SECOND DIVISION ADM. MATTER NO. RTJ-04-1848 October 25, 2005 (Formerly OCA I.P.I. No.

03-1804-RTJ) Philippine Amusement and Gaming Corporation (PAGCOR), represented by Atty. Carlos R. Bautista, Jr.,Complainant, vs. HON. ROMULO A. LOPEZ, CHICO-NAZARIO,* Presiding Judge, Branch 34, Regional Trial Court, Manila,Respondent. RESOLUTION AUSTRIA-MARTINEZ, J.: PAGCOR filed the instant administrative complaint against Judge Romulo A. Lopez of the Regional Trial Court (RTC) of Manila, Branch 34, seeking his dismissal from the service for alleged gross ignorance of the law and for his disbarment for such ignorance, violation of the lawyers oath and the Code of Professional Responsibility. The administrative complaint stemmed from the proceedings in Civil Case No. 00-99133,1 entitled, Filipinas Gaming Entertainment Totalizator Corporation (FILGAME) vs. PAGCOR, Department of Interior and Local Government (DILG), and Secretary Alfredo S. Lim, filed with the RTC of Manila and assigned by raffle to Branch 34 presided by respondent Judge. The antecedents and the pertinent proceedings that transpired therein are as follows: On June 17, 1999, PAGCOR entered into an Agreement with FILGAME and BELLE Jai-Alai Corporation (BELLE) for the resumption of the Jai-Alai operations in the country.2 FILGAME and BELLE jointly agreed to provide funds, at no cost to complainant, for pre-operating expenses and working capital. PAGCOR shall manage, operate and control all aspects of the Jai-Alai operations. On October 19, 2000, the Office of the President of the Philippines issued a Memorandum addressed to Alicia Ll. Reyes, then PAGCOR Chairperson and Chief Executive Officer, directing her to take immediate steps to close down all PAGCOR facilities and outlets in Jai-Alai, on-line bingo and internet casino gaming. On October 20, 2000, DILG, through then Secretary Alfredo S. Lim, caused the closure of the Jai-Alai main fronton. Thus, on November 6, 2000, FILGAME and BELLE filed the case for Specific Performance and Injunction with prayer for Damages and Temporary Restraining Order (TRO), and Writ of Preliminary Injunction 3 against PAGCOR, DILG and Secretary Alfredo Lim, docketed as Civil Case No. 00-99133 and raffled to herein respondent Judge. On November 10, 2000, respondent issued a writ of temporary restraining order effective for 20 days. On November 29, 2000, this Court rendered a decision in the cases, entitled, Raoul B. Del Mar vs. PAGCOR, BELLE and FILGAME and Federico S. Sandoval II and Michael T. Defensor vs. PAGCOR,4 the decretal portion of which reads: WHEREFORE, the petitions are GRANTED. Respondents PAGCOR, Belle Jai-Alai Corporation and Filipinas Gaming Entertainment Totalizator Corporation are enjoined from managing, maintaining and operating jai-alai games, and from enforcing the agreement entered into by them for that purpose. Motions for Reconsideration filed by PAGCOR, BELLE and FILGAME were subsequently denied. Consequently, FILGAME and BELLE filed a Motion to Admit Amended Complaint 5 with the trial court where the cause of action was changed, i.e., from Specific Performance to Recovery of Sum of Money, inasmuch as plaintiffs could no longer ask for specific performance of their agreement with complainant since the Court had declared the agreement without force and effect. Thus, FILGAME and BELLE sought to recover their pre-operating expenses and/or investments totaling P1,562,145,661.87 including the goodwill money of P200,000,000.00 which they allegedly invested with the complainant. Complainant filed an opposition on the ground that there is a substantial change in the complaint and cause of action.

On November 27, 2001, respondent issued an Order 6 admitting the amended complaint and directing complainant and DILG to file their answer. Complainant filed a motion to dismiss the amended complaint 7 on the ground that the trial court had not acquired jurisdiction over the case for failure of the plaintiffs to pay the prescribed docket fees considering that the docket fee originally paid was only P1,212.00. It claimed that per the affidavit of Atty. Ma. Concepcion Gloria, 8complainants representative, she attested to the fact that as computed by the Docket Fee Assessor, the amended complaint, which sought recovery of the P1,562,145,661.87 including the P200,000,000 goodwill money, should have docket fees of P15,775,903.68. On June 19, 2002, respondent issued an Order 9 denying complainants motion to dismiss and directed it to file its answer. Respondent judge made the following ratiocination: Considering the parties arguments, this Court is of the opinion and so holds that there is no basis for dismissing the amended complaint since the original complaint was filed and the corresponding docket fee was paid by the plaintiff, the Court had acquired jurisdiction over the said complaint. Having done so, and considering the rule for the payment of the docket fees set forth in the Sun Insurance Office, Ltd. with respect to initiatory pleadings, there is no firm ground to dismiss the Amended Complaint. Under the said ruling "where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the Court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period." If a late payment of the docket fee is allowed in filing initiatory pleading to vest jurisdiction to the Court, with more reason the same leniency should be afforded in an amended pleading/complaint which sets out additional/new cause of action necessitating the increase of the docket fee. The plaintiff is correct in not immediately paying the additional filing fee before the amended complaint is admitted for why will it pay when there is no assurance that the amended complaint will be admitted. Once jurisdiction is acquired and vested in a Court, said Court maintains its jurisdiction until judgment is had. (Aruego, Jr., et al. vs. CA, 254 SCRA 711-719). Such acquired jurisdiction is not lost by the amendment of a pleading that raises additional/new cause(s) of action. The jurisdiction of a Court is not lost even if additional docket fees are required by reason of the amendment. In the same ruling in Sun Insurance case, "any additional filing (docket) fee shall constitute a lien on the judgment and that it shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee provided that the cause of action has not prescribed." Moreover in Yuchengco vs. Republic, 333 SCRA 368, 381, the Supreme Court even allowed the payment of the filing fees beyond the prescriptive period. Complainant then filed its Answer with compulsory counterclaim. 10 A pre-trial conference was conducted. On October 10, 2002, respondent issued a Pre-trial Order and at the same time directed the parties to submit their respective comments and/or manifestations on the said order. The pre-trial order listed 13 issues to be resolved. During the October 25, 2002 hearing, FILGAME and BELLE manifested their intention to file a Motion for Summary Judgment which they subsequently filed. Complainant filed its opposition thereto. Respondent did not conduct any hearing on the motion for summary judgment. On May 19, 2003, respondent rendered his decision by way of Summary Judgment11 in favor of FILGAME and BELLE where complainant was ordered to return and pay the sum of P1,562,145,661.87, representing the amount of pre-operating expenses and/or investment including the goodwill money given by plaintiffs and the release ofP500,000.00 cash bond posted in support of the TRO. On June 10, 2003, complainant filed its notice of appeal 12 which was subsequently withdrawn. On June 12, 2003, complainant filed with the Court of Appeals (CA) a petition for certiorari seeking the annulment of the respondents decision by way of summary judgment for having been rendered without or in excess of jurisdiction and with grave abuse of discretion.13 On July 8, 2003, complainant filed the present administrative case charging respondent with gross ignorance of the law and for violations of the Lawyers Oath and Code of Professional Responsibility in connection with his actions in Civil Case No. 00-99133.

In a Resolution dated January 26, 2004,14 we deferred action on this complaint until the final resolution of the petition for certiorari filed before the CA. On January 21, 2004, a judgment by compromise agreement15 was rendered by the CA in the certiorari case filed with it and an entry of judgment was subsequently made.16 Thereafter, complainant sought the continuation of the pending administrative case because there was no longer any legal impediment with the resolution of the certioraricase. Complainant charges respondent for gross ignorance of the law and procedure in (1) admitting the amended complaint of plaintiffs FILGAME and BELLE in Civil Case No. 00-99133 despite the fact that (a) the amended complaint is a total change of theory of the case; and (b) that the required filing fees for the amended complaint were not paid; and (2) in rendering summary judgment (a) despite the fact that respondent found the existence of 13 factual issues to be resolved; (b) without conducting a hearing on the motion for summary judgment; (c) based on the alleged implied admission rather than on the personal knowledge of witnesses and other affiants; and (d) despite the fact that plaintiffs were estopped from denying the existence of these 13 issues raised in the pre-trial order. Complainant contends that respondent denied its motion to dismiss the amended complaint without requiring plaintiffs FILGAME and BELLE to pay the correct docket fees within a reasonable time from the admission of the amended complaint, thus the court is deprived of its lawful docket fees in the amount of P15,774,691.68; that respondents reliance on the third rule enunciated in the Sun Insurance, i.e., allowing docket fee to constitute as lien on the judgment, finds no application in the civil case since the P1.5 Billion claim is not in the nature of an award not specified in the pleading. Complainant claims that respondent Judge was grossly ignorant of the law when he disregarded the 13 factual issues enumerated in his Pre-trial Order dated October 10, 2002 and rendered a summary judgment on the case; that in rendering a summary judgment, he disposed of the case with undue haste thus depriving it of its day in court; that no hearing was conducted by respondent for purposes of resolving FILGAME and BELLEs motion for summary judgment as provided under Section 3, Rule 35 of the Rules on Civil Procedure; that although opposition, reply and rejoinder were submitted by the parties, the same appeared to be inadequate considering the mandatory nature of the summary hearing. Complainant avers that respondent granted summary judgment based on its alleged implied admissions when it failed to specifically deny certain material allegations in the amended complaint and other pleadings of FILGAME and BELLE; that such is contrary to Section 5, Rule 35 and jurisprudence. In his Comment, respondent denied having committed gross ignorance of the law in admitting the amended complaint since dismissal is not the consequence provided for in not paying the right docket fee at the time the complaint or initiatory pleading is filed; that the trial court acquires jurisdiction over a claim by the filing of appropriate pleading and payment of the prescribed filing fee but when subsequently the judgment awards a claim not specified in the pleading, the additional filing fee therefor shall constitute a lien on the judgment. He argues that the grant of summary judgment despite the existence of a list of issues in his Pre-trial Order dated October 10, 2002 was not even final and only listed issues or matters which complainant refused to admit when counsel for BELLE and FILGAME asked for stipulations; that the holding of a trial type hearing is not absolutely indispensable for the court to rule on a motion for summary judgment; that he granted the motion for summary judgment not solely on the implied admissions made by complainant but based on the evidence on record and that complainants contention that plaintiffs are estopped from challenging the list of issues in the Pre-trial Order is without basis since plaintiffs had vigorously insisted for a summary judgment. Complainant filed a Reply where it claimed that because of respondents undue haste in rendering summary judgment, some of its evidence were suppressed. Respondent filed his Rejoinder where he stated that in his Order dated February 19, 2004, he required the payment of additional docket fees on the amended complaint which was complied with; that since it was the clerk of court who computed the same, any deficiency can still be collected by issuing another order. He denied the suppression of evidence since the alleged evidence were not attached to its answer to the amended complaint. Complainant filed a Sur-rejoinder claiming that the additional docket fees were based on the compromise agreement entered by the parties in the CA in the amount of P120 million and not in the amended complaint for recovery of money in the amount of P1.56 billion. In a Resolution dated September 15, 2004,17 the Court referred the case to Justice Noel G. Tijam of the CA for investigation, report and recommendation.

The Investigating Justice submitted his Report recommending the dismissal of the administrative and the disbarment complaint against respondent for patent lack of merit, based on the following findings: Anent the issue on non-payment of docket fees on the amended complaint Based on the evidence, the undersigned Investigator finds that Respondent Judge did not commit gross ignorance of the law in admitting the amended complaint. There is no evidence that the respondent Judge acted in bad faith or was motivated by fraud, dishonesty or corruption in issuing the assailed order. It is a well-settled rule that once the jurisdiction of the court attaches, it continues until the case is finally terminated. The trial court cannot be ousted therefrom by subsequent happenings of events, although of a character would have prevented jurisdiction from attaching in the first instance. The trial court validly acquired jurisdiction over the amended complaint. In the case of PNOC Shipping and Transport Corp. vs. CA, the Supreme Court ruled that the plaintiffs failure to pay the docket fee corresponding to its increased claim for damages to P600,000.00 under the amended complaint should not be considered as having curtailed the lower courts jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. vs. Asuncion, the unpaid docket fee should be considered as a lien on the judgment even though private respondent therein specified the amount of P600,000.00 as its claim for damages in its amended complaint. Besides, it is too late in the day to invoke lack of jurisdiction because the case decided by the respondent Judge elevated on appeal to the Court of Appeals has become final and executory when PAGCOR voluntarily entered into a compromise agreement in the Court of Appeals. Respondent Judge did not deviate from the rules when he did not dismiss the amended complaint for failure to pay the additional docket fee because the court may still require the same to be paid within a reasonable time and in no case beyond the prescriptive period. The timely payment of docket fees is jurisdictional, but considerations of law and equity come into the picture. Despite the jurisdictional nature on the rule on the payment of the docket fee, the court still has discretion to relax the rule in meritorious cases. Furthermore, the undersigned Investigator agrees with Respondent Judges argument that the assailed Order was consistent with Sec. 3, Rule 10 of the Rules on Civil Procedure, as amended and the ruling in the case of Pagubo vs. CA. Indeed, although an amendment may substantially change or alter the cause of action or defense, the same must 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 proceedings." Contrary to PAGCORs claim that Respondent Judge failed to issue an order to collect the additional docket fees, the evidence shows that Respondent Judge in fact issued an Order dated February 19, 2004, directing the Clerk of Court of the RTC of Manila to collect and require payment of docket fees within 15 days. The order was issued after the entry of judgment on a compromise which automatically lifted the TRO which earlier prevented the Respondent Judge from directing Belle and Filgame to pay the additional fees. Moreover, at PAGCORs instance, Respondent Judge issued another Order dated October 26, 2004 directing the Clerk of Court to recompute the docket fee. As to the claim that respondent judge rendered summary judgment despite the 13 factual issues embodied in the Pre-trial Order and that he did not find that plaintiffs are estopped from denying these factual issues Section 10 of Rule 8 of the Rules provides that if the defendant is without knowledge or information sufficient to form a belief as to the truth of the material averment in the complaint, he is bound to so state and this shall have the effect of denial. In such a case it is indispensable that the matter denied for lack of knowledge is alleged be clearly set forth so that the adverse party is informed of what is denied. A scrutiny of the amended answer of PAGCOR in Civil Case No. 00-99133, shows that PAGCOR actually knows the gross and net income from the Jai-Alai operations, the tax paid by PAGCOR and the pre-operating expenses of Belle and Filgame. Considering that the Agreement between PAGCOR and Filgame and Belle provided that PAGCOR shall manage, operate and control all aspects of Jai-Alai operation pursuant to its franchise, it would have been unbelievable for them not to know the gross and net income from the Jai-Alai operations from June 1999 to December 2000; the tax paid by PAGCOR to BIR; and the effect of Jai- Alai operations on the government revenues and where the income of PAGCOR was used. Furthermore, Belle and Filgame had furnished PAGCOR a copy of the amount of pre-operating per request of PAGCOR as evidenced by a letter dated September 15, 1999 of Edgardo M. del Fonso, President of Belle Jai-Alai Corporation addressed to Renaldo Tenorio, President and Chief Operating Officer of PAGCOR and the receipt of which was not denied by PAGCOR.

PAGCORs blanket denial of the said allegations in the amended complaint is ineffective because such facts are within PAGCORs knowledge. Thus, said denial was properly treated as an admission. Indeed, in a similar case, PNB vs. Court of Appeals, the private respondent therein denied the averments in the complaint regarding the fact of withdrawal of $14,056.25 in PCIB-Cagayan de Oro City Account No. 16087 and the surrounding circumstances of said withdrawal. The private respondent, however, admitted the averment in the complaint that he is the sole signatory of the subject account. The Supreme Court considered said denial as ineffective because such fact was within the knowledge of the private respondent, being the sole signatory to the said account. Private respondents denial was consequently declared by the Supreme Court as equivalent to an admission. Respondent Judge, therefore, correctly granted the motion for summary judgment based on the Agreement dated June 17, 1999 and the stipulation made by PAGCORs counsel, Atty. Bautista, regarding the records of summary operations covering the period of June 1999 to October 2000 being true and correct, having been prepared by a responsible officer of PAGCOR and based on the existing records of PAGCOR. All told, based on the evidence, PAGCOR was privy to all the material allegations in the amended complaint relating to the Jai-Alai operations. It would have been incredulous for PAGCOR to claim ignorance or lack of knowledge of said material allegations. Convincingly, Respondent Judge had sufficient basis to render summary judgment. As to the claim that the summary judgment was rendered without hearing Based on the evidence,we find that Respondent Judge did not commit gross ignorance of the law in not conducting a trial type hearing in resolving the motion for summary judgment. Well-settled is the rule that, in proceedings for summary judgment, the court is merely expected to act chiefly on the basis of what is on the records of the case and that the hearing contemplated in the Rules is not de riguer as its purpose is only to determine whether the issues are genuine or not and not to receive evidence on issues set up in the pleadings. Based on the records and the evidence presented, the trial type hearing on the motion was dispensable in view of the fact that PAGCORs blanket/ineffective denial in its answer to the amended complaint had the effect of an admission, thus, did not raise any genuine issues. Furthermore, a hearing on the motion for summary judgment was not necessary considering that the evidence necessary for the resolution of the same was already part of the records. It is evident from the records, particularly in the minutes of the hearings held on November 22, 2002 and February 10, 2003, as well as Respondent Judges Order issued on even dates, that PAGCOR was given ample opportunity to be heard and present its evidence in opposition to the motion for summary judgment, but PAGCOR chose not to adduce any such evidence. The scheduled hearing on the motion for summary judgment was cancelled and the motion was considered submitted for resolution without PAGCOR objecting on the absence of a hearing. PAGCOR, therefore, cannot now insist that Respondent Judge should have conducted a hearing on the motion. As to the claim that respondent Judge granted the summary judgment based on complainants implied admissionsIt is a recognized rule in summary judgment that the trial court can determine whether there is genuine issue on the basis of the pleadings, admissions, documents, affidavits, and/or counter-affidavits submitted by the parties. On the basis of this rule PAGCOR cannot claim that Respondent Judge was grossly ignorant of the law and procedure when he rendered summary judgment based on implied admissions of the material facts in the amended complaint and not on personal knowledge of witnesses and other affiants. PAGCOR cannot rely solely on Section 5, Rule 35 of the Rules of Court because the provision pertains only to cases when affidavits and supporting papers are submitted to establish whether there is genuine issue. Such supporting affidavits must be made on personal knowledge. Section 1, Rule 35 is explicit that the movant of the motion for summary judgment can support his motion with affidavits, depositions and admissions. It is illogical to claim that a motion for summary judgment must be resolved based on affidavits alone, considering that the Rules are clear that the motion can likewise be supported by depositions and admissions. As to complainants claim that respondent Judge should be disbarred because he violated the laws, rules and legal principles The complaint for violation of lawyers oath and Code of Professional Responsibility is not meritorious. The complaint for disbarment is unfounded. There was no gross ignorance of the law and procedure committed by the Respondent Judge. Considering the evidence presented, Respondent Judge conducted the proceedings in accordance with the applicable laws and procedure. To constitute gross ignorance of the law, the judges actuation must not only be contrary

to law and jurisprudence, the judge must have also been moved by bad faith, fraud, dishonesty or corruption. The records are also bereft of any showing of bad faith, fraud, dishonesty and corruption on the part of the Respondent Judge. It is settled that in administrative proceedings, the complainant has the burden of substantiating the charges asseverated in the complaint. The complainant has the burden of proving the allegations in the complaint with substantial evidence. In the absence of evidence to the contrary, the presumption that respondent has regularly performed his duties will prevail. Applying the same in the case, PAGCOR failed to support its allegations with substantial and competent evidence to warrant the dismissal and disbarment of the Respondent Judge. As a matter of policy, in the absence of fraud, dishonesty, and corruption, the acts of the judge in his judicial capacity are not subject of disciplinary action even though such acts are erroneous. He cannot be subjected to liability civil, criminal, or administrative for any of his official acts, no matter how erroneous, as long as he acts in good faith. Only judicial errors tainted with fraud, dishonesty, gross ignorance, bad faith or deliberate intent to do an injustice will be administratively sanctioned. To hold otherwise, would be to render the judicial office untenable, for no one is called upon to try the facts or interpret the law in the process of administering justice can be infallible in his judgment. Well-settled is the rule that, if a party is prejudiced by the orders of a judge, his remedy lies with the proper court for proper judicial action and not with the office of the Court Administrator by means of an administrative complaint. It is an established doctrine and policy that disciplinary proceedings and criminal actions against judges are not complementary or suppletory of, nor a substitute for, these judicial remedies, whether ordinary or extraordinary. Resort to and exhaustion of these judicial remedies, as well as entry of judgment in the corresponding action or proceeding, is pre-requisite for the taking of other measure against the person of the judges concerned. It is only after the available judicial remedies have been exhausted and the appellate court have spoken with finality, the door to an inquiry into his criminal, civil and administrative liability may be said to have opened or closed. Here, the administrative complaint was filed by the Complainant pending the resolution of PAGCORs Petition for Certiorari filed before the Court of Appeals. As such, the filing of this administrative case was in disregard of the rules, if not malicious. Indeed, Civil Case No. 0099133 has not been resolved with finality at the time the administrative complaint was filed with the Supreme Court. Also, a review of the records of the case discloses the fact that counsels of PAGCOR were negligent in handling their case. Clearly, this baseless administrative case was filed merely to harass Respondent Judge in the hope that the negligence of PAGCORs counsel would be conveniently overlooked or unjustifiably mitigated. The Court agrees with the findings and recommendation of the Investigating Justice that the administrative complaint against respondent be dismissed. The Court finds no gross ignorance of law committed by respondent when he admitted the amended complaint notwithstanding that such amended complaint substantially altered the cause of action of plaintiffs FILGAME and BELLE. Section 3, Rule 10 of the Rules of Court, provides: 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. As held in Valenzuela vs. CA,18 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.(emphasis supplied). The original complaint filed by the plaintiffs was for specific performance and injunction with prayer for damages and for TRO and writ of preliminary injunction against complainant while the amended complaint was for recovery of sum of money. Such amendment to the original complaint was filed by plaintiffs FILGAME and BELLE after the Supreme Court decision declared that complainant could not enter into a joint agreement with other corporations to operate the Jai-Alai, and that the Agreement dated June 17, 1999 entered into between complainant and the plaintiffs is null and void. However, since plaintiffs had provided funds for complainants pre-operating expenses and working capital, plaintiffs had to file an amended

complaint which seeks the recovery of their expenses. Although the amended complaint substantially changed the cause of action of plaintiffs FILGAME and BELLE, the admission thereof by respondent is allowed under Section 3, Rule 10 and jurisprudence. The Court also finds that respondent was not guilty of gross ignorance of the law when he admitted the amended complaint despite the non-payment by plaintiffs FILGAME and BELLE of additional docket fees on the amended complaint. In Sun Insurance Office, Ltd. vs. Asuncion,19 the Court laid down the rules on the payment of docket fees as follows: 1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may also allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. 3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee.20 Respondent is correct in ruling in his Order dated June 19, 2002 that the court had jurisdiction over the amended complaint as it had acquired jurisdiction over the case when the original complaint was filed and the corresponding docket fee was paid thereon. Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its non-payment at the time of filing does not automatically cause the dismissal of the case, as long as the fee is paid within the applicable prescriptive or reglementary period. Respondent also stated in the same order that this Court in the Sun Insurance case had further declared that "any additional filing (docket) fee shall constitute a lien on the judgment and that it shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee provided that the cause of action has not prescribed." In PNOC Shipping and Transport Corporation vs. CA,21 the Court held: With respect to petitioner's contention that the lower court did not acquire jurisdiction over the amended complaint increasing the amount of damages claimed to P600,000.00, we agree with the Court of Appeals that the lower court acquired jurisdiction over the case when private respondent paid the docket fee corresponding to its claim in its original complaint. Its failure to pay the docket fee corresponding to its increased claim for damages under the amended complaint should not be considered as having curtailed the lower court's jurisdiction. Pursuant to the ruling in Sun Insurance Office, Ltd. (SIOL) v. Asuncion, the unpaid docket fee should be considered as a lien on the judgment even though private respondent specified the amount of P600,000.00 as its claim for damages in its amended complaint. 22 Thus, the unpaid additional docket fees should be considered as a lien on the judgment even though plaintiffs had specified the amount of P1,562,145,661.87 in the prayer of the amended complaint. Moreover, the issue of jurisdiction for non-payment of additional docket fees is deemed abandoned as there was neither a motion for reconsideration nor a petition questioning such Order filed by complainant. In fact, when the amended complaint was admitted and respondent directed complainant to file its answer, the latter filed its Answer with compulsory counterclaim and without questioning the jurisdiction of the trial court on the ground of insufficient payment of docket fees. Complainant even invoked the courts authority when it asked for affirmative relief on its counterclaim, thus it is estopped from challenging the courts jurisdiction.23 Moreover, as observed by the Investigating Justice, "it is too late in the day to invoke lack of jurisdiction because the civil case decided by the respondent which was elevated on appeal to the CA has become final and executory when complainant voluntarily entered into a compromise agreement in the CA."24 Thus, the issues raised in the petition for certiorari were not actually resolved. Thus, it becomes necessary for the Court to determine in the present administrative case whether or not respondent is guilty of gross ignorance of the law. Respondent, in his Order dated February 19, 2004, after the entry of judgment on the compromise agreement, directed plaintiffs BELLE and FILGAME to cause the computation of the additional docket on the amended complaint, of which the Clerk of Court of Manila is directed to collect. Plaintiffs paid the amount of P1,058,732.48. However, it appeared that based

on the affidavit of the collecting agent, she assessed the docket fees based on the judgment on the compromise which was presented to her by the plaintiffs and not on the amended complaint as stated in the respondents Order dated February 19, 2004, thus docket fees collected were still insufficient. If the amount of docket fees paid is insufficient considering the amount of the claim, the clerk of court of the lower court involved or his duly authorized deputy has the responsibility of making a deficiency assessment,25 thus it is no longer the fault of respondent when there was a mistake in the assessment. However, when the matter was brought to the attention of respondent by complainant in its sur-rejoinder in this administrative complaint, respondent called the attention of the clerk of court where she was asked to recompute the same so that proper order can be issued.26 Respondent, on November 18, 2004, issued another Order based on the compliance report submitted by the Clerk of Court that plaintiffs have still to pay the amount of P14,717,171.19 based on the claim in the amended complaint by directing the plaintiffs to pay within 15 days from receipt. These actuations of respondent are in accordance with the Sun Insurance case. Anent complainants claim that respondent was grossly ignorant of the law in rendering summary judgment (a) based on implied admissions; (b) notwithstanding the 13 factual issues embodied in respondents Pre-Trial Order dated October 10, 2002; and (c) without conducting a trial, the Court finds that these alleged errors committed by respondent pertained to the performance of his adjudicative functions. In Maquiran vs. Grageda,27 we held: As everyone knows, the law provides ample judicial remedies against errors or irregularities being committed by a Trial Court in the exercise of its jurisdiction. The ordinary remedies against errors or irregularities which may be regarded as normal in nature (i.e., error in appreciation or admission of evidence, or in construction or application of procedural or substantive law or legal principle) include a motion for reconsideration (or after rendition of judgment or final order, a motion for new trial), and appeal. The extraordinary remedies against error or irregularities which may be deemed extraordinary in character (i.e., whimsical, capricious, despotic exercise of power or neglect of duty, etc.) are, inter alia, the special civil action of certiorari, prohibition or mandamus, or a motion for inhibition, a petition for change of venue, as the case may be. Now, the established doctrine and policy is that disciplinary proceedings and criminal actions against Judges are not complementary or suppletory of, nor a substitute for, these judicial remedies, whether ordinary or extraordinary. Resort to and exhaustion of these judicial remedies, as well as the entry of judgment in the corresponding action or proceeding, are pre-requisites for the taking of other measures against the persons of the judges concerned, whether of civil, administrative, or criminal nature. It is only after the available judicial remedies have been exhausted and the appellate tribunals have spoken with finality, that the door to an inquiry into his criminal, civil, or administrative liability may be said to have opened, or closed. Law and logic decree that "administrative" or criminal remedies are neither alternative nor cumulative to judicial review where such review is available, and must wait on the result thereof'. Indeed, since judges must be free to judge, without pressure or influence from external forces or factors, they should not be subject to intimidation, the fear of civil, criminal or administrative sanctions for acts they may do and dispositions they may make in the performance of their duties and functions; and it is sound rule, which must be recognized independently of statute, that judges are not generally liable for acts done within the scope of their jurisdiction and in good faith; and that exceptionally, prosecution of the judge can be had only if "there be a final declaration by a competent court in some appropriate proceeding of the manifestly unjust character of the challenged judgment or order, and ** also evidence of malice or bad faith, ignorance of inexcusable negligence, on the part of the judge in rendering said judgment or order" or under the stringent circumstances set out in Article 32 of the Civil Code. Considering that the resolution of these issues was foreclosed when the parties entered into a compromise agreement in the petition for certiorari involving said issues, the Court, in the present administrative case, will not and cannot resolve the same for obvious reason. The least that the Court can do, under the circumstances, is to determine whether respondent may be held administratively liable for rendering the summary judgment. The 13 issues which were embodied in the Pre-trial Order of the respondent judge are as follows: 1. Whether or not plaintiffs incurred the total expenses of P1,562,145,661.87; 2. Whether or not PAGCOR as a result of the expenditures which FILGAME and Belle agreed to bear PAGCOR earned P200,000,000.00 goodwill money and a net income of P197,000,000.00; 3. Whether or not plaintiffs have only jointly earned P173,000,000.00 or barely 9% of their total investment ofP1.56 Billion;

4. Whether or not PAGCORs Jai- Alai operations generated gross earnings in the aggregate amount ofP2,826,947,353.00 from June of 1999 to November 30, 2000; 5. Whether or not the average earnings for that period is P157,052,630.73 per month for that same period; 6. Whether or not from the period from June 1999 to November 30, 2000 PAGCOR realized a net income ofP199,738,755.31; 7. Whether or not from the period of June 1999 to November 30, 2000 PAGCOR remitted the amount ofP262,470,808.71 to the BIR; 8. Whether or not with the reactivation of Jai-Alai operations no revenues were generated by the Philippine government; 9. Whether or not PAGCORs earnings from Jai-Alai operations contributed immensely not only in terms of boosting governments coffers but directly funding socio-economic projects; 10. Whether or not Belle and FILGAME relying on the representations made by PAGCOR, the OGCC and the Department of Justice have at all times faithfully complied with their obligations and undertakings with the end in mind that they will be able to recover their investment and earn a responsible return thereon before the expiration of the agreement between Belle and PAGCOR on the year 2008; 11. Whether or not Belle and FILGAME made its massive investment of financial and physical capital worth approximately P1.56 Billion relying upon PAGCORs representation and the Philippine governments categorical and official representation through the OGCC and Department of Justice that it was legal for Belle and FILGAME to recover its investment and profit through sharing in the income form (sic) an ongoing and legally sanctioned Jai-Alai operation carried on by PAGCOR under and in accordance with the June 17, 1999 agreement between plaintiffs and PAGCOR; 12. Whether or not PAGCOR closed the Jai-Alai operations before the finality of the resolution on June 19, 2001 and without legal basis; 13. Whether or not PAGCOR may be required to pay Belle and FILGAME by way of quantum meruit compensation for the use of facilities and network provided to PAGCOR, and for the services and technical know how already put to service of PAGCOR and the government for the years 1999 to 2000 based on the expected return of investment of Belle and FILGAME and the projected income of PAGCOR for the period ending in 2008. 28 A perusal of these issues convinces us that issues no. 1 and no. 13 are genuine issues which necessitate the presentation of evidence so as to establish plaintiffs FILGAME and BELLEs action for the recovery of the sum ofP1.56 Billion. The Court finds that respondent erred in rendering the summary judgment, however, respondent could not be held administratively liable. To justify the taking of drastic disciplinary action, the law requires that the error or mistake of the judge must be gross or patent, malicious, deliberate or in bad faith. 29 These are not present in the instant case. The Investigating Justice finds, and the Court agrees, that there is no evidence showing that respondent acted with malice in rendering the summary judgment. This is bolstered by the fact that a judgment by compromise agreement was already rendered by the CA on the civil case and an entry of judgment was subsequently made. Moreover, the Court finds that respondent had meticulously explained why he found no genuine issue as to the fact that plaintiffs are entitled to the recovery of their investments, to wit: a. The provisions of the June 17, 1999 Agreement between PAGCOR, BELLE and FILGAME (Exh "1") which gave PAGCOR the power to manage/operate and control all aspects of Jai-Alai operation, and the duty to both maintain separate accounts, ledgers and other records and to render periodic accounting and financial reports relative to Jai-Alai operation. b. The fact that the Managing Head for Finance of PAGCORs Jai-Alai Department, Mrs. Esther H. Reyes, not only testified that it was part of her job to make financial reports to management, but was able to produce both records of the daily gross receipts of Jai-Alai operations for September 2000 and October, 2000 and summaries of the results of those operations from June 1999 to October 2000. c. The fact that PAGCOR counsel, Atty. Carlos R. Bautista, Jr. categorically stipulated that the records of daily gross receipts and summaries of operations produced by Mrs. Esther H. Reyes are genuine and prepared by the corresponding Jai-Alai Department of PAGCOR based on PAGCORs records.

d. The fact that FILGAMESs Mr. Cesar Marcelo testified that PAGCOR required BELLE and FILGAME to submit valuations of the properties contributed by it to the Jai-Alai operations and that FILGAME in compliance submitted an appraisal report prepared by Cuervo Appraisers, Inc. while BELLE complied by submitting as an attachment to a letter dated September 15, 1999 to PAGCOR President Mr. Reynaldo Y. Tenorio an inventory listing the value of the assets contributed by BELLE and FILGAME to the Jai-Alai operation.30 We reiterate the rule that not every error or mistake that a judge commits in the performance of his duties renders him liable, unless he is shown to have acted in bad faith or with deliberate intent to do an injustice. Good faith and absence of malice, corrupt motives or improper considerations are sufficient defenses in which a judge charged with ignorance of the law can find refuge.31 Anent the claim that there was no hearing conducted on the motion for summary judgment, the same was with the acquiescence of PAGCORs counsel. The records show that the motion for summary judgment was set for hearing by plaintiffs on December 1, 2002, i.e., 11 days from service of the motion as required by the Rules. In the Order dated November 22, 2000 respondent granted PAGCORs prayer to be given 20 days to submit comment/opposition to the motion for summary judgment to copy furnish plaintiffs counsel who is then given 7 days to file his reply and for PAGCOR to file a rejoinder. The same order states that thereafter the pending incident shall be considered submitted for resolution. Complainant did not ask for a hearing or any additional relief. It evidently agreed to the respondents order that upon submission of those pleadings, the incident would be submitted for resolution. The signature of complainants counsel affixed in the minutes showed his agreement thereto. In fact, in the Order dated February 10, 2003, the respondent declared that both parties agreed that the motion and the subsequent pleadings filed are submitted for resolution. Again, complainants counsel never registered his objections thereto as he in fact affixed his signature to the minutes thereof. In Ley Construction and Development Corporation vs. Union Bank of the Philippines,32 the Court held: Admittedly, there is nothing in the records which indicates that Judge Arcangel conducted a hearing before he resolved respondents motion for summary judgment. Nevertheless as explained in Carcon Development Corporation v. Court of Appeals, in proceedings for summary judgment, the court is merely expected to act chiefly on the basis of what is in the records of the case and that the hearing contemplated in the Rules is not de riguer as its purpose is merely to determine whether the issues are genuine or not, and not to receive evidence on the issues set up in the pleadings. 33 Considering the foregoing, there exists no valid ground for the disbarment of respondent. WHEREFORE, the instant administrative complaint against respondent Judge Romulo A. Lopez is DISMISSED. SO ORDERED.

SECOND DIVISION G.R. No. 120384 January 13, 2004

PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORPORATION, petitioner-appellant, vs. PHILIPPINE INFRASTRUCTURES, INC., PHILIPPINE BRITISH ASSURANCE CO., INC., THE SOLID GUARANTY, INC., B.F. HOMES, INC., PILAR DEVELOPMENT CORPORATION and TOMAS F. AGUIRRE, respondents-appellees. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Philippine Export and Foreign Loan Guarantee Corporation. Petitioner corporation seeks to set aside the Decision 1 of the Court of Appeals dated August 31, 1994, dismissing CA-G.R. SP No. 31483; the Resolution dated May 18, 1995 denying petitioners motion for reconsideration; the Order of the Regional Trial Court (Branch 29) of Manila, dated December 7, 1992, dismissing Civil Case No. 86-381692 and the Order dated April 12, 1993 denying the motion for reconsideration of said dismissal order. The antecedent facts are as follows: The case was commenced at the Regional Trial Court on October 30, 1986, upon the filing by herein petitioner of a complaint for collection of sum of money against herein respondents Philippine Infrastructures, Inc. (PII for brevity), Philippine British Assurance Co., Inc. (PBAC), The Solid Guaranty, Inc. (Solid), B.F. Homes, Inc. (BF Homes), Pilar Development Corporation (PDC) and Tomas B. Aguirre (Aguirre). The complaint alleges that: petitioner issued five separate Letters of Guarantee in favor of the Philippine National Bank (PNB) as security for various credit accommodations extended by PNB to respondent PII; respondents PII, BF Homes, PDC and Aguirre executed a Deed of Undertaking binding themselves, jointly and severally, to pay or reimburse petitioner upon demand such amount of money or to repair the damages, losses or penalties which petitioner may pay or suffer on account of its guarantees; as security for prompt payment by respondent PII, the latter submitted to petitioner, surety and performance bonds issued by respondents PBAC and Solid; on April 24, 1985, the PNB called on the guarantees of petitioner, and so, the latter demanded from respondent PII the immediate settlement of P20,959, 529.36, representing the aggregate amount of the guarantees of petitioner called by PNB and the further sum ofP351,517.57 representing various fees and charges; PII refused to settle said obligations; petitioner likewise demanded payment from respondents Solid and PBAC but they also refused to pay petitioner; and because of the unjustified refusal of respondents to comply with their respective obligations, petitioner was constrained to secure the services of counsel and incur expenses for the purpose of prosecuting its valid claims against the respondents. It is prayed in the complaint that judgment be rendered ordering respondents PII, BF Homes, PDC and Aguirre to pay petitioner the amount of P21,311,046.93 plus interest and penalty charges thereon, ordering respondents Solid and PBAC to pay P5,758,000.00 andP9,596,000.00, respectively, under their surety and/or performance bonds and ordering respondents to pay petitioner the sums of P2,000,000.00 as attorneys fees and expenses of litigation and P50,000.00 as exemplary damages. Respondent BF Homes filed a Motion to Dismiss3 on the ground that it is undergoing rehabilitation receivership in the Securities and Exchange Commission (SEC) and pursuant to P.D. 902-A, the trial court has no jurisdiction to try the case. Respondent PII also filed a Motion to Dismiss 4 on the ground that the complaint states no cause of action since it does not allege that petitioner has suffered any damage, loss or penalty because of the guarantees petitioner had extended for and on behalf of respondent PII.

The other respondents filed their respective responsive pleadings. On June 10, 1987, Judge Roberto M. Lagman issued an Order 5 suspending the case only as against respondent BF Homes and denying respondent PIIs motion to dismiss. Thereafter, hearing on the merits ensued. On January 21, 1992, petitioner presented Rosauro Termulo, the treasury department manager of petitioner, who testified that the amount of P19,035,256.57 was paid on July 28, 1990 by petitioner to the PNB through the account of the National Treasury to cover the principal loan and interests, as guaranteed by petitioner; and, Exhibit "LL," a debit memo issued by the PNB, showing that the latter was paid by the National Treasurer in behalf of petitioner corporation. Consequently, on February 19, 1992, petitioner filed a Motion to Amend Complaint to Conform to Evidence 6 pursuant to Section 5, Rule 10 of the Revised Rules of Court, seeking to amend Paragraph 17 and the pertinent portion of the prayer in the complaint, to read as follows: 17. Because of the unjustified refusal of the defendants to comply with their respective obligations, the plaintiff as guarantor has been constrained to pay the Philippine National Bank thru the account of the National Treasury the amount of Nineteen Million Thirty-five Thousand Two Hundred Fifty-six and 57/100 (P19,035,256.57) on July 28, 1990 representing payment of principal loan of P12,790,094.83 and interest of P6,245,111.54 due March 16, 1987 on the Philippine Infrastructure, Inc./Philguaranty loan under the PNB Expanded Loan Collection Program; and which amount was deducted from the equity share of the National Government in Philguarantee. In view of defendants unwarranted failure and refusal to settle their respective accountabilities plaintiff was likewise constrained to secure the services of counsel and incur expenses in the process of prosecuting its just and valid claims against the defendants; accordingly, the defendants should be held liable, jointly and severally, to pay the plaintiff attorneys fees and expenses of litigation in the amount of P2,000,000.00 or about ten (10%) percent of the guaranteed obligations. ... PRAYER ... (a) Ordering defendant PII, BF Homes, PILAR and AGUIRRE to pay plaintiff, jointly and severally, the amount of P19,035,256.57 plus P351,517.57 extension guarantee fees and amendment fees, plus interests and penalty charges thereon; . . .7 Acting on the motion to amend, the trial court, at that time presided by Judge Joselito J. Dela Rosa, issued the assailed Order dated December 7, 1992,8 dismissing the case without prejudice on the ground of failure of the complaint to state a cause of action, thus in effect, reversing the Order dated June 10, 1987 issued by Judge Lagman five years earlier. Petitioners motion for reconsideration of the order of dismissal was denied by Judge de la Rosa per his Order 9 dated April 12, 1993. On June 9, 1993, a petition for review on certiorari was filed by petitioner against the Regional Trial Court with this Court. On June 23, 1993, the Court issued a Resolution10 which reads: Considering that under Section 9 of Batas Pambansa Blg. 129, the Intermediate Appellate Court (Court of Appeals) now exercises exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions, the Court Resolved to REFER this case to the Court of Appeals, for disposition. The Court of Appeals re-docketed the petition as CA-G.R. SP No. 31483. On August 31, 1994, the Court of Appeals promulgated the assailed Decision, dismissing the petition on the following grounds: FIRSTLY, an order of dismissal, whether right or wrong, is a final order. If it is erroneous, the remedy of the aggrieved party is appeal. Hence, the same cannot be assailed by certiorari, as in this case (Marahay vs. Malicor, 181 SCRA 811). Considering the Supreme Court Circular No. 2-90, paragraph 4 regarding an appeal by wrong mode, the order of dismissal in this case was therefore correctly issued by the respondent court a quo.

SECONDLY, the real purpose of petitioner herein in asking the respondent court a quo for leave to amend its complaint was not ostensibly to make the complaint conform to the evidence presented, as petitioner alleges, but to introduce a cause of action then non-existing when the complaint was filed. The ruling in the leading case of Surigao Mine Exploration Co. vs. Harris (69 Phil. 113) does not allow such amendment. Hence, the trial court was correct in denying the amendment and instead it dismissed the case. THIRDLY, in the case at bar, the motion to dismiss was first denied but there is nothing in the Rules of Court which prohibits the court from later on reversing itself and granting the motion to dismiss. This ruling is supported by earlier decisions of the Supreme Court in Lucas vs. Mariano, et al (L-29157, April 27, 1972) and Vda. De Haberer vs. Martinez, et al. (L-39386, Jan. 29, 1975) where the trial court dismissed the complaint, then set it aside and finally again ordered it dismissed. 11 On May 19, 1995, the appellate court issued a Resolution12 denying petitioners motion for reconsideration. Hence, on June 14, 1995, petitioner filed the present petition for review on certiorari, claiming that the Court of Appeals committed the following errors: I. THE HONORABLE COURT OF APPEALS AFFIRMATION OF THE REGIONAL TRIAL COURT JUDGES ORDER DISMISSING CIVIL CASE NO. 86-38169 MOTU PROPIO ON THE PREMISE THAT HIS PREDECESSOR JUDGE WAS IN ERROR IN NOT GRANTING THE MOTION TO DISMISS FILED YEARS BACK, ALLEGEDLY BECAUSE "THERE WAS NO CAUSE OF ACTION AT THE TIME OF THE FILING OF THE COMPLAINT" IS CONTRARY TO LAW AND JURISPRUDENCE. II. THE HONORABLE COURT OF APPEALS AFFIRMATION OF THE REGIONAL TRIAL COURT JUDGES ORDER IN NOT ALLOWING THE AMENDMENT OF THE COMPLAINT TO CONFORM TO THE EVIDENCE PRESENTED WITHOUT OBJECTIONS, IS CONTRARY TO LAW AND JURISPRUDENCE. III. THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT THE REAL PURPOSE OF PETITIONERAPPELLANT IN ASKING FOR LEAVE TO AMEND ITS COMPLAINT WAS NOT TO MAKE THE COMPLAINT CONFORM TO THE EVIDENCE PRESENTED BUT TO INTRODUCE A CAUSE OF ACTION THEN NONEXISTING WHEN THE COMPLAINT WAS FILED. IV. THE HONORABLE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE TO PETITIONERAPPELLANTS PETITION FOR REVIEW.13 Respondents, on the other hand, asseverate that the petitioner went to the Court of Appeals on a wrong remedy as the proper remedy was for it to appeal from the order of dismissal and not to file a petition for review on certiorari; and that the Court of Appeals committed no error in sustaining the lower court as the original complaint below failed to state a cause of action and the real purpose of the amendment was to introduce a subsequently acquired cause of action. The Court will first resolve the question whether an order dismissing a petition without prejudice should be appealed by way of ordinary appeal, petition for review on certiorari or a petition for certiorari. Indeed, prior to the 1997 Rules of Civil Procedure, an order dismissing an action may be appealed by ordinary appeal as what happened in Lucas vs. Mariano14 and Vda. de Haberer vs. Martinez,15 cited by the Court of Appeals in its assailed decision. However, in the advent of the 1997 Rules of Civil Procedure, Section 1(h), Rule 41 thereof expressly provides that no appeal may be taken from an order dismissing an action without prejudice. It may be subject of a special civil action for certiorari under Rule 65 of the Rules of Court, as amended by the said 1997 Rules of Civil Procedure. Considering that the assailed decision of the Court of Appeals was promulgated in 1994, respondent appellate court could not have committed any grave abuse of discretion in dismissing CA-G.R. SP No. 31483.

Nevertheless, in the higher interest of substantial justice and pursuant to the hornbook doctrine that procedural laws may be applied retroactively,16 the Court gives due course to the present petition and will resolve the issue whether the Court of Appeals erred in affirming the lower courts order dismissing the complaint on the ground that petitioner failed to state a cause of action for not alleging loss or actual payment made by it to PNB under its guarantees. The trial court issued an order of dismissal in stead of granting a motion to amend complaint to conform to evidence, pursuant to Section 5, Rule 10 of the Revised Rules of Court, to wit: Sec. 5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment, but failure to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence. It should be stressed that amendment was sought after petitioner had already presented evidence, more specifically, the testimony of petitioners Treasury Department Manager and a debit memo from the PNB (Exhibit "LL") proving that petitioner had paid the PNB in the amount of P19,035,256.57 pursuant to the guarantees it accorded to respondent PII. Petitioner avers that respondents did not raise any objection when it presented evidence to prove payment to PNB. Hence, as provided for in Section 5, Rule 10 of the Revised Rules of Court, when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. A scrutiny of the pleadings filed by respondents reveal that none of them denied petitioners claim that said evidence was presented before the trial court without objections having been raised by respondents. None of them claimed that they raised any objections at the time when petitioner presented its evidence to prove its payment to PNB. Respondents Pilar and Aguirre admitted the presentation of the said evidence. Respondents contend that since they had already alleged the failure of the complaint to state a cause of action as an affirmative defense in their answer, there was no further need for them to raise an objection at the time the evidence was introduced. This is not plausible. In Bernardo, Sr. vs. Court of Appeals,17 respondents therein also put up in their answer the affirmative defense of failure of the complaint to state a cause of action and the parties went on to present their respective evidence. The Court did not consider the allegation of this affirmative defense in the answer as an objection to evidence presented by the plaintiffs. Furthermore, the Court ruled that: The presentation of the contrariant evidence for and against imputations undoubtedly cured, clarified or expanded, as the case may be, whatever defects in the pleadings or vagueness in the issues there might have been in the amended complaint. . . . It is settled that even if the complaint be defective, but the parties go to trial thereon, and the plaintiff, without objection, introduces sufficient evidence to constitute the particular cause of action which it intended to allege in the original complaint, and the defendant voluntarily produces witnesses to meet the cause of action thus established, an issue is joined as fully and as effectively as if it had been previously joined by the most perfect pleadings. Likewise, when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings. 18 Evidently, herein respondents failure to object to the evidence at the time it is presented in court is fatal to their cause inasmuch as whatever perceived defect the complaint had was cured by the introduction of petitioners evidence proving actual loss sustained by petitioner due to payment made by it to PNB. Thus, the contention of respondents that the amendment would introduce a subsequently acquired cause of action as there was none at the time the original complaint was filed, is untenable. Furthermore, petitioners cause of action against respondents stemmed from the obligation of respondents PII, BF Homes, PDC and Aguirre under their Deed of Undertaking that was secured by the surety and performance bonds issued by respondents PBAC and Solid. Said Deed of Undertaking, which was annexed to and made an integral part of the complaint, provides as follows: ...

NOW, THEREFORE, for and in consideration of the foregoing premises, the OBLIGOR [PII] and CO-OBLIGORS [BF HOMES, PILAR, AGUIRRE] hereby promise, undertake and bind themselves to keep the OBLIGEE [PETITIONER] free and harmless from any damage or liability which may arise out of the issuance of its guarantee referred to in the first "whereas" clause. By these presents, the OBLIGOR and CO-OBLIGORS further bind themselves, jointly and severally, to pay or reimburse on demand, such amount of money, or repair the damages, losses or penalties which the OBLIGEE may pay or suffer on account of the aforementioned guarantees. The OBLIGOR and CO-OBLIGORS further undertake to comply with and be bound by the aforementioned terms and conditions enumerated in the attached Annex "A" and to perform such other acts and deeds which the OBLIGEE may impose for the implementation of the aforementioned guarantees. It is a condition of this instrument that failure of the OBLIGOR and CO-OBLIGORS to comply with this undertaking and to make good the performance of the other obligations herein undertaken and/or promised, shall be sufficient cause for the OBLIGEE to consider such failure as an event of default which shall give to the OBLIGEE the right to take such action against the OBLIGOR and/or CO-OBLIGORS for the protection of the OBLIGEEs interests. . . .19 A reading of the foregoing provisions of the contract, specially the phrase "the OBLIGOR and CO-OBLIGORS hereby promise, undertake and bind themselves to keep the OBLIGEE free and harmless from any damage or liability which may arise out of the issuance of its guarantee referred to in the first whereas clause," shows that the Deed of Undertaking is actually an indemnity against liability. In Cochingyan, Jr. vs. R & B Surety and Insurance Co., Inc.,20 the Court held thus: The petitioners lose sight of the fact that the Indemnity Agreements are contracts of indemnification not only against actual loss but against liability as well. While in a contract of indemnity against loss an indemnitor will not be liable until the person to be indemnified makes payment or sustains loss, in a contract of indemnity against liability, as in this case, the indemnitors liability arises as soon as the liability of the person to be indemnified has arisen without regard to whether or not he has suffered actual loss. ... (3) Petitioners are indemnitors of R & B Surety against both payments to and liability for payments to the PNB. The present suit is therefore not premature despite the fact that the PNB has not instituted any action against R & B Surety for the collection of its matured obligation under the Surety Bond. 21 [Emphasis supplied] In the present petition, petitioner had become liable to pay the amounts covered by said guarantees when, as the original complaint alleges, the PNB called upon said guarantees. Respondents obligation under the Deed of Undertaking to keep petitioner free and harmless from any damage or liability then became operative as soon as the liability of petitioner arose and there was no need for petitioner to first sustain actual loss before it could have a cause of action against respondents. The mere inclusion in petitioners original complaint of the allegation that the PNB had already called on the guarantees of petitioner is sufficient to constitute a cause of action against respondents. Clearly therefore, the original complaint, by itself, stated a valid cause of action. Verily, it was patently erroneous on the part of the trial court not to have allowed the amendments as to make the complaint conform to petitioners evidence that was presented without any objection from respondents. The trial court likewise patently acted with grave abuse of discretion or in excess of its jurisdiction amounting to lack of jurisdiction when, acting on a mere motion to amend the complaint, it erroneously dismissed the complaint on the ground of failure to state a cause of action. Consequently, the Court of Appeals committed a reversible error in sustaining the trial court. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated August 31, 1994 and its Resolution dated May 18, 1995 are REVERSED and SET ASIDE; and the Orders of the Regional Trial Court (Branch 29), Manila, dated December 7, 1992 and April 12, 1993 are NULL and VOID and SET ASIDE. Let the original records of Civil Case No. 86-38169 be REMANDED to the Regional Trial Court (Branch 29), Manila, for continuation of the trial on the merits. The presiding judge is directed to proceed with immediate dispatch upon receipt of the records of the case. Treble costs against private respondents. SO ORDERED.

Puno, (Chairman), Quisumbing, Callejo, Sr., and Tinga, JJ., concur.