[G.R. Nos. 142286-87.

April 15, 2005] KOREA EXCHANGE BANK v GONZALES For review in these consolidated petitions is the Joint Decision[1] of the Court of Appeals (CA) in CA-G.R. SP Nos. 46194 and 46436, as well as its Order[2] dated February 28, 2000 denying the motion for reconsideration thereof. The Antecedents The Phi-Han Development, Inc. (PHDI) is a domestic corporation organized primarily for the purpose of engaging in the real estate business.[3] Teodoro de Mesa and his siblings, namely, Antusa de Mesa Magno and Lourdes de Mesa Mendoza, were among its original incorporators and members of its board of directors. Jae Il Aum, a Korean national, was the president of the corporation, while Lourdes Mendoza served as its corporate secretary and treasurer.[4] On September 5, 1996, or barely a year after its operations began, the PHDI, together with Teodoro de Mesa, Antusa Magno and Lourdes Mendoza, filed a complaint in the Regional Trial Court (RTC) of Guagua, Pampanga, against Jae Il Aum and the Korea Exchange Bank (KEB), a foreign banking corporation licensed to do business in the Philippines. The plaintiffs alleged therein that through the machination of Jae Il Aum, KEB granted a loan to the PHDI in the amount of US$500,000.00, with the condition that the said loan be deposited with the KEB in the name of PHDI. Thereafter, the plaintiffs executed a real estate mortgage over their properties located in Lubao, Pampanga. As security for the said loan, PHDI deposited the said amount under its name with the KEB in two accounts, namely, Dollar Account No. 5311000486 and Peso Account No. 5311000487. Per Resolution No. 12-10-95 of the PHDI Board of Directors, the only authorized signatories to all applications for withdrawals from the said accounts were Jae Il Aum and Lourdes Mendoza. Jae Il Aum withdrew US$160,000.00 from the said account on February 15, 1996 by forging the signature of Lourdes Mendoza. He was again able to withdraw from the separate accounts, leaving US$163,000.00 as the balance thereof. It was further alleged that Jae Il Aum could not have withdrawn the said deposits without the connivance of the KEB. Moreover, the defendants failure to heed demands for an accounting of the said withdrawals and for the restitution of the said amounts constituted large scale estafa for which they are liable for exemplary and moral damages.[5] The case was docketed as Civil Case No. G-3012 and raffled to Branch 49 of the court. On September 13, 1996, the KEB filed a Motion to Dismiss[6] the complaint on the ground,[7] among others, that the case was within the exclusive jurisdiction of the Securities and Exchange Commission (SEC). On December 5, 1996, the trial court issued an Order denying the motion. The KEB filed a motion for reconsideration of the courts decision which was, however, denied.

The KEB filed a petition for certiorari and prohibition with the CA for the nullification of the orders of the RTC. The case was docketed as CA-G.R. SP No. 43363.[8] On March 17, 1999, the CA dismissed the petition. The KEB filed a motion for reconsideration, which was denied by the appellate court on July 22, 1999. It then filed a petition for review on certiorari in this Court, docketed as G.R. No. 139460.[9] Meanwhile, on April 2, 1997, the KEB filed a Complaint[10] against Lourdes Mendoza, Meneleo Mendoza, Antusa Magno, Francisco Magno, Teodoro de Mesa, Firmo de Mesa, Mercedes de Mesa Magno and the PHDI (PHDI, et al.) before the RTC of Guagua, Pampanga, for sum of money and reformation of real estate mortgage executed by PHDI in its favor. The case was docketed as Civil Case No. G-3119 and was raffled to Branch 50 of the court. The KEB alleged therein that on January 15, 1996, it extended a loan to the PHDI in the sum of US$500,000.00, payable within one year, with interest at 3 months London Interbank Offering Rate (LIBOR) + 2% per annum, evidenced by a promissory note executed by Jae Il Aum and Lourdes Mendoza, president and treasurer, respectively, for and in behalf of the PHDI, with Antusa Magno and Teodoro de Mesa acting as witnesses. Jae Il Aum and Lourdes Mendoza were authorized by resolution of the Board of Directors of PHDI to sign documents and other papers and mortgage corporate assets. To secure the payment of the said loan, Lourdes Mendoza and her siblings, Antusa de Mesa Magno, Firmo de Mesa, Meneleo Mendoza and Mercedes de Mesa, executed a real estate mortgage over 14 parcels of land they owned in common, under a Special Power of Attorney executed by them in favor of Teodoro, Lourdes and Antusa. However, the real estate mortgage failed to express the true intent and agreement of the parties therein because the debtors appearing therein were Lourdes de Mesa Mendoza, Antusa de Mesa Magno, Mercedes de Mesa and Firmo de Mesa, whereas the true agreement was to bind only PHDI as the debtor. It was further alleged that PHDI, et al. had not paid the loan of US$500,000.00 and the increment thereof despite demands therefor. The KEB prayed that, after due proceedings, judgment be rendered in its favor, ordering the reformation of the said real estate mortgage by designating the PHDI as the debtor; ordering PHDI, et al., jointly and severally, to pay US$500,000.00, with interest thereon at the rate of the LIBOR for a three-month loan plus 2%, compounded monthly; 10% of the total amount due as interest as withholding tax on the interest; 20% of the total amount due as attorneys fees; and costs of suit. The KEB, likewise, prayed that the properties mortgaged be foreclosed and sold in case of failure to pay the said loan and its increment within 90 days from notice of the judgment.[11] The KEB appended to its complaint a copy of the real estate mortgage and the secretarys certificate containing the resolution of the Board of Directors. The PHDI, et al. filed a motion to dismiss[12] the complaint on the ground of forum shopping, asserting that the KEB should have filed its counterclaim for the

reformation of the real estate mortgage and the collection of US$500,000.00, including increment and damages in Civil Case No. G-3012. They averred that since the KEB sought the collection of the US$500,000.00 loan which was referred to in paragraphs 2 and 3 of their complaint in Civil Case No. G-3012, the essential elements of litis pendentia were present; hence, the trial court should dismiss the complaint. The KEB opposed[13] the motion, contending that the complaint in Civil Case No. G3012 involved corporate fraud; hence, the RTC had no jurisdiction over the action in the said case, and as such, could not interpose any counterclaims therein. The KEB, likewise, averred that litis pendentia may be involved only when the RTC had jurisdiction over the action in Civil Case No. G-3012. Moreover, the actions in Civil Case Nos. G-3012 and G-3119 were unrelated. On July 23, 1997, the RTC issued an Order[14] denying the motion to dismiss, holding that the essential requirements of litis pendentia were not present, and that the grounds invoked therein were not indubitable. Thereafter, PHDI, et al. filed, in due course, their answer[15] with counterclaims in Civil Case No. G-3119 where they denied being indebted to the KEB. By way of special and affirmative defenses, they alleged that they were deceived by Jae Il Aum, in connivance with the KEB, into agreeing to secure a loan of US$500,000.00 from the latter with their properties as security therefor to be used for the development of their properties into a housing project; the US$500,000.00 loan of the PHDI was deposited in Account No. 5311000487 and Account No. 5311000486 with the KEB. Jae Il Aum was able to withdraw the amount of US$160,000.00 from the dollar account of PHDI based on an application for withdrawal bearing the forged signature of Lourdes Mendoza. Believing that Jae Il Aum could not validly withdraw from the said account without her presence, Lourdes de Mesa Mendoza signed applications for the withdrawals from the said accounts, authorizing Jae Il Aum to make the said withdrawals. Jae Il Aum was then able to withdraw the rest of the deposits of the PHDI. It was thus alleged that the acts of the plaintiff and Jae Il Aum constituted large scale estafa, and that he had been charged with large scale estafa in Criminal Case Nos. 4085 and 4092 in the RTC of Pampanga. The aforementioned unauthorized withdrawals could not have been made possible without the indispensable cooperation of the authorized and/or responsible officer/s of the KEB.[16] Moreover, the loan of the PHDI should be extinguished under the principle of set-off or compensation. By way of counterclaims, PHDI, et al., repleaded by reference all the allegations in their special and affirmative defenses as part thereof, and alleged that by reason of the foregoing acts of the KEB and Jae Il Aum, they suffered shame and humiliation. The PHDI, et al., prayed that the complaint be dismissed and, by way of counterclaim, that the KEB be ordered to pay P500,000.00 as moral damages, P500,000.00 as exemplary damages to deter like-minded foreigners from victimizing Filipinos, and P100,000.00 as attorneys fees, plus the cost of suit.[17]

On September 12, 1997, the KEB filed two motions: (1) a motion in Civil Case No. G3119 to dismiss the counterclaims of the PHDI, et al. for their failure to attach in their answer with counterclaims a certification of non-forum shopping as mandated by Supreme Court Administrative Circular No. 04-94 (now Section 5, Rule 7 of the Rules of Court);[18] and (2) a motion in Civil Case No. G-3012 to dismiss the complaint for forum shopping.[19] In its motion to dismiss the counterclaims in Civil Case No. G-3119, the KEB alleged that the causes of action of the PHDI, et al. as plaintiffs in Civil Case No. G-3012 for the collection of US$160,000.00 and damages, and their claim in Civil Case No. G3119 for the set-off of the said amount against its claim of US$500,000.00 were identical; hence, their counterclaims should be dismissed for forum shopping and, consequently, their complaint in Civil Case No. G-3012 should likewise be dismissed. The PHDI, et al. opposed the motion to dismiss their complaint in Civil Case No. G3012 alleging that the KEB failed to include forum shopping as a ground in its motion to dismiss their complaint; hence, is bound by the omnibus motion rule. They further alleged that their complaint could not be dismissed on the ground of forum shopping based on their counterclaims in their answer to the complaint, since they filed their answer and counterclaim after filing their complaint in Civil Case No. G-3012.[20] Besides, the trial court had already denied their motion to dismiss the complaint in Civil Case No. G-3119 on its finding that there was no litis pendentia. The PHDI, et al. also opposed the motion to dismiss[21] their counterclaims in Civil Case No. G-3119, on the ground that the causes of action in Civil Case No. G-3012 and their counterclaims in Civil Case No. G-3119 were unrelated. They asserted that the subject matter, causes of action and the issues in the two cases were different. On October 14, 1997, the trial court issued an Order[22] in Civil Case No. G-3012 denying the KEBs motion to dismiss the complaint, on its finding that the causes of action of the PHDI in Civil Case No. G-3012 were different from those in their counterclaim in Civil Case No. G-3119. The trial court also denied the motion (in Civil Case No. G-3119) to dismiss the counterclaims of the PHDI, et al., on its finding that the reliefs prayed for by the latter did not include the collection of US$160,000.00 from the KEB; hence, there was no forum shopping. The KEBs respective motions for reconsideration of the orders of dismissal in Civil Case Nos. G-3119 and G-3012 were denied by the trial courts, per the Orders dated October 24, 1997[23] and November 14, 1997.[24] The KEB filed a petition for certiorari, prohibition and mandamus against the PHDI, et al., in the CA, assailing the October 13 and 24, 1997 Orders of the trial court in Civil Case No. G-3119. The case was docketed as CA-G.R. SP No. 46194. The KEB also filed a petition for certiorari, prohibition and mandamus with the CA on January 6, 1998, assailing the RTCs Orders dated October 24 and November 14,

1997 in Civil Case No. G-3012. The case was docketed as CA-G.R. SP No. 46436. The two petitions were consolidated. Meanwhile, the KEB filed its answer to the counterclaims of the PHDI, et al., in Civil Case No. G-3119 for moral and exemplary damages.[25] It alleged, inter alia, that only the consent of the PHDI, through its signatories, was required for any withdrawal, and that all such withdrawals were made with the knowledge and consent of Lourdes de Mesa Mendoza, with her genuine signatures;[26] that the trial court had no jurisdiction over the counterclaims for moral and exemplary damages since the controversy involved corporate fraud which, under Subsection (a), Section 5 of Presidential Decree No. 902-A, was within the exclusive jurisdiction of the SEC; and that the counterclaims for moral and exemplary damages should be dismissed because of the pendency of Civil Case No. G-3012 which involved the same parties, the same rights, the same reliefs, the same issues, and the same causes of action, insofar as the complaint in Civil Case No. G-3012 and the counterclaim in this case were concerned. Moreover, there was no certification against forum shopping as required by Section 3, Rule 7 of the Rules of Court. They further insisted that all the withdrawals were authorized and made on the basis of genuine signatures; that PHDI, being a corporation and an artificial person, had no feelings, and, as such, moral damages could not be recovered from it; that it had all along acted in good faith; and that if PHDI, et al., hired the services of counsel, the attorneys fees should be for their own account, since they unjustifiably refused to pay.[27] On January 27, 2000, the CA rendered a Joint Decision[28] in CA-G.R. SP Nos. 46194 and 46436. The CA affirmed the assailed orders of the RTC in Civil Case No. G-3012, dismissing the petition in CA-G.R. SP No. 46436 but partially giving due course to and granting the petition in CA-G.R. SP No. 46194, by dismissing the counterclaims of the respondents for moral and exemplary damages in Civil Case No. G-3119 on the ground of forum shopping. The CA declared that the counterclaims of the PHDI, et al., for moral and exemplary damages in Civil Case No. G-3119, were merely permissive; hence, they were mandated to append thereto a certification of nonforum shopping. The CA anchored its decision on the rulings of this Court in Santo Tomas University Hospital v. Surla[29] and Valencia v. Court of Appeals.[30] However, the CA did not order the dismissal of the complaint in Civil Case No. G-3012, on its finding that the RTC did not commit grave abuse of its discretion in not ordering the dismissal of the same. Besides, the trial court had already dismissed the counterclaims of the PHDI, et al., for moral and exemplary damages in Civil Case No. G-3119.[31] Following the denial of its motion for reconsideration, the KEB, now the petitioner, filed with this Court, a consolidated petition for review on certiorari against PHDI, et al., the respondents, alleging that the CA erred (a) in not ordering the dismissal of the counterclaim of the latter in Civil Case No. G-3119 for their failure to append a certificate of non-forum shopping, and (b) in not dismissing the complaint in Civil Case No. G-3012 for forum shopping.[32]

As the issues in this case are interrelated, the Court shall delve into and resolve them simultaneously. The petitioner avers that the respondents are guilty of forum shopping because they sought to recover US$160,000.00 by way of set-off in their counterclaims in Civil Case No. G-3119, pending in Branch 50 of the RTC of Guagua, Pampanga, the same amount they sought to recover in their complaint in Civil Case No. G-3012 pending in Branch 49 of the said court. The petitioner asserts that the respondents also sought to recover P500,000.00 in moral damages, and P500,000.00 as exemplary damages in Civil Case No. G-3012, which are the same amounts the respondents sought to collect from the petitioner in their counterclaims in Civil Case No. G-3119. The petitioner notes that although the respondents alleged set-off of the US$160,000.00 in their special and affirmative defenses, they, however, repleaded and incorporated, by way of reference, the said allegations in their counterclaims for moral and exemplary damages and attorneys fees; hence, the claim of set-off or compensation of the respondents was a counterclaim. The respondents were, thus, mandated to append a certificate of non-forum shopping to their counterclaims as mandated by Section 5, Rule 7 of the Rules of Court, but failed to do so. The petitioner avers that there is identity of causes of action, issues and reliefs prayed for in the complaint of the respondents in Civil Case No. G-3012, and their counterclaims for set-off or compensation of the US$160,000.00, moral damages of P500,000.00 and P500,000.00 as exemplary damages in Civil Case No. G-3119. As such, the petitioner insists that the respondents were guilty of forum shopping, for which reason their complaint in Civil Case No. G-3012 should be dismissed. The respondents, for their part, refute the contentions of the petitioner and maintain that their claim for set-off or compensation[33] in Civil Case No. G-3119 is a counterclaim but is compulsory in nature; hence, there was no need for them to append a certificate of non-forum shopping. The respondents also allege that the petitioner itself is guilty of forum shopping because instead of filing counterclaims against them in Civil Case No. G-3012, it filed a complaint for reformation of the real estate mortgage and for the collection of US$500,000.00 and, in case of refusal or failure of the respondents to pay the said amount of US$500,000.00 for the judicial foreclosure of the real estate mortgage, docketed as Civil Case No. G-3119. The respondents assert that, by praying for the dismissal of their complaint in Civil Case No. G-3012 and their counterclaims in Civil Case No. G-3119, the petitioner could win in both instances without due process of law. The Courts Ruling A counterclaim, as now used and understood, includes both set-off and recoupment and is broader than both; it includes equitable demands and secures to the defendant full relief which is a separate action at law and would have secured him on the same state of facts being substantially a cross-action by the defendant against the plaintiff.[34]

A set-off (compensacion) is a money demand by the defendant against the plaintiff arising upon contract and constituting a debt independent of and unconnected with the cause of actions set forth in the complaint, and may be used to offset a plaintiffs claim but not to recover affirmatively. As in the case with recoupment, set-off may be used to offset a plaintiffs claim but not to recover affirmatively. This is similar to the English rule which was first authorized by an English statute in 1729. A recoupment (reconvencion) differs from a counterclaim (contrarreclamacion) in that, under a counterclaim, the defendant may have an affirmative judgment where he is able to prove a demand in excess of the plaintiffs demand, whereas in the case of recoupment, whatever the damages proved by the defendant, they can go only to reduce or extinguish the claim against him. Recoupment must arise out of the contract or transaction upon which the plaintiffs claim is founded. Recoupment is of French origin and means the cutting back of the plaintiffs claim by the defendant. It thus implies an admission of the plaintiffs claim. In Lopez v. Gloria and Sheriff of Leyte,[35] the Court ruled that for set-off or recoupment to be considered as a counterclaim, the following must concur: (1) the same be essentially a genuine action of the defendant against the plaintiff; (2) the same should have as its object to neutralize, wholly or partially, that which the plaintiff is trying to obtain; (3) the same does not have for its object to destroy directly the action of the plaintiff; and (4) the same ought not to pray for a positive remedy distinct from the payment of money. The Court explained that under the first requisite, independent of any other consideration, a genuine action is constituted by the defendant which could be employed separately against the plaintiff. On the second requisite, the Court declared that the defendant admits the facts upon which the action of the plaintiff is based. The second requisite is absent if the defendant bases his claim on facts which directly destroy the action or cause of action of the plaintiff. In such a case, the claim of the defendant would only be a special defense.[36] On the third requisite, set-off or recoupment may be merely a defense and not a counterclaim if it only tends to oppose or to destroy the action of the plaintiff. After consideration of the material allegations of the answer of the respondents in Civil Case No. G-3119, we believe that the respondents claim of set-off or compensation of the US$160,000.00 against the claim of US$500,000.00 of the petitioner against the respondents is a counterclaim. The respondents admit in their complaint in Civil Case No. G-3012 and in their answer in Civil Case No. G-3119 that they secured a loan from the petitioner in the amount of US$500,000.00, but maintain that they are not liable for the payment of the said loan because the petitioner, in connivance with Jae Il Aum, had withdrawn not only US$160,000.00 but the entire deposit of US$500,000.00 from the peso and dollar accounts of respondent PHDI without the consent of the respondents. The latter did not seek to recover affirmatively from the petitioner.

However, we do not agree with the contention of the respondents that their counterclaims are compulsory in nature. Section 7, Rule 5 of the Rules of Court reads: Sec. 7. Compulsory counterclaim. A compulsory counterclaim is one which, being cognizable by the regular courts of justice, arises out of or is connected with the transaction or occurrence constituting the subject matter of the opposing partys claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. Such a counterclaim must be within the jurisdiction of the court both as to the amount and the nature thereof, except that in an original action before the Regional Trial Court, the counterclaim may be considered compulsory regardless of the amount. As correctly held by the CA, the counterclaim of the respondents for moral and exemplary damages against the petitioner is permissive. So is the respondents claim of a set-off or compensation of the US$160,000.00 which they sought in Civil Case No. G-3012 against the US$500,000.00 claimed by the petitioner against the respondents in Civil Case No. G-3119. As the Court held in Yulienco v. Court of Appeals:[37] A counterclaim is defined as any claim for money or other relief which a defending party may have against an opposing party. A counterclaim is compulsory if (a) it arises out of, or is necessarily connected with, the transaction or occurrence which is the subject matter of the opposing partys claim; (b) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (c) the court has jurisdiction to entertain the claim. In other words, a compulsory counterclaim cannot be made the subject of a separate action but should be asserted in the same suit involving the same transaction or occurrence giving rise to it. The criteria or tests by which the compulsory or permissive nature of specific counterclaims can be determined are as follows: (1) Are the issues of fact and law raised by the claim and counterclaim largely the same? (2) Would res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule? (3) Will substantially the same evidence support or refute plaintiffs claim as well as defendants counterclaim? (4) Is there any logical relation between the claim and the counterclaim?[38]

In the present case, the issues of fact and law raised by the petitioner in its complaint in Civil Case No. G-3119, and in the counterclaims of the respondents for the set-off of not only the US$160,000.00 but the entirety of the deposits of the respondent PHDI of US$500,000.00, and for moral and exemplary damages, are not identical or even largely the same. In the complaint of the petitioner in Civil Case No. G-3119, the issue is whether the loan of US$500,000.00 was secured by respondent PHDI from the petitioner, and whether the respondents failed to pay the same and its increment despite the petitioners demands. On the other hand, the issues in the respondents counterclaims for set-off of the amount of US$160,000.00 are the following: whether the signature of respondent Lourdes Mendoza appearing on the said withdrawal application was forged; whether the petitioner connived with Jae Il Aum when the latter withdrew the said amount from the accounts of respondent PHDI; whether the petitioner and Jae Il Aum are obliged to pay the said amount to the respondent PHDI; and whether the obligations of the respondent to pay their loan of US$500,000.00 is extrajudicial pro tanto. Any judgment of the court on the complaint of the petitioner in Civil Case No. G-3119 would not bar any suit on the respondents counterclaim. The evidence of the petitioner on its claim in its complaint, and that of the respondents on their counterclaims are thus different. There is, likewise, no logical relation between the claim of the petitioner and the counterclaim of the respondents. Hence, the counterclaim of the respondents is an initiatory pleading, which requires the respondents to append thereto a certificate of non-forum shopping. Their failure to do so results to the dismissal of their counterclaim without prejudice.[39] The general rule is that compliance with the certificate of forum shopping is separate from and independent of the avoidance of the act of forum shopping itself. Forum shopping is a ground for summary dismissal of both initiatory pleadings without prejudice to the taking of appropriate action against the counsel or party concerned.[40] Case law has it that there is forum shopping when, between an action pending before the court and another one, there exist: (a) identity of parties, or at least such parties as represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and (c) the identity of the two preceding particulars is such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration. [41] Otherwise stated, there is forum shopping where a litigant sues the same party against whom another action or actions for the alleged violation of the same right and the enforcement of the same relief is/are still pending. The defense of litis pendentia in one case is a bar to the other/others; and, a final judgment is one that would constitute res judicata and thus would cause the dismissal of the rest. Absolute identity of parties is not required. It is enough that there is substantial identity of parties.[42] It is enough that the party against whom the estoppel is set

up is actually a party to the former case.[43] There is identity of causes of action if the same evidence will sustain the second action. The principle applies even if the relief sought in the two cases may be different.[44] Forum shopping consists of filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment.[45] What is truly important to consider, the Court ruled in Golangco v. Court of Appeals,[46] is the vexation caused the courts and parties-litigants who ask different courts and/or administrative agencies to rule on the same or restated causes and/or grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different courts upon the same issues. In Yupangco Cotton Mills, Inc. v. Court of Appeals,[47] the Court ruled that for forum shopping to exist, both actions must involve the same transactions, the same circumstances; and the actions must also raise identical causes of actions, subject matter and issues. Forum shopping is an act of malpractice that is prohibited and considered as trifling with the court. It is an improper conduct which tends to degrade the administration of justice. But there is no forum shopping where two different orders or questions, two different causes of action and issues are raised, and two objectives are sought.[48] In this case, in interposing their counterclaim for set-off of the US$160,000.00 against their loan of US$500,000.00 in Civil Case No. G-3119, as well as the counterclaims for P500,000.00 as moral damages, and P500,000.00 as exemplary damages, the respondents thereby engaged in forum shopping. As gleaned from the material averments of their complaint in Civil Case No. G-3012, the respondents, who are the plaintiffs therein, claimed that Jae Il Aum, who was the president of respondent PHDI, withdrew US$160,000.00 from the deposit accounts of the said respondent with the petitioner; that such withdrawal application bore the forged signature of respondent Lourdes Mendoza; and that the authorized office/officers of the petitioner connived with Jae Il Aum in consummating the withdrawal. The respondents prayed that the petitioner and Jae Il Aum be ordered to pay, jointly and severally, the said amount, plus P500,000.00 as moral damages and P500,000.00 as exemplary damages based on their claim that the petitioner, a corporation incorporated in Korea, and Jae Il Aum, a Korean national, victimized the respondents, who are Filipinos. The respondents merely restated and repleaded the same allegations in their counterclaims in Civil Case No. G-3119, and prayed that the aforesaid amount of US$160,000.00 be set-off against their loan of US$500,000.00 which was being claimed by the petitioner in the said case, in addition to awards for P500,000.00 as moral damages, and P500,000.00 as exemplary damages against the petitioner for allegedly victimizing Filipinos in their country. The threshold issues common to and decisive of the complaint in Civil Case No. G-3012 and the counterclaim for set-off in Civil Case No. G-3119 are whether the signature of respondent Lourdes Mendoza on the application for withdrawal of US$160,000.00 was forged, and whether the petitioner connived with Jae Il Aum in the alleged fraudulent withdrawal of the said amount. The evidence of the respondents as

plaintiffs in Civil Case No. G-3012 is the same evidence that they will have to adduce as plaintiffs on their counterclaim for set-off in Civil Case No. G-3119. Any judgment of the RTC of Guagua, Pampanga, Branch 49, in Civil Case No. G-3012 will, likewise, resolve the threshold issue in the respondents counterclaim for set-off in Civil Case No. G-3119. That Jae Il Aum is not a party in Civil Case No. G-3119 is not important; that the respondents did not pray in their counterclaim that the petitioner pay to them the US$160,000.00 withdrawn by Jae Il Aum is, likewise, not a bar to the application of the principle of litis pendentia. It must be stressed, however, that the dismissal of the complaint of the respondents against the petitioner in Civil Case No. G-3012 is without prejudice to the continuation of the case against Jae Il Aum. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The complaint of the respondents against the petitioner in Civil Case No. G-3012 is DISMISSED without prejudice to the continuation thereof against the defendant Jae Il Aum. No costs. SO ORDERED. [G.R. No. 133119. August 17, 2000] FINANCIAL BUILDING CORPORATION vs. FORBES PARK ASSOCIATION Before us is petition for review on certiorari of the Decision[1] dated March 20, 1998 of the Court of Appeals[2] in CA-GR CV No. 48194 entitled Forbes Park Association, Inc. vs. Financial Building Corporation, finding Financial Building Corporation (hereafter, Financial Building) liable for damages in favor of Forbes Park Association, Inc. (hereafter, Forbes Park), for violating the latters deed of restrictions on the construction of buildings within the Forbes Park Village, Makati. The pertinent facts are as follows: The then Union of Soviet Socialist Republic (hereafter, USSR) was the owner of a 4,223 square meter residential lot located at No. 10, Narra Place, Forbes Park Village in Makati City. On December 2, 1985, the USSR engaged the services of Financial Building for the construction of a multi-level office and staff apartment building at the said lot, which would be used by the Trade Representative of the USSR.[3] Due to the USSRs representation that it would be building a residence for its Trade Representative, Forbes Park authorized its construction and work began shortly thereafter. On June 30, 1986, Forbes Park reminded the USSR of existing regulations[4] authorizing only the construction of a single-family residential building in each lot within the village. It also elicited a reassurance from the USSR that such restriction has been complied with.[5] Promptly, the USSR gave its assurance that it has been complying with all regulations of Forbes Park.[6] Despite this, Financial Building

submitted to the Makati City Government a second building plan for the construction of a multi-level apartment building, which was different from the first plan for the construction of a residential building submitted to Forbes Park. Forbes Park discovered the second plan and subsequent ocular inspection of the USSRs subject lot confirmed the violation of the deed of restrictions. Thus, it enjoined further construction work. On March 27, 1987, Forbes Park suspended all permits of entry for the personnel and materials of Financial Building in the said construction site. The parties attempted to meet to settle their differences but it did not push through. Instead, on April 9, 1987, Financial Building filed in the Regional Trial Court of Makati, Metro Manila, a Complaint[7] for Injunction and Damages with a prayer for Preliminary Injunction against Forbes Park docketed as Civil Case No. 16540. The latter, in turn, filed a Motion to Dismiss on the ground that Financial Building had no cause of action because it was not the real party-in-interest. On April 28, 1987, the trial court issued a writ of preliminary injunction against Forbes Park but the Court of Appeals nullified it and dismissed the complaint in Civil Case No. 16540 altogether. We affirmed the said dismissal in our Resolution,[8] promulgated on April 6, 1988, in G.R. No. 79319 entitled Financial Building Corporation, et al. vs. Forbes Park Association, et al. After Financial Buildings case, G.R. No. 79319, was terminated with finality, Forbes Park sought to vindicate its rights by filing on October 27, 1989 with the Regional Trial Court of Makati a Complaint[9] for Damages, against Financial Building, docketed as Civil Case No. 89-5522, arising from the violation of its rules and regulations. The damages claimed are in the following amounts: (a) P3,000,000.00 as actual damages; (b) P1,000,000.00 as moral damages; (c) P1,000,000.00 as exemplary damages; and (d) P1,000,000.00 as attorneys fees.[10] On September 26, 1994, the trial court rendered its Decision[11] in Civil Case No. 89-5522 in favor of Forbes Park and against Financial Building, the dispositive portion of which reads, to wit: WHEREFORE, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against the defendant: (1) Ordering the defendant to remove/demolish the illegal structures within three (3) months from the time this judgment becomes final and executory, and in case of failure of the defendant to do so, the plaintiff is authorized to demolish/remove the structures at the expense of the defendant; (2) Ordering the defendant to pay damages, to wit: (a) P3,000,000.00 as actual damages by way of demolition expenses;

(b) P1,000,000.00 as exemplary damages; (c) P500,000.00 as attorneys fees; (d) the costs of suit. SO ORDERED. Financial Building appealed the said Decision of the trial court in Civil Case No. 895522 by way of a petition for review on certiorari[12] entitled Financial Building Corporation vs. Forbes Park Association, Inc. to the Court of Appeals and docketed therein as CA-GR CV No. 48194. However, the Court of Appeals affirmed it in its Decision[13] dated March 20, 1998, the dispositive portion of which reads: WHEREFORE, the Decision dated September 26, 1994 of the Regional Trial Court of Makati is AFFIRMED with the modification that the award of exemplary damages, as well as attorneys fees, is reduced to fifty thousand pesos (P50,000.00) each. Hence, this petition, wherein Financial Building assigns the following errors: I. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED BY RESPONDENT FPA DESPITE THE FACT THAT ITS ALLEGED CLAIMS AND CAUSES OF ACTION THEREIN ARE BARRED BY PRIOR JUDGMENT AND/OR ARE DEEMED WAIVED FOR ITS FAILURE TO INTERPOSE THE SAME AS COMPULSORY COUNTERCLAIMS IN CIVIL CASE NO. 16540; II. THE COURT OF APPEALS GRAVELY ERRED IN NOT DISMISSING THE COMPLAINT FILED BY RESPONDENT FPA AGAINST PETITIONER FBC SINCE RESPONDENT FPA HAS NO CAUSE OF ACTION AGAINST PETITIONER FBC; III. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING DAMAGES IN FAVOR OF RESPONDENT FPA DESPITE THE FACT THAT ON THE BASIS OF THE EVIDENCE ON RECORD, RESPONDENT FPA IS NOT ENTITLED THERETO AND PETITIONER FBC IS NOT LIABLE THEREFOR; IV. THE COURT OF APPEALS ERRED IN ORDERING THE DEMOLITION OF THE ILLEGAL STRUCTURES LOCATED AT NO. 10 NARRA PLACE, FORBES PARK, MAKATI CITY, CONSIDERING THAT THE SAME ARE LOCATED ON DIPLOMATIC PREMISES[14] We grant the petition. First. The instant case is barred due to Forbes Parks failure to set it up as a compulsory counterclaim in Civil Case No. 16540, the prior injunction suit initiated by Financial Building against Forbes Park.

A compulsory counterclaim is one which arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing partys claim.[15] If it is within the jurisdiction of the court and it does not require for its adjudication the presence of third parties over whom the court cannot acquire jurisdiction, such compulsory counterclaim is barred if it is not set up in the action filed by the opposing party.[16] Thus, a compulsory counterclaim cannot be the subject of a separate action but it should instead be asserted in the same suit involving the same transaction or occurrence, which gave rise to it.[17] To determine whether a counterclaim is compulsory or not, we have devised the following tests: (1) Are the issues of fact or law raised by the claim and the counterclaim largely the same? (2) Would res judicata bar a subsequent suit on defendants claim absent the compulsory counterclaim rule? (3) Will substantially the same evidence support or refute plaintiffs claim as well as the defendants counterclaim? and (4) Is there any logical relation between the claim and the counterclaim? Affirmative answers to the above queries indicate the existence of a compulsory counterclaim.[18] Undoubtedly, the prior Civil Case No. 16540 and the instant case arose from the same occurrence the construction work done by Financial Building on the USSRs lot in Forbes Park Village. The issues of fact and law in both cases are identical. The factual issue is whether the structures erected by Financial Building violate Forbes Parks rules and regulations, whereas the legal issue is whether Financial Building, as an independent contractor working for the USSR, could be enjoined from continuing with the construction and be held liable for damages if it is found to have violated Forbes Parks rules. As a result of the controversy, Financial Building seized the initiative by filing the prior injunction case, which was anchored on the contention that Forbes Parks prohibition on the construction work in the subject premises was improper. The instant case on the other hand was initiated by Forbes Park to compel Financial Building to remove the same structures it has erected in the same premises involved in the prior case and to claim damages for undertaking the said construction. Thus, the logical relation between the two cases is patent and it is obvious that substantially the same evidence is involved in the said cases. Moreover, the two cases involve the same parties. The aggregate amount of the claims in the instant case is within the jurisdiction of the regional trial court, had it been set up as a counterclaim in Civil Case No. 16540. Therefore, Forbes Parks claims in the instant case should have been filed as a counterclaim in Civil Case No. 16540. Second. Since Forbes Park filed a motion to dismiss in Civil Case No. 16540, its existing compulsory counterclaim at that time is now barred.

A compulsory counterclaim is auxiliary to the proceeding in the original suit and derives its jurisdictional support therefrom.[19] A counterclaim presupposes the existence of a claim against the party filing the counterclaim. Hence, where there is no claim against the counterclaimant, the counterclaim is improper and it must dismissed, more so where the complaint is dismissed at the instance of the counterclaimant.[20] In other words, if the dismissal of the main action results in the dismissal of the counterclaim already filed, it stands to reason that the filing of a motion to dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of the motion ultimately results in the dismissal of the counterclaim. Thus, the filing of a motion to dismiss and the setting up of a compulsory counterclaim are incompatible remedies. In the event that a defending party has a ground for dismissal and a compulsory counterclaim at the same time, he must choose only one remedy. If he decides to file a motion to dismiss, he will lose his compulsory counterclaim. But if he opts to set up his compulsory counterclaim, he may still plead his ground for dismissal as an affirmative defense in his answer.[21] The latter option is obviously more favorable to the defendant although such fact was lost on Forbes Park. The ground for dismissal invoked by Forbes Park in Civil Case No. 16540 was lack of cause of action. There was no need to plead such ground in a motion to dismiss or in the answer since the same was not deemed waived if it was not pleaded.[22] Nonetheless, Forbes Park still filed a motion to dismiss and thus exercised bad judgment in its choice of remedies. Thus, it has no one to blame but itself for the consequent loss of its counterclaim as a result of such choice. Inasmuch as the action for damages filed by Forbes Park should be as it is hereby dismissed for being barred by the prior judgment in G.R. No. 79319 (supra) and/or deemed waived by Forbes Park to interpose the same under the rule on compulsory counterclaims, there is no need to discuss the other issues raised by the herein petitioner. WHEREFORE, the instant petition is hereby GRANTED and the Decision dated March 20, 1998 of the Court of Appeals in CA-G.R. CV No. 48194 is hereby REVERSED and SET ASIDE. Costs against respondent Forbes Park Association, Inc. . SO ORDERED. [G.R. No. 158158. January 17, 2005] BMC-Super v CA

This is a petition for review of the Resolutions[1] of the Court of Appeals (CA) in CAG.R. SP No. 73353 filed by the Bukluran ng Manggagawa sa Clothman Knitting Corporation Solidarity of Unions in the Philippines for Empowerment and Reforms (the petitioner union) and Raymond Tomaroy, Roel Sardonidos, Joseph Sederio, Maritchu Javellana, Enrique Omadto, Efren Mogar, Francisco Bertulfo, Judy Roquero, Paterno Silvestre, Cayetano Palmon, Teodoro Ocop and Joseph Estifano. Respondent Clothman Knitting Corporation (CKC) is a domestic corporation engaged in knitting/textiles.[2] It has approximately one hundred forty-four (144) rank-and-file employees. The petitioner union is a legitimate labor organization of rank-and-file employees therein. The petitioners were rank-and-file employees of the respondent and were also members and officers of the petitioner union. In the year 2001, the rank-and-file employees at the CKC banded together and formed the petitioner union. It was registered with the Department of Labor and Employment (DOLE) on February 23, 2001. In reaction thereto, the respondent, headed by its President, Paul U. Lee, gathered the employees and advised them not to listen to outsiders.[3] Meanwhile, another group of rank-and-file employees banded together and formed the Nagkakaisang Lakas ng Manggagawa sa Clothman Corporation Katipunan (NLM-Katipunan). The NLM-Katipunan was issued a certificate of registration on April 23, 2001 by the DOLE.[4] A petition for certification election was later filed by the petitioner union with the Bureau of Labor Relations (BLR). Pending the resolution of the petition for certification election, the respondent issued a Memorandum[5] dated March 2, 2001, informing the employees of the change in the schedule brought about by the decrease in the orders from the customers. On March 10, 2001, another Memorandum[6] was issued by the respondent informing its employees at the Dyeing and Finishing Division that a temporary shutdown of the operations therein would be effected for one week, from March 12 to 17, 2001. The employees were advised to go on vacation leave, and were asked to verify any changes in the schedule from the Human Resources Division on March 17, 2001. Unable to solve its financial problems, the respondent decided to temporarily shutdown its operations at the Dyeing and Finishing Division effective the next day, scheduled to resume until further notice. It notified the DOLE of the said shutdown on May 26, 2001.[7] The operations of the other divisions of the CKC remained normal. For its reduced dyeing and finishing needs, the respondent brought the textiles to Crayons, Inc., a sister company. On June 11, 2001, while the respondents service truck with plate number TBK-158 was to deliver fabrics in Bulacan, the group of

petitioner Raymond Tomaroy and some companions approached the truck as it made its way towards Don Pedro Street and blocked its way. As a result, the driver of the service truck decided to return to the respondents compound. Later that day, petitioner Tomaroy, with sixteen (16) members of the petitioner union, staged a picket in front of the respondents compound, carrying placards with slogans that read: 1. Itigil ang sabwatan ng KATIPUNAN (FABIAN GROUP) at management BMCSUPER. 2. Mr. Paul Lee Huwag mong ipitin ang mid-year, 13th month pay ng mga manggagawa sa CKC. BMC-SUPER. 3. Ibalik ang pasok sa Finishing Department. 4. Mr. Paul Lee Magagara ang sasakyan mo, Montero, BMW, Pajero pero kaunting benepisyo ng manggagawa ay di mo maibigay. BMC-SUPER. 5. Kilalanin ang karapatan ng manggagawa na magtatag ng unyon. BMC-SUPER.[8] On June 14, 2001, twenty-three (23) members of the petitioner union gathered in front of the respondents compound carrying the same placards. Later that day, petitioner Tomaroy agreed to talk to the management with the following priority demands: (a) resumption of work; and (b) 13th month pay.[9] The next day, members of the petitioner union and their supporters gathered in front of the respondents compound.[10] From June 16, 2001 up to June 18, 2001, the members, as well as supporters of the union, gathered again in front of the companys compound.[11] On June 25, 2001, the respondent filed a petition to declare the strike illegal before the arbitration branch of the National Labor Relations Commission (NLRC), docketed as NLRC-NCR 06-03332-2001.[12] The respondent alleged that the picket of the members of the union from June 11, 2001 to June 18, 2001 in front of the companys compound constituted an illegal strike. It cited the following reasons: a) The strikers/picketers did not conduct a strike vote and no cooling-off period was observed; b) c) The strikers/picketers did not file a notice of strike; The reasons for the strike/picket involve a non-strikeable issue;

d) The work slowdown/picket caused damages to the petitioner in the sum of FIVE MILLION PESOS (P5,000,000.00);

e) The illegal acts of respondents constrained petitioner to seek the services of undersigned counsel for an attorneys fee of P50,000.00 and P2,000.00 per appearance.[13] In a Decision dated October 18, 2001, the Labor Arbiter granted the petition, declared the strike illegal and the employment status of the union officers who participated therein as terminated: WHEREFORE, in view of the foregoing, the petition filed by the petitioner is hereby GRANTED. The strike conducted by the respondents is hereby declared as illegal. Consequently, due to their illegal activities, the respondents namely: RAYMOND TOMAROY, President, ROEL SARDONIDOS, Vice-President, JOSEPH SEDERIO, Secretary, MARITCHU JAVELLANA, Treasurer, ENRIQUE OMADTO, Auditor, EFREN MOGAR, P.R.O., and FRANCISCO BERTULFO, P.R.O. and Board of Directors: JUDY ROQUERO, PATERNO SILVESTRE, CAYETANO PALMON, TEODORO OCOP and JOSEPH ESTIFANO are hereby declared to have lost their employment status with the petitioner.[14] The Labor Arbiter found that the continued decline in job prompted the respondent to implement a reduced working day from the original six (6) days to three (3) days per week because of the continued decrease of job orders, which further led to its decision to temporarily stop the operation in its Dyeing and Finishing Division for one (1) week March 12 to 17, 2001. The affected employees were then requested to utilize their vacation leaves and were, thereafter, admitted back to work. However, Tomaroy and members of the union staged a strike, and the labor unrest resulted in the cancellation of job orders amounting to P6,380,817.50. The aforestated losses prompted the petitioner to close and stop the business operations of its Dyeing and Finishing Division. It is worthy to note that the whole company did not cease to operate and that it was only the workers in the Dyeing and Finishing Division who were affected by the temporary lay-off. Thus, when the respondents conducted a picket in front of the companys premises, the whole business operations of the respondent was affected. As borne out by the records, the Labor Arbiter found that the petitioners therein failed to comply with the requirements for a valid strike, to wit: 1. It was not based on a valid factual ground, either based on Collective Bargaining Deadlock and/or Unfair Labor Practice; 2. No notice of strike was filed with the National Conciliation and Mediation Board of the DOLE; 3. There was no strike-vote taken by the majority members of the union;

4. There was no strike-vote report submitted to the DOLE at least seven (7) days before the intended date of the strike; 5. The cooling-off period prescribed by law was not observed; and 6. The 7-day visiting period after submission of the strike vote report was not fully observed.[15] Thus, the Labor Arbiter ruled that the strike staged by the petitioner union was illegal; hence, the union officers who knowingly participated in an illegal strike, already lost their employment status.[16] Aggrieved, the petitioner union interposed an appeal before the NLRC, docketed as NLRC-CA-030216-01. In a Resolution promulgated on May 10, 2002, the NLRC dismissed the appeal and affirmed the decision of the Labor Arbiter: WHEREFORE, in view of the foregoing, and finding no cogent reason to disturb the finding of the Labor Arbiter a quo, the assailed decision is hereby AFFIRMED.[17] The NLRC reasoned that it found no instances and/or situation befitting grave abuse of discretion on the part of the Labor Arbiter. Dissatisfied, the petitioner union filed a motion for reconsideration which was denied in a Resolution[18] dated July 24, 2002. The petitioner union filed a petition for certiorari before the CA, docketed as CA-G.R. SP No. 73353, raising the following error: I. PUBLIC RESPONDENTS, THE HONORABLE LABOR ARBITER AND THE COMMISSIONERS OF THE NATIONAL LABOR RELATIONS COMMISSION COMMITTED PATENT GRAVE ABUSED (SIC) OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN THEY FAILED TO APPRECIATE FACTS AND EVIDENCES, APPLICABLE LAWS AND EXISTING JURISPRUDENCE AND, IF NOT CORRECTED, WOULD CAUSE IRREPARABLE DAMAGE TO HEREIN RESPONDENTS.[19] In a Resolution[20] dated October 25, 2002, the CA dismissed the petition. The CA found that, contrary to Section 3, Rule 46 of the 1997 Rules of Civil Procedure, the petition for certiorari filed by the petitioner union did not contain the full names and actual addresses of all the petitioners and the respondents, as the petition merely mentioned BMC-SUPER, et al. as the petitioners. Further, the petition and the certification on non-forum shopping were signed by Raymond P. Tomaroy, who claimed to be the union president/authorized representative of petitioners without, however, any such authorization from the labor union and the other petitioners covered by the abbreviation et al. Moreover, the petition was not verified as

required by Section 1, Rule 65 of the 1997 Rules of Civil Procedure; hence, did not produce legal effect as provided for in Section 4, Rule 7 of the Rules of Court. In addition, the petition was signed by petitioner Raymond P. Tomaroy in his capacity as union president/authorized representative, assisted by Enrique T. Belarmino, Legal Head of Solidarity of Unions in the Philippines for Empowerment and Reforms, neither of whom was a duly authorized member of the Integrated Bar of the Philippines. Hence, according to the appellate court, neither of them had authority to conduct litigation before the CA.[21] A motion for reconsideration was filed by the petitioner union which was similarly denied in a Resolution[22] dated April 21, 2003. The CA reasoned that, contrary to the petitioners insistence that the verification was signed by Raymond P. Tomaroy, page 16 of the petition filed before it did not bear such signature. Moreover, the special power of attorney attached to the motion for reconsideration was subscribed and sworn to by the signatories therein before Notary Public Orlando C. Dy only on November 20, 2002, i.e., more than one (1) month after the filing of the petition on October 15, 2002. Consequently, the special power of attorney did not cure the defect in the certification against forum shopping signed by Raymond Tomaroy, which was, likewise, not accompanied by proof that he was authorized to file the petition on behalf of the petitioner union. The CA clarified that the authority of non-lawyers to represent the labor organization or members thereof applies only to proceedings before the NLRC or Labor Arbiters, as provided for in Article 222 of the Labor Code. On the other hand, a non-lawyer may appear before it only if he is a party-litigant. However, Raymond P. Tomaroy did not appear to be a party in the case before the CA as his name was not mentioned in the caption nor in the body of the petition.[23] Aggrieved, the petitioners filed the instant petition contending that: I PUBLIC RESPONDENT COURT OF APPEALS ERRED WHEN IT DISMISSED THE PETITIONERS APPEAL ON GROUNDS OF TECHNICALITIES. II PUBLIC RESPONDENT NATIONAL LABOR RELATIONS COMMISSION ERRED [WHEN] IT AFFIRMED THE FINDINGS OF THE HONORABLE LABOR ARBITER THAT PETITIONERS COMMITTED ILLEGAL STRIKE.[24] On the first ground, the petitioners allege that they complied with Section 3, Rule 46 and Section 7, Rule 3 of the Rules of Court. They contend that the petition filed before the CA by the petitioner unions president was sanctioned by Article 242 of the Labor Code, and the cases of Liberty Manufacturing Workers Union v. CFI of Bulacan,[25] Davao Free Workers Front v. CIR,[26] and La Carlota Sugar Central v.

CIR.[27] The petitioner union insists that it would be illogical for the union, as an entity, to require all its members to sign the said petition and the certificate of nonforum shopping. It avers that a labor union is a judicial entity which functions thru its officers. Thus, the president, as an officer of the union, needed no special power of attorney to sign for the union. It stresses that it did not violate Section 34, Rule 138 of the Rules of Court. The petitioner union further invokes the policy that the rules of technicality must yield to the broader interest of substantial justice; when the rules strictly applied resulting in technicalities that tend to frustrate rather than promote justice, this Court is empowered to support the rules. The petitioners argue that they did not stage a strike, much more an illegal strike. They explain that a strike means work stoppage. Considering that the Dyeing and Finishing Division of the respondent was shutdown, it could not have caused a work stoppage. The union members merely picketed in front of the respondents factory to urge the respondent to open and order the resumption of the operations in its Dyeing and Finishing Division. There was, thus, no need to comply with the requirements laid down by Article 263 of the Labor Code and its implementing rules. For its part, the respondent prayed that the petition be dismissed on the ground that the petition filed before the CA failed to comply with Section 1 of Rule 65, Section 3 of Rule 46, and Section 7 of Rule 3 of the Rules of Court, and that the requirement as to the signatories in the petition failed to comply with Section 3, Rule 7 of the Rules of Court. The respondent reiterates that the petitioners staged an illegal strike, and that as officers of the union who participated therein, the petitioners are deemed to have lost their employment status. The contention of the petitioners is erroneous. They are of the erroneous impression that the only respondent in the NLRC was the petitioner union and that it was sued in its representative capacity. The fact of the matter is that the respondent sued not only the petitioner union as respondent, but also its officers and members of its Board of Directors as principal respondents, and sought the termination of the employment of the said officers. The Labor Arbiter rendered judgment against all the respondents therein and declared the officers to have lost their employment status. The NLRC affirmed the decision on appeal. It was not only the union that assailed the decision of the NLRC in the CA, but also the dismissed officers. The petitioners (respondents therein) prayed for the reversal thereof and that another judgment be rendered as prayed for by them in their position paper in the NLRC, thus: WHEREFORE, premises considered, it is respectfully prayed to this Honorable Labor Arbiter that, after submission of this Position Paper, the above entitled case be considered submitted for resolution, and the decision be rendered in favor of the respondents employees:

1. Declaring Petitioners guilty of illegal reduction of working days, shutdown and UNFAIR LABOR PRACTICES against individual respondents; 2. Ordering petitioners be, jointly and severally, liable to pay respondents actual damages, payment of MORAL and EXEMPLARY DAMAGES in the amount of not less than P50,000.00 each individual employees and 10% of the total monetary award for the Office of BMC-SUPER plus P10,000.00 litigation expenses; 3. Ordering that Petitioner Paul Lee be in contempt of court and be fined to pay individual respondents in the amount of P50,000.00 each or imprisonment of Two (2) to Four (4) Years or both. Other relief and remedies equitable in the premises are, likewise, prayed for.[28] Under Section 3 of Rule 46 in relation to Section 1, Rule 65 of the Rules of Court, the petition for certiorari shall contain the full names and actual addresses of all the petitioners and the respondents, and that the failure of the petitioners to comply with the said requirement shall be sufficient ground for the dismissal of their petition: Sec. 3. Contents and filing of petition; effect of non-compliance with requirements. The petition shall contain the full names and actual addresses of all the petitioners and respondents, a concise statement of the matters involved, the factual background of the case and the grounds relied upon for the relief prayed for. It shall be filed in seven (7) clearly legible copies together with proof of service thereof on the respondent with the original copy intended for the court indicated as such by the petitioner, and shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution, or ruling subject thereof, such material portions of the record as are referred to therein and other documents relevant or pertinent thereto. The certification shall be accomplished by the proper clerk of court or by his duly authorized representative, or by the proper officer of the court, tribunal, agency or office involved or by his duly authorized representative. The other requisite number of copies of the petition shall be accompanied by clearly legible plain copies of all documents attached to the original. The petitioner shall also submit together with the petition a sworn certification that he has not theretofore commenced any other action involving the same issues in the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency; if there is such other action or proceeding, he must state the status of the same; and if he should, thereafter, learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal or agency, he undertakes to promptly inform the aforesaid courts and other tribunal or agency thereof within five (5) days therefrom.

The petitioner shall pay the corresponding docket and other lawful fees to the clerk of court and deposit the amount of P500.00 for costs at the time of the filing of the petition. The failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition. Moreover, under Section 1, Rule 7 of the Rules of Court, the title of the action indicates the names of the parties who shall be named in the original petition: Section 1. Caption. The caption sets forth the name of the court, the title of the action, and the docket number, if assigned. The title of the action indicates the names of the parties. They shall all be named in the original complaint or petition; but in subsequent pleadings, it shall be sufficient if the name of the first party on each side be stated with an appropriate indication when there are other parties. Their respective participation in the case shall be indicated. In this case, the title of the petition for certiorari filed in the CA does not contain the names of the petitioners officers of the petitioner BMC-SUPER and of the members of the Board of Directors; even the petition itself does not contain the full names and addresses of the said officers and members of the Board of Directors of the petitioner union. We quote the title of the petition and the averments thereof having reference to the parties-petitioners: BUKLURAN NG MANGGAGAWA SA CLOTHMAN KNITTING CORPORATION SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR EMPOWERMENT AND REFORMS (BMC-SUPER), ET AL., Petitioner, -vsCLOTHMAN KNITTING CORPORATION, Respondents.[29] Petitioners, BUKLURAN NG MANGGAGAWA SA CLOTHMAN SOLIDARITY OF UNIONS FOR EMPOWERMENT AND REFORMS (BMC-SUPER), et al., is a legitimate labor organization with Charter Certificate No. S-102, can be served with summons and other processes at 4th Floor Perlas Building, 646 Quezon Avenue, Quezon City.

Private Respondent, CLOTHMAN KNITTING CORPORATION, is a domestic corporation organized and existing under and by virtue of Philippine Laws engaged in textile industry with principal place of business at No. 57 Don Pedro Street, Don Pedro Village, Marulas, Valenzuela City. Public Respondents, National Labor Relations Commission, Second Division, herein impleaded as the tribunal exercising judicial functions who issued the assailed decision in NLRC Case No. 05-03332-2001.[30] The petitioners reliance on the ruling of this Court in Davao Free Workers Front v. CIR[31] is misplaced. In the said case, the Court held that the failure to specify the details regarding the number and names of the striking members of a labor union in the decision or in the complaint was of no consequence. This is due to the fact that it was established that all the union members went on strike as a result of the unfair labor practice of the employer, in consonance with the rule that it is precisely the function of a labor union to carry the representation of its members, particularly against the employers unfair labor practices against it and its members, and to file an action for their benefit and behalf without joining each and every member as a separate party. Significantly, the full names and addresses of the officers and members of the Board of Directors of the petitioner union are set forth in their petition at bench; proof that, indeed, there is a need for the full names and addresses of all the petitioners to be stated in the title of the petition and in the petition itself. We quote the title of the petition and the allegation therein having reference to the parties-petitioners: BUKLURAN NG MANGGAGAWA SA CLOTHMAN KNITTING CORPORATION SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR EMPOWERMENT AND REFORMS (BMC-SUPER), AND RAYMOND TOMAROY, ROEL SARDONIDOS, JOSEPH SEDERIO, MARITCHU JAVELLANA, ENRIQUE OMADTO, EFREN MOGAR, FRANCISCO BERTULFO, JUDY ROQUERO, PATERNO SILVESTRE, CAYETANO PALMON, TEODORO OCOP AND JOSEPH ESTIFANO, Petitioners.[32] 1. Petitioners, BUKLURAN NG MANGGAGAWA SA CLOTHMAN SOLIDARITY OF UNIONS FOR EMPOWERMENT AND REFORMS (BMC-SUPER), ROEL SARDONIDOS, JOSEPH SEDERIO, MARITCHU JAVELLANA, ENRIQUE OMADTO, EFREN MOGAR, FRANCISCO BERTULFO, JUDY ROQUERO, PATERNO SILVESTRE, CAYETANO PALMON, TEODORO OCOP AND JOSEPH ESTIFANO, the former is a legitimate labor organization with Charter Certificate No. S-102, and the latter are members of the former; they can be served with summons and other processes of this Honorable Court at c/o H.O. VICTORIA AND ASSOCIATES LAW OFFICES, Unit 305 Web-Jet Building, 64 Quezon Avenue cor. BMA Avenue, Quezon City.[33]

On the other hand, Section 5, Rule 7 of the Rules of Court reads: Sec. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not, therefore, commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should, thereafter, learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed. Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. As gleaned from the petition for certiorari in the CA, only the petitioner Raymond P. Tomaroy signed the certification of non-forum shopping in his capacity as the president of the petitioner union. The officers and members of the Board of Directors, who were, likewise, principal petitioners, did not execute any certification of non-forum shopping as mandated by the said Rule. The rule is that the certification of non-forum shopping must be signed by all the petitioners and that the signing by only one of them is insufficient.[34] Although petitioner Tomaroy was authorized by virtue of his position as president of the petitioner union to execute the certification for and in its behalf, he had no authority to do so for and in behalf of its petitioners-officers, as well as the members of the Board of Directors thereof. The execution by the individual petitioners of a special power of attorney subsequent to the dismissal of the petition by the CA authorizing petitioner Tomaroy to execute the requisite certification does not cure the fatal defect in their petition.[35] The respondent alleges that the petition for certiorari filed before the CA was correctly dismissed as it was not signed by counsel. The respondent noted that petitioner Tomaroy was not a lawyer and that petitioner Enrique Belarmino did not manifest in the petition that he was the lawyer. The respondent, thus, contends that Tomaroy and Belarmino engaged in the illegal practice of law, in violation of Section 34, Rule 138 of the Rules of Court.

We do not agree. Section 3, Rule 7 of the Rules of Court provides that every pleading must be signed by the party or counsel representing him.[36] Considering that the union is one of the petitioners, Tomaroy, as its president, may sign the pleading. For this reason alone, the CA cannot dismiss the petition. Even if we glossed over the procedural lapses of the petitioners and resolved the petition on its merits, we find that the petitioner union, along with its supporters, staged a strike without complying with the requirements laid down in Article 263 of the Labor Code and its Implementing Rules. The petitioner union alleges that it could not have staged a strike because the operations at the Dyeing and Finishing Division were temporarily stopped. It insists that it merely protested the unjustified closing of the respondents Dyeing and Finishing Division by forming a picket in front of the respondents compound to urge the re-opening thereof. We do not agree. A strike is any temporary stoppage of work by the concerted action of employees as a result of an industrial or labor dispute.[37] A labor dispute includes any controversy or matter concerning terms or conditions of employment or the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment, regardless of whether the disputants stand in the proximate relation of employer and employee.[38] The members and the supporters of the petitioner union, headed by petitioner Tomaroy, thru concerted action, caused a temporary stoppage of work as a result of an industrial dispute. This is evidenced in the June 13, 2001 spot report of the Atlantic Security & Investigation Agency: On or about 1445H of June 11, 2001, Mr. Jojo Flores and Mr. Rene Fabian were about to deliver fabrics in Bulacan with service truck TBK-158. Upon reaching the corner of Don Pedro St. and McArthur Highway, they gave way to a big truck turning to Don Pedro St. and at the same time the group of Mr. Raymond Tomaroy, the leader of BUKLURAN NG MANGGAGAWA SA CLOTHMAN SOLIDARITY OF UNIONS IN THE PHILIPPINES FOR EMPOWERMENT AND REFORMS BMC SUPER were on their way to CKC compound. Seeing the group, Mr. Fabian greeted them by giving a quick forward motion of his head. But instead, according to Mr. Fabian, Mr. Tomaroy with finger pointing on to Mr. Fabian accusing him as the one responsible for the delay of their 13th month pay. Mr. Fabian just told the group BMC-SUPER to read the Memorandum of the HRD dated June 8, 2001. Mr. Flores and Mr. Fabian returned to CKC, Don Pedro St., Marulas, Valenzuela, to report the matter.

At about 1517H of same date, Mr. Tomaroy with 16 members of BMC SUPER staged a rally and/or gathered in front of Clothman Knitting Corporation gate carrying placards with slogan read as follows: 1. Itigil ang sabwatan ng KATIPUNAN (FABIAN GROUP) at management BMCSUPER; 2. Mr. Paul Lee Huwag mong ipitin ang mid-year, 13th month pay ng mga manggagawa sa CKC. BMC-SUPER; 3. Ibalik ang pasok sa Finishing Department; 4. Mr. Paul Lee Magagara ang sasakyan mo, Montero, BMW, Pajero pero kaunting benepisyo ng manggagawa ay di mo maibigay BMC-SUPER; 5. Kilalanin ang karapatan ng manggagawa na magtatag ng unyon BMC-SUPER. On or about 1640H at the same date, a PNP-Valenzuela Mobil car had SPO1 Palma, PO2 Manresa and PO1 Isip on board. The police with the BMC-SUPER. The Valenzuela Police left at about 1727H. At about 1810H of the same date, the group of BMC-SUPER abandoned the area.[39] The subsequent Reports dated June 14, 15, 16 and 18, 2001 of the same agency further stated that members of the petitioner union, along with other employees particularly from the knitting department, joined in the picket.[40] It is, thus, apparent that the concerted effort of the members of the petitioner union and its supporters caused a temporary work stoppage. The allegation that there can be no work stoppage because the operation in the Dyeing and Finishing Division had been shutdown is of no consequence. It bears stressing that the other divisions were fully operational. There is nothing on record showing that the union members and the supporters who formed a picket line in front of the respondents compound were assigned to the finishing department. As can be clearly inferred from the spot reports, employees from the knitting department also joined in picket. The blockade of the delivery of trucks and the attendance of employees from the other departments of the respondent meant work stoppage. The placards that the picketers caused to be displayed arose from matters concerning terms or conditions of employment as well as the association or representation of persons in negotiating, fixing, maintaining, changing or arranging the terms and conditions of employment. Clearly, the petitioner union, its officers, members and supporters staged a strike. In order for a strike to be valid, the following requirements laid down in paragraphs (c) and (f) of Article 263 of the Labor Code must be complied with: (a) a notice of strike must be filed; (b) a strike-vote must be taken; and (c) the results of the strike-

vote must be reported to the DOLE.[41] It bears stressing that these requirements are mandatory, meaning, non-compliance therewith makes the strike illegal. The evident intention of the law in requiring the strike notice and strike-vote report is to reasonably regulate the right to strike, which is essential to the attainment of legitimate policy objectives embodied in the law.[42] Considering that the petitioner union failed to comply with the aforesaid requirements, the strike staged on June 11 to 18, 2001 is illegal. Consequently, the officers of the union who participated therein are deemed to have lost their employment status.[43] IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The Resolutions of the Court of Appeals in CA-G.R. SP No. 73353 are AFFIRMED. No costs. SO ORDERED. [G.R. No. 141973. June 28, 2005] PHILIPPINE PHOSPHATE FERTILIZER CORPORATION v CIR Once more, we stand by our ruling that: If the State expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments. When it is undisputed that a taxpayer is entitled to a refund, the State should not invoke technicalities to keep money not belonging to it. No one, not even the State, should enrich oneself at the expense of another.[1] The antecedents of this case are as follows: Philippine Phosphate Fertilizer Corporation (Philphos) is a domestic corporation registered with the Export Processing Zone Authority (EPZA). It manufactures fertilizers for domestic and international distribution and as such, utilizes fuel, oil and other petroleum products which it procures locally from Petron Philippines Corporation (Petron). Petron initially pays the Bureau of Internal Revenue (BIR) and the Bureau of Customs the taxes and duties imposed upon the petroleum products. Petron is then reimbursed by petitioner when Petron sells such petroleum products to the petitioner. In a letter dated August 28, 1995, petitioner sought a refund of specific taxes paid on the purchases of petroleum products from Petron for the period of September 1993 to December 1994 in the total amount of P602,349.00 which claim is pursuant to the incentives it enjoyed by virtue of its EPZA registration. Since the two-year period within which petitioner could file a case for tax refund before the Court of Tax Appeals (CTA) was about to expire and no action had been taken by the BIR, petitioner instituted a petition for review before the CTA against the Commissioner of Internal Revenue (CIR).[2] During the trial, to prove that the duties imposed upon the petroleum products delivered to

petitioner by Petron had been duly paid for by petitioner, petitioner presented a Certification from Petron dated August 17, 1995; a schedule of petroleum products sold and delivered to petitioner detailing the volume of sales and the excise taxes paid thereon; photocopies of Authority to Accept Payment for Excise Taxes issued by the CIR pertaining to petroleum products purchased; as well as the testimony of Sylvia Osorio, officer of Petron, to attest to the summary and certification presented.[3] The CIR did not present any evidence to controvert the ones presented by petitioner nor did it file an opposition to petitioners formal offer of evidence.[4] On August 11, 1998, the CTA promulgated its Decision finding that while petitioner is exempt from the payment of excise taxes, it failed to sufficiently prove that it is entitled to refund in this particular case since it did not submit invoices to support the summary of petroleum products sold and delivered to it by Petron.[5] The CTA rationalized thus: [P]etitioner, as an EPZA registered enterprise is exempted from the payment of excise taxes, and if said taxes were passed on by the supplier to EPZA registered enterprise like the petitioner, tax credit shall be granted to the latter. The fact that it was not the petitioner who had paid the taxes directly to the Bureau of Internal Revenue does not have an adverse effect on petitioners action for refund. The law granting the exemption makes no distinction as to the circumstances when the law shall apply. Since the law makes no distinction, neither should we. The exemption is so broad as to cover the present situation. Since an export processing zone is not considered to be covered by Philippine customs and internal revenue laws, the taxes paid by the petitioner on the petroleum products should be refunded or credited in its favor. Thus, the only thing left for us to do is to determine whether or not petitioner is entitled to the amount claimed for refund. After a careful scrutiny of the evidence presented, however, there appears to be a dispute with respect to the amount claimed. Petitioner submitted in evidence a certification issued by Petron to prove that the duties imposed upon the petroleum products delivered to petitioner by Petron had been duly paid for by petitioner (Exhibit A, p. 71, CTA records). Petitioner likewise presented a schedule of petroleum products sold and delivered to petitioner detailing the volume of sales and the excise taxes paid thereon (Exhibits A-1 to A-1a, pp. 72-73, CTA records). However, to show that Petron had previously paid the excise taxes on these petroleum products, petitioner presented photocopies of Authority to Accept Payment for Excise Taxes issued by respondent pertaining to petroleum products purchased (Exhibits A-2 to A-80), pp. 74-152, CTA records). Although these Authority to Accept Payment for Excise Taxes reflect therein the amount of excise taxes paid by Petron to respondent, this Court cannot verify the exact amount of excise taxes which correspond to the petroleum products delivered to petitioner. This Authority to Accept Payment for Excise Taxes only proves the payment of millions of pesos in excise taxes made by Petron during the period covered by the claim but they fail to show to this Court which part of this huge

amount actually represents the excise taxes paid on the petroleum products actually delivered to herein petitioner. Petitioner merely presented a summary of petroleum products sold and delivered by Petron during the period covered by the claim. We cannot, by the summary alone, ascertain the veracity of the amount being claimed neither can it prove the existence of the invoices being referred to therein. Petitioner should have submitted the invoices supporting the schedules of petroleum products sold and delivered to it by Petron. These invoices would reveal whether or not the amount claimed for refund by petitioner is correct. In an action for refund/credits the taxpayer has the burden of showing that the taxes paid are erroneously collected and that failure to meet such a burden is fatal to his cause. Tax refunds partake of the nature of the tax exemptions and therefore cannot be allowed unless granted in the most explicit and categorical language. The grant of refund privileges must be strictly construed against the taxpayer and liberally in favor of the government. (citations omitted) Petitioner has the burden to prove the material allegations in its petition as well as the truth of its claim.[6] (Emphasis supplied) disposing of the case as follows: WHEREFORE, in view of the foregoing, the claim of refund of petitioner in the amount of P602,349.00 is hereby DENIED for lack of merit.[7] On August 31, 1998, petitioner filed a motion for reconsideration alleging that it failed to submit invoices because it thought that the presentation of said invoices was not necessary to prove the claim for refund, since petitioners previous claims, in CTA Case Nos. 4654, 4993 and 4994,[8] involving similar facts, were granted by the CTA even without the presentation of invoices. It then prayed that the CTA decision be reconsidered and its claim for refund be allowed, or in the alternative, allow petitioner to present and offer the invoices in evidence to present its claim.[9] The CTA denied the motion for reconsideration on January 6, 1999, explaining as follows: It is important to note at the outset that Petitioners reliance on CTA Case Nos. 4994, 4654 and 4993 is misplaced because during the hearings of these cases up to the time of formal offer of evidence, CTA Circular No. 1-95 was not yet in effect. The nature and presentation of evidence involving voluminous documents prior to the effectivity of CTA Circular No. 1-95 differ from that which is required by this Court from the effectivity of said Circular beginning January 25, 1995. In the instant case, the Petition for Review was filed on September 1, 1995. It is obviously clear that the provisions of CTA Circular 1-95 already applied to Petitioners presentation of evidence. Quoted hereunder are portions of CTA Circular 1-95:

1. The party who desires to introduce as evidence such voluminous documents must present: (a) Summary containing the total amount/s of the tax account or tax paid for the period involved and a chronological or numerical list of the numbers, dates and amounts covered by the invoices or receipts; and (b) a Certification of an independent Certified Public Accountant attesting to the correctness of the contents of the summary after making an examination and evaluation of the voluminous receipts and invoices. Such summary and certification must properly be identified by a competent witness from the accounting firm. 2. The method of individual presentation of each and every receipt or invoice or other documents for marking, identification and comparison with the originals thereof need not be done before the Court or the Commissioner anymore after the introduction of the summary and CPA certification. It is enough that the receipts, invoices and other documents covering the said accounts or payments must be premarked by the party concerned and submitted to the Court in order to be made accessible to the adverse party whenever she/he desires to check and verify the correctness of the summary and CPA certification. However, the originals of the said receipts, invoices or documents should be ready for verification and comparison in case doubts on the authenticity of the particular documents presented is raised during the hearing of the case. It can be revealed from the evidence presented by the Petitioner that it failed to present a certification of an independent Certified Public Accountant, as well as the invoices supporting the schedules of petroleum products sold and delivered to it by Petron. From this perspective alone, the claim for refund was correctly denied. Now that an unfavorable decision has been rendered by this Court, Petitioner belatedly seeks to present the invoices as additional evidence. The prayer to present additional evidence partakes of the nature of a motion for new trial under Section 1 Rule 37 of the 1997 Rules of Civil Procedure. It has already been emphasized in several cases that failure to present evidence already existing at the time of trial does not warrant the grant of a new trial because said evidence can no longer be considered newly discovered but is more in the nature of forgotten evidence. Neither can such inadvertence on the part of the counsel to present said evidence qualify as excusable negligence.[10] (Emphasis supplied) CTA Presiding Judge Ernesto D. Acosta dissented with the view that in the interest of justice, petitioner should be given a chance to prove its case by allowing it to present the invoices of its purchases.[11] He reasoned that: A review of the schedule of invoices, Exhibits A-1 A-1-a, reveals that there are only about ninety four (94) invoices which does not need the assistance of an independent CPA. It can easily be presented before this Court or before a Clerk of Court for markings and comparison.

The reason advanced by the Petitioner was that they thought the presentation by the Manager of Petron Corporation of a duly notarized certification (supporting the schedules of invoices), coupled with testimonies of witness, Mrs. Sylvia Osorio of Petron Corporation, are enough to prove their case. Respondent did not even controvert said exhibits and testimonies. It is this Court that raised doubts on the veracity of the claim in view of the absence of the invoices. This ground could easily fall under the phrase mistake or excusable negligence as a ground for new trial under Sec. 1(a) of Rule 37 and not under the phrase newly discovered evidence as stated in our said resolution. The denial of this motion is too harsh considering that this case is only civil in nature, govern (sic) merely by the rule on preponderance of evidence.[12] On January 25, 1999, petitioner filed another motion for reconsideration with motion for new trial praying that it be allowed to present an additional witness and to have invoices and receipts pre-marked in accordance with CTA Circular No. 195.[13] The CTA denied the same for the reason that it found no convincing reason to reverse its earlier decision and the motion for new trial was filed beyond the period prescribed by Sec. 1, Rule 37 of the Rules of Court as well as for appeals as provided under Sec. 4, Rule 43.[14] Petitioner then went to the Court of Appeals (CA) which issued the herein assailed Resolution dismissing the petition for review, to wit: Considering that the AFFIDAVIT OF NON-FORUM SHOPPING was executed by petitioners counsel, when under Adm. Circular No. 04-94, the petitioner should be the one to certify as to the facts and undertakings as required; and since any violation of the circular shall be a cause for the dismissal of the petition, the petition for review is hereby DENIED DUE COURSE OUTRIGHT, and is DISMISSED. SO ORDERED.[15] The motion for reconsideration was likewise denied.[16] Hence the present petition raising the following issues: 1. Whether or not the Court of Tax Appeals should have granted petitioners claim for refund. 2. Whether or not the Court of Appeals should have given due course to the Petition for Review.[17] Anent the first issue, petitioner argues that: the CTA erred in denying its claim for refund for its failure to present invoices and receipts; the evidence it adduced, which the CIR did not controvert nor contest, is sufficient to support petitioners claim for refund or tax credit; as opined by the Presiding Judge of the CTA in his dissenting opinion, the failure of petitioner to present invoices and receipts is a minor

infraction of CTA Circular No. 1-95 which should not defeat petitioners right to refund; there is nothing in said circular which will support the contention of the CTA that the petitioner is mandated to present the invoices in the present case; the CTA, in its previous decisions involving the petitioner, one of which was even affirmed by the CA, held that a refund may be granted solely on the basis of certifications issued by Petron;[18] if it is the avowed purpose of CTA Circular No. 1-95 to ensure the speedy administration of justice, it should not compel petitioner to present additional voluminous evidence which will require the presentation of a Certified Public Accountant (CPA) for court examination aside from entailing additional costs to petitioner; petitioners counsel was of the honest belief that he was not required to adhere to what is provided in CTA Circular No. 1-95; petitioner should not be burdened by the infraction of its counsel and should be given the fullest opportunity to establish the merits of its action rather than for it to lose property on mere technicalities; it has also been held that evidence not offered and formally presented in evidence during the trial may still be considered by a court in the exercise of its discretion so as not to allow a mere technicality to overcome justice and fairness; petitioner should be granted its claim for refund, or, in the alternative, be given an opportunity to present the pre-marked invoices in accordance with CTA Circular No. 1-95.[19] As to the second issue, petitioner explains that: its counsel was of the belief that he was authorized to execute the affidavit of non-forum shopping; in any event, its counsel immediately attached to the motion a copy of the affidavit of non-forum shopping executed by petitioners President, Ramon C. Avecilla as soon as he learned of his error; and Supreme Court Administrative Circular No. 04-94 should be liberally construed following Maricalum Mining Corp. vs. NLRC,[20] Loyola vs. Court of Appeals,[21] and Philippine Fishing Boat Officers and Engineers Union vs. Court of Industrial Relations.[22] It then prayed that: the resolutions of the CA and the Decision of the CTA be reversed; and an order be issued to award petitioner tax credit certificate/refund in the amount of P602,349.00 representing excise taxes paid for the period of September 1993 to December 1994 or in the alternative to allow petitioner to adduce evidence before the CTA to support its case.[23] The CIR, in his Comment, contends that: the burden of proving entitlement to the refund/credit rests upon petitioner; the CTA was correct in requiring the submission of the invoices to support the schedules presented especially in this case where the CTA cannot determine which part of the huge amount paid by Petron actually represents the excise taxes paid on the petroleum products actually delivered to petitioner; the schedules are self-serving and if not corroborated by evidence have no evidentiary weight; the CTA is not precluded from requiring other evidence which will once and for all erase doubts to the claim for refund; claims for refund, partaking of the nature of tax exemptions, are construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority; even setting aside the requirements in CTA Circular No. 1-95, petitioner is still obliged to present the

invoices in order to corroborate the entries in the summary and to reveal whether or not the amount claimed for refund by petitioner is correct; petitioners Motion for Reconsideration and Motion for New Trial filed on January 25, 1999 were properly denied by the CTA for having been filed out of time; and the CTAs decision must be respected on appeal since it has developed an expertise on the subject.[24] Anent the second issue, respondent avers that the CA did not err in dismissing the petition for review on the ground that the affidavit of non-forum shopping was executed by petitioners counsel contrary to the requirements in Sec. 5, Rule 7 of the Rules of Court; and that the denial of the motion for reconsideration was also proper since the failure to comply with the requirements of non-forum shopping shall not be curable by mere amendment to the complaint.[25] For clarity, we shall first discuss the issue of whether or not the CA should have given due course to the petition for review. The primary question that has to be resolved is whether an Affidavit of Non-Forum Shopping, erroneously signed by counsel, may be cured by subsequent compliance. Generally, subsequent compliance with the requirement of affidavit of non-forum shopping does not excuse a party from failure to comply in the first instance.[26] Supreme Court Administrative Circular No. 04-94 of Section 5, Rule 7 of the 1997 Rules of Civil Procedure which requires the pleader to submit a certificate of nonforum shopping to be executed by the plaintiff or principal party is mandatory.[27] A certification of the plaintiffs counsel will not suffice for the reason that it is petitioner, and not the counsel, who is in the best position to know whether he actually filed or caused the filing of a petition.[28] A certification against forum shopping signed by counsel is a defective certification that is equivalent to noncompliance with the requirement and constitutes a valid cause for the dismissal of the petition.[29] Hence, strictly speaking, the CA was correct in dismissing the petition. There are instances, however, when we treated compliance with the rule with relative liberality, especially when there are circumstances or compelling reasons making the strict application of the rule clearly unjustified.[30] In the case of Far Eastern Shipping Co. vs. Court of Appeals,[31] while we said that, strictly, a certification against forum shopping by counsel is a defective certification, the verification, signed by petitioners counsel in said case, is substantial compliance inasmuch as it served the purpose of the Rules of informing the Court of the pendency of another action or proceeding involving the same issues.[32] We then explained that procedural rules are instruments in the speedy and efficient administration of justice which should be used to achieve such end and not to derail it.[33]

In Damasco vs. NLRC,[34] the certifications against forum shopping were erroneously signed by petitioners lawyers, which, generally, would warrant the outright dismissal of their actions.[35] We resolved however that as a matter of social justice, technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.[36] In Cavile vs. Heirs of Clarita Cavile,[37] we likewise held that the merits of the substantive aspects of the case may be deemed as special circumstance for the Court to take cognizance of a petition although the certification against forum shopping was executed and signed by only one of the petitioners.[38] Finally, in Sy Chin vs. Court of Appeals,[39] we categorically stated that while a petition may be flawed as the certificate of nonforum shopping was signed only by counsel and not by the party, such procedural lapse may be overlooked in the interest of substantial justice.[40] Here, the affidavit of non-forum shopping was signed by petitioners counsel. Upon receipt of the resolution of the CA, however, which dismissed its petition for noncompliance with the rules on affidavit of non-forum shopping, petitioner submitted, together with its motion for reconsideration, an affidavit signed by petitioners president in compliance with the said rule.[41] We deem this to be sufficient especially in view of the merits of the case, which may be considered as a special circumstance or a compelling reason that would justify tempering the hard consequence of the procedural requirement on non-forum shopping.[42] Which brings us to the other issue of whether or not the CTA should have granted petitioners claim for refund. The general rule is that claimants of tax refunds bear the burden of proving the factual basis of their claims.[43] This is because tax refunds are in the nature of tax exemptions, the statutes of which are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.[44] Taxes are the lifeblood of the nation, therefore statutes that allow exemptions are construed strictly against the grantee and liberally in favor of the government.[45] In this case, there is no dispute that petitioner is entitled to exemption from the payment of excise taxes by virtue of its being an EPZA registered enterprise.[46] As stated by the CTA, the only thing left to be determined is whether or not petitioner is entitled to the amount claimed for refund.[47] Petitioners entire claim for refund, however, was denied for petitioners failure to present invoices allegedly in violation of CTA Circular No. 1-95. But nowhere in said Circular is it stated that invoices are required to be presented in claiming refunds. What the Circular states is that: 1. The party who desires to introduce as evidence such voluminous documents must present: (a) Summary containing the total amount/s of the tax account or tax paid for the period involved and a chronological or numerical list of the numbers, dates and amounts covered by the invoices or receipts; and (b) a Certification of an

independent Certified Public Accountant attesting to the correctness of the contents of the summary after making an examination and evaluation of the voluminous receipts and invoices. Such summary and certification must properly be identified by a competent witness from the accounting firm. (Emphasis supplied) The CTA in denying petitioners motion for reconsideration, also mentioned for the first time that petitioners failure to present a certification of an independent CPA is another ground that justified the denial of its claim for refund. Again, we find such reasoning to be erroneous. The certification of an independent CPA is not another mandatory requirement under the Circular which petitioner failed to comply with. It is rather a requirement that must accompany the invoices should one decide to present invoices under the Circular. Since petitioner did not present invoices, on the assumption that such were not necessary in this case, it logically did not present a certification because there was nothing to certify. The CTA also could not deny that in its previous decisions involving petitioners claims for refund, invoices were not deemed necessary to grant such claims. It merely said that in said decisions, CTA Circular No. 1-95 was not yet in effect.[48] Since CTA Circular No. 1-95 did not make it mandatory to present invoices, coupled with the previous cases of petitioner where the certifications issued by Petron sufficed, it is understandable that petitioner did not think it necessary to present invoices and the accompanying certifications when it filed the present case for refund before the CTA. Even then, petitioner, in its motion for reconsideration, asked the CTA for an opportunity to present invoices to substantiate its claims. But this was denied by the CTA explaining that its prayer to present additional evidence partakes of the nature of a motion for new trial under Section 1, Rule 37 of the Rules of Court. The CTA held that under such rule, failure to present evidence already existing at the time of trial does not warrant the grant of a new trial because such evidence is not newly discovered but is more in the nature of forgotten evidence which is not excusable.[49] On this point, we agree with the dissenting opinion of CTA Presiding Judge Ernesto D. Acosta who stated that: The reason advanced by the Petitionerthat they thought the presentation by the Manager of Petron Corporation of a duly notarized certification (supporting the schedules of invoices), coupled with testimonies of witness, Mrs. Sylvia Osorio of Petron Corporation, are enough to prove their case could easily fall under the phrase mistake or excusable negligence as a ground for new trial under Sec. 1(a) of Rule 37 and not under the phrase newly discovered evidence as stated in our said resolution. The denial of this motion is too harsh considering that this case is only civil in nature, govern (sic) merely by the rule on preponderance of evidence.[50]

Sec. 1, Rule 37 of the Rules of Court provides as follows: SECTION 1. Grounds of and period for filing motion for new trial or reconsideration.--- Within the period for taking an appeal, the aggrieved party may move the trial court to set aside the judgment or final order and grant a new trial for one or more of the following causes materially affecting the substantial rights of said party: (a) Fraud, accident, mistake or excusable negligence which ordinary prudence could not have guarded against and by reason of which such aggrieved party has probably been impaired in his rights; or (b) Newly discovered evidence, which could not, with reasonable diligence, have discovered and produced at the trial, and which if presented would probably alter the result. It is true that petitioner could not move for new trial on the basis of newly discovered evidence because in order to have a new trial on the basis of newly discovered evidence, it must be proved that: (a) the evidence was discovered after the trial; (b) such evidence could not have been discovered and produced at the trial with reasonable diligence; (c) it is material, not merely cumulative, corroborative or impeaching; and (d) it is of such weight that, if admitted, will probably change the judgment.[51] This does not mean however, that petitioner is altogether barred from having a new trial. As pointed out by Judge Acosta, the reasons put forth by petitioner could fall under mistake or excusable negligence. The mistake that is allowable in Rule 37 is one which ordinary prudence could not have guarded against.[52] Negligence to be excusable must also be one which ordinary diligence and prudence could not have guarded against and by reason of which the rights of an aggrieved party have probably been impaired.[53] The test of excusable negligence is whether a party has acted with ordinary prudence while transacting important business.[54] In this case, it cannot be said that petitioner did not act with ordinary prudence in claiming its refund with the CTA, in light of its previous cases with the CTA which did not require invoices and the non-mandatory nature of CTA Circular No. 1-95. Respondent also argues that petitioners motion for new trial was filed out of time and should therefore be dismissed in view of Sec. 1, Rule 37 and Sec. 4, Rule 43 of the Rules of Court. Sec. 1, Rule 37 provides that:

Section 1. Grounds of and period for filing motion for new trial or reconsideration.--Within the period for taking an appeal, the aggrieved party may move the trial court to set aside the judgment or final order and grant a new trial and Sec. 4, Rule 43 holds that: Section 4. Period of appeal. --- The appeal shall be taken within fifteen (15) days from notice of the award, judgment, final order or resolution, or from the date of its last publication, if publication is required by law for its effectivity, or of the denial of petitioners motion for new trial or reconsideration duly filed in accordance with the governing law of the court or agency a quo. Only one (1) motion for reconsideration shall be allowed. Upon proper motion and the payment of the full amount of the docket fee before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. It is borne by the records however that in its first motion for reconsideration duly filed on time, petitioner had already prayed that it be allowed to present and offer the pieces of evidence deemed lacking by the CTA in its Decision dated August 11, 1998.[55] Thus, while it named its pleading as a Motion for New Trial only in its motion dated January 25, 1999, petitioner should not be deemed to have moved for new trial only at such time. We reiterate the fundamental principle that technical rules of procedure are not ends in themselves but are primarily designed to aid in the administration of justice.[56] And in cases before tax courts, Rules of Court applies only by analogy or in a suppletory character and whenever practicable and convenient shall be liberally construed in order to promote its objective of securing a just, speedy and inexpensive disposition of every action and proceeding.[57] The quest for orderly presentation of issues is not an absolute.[58] It should not bar the courts from considering undisputed facts to arrive at a just determination of a controversy.[59] This is because, after all, the paramount consideration remains the ascertainment of truth.[60] Section 8 of R.A. No. 1125 creating the CTA also expressly provides that it shall not be governed strictly by technical rules of evidence.[61] Since it is not disputed that petitioner is entitled to tax exemption, it should not be precluded from presenting evidence to substantiate the amount of refund it is claiming on mere technicality especially in this case, where the failure to present invoices at the first instance was adequately explained by petitioner. As we pronounced in BPI-Family Savings Bank, Inc. vs. Court of Appeals:[62] Technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. If the State expects its taxpayers to observe

fairness and honesty in paying their taxes, so must it apply the same standard against itself in refunding excess payments of such taxes. Indeed, the State must lead by its own example of honor, dignity and uprightness.[63] WHEREFORE, the petition is GRANTED. The assailed resolution is SET ASIDE and the case REMANDED to the Court of Tax Appeals for the reception of evidence, particularly invoices supporting the schedules of petroleum products sold and delivered to petitioner by Petron and the corresponding certification of an independent Certified Public Accountant, for the proper and immediate determination of the amount to be refunded to petitioner. SO ORDERED. G.R. No. 170049 March 14, 2008 GENEROSO A. JUABAN v RENE ESPINA and CEBU DISCOVERY BAY PROPERTIES, INC., This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court filed by the late Generoso A. Juaban (Juaban), now substituted by his heirs, and Francis M. Zosa (Zosa), assailing the Decision[1] dated 31 January 2005 of the Court of Appeals in CA-G.R. CV No. 60721, wherein the appellate court (1) made permanent the Writ of Preliminary Injunction it had earlier issued, enjoining petitioners from exercising rights of ownership over Lots No. 6720-C-2 and 6720-B-2, respectively, covered by Transfer Certificates of Title (TCTs) No. 36425 and No. 36426 of the Registry of Deeds of Lapu-Lapu City; (2) set aside the Decision of the Lapu-Lapu City Regional Trial Court (RTC), Branch 54, in Civil Case No. 4871-L which ordered the dismissal of the case; and (3) directed the RTC to undertake further proceedings in Civil Case No. 4871-L insofar as the issue of damages was concerned. The present Petition stems from the proceedings in Civil Case No. 4871-L before the Lapu-Lapu City RTC, Branch 54, but is still directly related to two other cases, particularly, Civil Case No. 2309-L before the Lapu-Lapu RTC, Branch 27, and (2) A.M. No, P-02-1580 before this Court, which we cannot simply overlook. The direct antecedent of the present petition, Civil Case No. 4871-L before the Lapu-Lapu City RTC, Branch 54, is the last of the three cases we are presenting hereunder: CASE No. 1: Bancale v. Paras, Civil Case No. 2309-L, Lapu-Lapu City RTC, Branch 27 The Heirs of Conrado Bancale filed before the Lapu-Lapu City RTC, Branch 27, a case for the recovery of the properties subject of the present Petition against a certain Eva Paras and other persons, which was docketed as Civil Case No. 2309-L. On 22 January 1996, petitioners Juaban and Zosa entered their appearance as counsels for the Heirs of Bancale.

The Heirs of Bancale later entered into a 31 January 1997 Agreement to Sell and to Buy with respondent Rene Espina (Espina), paragraph 5 of which states: That after the title is transferred to their names, the First Party [Heirs of Bancale] will execute an absolute deed of sale in favor of the second party [herein respondent Rene Espina] or whoever will be designated by him as the vendee for the consideration mentioned in paragraph 2 hereof. The amount of P2,000,000.00 advanced by the Second Party shall form part of said consideration.[2] In accordance with said Agreement, respondent Espina paid petitioners P2,000,000.00 as an advance on the purchase price for the subject properties for the benefit of the Heirs of Bancale. Respondent Espina then designated the other respondent in this case, Cebu Bay Discovery Properties, Inc. (CDPI), as the vendee of the said properties. Later, on 1 September 1997, respondents learned that petitioners, counsels Juaban and Zosa, had filed on 26 August 1997, at around 1:10 p.m., a Motion to fix their attorneys fees in Civil Case No. 2309-L. They also learned that the Lapu-Lapu City RTC, Branch 27, had issued an Order on the very same date of 26 August 1997, at around 2:20 p.m., granting the motion and fixing petitioners attorneys fees in the amount of P9,000,000.00. The Heirs of Bancale filed a Motion for Reconsideration, but the same was denied in an Order dated 22 September 1997. The Heirs of Bancale received a copy of the Order denying their Motion for Reconsideration on 9 October 1997, after which they filed a Notice of Appeal dated 15 October 1997. However, without waiting for the expiration of the period to appeal of the Heirs of Bancale, the Lapu-Lapu City RTC, Branch 27, issued on 10 October 1997 an Order, which states: Considering that the Order of this Court dated 26 August 1997 has already become final and executory, not having been appealed, the motion for execution is hereby GRANTED. Let a Writ of Execution issue to satisfy the Order dated August 26, 1997 to enforce the same fixing the attorneys fees. Sheriff Juan A. Gato of this Branch is hereby directed to implement the Writ.[3] The Heirs of Bancale filed another Motion for Reconsideration, this time, of the 10 October 1997 Order. Without directly ruling on this Motion, the Lapu-Lapu City RTC, Branch 27, issued on 14 October 1997 a Writ of Execution directing Sheriff Juan A. Gato (Gato) to satisfy the judgment for attorneys fees in the amount of P9,000,000.00 in favor of petitioners. On 23 October 1997, Sheriff Gato served notice that the rights, shares, interests and participation of the Heirs of Bancale in the subject properties were being levied on

execution to satisfy the Writ of Execution dated 14 October 1997. This was done despite the fact that the Writ of Execution issued by the trial court specifically directed that the attorneys fees were to be taken from the money due from the buyer to the sellers under the agreement to buy and sell. Thereafter, Sheriff Gato issued a Notice of Sale on Execution dated 24 October 1997, announcing that the subject properties were to be sold at a public auction on 28 November 1997 at 2:00 p.m. On 18 November 1997, respondents filed a Third Party Claim with the office of Sheriff Gato. On motion of petitioners, the Lapu-Lapu City RTC, Branch 27 fixed the sheriffs indemnity bond at P500,000.00. On 28 November 1997, the subject properties were sold at public auction to petitioners for P9,000,000.00. The sale was registered on 3 December 1997. On 1 December 1998, the Lapu-Lapu City RTC, Branch 27, under a new presiding judge, issued an Order resolving the Motions of the Heirs of Bancale seeking reconsideration of the previous Orders of the same court dated 22 September 1997 and 10 October 1997, and disposing thus: WHEREFORE, in view of the foregoing premises, this Court hereby sets aside the order issued in this case on October 10, 1997 which considered as final and executory the August 26, 1997 order and, in its stead, hereby gives due course to the appeal filed by the [Heirs of Bancale] from the order issued in this case on September 22, 1997, which in effect is an appeal from the said August 26, 1997 order.[4] This 1 December 1998 Order is currently on appeal with the Nineteenth Division of the Court of Appeals, where it is docketed as CA- G.R. CEB CV No. 61696. The Court of Appeals Resolutions granting due course to said appeal were elevated via a Petition for Certiorari, docketed as G.R. No. 156011, still pending before this Court. On 27 January 1999, petitioners wrote a letter to Sheriff Gato requesting him to execute a final deed of sale in their favor since no redemption of the subject properties was made. Sheriff Gato, in a letter dated 4 February 1999, answered that he no longer had any authority to issue the final deed of sale by virtue of the 1 December 1998 Order of the Lapu-Lapu City RTC, Branch 27. Nonetheless, in direct contravention of the contents of his letter, Sheriff Gato still transmitted to petitioners the final Deed of Conveyance without the approval of the trial court. CASE No. 2: Espina v. Gato, A.M. No. P-02-1580, Supreme Court The second case is an administrative complaint filed against Sheriff Gato by respondents, for allegedly acting with manifest bias and partiality in Civil Case No.

2309-L while it was still pending with the Lapu-Lapu City RTC, Branch 27. On 9 April 2003, this Court, speaking through Associate Justice Adolfo Azcuna, held: Firstly, the haste with which respondent levied upon the plaintiffs property is unexplained. Furthermore, despite a third-party claim filed by complainant Espina for CDPI on November 18, 1997, the property was sold at public auction to Attys. Juaban and Zosa on November 28, 1997. It is true that sheriffs are responsible for the prompt service and implementation of writs and other orders issued by the court. They cannot afford to be inefficient in the work assigned to them. However, prompt service and efficiency should not be reasons to compromise the integrity of the court and the proper administration of justice. By the very nature of their duties, sheriffs perform a very sensitive function in the dispensation of justice. Thus, their conduct must, at all times, be above suspicion. Secondly, as stated earlier, the trial court ordered in the writ of execution that the P9 million to be paid to Attys. Juaban and Zosa as attorneys fees be taken from the money due from the buyer to the sellers under the agreement to buy and sell. Nevertheless, respondent levied upon the aforementioned property in blatant disregard of this order. It is a well-settled rule that the duty of a sheriff is merely ministerial. When a writ is placed in the hands of the sheriff, it is his ministerial duty to proceed to execute in accordance with the terms of its mandate. Thirdly, when Attys. Juaban and Zosa requested respondent to issue a Final Deed of Conveyance to them, respondent already knew that he no longer had authority to issue the same. He had already been appraised of the fact that a subsequent order, dated December 1, 1998, set aside the orders that were the basis of the writ of execution. This was admitted by him in his letter to Attys. Juaban and Zosa. Despite this knowledge, he still issued a final deed of sale in favor of the said lawyers without the approval of the court. From all these facts, it is clear that respondent showed manifest partiality in favor of Attys. Juaban and Zosa, giving them unwarranted benefit, advantage and preference and that, with evident bad faith, he caused undue injury to complainants. Respondent thereby failed to comply with the strict standards required of public officers and employees. WHEREFORE, respondent Sheriff Juan Gato is found GUILTY of grave abuse of official functions and manifest partiality amounting to grave misconduct and conduct prejudicial to the administration of justice, and is hereby SUSPENDED FROM SERVICE FOR THREE (3) MONTHS WITHOUT PAY, with the warning that repetition in the future of the same or similar misconduct will be dealt with more severely.[5]

CASE No. 3: Espina v. Gato, Civil Case No. 4871-L, Lapu-Lapu City RTC, Branch 54 On 28 November 1997, respondents filed a complaint for injunction and damages with an application for the issuance of a temporary restraining order to enjoin, at whatever stage, the sale in a public auction of the subject properties by Sheriff Gato. Said complaint was docketed as Civil Case No. 4871-L before the Lapu-Lapu City RTC, Branch 54. Respondents claim that they were, as of the institution of said case, unaware that the subject properties had already been sold at a public auction. On 19 December 1997, petitioners filed a Motion to Dismiss, which was granted by the Lapu-Lapu City RTC, Branch 54, in an Order dated 30 July 1998. On 2 September 1998, respondents filed a Notice of Appeal, which was given due course by the LapuLapu City RTC, Branch 54, in an Order dated 7 September 1998. Respondents appeal before the Court of Appeals was docketed as CA-G.R. CV No. 60721. Respondents filed therein an Urgent Motion for Issuance of a Temporary Restraining Order and Writ of Preliminary Injunction dated 19 October 1998. On 26 November 1998, the Court of Appeals issued a Resolution granting respondents application for the issuance of a temporary restraining order, restraining Sheriff Gato from consolidating ownership over the subject properties in favor of petitioners. On 1 December 1998, respondents filed an Urgent Manifestation/Motion dated 1 December 1998 wherein they tendered the amount of P10,962,347.20 as payment for the redemption price of the subject properties, on the condition that if the application for preliminary injunction was denied or if the case is finally resolved in favor of petitioners, the said amount shall be considered as valid tender of the redemption price of the subject properties retroacting to the date of the filing of the Manifestation/Motion. In a comment dated 17 December 1998, petitioners interposed no objection to the deposit of said amount, but excepted to respondents claim that the tender would stop the running of interest on the redemption price. On 15 June 1999, the Court of Appeals issued a Resolution stating that respondents application for a writ of preliminary injunction to enjoin Sheriff Gato from consolidating ownership over the subject properties in favor of petitioners had been rendered moot in view of the 1 December 1998 Order by the Lapu-Lapu City RTC, Branch 27, in Civil Case No. 2309-L setting aside its Order dated 10 October 1997 and giving due course to respondents appeal therein. In the meantime, petitioners were able to acquire the Definite Deed of Sale of the subject properties from Sheriff Gato. Hence, respondents filed a Motion for Clarification and/or Reconsideration to Cite [Petitioners] in Contempt. Petitioners,

however, proceeded to register the Definite Deed of Sale issued by Sheriff Gato with the Register of Deeds in Lapu-Lapu City. In a Resolution dated 30 September 1999, the Court of Appeals granted respondents application for a writ of preliminary injunction and enjoined petitioners from exercising rights of ownership over the subject properties, such as alienating or encumbering the same. On 31 January 2005, the Court of Appeals rendered the assailed Decision, the dispositive portion of which reads: WHEREFORE, the Order dated July 30 1998 issued by the Regional Trial Court, Branch 54, Lapu-Lapu City, in Civil Case No. 4871-L dismissing the complaint, is hereby REVERSED and SET ASIDE. The Writ of Preliminary Injunction issued pursuant to the Courts resolution promulgated on September 30, 1999, subject to the conditionalities therein, is hereby made PERMANENT. The Regional Trial Court, Branch 54, Lapu-Lapu City is directed to undertake further proceedings in Civil Case No. 4871-L sofar as the issue on damages is concerned. Costs against appellees.[6] Petitioners Motion for Reconsideration of the foregoing decision was denied in a Resolution dated 20 September 2005. Hence, the present recourse, wherein petitioners bring forth the following issues for this Courts consideration: 1. Whether or not Rene Espina had a cause of action to file the Injunction and Damages Case against petitioners; 2. Whether or not the trial court acquired jurisdiction over the complaint and over CDPI in said case; 3. Whether or not only questions of law were raised in respondents appeal, which allegedly required the Court of Appeals to dismiss said appeal; 4. Whether or not the Court of Appeals erred in taking cognizance of the records in another case which were not offered and admitted as evidence as basis for its findings of facts; 5. Whether or not the Court of Appeals erred in issuing a permanent injunction against petitioners considering that there was allegedly no prayer in the complaint therefor.

We find no merit in the present Petition. Authority of Rene Espina to File the Case and the Jurisdiction of the RTC Only respondent Espina signed the Verification and Certification of Non-Forum Shopping attached to the complaint in the third case, Civil Case No. 4178-L, before the Lapu-Lapu City RTC, Branch 54; and apart from him, there was no signatory of the Verification and Certification of Non-Forum Shopping on behalf of respondent CDPI. Petitioners claim that the complaint should have been dismissed by the trial court since (1) respondent Espina had no more personal interest in the case, having assigned his rights to the subject properties to respondent CDPI; and (2) there was no authority or board resolution authorizing respondent Espina to file the complaint on behalf of his co-respondent CDPI. Sec. 2, Rule 3 of the Rules of Court requires that parties to a civil case must be real parties in interest, to wit: SEC. 2. Parties in interest.A real party in interest is the party who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized by law or these Rules, every action must be prosecuted or defended in the name of the real party in interest. We quote with approval the following ruling of the Court of Appeals on the issue of respondent Espinas personality to institute Civil Case No. 4178-L: The personality of appellant Rene Espina to sue in his personal capacity finds basis in the Agreement to Sell and to Buy. It is readily apparent in the Agreement that he has been designated as the Second Party, in his personal capacity, and not as agent or representative of a corporate entity. On the other hand, the Deed of Sale which was subsequently executed, is based on the aforesaid Agreement. Therefore, there is no gainsaying that appellant Rene Espina has a personal interest in the case.[7] Respondents right to the subject properties is based on the 31 January 1997 Agreement to Sell and to Buy executed between the Heirs of Bancale and respondent Espina. Hence, the said Agreement is the very source of the right, the violation of which constituted the cause of action in respondents complaint for injunction before the court a quo. It was respondent Espina who entered into the Agreement, and his rights as a party to the said contract were not extinguished just because he designated his co-respondent CDPI as vendee of the subject properties, pursuant to the authority given to him in paragraph 5 thereof. Among respondent Espinas rights as a party to the Agreement is his right to the full realization of the

purpose of the contract, which in this case, would be the transfer of the ownership of the subject properties from the Heirs of Bancale either to him or to his designated vendee. The public auction sale of the subject properties to petitioners would not only prevent the intended transfer of ownership under the Agreement, but would also render inutile respondent Espinas designation of respondent CPDI as a vendee. Moreover, it was undisputed that respondent Espina advanced P2,000.000 to the Heirs of Bancale, which formed part of the consideration for the ensuing sale of the subject properties. There was no proof that respondent Espina had already been reimbursed for the said amount. Having paid part of the purchase price for the subject properties, then respondent Espina has an interest therein. Having been established as a real party in interest, respondent Espina has not only the personality to file the complaint in Civil Case No. 4178-L, but also the authority to sign the certification against forum shopping as a plaintiff therein. We held in Mendigorin v. Cabantog,[8] Escorpizo v. University of Baguio[9] and Condo Suite Club Travel, Inc. v. National Labor Relations Commission[10] that the certification against forum shopping must be signed by the plaintiff or any of the principal parties and not by counsel.[11] We have also held in Cua v. Vargas,[12] that: The general rule is that the certificate of non-forum shopping must be signed by all the plaintiffs or petitioners in a case and the signature of only one of them is insufficient. Nevertheless, the rules on forum shopping, which were designed to promote and facilitate the orderly administration of justice, should not be interpreted with such absolute literalness as to subvert their own ultimate and legitimate objective. Strict compliance with the provisions regarding the certificate of non-forum shopping merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded. Under justifiable circumstances, the Court has relaxed the rule requiring the submission of such certification considering that although it is obligatory, it is not jurisdictional. Thus, when all the petitioners share a common interest and invoke a common cause of action or defense, the signature of only one of them in the certification against forum shopping substantially complies with the rules. In Bases Conversion and Development Authority v. Uy,[13] we held: Signature of a principal party sufficient for verification and certification Anent the assailed verification and certification of non-forum shopping, it is shown that it substantially complied with the requirements of the Rules. Dismissal of appeals that is purely on technical grounds is frowned upon. While only petitioner Ramon P. Ereneta signed the verification and certification of non-forum shopping such is not fatal to the instant petition. In Calo, we agreed with petitioners that the signature of only one petitioner in the verification and certification of non-forum

shopping satisfies the requirement under Section 2, Rule 42 of the Revised Rules on Civil Procedure. In Calo, we relied on Condo Suite Club Travel, Inc., v. NLRCwhere we ruled that the certification of non-forum shopping may be signed not only by the petitioners but also any of the principal parties. In the instant case, Mr. Ramon P. Erenta, a member of the Investment Committee of the Heritage Park Management Corporation, is a principal party in the instant case having been impleaded in Civil Case No. 99-0425 pending in the RTC. More so, in Calo, we also cited Cavile, et al. v. Heirs of Clarita Cavile, et. al.where we held that there was substantial compliance with the Rules when only petitioner Thomas George Cavile, Sr. signed in behalf of all the other petitioners of the certificate of non-forum shopping as the petitioners, being relatives and co-owners of the properties in dispute, shared a common interest in them, had a common defense in the complaint for partition, and filed the petition as a collective, raising only one argument to defend their rights over the properties in question. We reasoned that there was sufficient basis for Cavile, Sr., to speak for and in behalf of his co-petitioners, stating that they had not filed any action or claim involving the same issues in another court or tribunal, nor was there other pending action or claim in another court or tribunal involving the same issues. In the same vein, this is also true in the instant case where petitioners have filed their petition as a collective, sharing a common interest and having a common single defense. Thus, the certificate against forum shopping is not rendered invalid by the absence of the signature of an authorized official of respondent CDPI. The signature of respondent Espina as one of the plaintiffs therein suffices. Furthermore, the allegation concerning the defect in the Certificate against Forum Shopping was raised for the first time on appeal. The Motion to Dismiss filed by petitioners was based only on the following grounds: I That the claim or demand set forth in the plaintiffs pleading has been paid, waived, abandoned, or otherwise extinguished; II - That there is another cause of action pending between the parties for the same cause; III - That plaintiff Rene Espina has no legal capacity to sue.[14] The grounds alleged by petitioners and ruled upon by the trial court are thus (1) extinguishment, (2) litis pendentia, and (3) lack of legal capacity to sue on the part of Rene Espina. Of these grounds, only litis pendentia is related to the present allegation of petitioners concerning the defect in the Certification against Forum Shopping. Forum shopping exists where the elements of litis pendentia are present or where a final judgment in one case will amount to res judicata in the

other. However, forum shopping as a ground for the dismissal of actions is distinct and separate from the failure to submit a proper Certificate against Forum Shopping. One need not be held liable for forum shopping for his complaint to be dismissed on the ground of an absence or a defect in the Certificate against Forum Shopping. Conversely, one can be liable for forum shopping regardless of the presence or absence of a Certification against Forum Shopping. The presence of a Certification in such a case would only have the effect of making the person committing forum shopping additionally liable for perjury. Thus, we held in Spouses Melo v. Court of Appeals[15]: Indeed, compliance with the certification against forum shopping is separate from, and independent of, the avoidance of forum shopping itself. Thus, there is a difference in the treatment - in terms of imposable sanctions - between failure to comply with the certification requirement and violation of the prohibition against forum shopping. x x x. There being no allegation of a defect in the Certification against Forum Shopping on the part of respondents, neither the RTC nor the Court of Appeals was able to rule thereon. Both courts only ruled on the issue concerning litis pendentia, on which the Court of Appeals correctly held that: Litis pendentia is not present in this case vis--vis Civil Case No. 2309-L. The requisites of litis pendentia are: (a) identity of parties, or at least such parties who represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; (c) identity with respect to the two (2) preceding particulars in the two (2) cases is such that any judgment that may be rendered in the present case, regardless of which party is successful, would amount to res judicata in another case. The appellants herein are not parties in Civil Case No. 2309-L. There is no identity of rights asserted and reliefs prayed for. Civil Case No. 2309 is for recovery of ownership and possession; while the instant case is for injunction and damages. The judgment in one will not be a bar to the other case. These cases were conjoined only because of the incident in Civil Case No. 2309-L, i.e. the fixing of the attorneys fees and the subsequent execution on the subject properties which were, in the meantime, sold to and purchased by the appellants pursuant to an Agreement to Sell and to Buy. Appellees charge that appellants are guilty of forum shopping is without legal basis. It has been held that where the elements of litis pendentia are not present or where final judgment in one will not amount to res judicata in the other, there is no forum shopping.[16] Propriety of the Mode of Appeal

Petitioners also claim that since only questions of law were raised in respondents appeal to the Court of Appeals, the proper remedy should have been a Petition for Review filed directly with this Court under Rule 45 of the Rules of Court. Petitioners cite the Assignment of Errors raised by respondents before the Court of Appeals in CA-G.R. CV No. 60721: ASSIGNMENT OF ERRORS I. The court a quo erred in dismissing the complaint on the ground of litis pendentia. II. The court a quo erred in dismissing the complaint on the ground that the appellant Rene Espina has no legal capacity to sue. III. The court a quo should have issued a temporary restraining order, and after due hearing should have issued an injunction to enjoin appellee Sheriff Gato from erroneously levying on and selling at public auction the Subject Property to satisfy the Writ of Execution dated 14 October 1997 issued by the Trial Court in Civil Case No. 2309-L. Petitioners contend that since no evidence was presented by the parties in the lower court, the complaint having been dismissed on the timely motion by the petitioners, the appeal of the dismissal of the complaint required no determination by the appellate court of the probative value of the evidence presented by the parties. The Court of Appeals addressed this issue, thus: Appellees [Juaban and Espina] contend that since the assignment of errors raises only questions of law, the proper course of action is a Petition for Review direct to the Supreme Court in accordance with Rule 45, Revised Rules of Court. The appellees unduly limit themselves to the assignment of errors in the appeal and close their eyes to the glaring fact that, from the narration of facts above, certain acts taken by RTC Br. 27 before then Presiding Judge Risos, which are immoral, devious, and patently illegal, has constrained the Court to take a second look at the circumstances which gave rise to the instant appeal. As succinctly observed by the Court in its Resolution on appellants prayer for the issuance of a writ of preliminary injunction, However, inspite full knowledge that the appeal has been given due course and that therefore there is no more basis for further action on the execution sale, appellees Zosa and Juaban caused the consolidation of ownership and the issuance of new titles in their names. Said appellees are even aware that the redemption money for

the properties in the sum of P10,962,347.20 has been deposited with this Court by the appellants. In fact, appellees when asked to comment on the deposit, manifested that they have no objection to the deposit although they disagreed that interest or the redemption price would stop running. It is therefore without legal basis that notwithstanding those circumstances, the appellees, upon expiration of the temporary restraining order issued by this Court, immediately asked for the execution of a deed of sale in their favor since no redemption has been made and managed to obtain titles in their names. Such consolidation of ownership is patently erroneous as the decision granting them attorneys fees is not yet final and executory and is in fact the subject of appeal in this Court under CA-GR CV No. 61696.[17] We have held in Microsoft Corporation v. Maxicorp, Inc.[18] and Morales v. Skills International Company,[19] that: The distinction between questions of law and questions of fact is settled. A question of law exists when the doubt or difference centers on what the law is on a certain state of facts. A question of fact exists if the doubt centers on the truth or falsity of the alleged facts. Though this delineation seems simple, determining the true nature and extent of the distinction is sometime problematic. For example, it is incorrect to presume that all cases where the facts are not in dispute automatically involve purely questions of law. There is a question of law if the issue raised is capable of being resolved without need of reviewing the probative value of the evidence. The resolution of the issue must rest solely on what the law provides on a given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. If the query requires a re-evaluation of the credibility of witnesses, or the existence or relevance of surrounding circumstances and their relation to each other, the issue in that query is factual. In the fairly recent case of First Bancorp Inc. v. Court of Appeals,[20] we discussed the implications of the allegation by a party of the lack of jurisdiction of the Court of Appeals based on the ground that the appeal was based solely on questions of law: If the aggrieved party appeals by writ of error under Rule 41 of the Rules of Court to the CA and it turns out, from the brief of appellant, that only questions of law are raised, the appeal shall be dismissed: Sec. 2. Dismissal of improper appeal to the Court of Appeals. An appeal under Rule 41 taken from the Regional Trial Court to the Court of Appeals raising only questions of law shall be dismissed, issues purely of law not being reviewable by

said court. Similarly, an appeal by notice of appeal instead of by petition for review from the appellate judgment of a Regional Trial Court shall be dismissed. An appeal erroneously taken to the Court of Appeals shall not be transferred to the appropriate court but shall be dismissed outright. The nature of the issues to be raised on appeal can be gleaned from the appellants notice of appeal filed in the trial court and in his or her brief as appellant in the appellate court. The provision relied upon by respondent, Section 15, Rule 44 of the Rules of Court, reads: Sec. 15. Questions that may be raised on appeal. Whether or not the appellant has filed a motion for new trial in the court below, he may include in his assignment of errors any question of law or fact that has been raised in the court below and which is within the issues framed by the parties. This rule, however, does not relate to the nature of the issues that may be raised on appeal by the aggrieved party, whether issues of fact or issues of law, or the mode of appeal of the aggrieved party from a final order or resolution of the trial court in the exercise of its original jurisdiction; it merely provides the nature of the issues appellant may include in his assignment of error incorporated in his Brief as appellant. It may happen that the appellant may have raised in the trial court errors of fact or law or both, and need not include all said issues in his appeal in the appellate court. The appellant has the right to choose which issues of law he or she may raise in the CA in addition to factual issues already raised. A question of fact exists when a doubt or difference arises as to the truth or falsity of alleged facts. If the query requires a reevaluation of the credibility of witnesses or the existence or relevance of surrounding circumstances and their relation to each other, the issue in that query is factual. On the other hand, there is a question of law when the doubt or difference arises as to what the law is on certain state of facts and which does not call for an existence of the probative value of the evidence presented by the parties-litigants. In a case involving a question of law, the resolution of the issue rests solely on what the law provides on the given set of circumstances. Ordinarily, the determination of whether an appeal involves only questions of law or both questions of law and fact is best left to the appellate court. All doubts as to the correctness of the conclusions of the appellate court will be resolved in favor of the CA unless it commits an error or commits a grave abuse of discretion. In case of doubt, therefore, the determination of the Court of Appeals of whether an appeal involves only questions of law or both questions of law and fact shall be affirmed. As explained by the Court of Appeals, it was only after the appellate

courts painstaking review of the facts surrounding the dispute that the immoral, devious and patently illegal acts which attended the transfer of the subject properties to petitioners were brought to light. This Court finds no error or grave abuse of discretion on the part of the Court of Appeals in making the aforesaid finding. No less than this Court, in the second case, A.M. No. P-02-1580, found that Sheriff Gato showed manifest partiality in favor of Attys. Juaban and Zosa, giving them unwarranted benefit, advantage and preference and that, with evident bad faith, he caused undue injury to complainants [Espina and CDPI].[21] Irrefragably, respondents appeal before the Court of Appeals involved not only questions of law, because for the determination thereof, the appellate court was first called upon to make its own findings of facts which were significant to its complete and judicious resolution of the appeal. Taking Cognizance of Records in Another Case Petitioners claim that the Court of Appeals, in resolving CA-G.R. CV No. 60721, the appeal of the dismissal of Civil Case No. 4178-L by Lapu-Lapu City RTC, Branch 54, erred in taking cognizance of the records in another case as basis for its findings of facts. According to petitioners, the Court of Appeals based its findings of facts on the records of the first case, Civil Case No. 2309-L, pending before another Branch (Branch 27) of the RTC of Lapu-Lapu City. In Bongato v. Malvar,[22] we held: Second, as a general rule, courts do not take judicial notice of the evidence presented in other proceedings, even if these have been tried or are pending in the same court or before the same judge. There are exceptions to this rule. Ordinarily, an appellate court cannot refer to the record in another case to ascertain a fact not shown in the record of the case before it, yet, it has been held that it may consult decisions in other proceedings, in order to look for the law that is determinative of or applicable to the case under review. In some instances, courts have also taken judicial notice of proceedings in other cases that are closely connected to the matter in controversy. These cases may be so closely interwoven, or so clearly interdependent, as to invoke a rule of judicial notice. We find that the circumstances in Case No. 1 (Civil Case No. 2309-L) are too closely interwoven and so clearly interdependent with those in Case No. 3 (Civil Case No. 4178-L). Petitioners and respondents are claiming the very same subject properties. Case No. 3, the case at bar, calls for a determination of who has the superior right to the subject properties, petitioners or respondents. Petitioners are the ones who actually rely on Case No. 1 because their right to the subject properties is rooted in the proceedings therein. It should be recalled that they served as the counsels of the Heirs of Bacale in Case No. 1; they had the subject properties sold at a public auction to satisfy the award in their favor of attorneys fees; and they were

the successful bidders at the auction. Petitioners cannot insist on their right to the subject properties, yet prevent the Court of Appeals from looking into the basis or source of said right, as well as the circumstances surrounding their acquisition of the same. They cannot invoke orders, rulings or findings of the trial court in Case No. 1 which are supportive of their right to the subject properties but suppress those which are damaging. Even assuming for the sake of argument that the proceedings in Case No. 1 cannot be stated in our narration of facts on the ground that said proceedings have not yet been terminated, there is certainly nothing that prevents us from consulting Case No. 2 (A.M. No. P-02-1580) wherein Sheriff Gato was suspended by this Court for acting with grave abuse of official functions and manifest partiality amounting to grave misconduct and conduct prejudicial to the administration of justice in selling to petitioners the subject properties at a public auction despite respondents thirdparty claim. It bears to emphasize that Case No. 2 has already been decided with finality by this Court. Lack of Prayer for the Issuance of a Permanent Injunction Petitioners argue that the respondents did not make any allegation in their Complaint that they were the owners of the disputed properties and there was no prayer in their Complaint for the issuance of a permanent injunction against petitioners prohibiting them from exercising acts of ownership. An inspection of respondents Complaint, however, reveals that petitioners actually alleged ownership of the property in dispute: The defendants are doing, threatening, and/or attempting to conduct the said public auction sale which is in violation of the rights of the plaintiffs, as the property sought to be sold now belong to the plaintiffs, and not of Concordia Bancale et. al., and this tends to render whatever favorable judgment the Honorable Court may grant to the plaintiffs ineffectual.[23] As regards the alleged lack of prayer for the court to issue a permanent injunction prohibiting petitioners from exercising acts of ownership, it is necessary to examine the actual Prayer made by the respondents in their Complaint, which reads: WHEREFORE, plaintiffs most respectfully pray this Honorable Court, that upon filing of this complaint, a temporary restraining order be issued enjoining defendants from proceeding with the auction sale, or at whatever stage it is, of Lot 6720-C-2 of the subdivision plan Psd-07-05-012144, containing an area of 13,677 sq. meters and covered by Transfer Certificate of Title No. 36425 and Lot No. 6720-B-2 of the same subdivision plan, containing an area of 4,560 sq. meters and covered by Transfer

Certificate of Title No. 36426, all located at Lapulapu City, and upon notice to all the concerned, to issue the writ of preliminary injunction for the same purpose; After trial on the merits to make the injunction permanent, and to order the defendants, jointly and severally: 1. To reimburse the plaintiffs, jointly and severally the sum of P35,000,000.00 representing the purchase price of the properties, subject matter of this case, which were already paid by the plaintiffs to the Bancales; 2. To pay the plaintiffs the sum of P5,000,000.00 for moral damages; 3. To reimburse plaintiffs the sum of P20,000.00 for attorneys fees, plus the sum of P2,000.00 per court appearance, and the sum of P20,000.00 for litigation expenses; Plaintiffs further pray for such orders as may be just, appropriate and equitable under the premises.[24] We hold that the issuance by the Court of Appeals of a permanent injunction prohibiting petitioners from exercising acts of ownership is included in respondents prayer for such orders as may be just and equitable under the circumstances. Such a prayer in the complaint justifies the grant of a relief not otherwise specifically prayed for.[25] More importantly, we have ruled that it is the allegations in the pleading which determine the nature of the action and the Court shall grant relief warranted by the allegations and proof even if no such relief is prayed for.[26] It is the material allegations of the fact in the complaint, not the legal conclusions made in the prayer, that determine the relief to which the plaintiff is entitled.[27] If respondents were seeking to enjoin the sale of the subject properties, in effect, to prevent the transfer of ownership of the subject properties to others, then such prayer must be deemed to logically and reasonably include the prayer to enjoin others from exercising rights of ownership over the subject properties, for if the ownership of the subject properties are not transferred to any one else, then no one else has the right to exercise the rights appurtenant thereto. WHEREFORE, the Petition is DENIED. The Decision dated 31 January 2005 of the Court of Appeals in CA-G.R. CV No. 60721 is AFFIRMED. Costs against petitioners. SO ORDERED. G.R. No. 164757 October 18, 2010 CEBU METRO PHARMACY, INC v EURO-MED LABORATORIES, PHILIPPINES, INC.

Over time, this Court has been persistently confronted with issues involving the requirement of verification and certification against forum-shopping such as in the case at bar. This Petition for Review on Certiorari assails the Resolutions dated May 6, 20041 and June 30, 20042 of the Court of Appeals (CA) in CA-G.R. SP No. 83669, which respectively dismissed the Petition for Review before it and denied the motion for reconsideration thereto. Factual Antecedents Respondent Euro-Med Laboratories Philippines, Inc. (Euro-Med) filed on February 19, 2001 a Complaint for Sum of Money3 against petitioner Cebu Metro Pharmacy, Inc. (Cebu Metro) before the Municipal Trial Court in Cities (MTCC) of Cebu City. Euro-Med sought to recover from Cebu Metro the amount of P120,219.88 with interest as payment for the various intravenous fluids products which the latter purchased from the former on several occasions, as well as liquidated damages and attorneys fees. Cebu Metro on the other hand, while admitting the obligation, raised in its Answer with Counterclaim4 the following special and affirmative defenses: (1) that EuroMed has no cause of action against it as it was Cebu Metros former president and manager, Manolito Martinez (Martinez), who entered into a contract with Euro-Med without the approval of its Board of Directors; (2) that the complaint is already barred by laches considering that it was only after five years from the date of the last delivery that Euro-Med demanded payment from Cebu Metro; and, (3) that Euro-Meds branch in Cebu and its salesman committed fraud when they conspired with Martinez by dividing the commission obtained from the subject transaction among themselves. Cebu Metro claimed that said unauthorized and fraudulent transaction was prejudicial to it as same caused it to incur liability with mounting interests. Rulings of the Municipal Trial Court in Cities and the Regional Trial Court (RTC) Resolving the case in favor of Euro-Med in a Decision5 dated May 6, 2003, the MTCC of Cebu City, Branch 5 ruled that aside from Cebu Metros admission of its obligation, Euro-Med was able to prove by testimonial and documentary evidence the existence of said obligation. Unfortunately for Cebu Metro, all that it was able to put forward for its defense were mere allegations. Hence, the MTCC rendered judgment ordering Cebu Metro to pay Euro-Med the amount of P117,219.88 plus interest, attorneys fees and litigation expenses. Cebu Metro appealed to the RTC. On April 1, 2004, the RTC, Branch 20 of Cebu City rendered its Decision6 dismissing Cebu Metros appeal and affirming in toto the appealed MTCC Decision.1avvphi1 Unfazed, Cebu Metro went to the CA by way of Petition for Review.

Ruling of the Court of Appeals The CA refused to give due course to the petition on the ground that the verification and certification of non-forum shopping attached thereto was signed by one Carmel T. Albao (Albao), Manager of Cebu Metro, without any accompanying Secretarys Certificate/Board Resolution authorizing her to execute said verification and certification and to represent Cebu Metro in the petition. The CA thus dismissed the petition pursuant to Section 5, Rule 45 of the Rules of Court7 in a Resolution8 dated May 6, 2004. Cebu Metro filed a Motion for Reconsideration attaching therewith a Secretarys Certificate9 attesting to the approval of Board Resolution No. 2001-06, the pertinent portions of which read as follows: Resolution No. 2001-06 RESOLUTION AUTHORIZING CARMEL T. ALBAO, NEWLY ELECTED PRESIDENT AND MANAGER OF CEBU METRO PHARMACY, INC. TO REPLACE RODOLFO P. MACACHOR WHO IS GRAVELY SICK AND CONSIDERED RESIGNED, TO REPRESENT FOR AND BEHALF [sic] OF THE CORPORATION WHEREAS, in a Resolution No. 2001-03 unanimously approved by the Board in its Regular Meeting held on September 22, 2001 x x x the appointment of Rodolfo P. Macachor who was then the President and Manager of Cebu Metro Pharmacy, Inc., to represent for and behalf [sic] of the Corporation in Civil Case for Sum of Money filed by Euro-Med Laboratories Phil., Inc. before the Municipal Trial Court in Cities, Branch 5, Cebu City docketed as Civil Case No. R-44430; WHEREAS, Rodolfo P. Macachor suffered an Asthma Attack on October 17, 2001 and has been in a comatose condition. He was previously confined at Chong Hua Hospital and later transferred to Danao District Hospital; WHEREAS, Rodolfo P. Macachor being gravely sick should be considered resigned from the service; WHEREAS, CARMEL T. ALBAO, who is equally competent to handle the job as President and Manager of the Corporation has sufficient knowledge to run the affairs of the corporation and to defend the corporation in the abovementioned civil case. Now, therefore, on motion by Teresito Gulfan and unanimously seconded by all other members of the Board present, Resolve to authorize CARMEL T. ALBAO, newly elected President and Manager of Cebu Metro Pharmacy, Inc. to replace Rodolfo P. Macachor to represent for and

behalf [sic] of the corporation in the court hearings in Civil Case No. R-44430 For: Sum of Money before the Municipal Trial Court in Cities, Branch 5, Cebu City. (Emphasis ours) xxxx Also attached to said Motion for Reconsideration is a Secretarys Certificate10 likewise confirming the approval of Board Resolution No. 2001-03 which authorized Rodolfo P. Macachor, then President and Manager of Cebu Metro, to represent Cebu Metro in the aforementioned Civil Case. The CA, however, denied the Motion for Reconsideration in a Resolution dated June 30, 2004,11 the pertinent portions of which read: xxxx A perusal of the attached certification shows that Carmel Albaos authority is only to represent petitioner corporation in the court hearings in Civil Case No. R-44430 before the Municipal Trial Court in Cities, Branch 5, Cebu City and not to represent petitioner corporation in the present petition. WHEREFORE, the motion for reconsideration is hereby DENIED and our resolution dismissing the petition STANDS. Still undeterred, Cebu Metro comes before this Court through this Petition for Review on Certiorari. Issues Cebu Metro raises the following issues: 1. WHETHER THE RESOLUTION OF THE BOARD OF DIRECTORS OF PETITIONER CEBU METRO PHARMACY, INC. AUTHORIZING CARMEL T. ALBAO TO REPRESENT PETITIONER CORPORATION IN THE COURT HEARINGS IN CIVIL CASE NO. R-44430 BEFORE THE MUNICIPAL TRIAL COURT IN CITIES, BRANCH 5, CEBU CITY ALSO INCLUDES THE AUTHORITY TO REPRESENT PETITIONER CORPORATION IN ALL OTHER COURT PROCEEDINGS INCLUDING THE AUTHORITY TO VERIFY AND TO ISSUE A CERTIFICATE OF NON-FORUM SHOPPING UNTIL THE CASE IS FINALLY TERMINATED; AND, 2. IF, IN THE NEGATIVE, CAN THE DEFICIENCY BE CURED BY A SUBSEQUENT BOARD RESOLUTION OF THE PETITIONER-CORPORATION AFFIRMING AND CONFIRMING THE ACTS DONE BY CARMEL T. ALBAO WHO IS ITS PRESIDENT AND MANAGER IN FILING AN APPEAL BEFORE THE REGIONAL TRIAL COURT AND THE PETITION FOR REVIEW BEFORE THE COURT OF APPEALS.12

The Parties Arguments Cebu Metro claims that its Board of Directors did not pass another resolution authorizing Albao to file an appeal before the RTC and the CA because it felt that the authority it granted her is already sufficient. Besides, even without such resolution, Cebu Metro insists that the CA should have considered the fact that Albao is both the President and Manager of Cebu Metro. As President, Albao has the power of general supervision and control of the business and all acts done by her as president is presumed to be duly authorized unless the contrary appears. As Manager, she likewise has the implied authority to make any contract or do any other act which is necessary or appropriate to the conduct of the ordinary business of the corporation. It also alleges that Article V, Section 3(h) of its By-Laws provides that its President has the power to represent the corporation in all functions and proceedings. Hence, there was no need for a board resolution conferring authority upon Albao to sign the certification and verification against forum shopping attached to the Petition for Review filed before the CA. Moreover, Cebu Metro begs for leniency and asks this Court to set aside rules of technicalities, praying that the main case be resolved on the merits in the interest of substantial justice. Further, in an attempt to substantially comply with the requirements, Cebu Metro attaches to the present petition a Secretarys Certificate showing the approval of Resolution No. 2004-05 which authorizes Albao to represent the corporation in appealing the MTCC Decision in Civil Case No. R-44430 to the RTC, the CA and this Court. Euro-Med, on the other hand, points out that Cebu Metros Board Resolution No. 2001-06 is categorical in stating that Albao, as newly elected President and Manager of Cebu Metro, is authorized by the board to replace Rodolfo P. Macachor in representing the corporation only in the court hearings in Civil Case No. R-44430 for Sum of Money before the MTCC. It being clear from the wordings of said board resolution that Albaos authority is limited as such, Euro-Med insists that there can be no room for speculation that the same also includes the authority to execute the verification and certification of non-forum shopping should the case be brought on appeal. It is Euro-Meds position, therefore, that the CA correctly dismissed Cebu Metros petition for review. Our Ruling We grant the petition. In Hutama-RSEA/Super Max Phils., J.V. v. KCD Builders Corporation,13 Hutama as petitioner therein questioned the verification and certification on non-forum shopping of respondent KCD which the latter attached to its Complaint for Sum of Money filed before the RTC. According to Hutama, KCDs president did not present any proof that he is authorized by the corporation to sign the verification and certification of non-forum shopping. In explaining the requirement of verification

and certification against forum-shopping and upholding the authority of the president of the corporation to execute the same sans proof of authority, this Court has this to say: A pleading is verified by an affidavit that an affiant has read the pleading and that the allegations therein are true and correct as to his personal knowledge or based on authentic records. The party does not need to sign the verification. A partys representative, lawyer, or any person who personally knows the truth of the facts alleged in the pleading may sign the verification. On the other hand, a certification of non-forum shopping is a certification under oath by the plaintiff or principal party in the complaint or other initiatory pleading, asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith, that (a) he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasijudicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report that fact within five days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed. It is true that the power of a corporation to sue and be sued is lodged in the board of directors that exercises its corporate powers. However, it is settled and we have so declared in numerous decisions that the president of a corporation may sign the verification and the certification of non-forum shopping. In Ateneo de Naga University v. Manalo, we held that the lone signature of the University President was sufficient to fulfill the verification requirement, because such officer had sufficient knowledge to swear to the truth of the allegations in the petition. In Peoples Aircargo and Warehousing Co., Inc. v. CA, we held that in the absence of a charter or by-law provision to the contrary, the president of a corporation is presumed to have the authority to act within the domain of the general objectives of its business and within the scope of his or her usual duties. Moreover, even if a certain contract or undertaking is outside the usual powers of the president, the corporations ratification of the contract or undertaking and the acceptance of benefits therefrom make the corporate presidents actions binding on the corporation. (Citations omitted.) Moreover, this Courts pronouncement in Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,14 reiterated in PNCC Skyway Traffic Management and Security Division Workers Organization v. PNCC Skyway Corporation15 and Mid-Pasig Land Development Corporation v. Tablante,16 on the

authority of certain officers and employees of the corporation to sign the verification and certification of non-forum shopping is likewise significant, to wit: It must be borne in mind that Sec. 23, in relation to Sec. 25 of the Corporation Code, clearly enunciates that all corporate powers are exercised, all business conducted, and all properties controlled by the board of directors. A corporation has a separate and distinct personality from its directors and officers and can only exercise its corporate powers through the board of directors. Thus, it is clear that an individual corporate officer cannot solely exercise any corporate power pertaining to the corporation without authority from the board of directors. This has been our constant holding in cases instituted by a corporation. In a slew of cases, however, we have recognized the authority of some corporate officers to sign the verification and certification against forum shopping. In MactanCebu International Airport Authority v. CA, we recognized the authority of a general manager or acting general manager to sign the verification and certificate against forum shopping; in Pfizer v. Galan, we upheld the validity of a verification signed by an "employment specialist" who had not even presented any proof of her authority to represent the company; in Novelty Philippines Inc., v. CA, we ruled that a personnel officer who signed the petition but did not attach the authority from the company is authorized to sign the verification and non-forum shopping certificate; and in Lepanto Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson of the Board and President of the Company can sign the verification and certificate against non-forum shopping even without the submission of the boards authorization. In sum, we have held that the following officials or employees of the company can sign the verification and certification without need of a board resolution: (1) the Chairperson of the Board of Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4) Personnel Officer, and (5) an Employment Specialist in a labor case. While the above cases do not provide a complete listing of authorized signatories to the verification and certification required by the rules, the determination of the sufficiency of the authority was done on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of corporate officers or representatives of the corporation to sign the verification or certificate against forum shopping, being in a position to verify the truthfulness and correctness of the allegations in the petition. (Citations omitted.) From the foregoing, it is clear that Albao, as President and Manager of Cebu Metro, has the authority to sign the verification and certification of non-forum shopping even without the submission of a written authority from the board. As the corporations President and Manager, she is in a position to verify the truthfulness and correctness of the allegations in the petition. In addition, such an act is presumed to be included in the scope of her authority to act within the domain of

the general objectives of the corporations business and her usual duties in the absence of any contrary provision in the corporations charter or by-laws. Having said this, there is therefore no more need to discuss whether the authority granted to Albao under Board Resolution No. 2001-06 is only limited to representing Cebu Metro in the court hearings before the MTCC or extends up to signing of the verification and certification of non-forum shopping on appeal. Again, even without such proof of authority, Albao, as Cebu Metros President and Manager, is justified in signing said verification and certification. Thus, the CA should not have considered as fatal Cebu Metros failure to attach a Secretarys Certificate attesting to Albaos authority to sign the verification and certification of non-forum shopping and dismissed the petition or should have reinstated the same after Cebu Metros submission of the Secretarys Certificate showing that Board Resolution No. 200106 confirmed the election of Albao as the corporations President and Manager. Moreover, the fact that the Board of Directors of Cebu Metro ratified Albaos authority to represent the corporation in the appeal of the MTCC Decision in Civil Case No. R-44430 before the RTC, CA, and this Court, and consequently to sign the verification and certification on its behalf by the passage of Resolution No. 2004-05 confirming and affirming her authority only gives this Court more reason to uphold such authority. As a final note, it is worthy to emphasize that the dismissal of an appeal on a purely technical ground is frowned upon especially if it will result in unfairness. The rules of procedure ought not to be applied in a very rigid, technical sense for they have been adopted to help secure, not override, substantial justice. For this reason, courts must proceed with caution so as not to deprive a party of statutory appeal; rather they must ensure that all litigants are granted the amplest opportunity for the proper and just ventilation of their causes, free from the constraint of technicalities.17 WHEREFORE, the petition is GRANTED. The assailed Resolutions of the Court of Appeals dated May 6, 2004 and June 30, 2004 in CA-G.R. SP No. 83669 are REVERSED and SET ASIDE. Let the records of this case be REMANDED to the Court of Appeals which is hereby DIRECTED to take appropriate action thereon in light of the foregoing discussion with DISPATCH. SO ORDERED. G.R. No. 157447. April 29, 2005 NEMENCIO C. EVANGELISTA, PASCUAL G. QUINTO, LUIS B. BUENA, EUSEBIA V. TABLADA, CANUTO G. TISBE, DAVID R. CARULLO, SOFONIAS E. COLEGADO, FELIX B. BUENA, TORIBIO C. EVANGELISTA, LEBRADA A. NICOLAS, ALECIA J. RAMOS, MILA G. DE LOS REYES, SALVADOR I. DE LA TORRE, MOISES CRUZ, RUFINO

INFANTE, ALICIA ASTROLOGO, TRINIDAD LUMIQUED, LUZMINIDA QUINIQUINI, & TEODORA C. TEMERAS, Petitioners, vs. CARMELINO M. SANTIAGO, Respondents. DECISION CHICO-NAZARIO, J.: In this Petition for Review under Rule 45 of the Rules of Court, petitioners pray for the reversal of the Decision of the Court of Appeals in CA-G.R. CV No. 64957,1 affirming the Order of the Regional Trial Court (RTC) of San Mateo, Rizal, Branch 77, in Civil Case No. 1220,2 dismissing petitioners Complaint for declaration of nullity of Original Certificate of Title (OCT) No. 670 and all other titles emanating therefrom. In their Complaint, petitioners alleged that they occupied and possessed parcels of land, located in Sitio Panayawan, Barangay San Rafael, Montalban (now Rodriquez), Province of Rizal (Subject Property), by virtue of several Deeds of Assignment, dated 15 April 1994 and 02 June 1994, executed by a certain Ismael Favila y Rodriguez.3 According to the Deeds of Assignment, the Subject Property was part of a vast tract of land called "Hacienda Quibiga," which extended to Paraaque, Las Pias, Muntinlupa, Cavite, Batangas, Pasay, Taguig, Makati, Pasig, Mandaluyong, Quezon City, Caloocan, Bulacan, and Rizal; awarded to Don Hermogenes Rodriguez by the Queen of Spain and evidenced by a Spanish title. Ismael Favila claimed to be one of the heirs and successors-in-interest of Don Hermogenes Rodriguez. Acting as Attorney-in-Fact pursuant to a Special Power of Attorney executed by his "mga kapatid" on 25 February 1965, Ismael Favila signed the aforementioned Deeds of Assignment, assigning portions of the Subject Property to the petitioners, each portion measuring around 500 to 1,000 square meters, in exchange for the labor and work done on the Subject Property by the petitioners and their predecessors.4 Petitioners came by information that respondent was planning to evict them from the Subject Property. Two of the petitioners had actually received notices to vacate. Their investigations revealed that the Subject Property was included in Transfer Certificates of Titles (TCTs) No. 53028, No. 281660, No. N-39258 and No. 205270, all originating from OCT No. 670, and now in the name of respondent.5 OCT No. 670 was issued in the name of respondents mother, Isabel Manahan y Francisco, and three other individuals, pursuant to Decree No. 10248, dated 13 February 1913, in Case No. 8502 of the Court of Land Registration of the Philippine Islands. The whole property covered by OCT No. 670 was subsequently adjudicated in favor of Isabel Manahan Santiago (formerly Isabel Manahan y Francisco). Consequently, OCT No. 670 was cancelled and TCT No. T-53028 was issued exclusively in the name of Isabel Manahan Santiago. On 28 December 1968, Isabel

Manahan Santiago executed a Deed of Donation transferring the property to her son, respondent herein, who subsequently secured TCTs No. 281660, No. N-39258 and No. 205270 in his own name.6 Petitioners filed with the trial court, on 29 April 1996, an action for declaration of nullity of respondents certificates of title on the basis that OCT No. 670 was fake and spurious. Among the defects of OCT No. 670 pointed out by petitioners were that: (1) OCT No. 670 was not signed by a duly authorized officer; (2) Material data therein were merely handwritten and in different penmanships; (3) OCT No. 670 was not printed on the Official Form used in 1913, the year it was issued; (4) It failed to indicate the Survey Plan which was the basis of the Technical Description of the property covered by the title; (5) Decree No. 10248 referred to in OCT No. 670 was issued only on 11 April 1913, while OCT No. 670 was issued earlier, on 13 February 1913; and (6) Decree No. 10248 was issued over a property other than the one described in OCT No. 670, although also located in the Province of Rizal.7 Respondent filed his Answer with Prayer for Preliminary Hearing on the Affirmative Defenses on 03 July 1996. According to respondent, "[t]he allegations in the Complaint would readily and patently show that the same are flimsy, fabricated, malicious, without basis in law and in fact"8 As an affirmative defense, respondent claimed that the petitioners had no legal capacity to file the Complaint, and thus, the Complaint stated no cause of action. Since OCT No. 670 was genuine and authentic on its face, then OCT No. 670 and all of respondents land titles derived therefrom, are incontrovertible, indefeasible and conclusive against the petitioners and the whole world.9 Citing the consolidated cases of Director of Forestry, et al. v. Hon. Emmanuel M. Muoz, et al. and Pinagcamaligan Indo-Agro Development Corporation v. Hon. Macario Peralta, Jr., et al.,10 respondent argued that the Spanish title, on which petitioners based their claim, was neither indefeasible nor imprescriptible. Moreover, Presidential Decree (P.D.) No. 892, which took effect on 16 February 1976, required all holders of Spanish titles or grants to apply for registration of their lands under Republic Act No. 496, otherwise known as the Land Registration Act,11 within six months from effectivity of the decree. After the given period, Spanish titles could no longer be used as evidence of land ownership in any registration proceedings under the Torrens System. 12 Respondent also raised the affirmative defense of prescription. He pointed out that any action against his certificates of title already prescribed, especially with regard to OCT No. 670, which was issued in 1913 or more than 83 years prior to the filing of the Complaint by the petitioners. At the very least, respondent contended, "it must be presumed that the questioned land titles were issued by the public officials concerned in the performance of their regular duties and functions pursuant to the law."13

Even assuming arguendo that the petitioners entered and occupied the Subject Property, they did so as mere intruders, squatters and illegal occupants, bereft of any right or interest, since the Subject Property was already covered by Torrens certificates of title in the name of respondent and his predecessors-in-interest.14 Lastly, respondent denied knowing the petitioners, much less, threatening to evict them. In fact, petitioners were not included as defendants in Civil Case No. 783 entitled, "Carmelino M. Santiago v. Remigio San Pascual, et al.," which respondent instituted before the same trial court against squatters occupying the Subject Property. In its decision, dated 01 July 1992, the trial court held that "there is no doubt that the plaintiff (respondent herein) is the owner of the land involved in this case on which the defendants have built their houses and shanties" Although the decision in Civil Case No. 783 was appealed to the Court of Appeals, it had become final and executory for failure of the defendants-appellants therein to file their appellants brief.15 In the instant case, the trial court held a preliminary hearing on the affirmative defenses as prayed for by the respondent. During said hearing, petitioners presented their lone witness, Engineer Placido Naval, a supposed expert on land registration laws. In response to questions from Honorable Judge Francisco C. Rodriguez of the trial court, Engineer Naval answered that a parcel of land titled illegally would revert to the State if the Torrens title was cancelled, and that it was the State, through the Office of the Solicitor General, that should file for the annulment or cancellation of the title. Respondent, on the other hand, did not present any evidence but relied on all the pleadings and documents he had so far submitted to the trial court.16 After the preliminary hearing, the trial court issued the questioned Order, dated 05 February 1999, dismissing petitioners Complaint. Pertinent portions of the Order of the trial court read: After considering the testimonial and documentary evidence presented, this Court is inclined not to grant plaintiffs (sic) prayer. Finding credence and giving weight to plaintiffs (sic) lone but "expert witness", it is crystal clear that, to quote: 1. "a parcel of land titled illegally will revert to the State 2. it is the State who must file the corresponding case of annulment of title through the Office of the Solicitor General, and 3. a land illegally titled in the name of private individual, the State through the Office of the Solicitor General should file the corresponding case for cancellation of title." (TSN August 26, 1997). The above quoted testimony is straight from horse (sic) mouth so to speak as this was the testimony of the plaintiffs (sic) expert witness. And judging from the said

testimony alone aforecited, plaintiffs (sic) cause [of action] is bound to fail. "Plaintiffs (sic) own testimony" wrote "finis" to their case. From the record, this case was initiated and filed by private individuals, Nemencio Evangelista, et. al., contradicting their witness (sic) testimony. To reiterate, this Court finds credence to the testimony of the plaintiffs (sic) witness, i.e., is (sic) the State through the Office of the Solicitor General who must initiate and file a case of this nature when title to a land is being claimed to be obtained through fraud and allegedly spurious. The opinion of this Court anent the testimony of the witness is not without basis. Explicit is the pronouncement of the Supreme Court in the recent case of Heirs of Marciano Nagano v. Court of Appeals, to wit: An action for reversion has to be instituted by the Solicitor General pursuant to Section 101, Commonwealth Act No. 141. (282 SCRA 43). As to the documentary evidence, having gone through with the "Deed of Assignment/s" purportedly executed by and between a certain Ismael Favila y Rodriguez and the plaintiffs, which is the principal if not the only basis of plaintiffs claim ownership and possession of the subject parcel of land, the same does not hold water in a manner of speaking, for being self-serving. "Assignor Ismael Favila y Rodriguez" claimed in said Deed that he is the Attorney-in-Fact by virtue of an alleged Special Power of Attorney executed in his favor by his "mga kapatid" on February 23, 1965, but said Special Power of Attorney was not presented before this Court, thus there arises a doubt as to its existence and execution not to mention doubt on the existence of his "mga kapatid" who as alleged executed said Special Power Attorney (sic) in his favor. Even if this Court granting arguendo would admit the authenticity of said "Deeds of Assignment/s", that will not alter the outcome of the pending incident/s before this Court. Why? Because the said "Deed of Assignment/s" which were based on Spanish title have lost their evidentiary value pursuant to the Presidential Decree No. 892 i.e. "DISCONTINUANCE OF THE SPANISH MORTGAGE SYSTEM OF REGISTRATION AND OF THE USE OF SPANISH TITLES AS EVIDENCE IN LAND REGISTRATION PROCEEDINGS." There is no need to elaborate on the above-cited provisions of PD 892 as they are self-explanatory. Suffice it to say that there is no showing, that plaintiffs complied with the said law i.e. to "apply for registration of their lands under Act No. 496, otherwise known as the Land Registration Act, within six (6) months from the effectivity of this decree (February 16, 1976). Thereafter, Spanish titles cannot be used as evidence of land ownership in any registration proceedings under the Torrens System."

This being the case and likewise being clear that plaintiffs were not the lawful owners of the land subject of this case, for they did not comply with PD 892, the said plaintiffs do not have the legal standing to bring before this Court the instant complaint Moreover, the principal issue in this case is for the declaration of nullity of defendants title, which has nothing to do with plaintiffs (sic) claim of ownership and possession even if we set aside, albeit momentarily, the truth that plaintiffs (sic) claim were based on barred Spanish Title/s, and thus plaintiffs were never the owners of the parcel of land subject of this case. Further, defendants (sic) title especially so with the mother title OCT 670 was entered and issued in 1913 or more than Eighty Three (83) years ago, the same not having been questioned by any party. Only now that it is being questioned, but sad to say, plaintiffs who are on the offensive and relying on their lone expert witness, instead of bolstering their case, unwittingly sealed their fate 17 After the trial court denied petitioners Motion for Reconsideration in its Order, dated 20 July 1999,18 petitioners appealed both Orders of the trial court to the Court of Appeals. The Court of Appeals, in its Decision, dated 29 July 2002,19 affirmed the Order of the trial court, dated 05 February 1999, dismissing petitioners Complaint. The Court of Appeals denied petitioners Motion for Reconsideration in its Resolution, dated 14 February 2003.20 Thus, petitioners filed this Petition for Review 21 under Rule 45 of the Rules of Court, raising the following issues and praying for the reversal of the aforementioned Decision of the Court of Appeals affirming the Order of dismissal of the trial court: I. Whether the lower courts dismissal of the petitioners complaint should be proscribed by the rules of evidence it being based inter alia on Engr. Navals testimony, which was indisputably not based on facts but conclusion of law. II. Whether the lower courts dismissal of petitioners complaint should be proscribed by the rules of evidence it being done sans ample evidence except bare allegations of respondent. III. Whether the provision of P.D. 892, i.e., Spanish titles cannot be used as evidence of land ownership in any registration proceedings under the Torrens system, holds of an exception. IV. Whether an action for quieting of title, specifically where petitioners are in possession of subject land, can be subject of prescription.

In his Comment,22 the respondent, for the most part, reiterated the findings of the trial court and the Court of Appeals. The Court believes that the trial court rightfully dismissed petitioners Complaint, but for reasons different from those relied upon by the trial court and the Court of Appeals. According to the respondent, petitioners had no legal capacity to file the Complaint, and thus, the Complaint filed before the trial court stated no cause of action. Before anything else, it should be clarified that "the plaintiff has no legal capacity to sue"23 and "the pleading asserting the claim states no cause of action"24 are two different grounds for a motion to dismiss or are two different affirmative defenses. Failure to distinguish between "the lack of legal capacity to sue" from "the lack of personality to sue" is a fairly common mistake. The difference between the two is explained by this Court in Columbia Pictures, Inc. v. Court of Appeals:25 Among the grounds for a motion to dismiss under the Rules of Court are lack of legal capacity to sue and that the complaint states no cause of action. Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation he claims. On the other hand, a case is dismissible for lack of personality to sue upon proof that the plaintiff is not the real party-ininterest, hence grounded on failure to state a cause of action. The term "lack of capacity to sue" should not be confused with the term "lack of personality to sue." While the former refers to a plaintiffs general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality or any other general disqualifications of a party, the latter refers to the fact that the plaintiff is not the real party- in-interest. Correspondingly, the first can be a ground for a motion to dismiss based on the ground of lack of legal capacity to sue; whereas the second can be used as a ground for a motion to dismiss based on the fact that the complaint, on the face thereof, evidently states no cause of action. In the present case, this Court may assume that the respondent is raising the affirmative defense that the Complaint filed by the petitioners before the trial court stated no cause of action because the petitioners lacked the personality to sue, not being the real party-in-interest. It is the respondents contention that only the State can file an action for annulment of his certificates of title, since such an action will result in the reversion of the ownership of the Subject Property to the State. The affirmative defense that the Complaint stated no cause of action, similar to a motion to dismiss based on the same ground, requires a hypothetical admission of the facts alleged in the Complaint. In the case of Garcon v. Redemptorist Fathers,26 this Court laid down the rules as far as this ground for dismissal of an action or affirmative defense is concerned:

It is already well-settled by now that, in a motion to dismiss a complaint based on lack of cause of action, the question submitted to the court for determination is the sufficiency of the allegations of fact made in the complaint to constitute a cause of action, and not on whether these allegations of fact are true, for said motion must hypothetically admit the truth of the facts alleged in the complaint; that the test of the sufficiency of the facts alleged in the complaint is whether or not, admitting the facts alleged, the court could render a valid judgment upon the same in accordance with the prayer of said complaint. Stated otherwise, the insufficiency of the cause of action must appear in the face of the complaint in order to sustain a dismissal on this ground, for in the determination of whether or not a complaint states a cause of action, only the facts alleged therein and no other matter may be considered, and the court may not inquire into the truth of the allegations, and find them to be false before a hearing is had on the merits of the case; and it is improper to inject in the allegations of the complaint facts not alleged or proved, and use these as basis for said motion. In resolving whether or not the Complaint in the present case stated a cause of action, the trial court should have limited itself to examining the sufficiency of the allegations in the Complaint. It was proscribed from inquiring into the truth of the allegations in the Complaint or the authenticity of any of the documents referred or attached to the Complaint, since these are deemed hypothetically admitted by the respondent. The trial court evidently erred in making findings as to the authenticity of the Deeds of Assignment executed by Ismael Favila in favor of petitioners on 15 April 1994 and 02 June 1994; and questioning the existence and execution of the Special Power of Attorney in favor of said Ismael Favila by his siblings on 25 February 1965. These matters may only be resolved after a proper trial on the merits. Petitioners alleged in their Complaint, and respondent hypothetically admitted that: (1) Petitioners predecessors-in-interest, in the concept of owners, had been in actual, physical, open, continuous and adverse possession of the Subject Property against the whole world since time immemorial; (2) The Subject Property was part of the vast tract of land called "Hacienda Quibiga" awarded to Don Hermogenes Rodriguez by the Queen of Spain by virtue of a Spanish title; (3) Ismael Favila, an heir and successor-in-interest of Don Hermogenes Rodriguez, acting as Attorney-inFact pursuant to a Special Power of Attorney executed by his "mga kapatid" on 25 February 1965, executed Deeds of Assignment covering the Subject Property in favor of petitioners; (4) Petitioners still occupied and possessed the Subject Property, on which their houses were erected, when they discovered that the Subject Property was already covered by Torrens certificates of title in the name of respondent; and (5) That petitioners filed the Complaint to prevent their eviction by the respondent. To determine whether these allegations are sufficient to constitute a cause of action, it is important for this Court to establish first the nature of petitioners action.

Indeed, petitioners Complaint filed before the trial court was captioned as an action for declaration of nullity of respondents certificates of title. However, the caption of the pleading should not be the governing factor, but rather the allegations therein should determine the nature of the action, because even without the prayer for a specific remedy, the courts may nevertheless grant the proper relief as may be warranted by the facts alleged in the Complaint and the evidence introduced.27 The trial court believed that petitioners action was ultimately one for reversion of the Subject Property to the public domain. Based on the testimony of Engineer Naval and the case of Nagao v. Court of Appeals,28 it declared that the State, represented by the Office of the Solicitor General, is the party-in-interest in an action for cancellation of a certificate of title illegally issued in the name of a private individual, because the eventual effect of such cancellation is the reversion of the property to the State. The Court disagrees in this pronouncement of the trial court, and calls for a far closer review of its decision in Nagao v. Court of Appeals,29 wherein the Court held that It is then clear from the allegations in the complaint that private respondents claim ownership of the 2,250 square meter portion for having possessed it in the concept of an owner, openly, peacefully, publicly, continuously and adversely since 1920. This claim is an assertion that the lot is private land, or that even assuming it was part of the public domain, private respondents had already acquired imperfect title thereto under Section 48(b) of C.A. No. 141, otherwise known as the Public Land Act, as amended by R.A. No. 1942 Under Section 48, a subject lot is, for all legal intents and purposes, segregated from the public domain, because the beneficiary is "conclusively presumed to have performed all the conditions essential to a Government grant and shall be entitled to a certificate of title under the provisions of this chapter." Consequently, merely on the basis of the allegations in the complaint, the lot in question is apparently beyond the jurisdiction of the Director of the Bureau of Lands and could not be the subject of a Free Patent. Hence, dismissal of private respondents complaint was premature and trial on the merits should have been conducted to thresh out evidentiary matters. It would have been entirely different if the action were clearly for reversion, in which case, it would have to be instituted by the Solicitor General pursuant to Section 101 of C.A. No. 141, which provides: Sec. 101. All actions for the reversion to the Government of lands of the public domain or improvements thereon shall be instituted by the Solicitor General or the officer acting in his stead, in the proper courts, in the name of the [Republic] of the Philippines.

In the more recent case of Heirs of Ambrocio Kionisala v. Heirs of Honorio Dacut,30 the difference between an action for declaration of nullity of land titles from an action for reversion was more thoroughly discussed as follows: An ordinary civil action for declaration of nullity of free patents and certificates of title is not the same as an action for reversion. The difference between them lies in the allegations as to the character of ownership of the realty whose title is sought to be nullified. In an action for reversion, the pertinent allegations in the complaint would admit State ownership of the disputed land. Hence, in Gabila vs. Barriga [41 SCRA 131], where the plaintiff in his complaint admits that he has no right to demand the cancellation or amendment of the defendants title because even if the title were canceled or amended the ownership of the land embraced therein or of the portion affected by the amendment would revert to the public domain, we ruled that the action was for reversion and that the only person or entity entitled to relief would be the Director of Lands. On the other hand, a cause of action for declaration of nullity of free patent and certificate of title would require allegations of the plaintiffs ownership of the contested lot prior to the issuance of such free patent and certificate of title as well as the defendants fraud or mistake, as the case may be, in successfully obtaining these documents of title over the parcel of land claimed by plaintiff. In such a case, the nullity arises strictly not from the fraud or deceit but from the fact that the land is beyond the jurisdiction of the Bureau of Lands to bestow and whatever patent or certificate of title obtained therefore is consequently void ab initio. The real partyin-interest is not the State but the plaintiff who alleges a pre-existing right of ownership over the parcel of land in question even before the grant of title to the defendant In their Complaint, petitioners never alleged that the Subject Property was part of the public domain. On the contrary, petitioners asserted title over the Subject Property by virtue of their actual, physical, open, continuous and adverse possession thereof, in the concept of owners, by themselves and through their predecessors-in-interest, since time immemorial. The Deeds of Assignment executed in their favor and attached to their Complaint referred to a Spanish title granted by the Queen of Spain to their predecessor-in-interest, Don Hermogenes Rodriguez. Clearly, petitioners are asserting private title over the Subject Property, and consequently, their action could not be one for reversion. In their instant Petition, petitioners further averred that rather than an action for nullity of respondents certificates of title, theirs was more appropriately an action to remove a cloud on or to quiet their title over the Subject Property. Article 476 of the Civil Code, on removal of a cloud on or quieting of title, provides that:

Art. 476. Whenever there is a cloud on title to real property or any interest therein, by reason of any instrument, record, claim, encumbrance or proceeding which is apparently valid or effective but is in truth and in fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial to said title, an action may be brought to remove such cloud or to quiet the title. An action may also be brought to prevent a cloud from being cast upon title to real property or any interest therein. Respondents certificates of title over the Subject Property appeared valid or effective; but according to the petitioners, they were fake, spurious and/or fraudulent, and a cloud on their title to the same property that needed to be removed. A cloud on title has been defined as follows: Cloud on Title. A cloud on title is an outstanding instrument, record, claim, encumbrance or proceeding which is actually invalid or inoperative, but which may nevertheless impair or affect injuriously the title to property. The matter complained of must have a prima facie appearance of validity or legal efficacy. The cloud on title is a semblance of title which appears in some legal form but which is in fact unfounded. The invalidity or inoperativeness of the instrument is not apparent on the face of such instrument, and it has to be proved by extrinsic evidence31 Even as this Court agrees with the petitioners that their action was one for removal of a cloud on or quieting of title, it does arrive at the same conclusion as the trial court and the Court of Appeals that petitioners had no personality to file the said action, not being the parties-in-interest, and their Complaint should be dismissed for not stating a cause of action. According to Article 477 of the Civil Code, the plaintiff, in an action to remove a cloud on or to quiet title, must have legal or equitable title to, or interest in, the real property which is the subject matter of the action.32 Petitioners failed to establish in their Complaint that they had any legal or equitable title to, or legitimate interest in, the Subject Property so as to justify their right to file an action to remove a cloud on or to quiet title. Title to real property refers to that upon which ownership is based. It is the evidence of the right of the owner or the extent of his interest, by which means he can maintain control and, as a rule, assert right to exclusive possession and enjoyment of the property.33 In their Complaint, petitioners claimed title to the Subject Property by virtue of their actual and continuous possession of the same since time immemorial, by themselves and through their predecessors-in-interest. Yet, the Deeds of Assignment executed by Ismael Favila in their favor, attached to and an integral part of their Complaint, revealed that petitioners predecessors-in-interest based their right to the Subject Property on the Spanish title awarded to Don Hermogenes Rodriguez.

There existed a contradiction when petitioners based their claim of title to the Subject Property on their possession thereof since time immemorial, and at the same time, on the Spanish title granted to Don Hermogenes Rodriguez. Possession since time immemorial carried the presumption that the land had never been part of the public domain or that it had been private property even before the Spanish conquest.34 If the Subject Property was already private property before the Spanish conquest, then it would have been beyond the power of the Queen of Spain to award or grant to anyone. The title to and possession of the Subject Property by petitioners predecessors-ininterest could be traced only as far back as the Spanish title of Don Hermogenes Rodriguez. Petitioners, having acquired portions of the Subject Property by assignment, could acquire no better title to the said portions than their predecessors-in-interest, and hence, their title can only be based on the same Spanish title. Respondent maintained that P.D. No. 892 prevents petitioners from invoking the Spanish title as basis of their ownership of the Subject Property. P.D. No. 892 strengthens the Torrens system by discontinuing the system of registration under the Spanish Mortgage Law, and by categorically declaring all lands recorded under the latter system, not yet covered by Torrens title, unregistered lands. It further provides that within six months from its effectivity, all holders of Spanish titles or grants should apply for registration of their land under what is now P.D. No. 1529, otherwise known as the Land Registration Decree. Thereafter, Spanish titles can no longer be used as evidence of land ownership in any registration proceedings under the Torrens system. 35 Indubitably, P.D. No. 892 divests the Spanish titles of any legal force and effect in establishing ownership over real property. P.D. No. 892 became effective on 16 February 1976. The successors of Don Hermogenes Rodriguez had only until 14 August 1976 to apply for a Torrens title in their name covering the Subject Property. In the absence of an allegation in petitioners Complaint that petitioners predecessors-in-interest complied with P.D. No. 892, then it could be assumed that they failed to do so. Since they failed to comply with P.D. No. 892, then the successors of Don Hermogenes Rodriguez were already enjoined from presenting the Spanish title as proof of their ownership of the Subject Property in registration proceedings. Registration proceedings under the Torrens system do not create or vest title, but only confirm and record title already created and vested.36 By virtue of P.D. No. 892, the courts, in registration proceedings under the Torrens system, are precluded from accepting, confirming and recording a Spanish title. Reason therefore dictates that courts, likewise, are prevented from accepting and indirectly confirming such Spanish title in some other form of action brought before them (i.e., removal of cloud on or quieting of title), only short of ordering its recording or registration. To rule otherwise would open the doors to the circumvention of P.D. No. 892, and give

rise to the existence of land titles, recognized and affirmed by the courts, but would never be recorded under the Torrens system of registration. This would definitely undermine the Torrens system and cause confusion and instability in property ownership that P.D. No. 892 intended to eliminate. Petitioners argued that the Spanish title may still be presented as proof of ownership on the basis of the exception provided in the fourth whereas clause of P.D. No. 892, which reads: WHEREAS, Spanish titles to lands which have not yet been brought under the operation of the Torrens system, being subject to prescription, are now ineffective to prove ownership unless accompanied by proof of actual possession; . . . Since Petitioners alleged that they were in actual possession of the Subject Property, then they could still present the Spanish title as evidence of their ownership of the Subject Property. 37 This Court cannot sustain petitioners argument. Actual proof of possession only becomes necessary because, as the same whereas clause points out, Spanish titles are subject to prescription. A holder of a Spanish title may still lose his ownership of the real property to the occupant who actually possesses the same for the required prescriptive period.38 Because of this inherent weakness of a Spanish title, the applicant for registration of his Spanish title under the Torrens system must also submit proof that he is in actual possession of the real property, so as to discount the possibility that someone else has acquired a better title to the same property by virtue of prescription. Moreover, legislative intent must be ascertained from a consideration of the statute as a whole, and not just a particular provision alone. A word or phrase taken in the abstract may easily convey a meaning quite different from the one actually intended and evident when the word or phrase is considered with those with which it is associated. An apparently general provision may have a limited application if read together with other provisions of the statute.39 The fourth whereas clause of P.D. No. 892 should be interpreted and harmonized with the other provisions of the whole statute.40 Note that the tenor of the whole presidential decree is to discontinue the use of Spanish titles and to strip them of any probative value as evidence of ownership. It had clearly set a deadline for the filing of applications for registration of all Spanish titles under the Torrens system (i.e., six months from its effectivity or on 14 August 1976), after which, the Spanish titles may no longer be presented to prove ownership. All holders of Spanish titles should have filed applications for registration of their title on or before 14 August 1976. In a land registration proceeding, the applicant should present to the court his Spanish title plus proof of actual possession of the real property. However, if such land registration proceeding was filed and initiated

after 14 August 1976, the applicant could no longer present his Spanish title to the court to evidence his ownership of the real property, regardless of whether the real property was in his actual possession. Therefore, the fact that petitioners were in actual possession of the Subject Property when they filed the Complaint with the trial court on 29 April 1996 does not exclude them from the application of P.D. No. 892, and their Spanish title remain inadmissible as evidence of their ownership of the Subject Property, whether in a land registration proceeding or in an action to remove a cloud on or to quiet title. The preceding discussion does not bar holders of Spanish titles from claiming ownership of the real property on some other basis, such as those provided in either the Land Registration Decree41 or the Public Land Act.42 Petitioners though failed to allege any other basis for their titles in their Complaint aside from possession of the Subject Property from time immemorial, which this Court has already controverted; and the Spanish title, which is already ineffective to prove ownership over the Subject Property. Therefore, without legal or equitable title to the Subject Property, the petitioners lacked the personality to file an action for removal of a cloud on, or quieting of, title and their Complaint was properly dismissed for failing to state a cause of action. In view of the dismissal of the case on this ground, it is already unnecessary for this Court to address the issue of prescription of the action. Wherefore, this Court DENIES the instant petition and AFFIRMS the Decision of the Court of Appeals, dated 29 July 2002, and the Order of the Regional Trial Court of San Mateo, Rizal, Branch 77, dated 05 February 1999, dismissing petitioners Complaint for failure to state a cause of action. SO ORDERED.