead (Exh.
6). This steel centerline bulkhead was a steel separation of a vessel for the purpose of preventing the vessel from
sinking, especially in heavy weather. Pictures of the ship were taken by Wise Insurance showing that the vessel did
not have a steel centerline bulkhead (Exhs. 15 to 15-H).
Fabian also identified petitioner Benguets export declaration (Exh. 11) which provides therein that the cargo
loaded on the ship weighed 2,050 wet metric tons or 1,845 dry metric tons. [16] On further direct examination, he
testified that Certified Adjusters, Inc.s president, Mr. Edgardo Dio, wrote a letter, dated January 13, 1986, to the
shipping company inquiring as to the circumstances surrounding the loss of the cargo (Exh. 17). Seawood Shipping
responded to Certified Adjusters, Inc. in a letter, dated January 16, 1986, explaining that the weight of the cargo
might have been increased by the rains which occurred during the loading, and that the shortage upon unloading
might be due to the moisture which evaporated during the voyage from the Philippines to Japan. Fabian testified that
the moisture on the copper concentrates increased the weight of the cargo.
Fabian said that during his investigation he asked how and when the shipment was loaded in the vessel and
where it was loaded. He also checked records of the loading of the cargo. Although he admitted that the records
show that a shortage of the copper concentrates had occurred when these reached Japan, he attributed it to the rains
which occurred during the loading of the copper concentrates which increased their weight, although he conceded
that it was not possible that the rains would cause a shortage of around 300 metric tons. He did not know what could
have caused the shortage.[17]
The last witness to testify for the defense was Edgardo Dio, president and general manager of Certified
Adjusters, Inc. He testified that his company conducted an investigation and found that the vessel Sangkulirang No.
3 was not equipped with a steel centerline bulkhead. The main function of the steel centerline bulkhead was to
prevent shifting of the copper concentrates during transport. If there was no steel centerline bulkhead, the vessel was
liable to sink. He stated that the ship had two holds, one of which was loaded with petitioner Benguets copper
concentrates and the other with a Lepanto shipment. Dio identified photographs showing that only a wooden partition
separated the two cargoes on both holds (Exhs. 15-A to 15-G). He testified that his company wrote a letter to the
shipping company inquiring about the shortage which occurred on petitioner Benguets copper concentrates. He
expressed doubt that the loss of moisture of the copper concentrates caused the shortage because these were
actually mixed with some water to keep them from heating up or to prevent spontaneous combustion. According to
Dio, it was possible that some shifting of the cargo occurred as indicated by the photographs of the ship. [18]
Based on the evidence presented, the trial court rendered its decision on July 2, 1990 dismissing petitioners
complaint as well as Switzerland Insurances third-party complaint against Seawood Shipping.
On appeal, its decision was affirmed by the Court of Appeals. [19] Petitioner Benguet moved for reconsideration,
but its motion was denied.[20] Hence this petition.
Petitioner Benguet contends that the Court of Appeals gravely erred in ruling that it failed to establish the loss or
shortage of the subject cargo because such loss was sufficiently established by documentary and testimonial
evidence, as well as the admissions of private respondents. [21] Petitioner argues that documents regarding the
tonnage of the copper concentrates have been properly identified and that the bill of lading (Exh. A), the Certificate of
Weight (Exh. F), and the Mates Receipt (Exh. G), all of which stated that 2,243.496 wet metric tons of copper
concentrates were loaded on the ship, create a prima facie presumption that such amount was indeed what was
loaded on the vessel. Petitioner asserts that the Draft Survey Report of OMIC (Exh. B) was sufficient evidence to
prove that the cargo which arrived in Japan had a shortage of 355 wet metric tons.
We find petitioners contentions to be without merit.
First. It is settled that only questions of law may be raised on appeal by certiorari under Rule 45. The trial court,
having heard the witnesses and observed their demeanor and manner of testifying, is in a better position to decide
the question of their credibility. Hence, unless the factual findings complained of are not supported by the evidence

Page 13 of 68
on record or the assailed judgment is based on a misapprehension of facts, the findings of the trial court must be
accorded the highest respect, even finality, by this Court. [22] It is noteworthy that the Court of Appeals made the same
factual findings as did the trial court.[23]
Contrary to this rule, petitioner is raising questions of facts as it seeks an evaluation of the evidence presented
by the parties. However, we find no basis for concluding that both the trial court and the Court of Appeals
misappreciated the evidence in this case. To the contrary, we find that petitioner failed to present evidence to prove
that the weight of the copper concentrates actually loaded on the ship Sangkulirang No. 3 was 2,243.496 wet metric
tons and that there was a shortage of 355 metric tons when the cargo was discharged in Japan.
Petitioners own witness, Rogelio Lumibao, admitted that he was not present at the actual loading of the cargo at
Poro Point, his information being limited to what was contained in the bill of lading. As he was not in charge of the
operation, he did not see the actual weighing and loading of the copper concentrates. Nor did he prepare the bill of
lading. He only verified the weight of the cargo, from the time it was loaded on the ship to the time it was unloaded in
Japan, through the telephone. Neither was he present when the cargo was discharged in Japan. [24] Thus, Lumibao
testified:
Q Now Exhibit A is a bill of lading which you identified?
A Yes, sir.
Q Do you have anything to do in the preparation of this bill of lading?
A None, sir.
Q In other words, you did not verify if the weight stated in the bill of lading was the actual weight of the copper
concentrate loaded in the ship of the defendant Seawood Shipping Inc.?
....
A The bill of lading is prepared on the basis of the draft survey. That is the procedure.
Q And who undertakes the draft survey?
A For that particular shipment we required or hired the services of OMIC.
Q In other words, your draft survey is from the point of origin to Poro Point up to the point of destination,
Onahama, Japan, was done by OMIC?
A Yes, sir.
Q And you have nothing to do with OMIC?
A None, sir.
Q You are not an employee of OMIC?
A No, sir.
Q Are you connected with it in any way?
A No, sir.
Q In the Bill of Lading, you identified this document a xerox copy of the supposed original Bill of Lading and
marked as Exh. A, are the wordings and figures copper concentrate 2,243.496 WMT this means weight per
metric ton?
A Yes, sir.
Q Did you have it [verified] if this was the actual weight loaded on the ship of the defendant Seawood, Shipping,
Inc.?
A We were advised by the OMIC surveyor that the weight was loaded.
Q Did you personally verify if these figures are true?
A Yes, by phone.
Q Did you participate in weighing?

Page 14 of 68
 A No, sir. Just by phone.
Q In other words somebody else made the weighing not you?
A Yes, sir.
Q Did you personally do the verification of the actual weight loaded in the ship?
....
A Yes, sir by phone.
Q So you are informed [of] the weight actually loaded by phone?
A Yes, sir.
Q Do you always verify by phone?
A That is only preliminary, while waiting what is the concluding things. (sic) That is after the surveyor has
submitted the report to us.
Q So in other words, all the time you have been basing your testimony on reports prepared by other person?
A Yes, sir.
Q In fact, you have nothing to do with the preparation of the Bill of Lading?
A Yes, sir.
Q You have nothing to do with the weighing of the copper concentrate? . . . . You have nothing to do [with] the
transport of the copper concentrate from Camp 6, Baguio to Poro Point?
A None, sir.
Q You did not even accompany the truck?
A No, sir.
Q You were not at the shipside when this copper concentrate was loaded?
A No, sir.
Q You did not know whether there was spillage when or while loading copper concentrates?
A Yes, sir.
Q Neither were you on the ship on its way to Japan, were you?
A No, sir.
Q You were not at Onahama, Japan, the port of destination?
A No, sir.[25]
On the other hand, Ernesto Cayabyab testified that he was at Poro Point when the copper concentrates were
being loaded on the ship. Although he was present when the Certificate of Loading (Exh. E), Certificate of Weight
(Exh. F), and the Mates Receipt (Exh. G) were signed at the loading site,[26] he admitted that he could not say for
certain that no spillage occurred during the loading of the cargo on the ship because his attention was not on the
cargo at all times.[27]
It is evident that petitioners witnesses had no personal knowledge of the actual weight of copper concentrates
loaded on the vessel and discharged in Japan. Lumibao had no part in the preparation of the bill of lading (Exh. A)
and the Draft Survey Report prepared by OMIC (Exh. B). Nor was he present when the copper concentrates were
loaded on the vessel or when the cargo was unloaded in Japan. He merely relied on the declarations made by other
persons that 2,243.496 wet metric tons were indeed loaded on Sangkulirang No. 3 and that the cargo was short by
355 metric tons when unloaded in Japan. The same may be said of witness Cayabyab. While present at the loading
site and familiar with the procedure followed in loading the cargo, he admitted that he could not state for certain that
no spillage occurred as his attention was not at all times focused on the loading operation. Moreover, none of the
documents he identified, i.e., Certificate of Loading, Certificate of Weight, and Mates Receipt, were signed by him.He

Page 15 of 68
only witnessed the signing of these documents by other people. Hence, he was in no position to testify as to the truth
or falsity of the figures contained therein. The testimonies of these witnesses were thus hearsay. It has been held:

Any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge
of the witness but on the knowledge of another person who is not on the witness stand.Hearsay evidence, whether
objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions
to the hearsay evidence rule.[28]

Second. Petitioner contends that the genuineness and due execution of the documents presented, i.e., Bill of
Lading, Certificate of Loading, Certificate of Weight, Mates Receipt, were properly established by the testimony of its
witness, Ernesto Cayabyab, and that as a result, there is a prima facie presumption that their contents are true.
This contention has no merit. The admission of the due execution and genuineness of a document simply
means that the party whose signature it bears admits that he signed it or that it was signed by another for him with his
authority; that at the time it was signed it was in words and figures exactly as set out in the pleading of the party
relying upon it; that the document was delivered; and that any formal requisites required by law, such as a seal, an
acknowledgment, or revenue stamp, which it lacks, are waived by him. [29] In another case, we held that When the law
makes use of the phrase genuineness and due execution of the instrument it means nothing more than that the
instrument is not spurious, counterfeit, or of different import on its face from the one executed.[30] It is equally true,
however, that

Execution can only refer to the actual making and delivery, but it cannot involve other matters without enlarging its
meaning beyond reason. The only object of the rule was to enable a plaintiff to make out a prima facie, not a
conclusive case, and it cannot preclude a defendant from introducing any defense on the merits which does not
contradict the execution of the instrument introduced in evidence. [31]

In this case, respondents presented evidence which casts doubt on the veracity of these documents.
Respondent Switzerland Insurance presented Export Declaration No. 1131/85 (Exh. 11) [32] which petitioners own
witness, Rogelio Lumibao, prepared,[33] in which it was stated that the copper concentrates to be transported to Japan
had a gross weight of only 2,050 wet metric tons or 1,845 dry metric tons, 10 percent more or less.[34] On the other
hand, Certified Adjusters, Inc., to which Switzerland Insurance had referred petitioners claim, prepared a report which
showed that a total of 2,451.630 wet metric tons of copper concentrates were delivered at Poro Point. [35] As the report
stated:

It is to be pointed out that there were no actual weighing made at Benguet Exploration, Inc.s site. The procedure
done was that after weighing the trucks before and after unloading at Philex Poro Point Installation, the weight of the
load was determined and entered on Philex Trip Ticket which was later on copied and entered by the truck driver on
Benguet Exploration, Inc.s Transfer Slip.[36]

Considering the discrepancies in the various documents showing the actual amount of copper concentrates
transported to Poro Point and loaded in the vessel, there is no evidence of the exact amount of copper concentrates
shipped. Thus, whatever presumption of regularity in the transactions might have risen from the genuineness and due
execution of the Bill of Lading, Certificate of Weight, Certificate of Loading, and Mates Receipt was successfully
rebutted by the evidence presented by respondent Switzerland Insurance which showed disparities in the actual
weight of the cargo transported to Poro Point and loaded on the vessel. This fact is compounded by the admissions
made by Lumibao and Cayabyab that they had no personal knowledge of the actual amount of copper concentrates
loaded on the vessel.Correctly did the Court of Appeals rule:

In the face of these admissions, appellants claim of loss or shortage is placed in serious doubt, there being no other
way of verifying the accuracy of the figures indicated in appellants documentary evidence that could confirm the
alleged loss of 355.736 MT. Notwithstanding the figure stated in Bill of Lading No. PP/0-1 (Exhibit A) that 2,243.496
WMT of copper concentrates was loaded by appellant at the port of origin, it should be stressed that this is merely
prima facie evidence of the receipt by the carrier of said cargo as described in the bill of lading. Thus, it has been held
that recitals in the bill of lading as to the goods shipped raise only a rebuttable presumption that such goods were
delivered for shipment and as between the consignor and a receiving carrier, the fact must outweigh the recital
(Saludo vs. Court of Appeals, 207 SCRA 498, 509 [1992]). Resultingly, the admissions elicited from appellants
witnesses that they could not confirm the accuracy of the figures indicated in their documentary evidence with regard
to the actual weight of the cargo loaded at the port of origin and that unloaded at the port of destination, in effect
rebuts the presumption in favor of the figure indicated in the bill of lading.[37]

Page 16 of 68
WHEREFORE, the decision of the Court of Appeals is AFFIRMED.
SO ORDERED.

Page 17 of 68
 [G.R. No. 160242. May 17, 2005]

ASIAN CONSTRUCTION AND DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS and
MONARK EQUIPMENT CORPORATION, respondents.

DECISION
CALLEJO, SR., J.:

On March 13, 2001, Monark Equipment Corporation (MEC) filed a Complaint [1] for a sum of money with
damages against the Asian Construction and Development Corporation (ACDC) with the Regional Trial Court (RTC)
of Quezon City. The complaint alleged the following: ACDC leased Caterpillar generator sets and Amida mobile
floodlighting systems from MEC during the period of March 13 to July 15, 1998 but failed, despite demands, to pay
the rentals therefor in the total amount of P4,313,935.00; from July 14 to August 25, 1998, various equipments from
MEC were, likewise, leased by ACDC for the latters power plant in Mauban, Quezon, and that there was still a
balance of P456,666.67; and ACDC also purchased and took custody of various equipment parts from MEC for the
agreed price of P237,336.20 which, despite demands, ACDC failed to pay.
MEC prayed that judgment be rendered in its favor, thus:

1. Ordering defendant to pay the plaintiff the total amount of FIVE MILLION SEVENTY-ONE THOUSAND THREE
HUNDRED THIRTY-FIVE [PESOS] & 86/100 (P5,071,335.86);

2. Ordering defendant to pay the plaintiff legal interest of 12% per annum on the principal obligations in the total
amount of FIVE MILLION SEVENTY-ONE THOUSAND THREE HUNDRED THIRTY-FIVE [PESOS] & 86/100
(P5,071,335.86) computed from the date the obligations became due until fully paid;

3. Ordering defendant to pay attorneys fees in the amount equivalent to 15% of the amount of claim;

4. Ordering defendant to pay all costs of litigation.

Plaintiff prays for such other reliefs as may be just and equitable under the premises.[2]

ACDC filed a motion to file and admit answer with third-party complaint against Becthel Overseas Corporation
(Becthel). In its answer, ACDC admitted its indebtedness to MEC in the amount of P5,071,335.86 but alleged the
following special and affirmative defenses:
5. Defendant has incurred an obligation with plaintiff, in the amount of P5,071,335.86. But third-party
defendant fails and refuses to pay its overdue obligation in connection with the leased equipment used
by defendant to comply with its contracted services;
6. The equipment covered by the lease were all used in the construction project of Becthel in Mauban,
Quezon, and Expo in Pampanga and defendant was not yet paid of its services that resulted to the
non-payment of rentals on the leased equipment.[3]
And by way of third-party complaint against Becthel as third-party defendant, ACDC alleged that:
7. Third-party plaintiff repleads the foregoing allegations in the preceding paragraphs as may be material
and pertinent hereto;
8. Third-party BECTHEL OVERSEAS CORPORATION (herein called Becthel) is a corporation duly
organized and existing under the laws of the United States of America but may be served with
summons at Barangay Cagsiay I, Mauban, Quezon 4330, Philippines;
9. Third-party defendant Becthel contracted the services of third-party plaintiff to do construction work at its
Mauban, Quezon project using the leased equipment of plaintiff Monark;
10. With the contracted work, third-party plaintiff rented the equipment of the plaintiff Monark;

Page 18 of 68
 11. Third-party plaintiff rendered and complied with its contracted works with third-party defendant using
plaintiffs (Monark) rented equipment. But, third-party defendant BECTHEL did not pay for the
services of third-party plaintiff ASIAKONSTRUKT that resulted to the non-payment of plaintiff
Monarks claim;
12. Despite repeated demands, third-party defendant failed and refused to pay its overdue obligation to
third-party plaintiff ASIAKONSTRUKT, and third-party defendant needs to be impleaded in this case
for contribution, indemnity, subrogation or other reliefs to off-set or to pay the amount of money claim
of plaintiff Monark on the leased equipment used in the Mauban, Quezon project in the total amount
of P456,666.67;
13. By reason thereof, third-party plaintiff was compelled to prosecute its claim against third-party
defendant and hired the services of undersigned counsel for an attorneys fees of P500,000.00.[4]
ACDC prayed that judgment be rendered in its favor dismissing the complaint and ordering the third-party
defendant (Becthel) to pay P456,666.67 plus interest thereon and attorneys fees.[5]
MEC opposed the motion of ACDC to file a third-party complaint against Becthel on the ground that the
defendant had already admitted its principal obligation to MEC in the amount of P5,071,335.86; the transaction
between it and ACDC, on the one hand, and between ACDC and Becthel, on the other, were independent
transactions. Furthermore, the allowance of the third-party complaint would result in undue delays in the disposition of
the case.[6]
MEC then filed a motion for summary judgment, alleging therein that there was no genuine issue as to the
obligation of ACDC to MEC in the total amount of P5,071,335.86, the only issue for the trial courts resolution being
the amount of attorneys fees and costs of litigation.[7]
ACDC opposed the motion for summary judgment, alleging that there was a genuine issue with respect to the
amount of P5,071,335.86 being claimed by MEC, and that it had a third-party complaint against Becthel in connection
with the reliefs sought against it which had to be litigated. [8]
In its reply, MEC alleged that the demand of ACDC in its special and affirmative defenses partook of the nature
of a negative pregnant, and that there was a need for a hearing on its claim for damages.
On August 2, 2001, the trial court issued a Resolution denying the motion of ACDC for leave to file a third-party
complaint and granting the motion of MEC, which the trial court considered as a motion for a judgment on the
pleadings. The fallo of the resolution reads:

ACCORDINGLY, this Court finds defendant Asian Construction and Development Corporation liable to pay plaintiff
Monark Equipment Corporation and is hereby ordered to pay plaintiff the amount of FIVE MILLION SEVENTY-ONE
THOUSAND AND THREE HUNDRED THIRTY-FIVE & 86/100 PESOS (P5,071,335.86) plus 12% interest from the
filing of the complaint until fully paid.

SO ORDERED.[9]

ACDC appealed the resolution to the Court of Appeals (CA), alleging that
I. THE LOWER COURT ERRED IN DENYING THE MOTION TO FILE AND ADMIT ANSWER WITH
THIRD-PARTY COMPLAINT;
II. THE LOWER COURT ERRED IN GRANTING THE MOTION FOR SUMMARY JUDGMENT;
III. THE LOWER COURT ERRED WHEN IT DENIED THE THIRD-PARTY COMPLAINT AND ORDERED
DEFENDANT TO PAY THE AMOUNT OF P5,071,335.86 PLUS INTEREST OF 12% PER ANNUM.[10]
On July 18, 2001, the CA rendered judgment dismissing the appeal and affirming the assailed decision. The
appellate court ruled that since MEC had prayed for judgment on the pleadings, it thereby waived its claim for
damages other than the amount of P5,071,335.86; hence, there was no longer a genuine issue to be resolved by the
court which necessitated trial. The appellate court sustained the disallowance of the third-party complaint of ACDC
against Becthel on the ground that the transaction between the said parties did not arise out of the same transaction
on which MECs claim was based.
Its motion for reconsideration of the decision having been denied, ACDC, now the petitioner, filed the present
petition for review on certiorari, and raises the following issues:

Page 19 of 68
 I. WHETHER OR NOT A THIRD-PARTY COMPLAINT IS PROPER; AND
II. WHETHER OR NOT JUDGMENT ON THE PLEADINGS IS PROPER.[11]
Citing the rulings of this Court in Allied Banking Corporation v. Court of Appeals [12] and British Airways v. Court
of Appeals,[13] the petitioner avers that the CA erred in ruling that in denying its motion for leave to file a third-party
complaint, the RTC acted in accordance with the Rules of Court and case law. The petitioner maintains that it raised
genuine issues in its answer; hence, it was improper for the trial court to render judgment on the pleadings:

With due respect, the judgment on the pleadings affirmed by the Court of Appeals is not, likewise, proper considering
that the Answer with Third-Party Complaint, although it admitted the obligation to respondent, tendered an issue of
whether the respondents claim is connected with the third-party claim.

As alleged in the Answer with Third-Party Complaint, it is admitted then by respondent, for purposes of judgment on
the pleadings, that failure to pay respondent was in connection of Becthel Overseas Corporations failure to pay its
obligation to petitioner and that the equipment leased was used in connection with the Becthel Overseas Corporation
project.

This tendered issue could not just be disregarded in the light of the third-party complaint filed by herein petitioner and
third-party plaintiff which, as argued in the first discussion/argument, is proper and should have been given due
course.[14]

The petition is denied for lack of merit.

Section 11, Rule 6 of the Rules of Court provides:

Sec. 11. Third (fourth, etc.)-party complaint. A third (fourth, etc.) party complaint is a claim that a defending party
may, with leave of court, file against a person not a party to the action, called the third (fourth, etc.) party defendant,
for contribution, indemnity, subrogation or any other relief, in respect of his opponents claim.

Furthermore, Section 1, Rule 34 of the Rules of Court provides that the Court may render judgment on the
pleadings, as follows:

Section 1. Judgment on the pleadings. Where an answer fails to tender an issue, or, otherwise, admits the material
allegations of the adverse partys pleading, the court may, on motion of that party, direct judgment on such pleading.
However, in actions for declaration of nullity or annulment of marriage or for legal separation, the material facts
alleged in the complaint shall always be proved.

The purpose of Section 11, Rule 6 of the Rules of Court is to permit a defendant to assert an independent claim
against a third-party which he, otherwise, would assert in another action, thus preventing multiplicity of suits. All the
rights of the parties concerned would then be adjudicated in one proceeding. This is a rule of procedure and does not
create a substantial right. Neither does it abridge, enlarge, or nullify the substantial rights of any litigant. [15] This right
to file a third-party complaint against a third-party rests in the discretion of the trial court. The third-party complaint is
actually independent of, separate and distinct from the plaintiffs complaint, such that were it not for the rule, it would
have to be filed separately from the original complaint. [16]
A prerequisite to the exercise of such right is that some substantive basis for a third-party claim be found to
exist, whether the basis be one of indemnity, subrogation, contribution or other substantive right. [17] The bringing of a
third-party defendant is proper if he would be liable to the plaintiff or to the defendant or both for all or part of the
plaintiffs claim against the original defendant, although the third-party defendants liability arises out of another
transaction.[18] The defendant may implead another as third-party defendant (a) on an allegation of liability of the latter
to the defendant for contribution, indemnity, subrogation or any other relief; (b) on the ground of direct liability of the
third-party defendant to the plaintiff; or (c) the liability of the third-party defendant to both the plaintiff and the
defendant.[19] There must be a causal connection between the claim of the plaintiff in his complaint and a claim for
contribution, indemnity or other relief of the defendant against the third-party defendant. In Capayas v. Court of First
Instance,[20] the Court made out the following tests: (1) whether it arises out of the same transaction on which the
plaintiffs claim is based; or whether the third-party claim, although arising out of another or different contract or
transaction, is connected with the plaintiffs claim; (2) whether the third-party defendant would be liable to the plaintiff
or to the defendant for all or part of the plaintiffs claim against the original defendant, although the third-party
defendants liability arises out of another transaction; and (3) whether the third-party defendant may assert any
defenses which the third-party plaintiff has or may have to the plaintiffs claim.

Page 20 of 68
 The third-party complaint does not have to show with certainty that there will be recovery against the third-party
defendant, and it is sufficient that pleadings show possibility of recovery. [21] In determining the sufficiency of the third-
party complaint, the allegations in the original complaint and the third-party complaint must be examined.[22] A third-
party complaint must allege facts which prima facie show that the defendant is entitled to contribution, indemnity,
subrogation or other relief from the third-party defendant.[23]
It bears stressing that common liability is the very essence for contribution. Contribution is a payment made by
each, or by any of several having a common liability of his share in the damage suffered or in the money necessarily
paid by one of the parties in behalf of the other or others. [24] The rule on common liability is fundamental in the action
for contribution.[25] The test to determine whether the claim for indemnity in a third-party complaint is, whether it arises
out of the same transaction on which the plaintiffs claim is based, or the third-party plaintiffs claim, although arising
out of another or different contract or transaction, is connected with the plaintiffs claim. [26]
In this case, the claims of the respondent, as plaintiff in the RTC, against the petitioner as defendant therein,
arose out of the contracts of lease and sale; such transactions are different and separate from those between Becthel
and the petitioner as third-party plaintiff for the construction of the latters project in Mauban, Quezon, where the
equipment leased from the respondent was used by the petitioner. The controversy between the respondent and the
petitioner, on one hand, and that between the petitioner and Becthel, on the other, are thus entirely distinct from each
other. There is no showing in the proposed third-party complaint that the respondent knew or approved the use of the
leased equipment by the petitioner for the said project in Quezon. Becthel cannot invoke any defense the petitioner
had or may have against the claims of the respondent in its complaint, because the petitioner admitted its liabilities to
the respondent for the amount of P5,075,335.86. The barefaced fact that the petitioner used the equipment it leased
from the respondent in connection with its project with Becthel does not provide a substantive basis for the filing of a
third-party complaint against the latter. There is no causal connection between the claim of the respondent for the
rental and the balance of the purchase price of the equipment and parts sold and leased to the petitioner, and the
failure of Becthel to pay the balance of its account to the petitioner after the completion of the project in Quezon. [27]
We note that in its third-party complaint, the petitioner alleged that Becthel should be ordered to pay the balance
of its account of P456,666.67, so that the petitioner could pay the same to the respondent. However, contrary to its
earlier plea for the admission of its third-party complaint against Becthel, the petitioner also sought the dismissal of
the respondents complaint. The amount of P456,666.67 it sought to collect from Becthel would not be remitted to the
respondent after all.
The rulings of this Court in Allied Banking Corporation and British Airways are not applicable in this case since
the factual backdrops in the said cases are different.
In Allied Banking Corporation, Joselito Yujuico obtained a loan from General Bank and Trust Company. The
Central Bank of the Philippines ordered the liquidation of the Bank. In a Memorandum Agreement between the
liquidation of the Bank and Allied Banking Corporation, the latter acquired the receivables from Yujuico. Allied
Banking Corporation then sued Yujuico for the collection of his loan, and the latter filed a third-party complaint against
the Central Bank, alleging that by reason of its tortious interference with the affairs of the General Bank and Trust
Company, he was prevented from performing his obligation under the loan. This Court allowed the third-party
complaint based on the claim of the defendant therein, thus:

In the words of private respondent, he [s]eeks to transfer liability for the default imputed against him by the petitioner
to the proposed third-party defendants because of their tortious acts which prevented him from performing his
obligations. Thus, if at the outset the issue appeared to be a simple makers liability on a promissory note, it became
complex by the rendition of the aforestated decision.[28]

In British Airways, the Court allowed the third-party complaint of British Airways against its agent, the Philippine
Airlines, on the plaintiffs complaint regarding his luggage, considering that a contract of carriage was involved. The
Court ruled, thus:

Undeniably, for the loss of his luggage, Mahtani is entitled to damages from BA, in view of their contract of carriage.
Yet, BA adamantly disclaimed its liability and instead imputed it to PAL which the latter naturally denies. In other
words, BA and PAL are blaming each other for the incident.

In resolving this issue, it is worth observing that the contract of air transportation was exclusively between Mahtani
and BA, the latter merely endorsing the Manila to Hongkong leg of the formers journey to PAL, as its subcontractor or
agent. In fact, the fourth paragraph of the Conditions of Contracts of the ticket issued by BA to Mahtani confirms that
the contract was one of continuous air transportation from Manila to Bombay.

Page 21 of 68
4. xxx carriage to be performed hereunder by several successive carriers is regarded as a single operation.

Prescinding from the above discussion, it is undisputed that PAL, in transporting Mahtani from Manila to Hongkong
acted as the agent of BA.

Parenthetically, the Court of Appeals should have been cognizant of the well-settled rule that an agent is also
responsible for any negligence in the performance of its function and is liable for damages which the principal may
suffer by reason of its negligent act. Hence, the Court of Appeals erred when it opined that BA, being the principal,
had no cause of action against PAL, its agent or sub-contractor.

Also, it is worth mentioning that both BA and PAL are members of the International Air Transport Association (IATA),
wherein member airlines are regarded as agents of each other in the issuance of the tickets and other matters
pertaining to their relationship. Therefore, in the instant case, the contractual relationship between BA and PAL is one
of agency, the former being the principal, since it was the one which issued the confirmed ticket, and the latter the
agent.[29]

It goes without saying that the denial of the petitioners motion with leave to file a third-party complaint against
Becthel is without prejudice to its right to file a separate complaint against the latter.
Considering that the petitioner admitted its liability for the principal claim of the respondent in its Answer with
Third-Party Complaint, the trial court did not err in rendering judgment on the pleadings against it.
IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of merit. Costs against the petitioner.
SO ORDERED.

Page 22 of 68
 G.R. No. 199990, February 04, 2015

SPOUSES ROLANDO AND HERMINIA SALVADOR, Petitioners, v. SPOUSES ROGELIO AND ELIZABETH
RABAJA AND ROSARIO GONZALES, Respondents.

DECISION

MENDOZA, J.:

This is a petition for review on certiorari seeking to reverse and set aside the August 22, 2011 Decision 1 and the
January 5, 2012 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 90296 which affirmed with modification
the March 29, 2007 Decision of the Regional Trial Court Branch 214 (RTC-Branch 214), Mandaluyong City in Civil
Case No. MC-03-2175, for rescission of a contract (rescission case).

The Facts

This case stemmed from a dispute involving the sellers, petitioner spouses Rolando and Herminia Salvador (Spouses
Salvador); the sellers’ agent, Rosario Gonzales (Gonzales); and the buyers, respondent Spouses Rogelio and
Elizabeth Rabaja (Spouses Rabaja), over a parcel of land situated at No. 25, Merryland Village, 375 Jose Rizal
Street, Mandaluyong City (subject property), covered by Transfer Certificate of Title (TCT) No. 13426 and registered
in the names of Spouses Salvador. From 1994 until 2002, Spouses Rabaja were leasing an apartment in the subject
lot.

Sometime in July 1998, Spouses Rabaja learned that Spouses Salvador were looking for a buyer of the subject
property. Petitioner Herminia Salvador (Herminia) personally introduced Gonzales to them as the administrator of the
said property. Spouses Salvador even handed to Gonzales the owner’s duplicate certificate of title over the subject
property. On July, 3, 1998, Spouses Rabaja made an initial payment of P48,000.00 to Gonzales in the presence of
Herminia. Gonzales then presented the Special Power of Attorney3 (SPA), executed by Rolando Salvador (Rolando)
and dated July 24, 1998. On the same day, the parties executed the Contract to Sell 4 which stipulated that for a
consideration of P5,000,000.00, Spouses Salvador sold, transferred and conveyed in favor of Spouses Rabaja the
subject property. Spouses Rabaja made several payments totalling P950,000.00, which were received by Gonzales
pursuant to the SPA provided earlier as evidenced by the check vouchers signed by Gonzales and the improvised
receipts signed by Herminia.

Sometime in June 1999, however, Spouses Salvador complained to Spouses Rabaja that they did not receive any
payment from Gonzales. This prompted Spouses Rabaja to suspend further payment of the purchase price; and as a
consequence, they received a notice to vacate the subject property from Spouses Salvador for non-payment of
rentals.

Thereafter, Spouses Salvador instituted an action for ejectment against Spouses Rabaja. In turn, Spouses Rabaja
filed an action for rescission of contract against Spouses Salvador and Gonzales, the subject matter of the present
petition.

In the action for ejectment, the complaint was filed before the Metropolitan Trial Court of Mandaluyong City, Branch
60 (MeTC), where it was docketed as Civil Case No. 17344. In its August 14, 2002 Decision,5the MeTC ruled in favor
of Spouses Salvador finding that valid grounds existed for the eviction of Spouses Rabaja from the subject property
and ordering them to pay back rentals. Spouses Salvador were able to garnish the amount of P593,400.00 6 from
Spouses Rabaja’s time deposit account pursuant to a writ of execution issued by the MeTC. 7 Spouses Rabaja
appealed to the Regional Trial Court, Branch 212, Mandaluyong City (RTC-Br. 212) which reversed the MeTC ruling
in its March 1, 2005 decision.8 The RTC-Br. 212 found that no lease agreement existed between the parties.
Thereafter, Spouses Salvador filed an appeal with the CA which was docketed as CA-G.R. SP No. 89259. On March
31, 2006, the CA ruled in favor of Spouses Salvador and reinstated the MeTC ruling ejecting Spouses Rabaja.9 Not
having been appealed, the CA decision in CA-G.R. SP No. 89259 became final and executory on May 12,
2006.10chanroblesvirtuallawlibrary

Meanwhile, the rescission case filed by Spouses Rabaja against Spouses Salvador and Gonzales and docketed as
Civil Case No. MC No. 03-2175 was also raffled to RTC-Br. 212. In their complaint,11 dated July 7, 2003, Spouses
Rabaja demanded the rescission of the contract to sell praying that the amount of P950,000.00 they previously paid
to Spouses Salvador be returned to them. They likewise prayed that damages be awarded due to the contractual
breach committed by Spouses Salvador.

Page 23 of 68
Spouses Salvador filed their answer with counterclaim and cross-claim12 contending that there was no meeting of the
minds between the parties and that the SPA in favor of Gonzales was falsified. In fact, they filed a case for
falsification against Gonzales, but it was dismissed because the original of the alleged falsified SPA could not be
produced. They further averred that they did not receive any payment from Spouses Rabaja through Gonzales. In her
defense, Gonzales filed her answer13 stating that the SPA was not falsified and that the payments of Spouses Rabaja
amounting to P950,000.00 were all handed over to Spouses Salvador.

The pre-trial conference began but attempts to amicably settle the case were unsuccessful. It was formally reset to
February 4, 2005, but Spouses Salvador and their counsel failed to attend. Consequently, the RTC issued the pre-
trial order14declaring Spouses Salvador in default and allowing Spouses Rabaja to present their evidence ex
parte against Spouses Salvador and Gonzales to present evidence in her favor.

A motion for reconsideration,15 dated March 28, 2005, was filed by Spouses Salvador on the said pre-trial order
beseeching the liberality of the court. The rescission case was then re-raffled to RTC-Br. 214 after the Presiding
Judge of RTC-Br. 212 inhibited herself. In the Order,16 dated October 24, 2005, the RTC-Br. 214 denied the motion
for reconsideration because Spouses Salvador provided a flimsy excuse for their non-appearance in the pre-trial
conference.

Thereafter, trial proceeded and Spouses Rabaja and Gonzales presented their respective testimonial and
documentary evidence.

RTC Ruling

On March 29, 2007, the RTC-Br. 214 rendered a decision17 in favor of Spouses Rabaja. It held that the signature of
Spouses Salvador affixed in the contract to sell appeared to be authentic. It also held that the contract, although
denominated as “contract to sell,” was actually a contract of sale because Spouses Salvador, as vendors, did not
reserve their title to the property until the vendees had fully paid the purchase price. Since the contract entered into
was a reciprocal contract, it could be validly rescinded by Spouses Rabaja, and in the process, they could recover the
amount of P950,000.00 jointly and severally from Spouses Salvador and Gonzales. The RTC stated that Gonzales
was undoubtedly the attorney-in-fact of Spouses Salvador absent any taint of irregularity. Spouses Rabaja could not
be faulted in dealing with Gonzales who was duly equipped with the SPA from Spouses Salvador.

The RTC-Br. 214 then ruled that the amount of P593,400.00 garnished from the time deposit account of Spouses
Rabaja, representing the award of rental arrearages in the separate ejectment suit, should be returned by Spouses
Salvador.18 The court viewed that such amount was part of the purchase price of the subject property which must be
returned. It also awarded moral and exemplary damages in favor of Spouses Rabaja and attorney’s fees in favor of
Gonzales. The dispositive portion of the said decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, this court renders judgment as follows:chanRoblesvirtualLawlibrary

a. Ordering the “Contract to Sell” entered into by the plaintiff and defendant spouses Rolando and Herminia
Salvador on July 24, 1998 as RESCINDED;chanrobleslaw

b. Ordering defendant spouses Rolando and Herminia Salvador and defendant Rosario S. Gonzales jointly and
severally liable to pay plaintiffs:chanRoblesvirtualLawlibrary
1. the amount of NINE HUNDRED FIFTY THOUSAND PESOS (P950,000.00), representing the
payments made by the latter for the purchase of subject property;chanrobleslaw

2. the amount of TWENTY THOUSAND PESOS (P20,000.00), as moral damages;chanrobleslaw

3. the amount of TWENTY THOUSAND PESOS (P20,000.00), as exemplary damages;chanrobleslaw

4. the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00), as attorney’s

fees;chanrobleslaw

5. the cost of suit.

Page 24 of 68
 c. Ordering defendant Spouses Rolando and Herminia Salvador to pay plaintiffs the amount of FIVE
HUNDRED NINETY THREE THOUSAND PESOS (P593,000.00) (sic), representing the amount garnished
from the Metrobank deposit of plaintiffs as payment for their alleged back rentals;chanrobleslaw

d. Ordering the defendant Spouses Rolando and Herminia Salvador to pay defendant Rosario Gonzales on her
cross-claim in the amount of ONE HUNDRED THOUSAND PESOS (P100,000.00);chanrobleslaw

e. Dismissing the counterclaims of the defendants against the plaintiff.

SO ORDERED.19
Gonzales filed a motion for partial reconsideration, but it was denied by the RTC-Br. 114 in its Order,20dated
September 12, 2007. Undaunted, Spouses Salvador and Gonzales filed an appeal before the CA.

CA Ruling

On March 29, 2007, the CA affirmed the decision of the RTC-Br. 114 with modifications. It ruled that the “contract to
sell” was indeed a contract of sale and that Gonzales was armed with an SPA and was, in fact, introduced to
Spouses Rabaja by Spouses Salvador as the administrator of the property. Spouses Rabaja could not be blamed if
they had transacted with Gonzales.

The CA then held that Spouses Salvador should return the amount of P593,400.00 pursuant to a separate ejectment
case, reasoning that Spouses Salvador misled the court because an examination of CA-G.R. SP No. 89260 showed
that Spouses Rabaja were not involved in that case. CA-G.R. SP No. 59260 was an action between Spouses
Salvador and Gonzales only and involved a completely different residential apartment located at 302-C Jupiter Street,
Dreamland Subdivision, Mandaluyong City.

The CA, however, ruled that Gonzales was not solidarily liable with Spouses Salvador. The agent must expressly
bind himself or exceed the limit of his authority in order to be solidarily liable. It was not shown that Gonzales as
agent of Spouses Salvador exceeded her authority or expressly bound herself to be solidarily liable. The decretal
portion of the CA decision reads:chanRoblesvirtualLawlibrary
WHEREFORE, the appeal is PARTLY GRANTED. The assailed Decision dated March 29, 2007 and the Order dated
September 12, 2007, of the Regional Trial Court, Branch 214, Mandaluyong City, in Civil Case No. MC-03-2175, are
AFFIRMED with MODIFICATION in that Rosario Gonzalez is not jointly and severally liable to pay Spouses Rabaja
the amounts enumerated in paragraph (b) of the Decision dated March 29, 2007.

SO ORDERED.21
Spouses Salvador filed a motion for reconsideration but it was denied by the CA in its January 5, 2012 Resolution.

Hence, this petition.

ASSIGNMENT OF ERRORS

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LOWER COURT GRAVELY ABUSED ITS
DISCRETION IN DECLARING PETITIONERS IN DEFAULT AND IN DEPRIVING THEM OF THE OPPORTUNITY
TO CROSS-EXAMINE RESPONDENTS SPS. RABAJA AS WELL AS TO PRESENT EVIDENCE FOR AND IN
THEIR BEHALF, GIVEN THE MERITORIOUS DEFENSES RAISED IN THEIR ANSWER THAT CATEGORICALLY
AND DIRECTLY DISPUTE RESPONDENTS SPS. RABAJA’S CAUSE OF ACTION.

II

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT GRAVELY ERRED IN GIVING
CREDENCE TO THE TESTIMONY OF RESPONDENT GONZALES THAT PAYMENTS WERE INDEED REMITTED
TO AND RECEIVED BY PETITIONER HERMINIA SALVADOR EVEN AS THE IMPROVISED RECEIPTS WERE
EVIDENTLY MADE UP AND FALSIFIED BY RESPONDENT GONZALES.

III

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE TRIAL COURT GRAVELY ERRED IN
RESCINDING THE CONTRACT TO SELL WHEN THERE IS NOTHING TO RESCIND AS NO VALID CONTRACT

Page 25 of 68
TO SELL WAS ENTERED INTO, AND IN DIRECTING THE REFUND OF THE AMOUNT OF P950,000.00 WHEN
THE EVIDENCE CLEARLY SHOWS THAT SAID AMOUNT WAS PAID TO AND RECEIVED BY RESPONDENT
GONZALES ALONE WHO MISAPPROPRIATED THE SAME.

IV

THE COURT OF APPEALS ERRED IN AFFIRMING THE TRIAL COURT’S DECISION FOR PETITIONERS TO
RETURN THE AMOUNT OF P543,400.00 REPRESENTING RENTALS IN ARREARS GARNISHED OR
WITHDRAWN BY VIRTUE OF A WRIT OF EXECUTION ISSUED IN AN EJECTMENT CASE WHICH WAS TRIED
AND DECIDED BY ANOTHER COURT.

THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE LOWER COURT GRAVELY ERRED IN
AWARDING DAMAGES TO RESPONDENTS SPS. RABAJA, THERE BEING NO FACTUAL AND LEGAL BASES
FOR SUCH AWARD.

VI

THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE TRIAL COURT GRAVELY ERRED IN
AWARDING P100,000.00 TO RESPONDENT GONZALES AS ATTORNEY’S FEES WHEN RESPONDENT
GONZALES, IN FACT, COMMITTED FORGERY AND FALSIFICATION IN DEALING WITH THE PROPERTY OF
PETITIONERS AND MISAPPROPRIATED THE MONIES PAID TO HER BY RESPONDENTS SPS. RABAJA,
THUS GIVING PREMIUM TO HER FRAUDULENT ACTS.22
The foregoing can be synthesized into three main issues. First, Spouses Salvador contend that the order of default
must be lifted because reasonable grounds exist to justify their failure to attend the pre-trial conference on February
4, 2005. Second, Spouses Salvador raise in issue the veracity of the receipts given by Gonzales, the SPA and the
validity of the contract to sell. They claim that the improvised receipts should not be given credence because these
were crude and suspicious, measuring only by 2 x 2 inches which showed that Gonzales misappropriated the
payments of Spouses Rabaja for herself and did not remit the amount of P950,000.00 to them. As there was no
consideration, then no valid contract to sell existed. Third, Spouses Salvador argue that the ejectment case, from
which the amount of P593,400.00 was garnished, already became final and executory and could not anymore be
disturbed. Lastly, the award of damages in favor of Spouses Rabaja and Gonzales was improper absent any legal
and factual bases.

On January 21, 2013, Spouses Salvador filed their supplemental petition23 informing the Court that RTC-Br. 213 had
rendered a decision in Civil Case No. MC00-1082, an action for rescission of the SPA. The said decision held that
Spouses Salvador properly revoked the SPA in favor of Gonzales due to loss of trust and confidence. On September
11, 2013, Gonzales filed her comment to the supplemental petition, 24 contending that the RTC-Branch 213 decision
had no bearing because it had not yet attained finality. On even date, Spouses Rabaja filed their
Comment,25 asserting that the present petition is a mere rehash of the previous arguments of Spouses Salvador
before the CA. On November 15, 2013, Spouses Salvador replied that they merely wanted to show that the findings
by the RTC-Br. 213 should be given weight as a full-blown trial was conducted therein.26chanroblesvirtuallawlibrary

The Court’s Ruling

As a general rule, the Court’s jurisdiction in a Rule 45 petition is limited to the review of pure questions of law. A
question of law arises when the doubt or difference exists as to what the law is on a certain state of facts. Negatively
put, Rule 45 does not allow the review of questions of fact. A question of fact exists when the doubt or difference
arises as to the truth or falsity of the allegations.27chanroblesvirtuallawlibrary

The present petition presents questions of fact because it requires the Court to examine the veracity of the evidence
presented during the trial, such as the improvised receipts, the SPA given to Gonzales and the contract to sell. Even
the petitioner spouses themselves concede and ask the Court to consider questions of fact, 28 but the Court finds no
reason to disturb the findings of fact of the lower courts absent any compelling reason to the contrary.

The failure of Spouses Salvador to attend pre-trial conference warrants the presentation of evidence ex parte by
Spouses Rabaja

On the procedural aspect, the Court reiterates the rule that the failure to attend the pre-trial conference does not
result in the default of an absent party. Under the 1997 Rules of Civil Procedure, a defendant is only declared in

Page 26 of 68
default if he fails to file his Answer within the reglementary period. 29 On the other hand, if a defendant fails to attend
the pre-trial conference, the plaintiff can present his evidence ex parte. Sections 4 and 5, Rule 18 of the Rules of
Court provide:chanRoblesvirtualLawlibrary
Sec. 4. Appearance of parties.

It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-appearance of a party may be
excused only if a valid cause is shown therefor or if a representative shall appear in his behalf fully authorized in
writing to enter into an amicable settlement, to submit to alternative modes of dispute resolution, and to enter into
stipulations or admissions of facts and of documents.

Sec. 5. Effect of failure to appear.

The failure of the plaintiff to appear when so required pursuant to the next preceding section shall be cause for
dismissal of the action. The dismissal shall be with prejudice, unless otherwise ordered by the court. A similar failure
on the part of the defendant shall be cause to allow the plaintiff to present his evidence ex parte and the
court to render judgment on the basis thereof.

[Emphasis supplied]
The case of Philippine American Life & General Insurance Company v. Joseph Enario 30 discussed the difference
between the non-appearance of a defendant in a pre-trial conference and the declaration of a defendant in default in
the present Rules of Civil Procedure. The decision instructs:chanRoblesvirtualLawlibrary
Prior to the 1997 Revised Rules of Civil Procedure, the phrase "as in default" was initially included in Rule 20 of the
old rules, and which read as follows:chanRoblesvirtualLawlibrary
Sec. 2. A party who fails to appear at a pre-trial conference may be non-suited or considered as in default.cralawred
It was, however, amended in the 1997 Revised Rules of Civil Procedure. Justice Regalado, in his book, REMEDIAL
LAW COMPENDIUM, explained the rationale for the deletion of the phrase "as in default" in the amended provision,
to wit:chanRoblesvirtualLawlibrary
1. This is a substantial reproduction of Section 2 of the former Rule 20 with the change that, instead of defendant
being declared "as in default" by reason of his non-appearance, this section now spells out that the procedure will be
to allow the ex parte presentation of plaintiff’s evidence and the rendition of judgment on the basis thereof. While
actually the procedure remains the same, the purpose is one of semantical propriety or terminological accuracy as
there were criticisms on the use of the word "default" in the former provision since that term is identified with the
failure to file a required answer, not appearance in court.cralawred
Still, in the same book, Justice Regalado clarified that while the order of default no longer obtained, its effects were
retained, thus:chanRoblesvirtualLawlibrary
Failure to file a responsive pleading within the reglementary period, and not failure to appear at the hearing, is the
sole ground for an order of default, except the failure to appear at a pre-trial conference wherein the effects of a
default on the part of the defendant are followed, that is, the plaintiff shall be allowed to present evidence ex parte
and a judgment based thereon may be rendered against defendant.cralawred
From the foregoing, the failure of a party to appear at the pre-trial has indeed adverse consequences. If the absent
party is the plaintiff, then his case shall be dismissed. If it is the defendant who fails to appear, then the plaintiff is
allowed to present his evidence ex parte and the court shall render judgment based on the evidence presented. Thus,
the plaintiff is given the privilege to present his evidence without objection from the defendant, the likelihood being
that the court will decide in favor of the plaintiff, the defendant having forfeited the opportunity to rebut or present its
own evidence.31 The stringent application of the rules on pre-trial is necessitated from the significant role of the pre-
trial stage in the litigation process. Pre-trial is an answer to the clarion call for the speedy disposition of cases.
Although it was discretionary under the 1940 Rules of Court, it was made mandatory under the 1964 Rules and the
subsequent amendments in 1997.32 “The importance of pre-trial in civil actions cannot be
overemphasized.”33chanroblesvirtuallawlibrary

There is no dispute that Spouses Salvador and their counsel failed to attend the pre-trial conference set on February
4, 2005 despite proper notice. Spouses Salvador aver that their non-attendance was due to the fault of their counsel
as he forgot to update his calendar.34 This excuse smacks of carelessness, and indifference to the pre-trial stage. It
simply cannot be considered as a justifiable excuse by the Court. As a result of their inattentiveness, Spouses
Salvador could no longer present any evidence in their favor. Spouses Rabaja, as plaintiffs, were properly allowed by
the RTC to present evidence ex parte against Spouses Salvador as defendants. Considering that Gonzales as co-
defendant was able to attend the pre-trial conference, she was allowed to present her evidence. The RTC could only
render judgment based on the evidence presented during the trial.

Gonzales, as agent of Spouses Salvador, could validly receive the payments of Spouses Rabaja

Even on the substantial aspect, the petition does not warrant consideration. The Court agrees with the courts below

Page 27 of 68
in finding that the contract entered into by the parties was essentially a contract of sale which could be validly
rescinded. Spouses Salvador insist that they did not receive the payments made by Spouses Rabaja from Gonzales
which totalled P950,000.00 and that Gonzales was not their duly authorized agent. These contentions, however, must
fail in light of the applicable provisions of the New Civil Code which state:chanRoblesvirtualLawlibrary
Art. 1900. So far as third persons are concerned, an act is deemed to have been performed within the scope of the
agent's authority, if such act is within the terms of the power of attorney, as written, even if the agent has in fact
exceeded the limits of his authority according to an understanding between the principal and the agent.

xxxx

Art. 1902. A third person with whom the agent wishes to contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as regards the agency. Private or secret orders and
instructions of the principal do not prejudice third persons who have relied upon the power of attorney or instructions
shown them.

xxxx

Art. 1910. The principal must comply with all the obligations which the agent may have contracted within the scope of
his authority.cralawred
Persons dealing with an agent must ascertain not only the fact of agency, but also the nature and extent of the
agent’s authority. A third person with whom the agent wishes to contract on behalf of the principal may require the
presentation of the power of attorney, or the instructions as regards the agency. The basis for agency is
representation and a person dealing with an agent is put upon inquiry and must discover on his own peril the
authority of the agent.35chanroblesvirtuallawlibrary

According to Article 1990 of the New Civil Code, insofar as third persons are concerned, an act is deemed to have
been performed within the scope of the agent's authority, if such act is within the terms of the power of attorney, as
written. In this case, Spouses Rabaja did not recklessly enter into a contract to sell with Gonzales. They required her
presentation of the power of attorney before they transacted with her principal. And when Gonzales presented the
SPA to Spouses Rabaja, the latter had no reason not to rely on it.

The law mandates an agent to act within the scope of his authority which what appears in the written terms of the
power of attorney granted upon him.36 The Court holds that, indeed, Gonzales acted within the scope of her authority.
The SPA precisely stated that she could administer the property, negotiate the sale and collect any document and all
payments related to the subject property.37 As the agent acted within the scope of his authority, the principal must
comply with all the obligations.38 As correctly held by the CA, considering that it was not shown that Gonzales
exceeded her authority or that she expressly bound herself to be liable, then she could not be considered personally
and solidarily liable with the principal, Spouses Salvador. 39chanroblesvirtuallawlibrary

Perhaps the most significant point which defeats the petition would be the fact that it was Herminia herself who
personally introduced Gonzalez to Spouses Rabaja as the administrator of the subject property. By their own
ostensible acts, Spouses Salvador made third persons believe that Gonzales was duly authorized to administer,
negotiate and sell the subject property. This fact was even affirmed by Spouses Salvador themselves in their petition
where they stated that they had authorized Gonzales to look for a buyer of their property. 40 It is already too late in the
day for Spouses Salvador to retract the representation to unjustifiably escape their principal obligation.

As correctly held by the CA and the RTC, considering that there was a valid SPA, then Spouses Rabaja properly
made payments to Gonzales, as agent of Spouses Salvador; and it was as if they paid to Spouses Salvador. It is of
no moment, insofar as Spouses Rabaja are concerned, whether or not the payments were actually remitted to
Spouses Salvador. Any internal matter, arrangement, grievance or strife between the principal and the agent is theirs
alone and should not affect third persons. If Spouses Salvador did not receive the payments or they wish to
specifically revoke the SPA, then their recourse is to institute a separate action against Gonzales. Such action,
however, is not any more covered by the present proceeding.

The amount of P593,400.00 should not be returned by Spouses Salvador

Nevertheless, the assailed decision of the CA must be modified with respect to the amount of P593,400.00 garnished
by Spouses Salvador and ordered returned to Spouses Rabaja. The RTC ordered the return of the amount garnished
holding that it constituted a part of the purchase price. The CA ruled that Spouses Salvador misled the Court when
they improperly cited CA-G.R. SP No. 89260 to prove their entitlement to the said amount. Both courts erred in their
ruling.

Page 28 of 68
First, the garnishment of the amount of P593,400.00 against Spouses Rabaja was pursuant to the CA decision in CA-
G.R. SP No. 89259, an entirely different case involving an action for ejectment, and it does not concern the rescission
case which is on appeal before this Court. Moreover, the decision on the ejectment case is final and executory and
an entry of judgment has already been made.41 Nothing is more settled in law than that when a final judgment is
executory, it thereby becomes immutable and unalterable. The judgment may no longer be modified in any respect,
even if the modification is meant to correct what is perceived to be an erroneous conclusion of fact or law, and
regardless of whether the modification is attempted to be made by the court which rendered it or by the highest Court
of the land. The doctrine is founded on consideration of public policy and sound practice that, at the risk of occasional
errors, judgments must become final at some definite point in time. 42chanroblesvirtuallawlibrary

The March 31, 2006 CA decision43in CA-G.R. SP No. 89259 has long been final and executory and cannot any more
be disturbed by the Court. Public policy dictates that once a judgment becomes final, executory and unappealable,
the prevailing party should not be denied the fruits of his victory by some subterfuge devised by the losing party.
Unjustified delay in the enforcement of a judgment sets at naught the role and purpose of the courts to resolve
justiciable controversies with finality.44chanroblesvirtuallawlibrary

Meanwhile, in ruling that the garnishment was improper and thus ordering the return of the garnished amount, the CA
referred to its decision in CA-G.R. SP No. 89260. Spouses Salvador, however, clarified in its motion for
reconsideration45 before the CA and in the present petition46 that the garnishment was pursuant to CA-G.R. SP No.
89259, and not CA-G.R. SP No. 89260, another ejectment case involving another property. A perusal of the records
reveals that indeed the garnishment was pursuant to the ejectment case in the MeTC, docketed as Civil Case No.
17344,47 where Spouses Rabaja were the defendants. The MeTC decision was then reinstated by the CA in CA-G.R.
SP No. 89259, not CA-G.R. SP No. 89260. There, a writ of execution48 and notice of pay49 were issued against
Spouses Rabaja in the amount of P591,900.00.

Second, Spouses Rabaja’s appeal with the RTC never sought relief in returning the garnished amount.50Such issue
simply emerged in the RTC decision. This is highly improper because the court’s grant of relief is limited only to what
has been prayed for in the complaint or related thereto, supported by evidence, and covered by the party’s cause of
action.51chanroblesvirtuallawlibrary

If Spouses Rabaja would have any objection on the manner and propriety of the execution, then they must institute
their opposition to the execution proceeding a separate case. Spouses Rabaja can invoke the Civil Code provisions
on legal compensation or set-off under Articles 1278, 1279 and 1270.52 The two obligations appear to have
respectively offset each other, compensation having taken effect by operation of law pursuant to the said provisions
of the Civil Code, since all the requisites provided in Art. 1279 of the said Code for automatic compensation are duly
present.

No award of actual, moral and exemplary damages

The award of damages to Spouses Rabaja cannot be sustained by this Court. The filing alone of a civil action should
not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among
the grounds for moral damages.53 Article 2220 of the New Civil Code provides that to award moral damages in a
breach of contract, the defendant must act fraudulently or in bad faith. In this case, Spouses Rabaja failed to
sufficiently show that Spouses Salvador acted in a fraudulent manner or with bad faith when it breached the contract
of sale. Thus, the award of moral damages cannot be warranted.

As to the award of exemplary damages, Article 2229 of the New Civil Code provides that exemplary damages may be
imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages.54 The claimant must first establish his right to moral, temperate, liquidated or compensatory
damages. In this case, considering that Spouses Rabaja failed to prove moral or compensatory damages, then there
could be no award of exemplary damages.

With regard to attorney’s fees, neither Spouses Rabaja nor Gonzales is entitled to the award. The settled rule is that
no premium should be placed on the right to litigate and that not every winning party is entitled to an automatic grant
of attorney’s fees.55 The RTC reasoned that Gonzales was forced to litigate due to the acts of Spouses Salvador. The
Court does not agree. Gonzales, as agent of Spouses Salvador, should have expected that she would be called to
litigation in connection with her fiduciary duties to the principal.

In view of all the foregoing, the CA decision should be affirmed with the following
modifications:chanRoblesvirtualLawlibrary

Page 29 of 68
 1. The order requiring defendant Spouses Rolando and Herminia Salvador to pay plaintiffs the amount of Five
Hundred Ninety Three Thousand (P593,000.00) Pesos, representing the amount garnished from the
Metrobank deposit of plaintiffs as for their back rentals should be deleted;chanrobleslaw

2. The award of moral damages in the amount of Twenty Thousand (P20,000.00) Pesos; exemplary damages
in the amount of Twenty Thousand (P20,000.00) Pesos, and attorney’s fees in the amount of One Hundred
Thousand (P100,000.00) Pesos in favor of Spouses Rabaja should be deleted; and

3. The award of attorney’s fees in amount of One Hundred Thousand (P100,000.00) Pesos in favor of
Gonzales should be deleted.

The other amounts awarded are subject to interest at the legal rate of 6% per annum, to be reckoned from the date of
finality of this judgment until fully paid.

WHEREFORE, the petition is PARTLY GRANTED. The March 29, 2007 Decision of the Regional Trial Court, Branch
214, Mandaluyong City, in Civil Case No. MC-03-2175, is MODIFIED to read as follows:chanRoblesvirtualLawlibrary
“WHEREFORE, this Court renders judgment as follows:chanRoblesvirtualLawlibrary

a. Ordering the “Contract to Sell” entered into by Spouses Rogelio and Elizabeth Rabaja and Spouses Rolando
and Herminia Salvador on July 24, 1998 as RESCINDED;chanrobleslaw

b. Ordering Spouses Rolando and Herminia Salvador to pay Spouses Rogelio and Elizabeth
Rabaja:chanRoblesvirtualLawlibrary

1. The amount of Nine Hundred Fifty Thousand (P950,000.00) Pesos, representing the payments
made by the latter for the purchase of the subject property; and
2. The cost of suit;chanrobleslaw

c. Dismissing the counterclaims of Spouses Rolando and Herminia Salvador and Rosario Gonzales against
Spouses Rogelio and Elizabeth Rabaja

The amounts awarded are subject to interest at the legal rate of 6% per annum to be reckoned from the date of
finality of this judgment until fully paid.”
As aforestated, this is without prejudice to the invocation by either party of the Civil Code provisions on legal
compensation or set-off under Articles 1278, 1279 and 1270.

SO ORDERED.

Page 30 of 68
BANCO DE ORO-EPCI, INC. (formerly G.R. No. 181235
Equitable PCI Bank),
Petitioner, Present:

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

Promulgated:
JOHN TANSIPEK,
Respondent. July 22, 2009
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari assailing the Decision[1] of the Court of Appeals in CA-G.R.
CV No. 69130 dated 18 August 2006 and the Resolution of the same court dated 9 January 2008.

The facts of the case are as follows:

J. O. Construction, Inc. (JOCI), a domestic corporation engaged in the construction business in Cebu City,
filed a complaint against Philippine Commercial and Industrial Bank (PCIB) in the Regional Trial Court (RTC)
of Makati City docketed as Civil Case No. 97-508. The Complaint alleges that JOCI entered into a contract with Duty
Free Philippines, Inc. for the construction of a Duty Free Shop in Mandaue City. As actual construction went on,
progress billings were made. Payments were received by JOCI directly or through herein respondent John Tansipek,
its authorized collector. Payments received by respondent Tansipek were initially remitted to JOCI. However,
payment through PNB Check No. 0000302572 in the amount of P4,050,136.51 was not turned over to JOCI. Instead,
respondent Tansipek endorsed said check and deposited the same to his account in PCIB, Wilson Branch, Wilson
Street, Greenhills, San Juan, Metro Manila. PCIB allowed the said deposit, despite the fact that the check was
crossed for the deposit to payees account only, and despite the alleged lack of authority of respondent Tansipek to
endorse said check. PCIB refused to pay JOCI the full amount of the check despite demands made by the
latter. JOCI prayed for the payment of the amount of the check (P4,050,136.51), P500,000.00 in attorneys
fees, P100,000.00 in expenses, P50,000.00 for costs of suit, and P500,000.00 in exemplary damages.

PCIB filed a Motion to Dismiss the Complaint on the grounds that (1) an indispensable party was not
impleaded, and (2) therein plaintiff JOCI had no cause of action against PCIB. The RTC denied PCIBs Motion to
Dismiss.

PCIB filed its answer alleging as defenses that (1) JOCI had clothed Tansipek with authority to act as its
agent, and was therefore estopped from denying the same; (2) JOCI had no cause of action against PCIB ; (3) failure
to implead Tansipek rendered the proceedings taken after the filing of the complaint void; (4) PCIBs act of accepting
the deposit was fully justified by established bank practices; (5) JOCIs claim was barred by laches; and (6) the
damages alleged by JOCI were hypothetical and speculative. PCIB incorporated in said Answer its counterclaims for
exemplary damages in the amount of P400,000.00, and litigation expenses and attorneys fees in the amount
of P400,000.00.

Page 31 of 68
 PCIB likewise moved for leave for the court to admit the formers third-party complaint against respondent
Tansipek. The third-party complaint alleged that respondent Tansipek was a depositor at its Wilson Branch, San
Juan, Metro Manila, where he maintained Account No. 5703-03538-3 in his name and/or that of his wife,
Anita. Respondent Tansipek had presented to PCIB a signed copy of the Minutes of the meeting of the Board of
Directors of JOCI stating the resolution that

Checks payable to J.O. Construction, Inc. may be deposited to Account No. 5703-03538-3 under
the name of John and/or Anita Tansipek, maintained at PCIB, Wilson Branch. [2]

Respondent Tansipek had also presented a copy of the Articles of Incorporation of JOCI showing that he and his
wife, Anita, were incorporators of JOCI, with Anita as Treasurer.In the third-party complaint, PCIB prayed for
subrogation and payment of attorneys fees in the sum of P400,000.00.

PCIB filed a Motion to Admit Amended Third-Party Complaint. The amendment consisted in the correction of
the caption, so that PCIB appeared as Third-Party Plaintiff and Tansipek as Third-Party Defendant.

Upon Motion, respondent Tansipek was granted time to file his Answer to the Third-Party Complaint. He
was, however, declared in default for failure to do so. The Motion to Reconsider the Default Order was denied.

Respondent Tansipek filed a Petition for Certiorari with the Court of Appeals assailing the Default Order and
the denial of the Motion for Reconsideration. The Petition was docketed as CA-G.R. SP No. 47727. On 29 May 1998,
the Court of Appeals dismissed the Petition for failure to attach the assailed Orders. On 28 September 1998, the
Court of Appeals denied respondent Tansipeks Motion for Reconsideration for having been filed out of time.

Pre-trial on the main case ensued, wherein JOCI and PCIB limited the issues as follows:

1. Whether or not the defendant bank erred in allowing the deposit of Check No. 0302572
(Exh. A) in the amount of P4,050,136.51 drawn in favor of plaintiff JO Construction, Inc. in John
Tansipeks account when such check was crossed and clearly marked for payees account only.

2. Whether the alleged board resolution and the articles of Incorporation are genuine and a
valid defense against plaintiffs effort to collect the amount of P4,050,136.51.

On 14 July 2000, the RTC promulgated its Decision in Civil Case No. 97-508, the dispositive portion of
which reads:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff [JOCI] and against the
defendant bank [PCIB] ordering the latter to pay to the plaintiff the sum of P4,050,136.51 with
interest at the rate of twelve percent (12%) per annum from the filing of this complaint until fully
paid plus costs of suit. The other damages claimed by the plaintiff are denied for being speculative.

On the third party complaint, third-party defendant John Tansipek is ordered to pay the
third-party plaintiff Philippine Commercial and Industrial Bank all amounts said defendant/third-
party plaintiff shall have to pay to the plaintiff on account of this case.[3]

Respondent Tansipek appealed the Decision to the Court of Appeals. The case was docketed as CA-G.R.
CV No. 69130. Respondent Tansipek assigned the following alleged errors:

Page 32 of 68
 a) The trial courts decision upholding the order of default and the consequent ex-parte
reception of appellees evidence was anchored on erroneous and baseless conclusion that:

1) The original reglementary period to plead has already expired.

2) The ten day extended period to answer has likewise expired.

3) There is no need to pass upon a second motion to plead much less, any
need for a new motion for extended period to plead.

b) The trial court erred in utterly depriving the appellant of his day in court and in depriving
constitutional, substantive and procedural due process premised solely on pure and simple
technicality which never existed and are imaginary and illusory.

c) The trial court erred in ordering the third-party defendant-appellant John Tansipek to
pay the third party plaintiff-appellee PCIBank all amounts said bank shall have to pay to the
plaintiff-appellee by way of subrogation since appellant if allowed to litigate in the trial court, would
have obtained a favorable judgment as he has good, valid and meritorious defenses. [4]

On 18 August 2006, the Court of Appeals issued the assailed Decision finding that it was an error for the trial
court to have acted on PCIBs motion to declare respondent Tansipek in default. The Court of Appeals thus remanded
the case to the RTC for further proceedings, to wit:

WHEREFORE, premises considered, the appeal is GRANTED. The decision relative to

the third party complaint is REVERSED and SET ASIDE. The case is ordered REMANDED to the
trial court for further proceedings on the third party complaint. [5]

The Court of Appeals denied the Motion for Reconsideration of PCIB in a Resolution dated 9 January 2008.

Petitioner Banco de Oro-EPCI, Inc., as successor-in-interest to PCIB, filed the instant Petition for Review
on Certiorari, assailing the above Decision and Resolution of the Court of Appeals, and laying down a lone issue for
this Courts consideration:

WHETHER OR NOT THE COURT OF APPEALS CAN REVERSE ITS DECISION HANDED
DOWN EIGHT YEARS BEFORE.[6]

To recapitulate, upon being declared in default, respondent Tansipek filed a Motion for Reconsideration of
the Default Order. Upon denial thereof, Tansipek filed a Petition for Certiorari with the Court of Appeals, which was
dismissed for failure to attach the assailed Orders. Respondent Tansipeks Motion for Reconsideration with the Court
of Appeals was denied for having been filed out of time. Respondent Tansipek did not appeal said denial to this
Court.

Respondent Tansipeks remedy against the Order of Default was erroneous from the very
beginning. Respondent Tansipek should have filed a Motion to Lift Order of Default, and not a Motion for
Reconsideration, pursuant to Section 3(b), Rule 9 of the Rules of Court:

(b) Relief from order of default.A party declared in default may at any time after notice
thereof and before judgment file a motion under oath to set aside the order of default upon proper
showing that his failure to answer was due to fraud, accident, mistake or excusable negligence and
that he has a meritorious defense. In such case, the order of default may be set aside on such
terms and conditions as the judge may impose in the interest of justice.

Page 33 of 68
 A Motion to Lift Order of Default is different from an ordinary motion in that the Motion should be verified;
and must show fraud, accident, mistake or excusable neglect, and meritorious defenses. [7] The allegations of (1)
fraud, accident, mistake or excusable neglect, and (2) of meritorious defenses must concur.[8]

Assuming for the sake of argument, however, that respondent Tansipeks Motion for Reconsideration may be
treated as a Motion to Lift Order of Default, his Petition for Certiorari on the denial thereof has already been
dismissed with finality by the Court of Appeals. Respondent Tansipek did not appeal said ruling of the Court of
Appeals to this Court. The dismissal of the Petition for Certiorari assailing the denial of respondent Tansipeks Motion
constitutes a bar to the retrial of the same issue of default under the doctrine of the law of the case.

In People v. Pinuila,[9] we held that:

Law of the case has been defined as the opinion delivered on a former appeal. More
specifically, it means that whatever is once irrevocably established as the controlling legal rule of
decision between the same parties in the same case continues to be the law of the case, whether
correct on general principles or not, so long as the facts on which such decision was predicated
continue to be the facts of the case before the court.

It may be stated as a rule of general application that, where the evidence on a second
or succeeding appeal is substantially the same as that on the first or preceding appeal, all
matters, questions, points, or issues adjudicated on the prior appeal are the law of the case
on all subsequent appeals and will not be considered or readjudicated therein.

xxxx

As a general rule a decision on a prior appeal of the same case is held to be the law of the
case whether that decision is right or wrong, the remedy of the party deeming himself aggrieved
being to seek a rehearing.

Questions necessarily involved in the decision on a former appeal will be regarded as the
law of the case on a subsequent appeal, although the questions are not expressly treated in the
opinion of the court, as the presumption is that all the facts in the case bearing on the point decided
have received due consideration whether all or none of them are mentioned in the
opinion.(Emphasis supplied.)

The issue of the propriety of the Order of Default had already been adjudicated in Tansipeks Petition
for Certiorari with the Court of Appeals. As such, this issue cannot be readjudicated in Tansipeks appeal of the
Decision of the RTC on the main case. Once a decision attains finality, it becomes the law of the case, whether or not
said decision is erroneous.[10] Having been rendered by a court of competent jurisdiction acting within its authority, the
judgment may no longer be altered even at the risk of legal infirmities and errors it may contain. [11]

Respondent Tansipek counters that the doctrine of the law of the case is not applicable, inasmuch as a
Petition for Certiorari is not an appeal. Respondent Tansipek further argues that the Doctrine of the Law of the Case
applies only when the appellate court renders a decision on the merits, and not when such appeal was denied due to
technicalities.

We are not persuaded.

In Buenviaje v. Court of Appeals,[12] therein respondent Cottonway Marketing Corporation filed a Petition
for Certiorari with this Court assailing the Decision of the National Labor Relations Commission (NLRC)
ordering, inter alia, the reinstatement of therein petitioners and the payment of backwages from the time their salaries
were withheld up to the time of actual reinstatement. The Petition for Certiorari was dismissed by this Court. The

Page 34 of 68
subsequent Motion for Reconsideration was likewise denied.However, the Labor Arbiter then issued an Order limiting
the amount of backwages that was due to petitioners. The NLRC reversed this Order, but the Court of Appeals
reinstated the same. This Court, applying the Doctrine of the Law of the Case, held:

The decision of the NLRC dated March 26, 1996 has become final and executory upon the
dismissal by this Court of Cottonways petition for certiorari assailing said decision and the
denial of its motion for reconsideration. Said judgment may no longer be disturbed or modified
by any court or tribunal. It is a fundamental rule that when a judgment becomes final and
executory, it becomes immutable and unalterable, and any amendment or alteration which
substantially affects a final and executory judgment is void, including the entire proceedings held
for that purpose. Once a judgment becomes final and executory, the prevailing party can have it
executed as a matter of right, and the issuance of a writ of execution becomes a ministerial duty of
the court. A decision that has attained finality becomes the law of the case regardless of any
claim that it is erroneous. The writ of execution must therefore conform to the judgment to be
executed and adhere strictly to the very essential particulars.[13] (Emphases supplied.)

Furthermore, there is no substantial distinction between an appeal and a Petition for Certiorari when it
comes to the application of the Doctrine of the Law of the Case. The doctrine is founded on the policy of ending
litigation. The doctrine is necessary to enable the appellate court to perform its duties satisfactorily and efficiently,
which would be impossible if a question once considered and decided by it were to be litigated anew in the same
case upon any and every subsequent appeal.[14]

Likewise, to say that the Doctrine of the Law the Case applies only when the appellate court renders a
decision on the merits would be putting a premium on the fault or negligence of the party losing the previous
appeal. In the case at bar, respondent Tansipek would be awarded (1) for his failure to attach the necessary
requirements to his Petition for Certiorari with the Court of Appeals; (2) for his failure to file a Motion for
Reconsideration in time; and (3) for his failure to appeal the Decision of the Court of Appeals with this Court. The
absurdity of such a situation is clearly apparent.

It is important to note that a party declared in default respondent Tansipek in this case is not barred from
appealing from the judgment on the main case, whether or not he had previously filed a Motion to Set Aside Order of
Default, and regardless of the result of the latter and the appeals therefrom. However, the appeal should be based on
the Decisions being contrary to law or the evidence already presented, and not on the alleged invalidity of the default
order.[15]

WHEREFORE, the Decision of the Court of Appeals in CA-G.R. CV No. 69130 dated 18 August 2006 and
the Resolution of the same court dated 9 January 2008 are hereby REVERSED and SET ASIDE. The Decision of
the Regional Trial Court of Makati City in Civil Case No. 97-508 dated 14 July 2000 is hereby REINSTATED. No
pronouncement as to costs.
SO ORDERED.

Page 35 of 68
LISAM ENTERPRISES, INC. represented by G.R. No. 143264
LOLITA A. SORIANO, and LOLITA A. SORIANO,

Petitioners,

Present:

- versus -

VELASCO, JR., J., Chairperson,

PERALTA,
BANCO DE ORO UNIBANK, INC. (formerly
PHILIPPINE COMMERCIAL INTERNATIONAL ABAD,
BANK),* LILIAN S. SORIANO, ESTATE OF
LEANDRO A. SORIANO, JR., REGISTER OF MENDOZA, and
DEEDS OF LEGASPI CITY, and JESUS L.
PERLAS-BERNABE, JJ.
SARTE,

Respondents.

Promulgated:

April 23, 2012

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

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the
Resolution[1] of the Regional Trial Court of Legaspi City (RTC), dated November 11, 1999, dismissing petitioners
complaint, and its Order[2] dated May 15, 2000, denying herein petitioners Motion for Reconsideration and Motion to
Admit Amended Complaint, be reversed and set aside.

The records reveal the following antecedent facts.

Page 36 of 68
On August 13, 1999, petitioners filed a Complaint against respondents for Annulment of Mortgage with Prayer for
Temporary Restraining Order & Preliminary Injunction with Damages with the RTC of Legaspi City. Petitioner Lolita
A. Soriano alleged that she is a stockholder of petitioner Lisam Enterprises, Inc. (LEI) and a member of its Board of
Directors, designated as its Corporate Secretary. The Complaint also alleged the following:

4. Sometime in 1993, plaintiff LEI, in the course of its business operation, acquired by
purchase a parcel of residential land with improvement situated at Legaspi City, covered by
Transfer Certificate of Title No. 37866, copy attached as Annex A, which property is more
particularly described as follows:

xxxx

5. On or about 28 March 1996, defendant Lilian S. Soriano and the late Leandro A.
Soriano, Jr., as husband and wife (hereafter Spouses Soriano), in their personal capacity and for
their own use and benefit, obtained a loan from defendant PCIB (Legaspi Branch) (now known as
Banco de Oro Unibank, Inc.) in the total amount of P20 Million;

6. That as security for the payment of the aforesaid credit accommodation, the late
Leandro A. Soriano, Jr. and defendant Lilian S. Soriano, as president and treasurer, respectively of
plaintiff LEI, but without authority and consent of the board of said plaintiff and with the use of a
falsified board resolution, executed a real estate mortgage on 28 March 1996, over the above-
described property of plaintiff LEI in favor of defendant PCIB, and had the same registered with the
Office of the Registry of Deeds, Legaspi City, copy of the Real Estate Mortgage is hereto attached
and marked as Annex B, and made part hereof, to the prejudice of plaintiffs;

7. That specifically, the Spouses Soriano, with intent to defraud and prejudice plaintiff
LEI and its stockholders, falsified the signatures of plaintiff Lolita A. Soriano as corporate secretary
and director of plaintiff LEI, in a document denominated as board resolution purportedly issued by
the board of plaintiff LEI on 6 November 1995, making it appear that plaintiff LEI's Board met and
passed a board resolution on said date authorizing the Spouses Soriano to mortgage or encumber
all or substantially all of the properties of plaintiff LEI, when in fact and in truth, no resolution of that
nature was ever issued by the board of plaintiff LEI, nor a meeting was called to that effect, copy of
the resolution in question is hereto attached and marked as Annex C, and made part hereof;

8. That plaintiff Lolita A. Soriano as Corporate Secretary of plaintiff LEI, had never
signed a board resolution nor issued a Secretary's Certificate to the effect that on 6 November
1995 a resolution was passed and approved by plaintiff LEI authorizing the Spouses Soriano as
president and treasurer, respectively, to mortgage the above-described property of plaintiff LEI,
neither did she appear personally before a notary public on 28 March 1996 to acknowledge or
attest to the issuance of a supposed board resolution issued by plaintiff LEI on 6 November 1995;

Page 37 of 68
9. That defendant PCIB, knowing fully well that the property being mortgaged by the
Spouses Soriano belongs to plaintiff LEI, a corporation, negligently and miserably failed to exercise
due care and prudence required of a banking institution. Specifically, defendant PCIB failed to
investigate and to delve into the propriety of the issuance of or due execution of subject board
resolution, which is the very foundation of the validity of subject real estate mortgage. Further, it
failed to verify the genuineness of the signatures appearing in said board resolution nor to confirm
the fact of its issuance with plaintiff Lolita A. Soriano, as the corporate secretary of plaintiff
LEI. Furthermore, the height of its negligence was displayed when it disregarded or failed to notice
that the questioned board resolution with a Secretary's Certificate was notarized only on 28 March
1996 or after the lapse of more than four (4) months from its purported date of issue on 6
November 1995. That these circumstances should have put defendant PCIB on notice of the flaws
and infirmities of the questioned board resolution. Unfortunately, it negligently failed to exercise due
care and prudence expected of a banking institution;

10. That having been executed without authority of the board of plaintiff LEI said real estate
mortgage dated 28 March 1996 executed by the Spouses Soriano, as officers of plaintiff LEI in
favor of defendant PCIB, is the null and void and has no legal effect upon said
plaintiff. Consequently, said mortgage deed cannot be used nor resorted to by defendant PCIB
against subject property of plaintiff LEI as no right or rights whatsoever were created nor granted
thereunder by reason of its nullity;

11. Worst, sometime in August 1998, in order to remedy the defects in the mortgage
transaction entered by the Spouses Soriano and defendant PCIB, the former, with the unlawful
instigation of the latter, signed a document denominated as Deed of Assumption of Loans and
Mortgage Obligations and Amendment of Mortgage; wherein in said document, plaintiff LEI was
made to assume the P20 Million personal indebtedness of the Spouses Soriano with defendant
PCIB, when in fact and in truth it never so assumed the same as no board resolution duly certified
to by plaintiff Lolita A. Soriano as corporate secretary was ever issued to that effect, copy of said
Deed is hereto attached and marked as Annex D, and made part hereof;

12. Moreover, to make it appear that plaintiff LEI had consented to the execution of said
deed of assumption of mortgage, the Spouses Soriano again, through the unlawful instigation and
connivance of defendant PCIB, falsified the signature of plaintiff Lolita A. Soriano as corporate
secretary of plaintiff LEI in a document denominated as Corporate Resolution to Borrow, to make it
appear that plaintiff LEI so authorized the Spouses Soriano to perform said acts for the corporation,
when in fact and in truth no such authority or resolution was ever issued nor granted by plaintiff LEI,
nor a meeting called and held for said purpose in accordance with its By-laws; copy of which is
hereto attached and marked as Annex E and made part hereof;

13. That said irregular transactions of defendant Lilian S. Soriano and her husband
Leandro A. Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by
plaintiff Lolita A. Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for
herself and on behalf and for the benefit of plaintiff LEI, made demands upon defendants Lilian S.
Soriano and the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff LEI from such
mortgage lien, by paying in full their personal indebtedness to defendant PCIB in the principal sum

Page 38 of 68
 of P20 Million. However, said defendants, for reason only known to them, continued and still
continue to ignore said demands, to the damage and prejudice of plaintiffs;

14. Hence, on 25 June 1999, plaintiffs commenced a derivative suit against defendants
Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr., before the Securities and Exchange
Commission, docketed as SEC Case No. 06-99-6339 for Fraudulent Scheme and Unlawful
Machination with Damages in order to protect and preserve the rights of plaintiffs, copy of said
complaint is hereto attached as AnnexF;

15. That plaintiffs, in order to seek complete relief from the unauthorized mortgage
transaction between the Spouses Soriano and defendant PCIB, were further compelled to institute
this instant case to seek the nullification of the real estate mortgage dated 28 March
1999. Consequently, plaintiffs were forced to retain the services of a lawyer with whom they
contracted to pay P100,000.00 as and for attorney's fee;

16. That unfortunately, the plaintiffs learned that on 30 July 1999, defendant Sarte, in his
capacity as Notary Public of Daraga, Albay and upon application of defendant PCIB, issued a
notice of Auction/Foreclosure Sale of the property subject of the mortgage in question and has set
the auction sale on 7 September 1999 x x x;

17. That by reason of the fraudulent and surreptitious schemes perpetrated by defendant
Lilian S. Soriano and her husband, the late Leandro A. Soriano, Jr., in unlawful connivance and
through the gross negligence of defendant PCIB, plaintiff Lolita A. Soriano, as stockholder, suffered
sleepless nights, moral shock, wounded feeling, hurt pride and similar injuries, hence, should be
awarded moral damages in the amount of P200,000.00.

After service of summons on all defendants, the RTC issued a temporary restraining order on August 25, 1990 and,
after hearing, went on to issue a writ of preliminary injunction enjoining respondent PCIB (now known as Banco de
Oro Unibank, Inc.) from proceeding with the auction sale of the subject property.

Respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr. filed an Answer dated September
25, 1999, stating that the Spouses Lilian and Leandro Soriano, Jr. were duly authorized by LEI to mortgage the
subject property; that proceeds of the loan from respondent PCIB were for the use and benefit of LEI; that all
notarized documents submitted to PCIB by the Spouses Soriano bore the genuine signature of Lolita Soriano; and
that although the Spouses Soriano indeed received demands from petitioner Lolita Soriano for them to pay the loan,
they gave satisfactory explanations to the latter why her demands could not be honored. It was, likewise, alleged in
said Answer that it was respondent Lilian Soriano who should be entitled to moral damages and attorney's fees.

Page 39 of 68
On September 28, 1999, respondent PCIB filed a Motion to Dismiss the Complaint on grounds of lack of legal
capacity to sue, failure to state cause of action, and litis pendencia.Petitioners filed an Opposition thereto, while
PCIB's co-defendants filed a Motion to Suspend Action.

On November 11, 1999, the RTC issued the first assailed Resolution dismissing petitioners' Complaint. Petitioners
then filed a Motion for Reconsideration of said Resolution.While awaiting resolution of the motion for reconsideration,
petitioners also filed, on January 4, 2000, a Motion to Admit Amended Complaint, amending paragraph 13 of the
original complaint to read as follows:

13. That said irregular transactions of defendant Lilian S. Soriano and her husband Leandro
A. Soriano, Jr., on one hand, and defendant PCIB, on the other, were discovered by plaintiff Lolita
A. Soriano sometime in April 1999. That immediately upon discovery, said plaintiff, for herself and
on behalf and for the benefit of plaintiff LEI, made demands upon defendant Lilian S. Soriano and
the Estate of Leandro A. Soriano, Jr., to free subject property of plaintiff LEI from such mortgage
lien, by paying in full their personal indebtedness to defendant PCIB in the principal sum of P20
Million. However, said defendants, for reason only known to them, continued and still continue to
ignore said demands, to the damage and prejudice of plaintiffs; that plaintiff Lolita A. Soriano
likewise made demands upon the Board of Directors of Lisam Enterprises, Inc., to make legal steps
to protect the interest of the corporation from said fraudulent transaction, but unfortunately, until
now, no such legal step was ever taken by the Board, hence, this action for the benefit and in
behalf of the corporation;

On May 15, 2000, the trial court issued the questioned Order denying both the Motion for Reconsideration and the
Motion to Admit Amended Complaint. The trial court held that no new argument had been raised by petitioners in
their motion for reconsideration to address the fact of plaintiffs' failure to allege in the complaint that petitioner Lolita
A. Soriano made demands upon the Board of Directors of Lisam Enterprises, Inc. to take steps to protect the interest
of the corporation against the fraudulent acts of the Spouses Soriano and PCIB. The trial court further ruled that the
Amended Complaint can no longer be admitted, because the same absolutely changed petitioners' cause of action.

Petitioners filed the present petition with this Court, alleging that what are involved are pure questions of law, to wit:

FIRST, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT

DISMISSED THE ACTION ON THE GROUND THAT PETITIONER LOLITA A. SORIANO HAS NO
LEGAL CAPACITY TO SUE AS SHE IS NOT A REAL PARTY-IN-INTEREST;

Page 40 of 68
 SECOND, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT
DISMISSED THE ACTION ON THE GROUND THAT THERE IS ANOTHER ACTION PENDING
BETWEEN THE SAME PARTIES FOR THE SAME CAUSE;

THIRD, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT

DISMISSED THE ACTION ON THE GROUND THAT THE COMPLAINT STATES NO CAUSE OF
ACTION;

FOURTH, WHETHER OR NOT THE COURT COMMITTED A REVERSIBLE ERROR WHEN IT

DENIED THE ADMISSION OF PETITIONERS' AMENDED COMPLAINT FILED AS A MATTER OF
RIGHT, AFTER THE ORDER OF DISMISSAL WAS ISSUED BUT BEFORE ITS FINALITY.

FIFTH, WHETHER OR NOT THE COURT ERRED IN DISMISSING THE ACTION, INSTEAD OF
MERELY SUSPENDING THE SAME FOLLOWING THE DOCTRINE LAID DOWN IN UNION
GLASS. [3]

The petition is impressed with merit.

The Court shall first delve into the matter of the propriety of the denial of the motion to admit amended
complaint. Pertinent provisions of Rule 10 of the Rules of Court provide as follows:

Sec. 2. Amendments as a matter of right. − A party may amend his pleadings once as a matter of
right at any time before a responsive pleading is served x x x.

Sec. 3. Amendments by leave of court. − Except as provided in the next preceding section,
substantial amendments may be made only upon leave of court. But such leave may be refused if it
appears to the court that the motion was made with intent to delay. x x x

It should be noted that respondents Lilian S. Soriano and the Estate of Leandro A. Soriano, Jr. already filed their
Answer, to petitioners' complaint, and the claims being asserted were made against said parties. A responsive
pleading having been filed, amendments to the complaint may, therefore, be made only by leave of court and no
longer as a matter of right. However, in Tiu v. Philippine Bank of Communications,[4] the Court discussed this rule at
length, to wit:

Page 41 of 68
 x x x [A]fter petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court specifically
allows amendment by leave of court. The said Section states:

SECTION 3. Amendments by leave of court. - Except as provided in the next

preceding section, substantial amendments may be made only upon leave of
court. But such leave may be refused if it appears to the court that the motion
was made with intent to delay. Orders of the court upon the matters provided in
this section shall be made upon motion filed in court, and after notice to the
adverse party, and an opportunity to be heard.

This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure
in Valenzuela v. Court of Appeals, thus:

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended

the former rule in such manner that the phrase "or that the cause of action or
defense is substantially altered" was stricken-off and not retained in the new
rules. The clear import of such amendment in Section 3, Rule 10 is that under the
new rules, "the amendment may (now) substantially alter the cause of action or
defense." This should only be true, however, when despite a substantial change
or alteration in the cause of action or defense, the amendments sought to be
made shall serve the higher interests of substantial justice, and prevent delay
and equally promote the laudable objective of the rules which is to secure a "just,
speedy and inexpensive disposition of every action and proceeding.

The granting of leave to file amended pleading is a matter particularly addressed to the sound
discretion of the trial court; and that discretion is broad, subject only to the limitations that the
amendments should not substantially change the cause of action or alter the theory of the case, or
that it was not made to delay the action. Nevertheless, as enunciated in Valenzuela, even if the
amendment substantially alters the cause of action or defense, such amendment could still be
allowed when it is sought to serve the higher interest of substantial justice, prevent delay, and
secure a just, speedy and inexpensive disposition of actions and proceedings.

The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of

suits and in order that the real controversies between the parties are presented, their rights
determined, and the case decided on the merits without unnecessary delay. This liberality is
greatest in the early stages of a lawsuit, especially in this case where the amendment was
made before the trial of the case, thereby giving the petitioners all the time allowed by law to
answer and to prepare for trial.

Furthermore, amendments to pleadings are generally favored and should be liberally allowed in
furtherance of justice in order that every case, may so far as possible, be determined on its real
facts and in order to speed up the trial of the case or prevent the circuitry of action and
unnecessary expense. That is, unless there are circumstances such as inexcusable delay or the
taking of the adverse party by surprise or the like, which might justify a refusal of permission to
amend.[5]

Since, as explained above, amendments are generally favored, it would have been more fitting for the trial court to
extend such liberality towards petitioners by admitting the amended complaint which was filed before the order
dismissing the original complaint became final and executory. It is quite apparent that since trial proper had not yet
even begun, allowing the amendment would not have caused any delay. Moreover, doing

Page 42 of 68
so would have served the higher interest of justice as this would provide the best opportunity for the issues among all
parties to be thoroughly threshed out and the rights of all parties finally determined. Hence, the Court overrules the
trial court's denial of the motion to admit the amended complaint, and orders the admission of the same.

With the amendment stating that plaintiff Lolita A. Soriano likewise made demands upon the Board of Directors of
Lisam Enterprises, Inc., to make legal steps to protect the interest of the corporation from said fraudulent transaction,
but unfortunately, until now, no such legal step was ever taken by the Board, hence, this action for the benefit and in
behalf of the corporation, does the amended complaint now sufficiently state a cause of action? In Hi-Yield Realty,
Incorporated v. Court of Appeals,[6] the Court enumerated the requisites for filing a derivative suit, as follows:

a) the party bringing the suit should be a shareholder as of the time of the act or transaction
complained of, the number of his shares not being material;

b) he has tried to exhaust intra-corporate remedies, i.e., has made a demand on the board of
directors for the appropriate relief but the latter has failed or refused to heed his plea; and

c) the cause of action actually devolves on the corporation, the wrongdoing or harm having been,
or being caused to the corporation and not to the particular stockholder bringing the suit. [7]

A reading of the amended complaint will reveal that all the foregoing requisites had been alleged therein. Hence, the
amended complaint remedied the defect in the original complaint and now sufficiently states a cause of action.

Respondent PCIB should not complain that admitting the amended complaint after they pointed out a defect in the
original complaint would be unfair to them. They should have been well aware that due to the changes made by the
1997 Rules of Civil Procedure, amendments may now substantially alter the cause of action or defense. It should not
have been a surprise to them that petitioners would redress the defect in the original complaint by substantially
amending the same, which course of action is now allowed under the new rules.

The next question then is, upon admission of the amended complaint, would it still be proper for the trial court to
dismiss the complaint? The Court answers in the negative.

Saura v. Saura, Jr.[8] is closely analogous to the present case. In Saura,[9] the petitioners therein, stockholders of a
corporation, sold a disputed real property owned by the corporation, despite the existence of a case in the Securities

Page 43 of 68
and Exchange Commission (SEC) between stockholders for annulment of subscription, recovery of corporate assets
and funds, etc. The sale was done without the knowledge of the other stockholders, thus, said stockholders filed a
separate case for annulment of sale, declaration of nullity of deed of exchange, recovery of possession, etc., against
the stockholders who took part in the sale, and the buyer of the property, filing said case with the regular court
(RTC).Petitioners therein also filed a motion to dismiss the complaint for annulment of sale filed with the RTC, on the
ground of forum shopping, lack of jurisdiction, lack of cause of action, and litis pendentia among others. The Court
held that the complaint for annulment of sale was properly filed with the regular court, because the buyer of the
property had no intra-corporate relationship with the stockholders, hence, the buyer could not be joined as party-
defendant in the SEC case. To include said buyer as a party-defendant in the case pending with the SEC would
violate the then existing rule on jurisdiction over intra-corporate disputes. The Court also struck down the argument
that there was forum shopping, ruling that the issue of recovery of corporate assets and funds pending with the SEC
is a totally different issue from the issue of the validity of the sale, so a decision in the SEC case would not amount
to res judicata in the case before the regular court. Thus, the Court merely ordered the suspension of the proceedings
before the RTC until the final outcome of the SEC case.

The foregoing pronouncements of the Court are exactly in point with the issues in the present case. Here, the
complaint is for annulment of mortgage with the mortgagee bank as one of the defendants, thus, as held
in Saura,[10] jurisdiction over said complaint is lodged with the regular courts because the mortgagee bank has no
intra-corporate relationship with the stockholders. There can also be no forum shopping, because there is no identity
of issues. The issue being threshed out in the SEC case is the due execution, authenticity or validity of board
resolutions and other documents used to facilitate the execution of the mortgage, while the issue in the case filed by
petitioners with the RTC is the validity of the mortgage itself executed between the bank and the corporation,
purportedly represented by the spouses Leandro and Lilian Soriano, the President and Treasurer of petitioner LEI,
respectively. Thus, there is no reason to dismiss the complaint in this case.

IN VIEW OF THE FOREGOING, the Resolution of the Regional Trial Court of Legaspi City, Branch 4, dated
November 11, 1999, dismissing petitioners complaint in Civil Case No. 9729, and its Order dated May 15, 2000,
denying herein petitioners Motion for Reconsideration and Motion to Admit Amended Complaint, are
hereby REVERSEDand SET ASIDE. The Regional Trial Court of Legaspi City, Branch 4, is
hereby DIRECTED to ADMIT the Amended Complaint.

Considering further, that this case has been pending for some time and, under R.A. No. 8799, it is now the regular
courts which have jurisdiction over intra-corporate disputes, the Regional Trial Court of Legaspi City, Branch 4 is
hereby DIRECTED to PROCEED with dispatch in trying Civil Case No. 9729.

Page 44 of 68
 SO ORDERED.

HENRY CHING TIU, CHRISTOPHER HALIN GO, G.R. No. 151932

and GEORGE CO,
Petitioners, Present:

CARPIO MORALES, J.,*

CHICO-NAZARIO,
- versus - Acting Chairperson,**
VELASCO, JR.,
NACHURA, and
PERALTA, JJ.
PHILIPPINE BANK OF COMMUNICATIONS,
Respondent. Promulgated:

August 19, 2009

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

DECISION

PERALTA, J.:

This is a petition for review on certiorari, under Rule 45 of the Rules of Court, seeking to annul and set aside

the Decision[1] dated September 28, 2001, rendered by the Court of Appeals (CA) in CA-G.R. SP No. 57732,

dismissing the petition and affirming the assailed Orders of the Regional Trial Court (RTC) of Cagayan de Oro City,

Branch 21 in Civil Case No. 99-352, dated December 14, 1999 and January 11, 2000.

The factual and procedural antecedents are as follows:

In June 1993, Asian Water Resources, Inc. (AWRI), represented by herein petitioners, applied for a real

estate loan with the Philippine Bank of Communications (PBCOM) to fund its purified water distribution business. In

support of the loan application, petitioners submitted a Board Resolution [2] dated June 7, 1993. The loan was

guaranteed by collateral over the property covered by Transfer Certificate of Title No. T-13020.[3] The loan was

eventually approved.[4]

Page 45 of 68
 In August 1996, AWRI applied for a bigger loan from PBCOM for additional capitalization using the same

Board Resolution, but without any additional real estate collateral. Considering that the proposed additional loan was

unsecured, PBCOM required all the members of the Board of Directors of AWRI to become sureties. Thus, on August

16, 1996, a Surety Agreement[5] was executed by its Directors and acknowledged by a notary public on the same

date. All copies of the Surety Agreement, except two, were kept by PBCOM. Of the two copies kept by the notary

public, one copy was retained for his notarial file and the other was sent to the Records Management and Archives

Office, through the Office of the RTC Clerk of Court.[6]

Thereafter, on December 16, 1998, AWRI informed the bank of its desire to surrender and/or assign in its

favor, all the present properties of the former to apply as dacion en pago for AWRIs existing loan obligation to the

bank.[7] On January 11, 1999, PBCOM sent a reply denying the request. On May 12, 1999, PBCOM sent a letter to

petitioners demanding full payment of its obligation to the bank. [8]

Its demands having remained unheeded, PBCOM instructed its counsel to file a complaint for collection

against petitioners. The case was docketed as Civil Case No. 99-352.

On July 3, 1999, petitioners filed their Answer. It alleged, among other things, that they were not personally

liable on the promissory notes, because they signed the Surety Agreement in their capacities as officers of

AWRI. They claimed that the Surety Agreement attached to the complaint as Annexes A to A-2[9] were falsified,

considering that when they signed the same, the words In his personal capacity did not yet appear in the document

and were merely intercalated thereon without their knowledge and consent. [10]

In support of their allegations, petitioners attached to their Answer a certified photocopy of the Surety

Agreement issued on March 25, 1999 by the Records Management and Archives Office in Davao City, [11] showing

that the words In his personal capacity were not found at the foot of page two of the document where their signatures

appeared.[12]

Because of this development, PBCOMs counsel searched for and retrieved the file copy of the Surety

Agreement. The notarial copy showed that the words In his personal capacity did not appear on page two of the

Surety Agreement.[13]

Petitioners counsel then asked PBCOM to explain the alteration appearing on the agreement. PBCOM

subsequently discovered that the insertion was ordered by the bank auditor. It alleged that when the Surety

Agreement was inspected by the bank auditor, he called the attention of the loans clerk, Kenneth Cabahug, as to why

Page 46 of 68
the words In his personal capacity were not indicated under the signature of each surety, in accordance with bank

standard operating procedures. The auditor then ordered Mr. Cabahug to type the words In his personal capacity

below the second signatures of petitioners. However, the notary public was never informed of the insertion.[14] Mr.

Cabahug subsequently executed an affidavit[15] attesting to the circumstances why the insertion was made.

PBCOM then filed a Reply and Answer to Counterclaim with Motion for Leave of Court to Substitute Annex

A of the Complaint,[16] wherein it attached the duplicate original copy retrieved from the file of the notary

public. PBCOM also admitted its mistake in making the insertion and explained that it was made without the

knowledge and consent of the notary public. PBCOM maintained that the insertion was not a falsification, but was

made only to speak the truth of the parties intentions. PBCOM also contended that petitioners were already primarily

liable on the Surety Agreement whether or not the insertion was made, having admitted in their pleadings that they

voluntarily executed and signed the Surety Agreement in the original form. PBCOM, invoking a liberal application of

the Rules, emphasized that the motion incorporated in the pleading can be treated as a motion for leave of court to

amend and admit the amended complaint pursuant to Section 3, Rule 10 of the Rules of Court.

On December 14, 1999, the RTC issued an Order[17] allowing the substitution of the altered document with

the original Surety Agreement, the pertinent portion of which reads:

August 16, 1996 attached as Annexes A to A-2 of the reply and answer Resolving the Motion
to Substitute Annexes A to A-2 of the complaint and the opposition thereto by the defendant, this
Court, in the interest of justice, hereby allows the substitution of said Annexes A to A-2 of the
complaint with the duplicate original of notarial copy of the Agreement dated to counter-claim.

SO ORDERED.

Petitioners filed a motion for reconsideration,[18] but it was denied in the Order[19] dated January 11, 2000, to

wit:

Resolving the motion for reconsideration and the opposition thereto, the Court finds the
motion substantially a reiteration of the opposition to plaintiffs motion.

Additionally, the instant motion for reconsideration treats on evidentiary matter which can be
properly ventilated in the trial proper, hence, there is no cogent reason to disturb the Courts order
of December 14, 1999.

SO ORDERED.

Aggrieved, petitioners sought recourse before the CA via a petition for certiorari under Rule 65 of the Rules

of Court, docketed as CA-G.R. SP No. 57732.

Page 47 of 68
 Petitioners claimed that the RTC acted without or in excess of jurisdiction, or with grave abuse of discretion

amounting to lack or excess of jurisdiction in denying their motion for reconsideration and in allowing PBCOM to

substitute the altered copy of the Surety Agreement with the duplicate original notarial copy thereof considering that

the latters cause of action was solely and principally founded on the falsified document marked as Annexes A to A-

2.[20]

On September 28, 2001, the CA rendered a Decision dismissing the petition for lack of merit, the decretal

portion of which reads:

WHEREFORE, foregoing considered, the instant petition is hereby DENIED DUE

COURSE and, accordingly, DISMISSED for lack of merit. The assailed Orders dated December 14,
1999 and January 11, 2000 of the Regional Trial Court of Cagayan de Oro City, Branch 21, are
hereby AFFIRMED in toto.

SO ORDERED.[21]

Hence, the petition assigning the following errors:

I
THE COURT COMMITTED A REVERSIBLE ERROR IN AFFIRMING IN TOTO THE ORDER OF
THE LOWER COURT ALLOWING THE SUBSTITUTION OF THE FALSIFIED DOCUMENT BY
RELYING ON THE PROVISION OF SECTION 3, RULE 10 OF THE RULES OF COURT.

II
ACTING AS THE COURT ON THE PETITION FOR CERTIORARI, THE COURT COMMITTED A
REVERSIBLE ERROR HAVING NO JURISDICTION TO RULE ON THE OBLIGATION OF THE
PETITIONERS BASED ON THE FALSIFIED DOCUMENT

III
THE COURT ERRED IN GIVING CREDENCE TO THE ALLEGATION OF RESPONDENT BANK
THAT FROM AUGUST 15 TO DECEMBER 9, 1997 ASIAN WATER RESOURCES INC.
OBTAINED SEVERAL AVAILMENTS OF NEW BIGGER AND ADDITIONAL LOANS
TOTALLING P2,030,000.00 EVIDENCED BY 4 PROMISSORY NOTES MARKED AS ANNEXES
B, B-1, B-2 AND B-3.

IV
THE COURT FAILED TO CONSIDER THE MISAPPLICATION OF THE PRINCIPLE OF EQUITY
COMMITTED BY THE LOWER COURT IN ORDERING THE SUBSTITUTION OF THE FALSIFIED
DOCUMENT.[22]

Petitioners argue that the CA committed a reversible error in affirming the Order of the RTC allowing the

substitution of the document by relying on Section 3, Rule 10 of the Rules of Court. Petitioners assert that the Rules

do not allow the withdrawal and substitution of a falsified document once discovered by the opposing party.

Page 48 of 68
 Petitioners maintain that PBCOMs cause of action was solely and principally founded on the alleged falsified

document originally marked as

Annexes A to A-2. Thus, the withdrawal of the document results in the automatic withdrawal of the whole complaint

on the ground that there is no more cause of action to be maintained or enforced by plaintiff against petitioners. Also,

petitioners argue that if the substitution will be allowed, their defenses that were anchored on Annexes A to A-2 would

be gravely affected. Moreover, considering that the said document was already removed, withdrawn, and disregarded

by the RTC, the withdrawal and substitution of the document would prevent petitioners from introducing the falsified

documents during the trial as part of their evidence.[23]

Petitioners submit that the RTC misapplied the principle of equity when it allowed PBCOM to substitute the

document with the original agreement. Petitioners also claim that the remedy of appeal after the termination of the

case in the RTC would become ineffective and inadequate if the Order of the RTC allowing the withdrawal and

substitution of the document would not be nullified, because the falsified document would no longer be found in the

records of the case during the appeal.[24]

Petitioners contend that the CA went beyond the issue raised before it when it interpreted the provisions of

the Surety Agreement, particularly paragraph 4 thereof, and then ruled on the obligations of the parties based on

the document. Petitioners posit that the CA prematurely ruled on petitioners obligations, considering that their

obligations should be determined during trial on the merits, after the parties have been given the opportunity to

present their evidence in support of their respective claims. Petitioners stress that the CA went into the merit of the

case when it gave credence to the statement of fact of PBCOM that From August 15 to December 9, 1997, Asian

Water Resources, Inc. obtained several availments on its additional loans totalling P2,030,000.00 as evidenced by 4

promissory notes marked as Annexes B, B-1, B-2, and B-3. Thus, the conclusion of the CA in declaring the

petitioners liable as sureties violated their right to due process.[25]

For its part, PBCOM argues that since the complaint is based on an actionable document, i.e., the surety

agreement, the original or a copy thereof should be attached to the pleading as an exhibit, which shall be deemed

part of the pleading. Considering that the surety agreement is annexed to the complaint, it is an integral part thereof

and its substitution with another copy is in the nature of a substantial amendment, which is allowed by the Rules, but

with prior leave of court.

Moreover, PBCOM alleges that since the Rules provides that substantial amendments may be made upon

leave of court, the authority of the RTC to allow the amendment is discretionary. Thus, the CA correctly held that the

act of granting the said substitution was within the clear and proper discretion of the RTC.

Page 49 of 68
 The petition is without merit.

As to the substitution of the earlier surety agreement that was annexed to the complaint with the original

thereof, this Court finds that the RTC did not err in allowing the substitution.

The pertinent rule on actionable documents is found in Section 7, Rule 8 of the Rules of Court, which

provides that when the cause of action is anchored on a document, its substance must be set forth, and the original

or a copy thereof shall be attached to the pleading as an exhibit and deemed a part thereof, to wit:

Section 7. Action or defense based on document. Whenever an action or defense is based

upon a written instrument or document, the substance of such instrument or document shall be set
forth in the pleading, and the original or a copy thereof shall be attached to the pleading as an
exhibit, which shall be deemed to be a part of the pleading, or said copy may with like effect be set
forth in the pleading.

With respect to PBCOMs right to amend its complaint, including the documents annexed thereto, after

petitioners have filed their answer, Section 3, Rule 10 of the Rules of Court specifically allows amendment by leave of

court. The said Section states:

SECTION 3. Amendments by leave of court. Except as provided in the next preceding

section, substantial amendments may be made only upon leave of court. But such leave may be
refused if it appears to the court that the motion was made with intent to delay. Orders of the court
upon the matters provided in this section shall be made upon motion filed in court, and after notice
to the adverse party, and an opportunity to be heard.

This Court has emphasized the import of Section 3, Rule 10 of the 1997 Rules of Civil Procedure in Valenzuela v.

Court of Appeals,[26] thus:

Interestingly, Section 3, Rule 10 of the 1997 Rules of Civil Procedure amended the former
rule in such manner that the phrase or that the cause of action or defense is substantially altered
was stricken-off and not retained in the new rules. The clear import of such amendment in Section
3, Rule 10 is that under the new rules, the amendment may (now) substantially alter the cause of
action or defense. This should only be true, however, when despite a substantial change or
alteration in the cause of action or defense, the amendments sought to be made shall serve the
higher interests of substantial justice, and prevent delay and equally promote the laudable objective
of the rules which is to secure a just, speedy and inexpensive disposition of every action and
proceeding.[27]

The granting of leave to file amended pleading is a matter particularly addressed to the sound discretion of

the trial court; and that discretion is broad, subject only to the limitations that the amendments should not

substantially change the cause of action or alter the theory of the case, or that it was not made to delay the

action.[28] Nevertheless, as enunciated in Valenzuela, even if the amendment substantially alters the cause of action

Page 50 of 68
or defense, such amendment could still be allowed when it is sought to serve the higher interest of substantial justice;

prevent delay; and secure a just, speedy and inexpensive disposition of actions and proceedings.

The courts should be liberal in allowing amendments to pleadings to avoid a multiplicity of suits and in order

that the real controversies between the parties are presented, their rights determined, and the case decided on the

merits without unnecessary delay. This liberality is greatest in the early stages of a lawsuit, especially in this case

where the amendment was made before the trial of the case, thereby giving the petitioners all the time allowed by law

to answer and to prepare for trial.[29]

Furthermore, amendments to pleadings are generally favored and should be liberally allowed in furtherance

of justice in order that every case, may so far as possible, be determined on its real facts and in order to speed up the

trial of the case or prevent the circuity of action and unnecessary expense. That is, unless there are circumstances

such as inexcusable delay or the taking of the adverse party by surprise or the like, which might justify a refusal of

permission to amend.[30]

In the present case, there was no fraudulent intent on the part of PBCOM in submitting the altered surety

agreement. In fact, the bank admitted that it was a mistake on their part to have submitted it in the first place instead

of the original agreement. It also admitted that, through inadvertence, the copy that was attached to the complaint

was the copy wherein the words IN HIS PERSONAL CAPACITY were inserted to conform to the banks standard

practice. This alteration was made without the knowledge of the notary public. PBCOMs counsel had no idea that

what it submitted was the altered document, thereby necessitating the substitution of the surety agreement with the

original thereof, in order that the case would be judiciously resolved.

Verily, it is a cardinal rule of evidence, not just one of technicality but of substance, that the written document

is the best evidence of its own contents. It is also a matter of both principle and policy that when the written contract

is established as the repository of the parties stipulations, any other evidence is excluded, and the same cannot be

used to substitute for such contract, or even to alter or contradict the latter. [31] The original surety agreement is the

best evidence that could establish the parties respective rights and obligations. In effect, the RTC merely allowed the

amendment of the complaint, which consequently included the substitution of the altered surety agreement with a

copy of the original.

It is well to remember at this point that rules of procedure are but mere tools designed to facilitate the

attainment of justice. Their strict and rigid application that would result in technicalities that tend to frustrate rather

than promote substantial justice must always be avoided. [32] Applied to the instant case, this not only assures that it

Page 51 of 68
would be resolved based on real facts, but would also aid in the speedy disposition of the case by utilizing the best

evidence possible to determine the rights and obligations of the party- litigants.

Moreover, contrary to petitioners contention, they could not be prejudiced by the substitution since they can

still present the substituted documents, Annexes A to A-2, as part of the evidence of their affirmative defenses. The

substitution did not prejudice petitioners or delay the action. On the contrary, it tended to expedite the determination

of the controversy. Besides, the petitioners are not precluded from filing the appropriate criminal action against

PBCOM for attaching the altered copy of the surety agreement to the complaint. The substitution of the documents

would not, in any way, erase the existence of falsification, if any. The case before the RTC is civil in nature, while the

alleged falsification is criminal, which is separate and distinct from another. Thus, the RTC committed no reversible

error when it allowed the substitution of the altered surety agreement with that of the original.

A Petition for Certiorari under Rule 65 of the Rules of Court is intended for the correction of errors of

jurisdiction only or grave abuse of discretion amounting to lack or excess of jurisdiction. Its principal office is only to

keep the inferior court within the parameters of its jurisdiction or to prevent it from committing such a grave abuse of

discretion amounting to lack or excess of jurisdiction.[33]

For a petition for certiorari to prosper, the essential requisites that have to concur are: (1) the writ is directed

against a tribunal, a board or any officer exercising judicial or quasi-judicial functions; (2) such tribunal, board or

officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of

jurisdiction; and (3) there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law. [34]

The phrase without jurisdiction means that the court acted with absolute lack of authority or want of legal

power, right or authority to hear and determine a cause or causes, considered either in general or with reference to a

particular matter. It means lack of power to exercise authority. Excess of jurisdiction occurs when the court

transcends its power or acts without any statutory authority; or results when an act, though within the general power

of a tribunal, board or officer (to do) is not authorized, and is invalid with respect to the particular proceeding, because

the conditions which alone authorize the exercise of the general power in respect of it are wanting. Grave abuse of

discretion implies such capricious and whimsical exercise of judgment as to be equivalent to lack or excess of

jurisdiction; simply put, power is exercised in an arbitrary or despotic manner by reason of passion, prejudice, or

personal hostility; and such exercise is so patent or so gross as to amount to an evasion of a positive duty or to a

virtual refusal either to perform the duty enjoined or to act at all in contemplation of law.[35]

Page 52 of 68
 The present case failed to comply with the above-stated requisites. In the instant case, the soundness of the

RTCs Order allowing the substitution of the document involves a matter of judgment and discretion, which cannot be

the proper subject of a petition for certiorari under Rule 65. This rule is only intended to correct defects of jurisdiction

and not to correct errors of procedure or matters in the trial courts findings or conclusions.

However, this Court agrees with the petitioners contention that the CA should not have made determinations

as regards the parties respective rights based on the surety agreement. The CA went beyond the issues brought

before it and effectively preempted the RTC in making its own determinations. It is to be noted that the present case

is still pending determination by the RTC. The CA should have been more cautious and not have gone beyond the

issues submitted before it in the petition for certiorari; instead, it should have squarely addressed whether or not there

was grave abuse of discretion on the part of the RTC in issuing the Orders dated December 14, 1999 and January

11, 2000.

WHEREFORE, premises considered, the petition is DENIED. Subject to the above disquisitions, the

Decision of the Court of Appeals in CA-G.R. SP No. 57732, dated September 28, 2001, and the Orders of the

Regional Trial Court of Cagayan de Oro City, Branch 21, in Civil Case No. 99-352, dated December 14, 1999 and

January 11, 2000, are AFFIRMED.

SO ORDERED.

Page 53 of 68
 [G.R. No. 133657. May 29, 2002]

REMINGTON INDUSTRIAL SALES CORPORATION, petitioner, vs. THE COURT OF APPEALS and BRITISH
STEEL (ASIA), LTD., respondents.

DECISION
YNARES-SANTIAGO, J.:

Before us is a petition for review under Rule 45 of the Rules of Court assailing the decision of the Court of
Appeals in CA-G.R. SP No. 44529 dated February 24, 1998[1], which granted the petition for certiorari filed by
respondent British Steel Asia Ltd. (British Steel) and ordered the dismissal of petitioner Remington Industrial Sales
Corporations (Remington) complaint for sum of money and damages.Also assailed in this petition is the
resolution[2] of the Court of Appeals denying petitioners motion for reconsideration.
The facts of the case, as culled from the records, are as follows:
On August 21, 1996, petitioner filed a complaint [3] for sum of money and damages arising from breach of
contract, docketed as Civil Case No. 96-79674, before the sala of Judge Marino M. De la Cruz of the Regional Trial
Court of Manila, Branch 22. Impleaded as principal defendant therein was Industrial Steels, Ltd. (ISL), with Ferro
Trading GMBH (Ferro) and respondent British Steel as alternative defendants.
ISL and respondent British Steel separately moved for the dismissal of the complaint on the ground that it failed
to state a cause of action against them. On April 7, 1997, the RTC denied the motions to dismiss, [4] as well as the
ensuing motion for reconsideration.[5] ISL then filed its answer to the complaint.
On the other hand, respondent British Steel filed a petition for certiorari and prohibition before the Court of
Appeals,[6] docketed as CA-G.R. SP No. 44529. Respondent claimed therein that the complaint did not contain a
single averment that respondent committed any act or is guilty of any omission in violation of petitioners legal
rights. Apart from the allegation in the complaints Jurisdictional Facts that:

1.05. Defendants British Steel (Asia) Ltd. and Ferro Trading Gmbh, while understood by the plaintiff as mere
suppliers of goods for defendant ISL, are impleaded as party defendants pursuant to Section 13, Rule 3 of the
Revised Rules of Court.[7]

no other reference was made to respondent that would constitute a valid cause of action against it. Since petitioner
failed to plead any cause of action against respondent as alternative defendant under Section 13, Rule 3, [8] the trial
court should have ordered the dismissal of the complaint insofar as respondent was concerned.
Meanwhile, petitioner sought to amend its complaint by incorporating therein additional factual allegations
constitutive of its cause of action against respondent. Pursuant to Section 2, Rule 10 [9] of the Rules of Court,
petitioner maintained that it can amend the complaint as a matter of right because respondent has not yet filed a
responsive pleading thereto.[10]
Subsequently, petitioner filed a Manifestation and Motion [11] in CA-G.R. SP No. 44529 stating that it had filed a
Motion to Admit Amended Complaint together with said Amended Complaint before the trial court. Hence, petitioner
prayed that the proceedings in the special civil action be suspended.
On January 29, 1998, the trial court ruled on petitioners Motion to Admit Amended Complaint thus:

WHEREFORE, the Amended Complaint is NOTED and further proceedings thereon and action on the other incidents
as aforementioned are hereby held in abeyance until final resolution by the Honorable Court of Appeals (Special
6th Division) of the petition for certiorari and prohibition of petitioner (defendant British) and/or Manifestations and
Motions of therein private respondent, herein plaintiff.

SO ORDERED.[12]

Thereafter, on February 24, 1998, the Court of Appeals rendered the assailed decision in CA-G.R. SP No.
44529 as follows:

Page 54 of 68
WHEREFORE, this Court grants the writ of certiorari and orders the respondent judge to dismiss without prejudice
the Complaint in Civil Case No. 96-79674 against petitioner British Steel (Asia) Ltd. Costs against private respondent.

SO ORDERED.[13]

In the same decision, the Court of Appeals addressed petitioners prayer for suspension of proceedings in this
wise:

The incident which transpired after the filing of the instant petition for certiorari and prohibition are immaterial in the
resolution of this petition. What this Court is called upon to resolve is whether the lower court committed grave abuse
of discretion when it denied petitioners motion to dismiss the complaint against it. The admission or rejection by the
lower court of said amended complaint will not, insofar as this Court is concerned, impinge upon the issue of whether
or not said court gravely abused its discretion in denying petitioners motion to dismiss. [14]

Petitioner filed a motion for reconsideration of the appellate courts decision, which was denied in a resolution
dated April 28, 1998. Hence, this petition, anchored on the following grounds:
-I-

THE HON. COURT OF APPEALS ERRED IN ORDERING THE DISMISSAL OF THE COMPLAINT AGAINST THE
PRIVATE RESPONDENT FOR LACK OF CAUSE OF ACTION UNDER THE ORIGINAL COMPLAINT EVEN AS
SAID COMPLAINT WAS ALREADY AMENDED AS A MATTER OF RIGHT AND SUFFICIENT CAUSES OF ACTION
ARE AVERRED IN THE AMENDED COMPLAINT, IN GROSS VIOLATION OF SEC. 2, RULE 10 OF THE 1997
RULES OF CIVIL PROCEDURE.

-II-

THE HON. COURT OF APPEALS ERRED IN HOLDING THAT IF THE PETITIONER WANTS TO PURSUE ITS
CASE AGAINST THE PRIVATE RESPONDENT, IT HAS TO REFILE THE COMPLAINT, THUS PRE-EMPTING THE
RIGHT OF THE LOWER COURT TO RULE ON THE AMENDED COMPLAINT AND COMPELLING THE
PETITIONER TO LITIGATE ITS CAUSES OF ACTION AGAINST THE PRIVATE RESPONDENT AS AN
ALTERNATIVE DEFENDANT IN A SEPARATE ACTION, THEREBY ABETTING MULTIPLICITY OF SUITS.[15]

The basic issue in this case is whether or not the Court of Appeals, by granting the extraordinary writ of
certiorari, correctly ordered the dismissal of the complaint for failure to state a cause of action, despite the fact that
petitioner exercised its right to amend the defective complaint under Section 2, Rule 10 of the Rules of Court. Stated
differently, the query posed before us is: can a complaint still be amended as a matter of right before an answer has
been filed, even if there was a pending proceeding for its dismissal before the higher court?
Section 2, Rule 10[16] of the Revised Rules of Court explicitly states that a pleading may be amended as a
matter of right before a responsive pleading is served. This only means that prior to the filing of an answer, the
plaintiff has the absolute right to amend the complaint whether a new cause of action or change in theory is
introduced.[17] The reason for this rule is implied in the subsequent Section 3 of Rule 10 [18]. Under this provision,
substantial amendment of the complaint is not allowed without leave of court after an answer has been served,
because any material change in the allegations contained in the complaint could prejudice the rights of the defendant
who has already set up his defense in the answer.
Conversely, it cannot be said that the defendants rights have been violated by changes made in the complaint if
he has yet to file an answer thereto. In such an event, the defendant has not presented any defense that can be
altered[19] or affected by the amendment of the complaint in accordance with Section 2 of Rule 10. The defendant still
retains the unqualified opportunity to address the allegations against him by properly setting up his defense in the
answer. Considerable leeway is thus given to the plaintiff to amend his complaint once, as a matter of right, prior to
the filing of an answer by the defendant.
The right granted to the plaintiff under procedural law to amend the complaint before an answer has been
served is not precluded by the filing of a motion to dismiss [20] or any other proceeding contesting its sufficiency. Were
we to conclude otherwise, the right to amend a pleading under Section 2, Rule 10 will be rendered nugatory and
ineffectual, since all that a defendant has to do to foreclose this remedial right is to challenge the adequacy of the
complaint before he files an answer.

Page 55 of 68
 Moreover, amendment of pleadings is favored and should be liberally allowed in the furtherance of justice in
order to determine every case as far as possible on its merits without regard to technicalities.This principle is
generally recognized to speed up trial and save party litigants from incurring unnecessary expense, so that a full
hearing on the merits of every case may be had and multiplicity of suits avoided.[21]
In this case, the remedy espoused by the appellate court in its assailed judgment will precisely result in multiple
suits, involving the same set of facts and to which the defendants would likely raise the same or, at least, related
defenses. Plainly stated, we find no practical advantage in ordering the dismissal of the complaint against respondent
and for petitioner to re-file the same, when the latter can still clearly amend the complaint as a matter of right. The
amendment of the complaint would not prejudice respondents or delay the action, as this would, in fact, simplify the
case and expedite its disposition.
The fact that the other defendants below has filed their answers to the complaint does not bar petitioners right to
amend the complaint as against respondent. Indeed, where some but not all the defendants have answered, the
plaintiff may still amend its complaint once, as a matter of right, in respect to claims asserted solely against the non-
answering defendant, but not as to claims asserted against the other defendants. [22]
Furthermore, we do not agree with respondents claim that it will be prejudiced by the admission of the Amended
Complaint because it had spent time, money and effort to file its petition before the appellate court. [23] We cannot see
how the result could be any different for respondent, if petitioner merely re-filed the complaint instead of being
allowed to amend it. As adverted to earlier, amendment would even work to respondents advantage since it will
undoubtedly speed up the proceedings before the trial court. Consequently, the amendment should be allowed in the
case at bar as a matter of right in accordance with the rules.
WHEREFORE, the petition is GRANTED. The assailed decision and resolution of the Court of Appeals in CA-
G.R. SP No. 44529 dated February 24, 1998 and April 28, 1998, respectively, are REVERSED and SET ASIDE. The
Regional Trial Court of Manila, Branch 22 is further ordered to ADMIT petitioners Amended Complaint in Civil Case
No. 96-79674 and to conduct further proceedings in said case.
SO ORDERED.

Page 56 of 68
G.R. No. 193650 October 8, 2014

GEORGE PIDLIP P. PALILEO and JOSE DE LA CRUZ, Petitioners,

vs.
PLANTERS DEVELOPMENT BANK, Respondent.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 assails the July 28, 2009 Amended Decision2 of the Court of Appeals (CA) in
CA-G.R. SP No. 01317-MIN, entitled "Planters Development Bank, Petitioner, versus Hon. Eddie R. Roxas (in his
capacity as the former Pairing Judge), Hon. Panambulan M Mimbisa (in his capacity as the Presiding Judge of RTC,
Branch 37, General Santos City), Sheriff Marilyn P. Alano, Sheriff Ramon A. Castillo, George Philip P. Palileo, and
Jose Dela Cruz, Respondents," as well as its August 23, 2010 Resolution3 denying reconsideration of the assailed
amended judgment.

Factual Antecedents

In a June 15, 2006 Decision4 rendered by the Regional Trial Court (RTC) of General Santos City, Branch 37, in an
action for specific performance/sum of money with damages docketed as Civil Case No. 6474 and entitled "George
Philip P. Palileo and Jose Dela Cruz, Plaintiffs, versus, Planters Development Bank, Engr. Edgardo R. Torcende,
Arturo R. delos Reyes, Benjamin N. Tria, Mao Tividad and Emmanuel Tesalonia, Defendants," it was held thus:

Before this Court is a complaint for specific performance and/or sum of money and damages with prayer for the
issuance of writs of preliminary attachment and preliminary injunction filed by Plaintiff George Philip Palileo and Jose
L. Dela Cruz against Engr. Edgardo R. Torcende, Planters Development Bank (defendant Bank), Arturo R. Delos
Reyes, Benjamin N. Tria, Mao Tividad, and Emmanuel Tesalonia on 22 December 1998.

After summons together with the verified Complaint and its annexes were duly served upon defendants, the latter
answered. During Pre-Trial conference defendant Bank manifested [its] intention of settling the case amicably and
several attempts to explore the said settlement [were] made as per records of this case. In the last pre-trial hearing
dated 17 November 2000, only plaintiffs[,] George Philip Palileo and Jose L. Dela Cruz[,] and their counsel appeared,
thus, the latter move [sic] for the presentation of evidence ex-parte, which was granted by the Court with the
reservation of verifying the return card [to determine] whether the order for the pre-trial was indeed received by
defendants. Finally, [at the] 21 November 2001 hearing, x x x defendants [again] failed to appear and their failure to
file pre-trial brief was noted; thus [plaintiffs were] allowed to present evidence ex-parte before the Clerk of Court.

xxxx

IN LIGHT OF THE FOREGOING, defendants are hereby ORDERED to jointly and severally PAY plaintiffs as follows:

i) Actual Damages;

a) Plaintiff George Philip Palileo[,] the amount of Two Million Six Hundred Five Thousand Nine [sic]
Seventy Two Pesos and Ninety Two Centavos (₱2,605,972.92), with 12% compounded interest
[per annum] reckoned from the filing of this case until full settlement thereof;

b) Plaintiff Jose R. Dela Cruz[,] the amount of One Million Five Hundred Twenty Nine Thousand
Five Hundred Eight Thousand [sic] and Eighty Centavos (₱1,529,508.80), with 12% compounded
interest [per annum] reckoned from the filing of this case until full settlement thereof;

ii) Moral damages in the amount of Five Hundred Thousand Pesos (₱500,000.00) each;

iii) Exemplary Damages in the amount of Five Hundred Thousand Pesos (₱500,000.00) each;

Page 57 of 68
 iv) Attorney’s Fees in the amount of Five Hundred Thousand [Pesos] (₱500,000.00) each x x x and to pay
the costs.

SO ORDERED.5

Respondent Planters Development Bank (PDB) received a copy of the RTC Decision on July 17, 2006.

On July 31, 2006, PDB filed by private courier service – specifically LBC6 – an Omnibus Motion for Reconsideration
and for New Trial,7 arguing therein that the trial court’s Decision was based on speculation and inadmissible and
selfserving pieces of evidence; that it was declared in default after its counsel failed to attend the pre-trial conference
on account of the distance involved and difficulty in booking a flight to General Santos City; that it had adequate and
sufficient defenses to the petitioners’ claims; that petitioners’ claims are only against its codefendant, Engr. Edgardo
R. Torcende [Torcende]; that the award of damages and attorney’s fees had no basis; and that in the interest of
justice, it should be given the opportunity to cross-examine the petitioners’ witnesses, and thereafter present its
evidence.

Petitioners’ copy of the Omnibus Motion for Reconsideration and for New Trial was likewise sent on July 31, 2006 by
courier service through LBC, but in their address of record – Tupi, South Cotabato – there was no LBC service at the
time.

On August 2, 2006, PDB filed with the RTC another copy of the Omnibus Motion for Reconsideration and for New
Trial via registered mail; another copy thereof was simultaneously sent to petitioners by registered mail as well.

Meanwhile, petitioners moved for the execution of the Decision pending appeal.

In an August 30, 2006 Order,8 the RTC denied the Omnibus Motion for Reconsideration and for New Trial, while it
granted petitioners’ motion for execution pending appeal, which it treated as a motion for the execution of a final and
executory judgment. The trial court held, as follows:

Anent the first motion, records show that the Omnibus Motion for Reconsideration and for New Trial dated 28 July
2006 was initially filed via an LBC courier on 28 July 2006 and was actually received by the Court on 31 July 2006,
which was followed by filing of the same motion thru registered mail on 2 August 2006. Said motion was set for
hearing by the movant on 18 August 2006 or 16 days after its filing.

The motion fails to impress. Section 5, Rule 159 of the 1997 Rules of Civil Procedure as amended is pertinent thus:

Section 5. Notice of hearing. – The notice of hearing shall be addressed to all parties concerned, and shall specify the
time and date of the hearing which must not be later than ten (10) days after the filing of the motion. (Underscoring
and italics supplied)

The aforesaid provision requires [that] every motion shall be addressed to all parties concerned, and shall specify the
time and date of the hearing NOT later than ten (10) days after the filing of the motion. Being a litigated motion, the
aforesaid rule should have been complied [with]. Its noncompliance renders it defective.

[The] Rule is settled that a motion in violation thereof is pro forma and a mere scrap of paper. It presents no question
which the court could decide [upon]. In fact, the court has NO reason to consider it[;] neither [does] the clerk of court
[have] the right to receive the same. Palpably, the motion is nothing but an empty formality deserving no judicial
cognizance. Hence, the motion deserves a short shrift and peremptory denial for being procedurally defective.

As such, it does not toll the running of the reglementary period thus making the assailed decision final and executory.
This supervening situation renders the Motion for Execution pending appeal academic but at the same time it
operates and could serve [as] well as a motion for execution of the subject final and executory decision. Corollarily, it
now becomes the ministerial duty of this Court to issue a writ of execution thereon.

IN LIGHT OF THE FOREGOING, the Omnibus Motion for Reconsideration and New Trial is hereby DENIED, and the
Motion for Execution Pending Appeal (which is treated as a motion for execution of a final and executory judgment) is

Page 58 of 68
also GRANTED as explained above. Accordingly, let A WRIT OF EXECUTION be issued against herein defendants
to enforce the FINAL and EXECUTORY Decision dated 15 June 2006.

SO ORDERED.10

PDB received a copy of the above August 30, 2006 Order on September 14, 2006. 11

On August 31, 2006, a Writ of Execution12 was issued. PDB filed an Urgent Motion to Quash Writ of
Execution,13arguing that it was prematurely issued as the June 15, 2006 Decision was not yet final and executory;
that its counsel has not received a copy of the writ; and that no entry of judgment has been made with respect to the
trial court’s Decision. Later on, it filed a Supplemental Motion to Quash Writ of Execution, 14 claiming that the writ was
addressed to its General Santos branch, which had no authority to accept the writ.

On September 7, 2006, PDB filed a Notice of Appeal.15

In an October 6, 2006 Order,16 the RTC denied the motion to quash the writ of execution.

On October 9, 2006, the RTC issued a second Writ of Execution. 17

Ruling of the Court of Appeals

On October 11, 2006, PDB filed with the CA an original Petition for Certiorari, which was later amended, 18 assailing 1)
the trial court’s August 30, 2006 Order – which denied the omnibus motion for reconsideration of the RTC Decision
and for new trial; 2) its October 6, 2006 Order – which denied the motion to quash the writ of execution; and 3) the
August 31, 2006 and October 9, 2006 writs of execution.

On May 31, 2007, the CA issued a Decision19 dismissing PDB’s Petition for lack of merit. It sustained the trial court’s
pronouncement, that by setting the hearing of the Omnibus Motion for Reconsideration and for New Trial on August
18, 2006 – or 16 days after its filing on August 2, 2006 – PDB violated Section 5, Rule 15 of the Rules of Court which
categorically requires that the notice of hearing shall specify the time and date of the hearing which must not be later
than 10 days after the filing of the motion. Citing this Court’s ruling in Bacelonia v. Court of Appeals, 20 the CA
declared that the 10-day period prescribed in Section 5 is mandatory, and a motion that fails to comply therewith is
pro forma and presents no question which merits the attention and consideration of the court.

The appellate court further characterized PDB’s actions as indicative of a deliberate attempt to delay the proceedings,
noting that it did not timely move to reconsider the trial court’s November 17, 2000 ruling 21 allowing petitioners to
present their evidence ex parte, nor did it move to be allowed to present evidence in support of its defense. It was
only after the RTC rendered its June 15, 2006 Decision that PDB moved to be allowed to cross-examine petitioners’
witnesses and to present its evidence on defense.

The CA likewise held that the RTC did not err in ruling that the omnibus motion for reconsideration did not toll the
running of the prescriptive period, which thus rendered the June 15, 2006 Decision final and executory. It noted as
well that PDB’s September 7, 2006 notice of appeal was tardy.

The CA found no irregularity with respect to the writs of execution, which contained the fallo of the June 15, 2006
Decision of the RTC – thus itemizing the amount of the judgment obligation. Additionally, it held that the fact that the
judgment debtors are held solidarily liable does not require that the writs should be served upon all of the defendants;
that it is not true that the sheriffs failed to make a demand for the satisfaction of judgment upon PDB, as the mere
presentation of the writ to it operated as a demand to pay; and that PDB failed to attach the Sheriff’s Return to its
Petition, which thus prevents the appellate court from resolving its claim that the writs were not validly served.

PDB filed a Motion for Reconsideration,22 arguing that Rule 15, Section 5 of the Rules of Court should be relaxed in
view of the fact that judgment against it was based on a technicality – and not on a trial on the merits; that there was
no deliberate intention on its part to delay the proceedings; that the court acted with partiality in declaring that the
Omnibus Motion for Reconsideration and for New Trial was pro forma; that its notice of appeal was timely; and that
the writs of execution are null and void.

Page 59 of 68
On July 28, 2009, the CA made a complete turnaround and issued the assailed Amended Decision, which decreed
thus:

WHEREFORE, the motion for reconsideration is GRANTED. This Court’s May 31, 2007 Decision is SET ASIDE and
a new one is rendered GRANTING the petition for certiorari. The trial court’s Order dated August 30, 2006 is SET
ASIDE and the Writ of Execution issued by the trial court is QUASHED. The trial court is ORDERED to hear and rule
on the merits of petitioner’s "Omnibus Motion for Reconsideration and New Trial."

SO ORDERED.23

The CA reversed its original finding that the Omnibus Motion for Reconsideration and for New Trial was pro forma.
This time, it held just the opposite, ruling that PDB’s "tacit argument" that the "distances involved in the case at bench
call for a relaxation of the application of Section 5, Rule 15 of the Rules of Court" deserved consideration. It held that
Section 5 should be read together with Section 424 of the same Rule, thus:

When a pleading is filed and served personally, there is no question that the requirements in Sections 4 and 5 of Rule
15 of the Revised Rules of Civil Procedure pose no problem to the party pleading. Under this mode of service and
filing of pleadings, the party pleading is able to ensure receipt by the other party of his pleading at least three days
prior to the date of hearing while at the same time setting the hearing on a date not later than ten days from the filing
of the pleading.

When, as in the case at bench, the address of the trial court as well as that of the opposing counsel is too distant
from the office of the counsel of the party pleading to personally effect the filing and service of the pleading, the latter
counsel faces a real predicament. In a perfect world with the best postal service possible, it would be problematic
enough to ensure that both requisites are fully met: that opposing counsel receives the pleading at least three days
before the date of hearing and that the date of hearing is no more than ten days after the filing (mailing) of the
pleading. But, as a matter of fact, given the state of the postal service today – a matter the Court takes judicial notice
of – the party pleading often finds himself [locked] between the horns of a dilemma.

The case at bench presents the Court with the novel issue of whether the same rigid application of the cited Sections-
and-Rule is warranted when the filing and service of pleadings is by mail. The Court is of the opinion that when
confronted between [sic] the demands of sufficient notice and due process on the one hand and the requirement that
the date of hearing be set no later than ten days from filing, the stringent application of the Rules is not warranted and
a liberal posture is more in keeping with Section 6, Rule 1 of the 1997 Rules of Civil Procedure which provides:

SECTION 6. Construction. - These Rules shall be liberally construed in order to promote their objective of securing a
just, speedy, and inexpensive disposition of every action and proceeding. 25

The CA further sustained PDB’s argument that since judgment against it was arrived at by mere default or
technicality, it is correspondingly entitled to a relaxation of the Rules, in line with the principles of substantial justice. It
likewise held that PDB counsel’s act of setting the hearing of the Omnibus Motion for Reconsideration and for New
Trial 16 days after its filing was an excusable lapse; that no scheme to delay the case is evident from PDB’s actions;
that more telling is the trial court’s "blurring in cavalier fashion" the distinction between Sections 1 and 2 of Rule 39 of
the Rules of Court,26 as well as its unequal treatment of the parties from its strict application of Section 5, Rule 15
against respondent, while it bent backward to accommodate petitioners by converting the latter’s motion for execution
pending appeal into a motion for execution of a final and executor judgment.

Lastly, the appellate court concluded that the trial court committed grave abuse of discretion, which thus warrants the
grant of PDB’s Petition for Certiorari.

Petitioners filed their Urgent Motion for Reconsideration, 27 which the CA denied through its assailed August 23, 2010
Resolution. Hence, the instant Petition.

Issues

Petitioners frame the issues involved in this Petition, as follows:

Page 60 of 68
Being assailed herein is the refusal of the Court of Appeals, which is a patent error, for not giving credence to
petitioners-appellants’ arguments that the respondent-appellees’ special civil action for certiorari before it is clearly
devoid of merit as (i) the Decision dated June 15, 2006 of the RTC, Branch 37, General Santos City had become final
and executory before the special civil action for Certiorari was filed before it which should have been dismissed
outright, and which issue of "finality" was never ruled upon, (ii) granting arguendo that a certiorari proceeding could
still be had, the same should be filed under Rule 45 instead of Rule 65 of the 1997 Rules of Civil Procedure, (iii) the
alleged attendant abuse of discretion on the part of the public respondent judges, even granting arguendo that it exist
[sic], were [sic] not grave but on the contrary were purely errors of judgment and, (iv) the substantial and glaring
defects of the petition in the special civil action for certiorari before the Court of Appeals were consistently and clearly
called to its attention but were unjustifiably ignored by it.28

Petitioners’ Arguments

In their Petition and Reply,29 petitioners seek to reverse the assailed CA dispositions and to reinstate the appellate
court’s original May 31, 2007 Decision, arguing that the trial court’s June 15, 2006 Decision became final and
executor on account of PDB’s failure to timely file its Omnibus Motion for Reconsideration and for New Trial, as it
properly filed the same only on August 2, 2006 – or beyond the 15-day period allowed by the Rules of Court.

Petitioners argue that PDB’s filing of its Omnibus Motion for Reconsideration and for New Trial on July 31, 2006 by
courier service through LBC was improper, since there was no LBC courier service in Tupi, South Cotabato at the
time; naturally, they did not receive a copy of the omnibus motion. This is precisely the reason why PDB re-filed its
omnibus motion on August 2, 2006 through registered mail, that is, to cure the defective service by courier; but by
then, the 15-day period within which to move for reconsideration or new trial, or to file a notice of appeal, had already
expired, as the last day thereof fell on August 1, 2006 – counting from PDB’s receipt of the trial court’s Decision on
July 17, 2006.

Petitioners add that PDB’s notice of appeal – which was filed only on September 7, 2006 – was tardy as well; that
PDB’s resort to an original Petition for Certiorari to assail the trial court’s August 30, 2006 Order denying the Omnibus
Motion for Reconsideration and for New Trial was improper, for as provided under Section 9, Rule 37 of the Rules of
Court,30 an order denying a motion for new trial or reconsideration is not appealable, the remedy being an appeal
from the judgment or final order; that certiorari was resorted to only to revive PDB’s appeal, which was already lost;
and that it was merely a face-saving measure resorted to by PDB to recover from its glaring blunders, as well as to
delay the execution of the RTC Decision. They also assert that certiorari is not an available remedy, since PDB did
not file a motion for reconsideration with respect to the other assailed orders of the trial court.

Petitioners maintain as well that the CA erred in relaxing the application of the Rules of Court as to PDB, a banking
institution with adequate resources to engage counsel within General Santos City and not relegate Civil Case No.
6474 to its Manila lawyers who are thus constrained by the distance involved.

Respondent’s Arguments

Seeking the denial of the Petition, PDB in its Comment31 maintains that the CA did not err in declaring that its
Omnibus Motion for Reconsideration and for New Trial was not pro forma; that there are justifiable grounds to move
for reconsideration and/or new trial; that it had no intention to delay the proceedings; that it was correct for the
appellate court to relax the application of Section 5, Rule 15; and that the CA is correct in finding that the trial court
committed grave abuse of discretion in misapplying the Rules and in exhibiting partiality.

Our Ruling

The Court grants the Petition.

The proceedings in the instant case would have been greatly abbreviated if the court a quo and the CA did not
overlook the fact that PDB’s Omnibus Motion for Reconsideration and for New Trial was filed one day too late. The
bank received a copy of the trial court’s June 15, 2006 Decision on July 17, 2006; thus, it had 15 days – or up to
August 1, 2006 – within which to file a notice of appeal, motion for reconsideration, or a motion for new trial, pursuant
to the Rules of Court.32 Yet, it filed the omnibus motion for reconsideration and new trial only on August 2, 2006.

Page 61 of 68
Indeed, its filing or service of a copy thereof to petitioners by courier service cannot be trivialized.1âwphi1 Service
and filing of pleadings by courier service is a mode not provided in the Rules. 33 This is not to mention that PDB sent a
copy of its omnibus motion to an address or area which was not covered by LBC courier service at the time. Realizing
its mistake, PDB re-filed and re-sent the omnibus motion by registered mail, which is the proper mode of service
under the circumstances. By then, however, the 15-day period had expired.

PDB’s Notice of Appeal, which was filed only on September 7, 2006, was tardy; it had only up to August 1, 2006
within which to file the same. The trial court therefore acted regularly in denying PDB’s notice of appeal.

Since PDB’s Omnibus Motion for Reconsideration and for New Trial was filed late and the 15-day period within which
to appeal expired without PDB filing the requisite notice of appeal, it follows that its right to appeal has been
foreclosed; it may no longer question the trial court’s Decision in any other manner. "Settled is the rule that a party is
barred from assailing the correctness of a judgment not appealed from by him."34 The "presumption that a party who
did not interject an appeal is satisfied with the adjudication made by the lower court" 35 applies to it. There being no
appeal taken by PDB from the adverse judgment of the trial court, its Decision has become final and can no longer be
reviewed, much less reversed, by this Court. "Finality of a judgment or order becomes a fact upon the lapse of the
reglementary period to appeal if no appeal is perfected, and is conclusive as to the issues actually determined and to
every matter which the parties might have litigated and have x x x decided as incident to or essentially connected with
the subject matter of the litigation, and every matter coming within the legitimate purview of the original action both in
respect to matters of claim and of defense."36 And "[i]n this jurisdiction, the rule is that when a judgment becomes
final and executory, it is the ministerial duty of the court to issue a writ of execution to enforce the
judgment;"37 "execution will issue as a matter of right x x x (a) when the judgment has become final and executory;
(b) when the judgment debtor has renounced or waived his right of appeal; [or] (c) when the period for appeal has
lapsed without an appeal having been filed x x x." 38

Neither can the Court lend a helping hand to extricate PDB from the effects of its mistake; indeed, PDB erred more
than once during the course of the proceedings. For one, it did not attempt to set right its failure to appear during pre-
trial, which prompted the court to allow petitioners to present evidence ex parte and obtain a favorable default
judgment. Second, assuming for the sake of argument that it timely filed its Omnibus Motion for Reconsideration and
for New Trial, it nonetheless violated the ten-day requirement on the notice of hearing under Section 5 of Rule 15.
Third, even before it could be notified of the trial court’s resolution of its omnibus motion on September 14, 2006 –
assuming it was timely filed, it filed a notice of appeal on September 7, 2006 – which thus implies that it abandoned
its bid for reconsideration and new trial, and instead opted to have the issues resolved by the CA through the remedy
of appeal. If so, then there is no Omnibus Motion for Reconsideration and for New Trial that the trial court must rule
upon; its August 30, 2006 Order thus became moot and academic and irrelevant. "[W]here [an action] or issue has
become moot and academic, there is no justiciable controversy, so that a declaration thereon would be of no practical
use or value."39

Fourth, instead of properly pursuing its appeal to free itself from the unfavorable effects of the trial court’s denial of its
notice of appeal, PDB chose with disastrous results to gamble on its Omnibus Motion for Reconsideration and for
New Trial by filing an original Petition for Certiorari to assail the trial court’s denial thereof. Time and again, it has
been said that certiorari is not a substitute for a lost appeal, especially if one’s own negligence or error in one’s choice
of remedy occasioned such loss.40

What remains relevant for this Court to resolve, then, is the issue relative to the trial court’s October 6, 2006 Order –
which denied the motion to quash the writ of execution – and the August 31, 2006 and October 9, 2006 writs of
execution. The Court observes that the October 6, 2006 Order and the August 31, 2006 and October 9, 2006 writs of
execution were set aside and quashed merely as a necessary consequence of the CA’s directive in the Amended
Decision for the trial court to hear and rule on the merits of PDB’s Omnibus Motion for Reconsideration and for New
Trial. Other than this singular reason, the CA would have sustained them, and this is clear from a reading of both its
original May 31, 2007 Decision and its subsequent Amended Decision. Now, since the Court has herein declared that
PDB’s omnibus motion may not be considered for being tardy and for having been superseded by the bank’s filing of
a notice of appeal, then the CA’s original pronouncement regarding the October 6, 2006 Order and the August 31,
2006 and October 9, 2006 writs of execution should necessarily be reinstated as well.

In light of the above conclusions, the Court finds no need to further discuss the other issues raised by the parties.
They are rendered irrelevant by the above pronouncements.

WHEREFORE, the Petition is GRANTED. The assailed July 28, 2009 Amended Decision and August 23, 2010
Resolution of the Court of Appeals in CA-G.R. SP No. 01317-MIN are REVERSED and SET ASIDE. The Regional

Page 62 of 68
Trial Court of General Santos City, Branch 37 is ORDERED to proceed with the execution ofits June 15, 2006
Decision in Civil Case No. 6474.

SO ORDERED.

Page 63 of 68
G.R. No. 179638 July 8, 2013

HEIRS OF NUMERIANO MIRANDA, SR., namely: CIRILA (deceased), CORNELIO, NUMERIANO, JR., ERLINDA,
LOLITA, RUFINA, DANILO, ALEJANDRO, FELIMON, TERESITA, ELIZABETH and ANALIZA, all surnamed
MIRANDA, Petitioners,
vs.
PABLO R. MIRANDA, Respondent.

DECISION

DEL CASTILLO, J.:

An action for revival of a judgment cannot modify, alter, or reverse the original judgment, which is already final and
executory.1

This Petition for Review on Certiorari2 under Rule 45 of the Rules of Court assails the Decision3 dated June 14, 2007
and the Resolution4 dated September 11, 2007 of the Court of Appeals (CA) in CA-G.R. SP No. 97350.

Factual Antecedents

In 1994, petitioners Cirila, Cornelio, Numeriano, Jr., Erlinda, Lolita, Rufina, Danilo, Alejandro, Felimon, Teresita,
Elizabeth, and Analiza, all surnamed Miranda, representing themselves as the heirs of Numeriano Miranda, Sr., filed
before the Regional Trial Court (RTC) of Muntinlupa City, a Complaint5 for Annulment of Titles and Specific
Performance, docketed as Civil Case No. 94-612, against the heirs of Pedro Miranda, namely: Pacita and Oscar
Miranda; the heir of Tranquilino Miranda, Rogelio Miranda; and the spouses respondent Pablo Miranda and Aida
Lorenzo.

After trial, the RTC, Branch 256, rendered a Decision6 dated August 30, 1999, the dispositive portion of which reads:

WHEREFORE, premises considered, this court resolves:

1. To uphold and sustain the validity of TCT Nos. 186011, 186012, and 186013;

2. Ordering Pablo Miranda to indemnify all other heirs of NUMERIANO MIRANDA the amount equivalent to 12/13 fair
market value of the co-owned residential house, erected on the lot 826-A-3 covered by TCT No. 186013
corresponding to their shares, and for the said heirs to divide among themselves the aforesaid amount as follows:

1/13 to CIRILA MIRANDA

1/13 to CORNELIO MIRANDA

1/13 to NUMERIANO MIRANDA, JR.

1/13 to ERLINDA MIRANDA

1/13 to LOLITA MIRANDA

1/13 to RUFINA MIRANDA

1/13 to DANILO MIRANDA

1/13 to ALEJANDRO MIRANDA

1/13 to FELIMON MIRANDA

Page 64 of 68
 1/13 to TERESITA MIRANDA

1/13 to ELIZABETH MIRANDA

1/13 to ANALIZA MIRANDA

3. Ordering Plaintiffs Lolita Miranda, Alejandro Miranda, Teresita Miranda, Rufina Miranda and all persons claiming
rights under them to immediately vacate the abovementioned residential house and to jointly and severally pay to the
spouses Pablo and Aida Miranda a monthly rental of ₱2,000.00 from the date of notice of the promulgation of this
judgment up to the time that they have actually vacated the property;

4. Proclaiming that ROGELIO MIRANDA is not the biological son or child by nature of TRANQUILINO MIRANDA, and
therefore is not entitled to inherit from the latter;

5. Declaring CORNELIO MIRANDA, NUMERIANO MIRANDA, JR., ERLINDA MIRANDA, LOLITA MIRANDA,
RUFINA MIRANDA, DANIL[O] MIRANDA, ALEJANDRO MIRANDA, FELIMON MIRANDA, TERESITA MIRANDA,
ELIZABETH MIRANDA, ANALIZA MIRANDA, PABLO MIRANDA and PACITA MIRANDA as the lawful legal heirs of
the deceased TRANQUILINO MIRANDA and ordering them to partition among themselves Lot 826-A-1 covered by
TCT No. 186011 registered in the name of TRANQUILINO MIRANDA, containing an area of 213 square meters, as
follows:

1/13 aliquot share to Cornelio Miranda

1/13 aliquot share to Numeriano Miranda, Jr.

1/13 aliquot share to Erlinda Miranda

1/13 aliquot share to Lolita Miranda

1/13 aliquot share to Rufina Miranda

1/13 aliquot share to Danilo Miranda

1/13 aliquot share to Alejandro Miranda

1/13 aliquot share to Felimon Miranda

1/13 aliquot share to Teresita Miranda

1/13 aliquot share to Elizabeth Miranda

1/13 aliquot share to Analiza Miranda

1/13 aliquot share to Pablo Miranda

1/13 aliquot share to Pacita Miranda

6. Ordering all the abovenamed heirs to commission the survey of Lot 826-A-1 or to authorize in writing, one of them
to commission such survey, in order to avoid a chaotic situation similar to the case at bar. Should they not agree as to
what particular portion shall belong to one another, they may agree that it be allotted to one or two or several of them,
who shall indemnify the others at a price agreed upon by all of them. Should they not agree as to whom shall the
property be allotted, to sell the property to a third person at a price agreed upon by a majority of all of them, and to
partition the proceeds of the sale in accordance with No. 5 above.

SO ORDERED.7

Page 65 of 68
Petitioners did not file any appeal hence the Decision became final and executory. 8

On December 11, 2001, the RTC issued a Writ of Execution,9 which was not implemented.10

On July 8, 2005, respondent filed an Ex-parte Motion11 praying that the RTC issue a "Break-Open and Demolition
Order" in order to compel the petitioners to vacate his property. 12 But since more than five years have elapsed from
the time the Writ of Execution should have been enforced, the RTC denied the Motion in its Order 13 dated August 16,
2005.

This prompted respondent to file with the RTC a Petition14 for Revival of Judgment, which was docketed as Civil Case
No. 05-131. Petitioners opposed the revival of judgment assailing, among others, the jurisdiction of the RTC to take
cognizance of the Petition for Revival of Judgment.15

On June 20, 2006, the RTC rendered a Decision16 granting the Petition. Thus:

WHEREFORE, finding the instant petition to be meritorious, the petition is hereby GRANTED. Pursuant to Rule 39,
Section 6 of the Rules of Court, the Decision dated August 30, 1999 in Civil Case No. 94-612 is hereby REVIVED.

SO ORDERED.17

On July 13, 2006, petitioners filed a Notice of Appeal18 via LBC,19 which was opposed by respondent on the ground
that the Decision dated August 30, 1999 has long become final and executory. 20 Petitioners, in turn, moved for the
transmittal of the original records of the case to the CA, insisting that respondent’s opposition is without merit. 21

Ruling of the Regional Trial Court

Finding the appeal barred by prescription, the RTC denied the Notice of Appeal in its Order22 dated October 10, 2006,
to wit:

WHEREFORE, in view of the foregoing, the notice of appeal herein filed is hereby DENIED for lack of merit.

SO ORDERED.23

Feeling aggrieved, petitioners filed a Petition for Mandamus 24 with the CA praying that their Notice of Appeal be given
due course.25

Ruling of the Court of Appeals

On June 14, 2007, the CA denied the Petition for Mandamus on the ground that the Notice of Appeal was filed out of
time.26 The dispositive portion of the Decision reads:

WHEREFORE, premises considered, the petition is DENIED. The appeal is hereby DISMISSED for having been filed
out of time.

SO ORDERED.27

Petitioners moved for reconsideration but the same was denied by the CA in its Resolution 28 dated September 11,
2007.

Issues

Hence, this recourse, with petitioners raising the following issues:

1. WHETHER X X X THE APPEAL WAS PERFECTED ON TIME?

Page 66 of 68
 2. WHETHER X X X THE LATE (ONE DAY) FILING WAS JUSTIFIED?

3. WHETHER X X X AN ACTION FOR REVIVAL OF JUDGMENT IS APPEALABLE?

4. WHETHER THE APPEAL IS MERITORIOUS?

a. Whether the RTC below has exclusive original jurisdiction over an action for revival of judgment?

b. Whether xxx respondent herein, plaintiff therein, as one of the judgment creditors can file the
said action for revival ALONE?

c. Whether subsequent events or laws have rendered the judgment sought to be revived modified
or altered, or prevent its enforcement?

d. Whether res judicata or laches has seeped in, other judgment creditors not suing for any such
implementation of the 1999 judgment, ONLY PLAINTIFF ALONE?

e. Whether x x x the Petitioners are entitled to damages? 29

Petitioners’ Arguments

Petitioners assert that an action to revive judgment is appealable,30 and that their appeal was perfected on
time.31They insist that the Notice of Appeal, which they filed on the 15th day via LBC, was seasonably filed since the
law does not require a specific mode of service for filing a notice of appeal.32

Besides, even if their appeal was belatedly filed, it should still be given due course in the interest of
justice,33considering that their counsel had to brave the storm and the floods caused by typhoon "Florita" just to file
their Notice of Appeal on time.34

Petitioners further contend that their appeal is meritorious. 35 They insist that it is the Metropolitan Trial Court (MeTC),
not the RTC, which has jurisdiction over the Petition for Revival of Judgment since the amount in the tax declarations
of the properties involved is less than Fifty Thousand Pesos (₱50,000.00).36 They likewise assail the Decision dated
August 30, 1999, claiming that the deeds and certificates of title subject of Civil Case No. 94-612 were falsified.37

Respondent’s Arguments

Respondent, on the other hand, maintains that the Notice of Appeal was belatedly filed, 38 and that the revival of
judgment is unappealable as it is barred by prescription.39

Our Ruling

The Petition lacks merit.

The Notice of Appeal was belatedly filed.

It is basic and elementary that a Notice of Appeal should be filed "within fifteen (15) days from notice of the judgment
or final order appealed from."40

Under Section 3,41 Rule 13 of the Rules of Court, pleadings may be filed in court either personally or by registered
mail. In the first case, the date of filing is the date of receipt. In the second case, the date of mailing is the date of
receipt.

In this case, however, the counsel for petitioners filed the Notice of Appeal via a private courier, a mode of filing not
provided in the Rules. Though not prohibited by the Rules, we cannot consider the filing of petitioners’ Notice of
Appeal via LBC timely filed. It is established jurisprudence that "the date of delivery of pleadings to a private letter-

Page 67 of 68
forwarding agency is not to be considered as the date of filing thereof in court;" instead, "the date of actual receipt by
the court x x x is deemed the date of filing of that pleading." 42 Records show that the Notice of Appeal was mailed on
the 15th day and was received by the court on the 16th day or one day beyond the reglementary period. Thus, the
CA correctly ruled that the Notice of Appeal was filed out of time.

Neither can petitioners use typhoon "Florita" as an excuse for the belated filing of the Notice of Appeal because work
in government offices in Metro Manila was not suspended on July 13, 2006, the day petitioners’ Notice of Appeal was
mailed via LBC.43

And even if we, in the interest of justice, give due course to the appeal despite its late filing, the result would still be
the same. The appeal would still be denied for lack of merit.

The Decision dated August 30, 1999 is already final and executory.

An action for revival of judgment is a new and independent action. 44 It is different and distinct from the original
judgment sought to be revived or enforced.45 As such, a party aggrieved by a decision of a court in an action for
revival of judgment may appeal the decision, but only insofar as the merits of the action for revival is concerned. The
original judgment, which is already final and executory, may no longer be reversed, altered, or modified.46

In this case, petitioners assail the Decision dated August 30, 1999, which is the original judgment sought to be
revived or enforced by respondent.1âwphi1 Considering that the said Decision had already attained finality,
petitioners may no longer question its correctness. As we have said, only the merits of the action for revival may be
appealed, not the merits of the original judgment sought to be revived or enforced.

RTC has jurisdiction over the Petition for Revival of Judgment

As to whether the RTC has jurisdiction, we rule in the affirmative. An action for revival of judgment may be filed either
"in the same court where said judgment was rendered or in the place where the plaintiff or defendant resides, or in
any other place designated by the statutes which treat of the venue of actions in general." 47 In this case, respondent
filed the Petition for Revival of Judgment in the same court which rendered the Decision dated August 30, 1999.

All told, we find no error on the part of the CA in denying the Petition and dismissing the appeal for having been filed
out of time.

WHEREFORE, the Petition is hereby DENIED. The Decision dated June 14, 2007 and the Resolution dated
September 11, 2007 of the Court of Appeals in CA-G.R. SP No. 97350 are hereby AFFIRMED.

SO ORDERED.

Page 68 of 68