Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

156187 November 11, 2004

JIMMY T. GO, petitioner, vs. UNITED COCONUT PLANTERS BANK, ANGELO V. MANAHAN, FRANCISCO C. ZARATE, PERLITA A. URBANO and ATTY. EDWARD MARTIN, respondents. DECISION CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari1 assailing the Decision2 dated 31 July 2002 of the Court of Appeals in CA-G.R. SP No. 62625, the decretal portion of which reads: WHEREFORE, the petition is GRANTED and the assailed orders dated June 7, 2000, August 9, 2000 and November 8, 2000 are SET ASIDE. Respondent judge is directed to DISMISS Civil Case No. 67878 on the ground of improper venue. 3 Petitioner Jimmy T. Go and Alberto T. Looyuko are co-owners of Noahs Ark International, Noahs Ark Sugar Carriers, Noahs Ark Sugar Truckers, Noahs Ark Sugar Repacker, Noahs Ark Sugar Insurers, Noahs Ark Sugar Terminal, Noahs Ark Sugar Building, and Noahs Ark Sugar Refinery.4 Sometime in August 1996, petitioner Jimmy T. Go and Alberto T. Looyuko applied for an Omnibus Line accommodation with respondent United Coconut Planters Bank (UCPB) in the amount of Nine Hundred Million (P900,000,000) Pesos,5 and was favorably acted upon by the latter. The transaction was secured by Real Estate Mortgages over parcels of land, covered by Transfer Certificate of Title (TCT) No. 64070, located at Mandaluyong City with an area of 24,837 square meters, and registered in the name of Mr. Looyuko; and TCT No. 3325, also located at Mandaluyong City with an area of 14,271 square meters, registered in the name of Noahs Ark Sugar Refinery. On 21 July 1997, the approved Omnibus Line accommodation granted to petitioner was subsequently cancelled6by respondent UCPB. As a consequence, petitioner Jimmy T. Go demanded from UCPB the return of the two (2) TCTs (No. 64070 and No. 3325) covered by Real Estate Mortgages earlier executed. UCPB refused to return the same and proceeded to have the two (2) pre-signed Real Estate Mortgages notarized on 22 July 1997 and caused the registration thereof before the Registry of Deeds of Mandaluyong City on 02 September 1997. On 15 June 1999, respondent UCPB filed with the Office of the Clerk of Court and Ex-Officio Sheriff of Mandaluyong City an extrajudicial foreclosure of real estate mortgage7 covered by TCT No. 64070, for nonpayment of the obligation secured by said mortgage. As a result, the public auction sale of the mortgaged property was set on 11 April 2000 and 03 May 2000. To protect his interest, petitioner Jimmy T. Go filed a complaint for Cancellation of Real Estate Mortgage and damages, with prayer for temporary restraining order and/or writ of preliminary injunction, against respondent bank and its officers, namely, Angelo V. Manahan, Francisco C. Zarate, Perlita A. Urbano and Atty. Edward E. Martin, together with Ex-Officio Sheriff Lydia G. San Juan and Sheriff IV Helder A. Dyangco, with the Regional Trial Court of Pasig City, Branch 266, docketed as Civil Case No. 67878. The complaint was subsequently

amended8 on 22 May 2000. The amended complaint alleged, among other things, the following: that petitioner Jimmy T. Go is a co-owner of the property covered by TCT No. 64070, although the title is registered only in the name of Looyuko; that respondent bank was aware that he is a co-owner as he was asked to sign two deeds of real estate mortgage covering the subject property; that the approved omnibus credit line applied for by him and Looyuko did not materialize and was cancelled by respondent bank on 21 July 1997, so that the pre-signed real estate mortgages were likewise cancelled; that he demanded from respondent bank that TCTs No. 64070 and No. 3325 be returned to him, but respondent bank refused to do so; that despite the cancellation of the omnibus credit line on 21 July 1997, respondent bank had the two deeds of real estate mortgage dated and notarized on 22 July 1997 and caused the extrajudicial foreclosure of mortgage constituted on TCT No. 64070; that the auction sale scheduled on 11 April 2000 and 03 May 2000 be enjoined; that the two real estate mortgages be cancelled and TCTs No. 64070 and No. 3325 be returned to him; and that respondent bank and its officers be ordered to pay him moral and exemplary damages and attorneys fees. On 07 June 2000, respondent bank, instead of filing an answer, filed a motion to dismiss9 based on the following grounds: 1) that the court has no jurisdiction over the case due to nonpayment of the proper filing and docket fees; 2) that the complaint was filed in the wrong venue; 3) an indispensable party/real party in interest was not impleaded and, therefore, the complaint states no cause of action; 4) that the complaint was improperly verified; and 5) that petitioner is guilty of forum shopping and submitted an insufficient and false certification of non-forum shopping. On 07 June 2000, the trial court issued an order10 granting petitioners application for a writ of preliminary injunction. Correspondingly, the auction sale, scheduled on 11 April 2000 and 03 May 2000, was enjoined. On 09 August 2000, the trial court denied11 respondent banks motion to dismiss Civil Case No. 67878. A motion for reconsideration12 was filed, but the same was likewise denied in an Order13 dated 08 November 2000. Respondent bank questioned said orders before the Court of Appeals via a petition for certiorari14 dated 03 January 2001, alleging that the trial court acted without or in excess of jurisdiction or with grave abuse of discretion in issuing an order denying the motion to dismiss and the motion for reconsideration thereof. On 31 July 2002, the Court of Appeals15 set aside the Orders dated 07 June 2000, 09 August 2000 and 08 November 2000 issued by the trial court and directed the trial court to dismiss Civil Case No. 67878 on the ground of improper venue. A motion for reconsideration was filed by petitioner,16 which was denied in an order dated 14 November 2002.17 Hence, this petition for review on certiorari.18 On 16 June 2003, the Court gave due course to the petition, and required19 the parties to file their respective memoranda. Respondents filed their Joint Memorandum on 27 August 2003, while petitioner filed his on 25 September 2003 upon prior leave of court for extension. With leave of this Court, private respondents filed their reply to petitioners memorandum. In his memorandum, petitioner raised a lone issue: WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR WHEN IT FAILED TO APPLY THE LAW AND ESTABLISHED JURISPRUDENCE ON THE MATTER BY ISSUING THE QUESTIONED RESOLUTIONS FINDING THAT THE CASE A QUO IS A "REAL ACTION." Simply put, the issue to be resolved in this case is whether petitioners complaint for cancellation of real estate mortgage is a personal or real action for the purpose of determining venue.

In a real action, the plaintiff seeks the recovery of real property, or as provided for in Section 1, Rule 4, 20 a real action is an action affecting title to or possession of real property, or interest therein. These include partition or condemnation of, or foreclosure of mortgage on, real property. The venue for real actions is the same for regional trial courts and municipal trial courts -- the court which has territorial jurisdiction over the area where the real property or any part thereof lies.21 Personal action is one brought for the recovery of personal property, for the enforcement of some contract or recovery of damages for its breach, or for the recovery of damages for the commission of an injury to the person or property.22 The venue for personal actions is likewise the same for the regional and municipal trial courts -- the court of the place where the plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal defendants resides, at the election of the plaintiff, as indicated in Section 2 of Rule 4.23 It is quite clear then that the controlling factor in determining venue for cases of the above nature is the primary objective for which said cases are filed. Thus: 1. In Commodities Storage & Ice Plant Corp. v. Court of Appeals,24 this Court ruled that "an action to redeem by the mortgage debtor affects his title to the foreclosed property. If the action is seasonably made, it seeks to erase from the title of the judgment or mortgage debtor the lien created by registration of the mortgage and sale. If not made seasonably, it may seek to recover ownership to the land since the purchasers inchoate title to the property becomes consolidated after [the] expiration of the redemption period. Either way, redemption involves the title to the foreclosed property. It is a real action." 2. In Fortune Motors, (Phils.), Inc., v. Court of Appeals,25 this Court quoting the decision of the Court of Appeals ruled that "since an extrajudicial foreclosure of real property results in a conveyance of the title of the property sold to the highest bidder at the sale, an action to annul the foreclosure sale is necessarily an action affecting the title of the property sold. It is therefore a real action which should be commenced and tried in the province where the property or part thereof lies." 3. In Punsalan, Jr. v. Vda. de Lacsamana,26 this court ruled that "while it is true that petitioner does not directly seek the recovery . . . of the property in question, his action for annulment of sale and his claim for damages are closely intertwined with the issue of ownership of the building which, under the law, is considered immovable property, the recovery of which is petitioners primary objective. The prevalent doctrine is that an action for the annulment or rescission of a sale of real property does not operate to efface the fundamental and prime objective and nature of the case, which is to recover said real property. It is a real action. Respondent Court, therefore, did not err in dismissing the case on the ground of improper venue which was timely raised." 4. In Ruiz v. J. M. Tuason Co., Inc., et al.,27 the court ruled that "although [a] complaint is entitled to be one for specific performance, yet the fact that [complainant] asked that a deed of sale of a parcel of land . . . be issued in his favor and that a transfer certificate of title covering said land be issued to him, shows that the primary objective and nature of the action is to recover the parcel of land itself because to execute in favor of complainant the conveyance requested there is need to make a finding that he is the owner of the land which in the last analysis resolves itself into an issue of ownership. Hence, the action must be commenced in the province where the property is situated . . . ." 5. In Dr. Antonio A. Lizares, Inc. v. Hon. Hermogenes Caluag,28 this Court ruled that "an action praying that defendant be ordered `to accept the payment being made by plaintiff for the lot which the latter contracted to buy on installment basis from the former, to pay plaintiff compensatory damages and attorneys fees and to enjoin defendant and his agents from repossessing the lot in question, is one that affects title to the land under Section 3 of Rule 5, of the Rules of Court, and shall be commenced and tried in the province where the property or any part thereof lies, because, although the immediate remedy is to compel the defendant to accept the tender of payment allegedly made, it is obvious that this relief is merely the first step to establish plaintiffs title to [the] real property."

6. In Land Tenure Administration, et al. v. The Honorable Higinio B. Macadaeg and Alejandro T. Lim,29 this Court ruled that "where the lessee seeks to establish an interest in an hacienda that runs with the land and one that must be respected by the purchaser of the land even if the latter is not a party to the original lease contract, the question of whether or not the standing crop is immovable property become[s] irrelevant, for venue is determined by the nature of the principal claim. Since the lessee is primarily interested in establishing his right to recover possession of the land for the purpose of enabling him to gather his share of the crops, his action is real and must be brought in the locality where the land is situated." 7. In Espineli & Mojica v. Hon. Santiago and Vda. de Ramirez,30 the court ruled that "although the main relief sought in the case at bar was the delivery of the certificate of title, said relief, in turn, entirely depended upon who, between the parties, has a better right to the lot in question. As it is not possible for the court to decide the main relief, without passing upon the claim of the parties with respect to the title to and possession of the lot in question, the claim shall be determined x x x in the province where [the] said property or any part thereof lies." The case of Carandang v. Court of Appeals,31 is more particularly instructive. There, we held that an action for nullification of the mortgage documents and foreclosure of the mortgaged property is a real action that affects the title to the property. Thus, venue of the real action is before the court having jurisdiction over the territory in which the property lies, which is the Court of First Instance of Laguna. Petitioner in this case contends that a case for cancellation of mortgage is a personal action and since he resides at Pasig City, venue was properly laid therein. He tries to make a point by alluding to the case of Francisco S. Hernandez v. Rural Bank of Lucena.32 Petitioners reliance in the case of Francisco S. Hernandez v. Rural Bank of Lucena33 is misplaced. Firstly, said case was primarily an action to compel the mortgagee bank to accept payment of the mortgage debt and to release the mortgage. That action, which is not expressly included in the enumeration found in Section 2(a) of Rule 4 of the Old Civil Procedure and now under Section 1, Rule 4 of the 1997 Rules of Civil Procedure, does not involve titles to the mortgaged lots. It is a personal action and not a real action. The mortgagee has not foreclosed the mortgage. The plaintiffs title is not in question. They are in possession of the mortgaged lots. Hence, the venue of the plaintiffs personal action is the place where the defendant or any of the defendants resides or may be found, or where the plaintiff or any of the plaintiffs resides, at the election of the plaintiff. In the case at bar, the action for cancellation of real estate mortgage filed by herein petitioner was primarily an action to compel private respondent bank to return to him the properties covered by TCTs No. 64070 and No. 3325 over which the bank had already initiated foreclosure proceedings because of the cancellation by the said respondent bank of the omnibus credit line on 21 July 1997. The prime objective is to recover said real properties. Secondly, Carandang distinctly articulated that the ruling in Hernandez does not apply where the mortgaged property had already been foreclosed. Here, and as correctly pointed out by the appellate court, respondent bank had already initiated extrajudicial foreclosure proceedings, and were it not for the timely issuance of a restraining order secured by petitioner Go in the lower court, the same would have already been sold at a public auction. In a relatively recent case, Asset Privatization Trust v. Court of Appeals,34 it was succinctly stated that the prayer for the nullification of the mortgage is a prayer affecting real property, hence, is a real action. In sum, the cancellation of the real estate mortgage, subject of the instant petition, is a real action, considering that a real estate mortgage is a real right and a real property by itself. 35 An action for cancellation of real estate mortgage is necessarily an action affecting the title to the property. It is, therefore, a real action which should be commenced and tried in Mandaluyong City, the place where the subject property lies. WHEREFORE, the instant petition is DENIED for lack of merit. The assailed decision dated 31 July 2002 and the Order dated 14 November 2002 denying the motion for reconsideration are hereby AFFIRMED. With costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 160053 August 28, 2006 SPS. RENATO & ANGELINA LANTIN, Petitioners, vs. HON. JANE AURORA C. LANTION, Presiding Judge of the Regional Trial Court of Lipa City, Fourth Judicial Region, Branch 13, PLANTERS DEVELOPMENT BANK, ELIZABETH C. UMALI, ALICE PERCE, JELEN MOSCA, REGISTER OF DEEDS FOR LIPA CITY, BATANGAS, THE CLERK OF COURT and EXOFFICIO SHERIFF OF THE REGIONAL TRIAL COURT OF BATANGAS, Respondents. DECISION QUISUMBING, J.: This is a petition for certiorari assailing the orders dated May 15, 20031 and September 15, 20032 in Civil Case No. 2002-0555 issued by public respondent, Presiding Judge Jane Aurora C. Lantion, of the Regional Trial Court (RTC) of Lipa City, Batangas. The facts of the case are as follows: Petitioners Renato and Angelina Lantin took several peso and dollar loans from respondent Planters Development Bank and executed several real estate mortgages and promissory notes to cover the loans. They defaulted on the payments so respondent bank foreclosed the mortgaged lots. The foreclosed properties, in partial satisfaction of petitioners debt, were sold at a public auction where the respondent bank was the winning bidder. On November 8, 2003, petitioners filed against Planters Development Bank and its officers Elizabeth Umali, Alice Perce and Jelen Mosca (private respondents), a Complaint for Declaration of Nullity and/or Annulment of Sale and/or Mortgage, Reconveyance, Discharge of Mortgage, Accounting, Permanent Injunction, and Damages with the RTC of Lipa City, Batangas. Petitioners alleged that only their peso loans were covered by the mortgages and that these had already been fully paid, hence, the mortgages should have been discharged. They challenged the validity of the foreclosure on the alleged non-payment of their dollar loans as the mortgages did not cover those loans. Private respondents moved to dismiss the complaint on the ground of improper venue since the loan agreements restricted the venue of any suit in Metro Manila. On May 15, 2003, the respondent judge dismissed the case for improper venue. Petitioners sought reconsideration. They argued that the trial court in effect prejudged the validity of the loan documents because the trial court based its dismissal on a venue stipulation provided in the agreement. The motion for reconsideration was denied and the lower court held that the previous order did not touch upon the validity of the loan documents but merely ruled on the procedural issue of venue. Petitioners now come before us alleging that: I THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN HOLDING THAT THE VENUE STIPULATIONS IN THE "REAL ESTATE MORTGAGE" AND "PROMISSORY NOTES" FALL WITHIN THE PURVIEW OF SECTION 4(B) OF RULE 4

OF THE 1997 RULES OF CIVIL PROCEDURE IN THAT IT LIMITED THE VENUE OF ACTIONS TO A DEFINITE PLACE. II THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN NOT FINDING THAT THE MERE USE OF THE WORD "EXCLUSIVELY" DOESNOT, BY ITSELF, MEAN THAT SUCH STIPULATIONS AUTOMATICALLY PROVIDE FOR AN "EXCLUSIVE VENUE", AS CONTEMPLATED BY SECTION 4(B) OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE, SPECIALLY WHEN THE TENOR OR LANGUAGE OF THE ENTIRE VENUE STIPULATION CLEARLY PROVIDES OTHERWISE. III THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE FACT THAT HEREIN PETITIONERS COMPLAINT INVOLVES SEVERAL CAUSES OF ACTION WHICH DO NOT ARISE SOLELY FROM THE "REAL ESTATE MORTGAGE" AND "PROMISSORY NOTES" AND WHICH OTHER CAUSES OF ACTION MAY BE FILED IN OTHER VENUES UNDER SECTIONS 1 AND 2 OF RULE 4 OF THE 1997 RULES OF CIVIL PROCEDURE. IV THE HONORABLE JUDGE COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN DISREGARDING THE PRINCIPLE THAT THE RULE ON VENUE OF ACTIONS IS ESTABLISHED FOR THE CONVENIENCE OF THE PLAINTIFFS.3 The main issue in the present petition is whether respondent judge committed grave abuse of discretion when she dismissed the case for improper venue. Petitioners contend that, since the validity of the loan documents were squarely put in issue, necessarily this meant also that the validity of the venue stipulation also was at issue. Moreover, according to the petitioners, the venue stipulation in the loan documents is not an exclusive venue stipulation under Section 4(b) of Rule 4 of the 1997 Rules of Civil Procedure.4 The venue in the loan agreement was not specified with particularity. Besides, petitioners posit, the rule on venue of action was established for the convenience of the plaintiff, herein petitioners. Further, petitioners also contend that since the complaint involves several causes of action which did not arise solely from or connected with the loan documents, the cited venue stipulation should not be made to apply. Private respondents counter that, in their complaint, petitioners did not assail the loan documents, and the issue of validity was merely petitioners afterthought to avoid being bound by the venue stipulation. They also aver that the venue stipulation was not contrary to the doctrine in Unimasters,5 which requires that a venue stipulation employ categorical and suitably limiting language to the effect that the parties agree that the venue of actions between them should be laid only and exclusively at a definite place. According to private respondents, the language of the stipulation is clearly exclusive. At the outset, we must make clear that under Section 4 (b) of Rule 4 of the 1997 Rules of Civil Procedure, the general rules on venue of actions shall not apply where the parties, before the filing of the action, have validly agreed in writing on an exclusive venue. The mere stipulation on the venue of an action, however, is not enough to preclude parties from bringing a case in other venues. The parties must be able to show that such stipulation is exclusive.6 In the absence of qualifying or restrictive words, the stipulation should be deemed as merely an agreement on an additional forum, not as limiting venue to the specified place.7 The pertinent provisions of the several real estate mortgages and promissory notes executed by the petitioner respectively read as follows:

18. In the event of suit arising out of or in connection with this mortgage and/or the promissory note/s secured by this mortgage, the parties hereto agree to bring their causes of auction (sic) exclusively in the proper court of Makati, Metro Manila or at such other venue chosen by the Mortgagee, the Mortgagor waiving for this purpose any other venue.8 (Emphasis supplied.) I/We further submit that the venue of any legal action arising out of this note shall exclusively be at the proper court of Metropolitan Manila, Philippines or any other venue chosen by the BANK, waiving for this purpose any other venue provided by the Rules of Court.9 (Emphasis supplied.) Clearly, the words "exclusively" and "waiving for this purpose any other venue" are restrictive and used advisedly to meet the requirements. Petitioners claim that effecting the exclusive venue stipulation would be tantamount to a prejudgment on the validity of the loan documents. We note however that in their complaint, petitioners never assailed the validity of the mortgage contracts securing their peso loans. They only assailed the terms and coverage of the mortgage contracts. What petitioners claimed is that their peso loans had already been paid thus the mortgages should be discharged, and that the mortgage contracts did not include their dollar loans. In our view, since the issues of whether the mortgages should be properly discharged and whether these also cover the dollar loans, arose out of the said loan documents, the stipulation on venue is also applicable thereto. Considering all the circumstances in this controversy, we find that the respondent judge did not commit grave abuse of discretion, as the questioned orders were evidently in accord with law and jurisprudence. WHEREFORE, the petition is DISMISSED. The assailed orders dated May 15, 2003 and September 15, 2003 of the Regional Trial Court of Lipa City, Batangas, in Civil Case No. 2002-0555 are AFFIRMED. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 123555 January 22, 1999 PROGRESSIVE DEVELOPMENT CORPORATION, INC., petitioner, vs. COURT OF APPEALS and WESTIN SEAFOOD MARKET, INC. respondents. BELLOSILLO, J.: May the lessee which instituted before the Metropolitan Trial Court an action for forcible entry with damages against its lessor file a separate suit with the Regional Trial Court against the same lessor for moral and exemplary damages plus actual and compensatory damages based on the same forcible entry? On grounds of litis pendencia and forum-shopping petitioner invokes established jurisprudence that a party cannot by varying the form of action or adopting a different method of presenting his case evade the principle that the same cause of action shall not be litigated twice between the same parties or their privies. 1 Petitioner therefore prays for reversal of the decision of the Court of Appeals dated 27 May 1995, as well as its Resolution dated 17 January 1996 denying reconsideration, which upheld the denial by the Regional Trial Court of petitioner's motion to dismiss private respondent's damage suit. The antecedents: On 27 May 1991 petitioner leased to private, respondent Westin Seafood Market, Inc., a parcel of land with a commercial building thereon located at Aranet Center, Cubao, Quezon City, for a period of nine (9) years and three (3) months, i.e., from 2 January 1989 to 30 April 1998, with a monhtly rental of approximately P600,000.00. The contract contained, among others, the following pertinent terms and conditions: EFFECT OF VIOLATIONS 25. LESSEE hereby agrees that all the provisions contained in this Contract shall be deemed as conditions, as-well as covenants, and that this Contract shall be automatically terminated and cancelled without resorting to court action should LESSEE violate any or all said conditions, including the payment of Rent, CUSA and other charges indicated in the FLP when due within the time herein stipulated and in any such cases, LESSEE hereby irrevocably appoints LESSOR, its authorized agents, employees and/or representatives as his duly authorized attorney-in-fact, even after the termination, expiration or cancellation of this Contract, with full power and authority to open, enter, repossess, secure, enclose, fence and otherwise take full and complete physical possession and control of the leased premises and its contents without resorting to court action and/or to summarily disconnect electrical and/or water services thereof, and that LESSEE hereby irrevocably empowers LESSOR, his authorized agents, employees and/or representatives to take inventory and possession of whatever equipment, furniture, articles, merchandise, appliances, etc., found therein belonging to LESSEE, consignors and/or to any other persons and to place the same in LESSOR's warehouse or any other place at LESSOR's discretion for safekeeping; charging LESSEE the corresponding storage fees therefor; that in case LESSEE fails to claim-said equipment, furniture, articles, merchandise, appliances, etc. from storage and simultaneously liquidate any liability with LESSOR within seven (7) days from date of said transfer to LESSOR's warehouse, LESSOR is likewise hereby expressly authorized and empowered by LESSEE to dispose of said property/properties in a public sale through a Notary Public of LESSOR's choice and to apply the proceeds thereof to

whatever liability and/or indebtedness LESSEE may have to LESSOR plus reasonable expenses for the same, including storage fees, and the balance, if any, shall be turned over to LESSEE; that LESSEE hereby expressly agrees that any or all acts performed by LESSOR, his authorized agents, employees and/or representatives under the provisions of this Section may not be the subject of any petition for a Writ of Preliminary Injunction or Mandatory Injunction in court, and that LESSOR and/or his authorized agents, employees, and/or representatives shall be free from any civil and/or criminal liability or responsibility whatsoever therefor. TERMINATION OF LEASE 26. Upon-the automatic termination of this lease contract, as the case may be, LESSEE shall immediately vacate and redeliver physical possession of the leased premises, including the keys appertaining thereto, to LESSOR in good, clean and sanitary condition, reasonable wear and tear excepted, devoid of all occupants,. equipment, furnitures articles, merchandise, etc., belonging to LESSEE or to any other person except those belonging to LESSOR; that should LESSEE fail to comply with this provision, LESSOR is hereby given the same rights and power to proceed against LESSEE as expressly granted in the immediately; preceding section. Private respondent failed to pay rentals despite several demands by petitioner. As of 19 October 1992 the arrearages amounted to P8,608,284.66. Admittedly, non-payment of rentals constituted breach of their contract; thus, pursuant to the express authority granted petitioner under the above-quoted Secs. 25 and 26 of the lease agreement, petitioner on 31 October 1992 repossessed the leased premises, inventoried the movable properties found within and owned by private respondent and scheduled public auction for the sale of the movables on 19 August 1993 with notice to private respondent. On 26 November 1992 private respondent filed with the Metropolitan Trial Court of Quezon City a complaint against petitioner for forcible entry with damages and a prayer for a temporary restraining order and/or writ of preliminary injunction. 2 The case was raffled to Branch 40 presided over by Judge Guillermo L. Loja Jr. who issued a temporary restraining order enjoining petitioner from selling private respondent's properties at a public auction. On 9 December 1992 Judge Loja inhibited himself from trying the case and directed its transfer to Branch 34 presided over by Judge Joselito SD Generoso. Soon after, petitioner filed an urgent motion for the inhibition of Judge Generoso and the immediate reraffle of the case arguing that the summary transfer of the case to Judge Generoso was irregular as it was not done by raffle. The motion was granted and the case went to Branch 36 presided over by Judge Francisco D. Villanueva. Thereafter, on 22 December 1992, at the continuation of the hearing on the issuance of a writ preliminary mandatory injunction, the parties agreed, among others, on the following: (a) private respondent would deposit with the Philippine Commercial and Industrial Bank in the name of the Metropolitan Trial Court, Branch 36, the amount of P8,000,000.00 to guarantee the payment of its back rentals; (b) petitioner would defer the sale of the personal properties of the Westin Seafood Market, Inc., until a final settlement of the case had been arrived, at; (c) petitioner shall allow private respondent to retrieve all the perishable goods from inside the leased premises like frozen meat, vegetables and fish, all properly receipted for; (d) petitioner shall allow three (3) maintenance personnel of private respondent to enter the premises at reasonable working hours to maintain the restaurant equipment; and (e) the parties shall negotiate for the restoration of the premises to private respondent, and if no settlement be arrived at on or before January 8, 1993, the hearing on the merits of the case shall proceed and the disposition of the amount deposited representing the rental arrearages shall be left to the. discretion of the court. This agreement was incorporated in the order of the court dated 22 December 1992 3 which in effect terminated for all intents and purposes the incident on the issuance of a preliminary writ of injunction. Private respondent did not comply with its undertaking to deposit with the designated bank the amount representing its back rentals. Instead, with the forcible entry case still pending with the MeTC, private

respondent instituted on 9 June 1993 another action for damages against petitioner with the Regional Trial Court of Quezon City. The case was raffled to Branch 101 presided over by Judge Pedro T. Santiago. 4 Petitioner filed a motion, to dismiss the damage suit on the ground of litis pendencia and forum shopping. On 2 July 1993, instead of ruling on the motion, Judge Santiago issued an order archiving the case pending the outcome of the forcible entry case being heard at the MeTC for the reason that "the damages is (sic) principally anchored on whether or not the defendants (petitioner herein) have committed forcible entry." 5 On 2 August 1993 petitioner moved for reconsideration of the order and reiterated its motion to dismiss the suit for damages. Before petitioner's motion to dismiss could be resolved, private respondent filed with the RTC on 18 August 1993 an amended complaint for damages. On 14 September 1993 it also filed an Urgent Ex-Parte Motion for the Issuance of a Temporary Restraining Order and Motion for the Grant of a Preliminary Prohibitory and Preliminary Mandatory Injunction. On the very same day, Judge Santiago issued an order (a) denying petitioner's motion to dismiss, (b) admitting private respondent's amended complaint, and (c) granting private respondent's application for a temporary restraining order against petitioner. Thus, petitioner filed with the Court of Appeals a special civil action for certiorari and prohibition on the ground that Judge Santjago acted in excess of his jurisdiction and/or committed grave abuse of discretion amounting to lack of jurisdiction in admitting, the amended complaint of private respondent and issuing a restraining order against petitioner; in allowing private respondent to engage in forum shopping; and, taking cognizance of the action; for damages despite lack of jurisdiction. 6 But the Court of Appeals dismissed the petition due to the failure of petitioner to file a motion for reconsideration of Judge Santiago's order of 14 September 1993 which, it explained, was a prerequisite to the institution of a petition for certiorari and prohibition. It also found that the elements of litis pendencia were lacking to justify the dismissal of the action for damages with the RTC because despite the pendency of the forcible entry case with the MeTC the only damages recoverable thereat were those caused by the loss of the use and occupation of the property and not the kind of damages being claimed before the RTC which had no direct relation to loss of material possession. It clarified that since the damages prayed for in the amended complaint with the RTC were those caused by the alleged high-handed manner with which petitioner reacquired possession of the leased premises and the sale of private respondent's movables found therein, the RTC and not the MeTC had jurisdiction over the action of damages. 7 Petitioner, aggrieved by the decision of the appellate court, filed the instant petition for review on certiorari under Rule 45 of the Rules of Court alleging that it erred in (a) finding that petitioner failed to avail of its plain, speedy and adequate remedy of a prior motion for reconsideration with the RTC; (b) ruling that, the trial judge did not act with grave abuse of discretion in taking cognizance of the action for damages and injunction despite the pendency of the forcible entry case with the MeTC; and, (c) ruling that private respondent did not commit forum shopping since the causes of action before the RTC and MeTC were not identical with each other. There is merit in the petition. While generally a motion for reconsideration must first be filed before resorting tocertiorari in order to give the lower court an opportunity to correct the errors imputed to it 8 this rule admits of exceptions and is not intended to be applied without considering the circumstances of the case. 9 The filing of the motion for reconsideration before availing of the remedy of certiorari is not sine qua non when the issue raised is one purely of law, 10 or where the error is patent or the disputed order is void, 11 or the questions raised on certiorari are the same as those already squarely presented to and passed upon by the lower court In its motion for dismissal of the action for damages with the RTC petitioner raised the ground that another action for forcible entry was pending at the MeTC between the same parties involving the same matter and cause of action. Outrightly rejected by the RTC, the same issue was elevated by petitioner on certiorari before the Court of Appeals. Clearly, under the prevailing circumstance, any motion for reconsideration of the trial court would have been a pointless exercise. 12

We now turn to the issue of whether an action for damages filed with the Regional Trial Court by the lessee against the lessor should be dismissed on the ground of pendency of another action for forcible entry and damages earlier filed by the same lessee against the same lessor before the Metropolitan Trial Court. Sec. 1 of Rule 70 of the Rules of Court provides that any person deprived of the possession of any land or building by force, indimidation, threat, strategy or stealth, or against whom thepossession of any land or building is unlawfully withheld, may bring an action in the proper Municipal Trial Court against the person or persons unlawfully withholding or depriving of possession, together with damages and costs. The mandate under this rule is categorical: that all cases for forcible entry or unlawful detainer shall be filed before the Municipal Trial Court which shall include not only the plea for restoration of possession but also all claims for damages and costs arising therefrom. Otherwise expressed, no claim for damages arising out of forcible entry or unlawful detainer may be filed separately and independently of the claim for restoration of possession. This is consistent with the principle laid down in Sec. 1, par. (e), of Rule 16 of the Rules of Court which states that the pendency of another action between the same parties for the same cause is a ground for dismissal of an action. Res adjudicata requires that there must be between the action sought to be dismissed and the other action the following elements: (a) identity of parties or at least such as representing the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts; and, (c) the identity in the two (2) preceding particulars should be such that any judgment which may be rendered on the other action will, regardless of which party is successful, amount to res adjudicata in the action under consideration. 13 It is likewise basic under Sec. 3 of Rule 2 of the Revised Rules of Court, as amended, that a party may not institute more than one suit for a single cause of action. Under Sec. 4 of the same Rule, if two or more suits are instituted on the basis of the same cause of action, the filing of one or a judgment upon the merits in any one is available as a ground for the dismissal of the other or others. "Cause of action" is defined by Sec. 2 of Rule 2 as the act of omission by which a party violates a right of another. 14 These premises obtaining, there is no question at all that private respondent's cause of action in the forcible entry case and in the suit for damages is the alleged illegal retaking of possession of the leased premises by the lessor, petitioner herein, from which all legal reliefs arise. Simply stated, the restoration of possession and demand for actual damages in the case before the MeTC and the demand for damages with the RTC both arise from the same cause of action, i.e., the forcible entry by petitioner into the least premises. A comparative study of the two (2) complaints filed by private respondent against petitioner before the two (2) trial courts shows that not only are the elements of res adjudicata present, at least insofar as the claim for actual and compensatory damages is concerned, but also that the claim for damages moral and exemplary in addition to actual and compensatory constitutes splitting a single cause of action. Since this runs counter to the rule against multiplicity of suits, the dismissal of the second action becomes imperative. The complaint for forcible entry contains the following pertinent allegations 2.01 On 02 January 1989, plaintiff entered, into a contract of lease with defendant PDC over a property designated as Ground Floor, Seafood Market (hereinafter "Subject Premises") situated at the corner of EDSA, corner MacArthur Street, Araneta Center, Cubao, Quezon City, for a period of ten (10) years from 02 January 1989 to 30 April 1998. 2.02 Immediately after having acquired actual physical possession of the Subject Premises, plaintiff established and now operates thereon the now famous Seafood Market Restaurant. Since then, plaintiff had been in actual, continuous, and peaceful physical possession of the Subject Premises until 31 October 1992. xxx xxx xxx

3.02 Plaintiff, being the lessee of the Subject Premises, is entitled to the peaceful occupation and enjoyment of the Subject Premises to the exclusion of all others, including defendants herein. 3.03 Defendants' resort to strong arms tactics to forcibly wrest possession of the Subject Premises from plaintiff and maintain possession thereof through the use of force, threat, strategy and intimidation by the use of superior number of men and arms amounts to the taking of the law into their own hands. 3.04 Thus, defendants' act of unlawfully evicting out plaintiff from the Subject Premises it is leasing from defendant PDC and depriving it of possession thereof through the use of force, threat, strategy and intimidation should be condemned and declared illegal for being contrary; to public order and policy. 3.05 Consequently, defendants should be enjoined from continuing with their illegal acts and be ordered to vacate the Subject Premises and restore possession thereof, together with its contents, to plaintiff. xxx xxx xxx 4.07 Considering that defendants' act of forcibly grabbing possession of the Subject Premises from plaintiff is illegal and null and void, defendant should be adjudged liable to plaintiff for all the aforedescribed damages which plaintiff incurred as a result thereof. The amended complaint for damages filed by private respondent alleges basically the same factual circumstances and issues as bases for the relief prayed for, to wit: 4. On May 28, 1991, plaintiff and defendant PDC entered into a Contract of Lease for a period of ten years or from January 2, 1989 up to April 30, 1998 over a property designated as Ground Floor, Seafood Market (hereinafter referred to as Subject Premises) situated at the corner of EDSA corner McArthur Street, Araneta Center, Cubao, Quezon City. A copy of the lease contract is attached hereto as Annex "A". 5. Immediately thereafter, plaintiff took over actual physical possession of Subject Premises, and established thereon the now famous "Seafood Market Restaurant." xxx xxx xxx 7 On October 31, 1992 at around 8:30 p.m., defendant PDC, without the benefit of any writ of possession or any lawful court order and with the aid of approximately forty (40) armed security guards and policemen under the supervision of defendant Tejam, forcibly entered the subject premises through force, intimidation, threats and stealth and relying on brute force and in a thunderboltish manner and against plaintiff's will, unceremoniously drew away all of plaintiff's men out of the subject premises, thereby depriving herein plaintiff of its actual, physical and natural possession of the subject premises. The illegal, high-handed manner and gestapo like take-over by defendants of subject premises is more particularly described as follows: . . . 8. To date, defendants continue to illegally possess and hold the Subject Premises, including all the multi-million improvements, fixtures and equipment therein owned by plaintiff, all to the damage and prejudice of plaintiff. The actuations of defendants constitute an unlawful appropriation, seizure and taking of property against the will and consent of plaintiff. Worse, defendants are threatening to sell at public auction and without the consent of plaintiff and without lawful authority, the multi-million fixtures and equipment of plaintiff and at prices way below the market value thereof. Plaintiff hereby attaches as Annex "B" the letter from defendants dated August 6, 1993 addressed to plaintiff, informing the latter that the former

intends to sell at an auction on August 19, 1993 at 2:00 p.m. properties of the plaintiff presently in defendants' possession. xxx xxx xxx 12. Defendants' unlawful takeover of the premises constitutes a violation of its obligation under Art. 1654 of the New Civil Code requiring the lessor to maintain the lessee in peaceful and adequate enjoyment of the lease for the entire duration of the contract. Hence, plaintiff has filed the present suit for the recovery of damages under Art. 1659 of the New Civil Code. . . . Restated in its bare essentials, the forcible entry case has one cause of action, namely, the alleged unlawful entry by petitioner into the leased premises out of which three (3) reliefs (denominated by private respondent as is causes of action) arose: (a) the restoration by the lessor (petitioner herein) of the possession of the leased premises to the lessee; (b) the claim for actual damages due to the losses suffered by private respondent such as the deterioration of perishable foodstuff stored inside the premises and the deprivation of the use of the premises causing loss of expected profits; and, (c) the claim for attoney's fees and cost of suit. On the other hand, the complaint for damages prays for a monetary award consisting of (a) moral damages of P500,000.00 and exemplary damages of another P500,000.00; (b) actual damages of P20,000,000.00 and compensatory damages of P1,000,000.00 representing unrealized profits; and, (c) P200,000.00 for attorney's fees and costs, all based on the alleged forcible takeover of the leased premises by petitioner. Since actual and compensatory damages were already prayed for in the forcible entry case before the MeTC, it is obvious that this cannot be relitigated in the damage suit before the RTC by reason of res adjudicata. The other claims for moral and exemplary damages cannot also succeed considering that these sprung from the main incident being heard before the MeTC. Jurisprudence is unequivocal that when a single delict or wrong is committed like the unlawful taking or detention of the property of the another there is but one single cause of action regardless of the number of rights that may have been violated, and all such rights should be alleged in a single complaint as constituting one single cause of action. 15 In a forcible entry case, the real issue is the physical possession of the real property. The question of damages is merely secondary or incidental, so much so that the amount thereof does not affect the jurisdiction of the court. In other words, the unlawful act of a deforciant in taking possession of a piece of land by means of force and intimidation against the rights of the party actually in possession thereof is a delict or wrong, or a cause of action that gives rise to two (2) remedies, namely, the recovery of possession and recovery of damages arising from the loss of possession, but only to one action. For obvious reasons, both remedies cannot be the subject of two (2) separate and independent actions, one for recovery of posssession only, and the other, for the recovery of damages. That would inevitably lead to what is termed in law as splitting up a cause of action. 16 In David v. de la Cruz 17 we observed Herein tenants have but one cause of action against their landlord, their illegal ejectment or removal from their landholdings, which cause of action however entitles them to two (2) claims or remedies for reinstatement of damages. As both claims arise from the same cause of action, they should be alleged in a single complaint. A claim cannot be divided in such a way that a part of the amount of damages may be recovered in one case and the rest, in another. 18 In Bacharach v. Icarangal 19 we explained that the rule was aimed at preventing repeated litigations betweent the same parties in regard to the same subject of the controversy and to protect the defendant from unnecessary vexation. Nemo debet bis vexari pro una et eadem causa. What then is the effect of the dismissal of the other action? Since the rule is that all such rights should be alleged in a single complaint, it goes without saying that those not therein included cannot be the subject of subsequent complaints for they are barred forever. 20 If a suit is brought for a part of a claim, a judgment obtained in that action precludes the plaintiff from bringing a second action for the residue of the claim, notwithstanding that the second form of action is not identical with the first or different grounds for relief are set for the second suit. This principle not only embraces what was actually determined, but also extends to every matter which the parties might have litigated in the case. 21 This is why the legal basis upon which private

respondent anchored its second claim for damages, i.e., Art. 1659 in relation to Art. 1654 of the Civil Code, 22not otherwise raised and cited by private respondent in the forcible entry case, cannot be used as justification for the second suit for damages. We note, not without some degree of displeasure, that by filing a second suit for damages, private respondent was not only able to press a claim for moral and exemplary damages which by its failure to allege the same in its suit before the MeTC foreclosed its right to sue on it, but it was also able to obtain from the RTC, by way of another temporary restraining order, a second reprieve from an impending public auction sale of its movables which could not anymore secure from the MeTC before which the matter of the issuance of a preliminary writ of injunction was already closed. The foregoing discussions provide sufficient basis to petitioner's charge that private respondent and its counsel in the trial courts committed forum shopping. In Crisostomo v. Securities and Exchange Commission 23 we ruled There is forum-shopping whenever, as a result of an adverse opinion in one forum, party seeks a favorable opinion (other than by appeal or certiorari) in another. The principle applies . . . with respect to suits filed in the courts . . . in connection with litigations commenced in the court . . . in anticipation of an unfavorable . . . ruling and a favorable case where the court in which the second suit was brought, has no jurisdiction. This Court likewise elucidated in New Pangasinan Review, Inc. v. National Labor Relations Commission 24 that there is forum-shopping when the actions involve the same transactions, the same essential facts and circumstances. The reason behind the proscription of forum shopping is obvious. This unnecessarily burdens our courts with heavy caseloads, unduly taxes the manpower and financial resources of the judiciary and trifles with and mocks our judicial processes, thereby adversely affecting the efficient administration of justice. This condemnable conduct has prompted the Court to issue circulars 25 ordering among others that a violation thereof shall be cause for the dismissal of the case or cases without prejudice to the taking of appropriate action against the counsel or party concerned. The records ineluctably show that the complaint lodged, by private respondent with the Regional Trial Court of Quezon City contained no certification of non-forum shopping. When petitioner filed a motion to dismiss the case raising among others the ground of forum shopping it pointed out the absence of the required certification. The amended complaint, as well as the second and third amended complaints, attempted to rectify the error by invariably stating that there was no other action pending between the parties involving the same causes of action although there was actually a forcible entry case pending before the MTC of Quezon City. By its admission of a pending forcible entry case, it is obvious that private respondent was indulging in forum shopping. While private respondent conveniently failed to inform the RTC that it had likewise sought damages in the MTC on the basis of the same forcible entry, the fact remains that it precisely did so, which stratagem was being duplicated in the second case. This is a compelling reason to dismiss the second case. WHEREFORE, the Petition is GRANTED. The questioned Decision of the Court of Appeals dated 27 September 1995 and the Order of the Regional Trial Court of Quezon City dated 24 September 1993 are REVERSED and SET ASIDE. The Regional Trial Court of Quezon City is directed to dismiss Civil Case No. Q93-16409, "Westin Seafood Market, Inc. v. Progressive Development Corporation, et al.," and the Metropolitan Trial Court of Quezon City to proceed with the proper disposition of Civil Case No. 6589, "Westin Seafood Market, Inc. v. Progressive Development Corporation, et al.," with dispacth considering the summary nature of the case. Treble costs against private respondent.1wphi1.nt SO ORDERED

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 78343 May 21, 1988 HEIRS OF RICARDO OLIVAS, represented by POMPEYO F. OLIVAS, petitioners, vs. THE HON. FLORENTINO A. FLOR (Presiding Judge, Regional Trial Court, Fourth Judicial Region, Branch 79, Morong, Rizal), JOSE A. MATAWARAN, respondents. Belo, Abiera & Associates for petitioners. Domingo Z. Legaspi for respondents. RESOLUTION

MELENCIO-HERRERA, J.: This Petition for Review on certiorari seeks to set aside the Decision of the respondent Regional Trial Court, Branch 79, Morong, Rizal, in the ejectment case entitled "Heirs of Ricardo Olivas vs. Jose Matawaran" (Civil Case No. 227-M), which affirmed the Order of the Municipal Trial Court of Morong, Rizal ordering the dismissal of said case. The background facts disclose that: On 16 May 1986, petitioners filed a complaint for Forcible Entry before the Municipal Trial Court of Morong, Rizal (MTC, for short), alleging that private respondent, through stealth and strategy, urlawfully took possession of the disputed property and ousted petitioners from their possession thereof. The MTC issued summons stating that the Rule on Summary Procedure in Special Cases shall apply. On 29 May 1986, private respondent filed an Answer with Counterclaim stating, inter alia: 3. Paragraph 4 of the complaint is admitted insofar as the fact that defendant did complain to the Barangay Chairman regarding the repeated attempts of plaintiff to unlawfully grab possession of the property owned by defendant and his other brothers and sisters. On 30 June 1986, the MTC granted the Temporary Restraining Order petitioners prayed for. On 15 August 1986, the MTC required the parties to submit position papers within ten (10) days. On 19 September 1986, or approximately four (4) months after the filing of the Answer, private respondent filed a Motion to Dismiss alleging that the case should be dismissed outright for failure to state a cause of action. Petitioners submitted an Opposition contending that a Motion to Dismiss is a prohibited pleading under the Rule on Summary Procedure. On 29 December 1986, the MTC dismissed the case for failure of petitioners' Complaint to state a cause of action in that it failed to Identify sufficiently the land subject matter of this case.

An appeal was seasonably interposed by petitioners to respondent Regional Trial Court (RTC), Branch 79, Morong, Rizal. On 28 April 1987, Respondent RTC rendered a Decision affirming in toto the dismissal of the case by the MTC. Before us now, petitioners maintain that the MTC Decision is violative of the Rule on Summary Procedure, and that Respondent RTC erred in affirming the MTC's dismissal of the case. We resolved to give due course to the Petition finding, as we do, merit in the foregoing submissions. Compliance by the MTC with the Rules on Summary Procedure in Special Cases was wanting. For example, 'a preliminary conference during which the Court must clarify and define the issues of the case, which must be clearly and distinctly set forth in the Order to be issued immediately after such preliminary conference" (Section 6), was not -followed. Neither was Section 7 thereof which further requires that within ten (10) days from receipt of the said order, "the parties shall submit the affidavits of witnesses and other evidences on the factual issues defined therein, together with a brief statement of their positions setting forth the law and the facts relied upon by them." In the guise of a position paper, private respondent filed a Motion to Dismiss. While this is, indeed, a prohibited pleading (Sec. 15[a], Rule on Summary Procedure) it should be noted that the Motion was filed after an Answer had already been submitted within the reglementary period. In essence, therefore, it is not the pleading prohibited by the Rule on Summary Procedure. What the Rule prescribes is a Motion to Dismiss, which would stop the running of the period to file an Answer and cause undue delay. Be that as it may, dismissal of the case by the MTC, as affirmed by Respondent RTC, for failure to state a cause of action, is not in order. The description of the land in the Complaint, quoted hereunder, may, indeed, have been wanting: Bounded on the North, by Francisco Ramos; on the East by Ramon Aquino & Cipriano Aquino; on the South by Felisa Aquino; on the West by Casimiro, Francisco & Benito Ramos. Nonetheless, private respondent's Answer (paragraph 3, supra) left no room for doubt that the parties were acquainted with the Identity of the disputed property. It would be sheer technicality, destructive of the ends of substantial justice, were the case to be dismissed on the ground of lack of particularity of the disputed property. In fact, if the Rule on Summary Procedure had been followed, such additional data as were needed to define the issues of the case could have been threshed out in the preliminary conference. 1 It is true that the Rule on Summary Procedure allows the dismissal of a case outright due to failure to state a cause of action. 2 However, such dismissal is a permissible upon the filing of the complaint from a consideration by the Court of the allegations thereof. In this case, the proceedings had gone far afield. The outright dismissal was not ordered upon the filing of the complaint. On the contrary, the MTC made a determination that the case falls under summary procedure, issued summons stating that fact, and subsequently even issued a Temporary Restraining Order. ACCORDINGLY, the Decision under review is hereby SET ASIDE and this case is hereby ordered remanded to the Municipal Trial Court of Morong, Rizal, for further proceedings on the merits . No costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 101883 December 11, 1992 SPOUSES LYDIA and VIRGILIO MELITON,* petitioners, vs. COURT OF APPEALS and NELIA A. ZIGA, represented by her Attorney-in-Fact RAMON A. AREJOLA,**respondents. REGALADO, J.: In its judgment in CA-G.R. No. 25091 1 promulgated on August 9, 1991, respondent Court of Appeals annulled and set aside the orders dated February 22, 1991 and March 18, 1991 of the Regional Trial Court of Naga City, Branch 27, in Civil Case No. RTC 89-1942 thereof and ordered the dismissal of petitioner's complaint filed herein, hence this appeal by certiorari. On June 22, 1988, private respondent Nelia Ziga, in her own behalf and as attorney-in-fact of Alex A. Ziga and Emma A. Ziga-Siy, filed a complaint, docketed as Civil Case No. RTC 88-1480 of the Regional Trial Court, Branch 27, Naga City, 2 against herein petitioner Lydia Meliton for rescission of a contract of lease over a parcel of land situated at Elias Angeles Street, Naga City. Alleged as grounds therefor were said petitioner's failure, as lessee, to deposit the one month rental and to pay the monthly rentals due; her construction of a concrete wall and roof on the site of a demolished house on the leased premises without the lessor's written consent; and here unauthorized sublease of the leased property to a third party. On July 29, 1988, petitioner Lydia Meliton filed an answer to the complaint denying the material averments thereof and setting up three counterclaims for recovery of the value of her kitchenette constructed on the leased parcel of land and which was demolished by private respondent, in the amount of P34,000.00; the value of the improvements introduced in the kitchenette to beautify it, in the amount of P10,000.00, plus the value of the furniture and fixtures purchased for use in the kitchenette in the amount of P23,000.00; and moral damages in the amount of P20,000.00 aside from attorney's fees of P5,000.00 and P250.00 per court appearance, with litigation expenses in the amount of P1,000.00. 3 On May 29, 1989, the trial court, on motion of private respondent contending that her cause of action had already become moot and academic by the expiration of the lease contract on February 7, 1989, dismissed the complaint. The counterclaims of petitioner Lydia Meliton were also dismissed for non-payment of the docket fees, ergo the trial court's holding that thereby it had not acquired jurisdiction over the same. 4 On December 6, 1989, petitioners Lydia Meliton and Virgilio Meliton filed a complaint against private respondent for recovery of the same amounts involved and alleged in their counterclaims in Civil Case No. RTC 88-1480, which complaint was docketed as Civil Case No. RTC 89-1942 5 and likewise assigned to Branch 27 of the same trial court. On February 15, 1991, private respondent filed a motion to dismiss the complaint on the ground that the cause of action therein was barred by prior judgment in Civil Case No. RTC 88-1480, the order of dismissal wherein was rendered on May 29, 1989. 6 On February 22, 1991, the court below denied private respondent's motion to dismiss the complaint in Civil Case No. RTC 89-1942 on the ground that the dismissal of the petitioner's counterclaims in Civil Case No. RTC 88-1480 is not an adjudication on the merits as the court did not acquire jurisdiction over the

counterclaims for failure of petitioner Lydia Meliton to pay the docket fees, hence the said dismissal does not constitute a bar to the filing of the later complaint. 7 Private respondent's motion for reconsideration of the foregoing order was denied by the lower court for lack of merit in its order of March 18, 1991. 8 Dissatisfied therewith, private respondent filed a petition for certiorari with this Court. In our resolution dated April 29, 1991, we referred this case to the Court of Appeals for proper determination and disposition pursuant to Section 9, paragraph 1, of B.P. Blg. 129, 9 where it was docketed as CA-G.R. SP No. 25093. In a decision promulgated on August 9, 1991, the Court of Appeals granted the petition, the pertinent part of which reads: xxx xxx xxx The respondents' counterclaim against the petitioner in Civil Case No. RTC 88-1480 (Annex E, petition) is a compulsory counterclaim, it having (arisen) out of or being necessarily connected with the transaction or occurrence subject matter of the petitioner's complaint. The failure of the respondents to seek a reconsideration of the dismissal of their counterclaim or to take an appeal therefrom rendered the dismissal final. Such dismissal barred the prosecution of their counterclaim by another action (Section 4, Rule 9, Revised Rules of Court; Javier vs. IAC, 171 SCRA 605). The respondent Court, therefore, in issuing the orders complained of (Annexes G and I, petition), gravely abused its discretion amounting to lack of jurisdiction. WHEREFORE, the petition for certiorari is GRANTED. Accordingly, the orders complained of (Annexes G and I, petition) are annulled and set aside and the respondents' complaint in Civil Case No. RTC 89-1942 before the respondent Court, DISMISSED. Costs against the respondents, except the respondent Court.10 Petitioners are now before use, assailing the said judgment of the Court of Appeals and praying for the annulment thereof. The present petition requires the resolution of two principal issues, to wit: (1) whether or not the counterclaims of petitioners are compulsory in nature; and (2) whether or not petitioners, having failed to seek reconsideration of or to take an appeal from the order of dismissal of their counterclaims, are already barred from asserting the same in another action. 1. Considering Section 4 of Rule 9 of the Rules of Court, 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 party's 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. It has been postulated that while a number of criteria have been advanced for the determination of whether the counterclaim is compulsory or permissive, the "one compelling test of compulsoriness" is the logical relationship between the claim alleged in the complaint and that in the counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time, as where they involve many of the same factual and/or legal issues. The phrase "logical relationship" is given meaning by the purpose of the rule which it was designed to implement. Thus, a counterclaim is logically related to the opposing party's claim where, as already stated, separate trials of each of their respective claims would involve a substantial duplication of effort and time by the parties and the courts. Where multiple claims involve many of the same factual issues, or where they are offshoots of the same basic controversy between the parties, fairness and considerations of convenience and of economy require that the counterclaimant be permitted to maintain his cause of action. 11

In the aforesaid Civil Case No. 88-1480, all the requisites of a compulsory counterclaim are present. The counterclaims, as this term is now broadly defined, are logically related to the complaint. Private respondent's complaint was for rescission of the contract of lease due to petitioner Lydia Meliton's breach of her obligations under the said contract. On the other hand, petitioner's counterclaims were for damages for unlawful demolition of the improvements she introduced pursuant to her leasehold occupancy of the premises, as well as for the filing of that civil suit which is contended to be clearly unfounded. Both the claims therein of petitioners and private respondent arose from the same contract of lease. The rights and obligations of the parties, as well as their potential liability for damages, emanated from the same contractual relation. Petitioners' right to claim damages for the unlawful demolition of the improvements they introduced on the land was based on their right of possession under the contract of lease which is precisely the very same contract sought to be rescinded by private respondent in her complaint. The two actions are but the consequences of the reciprocal obligations imposed by law upon and assumed by the parties under their aforesaid lease contract. That contract of lease pleaded by private respondent constitutes the foundation and basis relied on by both parties for recovery of their respective claims. The relationship between petitioners' counterclaims and private respondent's complaint is substantially the same as that which exists between a complaint for recovery of land by the owner and the claim for improvements introduced therein by the possessor. As we have ruled, in actions for ejectment or for recovery of possession of real property, it is well settled that the defendant's claims for the value of the improvements on the property or necessary expenses for its preservation are required to be interposed in the same action as compulsory couterclaims. In such cases, it is the refusal of the defendant to vacate or surrender possession of the premises that serves as the vital link in the chain of facts and events, and which constitutes the transaction upon which the plaintiff bases his cause of action. It is likewise an "important part of the transaction constituting the subject matter of the counterclaim" of defendant for the value of the improvements or the necessary expenses incurred for the preservation of the property. They are offshoots of the same basic controversy between the parties, that is, the right of either to the possession of the property. 12 On the foregoing considerations, respondent Court of Appeals correctly held that the counterclaims of petitioners are compulsory in nature. 2. Petitioners having alleged compulsory counterclaims, the next point of inquiry is whether or not petitioners are already barred from asserting said claims in a separate suit, the same having been dismissed in the preceding one. The answer is in the negative. It is indeed the rule, embodied in Section 4, Rule 9 of the Rules of Court, that a counterclaim not set up shall be barred if it arises out of or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. However, said rule is not applicable to the case at bar. Contrary to the claim of private respondent, it cannot be said that therein petitioners failed to duly interpose their causes of action as counterclaims in the previous action. Petitioners' claims were duly set up as counterclaims in the prior case but the same were dismissed by reason of non-payment of docket fees. The ruling of respondent Court of Appeals to the effect that the failure of petitioners to appeal or to move for reconsideration of the said order of dismissal bars them from asserting their claims in another action cannot be upheld. Firstly, where a compulsory counterclaim is made the subject of a separate suit, it may be abated upon a plea of auter action pendant or litis pendentia and/or dismissed on the ground of res judicata, 13 depending on the stage or status of the other suit. Both defenses are unavailing to private respondent. The present action cannot be dismissed either on the ground of litis pendentia since there is no other pending action between the same parties and for the same cause, nor on the ground of res judicata.

In order that a prior judgment will constitute a bar to a subsequent case, the following requisites must concur: (1) the judgment must be final; (2) the judgment must have been rendered by a court having jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and second actions, identity of parties, of subject matter, and of causes of action. 14 The first case, Civil Case No. RTC 88-1480, was dismissed upon motion of private respondent, plaintiff therein, under Section 2 of Rule 17. Dismissal thereunder is without prejudice, except when otherwise stated in the motion to dismiss or when stated to be with prejudice in the order of the court. 15 The order of dismissal of the first case was unqualified, hence without prejudice and, therefore, does not have the effect of an adjudication on the merits. On a parity of rationale, the same rule should apply to a counterclaim duly interposed therein and which is likewise dismissed but not on the merits thereof. Moreover, in the same order of dismissal of the complaint, the counterclaims of herein petitioners were dismissed by reason of the fact the court a quo had not acquired jurisdiction over the same for non-payment of the docket fees. On that score, the said dismissal was also without prejudice, since a dismissal on the ground of lack of jurisdiction does not constitute res judicata, 16 there having been no consideration and adjudication of the case on the merits. The dismissal of the case without prejudice indicates the absence of a decision on the merits and leaves the parties free to litigate the matter in a subsequent action as though the dismissal action had not been commenced. 17 The discontinuance of a case not on the merits does not bar another action on the same subject matter. 18 Evidently, therefore, the prior dismissal of herein petitioners' counterclaims is not res judicataand will not bar the filing of another action based on the same causes of action. Secondly, a reading of the order of dismissal will show that the trial court, in dismissing the complaint of private respondent, did not intend to prejudice the claims of petitioners by barring the subsequent judicial enforcement thereof. As stated therein, "(t)he court in dismissing the counterclaim(s) has taken into account the fact that a counterclaim partakes of the nature of a complaint and/or a cause of action against the plaintiffs." 19 This is a clear indication, deducible by necessary implication, that the lower court was aware of the fact that petitioners could avail of the causes of action in said counterclaims in a subsequent independent suit based thereon and that there was no legal obstacle thereto. That this was the import and intendment of that statement in its order dismissing petitioners' counterclaims in Civil Case No. RTC 88-1480 was categorically confirmed by the very same court, wherein Civil Case No. RTC 89-1942 was also subsequently filed, in its assailed orders denying private respondent's motion to dismiss the latter case on the ground of res judicata. This is also concordant with the rule governing dismissal of actions by the plaintiff after the answer has been served as laid down in Rule 17 of the Rules of Court, which is summarized as follows: An action shall not be dismissed at the request of the plaintiff after the service of the answer, except by order of the court and upon such terms and conditions as the court deems proper. The trial court has the judicial discretion in ruling on a motion to dismiss at the instance of the plaintiff. It has to decide whether the dismissal of the case should be allowed, and if so, on what terms and conditions. 20 In dismissing private respondent's complaint, the trial court could not but have reserved to petitioners, as a condition for such dismissal, the right to maintain a separate action for damages. Petitioners' claims for damages in the three counterclaims interposed in said case, although in the nature of compulsory counterclaims but in light of the aforesaid reservation in the dismissal order, are consequently independent causes of action which can be the subject of a separate action against private respondent. An action for damages specifically applicable in a lessor-lessee relationship is authorized in Article 1659 of the Civil Code which provides that: Art. 1659. If the lessor or the lessee should not comply with the obligations set forth in articles 1654 and 1657, the aggrieved party may ask for the rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in force.

Paragraph 3 of Article 1654 of the same Code requires that the lessor must "maintain the lessee in the peaceful and adequate enjoyment of the lease for the entire duration of the contract." 21 The aggrieved party has the alternative remedies, in case of contractual breach, of rescission with damages, or for damages only, "allowing the contract to remain in force." The act of private respondent in demolishing the structures introduced by petitioners on the property leased and the improvements therein during the existence of the lease contract is a clear violation by her, as lessor, of her obligation mandated by paragraph 3, Article 1654 of the Civil Code. The said violation gave rise to a cause of action for damages in favor of herein petitioners. Lastly, even assuming arguendo that the bar under the rule on compulsory counterclaims may be invoked, the peculiar circumstances of this case irresistibly and justifiedly warrant the relaxation of such rule. The court a quo dismissed petitioners' counterclaims for non-payment of docket fees pursuant to our then ruling in Manchester Development Corporation, et al. vs. Court of Appeals, et al., 22 before its modification. The failure of petitioners to seek reconsideration of or to take an appeal from the order of dismissal of the counterclaim should not prejudice their right to file their claims in a separate action because they were thereby made to understand and believe that their counterclaims were merely permissive and could be the subject of a separate and independent action. Under the Rules, there is no need to pay docket fees for a compulsory counterclaim. 23The ruling in Manchester applies specifically to permissive counterclaims only, thereby excluding compulsory counterclaims from its purview, 24 and that was the ruling of the court below to which the litigants therein submitted. Had the trial court correctly specified that petitioners' counterclaims were compulsory, petitioners could have objected to the dismissal sought by private respondent on the ground that said counterclaims could not remain pending for independent adjudication. 25 Furthermore, under the Manchester doctrine, the defect cannot be cured by an amendment of the complaint or similar pleadings, much less the payment of the docket fee. Hence, the only remedy left for the petitioners was to file a separate action for their claims and to pay the prescribed docket fees therein within the applicable and reglementary period, which is what they did in the case at bar in obedience and deference to the judicial mandate laid down in their case. At any rate, the ambivalent positions adopted by the lower court can be considered cured by what we have construed as effectively a reservation in its order of dismissal for the filing of a complaint based on the causes of action in the dismissed counterclaims. This, then, is one case where it is necessary to heed the injunction that the rules of procedure are not to be applied in a rigid and technical sense. After all, rules of procedure are used only to help secure substantial justice. They cannot be applied to prevent the achievement of that goal. Form cannot and should not prevail over substance. 26 Absent a specific requirement for stringent application, the Rules of Court are to be liberally construed to the end that no party shall be deprived of his day in court on technicalities. The courts in our jurisdiction are tribunals both of law and equity. Hence, under the antecedents of this case, we are persuaded that even if only to approximate that desirable measure of justice we are sworn to dispense, this controversy should be resolved on the merits. WHEREFORE, the questioned judgment of respondent Court of Appeals is hereby REVERSED and SET ASIDE. Civil Case No. RTC 89-1942 is hereby REINSTATED and the Regional Trial Court of Naga City, Branch 27, or wherever the case has been assigned, is directed to proceed with deliberate dispatch in the adjudication thereof. SO ORDERED. Narvasa, C.J., Feliciano, Nocon and Campos, Jr., JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 146595 June 20, 2003

CARLO A. TAN, petitioner, vs. KAAKBAY FINANCE CORPORATION, DENNIS S. LAZARO and ROLDAN M. NOYNAY, respondents. RESOLUTION QUISUMBING, J.: Petitioner seeks the review and reversal of the decision of the Court of Appeals, dated August 22, 2000 in CAG.R. SP No. 58379,1 which affirmed the orders of the Regional Trial Court (RTC), Branch 37, Calamba, Laguna, dated February 8, 2000 and March 29, 2000 in Civil Case No. 2881-2000-C entitled "Carlo A. Tan v. Kaakbay Finance Corporation, Dennis S. Lazaro and Roldan M. Noynay"2 for declaration of nullity of the Promissory Note purportedly attached to the Real Estate Mortgage, the usurious and unlawful or exorbitant and unconscionable rates of interest and fees therein, and the Deed of Sale Under Pacto de Retro. Likewise, assailed is the appellate courts resolution3 dated December 20, 2000, denying petitioners motion for reconsideration. The facts, as culled from the records, are as follows: In the latter part of 1995, petitioner Carlo4 A. Tan applied for and was granted a loan of four million pesos (P4,000,000.00) by private respondent Kaakbay Finance Corporation (Kaakbay), as represented by its president, private respondent Dennis S. Lazaro. As collateral, a real estate mortgage5 on petitioner Tans parcel of land with the improvements therein all covered by Transfer Certificate Title No. T-2071256 located along Rizal St., Calamba, Laguna was executed. Petitioner alleged that the stipulated interest was 12% per annum until fully paid, which amount however, was not stated in the mortgage when he signed it on November 16, 1995. The amount loaned was released to him in two installments of P2,500,000.00 and P1,500,000.00 on November 23, 1995 and December 23, 1995, respectively. As of November 22, 1996, petitioner failed to pay his obligation. He claimed that Kaakbay never furnished him a copy of the real estate mortgage; that, according to Kaakbay, his obligation had now reached P5,570,000.00 because the actual interest was 0.3925% for a period of less than one year instead of the agreed-upon interest of 12% per annum; and that he was made to issue two postdated checks to guarantee his obligation, namely: UCPB Check No. CBA 052985 in the amount of P5,570,000.00 postdated to November 5, 1996; and UCPB Check No. CBA 095215 in the amount of P6,175,000.00 postdated to January 31, 1997.7 Petitioner further alleged that he negotiated with Kaakbay for a further extension of time to pay his obligation, which the latter agreed to. It was agreed that petitioner and Kaakbay would sign, execute, and acknowledge a Deed of Sale Under Pacto de Retro upon the expiration of a two-year period starting January 8, 1998 to January 8, 2000. Petitioner was then given a blank Deed of Sale Under Pacto de Retro on January 8, 1998 which he signed.8 His suspicions that Kaakbay was charging him usurious rates of interest were confirmed when he obtained a Statement of Account stating that his obligation had now reached P13,333,750.00.9 On October 21, 1999, petitioner learned of the existence of an accomplished Deed of Sale Under Pacto de Retro, which appeared that the same was signed by him and his wife Maria Rosario Delmo Tan, on one hand, and private respondent Lazaro on the other, and was allegedly notarized by private respondent Atty. Roldan M. Noynay on February 5, 1998,10 when in truth and in fact, he, his wife, and their witness Charito Morales did not sign it on said date, nor did they execute it before Atty. Noynay or any other notary public on said date.

On January 5, 2000, petitioner filed a complaint for Declaration of Nullity, Invalidity and Unenforceability or Annulment of the Promissory Notes purportedly attached to the Real Estate Mortgage dated November 16, 1995, the usurious and void rates of interest and other fees therein appearing, and the Deed of Sale Under Pacto De Retro purportedly dated February 5, 1998, and damages, with prayer for Preliminary Injunction and/or Temporary Restraining Order against respondents Kaakbay Finance Corporation, Dennis S. Lazaro and Roldan M. Noynay,11 with the RTC Calamba, Laguna, and docketed as Civil Case No. 2881-2000C. The complaint essentially prayed that herein petitioners obligation to Kaakbay Finance Corporation in the amount ofP4,000,000.00 be subject to interest of only 12% per annum from November 23, 1995; that the promissory notes attached to his Real Estate Mortgage dated November 16, 1995 be declared null and void; that the Deed of Sale Under Pacto de Retro dated February 5, 1998 be declared unenforceable; and that respondents pay moral and exemplary damages in the amount of P200,000.00 and P50,000.00, respectively, as well as attorneys fees. On the same date, petitioner filed a Notice of Lis Pendens with the Registry of Deeds of Calamba, Laguna, which was annotated on TCT No. 207125.12 On January 17, 2000, respondents, through their counsel, Atty. Roldan M. Noynay, filed their Consolidated Answer With Compulsory Counterclaim And Opposition To Temporary Restraining Order (TRO) and Preliminary Injunction.13 During the hearing of petitioners application for the issuance of a TRO, the parties agreed in open court that petitioner would withdraw his application for a TRO, while respondents in turn would hold in abeyance the registration of the Deed of Sale Under Pacto de Retro until the case was terminated. The trial court issued an order to that effect, dated January 17, 2000.14 Later, the law firm of Ortega, Del Castillo, Bacorro, Odulio, Calma, and Carbonell entered its appearance as counsel for respondents.15 Said counsel requested for an extension of time to file an Answer, and also moved for the withdrawal of the Consolidated Answer16 filed by Atty. Noynay insofar as respondents Kaakbay and Lazaro are concerned.17 Respondents also filed a Supplemental Opposition To The Prayer For Preliminary Injunction Or To Temporary Injunction.18 On February 3, 2000, respondents, through the new counsel, filed their Answer with Counterclaim, 19 praying that petitioner pay them four million pesos (P4,000,000.00) representing the principal amount of the loan, nine million three hundred thirty three thousand seven hundred fifty pesos (P9,333,750.00) representing the compounded monthly interest and annual penalty interest, two hundred fifty thousand pesos (P250,000.00) as litigation expenses, and five hundred thousand pesos (P500,000.00) as attorneys fees. In addition, respondents filed a Motion for Admission of Counterclaim Without Payment of Fees, on the ground that their counterclaim is compulsory in nature, hence it may be admitted without payment of fees.20 On February 21, 2000, petitioner filed an Urgent Motion to Expunge Motions and Pleadings Filed by Defendants Kaakbay Finance Corporation and Dennis S. Lazaro, Particularly Their Answer with Counterclaim and Motion for Admission of Counterclaim both Dated February 3, 2000 and/or Comment/Opposition (To Said Defendants Manifestation and Supplemental Opposition to their Prayer for Preliminary Injunction and to Temporary Injunction Dated January 24, 2000 and February 3, 2000 Respectively.)21 In this motion, petitioner pointed out that the respondents were being represented by their counsel, the law firm of Ortega, Del Castillo, Bacorro, Odulio, Calma, and Carbonell without stating if said law firm is in collaboration with or in substitution of their previous counsel, respondent Atty. Roldan M. Noynay. Petitioner argued that the procedure laid down in the rules concerning the change or substitution of counsel of a party litigant had not been properly complied with by the respondents, and thus the motions filed by the said law firm should be expunged. In addition, petitioner argued that respondents Answer with Counterclaim should not be admitted, as it partook of the nature of a permissive counterclaim, which required the payment of the prescribed filing fees; and since the fees were not paid, the lower court did not acquire jurisdiction over said Answer. In its order of February 8, 2000, the trial court granted respondents motion for admission of counterclaim without payment of fees.22

Petitioner then filed a "Supplemental Motion by Way of Motion for Reconsideration" but this was denied. Petitioner seasonably appealed to the Court of Appeals where he maintained that the trial court committed grave abuse of discretion in admitting the answer with counterclaim, which contains a permissive counterclaim the correct filing fees of which have not been paid by respondents Kaakbay and Lazaro to the trial court. Thus, petitioner insisted that the trial court had not acquired jurisdiction over the said answer with counterclaim. Alternatively, petitioner urged that said answer be expunged from the record of the case a quo. On August 22, 2000, the appellate court promulgated its decision, decreeing as follows: WHEREFORE, the instant petition is DENIED for lack of merit, and accordingly, DISMISSED.23 Petitioner then moved for reconsideration, but the appellate court denied it in the resolution dated December 20, 2000. Hence, this instant petition, where petitioner now contends that the Court of Appeals committed the following errors, in: (a) ITS HOLDING THAT "XXX THE LOWER COURT DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN DECLARING THE COUNTERCLAIM OF PRIVATE RESPONDENTS KAAKBAY FINANCE CORPORATION AND DENNIS S. LAZARO AS COMPULSORY, REQUIRING NO PAYMENT OF LEGAL FEES XXX" WHEN EVEN THE YULIENCO VS. COURT OF APPEALS CASE (G.R. NO. 131692, JUNE 10, 1999, 308 SCRA 206) IT CITED IN ITS DECISION FAVORABLY SUPPORTS THE ASSERTION OF PETITIONER THAT THE COUNTERCLAIM IN RESPONDENTS ANSWER IN THE CASE A QUO IS A PERMISSIVE COUNTERCLAIM. (b) ITS FAILURE TO RULE IN THE ASSAILED DECISION THAT HON. JUDGE JUANITA T. GUERRERO HAS ACTED WITHOUT OR IN EXCESS OF JURISDICTION, OR WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING THE ORDERS OF FEBRUARY 8, 2000 AND MARCH 29, 2000 CONSIDERING THAT THE COLLECTION OF THE TOTAL AMOUNT OF P14,083,750.00 REPRESENTING UNPAID LOAN AND ACCRUED INTEREST THEREIN BY WAY OF COUNTERCLAIM IS COMPULSORY AND THAT THE ANSWER MAY BE ADMITTED WITHOUT NECESSITY OF PAYING THE DOCKET FEES. (c) ITS FAILURE TO DECLARE IN THE ASSAILED DECISION THAT THE MOTION FOR ADMISSION OF COUNTERCLAIM WITHOUT PAYMENT OF FEES IS A MERE SCRAP OF PAPER AND VIOLATIVE OF SECTIONS 4, 5 AND 6, RULE 15 OF THE 1997 RULES OF CIVIL PROCEDURE. 24 The basic issue for resolution in this case is whether the counterclaim of respondents is compulsory or permissive in nature. Petitioner assails the Court of Appeals for affirming the trial courts order that the counterclaim of respondents is compulsory in nature, thus requiring no payment of legal fees. Petitioner contends that his complaint against the respondents is predicated on the unauthorized application of usurious, unconscionable and exorbitant rates of interest and other fees by respondents Kaakbay and Lazaro to petitioners loan without the latters knowledge, as well as the approval and the falsification of the promissory note supposed to be attached to the Real Estate Mortgage and the Deed of Sale Under Pacto de Retro. According to petitioner, he did not attempt to prevent the foreclosure of the mortgage because what he questions is the validity of the promissory note and the void rates of interest. He insists that these were falsified. He likewise assails the genuineness of the deed of sale in dispute. Since the evidence to be presented by the respondents to support the genuineness and due execution of the questioned promissory note and the Deed of Sale Under Pacto de Retro as a ground for the specific performance thereof, is not the same as the evidence to be presented by the petitioner as plaintiff in the case below to support his claim of fraud employed by respondents, petitioner asserts the counterclaim cannot be deemed compulsory. He adds

that since the respondents demand the payment of the loan and the interests pursuant to the contract of loan, completely inconsistent with his claim that subject documents were a nullity, what respondents had filed is not a compulsory counterclaim. For their part, respondents contend that their counterclaims are for payment of the unpaid loan of the petitioner in the amount of P4,000,000.00, the compounded interest with annual penalty equivalent to P9,333,750.00, litigation expenses of P250,000 and attorneys fees of P500,000. The respondents say these are all compulsory and not permissive counterclaims. Petitioner admitted in his complaint his indebtedness to respondent Kaakbay Finance Corporation in the amount of P4,000,000.00 and his liability for interest at the rate of 12% per annum only. These admissions arise out of, or are necessarily connected with, or have a logical relation to the transaction or occurrence forming the subject matter of the petitioners claim. Consequently, respondents conclude that the trial court did not err in ruling that payment of the docket fees is no longer necessary as their counterclaims are compulsory in nature. In Intestate Estate of Dalisay v. Hon. Marasigan,25 we held that a counterclaim is compulsory where: (1) it arises out of, or is necessarily connected with the transaction or occurrence that is the subject matter of the opposing partys claim; (2) it does not require the presence of third parties of whom the court cannot acquire jurisdiction; and (3) the trial court has jurisdiction to entertain the claim. 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 claims 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?26 In Quintanilla v. Court of Appeals, we said a "compelling test of compulsoriness" is whether there is "a logical relationship between the claim and counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and the court."27 Tested against the abovementioned standards, we agree with the appellate courts view that respondents counterclaims are compulsory in nature. Petitioners complaint was for declaration of nullity, invalidity or annulment of the promissory notes purportedly attached to the Real Estate Mortgage dated November 16, 1995 and the usurious and void interest rates appearing therein and the Deed of Sale Under Pacto De Retro. Respondents counterclaim was for the payment of the principal amount of the loan, compounded monthly interest and annual penalty interest arising out of the non-payment of the principal loan, litigation expenses and attorneys fees. There is no dispute as to the principal obligation of P4,000,000, but there is a dispute as to the rate and amount of interest. Petitioner insists that the amount of interest is only 12% yearly until fully paid, while respondents insist on 3.5% monthly. Also, respondents allege that petitioner owes them P9,333,750.00 representing the compounded monthly interest and annual penalty, which is disputed by petitioner. Petitioner further seeks the nullification of the Deed of Sale Under Pacto de Retro for being falsified, while respondents aver the deed is valid. It thus appears that the evidence required to prove petitioners claims is similar or identical to that needed to establish respondents demands for the payment of unpaid loan from petitioner such as amount of interest rates. In other words, petitioners claim is so related logically to respondents counterclaim, such that conducting separate trials for the claim and the counterclaim would result in the substantial duplication of the time and effort of the court and the parties. Clearly, this is the situation contemplated under the "compelling test of compulsoriness." The counterclaims of respondents herein are obviously compulsory, not permissive. As aptly held by the Court of Appeals, the issues of fact and law raised by both the claim and counterclaim are largely the same, with a logical relation, considering that the two claims arose out of the same circumstances requiring substantially the same evidence. Any decision the trial court will make in favor of petitioner will necessarily impinge on the claim of respondents, and vice versa. In this light, considering that the counterclaims of respondents are compulsory in nature, payment of docket fees is not required. The CA did not err in holding that the trial court had acquired jurisdiction on the matter. 28 WHEREFORE, the petition is hereby DENIED for lack of merit, and the assailed decision of the Court of Appeals dated August 22, 2000 and its resolution dated December 20, 2000, in CA-G.R. SP No. 58379, are AFFIRMED. No pronouncement as to costs.

SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 138822 January 23, 2001

EVANGELINE ALDAY, petitioner, vs. FGU INSURANCE CORPORATION, respondent. GONZAGA-REYES, J.: On 5 May 1989, respondent FGU Insurance Corporation filed a complaint with the Regional Trial Court of Makati1 alleging that petitioner Evangeline K. Alday owed it P114,650.76, representing unliquidated cash advances, unremitted costs of premiums and other charges incurred by petitioner in the course of her work as an insurance agent for respondent.2 Respondent also prayed for exemplary damages, attorney's fees, and costs of suit.3 Petitioner filed her answer and by way of counterclaim, asserted her right for the payment of P104,893.45, representing direct commissions, profit commissions and contingent bonuses earned from 1 July 1986 to 7 December 1986, and for accumulated premium reserves amounting to P500,000.00. In addition, petitioner prayed for attorney's fees, litigation expenses, moral damages and exemplary damages for the allegedly unfounded action filed by respondent.4 On 23 August 1989, respondent filed a "Motion to Strike Out Answer With Compulsory Counterclaim And To Declare Defendant In Default" because petitioner's answer was allegedly filed out of time.5 However, the trial court denied the motion on 25 August 1989 and similarly rejected respondent's motion for reconsideration on 12 March 1990.6 A few weeks later, on 11 April 1990, respondent filed a motion to dismiss petitioner's counterclaim, contending that the trial court never acquired jurisdiction over the same because of the non-payment of docket fees by petitoner.7 In response, petitioner asked the trial court to declare her counterclaim as exempt from payment of docket fees since it is compulsory and that respondent be declared in default for having failed to answer such counterclaim.8 In its 18 September 1990 Order, the trial court9 granted respondent's motion to dismiss petitioner's counterclaim and consequently, denied petitioner's motion. The court found petitioner's counterclaim to be merely permissive in nature and held that petitioner's failure to pay docket fees prevented the court from acquiring jurisdiction over the same.10 The trial court similar denied petitioner's motion for reconsideration on 28 February 1991.1wphi1.nt On 23 December 1998, the Court of Appeals11 sustained the trial court, finding that petitioner's own admissions, as contained in her answer, show that her counterclaim is merely permissive. The relevant portion of the appellate court's decision12 is quoted herewith Contrary to the protestations of appellant, mere reading of the allegations in the answer a quo will readily show that her counterclaim can in no way be compulsory. Take note of the following numbered paragraphs in her answer: "(14) That, indeed, FGU's cause of action which is not supported by any document other than the self-serving 'Statement of Account' dated March 28, 1988 x x x (15) That it should be noted that the cause of action of FGU is not the enforcement of the Special Agent's Contract but the alleged 'cash accountabilities which are not based on written agreement x x x. x x x x

(19) x x x A careful analysis of FGU's three-page complaint will show that its cause of action is not for specific performance or enforcement of the Special Agent's Contract rather, it is for the payment of the alleged cash accountabilities incurred by defendant during the period form [sic] 1975 to 1986 which claim is executory and has not been ratified. It is the established rule that unenforceable contracts, like this purported money claim of FGU, cannot be sued upon or enforced unless ratified, thus it is as if they have no effect. x x x." To support the heading "Compulsory Counterclaim" in her answer and give the impression that the counterclaim is compulsory appellant alleged that "FGU has unjustifiably failed to remit to defendant despite repeated demands in gross violation of their Special Agent's Contract x x x." The reference to said contract was included purposely to mislead. While on one hand appellant alleged that appellee's cause of action had nothing to do with the Special Agent's Contract, on the other hand, she claim that FGU violated said contract which gives rise of [sic] her cause of action. Clearly, appellant's cash accountabilities cannot be the offshoot of appellee's alleged violation of the aforesaid contract. On 19 May 1999, the appellate court denied petitioner's motion for reconsideration,13 giving rise to the present petition. Before going into the substantive issues, the Court shall first dispose of some procedural matters raised by the parties. Petitioner claims that respondent is estopped from questioning her non-payment of docket fees because it did not raise this particular issue when it filed its motion - the "Motion to Strike out Answer With Compulsory Counterclaim And To Declare Defendant In Default" - with the trial court; rather, it was only nine months after receiving petitioner's answer that respondent assailed the trial court's lack of jurisdiction over petitioner's counterclaims based on the latter's failure to pay docket fees.14 Petitioner's position is unmeritorious. Estoppel by laches arises from the negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled to assert it either has abandoned or declined to assert it.15 In the case at bar, respondent cannot be considered as estopped from assailing the trial court's jurisdiction over petitioner's counterclaim since this issue was raised by respondent with the trial court itself - the body where the action is pending - even before the presentation of any evidence by the parties and definitely, way before any judgment could be rendered by the trial court. Meanwhile, respondent questions the jurisdiction of the Court of Appeals over the appeal filed by petitioner from the 18 September 1990 and 28 February 1991 orders of the trial court. It is significant to note that this objection to the appellate court's jurisdiction is raised for the first time before this Court; respondent never having raised this issue before the appellate court. Although the lack of jurisdiction of a court may be raised at any stage of the action, a party may be estopped from raising such questions if he has actively taken part in the very proceedings which he questions, belatedly objecting to the court's jurisdiction in the event that the judgment or order subsequently rendered is adverse to him.16 In this case, respondent actively took part in the proceedings before the Court of Appeals by filing its appellee's brief with the same.17 Its participation, when taken together with its failure to object to the appellate court's jurisdiction during the entire duration of the proceedings before such court, demonstrates a willingness to abide by the resolution of the case by such tribunal and accordingly, respondent is now most decidedly estopped from objecting to the Court of Appeals' assumption of jurisdiction over petitioner's appeal.18 The basic issue for resolution in this case is whether or not the counterclaim of petitioner is compulsory or permissive in nature. 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 party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction.19 In Valencia v. Court of Appeals,20 this Court capsulized the criteria or tests that may be used in determining whether a counterclaim is compulsory or permissive, summarized 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 defendant's claim absent the compulsory counterclaim rule? 3. Will substantially the same evidence support or refute plaintiff's claim as well s defendant's counterclaim? 4. Is there any logical relation between the claim and the counterclaim? Another test, applied in the more recent case of Quintanilla v. Court of Appeals,21 is the "compelling test of compulsoriness" which requires "a logical relationship between the claim and counterclaim, that is, where conducting separate trials of the respective claims of the parties would entail a substantial duplication of effort and time by the parties and the court." As contained in her answer, petitioner's counterclaims are as follows: (20) That defendant incorporates and repleads by reference all the foregoing allegations as may be material to her Counterclaim against FGU. (21) That FGU is liable to pay the following just, valid and legitimate claims of defendant: (a) the sum of at least P104,893.45 plus maximum interest thereon representing, among others, direct commissions, profit commissions and contingent bonuses legally due to defendant; and (b) the minimum amount of P500,000.00 plus the maximum allowable interest representing defendant's accumulated premium reserve for 1985 and previous years, which FGU has unjustifiably failed to remit to defendant despite repeated demands in gross violation of their Special Agent's Contract and in contravention of the principle of law that "every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith." (22) That as a result of the filing of this patently baseless, malicious and unjustified Complaint, and FGU's unlawful, illegal and vindictive termination of their Special Agent's Contract, defendant was unnecessarily dragged into this litigation and to defense [sic] her side and assert her rights and claims against FGU, she was compelled to hire the services of counsel with whom she agreed to pay the amount of P30,000.00 as and for attorney's fees and stands to incur litigation expenses in the amount estimated to at least P20,000.00 and for which FGU should be assessed and made liable to pay defendant. (23) That considering further the malicious and unwarranted action of defendant in filing this grossly unfounded action, defendant has suffered and continues to suffer from serious anxiety, mental anguish, fright and humiliation. In addition to this, defendant's name, good reputation and business standing in the insurance business as well as in the community have been besmirched and for which FGU should be adjudged and made liable to pay moral damages to defendant in the amount of P300,000.00 as minimum. (24) That in order to discourage the filing of groundless and malicious suits like FGU's Complaint, and by way of serving [as] an example for the public good, FGU should be penalized and assessed exemplary damages in the sum of P100,000.00 or such amount as the Honorable Court may deem warranted under the circumstances.22 Tested against the abovementioned standards, petitioner's counterclaim for commissions, bonuses, and accumulated premium reserves is merely permissive. The evidence required to prove petitioner's claims differs from that needed to establish respondent's demands for the recovery of cash accountabilities from petitioner, such as cash advances and costs of premiums. The recovery of respondent's claims is not contingent or

dependent upon establishing petitioner's counterclaim, such that conducting separate trials will not result in the substantial duplication of the time and effort of the court and the parties. One would search the records in vain for a logical connection between the parties' claims. This conclusion is further reinforced by petitioner's own admissions since she declared in her answer that respondent's cause of action, unlike her own, was not based upon the Special Agent's Contract.23 However, petitioner's claims for damages, allegedly suffered as a result of the filing by respondent of its complaint, are compulsory.24 There is no need for need for petitioner to pay docket fees for her compulsory counterclaim. 25 On the other hand, in order for the trial court to acquire jurisdiction over her permissive counterclaim, petitioner is bound to pay the prescribed docket fees.26 The rule on the payment of filing fees has been laid down by the Court in the case ofSun Insurance Office, Ltd. V. Hon. Maximiano Asuncion271. It is not simply the filing of the complaint or appropriate initiatory pleading, but the payment of the prescribed docket fee, that vests a trial court with jurisdiction over the subject-matter or nature of the action. Where the filing of the initiatory pleading is not accompanied by payment of the docket fee, the court may allow payment of the fee within a reasonable time but in no case beyond the applicable prescriptive or reglementary period. 2. The same rule applies to permissive counterclaims, third-party claims and similar pleadings, which shall not be considered filed until and unless the filing fee prescribed therefor is paid. The court may allow payment of said fee within a reasonable time but also in no case beyond its applicable prescriptive or reglementary period. 3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a claim not specified in the pleading, or if specified the same has been left for determination by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien and assess and collect the additional fee. The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Susan v. Court of Appeals.28 In Suson, the Court explained that although the payment of the prescribed docket fees is a jurisdictional requirement, its non-payment does not result in the automatic dismissal of the case provided the docket fees are paid within the applicable prescriptive or reglementary period. Coming now to the case at bar, it has not been alleged by respondent and there is nothing in the records to show that petitioner has attempted to evade the payment of the proper docket fees for her permissive counterclaim. As a matter of fact, after respondent filed its motion to dismiss petitioner's counterclaim based on her failure to pay docket fees, petitioner immediately filed a motion with the trial court, asking it to declare her counterclaim as compulsory in nature and therefore exempt from docket fees and, in addition, to declare that respondent was in default for its failure to answer her counterclaim.29 However, the trial court dismissed petitioner's counterclaim. Pursuant to this Court's ruling in Sun Insurance, the trial court should have instead given petitioner a reasonable time, but in no case beyond the applicable prescriptive or reglementary period, to pay the filing fees for her permissive counterclaim. Petitioner asserts that the trial court should have declared respondent in default for having failed to answer her counterclaim.30 Insofar as the permissive counterclaim of petitioner is concerned, there is obviously no need to file an answer until petitioner has paid the prescribed docket fees for only then shall the court acquire jurisdiction over such claim.31 Meanwhile, the compulsory counterclaim of petitioner for damages based on the filing by respondent of an allegedly unfounded and malicious suit need not be answered since it is inseparable from the claims of respondent. If respondent were to answer the compulsory counterclaim of petitioner, it would merely result in the former pleading the same facts raised in its complaint.32 WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998 and its 19 May 1999 Resolution are hereby MODIFIED. The compulsory counterclaim of petitioner for damages filed in Civil Case No. 89-3816 is ordered REINSTATED. Meanwhile, the Regional Trial Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed docket fees for her permissive counterclaim (direct

commissions, profit commissions, contingent bonuses and accumulated premium reserves), after ascertaining that the applicable prescriptive period has not yet set in.33 SO ORDERED.1wphi1.nt

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-31822 July 31, 1972 JOSE SALCEDO QUIMPO, petitioner, vs. CATALINO DELA VICTORIA and FRANCISCA O. DELA VICTORIA, respondents. REYES, J.B.L., J.:p Petition to review the following orders of the Court Of First Instance of Davao, 16th Judicial District, Branch 11, in its Civil Case No. 6473, entitled Catalino dela Victoria, et al. vs. Jose Salcedo Quimpo: order of 29 July 1969 denying defendant-petitioner's motion to dismiss the complaint for forcible-entry for lack of merit, and granting the writ of immediate execution of the City Court decision of 16 January 1969 1 ; order of 16 August 1969, denying defendant-petitioner's motion for reconsideration thereof 2 ; and order of 12 November 1969 dismissing the defendant-petitioner's appeal from the aforesaid judgment of the City Court. The facts which led to the issuance of the disputed orders follow: On 2 May 1968, plaintiffs-respondents filed a complaint against defendant-petitioner with the Court of First Instance of Davao, Branch I, docketed therein as Civil Case No. 6005, for quieting of title and recovery of possession with damages. 4 On 28 June 1968, plaintiffs-respondents filed another case against defendant-petitioner with the City Court of Davao City (Civil Case No. 1299-B) for forcible entry over the same parcel of land, subject-matter of Civil Case No. 6005, supra. Plaintiffs-respondents prayed in the later case for the court to order defendant-petitioner ... to vacate the premises and deliver the possession thereof to the former, and ordering defendant to pay the plaintiffs the amount of P500.00 a month as rental and the same to begin from the later part of March, 1968 until possession thereof shall be delivered to the plaintiffs, and the amount of P500.00 as attorney's fees. ... In a motion to dismiss dated 13 July 1968, 6 defendant-petitioner sought the dismissal of the complaint for forcible entry alleging the pendency of Civil Case No. 6005; but the City Court, in its order of 29 November 1968, denied the said motion "for the reason that there is no identity of rights asserted and relief prayed for and for the further reason that it does not appear that any judgment which would be rendered on the other action will amount to res adjudicata in the herein case." 7 The same court order set the case for hearing on 12 December 1968. On 12 December 1968, defendant-petitioner was declared in default for failure to file his answer to the forcible entry case and the City Court set the reception of plaintiffs-respondents' evidence for the following day. On 16 January 1969 the same court rendered its decision ... ordering the defendant ... to vacate the premises in question and deliver possession thereof to the plaintiffs; to pay ... the sum of FIVE HUNDRED PESOS (P500.00) a month as rental and the same to commence from March, 1968 until possession thereof shall be delivered to the plaintiffs; and to pay the costs.

Defendant-petitioner then moved for the reconsideration of the aforesaid order of 29 November 1968 denying his motion to dismiss the complaint for forcible entry, and also the decision of 16 January 1969. However, his motion was denied in the City Court order of 4 March 1969. 8 Defendant-petitioner appealed to the Court of First Instance and it was docketed therein as Civil Case No. 6470. In a motion dated 5 July 1969, defendant-petitioner reiterated his arguments for the dismissal of the complaint for forcible entry as stated in his earlier motion in the City Court. In the meantime, plaintiffsrespondents moved for the issuance of an order for the immediate execution of the City Court decision of 16 January 1969. On 29 July 1969, the court a quo denied the motion to dismiss of 5 July 1969 for lack of merit, and at the same time granted the immediate execution of the City Court judgment. His motion for reconsideration having been denied, and his appeal dismissed, defendant filed the herein petition, claiming that the lower court 1. Did not acquire jurisdiction over the action for forcible entry, the verification of the corresponding complaint being void; 2. Erred in not dismissing the complaint for forcible entry filed a month after an action for recovery of possession and quieting of title had been filed by respondents against petitioner over the same cause of action, the same subject matter and the same parties; 3. Erred in granting the issuance of immediate execution before resolving the issue of the pendency of another action between the same parties over the same subject matter. 4. Erred in awarding P500.00 monthly rental in the complaint for forcible entry without any evidence as against the claim of P300.00 monthly rental in the action for recovery of possession and quieting of title; and 5. Erred in dismissing the appeal of petitioner who has been declared in default, without considering that a legal issue on the ruling of the inferior court denying the motion to dismiss is raised. It is pointed out in the first assigned error that since the verification in the complaint for forcible entry does not comply with Section 6, Rule 7, of the Revised Rules of Court, the complaint is void; hence, the City Court, and subsequently the court a quo, did not acquire jurisdiction over the said case. The verification in question states: xxx xxx xxx I, CATALINO DE LA VICTORIA, under oath, allege: that I am one of the plaintiffs in the aboveentitled case; that I have read the allegations thereof; that they are true and correct. xxx xxx xxx Section 6, Rule 7, Revised Rules of Court provides: ... Verification. A pleading is verified only by an affidavit stating that the person verifying has read the pleading and that the allegations thereof are true of his own knowledge. Verification based on information and belief, or upon knowledge, information and belief shall be deemed insufficient. Catalino dela Victoria, one of the plaintiffs (now respondents) clearly referred to the allegations in the complaint as having been read by him. However, while he stated that "they are true and correct," he omitted to state that said conclusion was reached of his own knowledge. The latter detail, however, is logically inferable since

affiant was a party and it does not appear that he was verifying upon information and belief. If petitioner entertained doubt about the true character of the verification, he should have asked that it be made more definite. Moreover, even if We should find the verification insufficient, that insufficiency would not render the complaint for forcible entry, or the whole proceedings in the court below, void. This Court already held in several decisions that the requirement regarding verification is not jurisdictional, but merely formal. Thus, in Villasanta vs. Bautista, L-30874, 26 November 1970, 36 SCRA 160, 170-171, this Court ruled: 5. Finally a word on respondents' insistence on their contention, citing inapplicable appellate court decisions, that "a pleading which lacks the required verification is fatal and does not confer jurisdiction." Respondents' contention that petitioner Villasanta's (the corporation's) verification of the petition "that the allegations therein contained are true and correct" is "insufficient" for non-compliance with the Rule's requirement that affiant state the allegations are "true of his own knowledge" is untenable. The Court has consistently held that the reglementary phrase "true of his own knowledge" is not a talismanic formula, the use of which would insure the granting of a petition and non-use whereof would result in a decree of dismissal. It has ruled absence of verification not to be fatally defective in meritorious cases'. What is important is that the object of the Rule, to insure good faith and veracity in the material averments of the petition, be complied with, so that the court may properly act on the case. Here, the petition has complied with the requirement in form and in substance. Villasanta in effect certified of his own knowledge to the truth of the petition as a whole, but with reference to the averments in paragraph 8 of the petition as to respondents' acts of intrusion and coercion at the concession area on 15 August 1969, specifically submitted with the petition the affidavits of on-scene witnesses Cone and two other company officials attesting thereto of their own knowledge. Thus, while it is true that Section 1, Rule 70, of the Revised Rules of Court requires the verification of the complaint for forcible entry, the insufficiency of the same, or its being defective, is not fatal to the jurisdiction of the City Court or that of the court a quo to which the case was later appealed. This Court went to hold further in Oshita vs. Republic, 9 that ... While the petition now before Us was not verified, it was, however, subscribed and sworn to by the petitioner, and We believe that the lower court did not commit a reversible error when it denied the motion to dismiss the petition upon the ground of lack of jurisdictional. The jurisdiction of the court was not affected by the absence of the proper verification of the petition. It may be stated here, though, that the lower court should have required appellee to have her petition verified before setting the case for hearing, in order to have the petition conform with the rule. 10 It will also be noted that defendant-petitioner raises the question of jurisdiction for the first time in this appeal, hence, he is now barred by laches. This Court ruled in Tijam vs. Sibonghanoy 11 that ... a party can not invoke the jurisdiction of a court to secure affirmative relief against his opponent and, after obtaining or failing to obtain such relief, repudiate or question that same jurisdiction(Dean vs. Dean, 136 Or. 694, 86 A. L. R. 79). In the case just cited, by way of explaining the rule, it was further said that the question whether the court had jurisdiction either of the subject-matter of the action or of the parties is barred from such conduct not because the judgment or order of the court is valid and conclusive as an adjudication, but for the reason that such a practice can not be tolerated obviously for reasons of public policy.

Furthermore, it has also been held that after voluntarily submitting a cause and encountering an adverse decision on the merits, it is too late for the loser to question the jurisdiction power of the court ... And inLittleton vs. Burgos, 16 Wyo, 58, the Court said that it is not right for a party who has affirm and invoked the jurisdiction of a court in a particular matter to secure an affirmative relief, to afterwards deny that same jurisdiction to escape a penalty. 12 Defendant-petitioner invoked the jurisdiction of the City Court when it sought to dismiss the complaint for forcible entry on the ground that the cause of action in this case is the same as in Civil Case No. 6005, supra. After defendant-petitioner was declared in default, and the decision rendered against him, said party again submitted to said jurisdiction by filing a motion for reconsideration of said decision. His motion having been denied, he appealed the case to the court a quo where he also filed a motion, dismiss the forcible entry case on the same grounds stated in a similar motion before the City Court. Thus, defendant petitioner voluntarily invoked and submitted himself to the jurisdiction of both courts. Having failed to obtain the relief sought from these courts, he can not now question the jurisdiction invoked. With respect to the second assignment of error, one the grounds for a motion to dismiss under Rule 16 of the Revised Rules of Court is the pendency of another action between the same parties for the same cause. 13 In order that this ground may be availed of there must be, between the action under consideration and the other action, (1) identity of parties, or at least such as representing the same interest in both actions; (2) identity rights asserted and relief prayed for, the relief being founded on the same facts; and (3) the identity on the two preceeding particulars should be such that any judgment which may be rendered on the other action will regardless which party is successful amount to res adjudicata in the action under consideration. 14 While there may be identity of parties and subject matter in the forcible entry case and Civil Case No. 6005, for quieting of title, the rights asserted and the relief prayed for in the said cases are not the same. In the former case, to the legal right claimed is possession, while in the latter case, the legal right asserted is ownership. We can not assent to the proposition that the motion to dismiss should have been granted by the Municipal Court of origin, and sustained on appeal by the Court of First Instance, for the reason that the question of ownership was necessarily involved in the action for forcible entry (not for unlawful detainer), as is proved by the admitted pendency of the prior suit for quieting of title in the Court of First Instance. While the fact that triggered both actions was appellant Quimpo's forcible invasion of respondent's titled property in March of 1968, on the pretext that the part of respondent's land forcibly entered and occupied by him was part of the area covered by his pasture permit from the Bureau of Forestry, still the causes of action in the two cases are distinct from each other. In the action to quiet title the question involved is whether the pasture permit could include property for which O.C.T. No. P-2385 of the Registry of Deeds of Davao province had been previously issued to appellees de la Victoria. But in the forcible entry case, the issue is whether, assuming that Quimpo's pasture permit were valid, he had the right to forcibly eject the prior occupants, who were appellees de la Victoria, even destroying their improvements. In other words, in the quieting of title case, the Court must decide who had the better right. In the Municipal court, the issue was, in effect, whether an owner can take the law in his own hands. That he can not do so seems incontestable: it is not so much a question of possession as it is one of law and order. To require appellees de la Victoria to acquiesce to the high-handed conduct of appellant Quimpo, and to submit to his tour de force, until the superiority of their Torrens Title is finally adjudged, after God knows how many years, is undoubtedly against all justice and equity. It is contended in the next assigned error that immediate execution of the City Court decision in the forcible entry case should not have been granted pending a resolution of the issue of the pendency of another action between the same parties over the same subject matter. The contention is without merit. Section 8, Rule 70, of Revised Rules of Court not only authorizes but also requires the immediate execution of a judgment in plaintiff's favor. The said provision, taken in relation to that of section 10 of the same Rules, is mandatory, 15 the only exception being when the delay is due to fraud, accident, mistake, excusable negligence. 16 The purpose of the law is to prevent further damages to him caused by the loss of his possession. 17 However, defendant may stay execution (a) by perfecting his appeal and filing a supersedeas bond; and (b) by depositing from time to time, with the Court First Instance, during the

pendency of the appeal, the amount or rents or the reasonable value of the use and occupation of the property as fixed by the justice of peace or municipal court in its judgment. 18 While defendant-petitioner perfected the appeal, he did not file a supersedeas bond and deposit the monthly rentals of P500.00 monthly fixed by the City Court. In the absent thereof, he can not be heard to complain against the immediate execution of the judgment which is legally sanctioned. Defendant-petitioner likewise questions the amount P500.00 as monthly rental of the subject parcel of land fixed by the City Court. The question of rental is a factual issue, and in the absence of proof to show that the said court abused its discretion in awarding the same, We are not inclined to disturb said finding. This award, however, may be raised as a defense in Civil Case No. 6005 for quieting of title where rental is also prayed for by plaintiffsrespondents for the possession of the land as incident to their claim of ownership. The issues raised against the decision of the City Court of Davao being unmeritorious, as previously shown, it becomes irrelevant to discuss the final question of whether defendant-petitioner can appeal the judgment of the inferior court which declared him in default. WHEREFORE, finding no reversible error in the orders appealed from, the same are hereby affirmed, with costs against defendant-petitioner.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 98023 October 17, 1991 MULTINATIONAL VILLAGE HOMEOWNERS' ASSOCIATION, INC., petitioner, vs. COURT OF APPEALS and MULTINATIONAL REALTY and DEVELOPMENT CORPORATION, respondents. Benjamin V. Aritao for petitioner. Tabaquero, Albano & Associates for private respondent.

CRUZ, J.:p The subject of this controversy is a stretch of road connecting the Multinational Village in Paraaque, Metro Manila, with the Ninoy Aquino Avenue. The use of this road is disputed between the Multinational Village Homeowners' Association, Inc., the herein petitioner, and private respondent Multinational Realty and Development Corporation. The issue arose when the Corporation filed a complaint on March 15, 1989, against the Association and the GMan Security Agency in the Regional Trial Court of Makati for "Enforcement of Rights of Property Ownership, Injunction with Temporary Restraining Order and Damages." The Corporation alleged that, as owner, it had allowed the Association to use the road and set up thereon a guardhouse manned by the Agency, but the defendants were now preventing the plaintiff from using the road for transporting construction materials needed to develop its other lots adjacent to the Village. The plaintiff prayed that it be placed in peaceful possession of the said road with full exercise and enforcement of the attributes and rights of ownership plus damages, attorney's fees and costs. On April 4, 1989, Judge Job B. Madayag, after hearing, granted the writs of preliminary prohibitory and mandatory injunctions prohibiting the defendants from preventing the plaintiff from using the road and ordering them to remove the guardhouse and transfer it inside the Village. The defendants filed their answer on April 13, 1989, and on July 20, 1989, a motion to dismiss on the grounds of lack of jurisdiction and litis pendentia. This motion was denied on October 3, 1989. The Association went to the Court of Appeals on certiorari with a prayer for preliminary injunction, which was also denied in a decision dated January 29, 1991. 1 The Association then came to this Court to question that decision. Specifically, the petitioner alleges that the complaint of the Corporation comes under the jurisdiction of the Housing and Land Use Regulatory Board under PD 957, as amended; that there is a pending administrative case between the parties before the said agency that barred the filing of the civil case; and that the civil case is a form of forum-shopping. The private respondent has submitted its comment, and the Court is now ready to decide. We deal first with the question of jurisdiction. The position of the petitioner is that the subject-matter of Civil Case No. 89-3446 comes under the jurisdiction of the HLURB conformably to PD 957, providing as follows:

SECTION 1. In the exercise of its function to regulate the real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices. B. Claims involving refund and any other claims filed by subdivision, lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. Parenthetically, exclusive jurisdiction over these cases was originally vested in the National Housing Authority but was transferred by EO 648 dated February 7, 1981, to the Human Settlements Regulatory Commission, which was renamed Housing and Land Use Regulatory Board by EO 90 on December 17, 1986. A study of the above-quoted section shows that the contention of the Association is untenable. It disregards the fact that the Corporation has directly asserted a claim of ownership over the subject property, which is why it filed its complaint not with the HLURB but with the regional trial court. The mere contention by the defendant that the road is subject to the exclusive use of the Village will not remove the case from the jurisdiction of the trial court and transfer it to the administrative agency. It is elementary that jurisdiction is determined by the allegations in the complaint, not the allegations in the answer. As we have held often enough Jurisdiction over the subject-matter is determined upon the allegations made in the complaint, irrespective of whether the plaintiff is entitled or not entitled to recover upon the claim asserted therein a matter resolved only after and as a result of the trial. Neither can the jurisdiction of the court be made to depend upon the defenses made by the defendant in his answer or motion to dismiss. If such were the rule, the question of jurisdiction would depend almost entirely upon the defendant. 2 Significantly, the Association has admitted in its answer to the complaint of the Corporation that the latter is the owner of the disputed road. The Association insists, however, that the said road forms part of the Village and is reserved by agreement with the Corporation for the exclusive use of the residents. True or not, that argument may be as it has been asserted as a defense to resist the demands of the Corporation. But such a submission surely cannot have the effect of transferring the controversy to the HLURB as the complaint is not among the cases subject to its exclusive jurisdiction under Section 1 of P.D. 957 as amended. The matter is clearly resoluble by the courts of justice under the provisions of the Civil Code. Invocation by the petitioner of Solid Homes, Inc. v. Payawal 3 does not advance its cause. That case involved a complaint for the delivery of title to a subdivision lot and clearly came under the exclusive jurisdiction of the HLURB pursuant to the above-quoted Section 1 of PD 957. The administrative case referred to by the petitioner is the complaint it filed with the HLURB against the private respondent on May 28, 1987, for the latter's alleged failure to provide the facilities, improvements and constructions in the Village as promised in its brochures and advertisements. The decision of the Board was apparently satisfactory to the Corporation, which moved for its immediate implementation, but was opposed by the Association, which moved for its reconsideration. Reconsideration having been denied, the Association filed a second motion for reconsideration, which was also denied. The Association then appealed to the Office of the President, where the case is still pending. 4 The submission that the civil case is barred by the pending appeal of the administrative decision to the Office of the President is unacceptable. The requisites of litis pendentia are the following:

a. Identity of parties, or at least such as representing the same interests in both actions. b. Identity of rights asserted and relief prayed for, the relief being founded on the same facts. c. The identity in the two cases should be such that the judgment that may be rendered in one would, regardless of which party is successful, amount to res adjudicata in the other. 5 It must be noted in the first place that there is no clear identity of subject-matter in the administrative and civil cases. The HLURB decision now under appeal referred only to "the road lots and the sites for parks, playgrounds and recreational uses that (were) still, vacant for preparation and/or levelling," 6 without definitely specifying if it included the disputed road. No less importantly, it cannot be said that the causes of action in the two cases are identical. The administrative case is an action filed by the Association for the specific performance by the Corporation of its legal obligations whereas the civil case is an action for the enforcement of a claimed property right of the Corporation against the Association. The wrongful act of the Association alleged in the civil action commenced in 1989 could not have been litigated in the earlier administrative action, which was filed against the Corporation in 1987. Finally, the charge of forum-shopping must also be rejected, in light of the considerations above discussed. As we held in Villanueva v. Adre: 7 There is forum-shopping whenever, as result of an adverse opinion in one forum, a party seeks a favorable opinion (other than by appeal or certiorari) in another, and the principle applies not only with respect to suits filed in the courts while an administrative proceeding is pending, in order to defeat administrative processes and in anticipation of an unfavorable administrative ruling and a favorable court ruling. It is noted that the private respondent found the decree in the administrative case acceptable and has not seen fit to ask for its modification or reversal. The Association has not shown that the Corporation apprehends an adverse opinion in the appeal now before the Office of the President and seeks at this time "to defeat administrative processes" with "a favorable court ruling." In fact, the action commenced by the Corporation in the regional trial court was precipitated by the refusal of the Association to allow the use of the road in question by the complainant. The Corporation would not have filed its complaint at all had it not been denied access to the said road. We are satisfied that the complaint filed by the Corporation against the Association comes under the jurisdiction of the Regional Trial Court of Makati and is not barred by the earlier administrative case filed by the Association against the Corporation before the HLURB. The two actions can stand and proceed separately and each may be decided either by the judicial tribunal or the administrative agency in the exercise of their respective jurisdictions. WHEREFORE, the petition is DENIED, with costs against the petitioner. It is so ordered.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 117186 June 29, 1995 ALAN M. LOYOLA, petitioner, vs. COURT OF APPEALS, THE HON. JUDGE MARIA CARILLO ZALDIVAR in her capacity as the Presiding Judge of the RTC, Kalibo, Branch 6; THE HON. EDUARDO R. AVELINO, in his capacity as the presiding Judge of the MCTC, Macato-Tangalan, and ANICETO FERNANDEZ III, respondents. DAVIDE, JR., J.: After the issues were joined with the filing of the comments on the petition, we resolved to decide this case on the merits in view of the novel issue presented, namely, whether the public respondent Court of Appeals committed a reversible error in dismissing the petitioner's petition for review and in upholding (a) the order of the 4th Municipal Circuit Trial Court (MCTC) of Macato-Tangalan, Aklan, of 30 May 1994 denying the petitioner's motion to dismiss Election Protest Case No. 94-02 based on a claim that it was not accompanied by a certification of non-forum shopping required in Administrative Circular No. 04-94 of this Court, and (b) the decision of Branch 6 of the Regional Trial Court (RTC) of Kalibo, Aklan, of 13 June 1994, denying the petitioner's petition for certiorari and mandamus the order of the MCTC. It appears that in the barangay election of 9 May 1994, the Board of petitioner was proclaimed on 10 May 1994 by the Barangay Board of Canvassers as the duly elected Punong Barangay of barangay Poblacion of the Municipality of Tangalan, Aklan. On 18 May 1994, private respondent Aniceto Fernandez III, the defeated candidate for Punong Barangay, filed with the 4th MCTC of Macato-Tangalan an election protest against the petitioner which was docketed as Election protest Case No. 94-02. On that same date, respondent Judge Eduardo R. Avelino of the said court issued an order directing the issuance of summons to the petitioner, directing the latter to answer the petition within five days from receipt thereof, and setting the hearings of the case for 25 May to 31 May 1994. The protest was not accompanied by a certification of non-forum shopping required under Administrative Circular No. 04-94 of this Court which took effect on 1 April 1994. However, the following day or on 19 May 1994, in compliance with the said circular, the private respondent submitted to the MCTC his certification of non-forum shopping. On 25 May 1994, the petitioner filed a motion to dismiss the protest for the private respondent's failure to strictly comply with Administrative Circular No. 04-94. He claims that the filing of the certification on 19 May 1994 was merely the private respondent's desperate attempt to cure the jurisdictional flaw of his petition. On 30 May 1994, the MCTC issued an order denying the motion to dismiss and, in support of the denial, it reasoned thus: The issues to be resolved are the following: (a) Is Administrative Circular No. 04-94, a substantive law or merely a procedural law that governs pleading, practice or procedure? (b) If it is a procedural Law, it is strictly construed in accordance with its terminology or it may be given a Literal interpretation to give effect to its spirit and purpose?

(c) Is it applicable to election protest for barangay offices where public interests are involved? In pursuance to the provisions of the Constitution, the Supreme Court promulgated the Rules of Court as a uniform rule governing pleading, practice and procedure in all courts of the Philippines. In the exercise of said power and authority, the Supreme Court issued several amendatory rules, one of which is Administrative Circular No. 04-94. Being a procedural law, the requirements of said circular is not jurisdictional in character. Rule 1, Sec. 2 of the Revised Rules of Court provides: These rules shall be liberally construed in order to promote their object and to assist the parties in obtaining just, speedy, and inexpensive determination of every action and proceeding. A perusal of the record shows that protestant Aniceto D. Fernandez, III submitted the required affidavit of Non-Forum Shopping on May 19, 1994, a day after the filing of his petition. Although the affidavit in question was not simultaneously filed with his petition, the Court considers the same as substantial compliance. If we look into the spirit and purpose of Administrative Circular No. 04-94, it was apparently intended to curtail the pernicious practice of forum shopping, which was considered as one of the factors that caused backlog in the court dockets. Obviously, a protestant in an election protest for barangay office cannot conduct forum shopping in any other courts because the Omnibus Election Code confers the exclusive and original jurisdiction to try the same to the Municipal Trial Court. Election contest involves public interest. It imposed upon the court the imperative duty to ascertain by all means within its command, the real candidate who was chosen by the electorate. It has been postulated as a fundamental principle in election cases, that technicalities or procedural barriers should not be allowed to stand if the same would tend to defeat, rather than promote, the interest of justice. Rule 143 of the Revised Rules of Court states: These rules shall not apply to land registration, cadastral and election cases, naturalization and insolvency proceedings, and other cases, not herein provided for, except by analogy or in a suppletory character and whenever practicable and convenient. If the Court believes that the application of Administrative Circular No. 04-94 in its suppletory character is impracticable and inconvenient under the circumstances, the same may not be strictly applied to election cases. By legislative fiat the trial of election cases shall be conducted in a summary manner without the cumbersome procedure prescribed for ordinary litigations in order that its results may be determined in the shortest time possible. Contesting the denial of his motion to dismiss, the petitioner filed with Branch 6 of the RTC of Aklan a petition forcertiorari and mandamus with damages and attorney's fees. The case was docketed as Special Civil Action No. 4828. He prayed therein that a temporary restraining order be issued enjoining respondent Judge Avelino from proceeding with the hearing, revision, and recount in the election protest case. He also prayed that, after hearing, Judge Avelino be directed to dismiss the election protest and that the private respondent be ordered to pay to the petitioner actual damages, attorney's fees, and litigation expenses.

In a decision rendered on 13 June 1994, the RTC of Aklan, per Judge Maria Carillo Zaldivar, denied the petition for lack of merit. Regarding the submission of the certification of non-forum shopping a day after the filing of the protest, it held that "amendments and/or supplements to a complaint is a matter of right before the Answer is filed." It further ruled that Administrative Circular No. 04-94 does not apply to election cases which are covered by a special law; in any event, the circular is suppletory to the Rules of Court, and Section 2, Rule 1 of the latter provides that the rules shall be liberally construed in order to promote their object and to assist the parties in obtaining a just, speedy, and inexpensive determination of every action and proceeding. Finally, it opined that since the MCTC in this case is a single sala court, the private respondent cannot go elsewhere but to such court; besides, Administrative Circular No. 04-94 is a formal procedural requirement which could be cured before the actual trial is conducted and that since the certification of non-forum shopping was filed within a reasonable time before the petitioner filed his answer, the Circular was substantially petitioner filed his answer, the Circular was substantially complied with. His motion to reconsider the decision having been denied by the RTC, the petitioner filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP No. 34695, to set aside the denial order of the MCTC and the decision of the RTC. In its decision of 22 August 1994, the Court of Appeals dismissed the petition because no error was committed by the MCTC and RTC. It agreed with the said courts that there was substantial compliance with Administrative Circular No. 04-94. It further stated: Moreover, while we believe that the Non-Forum Certification is essential under the circular, same is not jurisdictional but only a formal requirement, noncompliance therewith shall cause the dismissal of the action. It is also mandatory but at the same time curable, specially so when timely or seasonably complied with. Failing in his bid to obtain a reconsideration of the decision, the petitioner instituted the instant petition for review. The core issues for our determination are (1) whether Administrative Circular No. 04-94 is mandatory and jurisdictional; and (2) whether it is applicable in election cases. I. By the clear language of the second sanction imposed by Administrative Circular No. 04-94, to wit: 2. Any violation of this Circular shall be a cause for the dismissal of the Complaint, petition, application or other initiatory pleading, upon motion and after hearing. However any clearly willful and deliberate forum shopping by any party and his counsel through the filing of multiple complaints or other initiatory pleadings to obtain favorable action shall be a ground for summary dismissal thereof and shall constitute direct contempt of court. Furthermore, the submission of a false certification or non-compliance with the undertakings therein, as provided in Paragraph 1 hereof, shall constitute indirect contempt of court, without prejudice to disciplinary proceedings against the counsel and the filing of a criminal action against the guilty party. it is evident that the Circular is mandatory. It is not, however, jurisdictional. Jurisdiction over the subject or nature of the action is conferred by law. 1Otherwise stated, there is lack of jurisdiction over the nature of the action where the type of action is reposed by law in certain other courts. 2

Substantial compliance with the Circular is sufficient. This Circular expanded or broadened the applicability of Circular No. 28-91 of this Court. 3 In Gabionza vs. Court of Appeals, 4 this Court held that substantial compliance therewith is sufficient for: It is scarcely necessary to add that Circular No. 28-91 must be so interpreted and applied as to achieve the purposes projected by the Supreme Court when it promulgated that Circular. Circular No. 28-91 was designed to serve as an instrument to promote and facilitate the orderly administration of justice and should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective or the goal of all rules of procedure which is to achieve substantial justice as expeditiously as possible. In this case, it is a fact that the certification of non-forum shopping was filed by the private respondent on 19 May 1994, a day after he filed his election protest. Since the proclamation of the results of the election was made by the barangay board of canvassers on 10 May 1994, the private respondent, pursuant to Section 9 of R.A. 6679, 5 had ten days therefrom or until 20 May 1994 within which to file an election protest. The filing of the certification was therefore still within the period for filing an election protest. Accordingly, although the certification was not filed simultaneously with the initiatory pleading, its filing within the reglementary period was a substantial compliance with Administrative Circular No. 04-94. The fact that the Circular requires that it be strictly complied with merely underscores its mandatory nature in that it cannot be dispensed with or its requirements altogether disregarded, but it does not thereby interdict substantial compliance with its provisions under justifiable circumstances. II. We do not agree with the MCTC that Administrative Circular No. 04-94 is not applicable to election cases because it is merely amendatory of the Rules of Court and the latter, pursuant to Rule 143 thereof, is not applicable to election cases. There is nothing in the Circular that indicates that it does not apply to election cases. On the contrary, it expressly provides that the requirements therein, which are in addition to those in pertinent provisions of the Rules of Court and existing circulars, "shall be strictly complied with in the filing of complaints, petitions, applications or other initiatory pleadings in all courts and agencies other than the Supreme Court and the Court of Appeals." Ubi lex non distinguit, nec nos distinguere debemus. Nor are we persuaded by its ruling that considering that the MCTC has after all the original and exclusive jurisdiction over the election protest, the certification was unnecessary since the private respondent could not have filed the case anywhere else. The argument fails to consider the possibility of a party availing, rightly or wrongly, of other legal remedies; or of filing the same election protest in more than one MTC, despite the erroneous venues; or of even being unaware of the original exclusive jurisdiction of the MTC over such election protests and filing one of the protests in the RTC by mistake. WHEREFORE, the instant petition is DENIED and the Municipal Circuit Trial Court of Macato-Tangalan, Aklan, is directed to proceed with dispatch in the hearing and resolution of Election Protest Case No. 94-02. This decision is immediately executory. Costs against the petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 146062 June 28, 2001

SANTIAGO ESLABAN, JR., in his capacity as Project Manager of the National Irrigation Administration, petitioner, vs. CLARITA VDA. DE ONORIO, respondent. MENDOZA, J.: This is a petition for review of the decision1 of the Court of Appeals which affirmed the decision of the Regional Trial Court, Branch 26, Surallah, South Cotabato, ordering the National Irrigation Administration (NIA for brevity) to pay respondent the amount of P107,517.60 as just compensation for the taking of the latters property. The facts are as follows: Respondent Clarita Vda. de Enorio is the owner of a lot in Barangay M. Roxas, Sto. Nio, South Cotabato with an area of 39,512 square meters. The lot, known as Lot 1210-A-Pad-11-000586, is covered by TCT No. T22121 of the Registry of Deeds, South Cotabato. On October 6, 1981, Santiago Eslaban, Jr., Project Manager of the NIA, approved the construction of the main irrigation canal of the NIA on the said lot, affecting a 24,660 square meter portion thereof. Respondents husband agreed to the construction of the NIA canal provided that they be paid by the government for the area taken after the processing of documents by the Commission on Audit. Sometime in 1983, a Right-of-Way agreement was executed between respondent and the NIA (Exh. 1). The NIA then paid respondent the amount of P4,180.00 as Right-of-Way damages. Respondent subsequently executed an Affidavit of Waiver of Rights and Fees whereby she waived any compensation for damages to crops and improvements which she suffered as a result of the construction of a right-of-way on her property (Exh. 2). The same year, petitioner offered respondent the sum of P35,000.00 by way of amicable settlement pursuant to Executive Order No. 1035, 18, which provides in part that Financial assistance may also be given to owners of lands acquired under C.A. 141, as amended, for the area or portion subject to the reservation under Section 12 thereof in such amounts as may be determined by the implementing agency/instrumentality concerned in consultation with the Commission on Audit and the assessors office concerned. Respondent demanded payment for the taking of her property, but petitioner refused to pay. Accordingly, respondent filed on December 10, 1990 a complaint against petitioner before the Regional Trial Court, praying that petitioner be ordered to pay the sum of P111,299.55 as compensation for the portion of her property used in the construction of the canal constructed by the NIA, litigation expenses, and the costs. Petitioner, through the Office of the Solicitor-General, filed an Answer, in which he admitted that NIA constructed an irrigation canal over the property of the plaintiff and that NIA paid a certain landowner whose property had been taken for irrigation purposes, but petitioner interposed the defense that: (1) the government had not consented to be sued; (2) the total area used by the NIA for its irrigation canal was only 2.27 hectares, not 24,600 square meters; and (3) respondent was not entitled to compensation for the taking of her property considering that she secured title over the property by virtue of a homestead patent under C.A. No. 141.

At the pre-trial conference, the following facts were stipulated upon: (1) that the area taken was 24,660 square meters; (2) that it was a portion of the land covered by TCT No. T-22121 in the name of respondent and her late husband (Exh. A); and (3) that this area had been taken by the NIA for the construction of an irrigation canal.2 On October 18, 1993, the trial court rendered a decision, the dispositive portion of which reads: In view of the foregoing, decision is hereby rendered in favor of plaintiff and against the defendant ordering the defendant, National Irrigation Administration, to pay to plaintiff the sum of One Hundred Seven Thousand Five Hundred Seventeen Pesos and Sixty Centavos (P107,517.60) as just compensation for the questioned area of 24,660 square meters of land owned by plaintiff and taken by said defendant NIA which used it for its main canal plus costs.3 On November 15, 1993, petitioner appealed to the Court of Appeals which, on October 31, 2000, affirmed the decision of the Regional Trial Court. Hence this petition. The issues in this case are: 1. WHETHER OR NOT THE PETITION IS DISMISSIBLE FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 5, RULE 7 OF THE REVISED RULES OF CIVIL PROCEDURE. 2. WHETHER OR NOT LAND GRANTED BY VIRTUE OF A HOMESTEAD PATENT AND SUBSEQUENTLY REGISTERED UNDER PRESIDENTIAL DECREE 1529 CEASES TO BE PART OF THE PUBLIC DOMAIN. 3. WHETHER OR NOT THE VALUE OF JUST COMPENSATION SHALL BE DETERMINED FROM THE TIME OF THE TAKING OR FROM THE TIME OF THE FINALITY OF THE DECISION. 4. WHETHER THE AFFIDAVIT OF WAIVER OF RIGHTS AND FEES EXECUTED BY RESPONDENT EXEMPTS PETITIONER FROM MAKING PAYMENT TO THE FORMER. We shall deal with these issues in the order they are stated. First. Rule 7, 5 of the 1997 Revised Rules on Civil Procedure provides 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 theretofore 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 the 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 . . . . By reason of Rule 45, 4 of the 1997 Revised Rules on Civil Procedure, in relation to Rule 42, 2 thereof, the requirement of a certificate of non-forum shopping applies to the filing of petitions for review on certiorari of the decisions of the Court of Appeals, such as the one filed by petitioner. As provided in Rule 45, 5, "The failure of the petitioner to comply with any of the foregoing requirements regarding . . . the contents of the document which should accompany the petition shall be sufficient ground for the dismissal thereof."

The requirement in Rule 7, 5 that the certification should be executed by the plaintiff or the principal means that counsel cannot sign the certificate against forum-shopping. The reason for this is that the plaintiff or principal knows better than anyone else whether a petition has previously been filed involving the same case or substantially the same issues. Hence, a certification signed by counsel alone is defective and constitutes a valid cause for dismissal of the petition.4 In this case, the petition for review was filed by Santiago Eslaban, Jr., in his capacity as Project Manager of the NIA. However, the verification and certification against forum-shopping were signed by Cesar E. Gonzales, the administrator of the agency. The real party-in-interest is the NIA, which is a body corporate. Without being duly authorized by resolution of the board of the corporation, neither Santiago Eslaban, Jr. nor Cesar E. Gonzales could sign the certificate against forum-shopping accompanying the petition for review. Hence, on this ground alone, the petition should be dismissed. Second. Coming to the merits of the case, the land under litigation, as already stated, is covered by a transfer certificate of title registered in the Registry Office of Koronadal, South Cotabato on May 13, 1976. This land was originally covered by Original Certificate of Title No. (P-25592) P-9800 which was issued pursuant to a homestead patent granted on February 18, 1960. We have held: Whenever public lands are alienated, granted or conveyed to applicants thereof, and the deed grant or instrument of conveyance [sales patent] registered with the Register of Deeds and the corresponding certificate and owners duplicate of title issued, such lands are deemed registered lands under the Torrens System and the certificate of title thus issued is as conclusive and indefeasible as any other certificate of title issued to private lands in ordinary or cadastral registration proceedings.5 The Solicitor-General contends, however, that an encumbrance is imposed on the land in question in view of 39 of the Land Registration Act (now P.D. No. 1529, 44) which provides: Every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of title for value in good faith shall hold the same free from all encumbrances except those noted on said certificate, and any of the following encumbrances which may be subsisting, namely: .... Third. Any public highway, way, private way established by law, or any government irrigation canal or lateral thereof, where the certificate of title does not state that the boundaries of such highway, way, irrigation canal or lateral thereof, have been determined. As this provision says, however, the only servitude which a private property owner is required to recognize in favor of the government is the easement of a "public highway, way, private way established by law, or any government canal or lateral thereof where the certificate of title does not state that the boundaries thereof have been pre-determined." This implies that the same should have been pre-existing at the time of the registration of the land in order that the registered owner may be compelled to respect it. Conversely, where the easement isnot pre-existing and is sought to be imposed only after the land has been registered under the Land Registration Act, proper expropriation proceedings should be had, and just compensation paid to the registered owner thereof.6 In this case, the irrigation canal constructed by the NIA on the contested property was built only on October 6, 1981, several years after the property had been registered on May 13, 1976. Accordingly, prior expropriation proceedings should have been filed and just compensation paid to the owner thereof before it could be taken for public use. Indeed, the rule is that where private property is needed for conversion to some public use, the first thing obviously that the government should do is to offer to buy it.7 If the owner is willing to sell and the parties can agree on the price and the other conditions of the sale, a voluntary transaction can then be concluded and the

transfer effected without the necessity of a judicial action. Otherwise, the government will use its power of eminent domain, subject to the payment of just compensation, to acquire private property in order to devote it to public use. Third. With respect to the compensation which the owner of the condemned property is entitled to receive, it is likewise settled that it is the market value which should be paid or "that sum of money which a person, desirous but not compelled to buy, and an owner, willing but not compelled to sell, would agree on as a price to be given and received therefor."8 Further, just compensation means not only the correct amount to be paid to the owner of the land but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just" for then the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss.9 Nevertheless, as noted in Ansaldo v. Tantuico, Jr.,10 there are instances where the expropriating agency takes over the property prior to the expropriation suit, in which case just compensation shall be determined as of the time of taking, not as of the time of filing of the action of eminent domain. Before its amendment in 1997, Rule 67, 4 provided: Order of condemnation. When such a motion is overruled or when any party fails to defend as required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint upon the payment of just compensation to be determined as of the date of the filing of the complaint. . . . It is now provided that SEC. 4. Order of expropriation. If the objections to and the defense against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. A final order sustaining the right to expropriate the property may be appealed by any party aggrieved thereby. Such appeal, however, shall not prevent the court from determining the just compensation to be paid. After the rendition of such an order, the plaintiff shall not be permitted to dismiss or discontinue the proceeding except on such terms as the court deems just and equitable. (Emphasis added) Thus, the value of the property must be determined either as of the date of the taking of the property or the filing of the complaint, "whichever came first." Even before the new rule, however, it was already held in Commissioner of Public Highways v. Burgos11 that the price of the land at the time of taking, not its value after the passage of time, represents the true value to be paid as just compensation. It was, therefore, error for the Court of Appeals to rule that the just compensation to be paid to respondent should be determined as of the filing of the complaint in 1990, and not the time of its taking by the NIA in 1981, because petitioner was allegedly remiss in its obligation to pay respondent, and it was respondent who filed the complaint. In the case of Burgos,12 it was also the property owner who brought the action for compensation against the government after 25 years since the taking of his property for the construction of a road. Indeed, the value of the land may be affected by many factors. It may be enhanced on account of its taking for public use, just as it may depreciate. As observed in Republic v. Lara:13 [W]here property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry by the plaintiff upon the property may

have depreciated its value thereby; or there may have been a natural increase in the value of the property from the time it is taken to the time the complaint is filed, due to general economic conditions. The owner of private property should be compensated only for what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury. And what he loses is only the actual value of his property at the time it is taken. This is the only way that compensation to be paid can be truly just, i.e., "just" not only to the individual whose property is taken, "but to the public, which is to pay for it" . . . . In this case, the proper valuation for the property in question is P16,047.61 per hectare, the price level for 1982, based on the appraisal report submitted by the commission (composed of the provincial treasurer, assessor, and auditor of South Cotabato) constituted by the trial court to make an assessment of the expropriated land and fix the price thereof on a per hectare basis.14 Fourth. Petitioner finally contends that it is exempt from paying any amount to respondent because the latter executed an Affidavit of Waiver of Rights and Fees of any compensation due in favor of the Municipal Treasurer of Barangay Sto. Nio, South Cotabato. However, as the Court of Appeals correctly held: [I]f NIA intended to bind the appellee to said affidavit, it would not even have bothered to give her any amount for damages caused on the improvements/crops within the appellees property. This, apparently was not the case, as can be gleaned from the disbursement voucher in the amount of P4,180.00 (page 10 of the Folder of Exhibits in Civil Case 396) issued on September 17, 1983 in favor of the appellee, and the letter from the Office of the Solicitor General recommending the giving of "financial assistance in the amount of P35,000.00" to the appellee. Thus, We are inclined to give more credence to the appellees explanation that the waiver of rights and fees "pertains only to improvements and crops and not to the value of the land utilized by NIA for its main canal."15 WHEREFORE, premises considered, the assailed decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION to the extent that the just compensation for the contested property be paid to respondent in the amount of P16,047.61 per hectare, with interest at the legal rate of six percent (6%) per annum from the time of taking until full payment is made. Costs against petitioner.1wphi1.nt SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 148120 October 24, 2003

RODRIGO QUIRAO, MONICA QUIRAO, ROBERTO QUIRAO, EDILBERTO QUIRAO, JESUS GOLE, GERARDO QUIRAO, LAMBERTO VALDEZ & FEDERICO QUIRAO, petitioners, vs. LYDIA QUIRAO & LEOPOLDO QUIRAO, JR., respondents. DECISION PUNO, J.: The issue in this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court is whether Branch 21 of the Regional Trial Court of Mambusao, Capiz should admit the amended answer of petitioners. Respondents Lydia Quirao and Leopoldo Quirao, Jr. filed before the trial court a complaint for recovery of possession, ownership and damages against petitioners Rodrigo Quirao, Monica Quirao, Roberto Quirao, Edilberto Quirao, Gerardo Quirao, Jesus Gole, Lamberto Valdez, Federico Quirao and Avelino Ngitngit.1Respondents claimed that the late Leopoldo Quirao was the owner of the sugarland, subject matter of the controversy. Respondent Lydia is his widow, while Leopoldo, Jr. is his legitimate son and compulsory heir. They alleged that in 1988, petitioners forcibly took possession of the sugarland and appropriated for themselves its income. They prayed for the issuance of a writ of Preliminary Mandatory Injunction for petitioners to vacate the property.2 In their Answer, petitioners claimed that the subject property was owned by their grandfather, Segundo Clarito; that petitioner Rodrigo Quirao had been in possession of the land even before the Second World War; and that Leopoldo Quirao never possessed it. They further alleged that petitioners Jesus Gole, Avelino Ngitngit and Lamberto Valdez were recipients of Emancipation Patents issued by the government.3 A few months after their Answer, petitioners filed a Motion to Dismiss the complaint citing a Deed of ExtraJudicial Partition with Sale of the subject property purportedly executed by respondents in favor of a certain Carlito de Juan ("de Juan"). Petitioners contended that since respondents no longer own the property, they lack the standing to file the complaint.4 They further alleged that it was only after they filed their Answer that they learned of the existence of the deed. The trial court denied the motion to dismiss for lack of merit. 5 The case underwent pre-trial. Petitioners' second counsel, who took over the case, filed an amended pre-trial brief which reiterated the allegation that respondents were not the real parties in interest as they had sold the property to de Juan. Trial ensued and after respondents rested their case, petitioners filed a "Motion for Leave of Court to Admit Attached Amended Answer."6 They sought the amendment of their Answer by adding the alternative defense that even if respondents were the owners of the property by inheritance from Leopoldo Quirao, they (respondents) executed a Deed of Extra-Judicial Partition of Property with Sale in favor of de Juan. They further claimed that in turn, de Juan sold part of the property to them.7 The second sale appears to be evidenced by a Deed of Sale8 involving part of the subject property executed by de Juan and petitioners. It also appears that Rodrigo made a partial payment of P50,000.00, evidenced by the receipt signed by de Juan.9 Respondents opposed the motion on the grounds that: (1) it is dilatory and (2) the amendments are substantial and cannot be allowed as the parties have already undergone a pre-trial conference.10

The motion was again denied by the trial court. It ratiocinated that the amendments will prejudice the respondents since they had already rested their case and the alleged facts were already existing and known to the petitioners when they filed their answer.11 Petitioners' motion for reconsideration12 was likewise denied.131awphi1.nt Petitioners repaired to the Court of Appeals which also dismissed their petition for lack of merit. The appellate court ruled that the amendments are basically the same issues raised in their motion to dismiss and are substantial ones which may properly be refused. It cited Batara vs. Court of Appeals,14 where we held that the negligence and ignorance of petitioners' previous counsels cannot qualify as "transcendental matters" which can outweigh technicalities.15 Petitioners filed a motion for reconsideration16 but their efforts were in vain.17 Thus, this petition based on the following grounds: A. THE OMISSION AND INACTION SEPARATELY AND INDIVIDUALLY COMMITTED BY EACH OF PETITIONERS' THREE PREVIOUS LAWYERS CONSTITUTE MERELY SIMPLE NEGLIGENCE WHICH, AS A GENERAL RULE, SHOULD BIND THEM. HOWEVER, WHEN PUT AND CONSIDERED TOGETHER, SUCH OMISSION AND INACTION ARE TRANSFORMED INTO AND COULD BE RIGHTFULLY CONSIDERED AS GROSS AND RECKLESS AND, HENCE, SHOULD NOT AND COULD NEVER BIND THEM. IT IS HUMBLY SUBMITTED THAT EVEN AT THIS LATE STAGE OF THE PROCEEDING, THE AMENDMENTS SOUGHT TO BE INTRODUCED IN THE ORIGINAL ANSWER MAY STILL BE LAWFULLY ALLOWED; OTHERWISE, PETITIONERS WOULD BE DEPRIVED OF THEIR PROPERTY WITHOUT DUE PROCESS OF LAW; B. IN THE HIGHER INTEREST OF SUBSTANTIAL JUSTICE, THE AMENDMENTS SOUGHT TO BE INTRODUCED IN THE ORIGINAL ANSWER SHOULD HAVE BEEN LIBERALLY ALLOWED SINCE THIS COURSE OF ACTION WOULD RESULT IN THE RESOLUTION OF THE CASE BELOW BASED ON PURE MERITS, RATHER THAN ON PURE TECHNICALITY. MOREOVER, THE RIGHTS OF RESPONDENTS COULD BE AMPLY PROTECTED, AND WHATEVER DELAY HAS ALREADY BEEN INCURRED IS NEVER SOLELY ATTRIBUTABLE TO PETITIONERS; C. THE COURT A QUO HAS LIBERALLY CONSTRUED THE RULES IN FAVOR OF RESPONDENTS AND STRICTLY CONSTRUED THEM AGAINST PETITIONERS; and D. IN ITS DECISION, THE COURT OF APPEALS COMMITTED THE FOLLOWING ERRORS: 1) IT RULED THAT THE MATTER SOUGHT TO BE INTRODUCED IN THE ORIGINAL ANSWER IS THE SAME ISSUE ALLEGED IN PETITIONERS' MOTION TO DISMISS WHICH WAS DENIED BY THE COURT A QUO; 2) IT FAILED TO DISCUSS THE THIRD GROUND EVEN AS THIS WAS EXPLICITLY RAISED BEFORE IT; AND 3) IT APPLIED THE JURISPRUDENCE LAID IN (sic) DOWN IN THE BATARA CASE.18 The Rules of Court allow amendments of pleadings as a matter of right before a responsive pleading is served;19otherwise, leave of court must first be obtained.20 Our case law teaches us that amendments to pleadings are favored and should be liberally allowed in furtherance of justice. This liberality is greatest in the early stages of a lawsuit, decreases as it progresses, and changes at times to a strictness amounting to a prohibition. Amendments are likewise subject to the limitation that they are not dilatory.21 Thus, trial courts are given the discretion to grant leave of court to file amended pleadings, and their exercise of this discretion will normally not be disturbed on appeal, unless there is evident abuse thereof.22 In the case at bar, petitioners filed their motion for leave of court to admit amended answer only after respondents have rested their case. Petitioners argue that the error was due to the oversight of the three previous counsels. Petitioners' fourth counsel also claims that he learned of the alternative defense late as his clients (petitioners herein) did not inform him of the Deed of Sale.23 Allegedly, they relied on the advice of their previous counsels that the said deed of sale "was a mere scrap of paper because it was not signed by Carlito de Juan."24 Respondents contend that petitioners' motion is too late in the day.

Petitioners' motion for admission of amended answer may be a little tardy but this by itself is not a cause for its denial. Their amended answer alleges that respondents no longer own the subject property having sold the same to de Juan who, in turn, sold the property to petitioners. These allegations, if correct, are vital to the disposition of the case at bar. The interest of justice and equity demand that they be considered to avoid a result that is iniquitous.1vvphi1.nt Truth cannot be barred by technical rules. For this reason, our ruling case law holds that amendments to pleadings are generally favored and should be liberally allowed in furtherance of justice so that every case may so far as possible be determined on its real facts and in order to prevent the circuity of action.25 We should always bear in mind that rules of procedure are mere tools designed to facilitate the attainment of justice. Their strict and rigid application especially on technical matters, which tends to frustrate rather than promote substantial justice, must be avoided. Technicality, when it deserts its proper office as an aid to justice and becomes its great hindrance and chief enemy, deserves scant consideration from the courts.26 IN VIEW WHEREOF, the petition is GRANTED. Branch 21 of the Regional Trial Court of Mambusao, Capiz is directed to admit the amended answer. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 129313 October 10, 2001

SPOUSES MA. CRISTINA D. TIRONA and OSCAR TIRONA, SPOUSES MA. PAZ D. BAUTISTA and CESAR BAUTISTA, SPOUSES MA. ARANZAZU D. ORETA and CANUTO ORETA, SPOUSES MA. CORAZON D. BAUTISTA and PABLO S. BAUTISTA, JR., and DEO S. DIONISIO, petitioners, vs. HON. FLORO P. ALEJO as Presiding Judge, Regional Trial Court of Valenzuela, Metro Manila, Branch 172, JUANITO IGNACIO and LUIS NUEZ, respondents. QUISUMBING, J.: This petition for review assails the joint decision1 dated April 10, 1997, of the Regional Trial Court of Valenzuela, Branch 172, in Civil Cases Nos. 5169-V-97 and 5093-V-97. The factual background for this petition are culled from the records of the cases. A. Civil Case No. 5093-V-97: On March 25, 1996, herein petitioners sued private respondent Luis Nuez before the Metropolitan Trial Court of Valenzuela, Branch 81. The suit was docketed as Civil Case No. 6633 for ejectment. Petitioners claimed to be owners of various fishpond lots located at Coloong, Valenzuela.2 They alleged, among others that: (1) on January 20, 1996, private respondent Nuez, "by means of force, stealth, or strategy, unlawfully entered the said fishpond lots and occupied the same" against their will, thereby depriving them of possession of said fishpond; (2) Nuez illegally occupied a house owned by and built on the lot of petitioner Deo Dionisio; and (3) Nuez unlawfully operated and used petitioners's fishpond, despite their demands to vacate the same. Petitioners prayed that the court order Nuez to vacate Dionisio's house; surrender possession of the fishpond to them; remove all milkfish fingerlings at his expense; and pay a monthly compensation of P29,000.00 from January 20, 1996 to the time he surrenders possession, with interest at twelve percent (12%) yearly until fully paid.1wphi1.nt Nuez admitted in his answers that petitioners owned the fishponds, but denied the other allegations. He raised the following affirmative defenses: (1) the MeTC had no jurisdiction over the case, for petitioners' failure to allege prior physical possession in their complaint; (2) petitioners' action was premature in view of the pendency of a complaint he filed with the Department of Agrarian Reform Adjudication Board (DARAB), docketed as Case No. IV-MM-0099-95R, where the issue of possession in the concept of tenancy is the same as that raised by petitioners in Civil Case No. 6633; and (3) petitioners are guilty of forum-shopping since by they were fully aware of the said DARAB case. He moved that the ejectment suit be dismissed. On October 1, 1996, the MeTC of Valenzuela, Branch 81, decided Civil Case No. 6633 as follows: WHEREFORE, premises considered, judgement is hereby rendered in favor of the plaintiffs and against the defendant and all persons claiming rights under him: 1. To peacefully vacate and surrender the subject premises to the plaintiffs: 2. To peacefully vacate and surrender the house belonging to plaintiff Deo S. Dionisio; 3. To pay the amount of P27,000.00 a month as reasonable compensation from January 20, 1996 up to the time he finally vacates the subject premises;

4. To pay the amount of P10,000.00 as and for attorney's fees; and 5. To pay the costs of suit. SO ORDERED.3 On November 15, 1996, Nuez appealed said decision to the Regional Trial Court of Valenzuela, which docketed the appeal as Civil Case No. 5093-V-97. B. Civil Case No. 5169-V-97 On March 25, 1996, petitioners also instituted Civil Case No. 6632 for ejectment against private respondent Juanito Ignacio with the Metropolitan Trial Court of Valenzuela, Branch 82. The allegations were essentially the same as those against private respondent Nuez, except it is alleged that Ignacio "also illegally occupied the house constructed on the lot of, and belonging to the plaintiff Spouses Ma. Paz D. Bautista and Cesar Bautista." Petitioners sought the same relief prayed for in Civil Case No. 6633. Ignacio raised similar defenses as those offered by Nuez in Civil Case No. 6633. Like Nuez, he also moved for dismissal of the ejectment suit against him. On February 11, 1997, the MeTC of Valenzuela, Branch 82 issued an order dismissing Civil Case No. 6633 against Ignacio, thus: WHEREFORE, PREMISES CONSIDERED, defendant's motion to cite plaintiffs in contempt of court is denied, and his other motion to dismiss the case is hereby GRANTED. Accordingly, the above-entitled case is DISMISSED without pronouncement as to costs. SO ORDERED.4 In granting Ignacio's Motion to Dismiss, the MeTC said: It is now clear to the mind of the Court that the issue of recovery of possession pursued by plaintiffs in this case is pending also for adjudication among other issues in DARAB Case No. IV-MM-0099-95. There is no dispute that both this case and the DARAB case involve the same real property or at least, adjoining lots covered by titles in the names of some of the plaintiffs, which lots are also involved in this case. xxx Clearly, said DARAB case is a prejudicial question to the case at bar, and or vice versa (stress in the original). The possibility that this Court and the DARAB may come up with two contradicting decisions on issue of possession shall always be there, and since the DARAB case was files first, there appears compelling necessity to halt proceedings in this case5 On February 27, 1997, petitioners appealed the foregoing Order to the Regional Trial Court of Valenzuela, which docketed their appeal as Civil Case No. 5169-V-97. Since Civil Cases Nos. 5093-V-97 and 5169-V-97 involved essentially the same parties, the same subject matter, and the same issues, the cases were jointly heard before Branch 172 of the RTC of Valenzuela. On April 10, 1997, Civil Cases Nos. 5093-V-97 and 5169-V97 were jointly decided. WHEREFORE, judgment is hereby rendered as follows:

1. Affirming the appealed Order of the trial court dated February 11, 1997 dismissing Civil Case No. 6632, with the modification that the plaintiffs be made liable to pay the costs of suit; and 2. Reversing the appealed decision of the trial court dated October 1, 1996 in Civil Case No. 6633 and dismissing the above-entitled case for the reasons stated above. The plaintiffs are ordered to pay the costs of suit. SO ORDERED.6 In ruling against herein petitioners, the RTC found: (1) As correctly pointed out by the counsel for the defendants in his memorandum on appeal, it is now settled that a complaint for forcible entry to fall within the jurisdiction of the inferior court must allege plaintiffs prior physical possession of the property by any of the means provided in Section 1 of Rule 70 of the Revised Rules of Court. Bare allegation in the complaint that the plaintiff was deprived of the possession of the property is insufficient to make the action one for forcible entry (citation omitted) In the instant case, while the complainants allege that the defendants (Ignacio in Civil Case No. 6632 and Nuez in Civil Case No. 6633) by means of force, stealth or strategy "unlawfully entered the said fishpond lots and occupied the same against the will of the plaintiffs," there is no allegation that the plaintiffs had prior physical possession of the property in dispute. The complaint(s) in the above-entitled case therefore did not fall within the jurisdiction of the trial courts. (2) The DARAB case (Case No. IV-MM-0099-95R) between the herein parties and covering the same subject matter was filed was ahead of the instant cases. The allegation in the DARAB complaint that the complainants are agricultural or share tenants is opposed to the claim of the respondents in their answer that the complainants are their industrial partners. The DARAB case thus presented a dispute that is Agrarian Reform, thru the DARAB, is vested with exclusive jurisdiction over all agrarian reform matters or agrarian disputes. The principal issue in the instant cases for forcible entry whether or not to eject the defendants from the fishponds is necessarily connected with the agrarian dispute now pending resolution before the DARAB. It is therefore beyond the competence of the inferior court to resolve. xxx (3) The plaintiffs were less that honest in certifying under oath that they have no knowledge of any case pending before any tribunal or agency involving the same issues raised in the instant cases. At the time of their certification, there was pending before the DARAB of a case between the same parties with the same subject matter and where the issue of possession as raised in the instant cases is necessarily included in the larger issue of agricultural tenancy. The plaintiffs therefore violated Administrative Order No. 04-94 of the Supreme Court, which is a ground for dismissal.7 On May 6, 1997, petitioners files with the RTC a joint Motion for Leave to Amend Complaint in Civil Cases Nos. 6632 and 6633 and a Motion for Reconsideration, together with the proposed Amended Complaints. On May 20,1997, the RTC denied the aforementioned motions. Hence, the instant petition. Petitioners assign the following as errors committed by the RTC: 1. THE LOWER COURT ERRED IN GIVING PRIME IMPORTANCE TO THE FAILURE OF PLAINTIFFS TO AVER THEIR COMPLAINT(S) THAT THEY WERE IN POSSESSION AT THE TIME OF THE FORCIBLE ENTRY MADE BY PRIVATE RESPONDENTS. 2. THE LOWER COURT ERRED IN FAILING TO MAKE A FINDING THAT PLAINTIFFS WERE IN POSSESSION OF THEIR PROPERTIES AT THE TIME OF FORCIBLE ENTRY THEREUNTO BY

PRIVATE RESPONDENTS, FOR WHICH SHOULD HAVE BEEN GRANTED TO HEREIN PETITIONERS. 3. THE PENDENCY OF THE SUIT FILED BY PRIVATE RESPONDENTS IN THE DEPARTMENT OF AGRARIAN REFORM DID NOT PROSCRIBE THE INSTITUTION OF THE EJECTMENT CASE(S). 4. THERE HAD BEEN NO INFRACTION ON THE AFFIDAVIT OF NON-FORUM SHOPPING REQUIREMENTS. The main issue for our resolution involves the jurisdiction of the metropolitan trial courts: was petitioner's failure to allege prior physical possession in a case for forcible entry fatal to the jurisdiction of the inferior courts? Ancillary thereto, we also must inquire (a) whether the pendency of the Case No. IV-MM-0099-95R before the DARAB barred the filing of Civil Cases Nos. 6632 and 6633 for forcible entry; and (b) whether petitioners violated Supreme Court Administrative Circular No. 04-94 proscribing forum shopping. On the main issue, petitioners contend that the averment of the identities of the persons in possession of the disputed properties at the time of the forcible entry thereunto is not jurisdictional in character. Petitioners argue that the deficiency, if any, could have been remedied by amended or supplemental pleadings or by the submission of admissible evidence. They point out that the MeTC, Branch 81 in Civil Case No. 6633 had received evidence of petitioners' actual possession, resulting in a finding of fact of actual possession in its Decision of October 1, 1996. It was, therefore, an error for the RTC to have disregarded said finding of fact on the ground that the requisites for the MeTC to acquire jurisdiction over the forcible entry cases had not been complied with. It was likewise error for the RTC to have denied the admission of petitioners' Amended Complaints. Private respondents argue that a closer scrutiny of the allegations in the complaints in Civil Cases Nos. 6632 and 6633 filed with the court of origin will clearly show that there is no allegation whatsoever of prior physical possession on petitioners' part. All that is averred is unlawful deprivation by private respondents. They submit that this glaring defect is fatal enough to deprive the inferior court of jurisdiction over the forcible entry cases. With respect to the denial of admission of petitioners Amended Complaints, private respondents point out that amendments for the purpose of making the complaint confer jurisdiction upon the court are not allowed. The jurisdiction of a court is determined by the allegations of the complaint, and the rule is no different in actions for ejectment.8 Thus, in ascertaining whether or not the action is one for forcible entry falling within the exclusive of the inferior courts, the averments of the complaint and the character of the relief sought are to be examined. Petitioners' complaints in Civil Cases Nos. 6632 and 6633 are virtually identical, save as to the names of the defendants and the owners of the houses allegedly occupied by private respondents. The pertinent allegations in Civil Case No. 6633 read: 3) That plaintiffs in their individual rights, are respective owners in fee simple of fishpond lots located at Barangay Coloong, Municipality of Valenzuela, Metro Manila, With areas, lot numbers, and titles, xerox copies of which are Annexes hereto xxx 4) That on or about January 20, 1996, said defendant Luis Nuez by means of force, stealth or strategy, unlawfully entered the said fishpond lots and occupied the same against the will of the plaintiffs thereby depriving said owners of the possession of the same; 5) That defendant Luis Nuez also illegally occupied the house constructed on the lot of, and belonging to, plaintiff Deo S. Dionision. 6) That the said defendant also planted bangus fingerlings in the said fishponds and despite demands for them to remove the same and vacate the fishponds still continue to unlawfully, illegally, and

wantonly occupy said house and operate said fishponds to the great damage and prejudice of the plaintiffs.9 Petitioners submit that the phrase "thereby depriving said owners of the possession of the same" in paragraph 4 is tantamount to an averment of prior physical possession since private respondents could not have deprived them of possession unless the latter had been previously in possession of the subject properties. We are not persuaded. It cannot be inferred from the aforecited phrase that the possession that petitioners were supposedly deprived of is a prior physical possession. The question arises, what sort of prior physical possession is to averred? The word "possession" as used in forcible entry and unlawful detainer, means nothing more than physical possession, (stress supplied) not legal possession in the sense contemplated in civil law.10The allegation must likewise show priority in time. Both requisites are wanting in the phrase relied upon by petitioners. A reading of the allegations in the complaints leads us to conclude that petitioners' action was once for forcible entry, not unlawful detainer. The distinctions between the two actions are: (1) In an action for forcible entry, the plaintiff must allege and prove that he was in prior physical possession of the premises until deprived thereof, while in illegal detainer, the plaintiff need not have been in prior physical possession; and (2) in forcible entry, the possession by the defendant is unlawful ab initio because he acquires possession by force, intimidation, threat, strategy, or stealth, while in unlawful detainer, possession is originally lawful but becomes illegal by reason of the termination of his right of possession under his contract with the plaintiff. In pleadings files in courts of special jurisdiction, the special facts giving the court jurisdiction must be specially alleged and set out. Otherwise, the complaint is demurrable.11 Hence, in actions for forcible entry, two allegations are mandatory for the municipal court to acquire jurisdiction: First, the plaintiff must allege his prior physical possession of the property. Second, he must also allege that he was deprived of his possession by any of the means provided for in Section 1, Rule 70 of the Rules of Court, namely: force, intimidation, threats, strategy, and stealth.12 Recall that the complaints in Civil Cases Nos. 6632 and 6633 failed to allege prior physical possession of the property on the part of petitioners. All that is alleged is unlawful deprivation of their possession by private respondents. The deficiency is fatal to petitioners' actions before the Metropolitan Trial Court of Valenzuela. Such bare allegation is insufficient for the MeTC to acquire jurisdiction. No reversible error was, therefore, committed by the RTC when it held that the Metropolitan Trial Court acquired no jurisdiction over Civil Cases Nos. 6632 and 6633 for failure of the complaints to aver physical possession by petitioners. But was the deficiency remedied, however, when petitioners submitted their Amended Complaints? The policy in this jurisdictions is that amendments to pleadings are favored and liberally allowed in the interests of substantial justice. Thus, amendments of the complaint may be allowed even if an order for its amendments of the complaint may be allowed even if an order for its dismissal has been issued so long as the motion to amend is filed before the order of dismissal acquired finality.13 Note, however, that it is not a hard and fast rule. An amendment is not allowed where the court has no jurisdiction over the original complaint and the purpose of the amendment is to confer jurisdiction upon the court,14 or where the action originally pleaded in the complaint was outside the jurisdiction of the court.15 We have carefully perused petitioners' proposed amendments and found them to include the allegation that petitioners were in prior physical possession of the disputed fishponds before said possession was allegedly disturbed. Clearly, the purpose is to sidestep the RTC ruling that MeTC had no jurisdiction. Over their complaints and allow the inferior court to acquire jurisdiction. This we cannot allow. Where the court of origin had no jurisdiction over the original complaint in the first place, amendments may not be had. It is axiomatic that before an amendment can be permitted, the trial court must have acquired jurisdiction over the case in the first instance.16 Regarding the second issue, petitioners contend that the DARAB had no jurisdiction over Case No. IV-MM0099-95R. They submit that with the passage of Republic Act No. 788117 on February 20, 1995, private lands directly and exclusively used for prawn farms and fishponds are exempt from the coverage of the Comprehensive Agrarian Reform Law or Republic Act No. 6657. No agrarian relation thus subsisted between the parties for the DARAB to take cognizance of. Thus, litis pendentia did not bar the filing of Civil Cases Nos. 6632 and 6633. Stated differently, the pendency of Case No. IV-MM-0099-95R did not divest the MeTC of its jurisdiction to hear and try the forcible entry cases.

Private respondents contend that a comparison between DARAB Case No. IV-MM-0099-95R and Civil Cases Nos. 6632 and 6633 would show the same parties, the same subject matter of controversy, and the same issues. In other words, litis pendentia lies and may be availed of to dismiss the cases for forcible entry filed with the MeTC. At the outset, we must point out that petitioners' reliance upon Republic Act No. 7881 is off tangent. It is not disputed that at the time of the filing of Civil Cases Nos. 6632 and 6633, an agrarian relation's dispute was pending before the DARAB. The records show that private respondents as the complainants in Case No. IVMM-0099-95R, were asserting tenancy rights, including the right to possession of the disputed fishponds or parts thereof, under Republic Act Nos. 384418 and 1199.19 Private respondents were thus claiming vested substantive rights, dating back to 1975 in the case of respondent Ignacio and 1979 in the case of respondent Nuez, under substantive laws. A substantive law is a law, which creates, defines, or regulates rights concerning life, liberty, or property, or the powers of agencies or instrumentalities for the administration of public affairs.20 Republic Act No. 7881, in exempting prawn and fishponds from the coverage of the Comprehensive Agrarian Reform Law of 1988, is a substantive law. By its very nature and essence, substantive law operates prospectively21 and may not be construed retroactively without affecting previous or past rights. Hence, in view of the absence of a contrary intent in its provisions, Republic Act No. 7881 should be given a prospective operation and may not affect rights claimed under previous agrarian legislation. Under Rule 16, Section 1 of the Rules of Court, litis pendentia or pendency of another action is a ground for the dismissal of the second action. Recall that in the motions to dismiss filed by private respondents in Civil Cases No. 6632 and 6633, the pendency of the DARAB case was one of the grounds relied upon in seeking the dismissal of both actions. For litis of the grounds relied upon in seeking the dismissal of both actions. For litis pendentia to lie, the following requisites must be satisfied: 1. Identity of parties or representation in both cases; 2. Identity of rights asserted and relief prayed for ; 3. The relief must be founded on the same facts and the same basis; and 4. Identity of the two preceding particulars should be such that any judgment, which may be rendered in the other action, will, regardless of which party is successful, amount to res judicata on the action under consideration.22 These requisites, in our view, are present in this case. For one, the parties in the DARAB case and in the forcible entry cases filed with the MeTC are the same. Also, there is identity of rights asserted and reliefs prayed for. The action in Case No. IV-MM-0099-95R is for "declaration of tenancy, accounting, recovery of possession, specific performance, recovery of sum of money, plus damages" against petitioners. Note that the properties that private respondents seek to recover possession of in the DARAB case form part of the properties from which petitioners seek the ejectment of private respondents. The evident and logical conclusion then is that any decision that may be rendered in the DARAB case regarding the question of possession will also resolve the question of possession in the forcible entry cases. Undergirding the principle of litis pendentia is the theory that a party is not allowed to vex another more than once regarding the same subject matter and for the same cause of action. This theory is founded on the public policy that the same matter should not be subject of controversy in court more than once in order that possible conflicting judgments may be avoided, for the sake of the stability in the rights and status of persons. The MeTC of Valenzuela, Branch 82, recognized this doctrine when it dismissed Civil Case No. 6632 to avoid possibility of two contradictory decisions on the question of possession emanating from the DARAB and the trial court. In turn, the RTC was correct in finding that the issue of possession was inextricably intertwined with the agrarian dispute, an issue which was beyond the jurisdiction and competence of the inferior court to setlle. In so doing, the RTC deferred to the primary jurisdiction and administrative expertise of the DARAB to settle agrarian cases. Thus, we are constrained to conclude that under the concept of litis pendentia, the pendency of DARAB Case No. IV-MM-0099-95R served as a bar to the filing of Civil Cases Nos. 6632 and 6633.

On the third issue, petitioners maintain that the petitioner-affiant who subscribed the requisite Affidavit of Nonforum Shopping understood that the issues pending resolution before the DARAB had no relation to petitioners' actions for forcible entry, and hence had seen no need to report anymore the pendency of the DARAB case. Moreover, private respondents claim that in their pleadings they early enough disclosed the pendency of the DARAB case to the courts hearing the ejectment cases. Hence, they aver that there was no violation whatsoever of the non-forum shopping requirements. Private respondents argue that petitioners' explanations on the matter amount to a mea culpa on account of wild speculation and assumption of the facts of the case. They ask us to affirm the findings below that petitioners violated the Court's Circular proscribing forum shopping. Supreme Court Administrative Circular No. 04-94, imposing additional requisites in civil complaints, petitions, and other initiatory pleadings filed in all courts and agencies to prevent forum shopping, provides in part: 1. The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition, application or other initiatory pleading shall certify under oath in such original pleading, or in a sworn certification annexed thereto and simultaneously filed therewith to the truth of the following facts and undertakings: (a) he has not theretofore commences any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (c) if there is any such action or proceeding which is either pending or may have been terminated, he must state the status thereof; and (d) if should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals, or any other tribunal or agency, he undertakes to report that fact within five (5) days therefrom to the court or agency wherein the original pleading and sworn certificate contemplated herein have been filed. xxx 2. Any violation of this Circular shall be a cause for the dismissal of the complaint, petition, application or other initiatory pleading, upon motion and after hearing That there was a DARAB case pending involving the same parties with the same subject matter at the time petitioners filed Civil Cases Nos. 6632 and 6633 is not contested. Petitioners admit that they assumed that the issues in the agrarian case and the forcible entry cases were different and hence saw no need to report the pendency of the former to the trial court in their certification of non-forum shopping. We fail to see the basis for this assumption. The records disclose that the issue of possession as raised in the forcible entry cases in necessarily included in the question of agricultural tenancy raised in the DARAB case. Note that petitioners actively participated in the latter case and thus, could not have been unaware that the possession of the subject fishponds or parts thereof was in issue before the Board. Petitioners' failure to see that paragraph 1(b), 1(c), or 1(d) of Administrative Circular No. 04-94 applied to them is simply incomprehensible. We agree with the RTC in certifying under oath that they have no knowledge of any case pending before any other tribunal or agency involving the same issue raised in their forcible entry cases, petitioners were less than candid. To determine whether a party violated the rule against forum shopping, the test applied is whether the elements of litis pendentia are present or whether a final judgment in one case will amount to res judicata in another.23Recall that as earlier discussed, the requisites of litis pendentia barred the filing of Civil Cases Nos. 6632 and 6633 given the pendency of DARAB Case No. IV-MM-0099-95R. Based thereon, the Regional Trial Court correctly dismissed the forcible entry cases on the additional ground of forum shopping.1wphi1.nt WHEREFORE, the instant petition is DENIED, and the Decision of the Regional Trial Court of Valenzuela, Branch 172, in Civil Cases Nos. 5093-V-97 and 5169-V-97 is AFFIRMED. Costs against petitioners. SO ORDERED.