Banda vs Ermita

G.R. No. 166620

April 20, 2010

ATTY. SYLVIA BANDA, CONSORICIA O. PENSON, RADITO V. PADRIGANO, JEAN R. DE MESA,

LEAH P. DELA CRUZ, ANDY V. MACASAQUIT, SENEN B. CORDOBA, ALBERT BRILLANTES, GLORIA
BISDA, JOVITA V. CONCEPCION, TERESITA G. CARVAJAL, ROSANNA T. MALIWANAG, RICHARD
ODERON, CECILIA ESTERNON, BENEDICTO CABRAL, MA. VICTORIA E. LAROCO, CESAR ANDRA,
FELICISIMO GALACIO, ELSA R. CALMA, FILOMENA A. GALANG, JEAN PAUL MELEGRITO, CLARO
G. SANTIAGO, JR., EDUARDO FRIAS, REYNALDO O. ANDAL, NEPHTALIE IMPERIO, RUEL
BALAGTAS, VICTOR R. ORTIZ, FRANCISCO P. REYES, JR., ELISEO M. BALAGOT, JR., JOSE C.
MONSALVE, JR., ARTURO ADSUARA, F.C. LADRERO, JR., NELSON PADUA, MARCELA C. SAYAO,
ANGELITO MALAKAS, GLORIA RAMENTO, JULIANA SUPLEO, MANUEL MENDRIQUE, E. TAYLAN,
CARMELA BOBIS, DANILO VARGAS, ROY-LEO C. PABLO, ALLAN VILLANUEVA, VICENTE R.
VELASCO, JR., IMELDA ERENO, FLORIZA M. CATIIS, RANIEL R. BASCO, E. JALIJALI, MARIO C.
CARAAN, DOLORES M. AVIADO, MICHAEL P. LAPLANA, GUILLERMO G. SORIANO, ALICE E.
SOJO, ARTHUR G. NARNE, LETICIA SORIANO, FEDERICO RAMOS, JR., PETERSON CAAMPUED,
RODELIO L. GOMEZ, ANTONIO D. GARCIA, JR., ANTONIO GALO, A. SANCHEZ, SOL E. TAMAYO,
JOSEPHINE A.M. COCJIN, DAMIAN QUINTO, JR., EDLYN MARIANO, M.A. MALANUM, ALFREDO
S. ESTRELLA, and JESUS MEL SAYO, Petitioners,
vs.
EDUARDO R. ERMITA, in his capacity as Executive Secretary, The Director General of the
Philippine Information Agency and The National Treasurer, Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
The present controversy arose from a Petition for Certiorari and prohibition challenging the
constitutionality of Executive Order No. 378 dated October 25, 2004, issued by President
Gloria Macapagal Arroyo (President Arroyo). Petitioners characterize their action as a class suit
filed on their own behalf and on behalf of all their co-employees at the National Printing Office
(NPO).
The NPO was formed on July 25, 1987, during the term of former President Corazon C. Aquino
(President Aquino), by virtue of Executive Order No. 2851 which provided, among others, the
creation of the NPO from the merger of the Government Printing Office and the relevant

printing units of the Philippine Information Agency (PIA). Section 6 of Executive Order No. 285
reads:
SECTION 6. Creation of the National Printing Office. There is hereby created a National
Printing Office out of the merger of the Government Printing Office and the relevant printing
units of the Philippine Information Agency. The Office shall have exclusive printing jurisdiction
over the following:
a. Printing, binding and distribution of all standard and accountable forms of national,
provincial, city and municipal governments, including government corporations;
b. Printing of officials ballots;
c. Printing of public documents such as the Official Gazette, General Appropriations Act,
Philippine Reports, and development information materials of the Philippine Information
Agency.
The Office may also accept other government printing jobs, including government
publications, aside from those enumerated above, but not in an exclusive basis.
The details of the organization, powers, functions, authorities, and related management
aspects of the Office shall be provided in the implementing details which shall be prepared
and promulgated in accordance with Section II of this Executive Order.
The Office shall be attached to the Philippine Information Agency.
On October 25, 2004, President Arroyo issued the herein assailed Executive Order No. 378,
amending Section 6 of Executive Order No. 285 by, inter alia, removing the exclusive
jurisdiction of the NPO over the printing services requirements of government agencies and
instrumentalities. The pertinent portions of Executive Order No. 378, in turn, provide:
SECTION 1. The NPO shall continue to provide printing services to government agencies and
instrumentalities as mandated by law. However, it shall no longer enjoy exclusive jurisdiction
over the printing services requirements of the government over standard and accountable
forms. It shall have to compete with the private sector, except in the printing of election

paraphernalia which could be shared with the Bangko Sentral ng Pilipinas, upon the discretion
of the Commission on Elections consistent with the provisions of the Election Code of 1987.
SECTION 2. Government agencies/instrumentalities may source printing services outside NPO
provided that:
2.1 The printing services to be provided by the private sector is superior in quality and at a
lower cost than what is offered by the NPO; and
2.2 The private printing provider is flexible in terms of meeting the target completion time of
the government agency.
SECTION 3. In the exercise of its functions, the amount to be appropriated for the programs,
projects and activities of the NPO in the General Appropriations Act (GAA) shall be limited to
its income without additional financial support from the government. (Emphases and
underscoring supplied.)
Pursuant to Executive Order No. 378, government agencies and instrumentalities are allowed
to source their printing services from the private sector through competitive bidding, subject
to the condition that the services offered by the private supplier be of superior quality and
lower in cost compared to what was offered by the NPO. Executive Order No. 378 also limited
NPOs appropriation in the General Appropriations Act to its income.
Perceiving Executive Order No. 378 as a threat to their security of tenure as employees of the
NPO, petitioners now challenge its constitutionality, contending that: (1) it is beyond the
executive powers of President Arroyo to amend or repeal Executive Order No. 285 issued by
former President Aquino when the latter still exercised legislative powers; and (2) Executive
Order No. 378 violates petitioners security of tenure, because it paves the way for the gradual
abolition of the NPO.
We dismiss the petition.
Before proceeding to resolve the substantive issues, the Court must first delve into a
procedural matter. Since petitioners instituted this case as a class suit, the Court, thus, must
first determine if the petition indeed qualifies as one. In Board of Optometry v. Colet,2 we held
that "[c]ourts must exercise utmost caution before allowing a class suit, which is the exception

to the requirement of joinder of all indispensable parties. For while no difficulty may arise if
the decision secured is favorable to the plaintiffs, a quandary would result if the decision were
otherwise as those who were deemed impleaded by their self-appointed representatives
would certainly claim denial of due process."
Section 12, Rule 3 of the Rules of Court defines a class suit, as follows:
Sec. 12. Class suit. When the subject matter of the controversy is one of common or general
interest to many persons so numerous that it is impracticable to join all as parties, a number of
them which the court finds to be sufficiently numerous and representative as to fully protect
the interests of all concerned may sue or defend for the benefit of all. Any party in interest
shall have the right to intervene to protect his individual interest.
From the foregoing definition, the requisites of a class suit are: 1) the subject matter of
controversy is one of common or general interest to many persons; 2) the parties affected are
so numerous that it is impracticable to bring them all to court; and 3) the parties bringing the
class suit are sufficiently numerous or representative of the class and can fully protect the
interests of all concerned.
In Mathay v. The Consolidated Bank and Trust Company,3 the Court held that:
An action does not become a class suit merely because it is designated as such in the
pleadings. Whether the suit is or is not a class suit depends upon the attending facts, and the
complaint, or other pleading initiating the class action should allege the existence of the
necessary facts, to wit, the existence of a subject matter of common interest, and the
existence of a class and the number of persons in the alleged class, in order that the court
might be enabled to determine whether the members of the class are so numerous as to make
it impracticable to bring them all before the court, to contrast the number appearing on the
record with the number in the class and to determine whether claimants on record adequately
represent the class and the subject matter of general or common interest. (Emphases ours.)
Here, the petition failed to state the number of NPO employees who would be affected by the
assailed Executive Order and who were allegedly represented by petitioners. It was the
Solicitor General, as counsel for respondents, who pointed out that there were about 549
employees in the NPO.4 The 67 petitioners undeniably comprised a small fraction of the NPO
employees whom they claimed to represent. Subsequently, 32 of the original petitioners

executed an Affidavit of Desistance, while one signed a letter denying ever signing the
petition,5 ostensibly reducing the number of petitioners to 34. We note that counsel for the
petitioners challenged the validity of the desistance or withdrawal of some of the petitioners
and insinuated that such desistance was due to pressure from people "close to the seat of
power."6 Still, even if we were to disregard the affidavit of desistance filed by some of the
petitioners, it is highly doubtful that a sufficient, representative number of NPO employees
have instituted this purported class suit. A perusal of the petition itself would show that of the
67 petitioners who signed the Verification/Certification of Non-Forum Shopping, only 20
petitioners were in fact mentioned in the jurat as having duly subscribed the petition before
the notary public. In other words, only 20 petitioners effectively instituted the present case.
Indeed, in MVRS Publications, Inc. v. Islamic Dawah Council of the Philippines, Inc.,7 we
observed that an element of a class suit or representative suit is the adequacy of
representation. In determining the question of fair and adequate representation of members
of a class, the court must consider (a) whether the interest of the named party is coextensive
with the interest of the other members of the class; (b) the proportion of those made a party,
as it so bears, to the total membership of the class; and (c) any other factor bearing on the
ability of the named party to speak for the rest of the class.
Previously, we held in Ibaes v. Roman Catholic Church8 that where the interests of the
plaintiffs and the other members of the class they seek to represent are diametrically
opposed, the class suit will not prosper.
It is worth mentioning that a Manifestation of Desistance,9 to which the previously mentioned
Affidavit of Desistance10 was attached, was filed by the President of the National Printing
Office Workers Association (NAPOWA). The said manifestation expressed NAPOWAs
opposition to the filing of the instant petition in any court. Even if we take into account the
contention of petitioners counsel that the NAPOWA President had no legal standing to file
such manifestation, the said pleading is a clear indication that there is a divergence of opinions
and views among the members of the class sought to be represented, and not all are in favor
of filing the present suit. There is here an apparent conflict between petitioners interests and
those of the persons whom they claim to represent. Since it cannot be said that petitioners
sufficiently represent the interests of the entire class, the instant case cannot be properly
treated as a class suit.

As to the merits of the case, the petition raises two main grounds to assail the constitutionality
of Executive Order No. 378:
First, it is contended that President Arroyo cannot amend or repeal Executive Order No. 285
by the mere issuance of another executive order (Executive Order No. 378). Petitioners
maintain that former President Aquinos Executive Order No. 285 is a legislative enactment, as
the same was issued while President Aquino still had legislative powers under the Freedom
Constitution;11 thus, only Congress through legislation can validly amend Executive Order No.
285.
Second, petitioners maintain that the issuance of Executive Order No. 378 would lead to the
eventual abolition of the NPO and would violate the security of tenure of NPO employees.
Anent the first ground raised in the petition, we find the same patently without merit.
It is a well-settled principle in jurisprudence that the President has the power to reorganize the
offices and agencies in the executive department in line with the Presidents constitutionally
granted power of control over executive offices and by virtue of previous delegation of the
legislative power to reorganize executive offices under existing statutes.
In Buklod ng Kawaning EIIB v. Zamora,12 the Court pointed out that Executive Order No. 292
or the Administrative Code of 1987 gives the President continuing authority to reorganize and
redefine the functions of the Office of the President. Section 31, Chapter 10, Title III, Book III of
the said Code, is explicit:
Sec. 31. Continuing Authority of the President to Reorganize his Office. The President,
subject to the policy in the Executive Office and in order to achieve simplicity, economy and
efficiency, shall have continuing authority to reorganize the administrative structure of the
Office of the President. For this purpose, he may take any of the following actions:
(1) Restructure the internal organization of the Office of the President Proper, including the
immediate Offices, the President Special Assistants/Advisers System and the Common Staff
Support System, by abolishing, consolidating or merging units thereof or transferring functions
from one unit to another;

(2) Transfer any function under the Office of the President to any other Department or Agency
as well as transfer functions to the Office of the President from other Departments and
Agencies; and
(3) Transfer any agency under the Office of the President to any other department or agency
as well as transfer agencies to the Office of the President from other Departments or agencies.
(Emphases ours.)
Interpreting the foregoing provision, we held in Buklod ng Kawaning EIIB, thus:
But of course, the list of legal basis authorizing the President to reorganize any department or
agency in the executive branch does not have to end here. We must not lose sight of the very
source of the power that which constitutes an express grant of power. Under Section 31,
Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987),
"the President, subject to the policy in the Executive Office and in order to achieve simplicity,
economy and efficiency, shall have the continuing authority to reorganize the administrative
structure of the Office of the President." For this purpose, he may transfer the functions of
other Departments or Agencies to the Office of the President. In Canonizado v. Aguirre [323
SCRA 312 (2000)], we ruled that reorganization "involves the reduction of personnel,
consolidation of offices, or abolition thereof by reason of economy or redundancy of
functions." It takes place when there is an alteration of the existing structure of government
offices or units therein, including the lines of control, authority and responsibility between
them. The EIIB is a bureau attached to the Department of Finance. It falls under the Office of
the President. Hence, it is subject to the Presidents continuing authority to reorganize.13
(Emphasis ours.)
It is undisputed that the NPO, as an agency that is part of the Office of the Press Secretary
(which in various times has been an agency directly attached to the Office of the Press
Secretary or as an agency under the Philippine Information Agency), is part of the Office of the
President.14
Pertinent to the case at bar, Section 31 of the Administrative Code of 1987 quoted above
authorizes the President (a) to restructure the internal organization of the Office of the
President Proper, including the immediate Offices, the President Special Assistants/Advisers
System and the Common Staff Support System, by abolishing, consolidating or merging units
thereof or transferring functions from one unit to another, and (b) to transfer functions or

offices from the Office of the President to any other Department or Agency in the Executive
Branch, and vice versa.
Concomitant to such power to abolish, merge or consolidate offices in the Office of the
President Proper and to transfer functions/offices not only among the offices in the Office of
President Proper but also the rest of the Office of the President and the Executive Branch, the
President implicitly has the power to effect less radical or less substantive changes to the
functional and internal structure of the Office of the President, including the modification of
functions of such executive agencies as the exigencies of the service may require.
In the case at bar, there was neither an abolition of the NPO nor a removal of any of its
functions to be transferred to another agency. Under the assailed Executive Order No. 378,
the NPO remains the main printing arm of the government for all kinds of government forms
and publications but in the interest of greater economy and encouraging efficiency and
profitability, it must now compete with the private sector for certain government printing
jobs, with the exception of election paraphernalia which remains the exclusive responsibility of
the NPO, together with the Bangko Sentral ng Pilipinas, as the Commission on Elections may
determine. At most, there was a mere alteration of the main function of the NPO by limiting
the exclusivity of its printing responsibility to election forms.15
There is a view that the reorganization actions that the President may take with respect to
agencies in the Office of the President are strictly limited to transfer of functions and offices as
seemingly provided in Section 31 of the Administrative Code of 1987.
However, Section 20, Chapter 7, Title I, Book III of the same Code significantly provides:
Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall exercise
such other powers and functions vested in the President which are provided for under the
laws and which are not specifically enumerated above, or which are not delegated by the
President in accordance with law. (Emphasis ours.)
Pursuant to Section 20, the power of the President to reorganize the Executive Branch under
Section 31 includes such powers and functions that may be provided for under other laws. To
be sure, an inclusive and broad interpretation of the Presidents power to reorganize executive
offices has been consistently supported by specific provisions in general appropriations laws.

In the oft-cited Larin v. Executive Secretary,16 the Court likewise adverted to certain
provisions of Republic Act No. 7645, the general appropriations law for 1993, as among the
statutory bases for the Presidents power to reorganize executive agencies, to wit:
Section 48 of R.A. 7645 provides that:
"Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch.
The heads of departments, bureaus and offices and agencies are hereby directed to identify
their respective activities which are no longer essential in the delivery of public services and
which may be scaled down, phased out or abolished, subject to civil [service] rules and
regulations. x x x. Actual scaling down, phasing out or abolition of the activities shall be
effected pursuant to Circulars or Orders issued for the purpose by the Office of the President."
Said provision clearly mentions the acts of "scaling down, phasing out and abolition" of offices
only and does not cover the creation of offices or transfer of functions. Nevertheless, the act
of creating and decentralizing is included in the subsequent provision of Section 62, which
provides that:
"Sec. 62. Unauthorized organizational changes. Unless otherwise created by law or directed
by the President of the Philippines, no organizational unit or changes in key positions in any
department or agency shall be authorized in their respective organization structures and be
funded from appropriations by this Act."
The foregoing provision evidently shows that the President is authorized to effect
organizational changes including the creation of offices in the department or agency
concerned.
The contention of petitioner that the two provisions are riders deserves scant consideration.
Well settled is the rule that every law has in its favor the presumption of constitutionality.
Unless and until a specific provision of the law is declared invalid and unconstitutional, the
same is valid and binding for all intents and purposes.17 (Emphases ours)
Buklod ng Kawaning EIIB v. Zamora,18 where the Court upheld as valid then President Joseph
Estradas Executive Order No. 191 "deactivating" the Economic Intelligence and Investigation
Bureau (EIIB) of the Department of Finance, hewed closely to the reasoning in Larin. The
Court, among others, also traced from the General Appropriations Act19 the Presidents

authority to effect organizational changes in the department or agency under the executive
structure, thus:
We adhere to the precedent or ruling in Larin that this provision recognizes the authority of
the President to effect organizational changes in the department or agency under the
executive structure. Such a ruling further finds support in Section 78 of Republic Act No. 8760.
Under this law, the heads of departments, bureaus, offices and agencies and other entities in
the Executive Branch are directed (a) to conduct a comprehensive review of their respective
mandates, missions, objectives, functions, programs, projects, activities and systems and
procedures; (b) identify activities which are no longer essential in the delivery of public
services and which may be scaled down, phased-out or abolished; and (c) adopt measures that
will result in the streamlined organization and improved overall performance of their
respective agencies. Section 78 ends up with the mandate that the actual streamlining and
productivity improvement in agency organization and operation shall be effected pursuant to
Circulars or Orders issued for the purpose by the Office of the President. x x x.20 (Emphasis
ours)
Notably, in the present case, the 2003 General Appropriations Act, which was reenacted in
2004 (the year of the issuance of Executive Order No. 378), likewise gave the President the
authority to effect a wide variety of organizational changes in any department or agency in the
Executive Branch. Sections 77 and 78 of said Act provides:
Section 77. Organized Changes. Unless otherwise provided by law or directed by the
President of the Philippines, no changes in key positions or organizational units in any
department or agency shall be authorized in their respective organizational structures and
funded from appropriations provided by this Act.
Section 78. Institutional Strengthening and Productivity Improvement in Agency Organization
and Operations and Implementation of Organization/Reorganization Mandated by Law. The
Government shall adopt institutional strengthening and productivity improvement measures
to improve service delivery and enhance productivity in the government, as directed by the
President of the Philippines. The heads of departments, bureaus, offices, agencies, and other
entities of the Executive Branch shall accordingly conduct a comprehensive review of their
respective mandates, missions, objectives, functions, programs, projects, activities and
systems and procedures; identify areas where improvements are necessary; and implement
corresponding structural, functional and operational adjustments that will result in

streamlined organization and operations and improved performance and productivity:

PROVIDED, That actual streamlining and productivity improvements in agency organization
and operations, as authorized by the President of the Philippines for the purpose, including
the utilization of savings generated from such activities, shall be in accordance with the rules
and regulations to be issued by the DBM, upon consultation with the Presidential Committee
on Effective Governance: PROVIDED, FURTHER, That in the implementation of
organizations/reorganizations, or specific changes in agency structure, functions and
operations as a result of institutional strengthening or as mandated by law, the appropriation,
including the functions, projects, purposes and activities of agencies concerned may be
realigned as may be necessary: PROVIDED, FINALLY, That any unexpended balances or savings
in appropriations may be made available for payment of retirement gratuities and separation
benefits to affected personnel, as authorized under existing laws. (Emphases and underscoring
ours.)
Implicitly, the aforequoted provisions in the appropriations law recognize the power of the
President to reorganize even executive offices already funded by the said appropriations act,
including the power to implement structural, functional, and operational adjustments in the
executive bureaucracy and, in so doing, modify or realign appropriations of funds as may be
necessary under such reorganization. Thus, insofar as petitioners protest the limitation of the
NPOs appropriations to its own income under Executive Order No. 378, the same is statutorily
authorized by the above provisions.
In the 2003 case of Bagaoisan v. National Tobacco Administration,21 we upheld the
"streamlining" of the National Tobacco Administration through a reduction of its personnel
and deemed the same as included in the power of the President to reorganize executive
offices granted under the laws, notwithstanding that such streamlining neither involved an
abolition nor a transfer of functions of an office. To quote the relevant portion of that
decision:
In the recent case of Rosa Ligaya C. Domingo, et al. vs. Hon. Ronaldo D. Zamora, in his capacity
as the Executive Secretary, et al., this Court has had occasion to also delve on the Presidents
power to reorganize the Office of the President under Section 31(2) and (3) of Executive Order
No. 292 and the power to reorganize the Office of the President Proper. x x x
xxxx

The first sentence of the law is an express grant to the President of a continuing authority to
reorganize the administrative structure of the Office of the President. The succeeding
numbered paragraphs are not in the nature of provisos that unduly limit the aim and scope of
the grant to the President of the power to reorganize but are to be viewed in consonance
therewith. Section 31(1) of Executive Order No. 292 specifically refers to the Presidents power
to restructure the internal organization of the Office of the President Proper, by abolishing,
consolidating or merging units hereof or transferring functions from one unit to another, while
Section 31(2) and (3) concern executive offices outside the Office of the President Proper
allowing the President to transfer any function under the Office of the President to any other
Department or Agency and vice-versa, and the transfer of any agency under the Office of the
President to any other department or agency and vice-versa.
In the present instance, involving neither an abolition nor transfer of offices, the assailed
action is a mere reorganization under the general provisions of the law consisting mainly of
streamlining the NTA in the interest of simplicity, economy and efficiency. It is an act well
within the authority of the President motivated and carried out, according to the findings of
the appellate court, in good faith, a factual assessment that this Court could only but accept.22
(Emphases and underscoring supplied.)
In the more recent case of Tondo Medical Center Employees Association v. Court of
Appeals,23 which involved a structural and functional reorganization of the Department of
Health under an executive order, we reiterated the principle that the power of the President
to reorganize agencies under the executive department by executive or administrative order is
constitutionally and statutorily recognized. We held in that case:
This Court has already ruled in a number of cases that the President may, by executive or
administrative order, direct the reorganization of government entities under the Executive
Department. This is also sanctioned under the Constitution, as well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have
control of all executive departments, bureaus and offices." Section 31, Book III, Chapter 10 of
Executive Order No. 292, also known as the Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject
to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency,

shall have continuing authority to reorganize the administrative structure of the Office of the
President. For this purpose, he may take any of the following actions:
xxxx
In Domingo v. Zamora [445 Phil. 7 (2003)], this Court explained the rationale behind the
Presidents continuing authority under the Administrative Code to reorganize the
administrative structure of the Office of the President. The law grants the President the power
to reorganize the Office of the President in recognition of the recurring need of every
President to reorganize his or her office "to achieve simplicity, economy and efficiency." To
remain effective and efficient, it must be capable of being shaped and reshaped by the
President in the manner the Chief Executive deems fit to carry out presidential directives and
policies.
The Administrative Code provides that the Office of the President consists of the Office of the
President Proper and the agencies under it. The agencies under the Office of the President are
identified in Section 23, Chapter 8, Title II of the Administrative Code:
Sec. 23. The Agencies under the Office of the President.The agencies under the Office of the
President refer to those offices placed under the chairmanship of the President, those under
the supervision and control of the President, those under the administrative supervision of the
Office of the President, those attached to it for policy and program coordination, and those
that are not placed by law or order creating them under any specific department.
xxxx
The power of the President to reorganize the executive department is likewise recognized in
general appropriations laws. x x x.
xxxx
Clearly, Executive Order No. 102 is well within the constitutional power of the President to
issue. The President did not usurp any legislative prerogative in issuing Executive Order No.
102. It is an exercise of the Presidents constitutional power of control over the executive
department, supported by the provisions of the Administrative Code, recognized by other
statutes, and consistently affirmed by this Court.24 (Emphases supplied.)

Subsequently, we ruled in Anak Mindanao Party-List Group v. Executive Secretary25 that:

The Constitutions express grant of the power of control in the President justifies an executive
action to carry out reorganization measures under a broad authority of law.
In enacting a statute, the legislature is presumed to have deliberated with full knowledge of all
existing laws and jurisprudence on the subject. It is thus reasonable to conclude that in passing
a statute which places an agency under the Office of the President, it was in accordance with
existing laws and jurisprudence on the Presidents power to reorganize.
In establishing an executive department, bureau or office, the legislature necessarily ordains
an executive agencys position in the scheme of administrative structure. Such determination
is primary, but subject to the Presidents continuing authority to reorganize the administrative
structure. As far as bureaus, agencies or offices in the executive department are concerned,
the power of control may justify the President to deactivate the functions of a particular
office. Or a law may expressly grant the President the broad authority to carry out
reorganization measures. The Administrative Code of 1987 is one such law.26
The issuance of Executive Order No. 378 by President Arroyo is an exercise of a delegated
legislative power granted by the aforementioned Section 31, Chapter 10, Title III, Book III of
the Administrative Code of 1987, which provides for the continuing authority of the President
to reorganize the Office of the President, "in order to achieve simplicity, economy and
efficiency." This is a matter already well-entrenched in jurisprudence. The reorganization of
such an office through executive or administrative order is also recognized in the
Administrative Code of 1987. Sections 2 and 3, Chapter 2, Title I, Book III of the said Code
provide:
Sec. 2. Executive Orders. - Acts of the President providing for rules of a general or permanent
character in implementation or execution of constitutional or statutory powers shall be
promulgated in executive orders.
Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of
governmental operations in pursuance of his duties as administrative head shall be
promulgated in administrative orders. (Emphases supplied.)

To reiterate, we find nothing objectionable in the provision in Executive Order No. 378 limiting
the appropriation of the NPO to its own income. Beginning with Larin and in subsequent cases,
the Court has noted certain provisions in the general appropriations laws as likewise reflecting
the power of the President to reorganize executive offices or agencies even to the extent of
modifying and realigning appropriations for that purpose.
Petitioners contention that the issuance of Executive Order No. 378 is an invalid exercise of
legislative power on the part of the President has no legal leg to stand on.
In all, Executive Order No. 378, which purports to institute necessary reforms in government in
order to improve and upgrade efficiency in the delivery of public services by redefining the
functions of the NPO and limiting its funding to its own income and to transform it into a selfreliant agency able to compete with the private sector, is well within the prerogative of
President Arroyo under her continuing delegated legislative power to reorganize her own
office. As pointed out in the separate concurring opinion of our learned colleague, Associate
Justice Antonio T. Carpio, the objective behind Executive Order No. 378 is wholly consistent
with the state policy contained in Republic Act No. 9184 or the Government Procurement
Reform Act to encourage competitiveness by extending equal opportunity to private
contracting parties who are eligible and qualified.271avvphi1
To be very clear, this delegated legislative power to reorganize pertains only to the Office of
the President and the departments, offices and agencies of the executive branch and does not
include the Judiciary, the Legislature or the constitutionally-created or mandated bodies.
Moreover, it must be stressed that the exercise by the President of the power to reorganize
the executive department must be in accordance with the Constitution, relevant laws and
prevailing jurisprudence.
In this regard, we are mindful of the previous pronouncement of this Court in Dario v. Mison28
that:
Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in
good faith. As a general rule, a reorganization is carried out in "good faith" if it is for the
purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in
case of a dismissal) or separation actually occurs because the position itself ceases to exist.
And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the
"abolition," which is nothing else but a separation or removal, is done for political reasons or

purposely to defeat security of tenure, or otherwise not in good faith, no valid "abolition"
takes place and whatever "abolition" is done, is void ab initio. There is an invalid "abolition" as
where there is merely a change of nomenclature of positions, or where claims of economy are
belied by the existence of ample funds. (Emphasis ours.)
Stated alternatively, the presidential power to reorganize agencies and offices in the executive
branch of government is subject to the condition that such reorganization is carried out in
good faith.
If the reorganization is done in good faith, the abolition of positions, which results in loss of
security of tenure of affected government employees, would be valid. In Buklod ng Kawaning
EIIB v. Zamora,29 we even observed that there was no such thing as an absolute right to hold
office. Except those who hold constitutional offices, which provide for special immunity as
regards salary and tenure, no one can be said to have any vested right to an office or salary.30
This brings us to the second ground raised in the petition that Executive Order No. 378, in
allowing government agencies to secure their printing requirements from the private sector
and in limiting the budget of the NPO to its income, will purportedly lead to the gradual
abolition of the NPO and the loss of security of tenure of its present employees. In other
words, petitioners avow that the reorganization of the NPO under Executive Order No. 378 is
tainted with bad faith. The basic evidentiary rule is that he who asserts a fact or the
affirmative of an issue has the burden of proving it.31
A careful review of the records will show that petitioners utterly failed to substantiate their
claim. They failed to allege, much less prove, sufficient facts to show that the limitation of the
NPOs budget to its own income would indeed lead to the abolition of the position, or removal
from office, of any employee. Neither did petitioners present any shred of proof of their
assertion that the changes in the functions of the NPO were for political considerations that
had nothing to do with improving the efficiency of, or encouraging operational economy in,
the said agency.
In sum, the Court finds that the petition failed to show any constitutional infirmity or grave
abuse of discretion amounting to lack or excess of jurisdiction in President Arroyos issuance of
Executive Order No. 378.

WHEREFORE, the petition is hereby DISMISSED and the prayer for a Temporary Restraining
Order and/or a Writ of Preliminary Injunction is hereby DENIED. No costs.
SO ORDERED.

Navarro vs Escobido
G.R. No. 153788

November 27, 2009

ROGER V. NAVARRO, Petitioner,

vs.
HON. JOSE L. ESCOBIDO, Presiding Judge, RTC Branch 37, Cagayan de Oro City, and KAREN T.
GO, doing business under the name KARGO ENTERPRISES, Respondents.
DECISION
BRION, J.:
This is a petition for review on certiorari1 that seeks to set aside the Court of Appeals (CA)
Decision2 dated October 16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No.
64701. These CA rulings affirmed the July 26, 20004 and March 7, 20015 orders of the
Regional Trial Court (RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V.
Navarros (Navarro) motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case
Nos. 98-599 (first complaint)6 and 98-598 (second complaint),7 before the RTC for replevin
and/or sum of money with damages against Navarro. In these complaints, Karen Go prayed
that the RTC issue writs of replevin for the seizure of two (2) motor vehicles in Navarros
possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a resident of
Cagayan de Oro City and doing business under the trade name KARGO ENTERPRISES, an entity
duly registered and existing under and by virtue of the laws of the Republic of the Philippines,
which has its business address at Bulua, Cagayan de Oro City; that defendant ROGER
NAVARRO is a Filipino, of legal age, a resident of 62 Dolores Street, Nazareth, Cagayan de Oro
City, where he may be served with summons and other processes of the Honorable Court; that
defendant "JOHN DOE" whose real name and address are at present unknown to plaintiff is
hereby joined as party defendant as he may be the person in whose possession and custody

the personal property subject matter of this suit may be found if the same is not in the
possession of defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others, buying and selling motor
vehicles, including hauling trucks and other heavy equipment;
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated that on
August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle which is
more particularly described as follows
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
as evidenced by a LEASE AGREEMENT WITH OPTION TO PURCHASE entered into by and
between KARGO ENTERPRISES, then represented by its Manager, the aforementioned GLENN
O. GO, and defendant ROGER NAVARRO xxx; that in accordance with the provisions of the
above LEASE AGREEMENT WITH OPTION TO PURCHASE, defendant ROGER NAVARRO
delivered unto plaintiff six (6) post-dated checks each in the amount of SIXTY-SIX THOUSAND
THREE HUNDRED THIRTY-THREE & 33/100 PESOS (P66,333.33) which were supposedly in
payment of the agreed rentals; that when the fifth and sixth checks, i.e. PHILIPPINE BANK OF
COMMUNICATIONS CAGAYAN DE ORO BRANCH CHECKS NOS. 017112 and 017113,
respectively dated January 8, 1998 and February 8, 1998, were presented for payment and/or
credit, the same were dishonored and/or returned by the drawee bank for the common
reason that the current deposit account against which the said checks were issued did not
have sufficient funds to cover the amounts thereof; that the total amount of the two (2)
checks, i.e. the sum of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTY-SIX &
66/100 PESOS (P132,666.66) therefore represents the principal liability of defendant ROGER
NAVARRO unto plaintiff on the basis of the provisions of the above LEASE AGREEMENT WITH
RIGHT TO PURCHASE; that demands, written and oral, were made of defendant ROGER
NAVARRO to pay the amount of ONE HUNDRED THIRTY-TWO THOUSAND SIX HUNDRED SIXTYSIX & 66/100 PESOS (P132,666.66), or to return the subject motor vehicle as also provided for
in the LEASE AGREEMENT WITH RIGHT TO PURCHASE, but said demands were, and still are, in
vain to the great damage and injury of herein plaintiff; xxx

4. That the aforedescribed motor vehicle has not been the subject of any tax assessment
and/or fine pursuant to law, or seized under an execution or an attachment as against herein
plaintiff;
xxx
8. That plaintiff hereby respectfully applies for an order of the Honorable Court for the
immediate delivery of the above-described motor vehicle from defendants unto plaintiff
pending the final determination of this case on the merits and, for that purpose, there is
attached hereto an affidavit duly executed and bond double the value of the personal
property subject matter hereof to answer for damages and costs which defendants may suffer
in the event that the order for replevin prayed for may be found out to having not been
properly issued.
The second complaint contained essentially the same allegations as the first complaint, except
that the Lease Agreement with Option to Purchase involved is dated October 1, 1997 and the
motor vehicle leased is described as follows:
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-510528
Motor No. 6D14-423403
The second complaint also alleged that Navarro delivered three post-dated checks, each for
the amount of P100,000.00, to Karen Go in payment of the agreed rentals; however, the third
check was dishonored when presented for payment.8
On October 12, 19989 and October 14, 1998,10 the RTC issued writs of replevin for both cases;
as a result, the Sheriff seized the two vehicles and delivered them to the possession of Karen
Go.
In his Answers, Navarro alleged as a special affirmative defense that the two complaints stated
no cause of action, since Karen Go was not a party to the Lease Agreements with Option to
Purchase (collectively, the lease agreements) the actionable documents on which the
complaints were based.
On Navarros motion, both cases were duly consolidated on December 13, 1999.

In its May 8, 2000 order, the RTC dismissed the case on the ground that the complaints did not
state a cause of action.
In response to the motion for reconsideration Karen Go filed dated May 26, 2000,11 the RTC
issued another order dated July 26, 2000 setting aside the order of dismissal. Acting on the
presumption that Glenn Gos leasing business is a conjugal property, the RTC held that Karen
Go had sufficient interest in his leasing business to file the action against Navarro. However,
the RTC held that Karen Go should have included her husband, Glenn Go, in the complaint
based on Section 4, Rule 3 of the Rules of Court (Rules).12 Thus, the lower court ordered Karen
Go to file a motion for the inclusion of Glenn Go as co-plaintiff.1avvphi1
When the RTC denied Navarros motion for reconsideration on March 7, 2001, Navarro filed a
petition for certiorari with the CA, essentially contending that the RTC committed grave abuse
of discretion when it reconsidered the dismissal of the case and directed Karen Go to amend
her complaints by including her husband Glenn Go as co-plaintiff. According to Navarro, a
complaint which failed to state a cause of action could not be converted into one with a cause
of action by mere amendment or supplemental pleading.
On October 16, 2001, the CA denied Navarros petition and affirmed the RTCs order.13 The CA
also denied Navarros motion for reconsideration in its resolution of May 29, 2002,14 leading
to the filing of the present petition.
THE PETITION
Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since
it did not have the requisite juridical personality to sue, the actual parties to the agreement
are himself and Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go,
she was not a real party-in-interest and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the complaint to include
Glenn Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint
which does not state a cause of action cannot be converted into one with a cause of action by
a mere amendment or a supplemental pleading. In effect, the lower court created a cause of
action for Karen Go when there was none at the time she filed the complaints.

Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed
the theory of the complaints, to his great prejudice. Navarro claims that the lower court
gravely abused its discretion when it assumed that the leased vehicles are part of the conjugal
property of Glenn and Karen Go. Since Karen Go is the registered owner of Kargo Enterprises,
the vehicles subject of the complaint are her paraphernal properties and the RTC gravely erred
when it ordered the inclusion of Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the same order that
required Karen Go to amend her complaints, claiming that by issuing this order, the trial court
violated Rule 10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro maintains that the
complaints were premature because no prior demand was made on him to comply with the
provisions of the lease agreements before the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based on flawed
complaints, the vehicles were illegally seized from his possession and should be returned to
him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no
real interest in the subject of the complaint, even if the lease agreements were signed only by
her husband, Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease
agreements merely as the manager of Kargo Enterprises. Moreover, Karen Go maintains that
Navarros insistence that Kargo Enterprises is Karen Gos paraphernal property is without
basis. Based on the law and jurisprudence on the matter, all property acquired during the
marriage is presumed to be conjugal property. Finally, Karen Go insists that her complaints
sufficiently established a cause of action against Navarro. Thus, when the RTC ordered her to
include her husband as co-plaintiff, this was merely to comply with the rule that spouses
should sue jointly, and was not meant to cure the complaints lack of cause of action.
THE COURTS RULING
We find the petition devoid of merit.
Karen Go is the real party-in-interest

The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended
in the name of the real party-in-interest, i.e., the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit.15
Interestingly, although Navarro admits that Karen Go is the registered owner of the business
name Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case.
According to Navarro, while the lease contracts were in Kargo Enterprises name, this was
merely a trade name without a juridical personality, so the actual parties to the lease
agreements were Navarro and Glenn Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it
ordered the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action
for the complaints when in truth, there was none.
We do not find Navarros arguments persuasive.
The central factor in appreciating the issues presented in this case is the business name Kargo
Enterprises. The name appears in the title of the Complaint where the plaintiff was identified
as "KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification
was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant
"leased from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the
Complaint specifies and attaches as its integral part the Lease Agreement that underlies the
transaction between the plaintiff and the defendant. Again, the name KARGO ENTERPRISES
entered the picture as this Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the
LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager,
xxx
thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented.
In other words, by the express terms of this Lease Agreement, Glenn Go did sign the

agreement only as the manager of Kargo Enterprises and the latter is clearly the real party to
the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a
natural person, nor a juridical person, as defined by Article 44 of the Civil Code:
Art. 44. The following are juridical persons:
(1) The State and its political subdivisions;
(2) Other corporations, institutions and entities for public interest or purpose, created by law;
their personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the
law grants a juridical personality, separate and distinct from that of each shareholder, partner
or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a
civil action. This legal reality leads to the question: who then is the proper party to file an
action based on a contract in the name of Kargo Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza,17 where we said:
Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court.
The law merely recognizes the existence of a sole proprietorship as a form of business
organization conducted for profit by a single individual, and requires the proprietor or owner
thereof to secure licenses and permits, register the business name, and pay taxes to the
national government. It does not vest juridical or legal personality upon the sole
proprietorship nor empower it to file or defend an action in court.
Thus, the complaint in the court below should have been filed in the name of the owner of
Juasing Hardware. The allegation in the body of the complaint would show that the suit is
brought by such person as proprietor or owner of the business conducted under the name and
style Juasing Hardware. The descriptive words "doing business as Juasing Hardware" may be
added to the title of the case, as is customarily done.18 [Emphasis supplied.]

This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:
SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or
injured by the judgment in the suit, or the party entitled to the avails of the suit. Unless
otherwise authorized by law or these Rules, every action must be prosecuted or defended in
the name of the real party in interest.
As the registered owner of Kargo Enterprises, Karen Go is the party who will directly benefit
from or be injured by a judgment in this case. Thus, contrary to Navarros contention, Karen
Go is the real party-in-interest, and it is legally incorrect to say that her Complaint does not
state a cause of action because her name did not appear in the Lease Agreement that her
husband signed in behalf of Kargo Enterprises. Whether Glenn Go can legally sign the Lease
Agreement in his capacity as a manager of Kargo Enterprises, a sole proprietorship, is a
question we do not decide, as this is a matter for the trial court to consider in a trial on the
merits.
Glenn Gos Role in the Case
We find it significant that the business name Kargo Enterprises is in the name of Karen T.
Go,19 who described herself in the Complaints to be "a Filipino, of legal age, married to
GLENN O. GO, a resident of Cagayan de Oro City, and doing business under the trade name
KARGO ENTERPRISES."20 That Glenn Go and Karen Go are married to each other is a fact
never brought in issue in the case. Thus, the business name KARGO ENTERPRISES is registered
in the name of a married woman, a fact material to the side issue of whether Kargo
Enterprises and its properties are paraphernal or conjugal properties. To restate the parties
positions, Navarro alleges that Kargo Enterprises is Karen Gos paraphernal property,
emphasizing the fact that the business is registered solely in Karen Gos name. On the other
hand, Karen Go contends that while the business is registered in her name, it is in fact part of
their conjugal property.
The registration of the trade name in the name of one person a woman does not
necessarily lead to the conclusion that the trade name as a property is hers alone, particularly
when the woman is married. By law, all property acquired during the marriage, whether the
acquisition appears to have been made, contracted or registered in the name of one or both
spouses, is presumed to be conjugal unless the contrary is proved.21 Our examination of the
records of the case does not show any proof that Kargo Enterprises and the properties or

contracts in its name are conjugal. If at all, only the bare allegation of Navarro to this effect
exists in the records of the case. As we emphasized in Castro v. Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the
marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains
exclusively to the husband or to the wife." This article does not require proof that the property
was acquired with funds of the partnership. The presumption applies even when the manner
in which the property was acquired does not appear.23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises
as a sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal
property.
Article 124 of the Family Code, on the administration of the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong
to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject
to recourse to the court by the wife for proper remedy, which must be availed of within five
years from the date of the contract implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in
managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to
obtain the consent of the other before performing an act of administration or any act that
does not dispose of or encumber their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the
contract of partnership in all that is not in conflict with what is expressly determined in this
Chapter or by the spouses in their marriage settlements. In other words, the property relations
of the husband and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of
Gains of the Family Code and, suppletorily, by the spouses marriage settlement and by the
rules on partnership under the Civil Code. In the absence of any evidence of a marriage
settlement between the spouses Go, we look at the Civil Code provision on partnership for
guidance.

A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code,
which states:
Art. 1811. A partner is a co-owner with the other partners of specific partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement between the
partners, has an equal right with his partners to possess specific partnership property for
partnership purposes; xxx
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and
the properties registered under this name; hence, both have an equal right to seek possession
of these properties. Applying Article 484 of the Civil Code, which states that "in default of
contracts, or special provisions, co-ownership shall be governed by the provisions of this Title,"
we find further support in Article 487 of the Civil Code that allows any of the co-owners to
bring an action in ejectment with respect to the co-owned property.
While ejectment is normally associated with actions involving real property, we find that this
rule can be applied to the circumstances of the present case, following our ruling in Carandang
v. Heirs of De Guzman.24 In this case, one spouse filed an action for the recovery of credit, a
personal property considered conjugal property, without including the other spouse in the
action. In resolving the issue of whether the other spouse was required to be included as a coplaintiff in the action for the recovery of the credit, we said:
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to
the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is
not warranted, whether or not there was an order for her inclusion in the complaint pursuant
to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter or by
the spouses in their marriage settlements.

This provision is practically the same as the Civil Code provision it superseded:
Art. 147. The conjugal partnership shall be governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with
the other partners of specific partnership property." Taken with the presumption of the
conjugal nature of the funds used to finance the four checks used to pay for petitioners stock
subscriptions, and with the presumption that the credits themselves are part of conjugal
funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring
an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular and Adlawan v.
Adlawan, we held that, in a co-ownership, co-owners may bring actions for the recovery of coowned property without the necessity of joining all the other co-owners as co-plaintiffs
because the suit is presumed to have been filed for the benefit of his co-owners. In the latter
case and in that of De Guia v. Court of Appeals, we also held that Article 487 of the Civil Code,
which provides that any of the co-owners may bring an action for ejectment, covers all kinds
of action for the recovery of possession.
In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may
bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only
one of the co-owners, namely the co-owner who filed the suit for the recovery of the coowned property, is an indispensable party thereto. The other co-owners are not indispensable
parties. They are not even necessary parties, for a complete relief can be accorded in the suit
even without their participation, since the suit is presumed to have been filed for the benefit
of all co-owners.25 [Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against Navarro to recover
possession of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is
consistent with Article 124 of the Family Code, supporting as it does the position that either
spouse may act on behalf of the conjugal partnership, so long as they do not dispose of or
encumber the property in question without the other spouses consent.

On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to
recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party
to the suit, based on Section 4, Rule 4 of the Rules, which states:
Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as
provided by law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we have held in a
number of cases26 that the misjoinder or non-joinder of indispensable parties in a complaint is
not a ground for dismissal of action. As we stated in Macababbad v. Masirag:27
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of
parties is a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on
motion of any party or on its own initiative at any stage of the action and on such terms as are
just. Any claim against a misjoined party may be severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to
implead the indispensable party at any stage of the action. The court, either motu proprio or
upon the motion of a party, may order the inclusion of the indispensable party or give the
plaintiff opportunity to amend his complaint in order to include indispensable parties. If the
plaintiff to whom the order to include the indispensable party is directed refuses to comply
with the order of the court, the complaint may be dismissed upon motion of the defendant or
upon the court's own motion. Only upon unjustified failure or refusal to obey the order to
include or to amend is the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband
as a party plaintiff is fully in order.
Demand not required prior
to filing of replevin action

In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro
apparently likens a replevin action to an unlawful detainer.
For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond,
pursuant to Section 2, Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other person who personally
knows the facts:
(a) That the applicant is the owner of the property claimed, particularly describing it, or is
entitled to the possession thereof;
(b) That the property is wrongfully detained by the adverse party, alleging the cause of
detention thereof according to the best of his knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant
to law, or seized under a writ of execution or preliminary attachment, or otherwise placed
under custodia legis, or if so seized, that it is exempt from such seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in double the value of the
property as stated in the affidavit aforementioned, for the return of the property to the
adverse party if such return be adjudged, and for the payment to the adverse party of such
sum as he may recover from the applicant in the action.
We see nothing in these provisions which requires the applicant to make a prior demand on
the possessor of the property before he can file an action for a writ of replevin. Thus, prior
demand is not a condition precedent to an action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a prior demand is
necessary, as he has already admitted in his Answers that he had received the letters that
Karen Go sent him, demanding that he either pay his unpaid obligations or return the leased

motor vehicles. Navarros position that a demand is necessary and has not been made is
therefore totally unmeritorious.
WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs
against petitioner Roger V. Navarro.
SO ORDERED.

Pantranco vs Standard Issurance

G.R. No. 140746
March 16, 2005
PANTRANCO NORTH EXPRESS, INC., and ALEXANDER BUNCAN, Petitioner,
vs.
STANDARD INSURANCE COMPANY, INC., and MARTINA GICALE, Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us is a petition for review on certiorari assailing the Decision1 dated July 23 1999 and
Resolution2 dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453, entitled
"Standard Insurance Company, Inc., and Martina Gicale vs. PANTRANCO North Express, Inc.,
and Alexander Buncan."
In the afternoon of October 28, 1984, Crispin Gicale was driving the passenger jeepney owned
by his mother Martina Gicale, respondent herein. It was then raining. While driving north
bound along the National Highway in Talavera, Nueva Ecija, a passenger bus, owned by
Pantranco North Express, Inc., petitioner, driven by Alexander Buncan, also a petitioner, was
trailing behind. When the two vehicles were negotiating a curve along the highway, the
passenger bus overtook the jeepney. In so doing, the passenger bus hit the left rear side of the
jeepney and sped away.
Crispin reported the incident to the Talavera Police Station and respondent Standard
Insurance Co., Inc. (Standard), insurer of the jeepney. The total cost of the repair was
P21,415.00, but respondent Standard paid only P8,000.00. Martina Gicale shouldered the
balance of P13,415.00.
Thereafter, Standard and Martina, respondents, demanded reimbursement from petitioners
Pantranco and its driver Alexander Buncan, but they refused. This prompted respondents to
file with the Regional Trial Court (RTC), Branch 94, Manila, a complaint for sum of money.
In their answer, both petitioners specifically denied the allegations in the complaint and
averred that it is the Metropolitan Trial Court, not the RTC, which has jurisdiction over the
case.

On June 5, 1992, the trial court rendered a Decision3 in favor of respondents Standard and
Martina, thus:
"WHEREFORE, and in view of the foregoing considerations, judgment is hereby rendered in
favor of the plaintiffs, Standard Insurance Company and Martina Gicale, and against
defendants Pantranco Bus Company and Alexander Buncan, ordering the latter to pay as
follows:
(1) to pay plaintiff Standard Insurance the amount of P8,000.00 with interest due thereon
from November 27, 1984 until fully paid;
(2) to pay plaintiff Martina Gicale the amount of P13,415.00 with interest due thereon from
October 22, 1984 until fully paid;
(3) to pay the sum of P10,000.00 for attorneys fees;
(4) to pay the expenses of litigation and the cost of suit.
SO ORDERED."
On appeal, the Court of Appeals, in a Decision4 dated July 23, 1999, affirmed the trial courts
ruling, holding that:
"The appellants argue that appellee Gicales claim of P13,415.00 and appellee insurance
companys claim of P8,000.00 individually fell under the exclusive original jurisdiction of the
municipal trial court. This is not correct because under the Totality Rule provided for under
Sec. 19, Batas Pambansa Bilang 129, it is the sum of the two claims that determines the
jurisdictional amount.
xxx
In the case at bench, the total of the two claims is definitely more than P20,000.00 which at
the time of the incident in question was the jurisdictional amount of the Regional Trial Court.

Appellants contend that there was a misjoinder of parties. Assuming that there was, under the
Rules of Court (Sec. 11, Rule 7) as well as under the Rules of Civil Procedure (ditto), the same
does not affect the jurisdiction of the court nor is it a ground to dismiss the complaint.
xxx
It does not need perspicacity in logic to see that appellees Gicales and insurance companys
individual claims against appellees (sic) arose from the same vehicular accident on October 28,
1984 involving appellant Pantrancos bus and appellee Gicales jeepney. That being the case,
there was a question of fact common to all the parties: Whose fault or negligence caused the
damage to the jeepney?
Appellants submit that they were denied their day in court because the case was deemed
submitted for decision "without even declaring defendants in default or to have waived the
presentation of evidence." This is incorrect. Of course, the court did not declare defendants in
default because that is done only when the defendant fails to tender an answer within the
reglementary period. When the lower court ordered that the case is deemed submitted for
decision that meant that the defendants were deemed to have waived their right to present
evidence. If they failed to adduce their evidence, they should blame nobody but themselves.
They failed to be present during the scheduled hearing for the reception of their evidence
despite notice and without any motion or explanation. They did not even file any motion for
reconsideration of the order considering the case submitted for decision.
Finally, contrary to the assertion of the defendant-appellants, the evidence preponderantly
established their liability for quasi-delict under Article 2176 of the Civil Code."
Petitioners filed a motion for reconsideration but was denied by the Appellate Court in a
Resolution dated November 4, 1999.
Hence, this petition for review on certiorari raising the following assignments of error:

I
WHETHER OR NOT THE TRIAL COURT HAS JURISDICTION OVER THE SUBJECT OF THE ACTION
CONSIDERING THAT RESPONDENTS RESPECTIVE CAUSE OF ACTION AGAINST PETITIONERS DID

NOT ARISE OUT OF THE SAME TRANSACTION NOR ARE THERE QUESTIONS OF LAW AND FACTS
COMMON TO BOTH PETITIONERS AND RESPONDENTS.
II
WHETHER OR NOT PETITIONERS ARE LIABLE TO RESPONDENTS CONSIDERING THAT BASED ON
THE EVIDENCE ADDUCED AND LAW APPLICABLE IN THE CASE AT BAR, RESPONDENTS HAVE
NOT SHOWN ANY RIGHT TO THE RELIEF PRAYED FOR.
III
WHETHER OR NOT PETITIONERS WERE DEPRIVED OF THEIR RIGHT TO DUE PROCESS."
For their part, respondents contend that their individual claims arose out of the same
vehicular accident and involve a common question of fact and law. Hence, the RTC has
jurisdiction over the case.
I
Petitioners insist that the trial court has no jurisdiction over the case since the cause of action
of each respondent did not arise from the same transaction and that there are no common
questions of law and fact common to both parties. Section 6, Rule 3 of the Revised Rules of
Court,5 provides:
"Sec. 6. Permissive joinder of parties. All persons in whom or against whom any right to relief
in respect to or arising out of the same transaction or series of transactions is alleged to exist,
whether jointly, severally, or in the alternative, may, except as otherwise provided in these
Rules, join as plaintiffs or be joined as defendants in one complaint, where any question of law
or fact common to all such plaintiffs or to all such defendants may arise in the action; but the
court may make such orders as may be just to prevent any plaintiff or defendant from being
embarrassed or put to expense in connection with any proceedings in which he may have no
interest."
Permissive joinder of parties requires that: (a) the right to relief arises out of the same
transaction or series of transactions; (b) there is a question of law or fact common to all the

plaintiffs or defendants; and (c) such joinder is not otherwise proscribed by the provisions of
the Rules on jurisdiction and venue.6
In this case, there is a single transaction common to all, that is, Pantrancos bus hitting the rear
side of the jeepney. There is also a common question of fact, that is, whether petitioners are
negligent. There being a single transaction common to both respondents, consequently, they
have the same cause of action against petitioners.
To determine identity of cause of action, it must be ascertained whether the same evidence
which is necessary to sustain the second cause of action would have been sufficient to
authorize a recovery in the first.7 Here, had respondents filed separate suits against
petitioners, the same evidence would have been presented to sustain the same cause of
action. Thus, the filing by both respondents of the complaint with the court below is in order.
Such joinder of parties avoids multiplicity of suit and ensures the convenient, speedy and
orderly administration of justice.
Corollarily, Section 5(d), Rule 2 of the same Rules provides:
"Sec. 5. Joinder of causes of action. A party may in one pleading assert, in the alternative or
otherwise, as many causes of action as he may have against an opposing party, subject to the
following conditions:
xxx
(d) Where the claims in all the causes of action are principally for recovery of money the
aggregate amount claimed shall be the test of jurisdiction."
The above provision presupposes that the different causes of action which are joined accrue in
favor of the same plaintiff/s and against the same defendant/s and that no misjoinder of
parties is involved.8 The issue of whether respondents claims shall be lumped together is
determined by paragraph (d) of the above provision. This paragraph embodies the "totality
rule" as exemplified by Section 33 (1) of B.P. Blg. 1299 which states, among others, that
"where there are several claims or causes of action between the same or different parties,
embodied in the same complaint, the amount of the demand shall be the totality of the claims
in all the causes of action, irrespective of whether the causes of action arose out of the same
or different transactions."

As previously stated, respondents cause of action against petitioners arose out of the same
transaction. Thus, the amount of the demand shall be the totality of the claims.
Respondent Standards claim is P8,000.00, while that of respondent Martina Gicale is
P13,415.00, or a total of P21,415.00. Section 19 of B.P. Blg. 129 provides that the RTC has
"exclusive original jurisdiction over all other cases, in which the demand, exclusive of interest
and cost or the value of the property in controversy, amounts to more than twenty thousand
pesos (P20,000.00)." Clearly, it is the RTC that has jurisdiction over the instant case. It bears
emphasis that when the complaint was filed, R.A. 7691 expanding the jurisdiction of the
Metropolitan, Municipal and Municipal Circuit Trial Courts had not yet taken effect. It became
effective on April 15, 1994.
II
The finding of the trial court, affirmed by the Appellate Court, that petitioners are negligent
and thus liable to respondents, is a factual finding which is binding upon us, a rule wellestablished in our jurisprudence. It has been repeatedly held that the trial court's factual
findings, when affirmed by the Appellate Court, are conclusive and binding upon this Court, if
they are not tainted with arbitrariness or oversight of some fact or circumstance of
significance and influence. Petitioners have not presented sufficient ground to warrant a
deviation from this rule.10
III
There is no merit in petitioners contention that they were denied due process. Records show
that during the hearing, petitioner Pantrancos counsel filed two motions for resetting of trial
which were granted by the trial court. Subsequently, said counsel filed a notice to withdraw.
After respondents had presented their evidence, the trial court, upon petitioners motion,
reset the hearing to another date. On this date, Pantranco failed to appear. Thus, the trial
court warned Pantranco that should it fail to appear during the next hearing, the case will be
submitted for resolution on the basis of the evidence presented. Subsequently, Pantrancos
new counsel manifested that his client is willing to settle the case amicably and moved for
another postponement. The trial court granted the motion. On the date of the hearing, the
new counsel manifested that Pantrancos employees are on strike and moved for another

postponement. On the next hearing, said counsel still failed to appear. Hence, the trial court
considered the case submitted for decision.
We have consistently held that the essence of due process is simply an opportunity to be
heard, or an opportunity to explain ones side or an opportunity to seek for a reconsideration
of the action or ruling complained of.11
Petitioner Pantranco filed an answer and participated during the trial and presentation of
respondents evidence. It was apprised of the notices of hearing issued by the trial court.
Indeed, it was afforded fair and reasonable opportunity to explain its side of the controversy.
Clearly, it was not denied of its right to due process. What is frowned upon is the absolute lack
of notice and hearing which is not present here.
WHEREFORE, the petition is DENIED. The assailed Decision dated July 23 1999 and Resolution
dated November 4, 1999 of the Court of Appeals in CA-G.R. CV No. 38453 are hereby
AFFIRMED. Costs against petitioners.
SO ORDERED.
Panganiban, (Chairman), Corona, Carpio-Morales, and Garcia, JJ., concur.

Imson vs CA
G.R. No. 106436 December 3, 1994
VIRGILIO D. IMSON, petitioner,
vs.
HON. COURT OF APPEALS, HOLIDAY HILLS STOCK AND BREEDING FARM CORPORATION, FNCB
FINANCE CORPORATION, respondents.
Polotan Law Office for petitioner.
Felix R. Solomon for private respondents.
PUNO, J.:
The case at bench arose from a vehicular collision on December 11, 1983, involving
petitioner's Toyota Corolla and a Hino diesel truck registered under the names of private
respondents FNCB Finance Corporation and Holiday Hills Stock and Breeding Farm
Corporation. The collision seriously injured petitioner and totally wrecked his car.
On January 6, 1984, petitioner filed with the RTC Baguio City 1 a Complaint for Damages 2
Sued were private respondents as registered owners of the truck; truck driver Felix B. Calip, Jr.;
the beneficial owners of the truck, Gorgonio Co Adarme, Felisa T. Co (also known as Felisa
Tan), and Cirilia Chua Siok Bieng, and the truck insurer, Western Guaranty Corporation.
The Complaint prayed that defendants be ordered to pay, jointly and severally, two hundred
seventy thousand pesos (P270,000.00) as compensatory damages, fifty thousand pesos
(P50,000.00) each as moral and exemplary damages, and attorney's fees, litigation expenses,
and cost of suit. 8
Defendants driver and beneficial owners failed to answer and were declared in default. 4 On
May 29, 1987, however, petitioner and defendant insurer, entered into a compromise
agreement which provided, inter alia:
1. Defendant Western Guaranty Corporation (Western Guaranty for short) admits that
its total liability under the laws and the insurance contract sued upon is P70,000.00;

2. In full settlement of its liability under the laws and the said insurance contract,
defendant Western Guaranty shall pay plaintiff (herein petitioner) the amount of
P70,000.00 upon the signing of this compromise agreement;
3. This compromise agreement shall in no way waive nor prejudice plaintiffs (herein
petitioner's) rights to proceed against the other defendants with respect the remainder
of his claims;
4. This compromise agreement shall be a full and final settlement of the issues between
plaintiff (herein petitioner) and defendant Western Guaranty in their complaint and
answer and, from now on, they shall have no more right against one another except the
enforcement of this compromise agreement.
In consequence of the compromise agreement, the trial court dismissed the Complaint for
Damages against Western Guaranty Corporation on June 16, 1987. 8 A copy of the Order of
dismissal was received by private respondent Holiday Hills Stock and Breeding Farm
Corporation on July 13, 1987. Nearly eighteen (18) months later, said private respondent
moved to dismiss the case against all the other defendants. It argued that since they are all
indispensable parties under a common cause of action, the dismissal of the case against
defendant insurer must result in the dismissal of the suit against all of them. The trial court
denied the motion.
Private respondent Holiday Hills Stock and Breeding Farm Corporation assailed the denial
order through a Petition for Certiorari, Prohibition and Mandamus With Restraining Order filed
with respondent Court of Appeals. The Petition was docketed as CA-G.R. SP No. 17651. On July
10, 1992, the Court of Appeals, 7 through its Special Sixth Division, 8 reversed the trial court,
as it ruled:
The petitioner (herein private respondent Holiday Hills Stock and Breeding Farm Corporation)
cites the doctrine laid down in Lim Tanhu v. Hon. Ramolete, 66 SCRA 425, as applied later in Co
v. Acosta, 134 SCRA 185, to support its averment that the court a quo gravely abused its
discretion in refusing to dismiss the case.
Essentially, the doctrine adverted to essays that in a common cause of action where all the
defendants are indispensable parties, the court's power to act is integral and cannot be split,
such that it cannot relieve any of them and at the same time render judgment against the rest.

We find applicability of the doctrine to the case at bar.

A cursory reading of the complaint . . . reveals that the cause of action was the alleged bad
faith and gross negligence of the defendants resulting in the injuries complained of and for
which the action for damages was filed. The inclusion of Western Guaranty Corporation was
vital to the claim, it being the insurer of the diesel truck without which, the claim could be set
for naught. Stated otherwise, it is an indispensable party as the petitioner (herein private
respondent stock and breeding farm corporation) . . . . Private respondent's (herein
petitioner's argument that the said insurance company was sued on a different cause of
action, i.e., its bounden duty under the insurance law to pay or settle claims arising under its
policy coverage, is untenable, for the cited law perceives the existence of a just cause, and
according to the answer filed by the Western Guaranty Corporation . . . the proximate cause of
the accident was the fault of the plaintiff (herein petitioner), hence it was not liable for
damages. There is in fact a congruence of affirmative defense among the answering
defendants.
Moreover, it is undisputed that the injury caused is covered by the insurance company
concerned. Thus, when the said insurer settled its liability with the private respondent
(petitioner herein) . . . , the other defendants, as the insured and indispensable parties to a
common cause of action, necessarily benefited from such settlement including the defaulted
defendants, for as stated in the aforecited cases, it is deemed that anything done by or for the
answering defendant is done by or for the ones in default since it is implicit in the rule that
default is in essence a mere formality that deprives them of no more than to take part in the
trial, but if the complaint is dismissed as to the answering defendant, it should also be
dismissed as to them. 9 (Citations omitted.)
Petitioner now comes to this Court with the following assignments of error:
A.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT
THE DEFENDANTS NO. 248-R ARE INDISPENSABLE PARTIES;
B.

RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT

IN CIVIL CASE NO. 248-R THERE IS A COMMON CAUSE OF ACTION AGAINST THE
DEFENDANTS THEREIN;
C.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT
IN CIVIL CASE NO. 248-R THE RULING OF THIS HONORABLE COURT IN LIM TAN HU VS.
RAMOLETE IS APPLICABLE;
D.
RESPONDENT COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN RULING THAT
THE DOCTRINE OF ESTOPPEL AND LACHES ON MATTERS OF JURISDICTION IS NOT
APPLICABLE IN CIVIL CASE NO. 248-R.
There is merit to the petition,.
In the case of Lim Tanhu v. Ramolete, 66 SCRA 425, 458-459 (1975) this court held that:
. . . (I)n all instances where a common cause of action is alleged against several defendants,
some of whom answer and the others do not, the latter or those in default acquire a vested
right not only to own the defense interposed in the answer of their co-defendant or codefendants not in default but also to expect a result of the litigation totally common with
them in kind and in amount whether favorable or unfavorable. The substantive unity of the
plaintiffs cause against all the defendants is carried through to its adjective phase as
ineluctably demanded by the homogeneity and indivisibility of justice itself. . . . The integrity of
the common cause of action against all the defendants and the indispensability of all of them
in the proceedings do not permit any possibility of waiver of the plaintiffs right only as to one
or some of them, without including all of them, and so, as a rule, withdrawal must be deemed
to be a confession of weakness as to all. . . . . Where all the defendants are indispensable
parties, for which reason the absence of any of them in the case would result in the court
losing its competency to act validly, any compromise that the plaintiff might wish to make with
any of them must, as a matter of correct procedure, have to await until after the rendition of
the judgment, at which stage the plaintiff may then treat the matter of its execution and the
satisfaction of his claim as variably as he might please. Accordingly, in the case now before Us
together with the dismissal of the complaint against the non-defaulted defendants, the court

should have ordered also the dismissal thereof as to petitioner (referring to the defaulting
defendants in the case).
In sum, Lim Tanhu states that where a complaint alleges a common cause of action against
defendants who are all indispensable parties to the case, its dismissal against any of them by
virtue of a compromise agreement with the plaintiff necessarily results in the dismissal of the
case against the other defendants, including those in default. The ruling is rooted on the
rationale that the court's power to act in a case involving a common cause of action against
indispensable parties "is integral and cannot be split such that it cannot relieve any of them
and at the same time render judgment against the rest. 10
For Lim Tanhu to apply to the case at bench, it must be established that: (1) petitioner has
common cause of action against private respondents and the other defendants in Civil Case
No. 248-R; and (2) all the defendants are indispensable parties to the case.
Cause of action has a fixed meaning in this jurisdiction. It is the delict or wrong by which the
right of the plaintiff is violated by the defendant. 11 The question as to whether a plaintiff has
a cause of action is determined by the averments in the pleadings pertaining to the acts of the
defendant. Whether such acts give him a right of action is determined by substantive law. 12
In the case at bench, it is clear that petitioner has different and separate causes of action
against the defendants in the case. The allegations in the Complaint show that petitioner seeks
to recover from the truck driver for his wrong which caused injury to petitioner and his car.
The cause of action against him is based on quasi-delict under Article 2176 of the New Civil
Code. Quasi-delict, too, is the basis of the cause of action against defendants beneficial and
registered owners. But in their case, it is Article 2180 of the same Code which governs the
rights of the parties.
However, with respect to defendant Western Guaranty Corporation, petitioner's cause of
action is based on contract. He seeks to recover from the insurer on the basis of the third party
liability clause of its insurance contract with the owners of the truck. This is acknowledged by
the second paragraph of the compromise agreement between petitioner and defendant
insurer, thus:

2. In full settlement of its liability under the laws and the said insurance contract, defendant
Western Guaranty shall pay plaintiff (herein petitioner) the amount of P70,000.00 upon the
signing of this compromise agreement.
Quite clearly then, Lim Tanhu will not apply to the case at bench for there is no showing that
petitioner has a common cause of action against the defendants in Civil Case No. 248-R.
But this is not all. Defendants in Civil Case No. 248-R are not all indispensable parties. An
indispensable party is one whose interest will be affected by the court's action in the litigation,
and without whom no final determination of the case can be had. The party's interest in the
subject matter of the suit and in the relief sought are so inextricably intertwined with the
other parties' that his legal presence as a party to the proceeding is an absolute necessity. 13
In his absence there cannot be a resolution of the dispute of the parties before the court
which is effective, complete, or equitable. 14
Conversely, a party is not indispensable to the suit if his interest in the controversy or subject
matter is distinct and divisible from the interest of the other parties and will not necessarily be
prejudiced by a judgment which does complete justice to the parties in court. 15 He is not
indispensable if his presence would merely permit complete relief between him and those
already parties to the action, or will simply avoid multiple litigation. 16
It is true that all of petitioner's claims in Civil Case No. 248-R is premised on the wrong
committed by defendant truck driver. Concededly, the truck driver is an indispensable party to
the suit. The other defendants, however, cannot be categorized as indispensable parties. They
are merely proper parties to the case. Proper parties have been described as parties whose
presence is necessary in order to adjudicate the whole controversy, but whose interests are so
far separable that a final decree can be made in their absence without affecting them. 17 It is
easy to see that if any of them had not been impleaded as defendant, the case would still
proceed without prejudicing the party not impleaded. Thus, if petitioner did not sue Western
Guaranty Corporation, the omission would not cause the dismissal of the suit against the other
defendants. Even without the insurer, the trial court would not lose its competency to act
completely and validly on the damage suit. The insurer, clearly, is not an indispensable party in
Civil Case No. 248-R.
IN VIEW WHEREOF, the instant petition is GRANTED. The Decision, dated July 10, 1992, of the
Court of Appeals in CA-G.R. SP No. 17651 is REVERSED AND SET ASIDE. The Complaint in Civil

Case No. 248-R is REINSTATED and REMANDED to the trial court for further proceedings. No
costs.
SO ORDERED.
Narvasa C.J., Regalado and Mendoza, JJ., concur.

Garcia vs Reyes
G.R. No. 5592
JUAN GARCIA, plaintiff-appellant,
vs.
FRANCISCO REYES, ET AL., defendants-appellees.
Hartigan & Rohde and Roman Lacson, for appellant.
Ramon Sotelo, for appellees.
TORRES, J.:
On November 21, 1907, Juan Garcia filed a written complaint with the Court of First Instance
of this city, which, after being answered by the defendants, was amended by another of
November 7, 1908. Said amended complaint alleges that on September 9, 1907. Francisco
Reyes, the defendants' father, was the owner of a house of strong materials, built on leased
land belonging to the Tuason estate and situated on Calle Sulucan, at No. 86, district of
Sampaloc, Manila; that said property is bounded along its front by the street just named, and
the right, left, and back, by lands of the said estate, and has frontage of 21 meters and 80
centimeters and a depth of 8 meters; that the house was constructed in 1894 by the said
Reyes, married since 1887 to Carmen Carvajal, with money derived from the conjugal
partnership arising out of the said marriage; that on the said date of September 9 the house
aforementioned was sold at public auction by the sheriff of Manila in compliance with a
judgment and execution rendered and issued against the said Francisco Reyes, and was
adjudicated to the plaintiff for P4,000, the selling price; that prior to such sale, Francisco
Reyes, as the legal representative of his aforementioned wife, and for the purpose of eluding
payment to the plaintiff of the sum specified in the judgment, transferred the said house to
the attorneys, Messrs. Chicote, Miranda & Sierra, and these gentlemen then transferred it in
turn to Rafael Sierra, one of the members of the said firm, who afterwards made a gift of the
said house to the minor defendants. The complaint alleges that these successive transfer of
the property to Chicote, Miranda & Sierra, to Sierra, and finally to the defendants, are null and
void, for the reason that the said house never belonged to the said Carmen Carvajal. The
plaintiff therefore prays that the said transfers be declared null and void, and that it be
declared that the defendants have no right whatever to the said house and that the plaintiff is
the owner thereof.

Ramon Sotelo, the guardian ad litem of the defendants, Francisco Reyes, Maria de los Dolores,
Jose Reyes, Maria Luisa Reyes, Manuel Reyes, and Carlos Reyes, in his answer to the
complaint, of November 18, 1908, set forth: That he denied generally and specifically all the
allegations of the amended complaint, in so far as they were not in harmony with the
amended answer, as well as each and all of the allegations contained in paragraphs 1, 2, 3, and
5 of the said amended complaint, and also each and all of the allegations of paragraph 4
thereof, in so far as they did not agree with his answer. As a special defense, he alleged: That
on September 22, 1894, Dolores Carvajal y Guivelondo constructed, with her own funds, the
building mentioned; that about the year 1905, the law firm composed of Attorneys Chicote,
Miranda & Sierra rendered professional services to Francisco Reyes y Mijares, the father of the
defendants and husband of the aforesaid Dolores Carvajal, earning therefor fees in the sum of
P11,000 and incurring expenses, chargeable to their client, amounting to P33; that on
November 10, 1905, Francisco Reyes y Mijares, by virtue of a power of attorney executed in
his favor by his wife, deeded the house in question to the said firm of Chicote, Miranda &
Sierra, in payment of the said fees; that about the month of May, 1906, Rafael Sierra, one of
the members of the said firm, ceased to belong thereto and, as a result of a settlement
effected between these law partners, he was awarded, together with other property, the
respective shares which Miranda and Chicote had in the house mentioned; that subsequently
Sierra, in consideration of the ties of affection and love which had united him with the
defendants and their parents, and because of the innumerable kindnesses and favors which he
had received from the latter, made a free, absolute and irrevocable gift of the property
described to the minor defendants; that all the said transfers were made in good faith and for
just motives, and that the plaintiff Garcia was not a party to any of the contracts, the
annulment of which is asked, nor was he either a principal or a subsidiary obligor. The said
Ramon Sotelo therefore prayed that the defendants be absolved from the amended
complaint.
The case having come to trial and testimony been produced by both parties, the judge, by
order of May 11, 1909, dismissed the said amended complaint with the costs against the
plaintiff, who, on being notified thereof, duly excepted thereto and announced his intention to
file a bill of exceptions which, when presented, was approved, certified and forwarded to the
clerk of this court.
As may be seen from the foregoing review of the proceedings, the plaintiff seeks an
annulment of the transfers made of the house that belonged to Francisco Reyes, the
defendants' father, and which was sold at public auction by the sheriff of this city to the

plaintiff, Juan Garcia, who contends that the minor defendants have no right whatever to the
said house, inasmuch as he is the sole owner thereof.
The issues of fact and of law relative to the fundamental features of this litigation, and the
questions as to whether the plaintiff is or is not entitled to ask for the annulment of the
successive transfers of the said house, and as to its donation to the minor defendants, will be
resolved at the proper time when the final decision is rendered, which will also decide
whether the plaintiff, as a result of the said sale effected by the sheriff, is the legitimate owner
of the house referred to.
However, in order to bring this suit duly to a close, it is imperative to determine the only
question raised in connection with the pending appeal, to wit, whether all the persons who
intervened in the matter of the transfers and donation herein referred to, are or are not
necessary parties to this suit, since it is asked in the complaint that the said transfers and
donation be declared null and void an indispensable declaration for the purpose, in a
proper case, of concluding the plaintiff to be the sole owner of the house in dispute.
If such a declaration of annulment can directly affect the persons who made and who were
concerned in the said transfers, nothing could be more proper and just than to hear them in
the litigation, as parties interested in maintaining the validity of those transactions, and
therefore, whatever be the nature of the judgment rendered, Francisco Reyes, Dolores
Carvajal, Alfredo Chicote, Vicente Miranda, and Rafael Sierra, besides the said minors, must be
included in the case as defendants.
Section 114 of the Code of Civil Procedure reads:
Every action must be prosecuted in the name of the real party in interest . . .
Any person should be made a defendant who has or claims an interest in the controversy or
the subject matter thereof adverse to the plaintiff, or who is a necessary party to a complete
determination or settlement of the questions involved therein. . . .
Section 122 of the same code prescribes:
The court may determine any controversy between parties before it, if it can be done without
prejudice to the rights of others, or by preserving their rights for future action; but, when a

complete determination of the controversy can not be had without the presence of other
parties, the court must order them to be brought in, and to that end may order amended or
supplemental pleadings, or a cross complaint, to be filed, and summons therein to be duly
issued and served.
In the order from which appeal is taken it is admitted that it would be impossible to decide the
allegations made in the complaint without a previous hearing of all the parties interested who
may be affected by the final decision of the present litigation; wherefore the provisions of law
contained in the two preinserted sections must be complied with, and if the plaintiff shall so
include the said parties in a new amended complaint, the judge, fulfilling the requirements of
the law, must, in accordance therewith, continue the trial through all its proceedings.
The nonobservance of the rules established by the code of Procedure for the substantiation
and proper decision of causes in which questions of controversy between the parties are
ventilated prevents the due determination of the same with respect to the fundamental issues
of the litigation and makes it necessary to decide, in the first place, such questions as relate to
the form of the action. Obedience to the rules of procedure, established by law for the
substantiation and proper decision of a cause, is a matter of public policy.
It is to be presumed that the parties hereinbefore mentioned, and the representative of the
said minors, are directly interested in sustaining the validity of the deed, transfers, and
donation above-mentioned; wherefore, now that it is asked that the same be annulled, in
order that they may defend themselves, they must be considered as necessary parties to this
suit, since, without their being heard or their intervention, it would be impossible, validly to
declare, in a proper case, the said transfers and donation null and void, nor, without such a
declaration, could the prayer be granted in case it were proper so to do, which proposes that
the plaintiff be found to be the sole owner of the property. (Sanidad vs. Cabotaje, 5 Phil. Rep.,
204; Ruguian vs. Ruguian, 9 Phil. Rep., 527.)
For the foregoing reasons, it is proper, in our opinion, with a revocation of the order of
dismissal appealed from, to return the case to the Court of First Instance, in order that, if the
plaintiff should amend his complaint by including therein as defendants the representative of
the minors and all the parties mentioned in this decision as being interested in the present
litigation, the court may continue the trial and in due time render such judgment as the law
and the evidence demand. So ordered.

Arellano, C.J., Johnson, Moreland and Trent, JJ., concur.

Aldawan vs Aldawan
G.R. No. 161916
January 20, 2006
ARNELITO ADLAWAN, Petitioner,
vs.
EMETERIO M. ADLAWAN and NARCISA M. ADLAWAN, Respondents.

DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the September 23, 2003 Decision1 of the Court of Appeals
in CA-G.R. SP No. 74921 which set aside the September 13, 2002 Decision2 of the Regional
Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No. CEB-27806, and reinstated the
February 12, 2002 Judgment3 of the Municipal Trial Court (MTC) of Minglanilla, Metro Cebu, in
Civil Case No. 392, dismissing petitioner Arnelito Adlawans unlawful detainer suit against
respondents Emeterio and Narcisa Adlawan. Likewise questioned is the January 8, 2004
Resolution4 of the Court of Appeals which denied petitioners motion for reconsideration.
The instant ejectment suit stemmed from the parties dispute over Lot 7226 and the house
built thereon, covered by Transfer Certificate of Title No. 8842,5 registered in the name of the
late Dominador Adlawan and located at Barrio Lipata, Municipality of Minglanilla, Cebu. In his
complaint, petitioner claimed that he is an acknowledged illegitimate child6 of Dominador
who died on May 28, 1987 without any other issue. Claiming to be the sole heir of Dominador,
he executed an affidavit adjudicating to himself Lot 7226 and the house built thereon.7 Out of
respect and generosity to respondents who are the siblings of his father, he granted their plea
to occupy the subject property provided they would vacate the same should his need for the
property arise. Sometime in January 1999, he verbally requested respondents to vacate the
house and lot, but they refused and filed instead an action for quieting of title8 with the RTC.
Finally, upon respondents refusal to heed the last demand letter to vacate dated August 2,
2000, petitioner filed the instant case on August 9, 2000.9
On the other hand, respondents Narcisa and Emeterio, 70 and 59 years of age, respectively,10
denied that they begged petitioner to allow them to stay on the questioned property and

stressed that they have been occupying Lot 7226 and the house standing thereon since birth.
They alleged that Lot 7226 was originally registered in the name of their deceased father,
Ramon Adlawan11 and the ancestral house standing thereon was owned by Ramon and their
mother, Oligia Maacap Adlawan. The spouses had nine12 children including the late
Dominador and herein surviving respondents Emeterio and Narcisa. During the lifetime of
their parents and deceased siblings, all of them lived on the said property. Dominador and his
wife, Graciana Ramas Adlawan, who died without issue, also occupied the same.13 Petitioner,
on the other hand, is a stranger who never had possession of Lot 7226.
Sometime in 1961, spouses Ramon and Oligia needed money to finance the renovation of
their house. Since they were not qualified to obtain a loan, they transferred ownership of Lot
7226 in the name of their son Dominador who was the only one in the family who had a
college education. By virtue of a January 31, 1962 simulated deed of sale,14 a title was issued
to Dominador which enabled him to secure a loan with Lot 7226 as collateral. Notwithstanding
the execution of the simulated deed, Dominador, then single, never disputed his parents
ownership of the lot. He and his wife, Graciana, did not disturb respondents possession of the
property until they died on May 28, 1987 and May 6, 1997, respectively.
Respondents also contended that Dominadors signature at the back of petitioners birth
certificate was forged, hence, the latter is not an heir of Dominador and has no right to claim
ownership of Lot 7226.15 They argued that even if petitioner is indeed Dominadors
acknowledged illegitimate son, his right to succeed is doubtful because Dominador was
survived by his wife, Graciana.16
On February 12, 2002, the MTC dismissed the complaint holding that the establishment of
petitioners filiation and the settlement of the estate of Dominador are conditions precedent
to the accrual of petitioners action for ejectment. It added that since Dominador was survived
by his wife, Graciana, who died 10 years thereafter, her legal heirs are also entitled to their
share in Lot 7226. The dispositive portion thereof, reads:
In View of the foregoing, for failure to prove by preponderance of evidence, the plaintiffs
cause of action, the above-entitled case is hereby Ordered DISMISSED.
SO ORDERED.

On appeal by petitioner, the RTC reversed the decision of the MTC holding that the title of
Dominador over Lot 7226 cannot be collaterally attacked. It thus ordered respondents to turn
over possession of the controverted lot to petitioner and to pay compensation for the use and
occupation of the premises. The decretal portion thereof, provides:
Wherefore, the Judgment, dated February 12, 2002, of the Municipal Trial Court of
Minglanilla, Cebu, in Civil Case No. 392, is reversed. Defendants-appellees are directed to
restore to plaintiff-appellant possession of Lot 7226 and the house thereon, and to pay
plaintiff-appellant, beginning in August 2000, compensation for their use and occupation of
the property in the amount of P500.00 a month.
So ordered.18
Meanwhile, the RTC granted petitioners motion for execution pending appeal19 which was
opposed by the alleged nephew and nieces of Graciana in their motion for leave to intervene
and to file an answer in intervention.20 They contended that as heirs of Graciana, they have a
share in Lot 7226 and that intervention is necessary to protect their right over the property. In
addition, they declared that as co-owners of the property, they are allowing respondents to
stay in Lot 7226 until a formal partition of the property is made.
The RTC denied the motion for leave to intervene.21 It, however, recalled the order granting
the execution pending appeal having lost jurisdiction over the case in view of the petition filed
by respondents with the Court of Appeals.22
On September 23, 2003, the Court of Appeals set aside the decision of the RTC and reinstated
the judgment of the MTC. It ratiocinated that petitioner and the heirs of Graciana are coowners of Lot 7226. As such, petitioner cannot eject respondents from the property via an
unlawful detainer suit filed in his own name and as the sole owner of the property. Thus
WHEEFORE, premises considered, the appealed Decision dated September 13, 2002 of the
Regional Trial Court of Cebu City, Branch 7, in Civil Case No. CEB-27806 is REVERSED and SET
ASIDE, and the Judgment dated February 12, 2002 of the Municipal Trial Court of Minglanilla,
Metro Cebu, in Civil Case No. 392 is REINSTATED. Costs against the respondent.
SO ORDERED.23

Petitioners motion for reconsideration was denied. Hence, the instant petition.
The decisive issue to be resolved is whether or not petitioner can validly maintain the instant
case for ejectment.
Petitioner averred that he is an acknowledged illegitimate son and the sole heir of Dominador.
He in fact executed an affidavit adjudicating to himself the controverted property. In ruling for
the petitioner, the RTC held that the questioned January 31, 1962 deed of sale validly
transferred title to Dominador and that petitioner is his acknowledged illegitimate son who
inherited ownership of the questioned lot. The Court notes, however, that the RTC lost sight of
the fact that the theory of succession invoked by petitioner would end up proving that he is
not the sole owner of Lot 7226. This is so because Dominador was survived not only by
petitioner but also by his legal wife, Graciana, who died 10 years after the demise of
Dominador on May 28, 1987.24 By intestate succession, Graciana and petitioner became coowners of Lot 7226.25 The death of Graciana on May 6, 1997, did not make petitioner the
absolute owner of Lot 7226 because the share of Graciana passed to her relatives by
consanguinity and not to petitioner with whom she had no blood relations. The Court of
Appeals thus correctly held that petitioner has no authority to institute the instant action as
the sole owner of Lot 7226.
Petitioner contends that even granting that he has co-owners over Lot 7226, he can on his
own file the instant case pursuant to Article 487 of the Civil Code which provides:
ART. 487. Any one of the co-owners may bring an action in ejectment.
This article covers all kinds of actions for the recovery of possession. Article 487 includes
forcible entry and unlawful detainer (accion interdictal), recovery of possession (accion
publiciana), and recovery of ownership (accion de reivindicacion).26 A co-owner may bring
such an action without the necessity of joining all the other co-owners as co-plaintiffs because
the suit is presumed to have been filed to benefit his co-owners. It should be stressed,
however, that where the suit is for the benefit of the plaintiff alone who claims to be the sole
owner and entitled to the possession of the litigated property, the action should be
dismissed.27
The renowned civilist, Professor Arturo M. Tolentino, explained

A co-owner may bring such an action, without the necessity of joining all the other co-owners
as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all. If the action is
for the benefit of the plaintiff alone, such that he claims possession for himself and not for the
co-ownership, the action will not prosper. (Emphasis added)28
In Baloloy v. Hular,29 respondent filed a complaint for quieting of title claiming exclusive
ownership of the property, but the evidence showed that respondent has co-owners over the
property. In dismissing the complaint for want of respondents authority to file the case, the
Court held that
Under Article 487 of the New Civil Code, any of the co-owners may bring an action in
ejectment. This article covers all kinds of actions for the recovery of possession, including an
accion publiciana and a reinvidicatory action. A co-owner may bring such an action without the
necessity of joining all the other co-owners as co-plaintiffs because the suit is deemed to be
instituted for the benefit of all. Any judgment of the court in favor of the co-owner will benefit
the others but if such judgment is adverse, the same cannot prejudice the rights of the
unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be
the sole owner and entitled to the possession thereof, the action will not prosper unless he
impleads the other co-owners who are indispensable parties.
In this case, the respondent alone filed the complaint, claiming sole ownership over the
subject property and praying that he be declared the sole owner thereof. There is no proof
that the other co-owners had waived their rights over the subject property or conveyed the
same to the respondent or such co-owners were aware of the case in the trial court. The trial
court rendered judgment declaring the respondent as the sole owner of the property and
entitled to its possession, to the prejudice of the latters siblings. Patently then, the decision of
the trial court is erroneous.
Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his
siblings, being co-owners of the property, as parties. The respondent failed to comply with the
rule. It must, likewise, be stressed that the Republic of the Philippines is also an indispensable
party as defendant because the respondent sought the nullification of OCT No. P-16540 which
was issued based on Free Patent No. 384019. Unless the State is impleaded as partydefendant, any decision of the Court would not be binding on it. It has been held that the
absence of an indispensable party in a case renders ineffective all the proceedings subsequent
to the filing of the complaint including the judgment. The absence of the respondents siblings,

as parties, rendered all proceedings subsequent to the filing thereof, including the judgment of
the court, ineffective for want of authority to act, not only as to the absent parties but even as
to those present.30
In the instant case, it is not disputed that petitioner brought the suit for unlawful detainer in
his name alone and for his own benefit to the exclusion of the heirs of Graciana as he even
executed an affidavit of self- adjudication over the disputed property. It is clear therefore that
petitioner cannot validly maintain the instant action considering that he does not recognize
the co-ownership that necessarily flows from his theory of succession to the property of his
father, Dominador.
In the same vein, there is no merit in petitioners claim that he has the legal personality to file
the present unlawful detainer suit because the ejectment of respondents would benefit not
only him but also his alleged co-owners. However, petitioner forgets that he filed the instant
case to acquire possession of the property and to recover damages. If granted, he alone will
gain possession of the lot and benefit from the proceeds of the award of damages to the
exclusion of the heirs of Graciana. Hence, petitioner cannot successfully capitalize on the
alleged benefit to his co-owners. Incidentally, it should be pointed out that in default of the
said heirs of Graciana, whom petitioner labeled as "fictitious heirs," the State will inherit her
share31 and will thus be petitioners co-owner entitled to possession and enjoyment of the
property.
The present controversy should be differentiated from the cases where the Court upheld the
right of a co-owner to file a suit pursuant to Article 487 of the Civil Code. In Resuena v. Court
of Appeals,32 and Sering v. Plazo,33 the co-owners who filed the ejectment case did not
represent themselves as the exclusive owner of the property. In Celino v. Heirs of Alejo and
Teresa Santiago,34 the complaint for quieting of title was brought in behalf of the co-owners
precisely to recover lots owned in common.35 Similarly in Vencilao v. Camarenta,36 the
amended complaint specified that the plaintiff is one of the heirs who co-owns the
controverted properties.
In the foregoing cases, the plaintiff never disputed the existence of a co-ownership nor
claimed to be the sole or exclusive owner of the litigated lot. A favorable decision therein
would of course inure to the benefit not only of the plaintiff but to his co-owners as well. The
instant case, however, presents an entirely different backdrop as petitioner vigorously

asserted absolute and sole ownership of the questioned lot. In his complaint, petitioner made
the following allegations, to wit:
3. The plaintiff was the only son (illegitimate) and sole heir of the late DOMINADOR ADLAWAN
who died intestate on 28 May 1987 without any other descendant nor ascendant x x x.
xxxx
5. Being the only child/descendant and, therefore, sole heir of the deceased Dominador
Adlawan, the plaintiff became the absolute owner, and automatically took POSSESSION, of the
aforementioned house and lot x x x. (Emphasis added)
Clearly, the said cases find no application here because petitioners action operates as a
complete repudiation of the existence of co-ownership and not in representation or
recognition thereof. Dismissal of the complaint is therefore proper. As noted by Former
Supreme Court Associate Justice Edgrado L. Paras "[i]t is understood, of course, that the action
[under Article 487 of the Civil Code] is being instituted for all. Hence, if the co-owner expressly
states that he is bringing the case only for himself, the action should not be allowed to
prosper."
Indeed, respondents not less than four decade actual physical possession of the questioned
ancestral house and lot deserves to be respected especially so that petitioner failed to show
that he has the requisite personality and authority as co-owner to file the instant case. Justice
dictates that respondents who are now in the twilight years of their life be granted possession
of their ancestral property where their parents and siblings lived during their lifetime, and
where they, will probably spend the remaining days of their life.
WHEREFORE, the petition is DENIED. The September 23, 2003 Decision of the Court of Appeals
in CA-G.R. SP No. 74921 which reinstated the February 12, 2002 Judgment of the Municipal
Trial Court of Minglanilla, Metro Cebu, dismissing petitioners complaint in Civil Case No. 392,
and its January 8, 2004 Resolution, are AFFIRMED.
SO ORDERED.

Arcelona vs CA
[G.R. No. 102900. October 2, 1997]
MARCELINO ARCELONA, TOMASA ARCELONA-CHIANG and RUTH ARCELONA, represented by
their attorney-in-fact, ERLINDA PILE, petitioner vs. COURT OF APPEALS, REGIONAL TRIAL
COURT OF DAGUPAN CITY, Branch XL, and MOISES FARNACIO, respondent.
DECISION
PANGANIBAN, J.:
What are the remedies and the grounds therefor to invalidate a final and executory judgment?
May extraneous matters, not found in the records of the original case, be used to void such
final judgment? Procedurally, may an independent action for annulment of a decision filed in
the Court of Appeals, prosper in the face of a claim that the remedy of intervention could have
been availed of in the regional trial court during the original proceedings? Are all the coowners pro indiviso of a real property indispensable parties? Does the non-inclusion of some
of such co-owners in a suit involving tenancy over said property constitute sufficient ground to
nullify the final decision rendered in such case?
The Case
These are the main questions raised in this petition for review of the Decision[1] in CA G.R. SP
No. 24846 promulgated on July 16, 1991 by the Court of Appeals[2] denying petitioners plea
for annulment of a final and executory judgment rendered by the Regional Trial Court of
Dagupan City, Branch 40, in Civil Case No. D-7240, and the Resolution[3] promulgated on
November 21, 1991 by the appellate court denying their motion for reconsideration.
The Facts
Petitioners Marcelino Arcelona, Tomasa Arcelona-Chiang and Ruth Arcelona are natural-born
Filipinos who are now naturalized Americans residing in California, U. S.A. Petitioner Ruth
Arcelona is the surviving spouse and legal heir of the deceased Benedicto Arcelona, brother of
Marcelino and Tomasa. Together with their three sisters - Pacita Arcelona-Olanday, Maria
Arcelona-Arellano and Natividad Arcelona-Cruz (hereinafter collectively referred to as
Olanday, et al.) -- petitioners are co-owners pro-indiviso of a fishpond which they inherited

from their deceased parents.[4] The six Arcelonas (two brothers and four sisters) are named as
co-owners in Transfer Certificate of Title No. 34341 which evidences ownership over the
fishpond.
On March 4, 1978, a contract of lease over the fishpond was executed between Cipriano
Tandoc and Olanday, et al. The lease contract was for a period of three (3) years but was
renewed up to February 2, 1984.[5]
Private Respondent Moises Farnacio was appointed in turn by Tandoc as caretaker-tenant of
the same fishpond, effective on the date the contract of lease was executed. After the
termination of the lease contract, the lessee (Tandoc) surrendered possession of the leased
premises to the lessors, Olanday, et al.
Three days thereafter, on February 7, 1984, Private Respondent Farnacio instituted Civil Case
D-7240 for peaceful possession, maintenance of security of tenure plus damages, with
motion for the issuance of an interlocutory order against Olanday, et al., before Respondent
Regional Trial Court of Dagupan City, Branch 40. The case was intended to maintain private
respondent as tenant of the fishpond.[6]
On October 31, 1984, the trial court rendered a decision in favor of private respondent, the
dispositive portion of which reads:[7]
WHEREFORE, in the light of the foregoing considerations, this Court hereby renders judgment
as follows; to wit:
1. Declaring and recognizing Moises Farnacio as tenant-caretaker over the fishpond in
question located at Lomboy District, Dagupan City;
2. Ordering the defendants to maintain plaintiff in the peaceful possession and cultivation of
said fishpond, with all the rights accorded and obligations imposed upon him by law;
3. Ordering the Branch Clerk of Court to withdraw and deliver to the plaintiff all the amounts
deposited with this Court; and
4. All others claims of the parties are hereby denied for lack of merit.

Olanday, et al. elevated the decision to the then Intermediate Appellate Court (IAC)[8] which
affirmed with slight modification the decision of the trial court on May 31, 1985. On appeal,
this Court[9] sustained the IAC decision in G.R. No. 71217. On May 25, 1991, after remand of
the case to the court of origin, private respondent was placed in possession of the entire
property covered by TCT 34341.
Petitioners then filed with Respondent Court of Appeals a petition for annulment of the
aforesaid judgment against private respondent and the implementing sheriff.[10] The case
was docketed as CA GR SP No. 24846. On May 8, 1991, Respondent Court issued a resolution
directing petitioners to implead as party defendant the Regional Trial Court of Dagupan City,
Branch 50, Dagupan City.[11] Respondent Court promulgated in due course the assailed
Decision and Resolution.
Dissatisfied, petitioners lodged this petition for review before us on May 10, 1992. On August
24, 1992, due course was granted to the petition and the parties filed their respective
memoranda.
The Issues
In their Memorandum dated November 7, 1992, petitioners allege that Respondent Court of
Appeals has committed the following errors:[12]
I. The Respondent Court of Appeals erred in ruling that the sole and only ground for
annulment of judgment is extrinsic fraud.
II. The Respondent Court of Appeals erred when it failed to consider that lack of due process
and jurisdiction over the persons of the petitioners are also valid grounds for annulment of
judgment.
III. In annulment of judgment the grounds should be based solely on the records of the case. It
is then an error for the Respondent Court of Appeals to consider matters extraneous to the
records of the case.
IV.The Respondent Court of Appeals erred in ruling that petitioners should have intervened in
the proceedings for issuance of writ of execution before the lower court.

V. The Respondent Court of Appeals erred in ruling that the petitioners are estopped or are
guilty of laches in questioning the decision of the lower court.
The Court believes that these five assigned errors may be condensed into three issues:
(1) May a final judgment be annulled on the ground of lack of jurisdiction (over the subject
matter and/or over the person of indispensable parties) and denial of due process, aside from
extrinsic fraud?
(2) May extraneous matters, not found in the records of the original case, be used in voiding
or defending the validity of such final judgment?
(3) Procedurally, will an independent action for annulment of the decision of the regional trial
court (which was affirmed both by the Court of Appeals and the Supreme Court) filed before
the Court of Appeals prosper, or is intervention before the court of origin the only remedy?
The Courts Ruling
The petition is meritorious.
First Issue: Grounds for Annulment of Final Judgment
Petitioners contend that Respondent Court of Appeals erred in decreeing the all-sweeping
and categorical pronouncement that the sole and only ground for annulment of judgment is
extrinsic fraud, and in thereby ignoring various Supreme Court rulings that a final judgment
may also be annulled for a) lack of jurisdiction over the subject matter; b) lack of jurisdiction
over the persons of necessary or indispensable parties; and c) lack of due process.[13]
Petitioners argue that, being co-owners of the subject property, they are indispensable
parties.[14] Inasmuch as they were not impleaded in Civil Case D-7240, the questioned
judgment of the lower court is void insofar as the petitioners are concerned for want of
jurisdiction over their persons and [for] lack of due process.[15] Petitioners do not see any
reason why a person who was not made a party at all could not assail the same proceedings
involving his property and affecting his rights and interests.[16]
Petitioners further maintain that since the case involves the personal status of the private
respondent, or relates to, or the subject of which is property within the Philippines, then the

petitioners as non-residents are entitled to extra-territorial service,[17] which is a due

process requirement. As they were never served with summons, to bar them [from]
questioning the proceedings of the lower court will be compounding injustice x x x. If a party
to a case can assail the proceedings for defective service of summons, the same right should
be afforded to a person who was not made a party at all.[18]
Public respondent disposed of petitioners above contention in this wise:[19]
First. Annulment of judgment, as the Supreme Court had occasion to rule, rests on a single
ground: extrinsic fraud (Canlas vs. Court of Appeals, 170 [sic] SCRA 160, 170). Islamic Da Wah
Council of the Phils. vs. Court of Appeals, 178, 186, citing Anuran vs. Aquino, 38 Phil. 29,
emphatically announced that there can be no question as to the right of any person adversely
affected by a judgment to maintain an action to enjoin its enforcement and to have it declared
a nullity on the ground of fraud and collusion practiced in obtaining the judgment when such
fraud is extrinsic or collateral to the matters involved in the issues raised at the trial which
resulted in such judgment.
xxx

xxx

xxx

Clearly, there is nothing in the petition that extrinsic fraud, as Macabingkil defines it, indeed
vitiated the proceedings during the trial of Civil Case No. D-7240.
The essence of the instant petition is worded by the petitioners as follows:
The common property involved in this case is covered by a Torrens Title, specifically
mentioning the co-owners thereof. To bind the entire property and the owners thereof, all
the registered owners must be impleaded. The private respondent ONLY IMPLEADED the
three co-owners, excluding the petitioners herein. For the petitioners to be bound by the
questioned decision, such would really be a derogation of their constitutional right to due
process. The questioned decision, too, suffers the fatal defect of utter want of jurisdiction.
Accordingly, since the petition for annulment of judgment is not based on the ground of
extrinsic fraud, the petition suffers from a basic and fundamental infirmity that deprives
petitioners of a valid cause of action against respondents herein.

We hold that the Court of Appeals erred in limiting the ground(s) for annulment of judgment
to only one, namely, extrinsic fraud. While it is true that in the cited cases of Canlas vs. CA[20]
and Islamic Da Wah Council of the Philippines. vs. Court of Appeals,[21] this Court said that a
judgment may be annulled on the ground of extrinsic or collateral fraud,[22] we should
hasten to add that in Macabingkil vs. Peoples Homesite and Housing Corporation,[23] where
the above ruling on annulment of judgment was based, we held that there are really three
ways by which a final judgment may be attacked: [24]
Under existing rules, there are three (3) ways by which a final and executory judgment may
be set aside. The first is by petition for relief from judgment under Rule 38 of the Revised Rules
of Court, when judgment has been taken against the party through fraud, accident, mistake or
excusable negligence, in which case the petition must be filed within sixty (60) days after the
petitioner learns of the judgment, but not more than six (6) months after such judgment was
entered. The second is by direct action to annul and enjoin the enforcement of the judgment.
This remedy presupposes that the challenged judgment is not void upon its face, but is entirely
regular in form, and the alleged defect is one which is not apparent upon its face or from the
recitals contained in the judgment.[fn: Abbain v. Chua, 22 SCRA 798; Cadano v. Cadano, 49
SCRA 33; Anuran v. Aquino, 38 Phil. 329] As explained in Banco Espaol-Filipino v. Palanca,[fn:
37 Phil. 291, 949] under accepted principles of law and practice, long recognized in American
courts, the proper remedy in such case, after the time for appeal or review has passed, is for
the aggrieved party to bring an action enjoining the judgment, if not already carried into
effect; or if the property has already been disposed of, he may institute suit to recover it. The
third is either a direct action, as certiorari, or by a collateral attack against the challenged
judgment (which is) is void upon its face, or that the nullity of the judgment is apparent by
virtue of its own recitals. As aptly explained by Justice Malcolm in his dissent in Banco
Espaol-Filipino v. Palanca, supra, A judgment which is void upon its face, and which requires
only an inspection of the judgment roll to demonstrate its want of vitality is a dead limb upon
the judicial tree, which should be lopped off, if the power so to do exists.
Since the aforementioned decision in Civil Case No. Q-5866 is not void upon its face, it may
only be annulled by direct action on the ground of fraud.
It is only extrinsic or collateral fraud, as distinguished from intrinsic fraud, however, that can
serve as a basis for the annulment of judgment. [Aring v. Original, 6 SCRA 1021, 1025; Velasco
v. Velasco, 2 SCRA 736] Fraud has been regarded as extrinsic or collateral, within the meaning
of the rule, where it is one the effect of which prevents a party from having a trial, or real

contest, or from presenting all of his case to the court, or where it operates upon matters
pertaining, not to the judgment itself, but to the manner in which it was procured so that
there is not a fair submission of the controversy.[46 Am. Jur. 913] x x x.
It is clear then that to set aside a final and executory judgment, there are three remedies
available to a litigant: first, a petition for relief from judgment under Rule 38 of the Rules of
Court [25] on grounds of fraud, accident, mistake and excusable negligence filed within sixty
(60) days from the time petitioner learns of the judgment but not more than six (6) months
from the entry thereof; second, a direct action to annul the judgment on the ground of
extrinsic fraud; and third, a direct action for certiorari or collateral attack to annul a judgment
that is void upon its face or void by virtue of its own recitals. Thus, Macabingkil did not
preclude the setting aside of a decision that is patently void where mere inspection of the
judgment is enough to demonstrate its nullity on grounds of want of jurisdiction or noncompliance with due process of law. This doctrine is recognized in other cases:[26]
x x x. There is no question that a final judgment may be annulled. There are, however,
certain requisites which must be established before a judgment can be the subject of an action
for annulment. Under the present procedure, aside from the reliefs provided in these two
sections (Secs. 1 & 2, Rule 38), there is no other means whereby the defeated party may
procure final and executory judgment to be set aside with a view to the renewal of the
litigation, unless (a) the judgment is void for want of jurisdiction or for lack of due process of
law, or (b) it has been obtained by fraud. (I Morans Rules of Court 1950 Ed., p. 697, citing
Anuran v. Aquino, 38 Phil. 29; Banco Espaol-Filipino v. Palanca, 37 Phil. 921). Reason of
public policy which favors the stability of judicial decisions are (sic) mute in the presence of
fraud which the law abhors (Garchitorena vs. Sotelo, 74 Phil. 25).
On the one hand, extrinsic fraud is the ground to annul a voidable final judgment; the
declaration of nullity of a patently void final judgment, on the other, is based on grounds other
than extrinsic fraud. To say, then, that petitioners can avail themselves only of the ground of
extrinsic fraud and no other is to fail to appreciate the true meaning and ramifications of
annulment/nullity.
Jurisdiction is conferred by law. Its exercise must strictly comply with the legal requisites;
otherwise, a challenge on the ground of lack of jurisdiction may be brought up anytime. Such
jurisdiction normally refers to jurisdiction over the subject. As an example, in a case involving
the issuance of a new owners duplicate certificate of title the original of which was lost, stolen

or destroyed, the court must strictly comply with the requisites of Section 109 of P.D. 1529;
otherwise, its jurisdiction may be attacked anytime. Thus, we ruled in New Durawood Co. Inc.
vs. Court of Appeals:[27]
In Demetriou vs. Court of Appeals, et al.,[238 SCRA 158, at 162 (November 14, 1994)] this
Court ruled:
In Serra Serra v. Court of Appeals (195 SCRA 482 [1991]), on facts analogous to those involved
in this case, this Court already held that if a certificate of title has not been lost but is in fact in
the possession of another person, the reconstituted title is void and the court rendering the
decision has not acquired jurisdiction. Consequently the decision may be attacked any time.
In the instant case, the owners duplicate certificates of title were in the possession of Dy
Quim Pong, the petitioners chairman of the board and whose family controls the petitioner
corporation. Since said certificates were not in fact lost or destroyed, there was no necessity
for the petition filed in the trial court for the Issuance of New Owners Duplicate Certificates
of Title x x x, In fact, the said court never acquired jurisdiction to order the issuance of new
certificates. Hence, the newly issued duplicates are themselves null and void.
It is obvious that this lapse happened because private respondents and respondent judge
failed to follow the procedure set forth in P.D. No. 1529 which, as already stated, governs the
issuance of new owners duplicate certificates of title.
Section 109 of the said law provides, inter alia, that due notice under oath of the loss or theft
of the owners duplicate certificate shall be sent by the owner or by someone in his behalf to
the Register of Deeds x x x (italics supplied). In this case, while an affidavit of loss was
attached to the petition in the lower court, no such notice was sent to the Register of Deeds.
Private respondents tried to convince the Court that by their failure to locate Francis
Dytiongsee, they had no other recourse but to file a petition for reconstitution. Sec. 107 of the
P.D. 1529 , however, states that the remedy, in case of the refusal or failure of the holder -- in
this case, the petitioner -- to surrender the owners duplicate certificate of title, is a petition in
court to compel surrender of the same to the Register of Deeds, and not a petition for
reconstitution.

Ineluctably, a judgment rendered without jurisdiction over the subject matter is void. As we
elucidated in Leonor vs. CA:[28]
Clearly and unequivocally, the summary procedure under Rule 108, and for that matter under
Art. 412 of the Civil Code, cannot be used by Mauricio to change his and Virginias civil status
from married to single and of their three children from legitimate to illegitimate. Neither does
the trial court, under said Rule, have any jurisdiction to declare their marriage null and void
and as a result thereof, to order the local civil registrar to cancel the marriage entry in the civil
registry. Further, the respondent trial judge gravely and seriously abused his discretion in
unceremoniously expanding his very limited jurisdiction under such rule to hear evidence on
such a controversial matter as nullity of a marriage under the Civil Code and/or Family Code, a
process that is proper only in ordinary adversarial proceedings under the Rules.
Jurisdiction over the Persons
of Indispensable Parties
True, the above dispositions refer to jurisdiction over the subject matter. Basic considerations
of due process, however, impel a similar holding in cases involving jurisdiction over the
persons of indispensable parties which a court must acquire before it can validly pronounce
judgments personal to said defendants. Courts acquire jurisdiction over a party plaintiff upon
the filing of the complaint. On the other hand, jurisdiction over the person of a party
defendant is assured upon the service of summons in the manner required by law or
otherwise by his voluntary appearance. As a rule, if a defendant has not been summoned, the
court acquires no jurisdiction over his person, and a personal judgment rendered against such
defendant is null and void.[29] A decision that is null and void for want of jurisdiction on the
part of the trial court is not a decision in the contemplation of law and, hence, it can never
become final and executory.[30]
Rule 3, Section 7 of the Rules of Court, defines indispensable parties as parties-in-interest
without whom there can be no final determination of an action. As such, they must be joined
either as plaintiffs or as defendants. The general rule with reference to the making of parties
in a civil action requires, of course, the joinder of all necessary parties where possible, and the
joinder of all indispensable parties under any and all conditions, their presence being a sine
qua non for the exercise of judicial power.[31] It is precisely when an indispensable party is
not before the court (that) the action should be dismissed.[32] The absence of an

indispensable party renders all subsequent actions of the court null and void for want of
authority to act, not only as to the absent parties but even as to those present.[33]
Petitioners are co-owners of a fishpond. Private respondent does not deny this fact, and the
Court of Appeals did not make any contrary finding. The fishpond is undivided; it is impossible
to pinpoint which specific portion of the property is owned by Olanday, et al. and which
portion belongs to petitioners. Thus, it is not possible to show over which portion the tenancy
relation of private respondent has been established and ruled upon in Civil Case D-7240.
Indeed, petitioners should have been properly impleaded as indispensable parties.
Servicewide Specialists, Incorporated vs. Court of Appeals[34] held that no final determination
of a case could be made if an indispensable party is not impleaded:
x x x. An indispensable party is one whose interest will be affected by the courts action in
the litigation, and without whom no final determination of the case can be had. The partys
interest in the subject matter of the suit and in the relief sought are so inextricably intertwined
with the other parties that his legal presence as a party to the proceeding is an absolute
necessity. In his absence there cannot be a resolution of the dispute of the parties before the
court which is effective, complete, or equitable.
Formerly, Article 487 of the old Civil Code provided that any one of the co-owners may bring
an action in ejectment. It was subsequently held that a co-owner could not maintain an
action in ejectment without joining all the other co-owners. Former Chief Justice Moran, an
eminent authority on remedial law, explains:[35]
x x x. As held by the Supreme Court, were the courts to permit an action in ejectment to be
maintained by a person having merely an undivided interest in any given tract of land, a
judgment in favor of the defendants would not be conclusive as against the other co-owners
not parties to the suit, and thus the defendant in possession of the property might be harassed
by as many succeeding actions of ejectment, as there might be co-owners of the title asserted
against him. The purpose of this provision was to prevent multiplicity of suits by requiring the
person asserting a right against the defendant to include with him, either as co-plaintiffs or as
co-defendants, all persons standing in the same position, so that the whole matter in dispute
may be determined once and for all in one litigation.
Contrariwise, it is logical that a tenant, in an action to establish his status as such, must
implead all the pro-indiviso co-owners; in failing to do so, there can be no final determination

of the action. In other words, a tenant who fails to implead all the co-owners cannot establish
with finality his tenancy over the entire co-owned land.
Co-owners in an action for the security of tenure of a tenant are encompassed within the
definition of indispensable parties; thus, all of them must be impleaded. As defined:[36]
An indispensable party is a party who has such an interest in the controversy or subject
matter that a final adjudication cannot be made, in his absence, without injuring or affecting
that interest, a party who has not only an interest in the subject matter of the controversy, but
also has an interest of such nature that a final decree cannot be made without affecting his
interest or leaving the controversy in such a condition that its final determination may be
wholly inconsistent with equity and good conscience. It has also been considered that an
indispensable party is a person in whose absence there cannot be a determination between
the parties already before the court which is effective, complete, or equitable. Further, an
indispensable party is one who must be included in an action before it may properly go
forward.
A person is not an indispensable party, however, if his interest in the controversy or subject
matter is separable from the interest of the other parties, so that it will not necessarily be
directly or injuriously affected by a decree which does complete justice between them. Also, a
person is not an indispensable party if his presence would merely permit complete relief
between him and those already parties to the action, or if he has no interest in the subject
matter of the action. It is not a sufficient reason to declare a person to be an indispensable
party that his presence will avoid multiple litigation.
Clearly, the decision in Civil Case D-7240 cannot bind petitioners and cannot adjudicate the
entire co-owned property, not even that portion belonging to Olanday et al., ownership of the
property being still pro-indiviso. Obviously, the failure to implead petitioners barred the lower
court from making a final adjudication. Without the presence of indispensable parties to a suit
or proceeding, a judgment therein cannot attain finality.[37]
Ergo, res inter alios judicatae nullum aliis praejudicarium faciunt.[38] Thus, the Court, through
former Chief Justice Marcelo B. Fernan, held that a person who was not impleaded in the
complaint cannot be bound by the decision rendered therein, for no man shall be affected by a
proceeding in which he is a stranger[39]

Admittedly, in this case, the want of jurisdiction of the trial court in rendering its decision in
Civil Case No. D-7240 is not patent on the face of said judgment. However, there were glaring
documentary and testimonial pieces of evidence referred to by the trial court in its decision
which should have prompted it to inquire further whether there were other indispensable
parties who were not impleaded. These facts and circumstances should have forewarned the
trial court that it had not acquired jurisdiction over a number of indispensable parties. In
American jurisprudence, the nullity of a decision arising from lack of jurisdiction may be
determined from the record of the case, not necessarily from the face of the judgment
only.[40] We believe that this rule should be applied to this case, considering that in the
assailed trial courts decision, referrals were made to crucial evidence which if scrutinized
would readily reveal that there were indispensable parties omitted.
First, the decision referred to the subject property as Lot No. 3312 of the Cadastral
Survey.[41] This lot was particularly described in private respondents Complaint dated
February 6, 1984 filed in Civil Case D-7240.[42] Obviously such description was copied by
private respondent from the transfer certificate of title over the subject fishpond issued on
August 12, 1975 naming all the co-owners, including the herein petitioners and the fact of
their foreign residences, thus:[43]
IT IS HEREBY CERTIFIED that certain land situated in the City of Dagupan, formerly in the
Province of Pangasinan bounded and described as follows:
A parcel of land (Lot 3312 of the Cadastral Survey of Dagupan), situated in the City of Dagupan.
xxx
is registered in accordance with the provisions of the Land Registration Act in the name of
PACITA ARCELONA, married to Miguel Ulanday; TOMASA ARCELONA, married to Tung Ming
Chiang; MARCELINO V. ARCELONA, married to Soledad Tiongco; MARIA V. ARCELONA, married
to Oreste Arellano; BENEDICTO V. ARCELONA, married to Ruth Suget; and NATIVIDAD
ARCELONA, married to Agrimero Cruz; all of legal age, Filipinos, the second and fifth named
residents of Los Angeles, California, U.S.A., third & fourth of Manila; first of Villasis, Pangasinan
& the last named of Lingayen, Pangasinan as owner thereof in fee simple, subject to such of
the incumbrances mentioned in Section 39 of said Act as may be subsisting, and to
xxx

xxx

xxx

Entered at the City of Dagupan

Philippines, on the 12th day of
August in the year nineteen hundred
and seventy-five at 4:00 p m.
(Underscoring supplied).
Considering that private respondent was suing to establish his status as a tenant over the
subject fishpond, the responsibility for impleading all the indispensable parties undeniably
rested on him as provided under Rule 3 of the Rules of Court. Section 2 of Rule 3 requires that
every action must be prosecuted and defended in the name of the real party in interest. All
persons having an interest in the subject of the action and in obtaining the relief demanded
shall be joined as plaintiffs. Further, Section 7 of the same rule states that (p)arties in
interest without whom no final determination can be had of an action shall be joined either as
plaintiffs or defendants.
Second, Respondent Court of Appeals ruled that private respondent in his motion to dismiss
(before said Court) alleged that petitioners knew of the lessee as revealed by the testimony of
Pacita Olanday, one of the defendants in Civil Case No. D-7240 and a sister of petitioners.
(TSN, pp. 15-16, hearing of October 2, 1984, Civil Case No. D-7240). That being so, why did
private respondent fail to include petitioners as defendants in the case below? It should be
noted that the lease contract was between Cipriano Tandoc and Olanday, et al. Private
respondent, a caretaker-tenant of Tandoc, knew or should have known that there were coowners other than Olanday, et al. And even conceding arguendo that petitioners had
authorized Olanday, et al. to enter into a lease contract with Tandoc, this fact did not
authorize the latter to represent petitioners in the civil case he brought. Under Rule 9, Section
9 of the Rules of Court, the pleader is required to set forth the names, if known to him, of
persons who ought to be parties, if complete relief is to be accorded to those who are already
parties but who are not joined; and to state why they have been omitted. Surely, he brought
suit to establish his status as a tenant. It is thus his responsibility to state the names of all the
persons against whom he wants to establish his status as tenant.

Third, both the private respondent and the trial court knew of the obvious omission of
petitioners as party defendants. Telling is the fact that, by reciting part of the transcript of
stenographic notes, private respondent himself provided clear evidence in his memorandum
that he knew of the existence of other co-owners who were not impleaded in his case against
Olanday et al.[44]
As admitted by Pacita Olanday, one of the defendants in Civil Case No. D-7240, the
petitioners know of the lease with Cipriano Tandoc; they were authorized to lease the shares
of the petitioners. Here is the testimony of Pacita Olanday:
ATTY. VINLUAN:
Q. You made mentioned that you were authorized by your brothers and sister who are (sic)
residing in the United States to enter into a contract. Did these brothers and sister of yours
make any special power of attorney authorizing you to that effect?
xxxxxxx
A I talked with my brothers when they balik-bayan, they said I will make an agreement.
(tsn. October 2, 1984 pp. 15 and 16 - CV# D-7240).
He also knew that in executing the lease, Pacita Olanday represented only her sisters (Maria
and Natividad) who were residing in the Philippines. Definitely, at the time of the execution of
the contract, she had no brother residing in the Philippines because her only brothers,
Marcelino and Benedicto Arcelona, (the latter now deceased and represented in this case by
Petitioner Ruth Arcelona) were living in California. This fact can be deduced from the recitals
of the RTC decision:[45]
It is undisputed in the records that the defendants (referring to Olanday, et al.) are co-owners
and civil law lessors of a fishpond otherwise known as Lot No. 3312 of the Cadastral Survey of
Dagupan City; that as owners, they entered into a Contract of Lease (Exh. 1) with one
Cipriano Tandoc dated March 4, 1978 for a term of three (3) years from February 2, 1982,
which contract was renewed for another two (2) years up to February 2, 1984. On the 31st of
January, 1984, Exhibit 3, an Affidavit of Surrender of Rights and Possession of Lessee over a
Fishpond was executed between Cipriano Tandoc and Pacita Olanday who signed for herself
and in behalf of her two (2) sisters. Plaintiff Moises Farnacio was however, instituted as

caretaker-tenant over the same fishpond by Cipriano Tandoc on the date of the Contract of
Lease was entered into between the owners-lessors and Cipriano Tandoc. The private
agreement (Exh. D) signed by Cipriano Tandoc and Moises Farnacio is, however, assailed in a
criminal case for falsification in the Fiscals Office. (Underscoring supplied)
In fact, only these co-owners who are residing in the Philippines were joined as defendants in
Civil Case D-7240. But the mention of Pacitas relatives who were residing abroad should have
made the trial court aware of the existence of indispensable parties who were not yet
impleaded.
Despite this knowledge of the apparent defect in the complaint and in its jurisdiction, the trial
court did not take the initiative to implead petitioners as defendants or to order private
respondent to do so, contrary to the clear mandate of Rule 3, Sec. 11 of the Rules of Court[46]
which provides:
Sec. 11. Misjoinder and non-joinder of parties. -- Misjoinder of parties is not ground for
dismissal of an action. Parties may be dropped or added by order of the court on motion of
any party or on its own initiative at any stage of the action and on such terms as are just. Any
claim against a party may be severed and proceeded with separately.
The foregoing testimony on the existence of other co-owners was a clear signal that
indispensable parties had not yet been impleaded. Indeed, this knowledge should have put
the private respondent and the trial court on guard. The burden to implead or to order the
impleading of indispensable parties is placed on private respondent and on the trial court,
respectively. Since no evidence was presented to prove that petitioners were aware of the
civil case filed against Olanday et al., they cannot be faulted for not intervening therein.
In sum, we hold that the nullity of a judgment grounded on lack of jurisdiction may be shown
not only by what patently appears on the face of such decision but also by documentary and
testimonial evidence found in the records of the case and upon which such judgment is based.
Before ending our discussion on the first issue, we must stress that the then Intermediate
Appellate Court and this Court, in affirming the RTC decision in Civil Case No. D-7240 which we
here nullify, had not been given the occasion to rule on the issue of the trial courts jurisdiction
over the persons of indispensable parties; verily, this question had not been raised before the
two appellate courts. The review of civil cases by appellate courts is confined only to the

issues raised by the parties. Hence, appellate courts do not have the privilege or the
opportunity afforded the trial courts to consider matters beyond the specifically contested
issues, e.g., jurisdiction over indispensable parties, as in this case. Such lack of jurisdiction
could not have been known by the appellate courts, including this Court, as it was not patent
from the documents or submissions filed before them. The issue raised before the then
Intermediate Appellate Court and this Court was formulated in this wise: (t)he validity of
private respondents claim that he is a tenant of the petitioners fishpond, with security of
tenure as such assured under the law, is the basic question presented in this appeal.[47] We
underscore the fact that the issue of whether all the indispensable parties had been validly
impleaded, if at all, had not been raised at that time. In any event, whether the indispensable
parties were actually impleaded and jurisdiction over them was acquired was a factual
question for the trial court to determine. Consistent with the basic doctrine that factual
findings of lower courts are binding on appellate courts unless covered by the recognized
exceptions,[48] appellate courts must be able to rely on the implied affirmation of the trial
court that jurisdiction had been acquired over indispensable parties, especially when this was
not raised as an issue on appeal. The responsibility for impleading indispensable parties for
the exhaustive trial of a case cannot rest on this forum or on the then Intermediate Appellate
Court. Indeed, the Decision of this Court affirming the said trial courts decision is captioned
only as Pacita A. Olanday, Maria A. Arellano and Natividad A. Cruz, petitioners, vs.
Intermediate Appellate Court and Moises Farnacio, respondents, clearly indicating that
petitioners herein had been omitted as indispensable parties in the proceedings before the
trial court and before the appellate tribunals. Substantial justice requires that this error be
now rectified.
Second Issue: Estoppel and Laches
Apart from holding that there was only one ground to annul a judgment, namely, extrinsic
fraud, the appellate court -- using extraneous evidence -- also found that estoppel and laches
had set in against petitioners, thereby barring them from asserting lack of jurisdiction over
their persons. These extraneous matters are stated by the Respondent Court in this wise:
x x x True, indeed, that petitioners were not original parties to the action and that the
decision embraces half of the property in dispute belonging to petitioners as co-owners
thereof. But they cannot now complain they were denied due process. It will be recalled that
the contract of lease was entered with one Cipriano Tandoc on March 4, 1978 for a term of
three years, which contract was renewed for another two years up to February 2, 1984.

During all the years of the existence of the lease contract, it would be incredulous for
petitioners to assert that they never knew of such lease agreement from their three sisters,
the defendants herein. Petitioners raised no overt protest against the lease contract executed
by their sisters with Cipriano Tandoc in 1978 and renewed in 1982. Petitioners took no direct
action to promptly disavow or disaffirm the action taken by their sisters to lease the entire
property to Tandoc.
It is likewise unbelievable that during all the years that the subject property (fishpond) is under
litigation in Civil Case No. D-7240 from 1984 to 1991, petitioners were not aware that their
property is subject of the controversy. By their continued silence, they have permitted the
acts of their sisters in leasing the property and they cannot now be heard, after a prolonged
period of time, to denounce such acts as done without their knowledge and consent. The rule
of acquiescence by silence has estopped petitioners to deny the reality of the state of things
which they made to appear to exist and upon which others have been led to reply. Parties
must take the consequences of the position they assume. Sound ethics require that the
apparent in its effects and consequences should be as if it were real, and the law properly so
regards.(Metro Manila Transit Corporation vs. Morales, 173 SCRA 629, 633).
In Santiago Syjuco, Inc. vs. Castro, 175 SCRA 171, 192, it was held, inter alia:
xxx

xxx

xxx

x x x. Likewise, in Criminal Case No. 16866 for falsification against respondent Farnacio before
Branch 3 of the Municipal Trial Court of Dagupan City, witness Juan Bernal testified that the
petitioners herein Tomasa Arcelona, Marcelino Arcelona and Ben Arcelona authorized their
sisters Natividad Cruz, Corazon Arcelona, Pacita Olanday to lease the fishpond to Cipriano
Tandoc. (TSN, pp. 5-6, hearing of August 10, 1987 in Criminal Case No. 16866).[49]
Petitioners balk at these pronouncements, arguing that in annulment of judgments, the
grounds thereof must be based solely on the records of the case. They contend that to
permit the courts record to be contradicted or varied by evidence dehors would render such
records of no avail. Petitioners contend that Respondent Court of Appeals erred in taking
into account the proceedings in Criminal Case No. 16866 to show alleged knowledge of the
petitioners herein of the lease of the property to Cipriano Tandoc.[50] Petitioners submit that
the bone of contention in this case is not knowledge of the petitioners of the Lease Contract
executed by Pacita Olanday et al. and Cipriano Tandoc, but whether the petitioners knew of

the case filed by private respondent against Pacita Olanday et al. involving their common
property.
Petitioners stress that Private Respondent Farnacio is a total stranger and has absolutely no
privity of interest with them because it was Tandoc, not Farnacio, who entered into a lease
contract with Olanday, et al. [51]
Petitioners deny any concealment or deception on their part that would constitute estoppel.
They contend that in the transfer certificate of title, their names were specifically mentioned
as co-owners of the property on which the private respondent sought to be installed in
physical possession as tenant.[52] They aver that Respondent Court of Appeals finding that
they had knowledge of the lease contract is based on presumption not on clear and
convincing evidence. Assuming, according to petitioners, that they can be held in estoppel, it
can only be as against Cipriano Tandoc, not private respondent who was never a party to the
lease contract.[53]
Since the judgment is void insofar as the petitioners are concerned for lack of jurisdiction
[over] their persons and for want of due process, and since they were never given the
opportunity to institute any action to protect their interest, petitioners contend that to bar
them now by laches and estoppel will create an unfair and unjust situation. For as
petitioners candidly state, they do not question the pronouncement that private respondent
is the tenant of Pacita Olanday et al.; however, they submit that the issue in this case is
whether private respondent is also the tenant of herein petitioners entitled to be placed in
physical possession and cultivation of their undetermined share in the property without
[petitioners] being made parties in the case.[54]
Private respondent counters that Pacita Olanday x x x testified that she was authorized to
lease the share of x x x petitioners. According to private respondent, while petitioners were
in the Philippines, they were informed of the appointment of private respondent as caretakertenant of the entire fishpond, and they did not object to such appointment.[55] Further,
private respondent contends that petitioners failed to intervene in the case before the writ of
execution was granted on May 5, 1991 despite the appearance x x x of their counsel, Atty.
Marina Cruz, when the motion for issuance of said writ was heard. Private respondent adds
that he was impliedly recognized as a tenant when petitioners received their corresponding
shares [i]n the lease rental of the property from the private respondent, through Olanday, et
al. and their counsel, Atty. Marina Cruz.[56]

As correctly put by petitioners, we hold that Respondent Court of Appeals, in deciding the
petition to declare the judgment void, cannot consider extraneous matters to vary what the
records bear. In other words, the Court of Appeals cannot annul or declare null the assailed
decision with such extraneous matters. The validity or nullity of the said decision must stand
or fall on its own face and the evidence on record.
In an action to declare a judgment void because of lack of jurisdiction over the parties or
subject matter, only evidence found in the records of the case can justify the annulment of
the said judgment. Contrariwise, the nullity of the judgment due to lack of jurisdiction may be
proved at most by the evidence on record but never by extraneous evidence. Sen. Vicente J.
Francisco aptly explains this in his treatise on the Rules of Court:[57]
The validity of a final judgment may be attacked on the ground that the judgment or order is
null and void, because the court had no power or authority to grant the relief or no jurisdiction
over the subject matter or over the parties or both. The aggrieved party may attack the
validity of the final judgment by a direct action or proceeding in order to annul the same, as
certiorari, which is not incidental to, but is the main object of the proceeding. The validity of a
final judgment may also be attacked collaterally as when a party files a motion for the
execution of the judgment and the adverse party resists the motion by claiming that the court
has no authority to pronounce the judgment and that the same is null and void for lack of
jurisdiction over the subject matter or over the parties.
In cases of collateral attack, the principles that apply have been stated as follows: The
legitimate province of collateral impeachment is void judgments. There and there alone can it
meet with any measure of success. Decision after decision bears this import: In every case
the field of collateral inquiry is narrowed down to the single issue concerning the void
character of the judgment and the assailant is called upon to satisfy the court that such is the
fact. To compass his purpose of overthrowing the judgment, it is not enough that he shows a
mistaken or erroneous decision or a record disclosing non-jurisdictional irregularities in the
proceedings leading up to the judgment. He must go beyond this and show to the court,
generally from the fact of the record itself, and not by extraneous evidence that the judgment
complained of is utterly void. If he can do that his attack will succeed for the cases leave no
doubt respecting the right of a litigant to collaterally impeach a judgment that he can prove to
be void.

The reason for the rule of exclusion of extraneous proof to show that the judgment
complained of is utterly void for lack of jurisdiction has been expressed in the following words:
The doctrine that the question of jurisdiction is to be determined by the record alone, thereby
excluding extraneous proof seems to be the natural unavoidable result of that stamp of
authenticity which, from the earliest times, was placed upon the record, and which gave it
such uncontrollable credit and verity that no plea, proof, or averment could be heard to the
contrary. x x x Any rule, x x x would be disastrous in its results, since to permit the courts
record to be contradicted or varied by evidence dehors would render such records of no avail
and definite sentences would afford but slight protection to the rights of parties once solemnly
adjudicated.
We should add, however, that where an action for annulment of judgment is grounded on
extrinsic fraud, extraneous evidence is admitted. We have held that, although a person need
not be a party to the judgment sought to be annulled by reason of extrinsic fraud, he must
prove his allegation that the judgment was obtained by the use of fraud and collusion and that
he would be adversely affected thereby.[58] Fraud must be extraneous; otherwise, there
would be no end to litigation. Extrinsic fraud refers to any fraudulent act committed by a
prevailing party outside the trial of the case, whereby the defeated party has been prevented
from fully exhibiting his side of the case, because of fraud or deception practiced on him by his
opponent.[59] As distinctly defined in Cosmic Lumber Corporation vs. Court of Appeals, et
al.,[60]
There is extrinsic fraud within the meaning of Sec. 9, par. (2), of B.P. Blg. 129, where it is one
the effect of which prevents a party from hearing a trial, or real contest, or from presenting all
of his case to the court, or where it operates upon matters, not pertaining to the judgment
itself, but to the manner in which it was procured so that there is not a fair submission of the
controversy. In other words, extrinsic fraud refers to any fraudulent act of the prevailing party
in the litigation which is committed outside of the trial of the case, whereby the defeated
party has been prevented from exhibiting fully his side of the case by fraud or deception
practiced on him by his opponent. (fn: Makabingkil v. PHHC, No. L-29080, 17 August 1976, 72
SCRA 326, 343-344) Fraud is extrinsic where the unsuccessful party has been prevented from
exhibiting fully his case, by fraud or deception practiced on him by his opponent, as keeping
him away from court, a false promise of a compromise; or where the defendant never had
knowledge of the suit, being kept in ignorance by the acts of the plaintiff; or where an
attorney fraudulently or without authority connives at his defeat ; these and similar cases
which show that there has never been a real contest in the trial or hearing of the case are

reasons for which a new suit may be sustained to set aside and annul the former judgment
and open the case for a new and fair hearing. (fn: Id., p. 344 citing U.S. v. Throckmorton, 25 L.
Ed. 93, 95).
In deciding the petition for annulment of judgment which should be a petition to declare
judgment void Respondent Court of Appeals should not have considered the following
matters which find no support from the records and are thus considered extraneous: (1) the
assumption that petitioners knew of the five-year lease contract with private respondent and
the pendency of Civil Case No. D-7240 from 1984 to 1991; and (2) the testimony of Juan Bernal
in a separate criminal case before another court concerning the authority granted to Olanday
et al. and where petitioners were not parties. The rule is that the nullity of the decision arising
from want of jurisdiction and/or due process should appear from the records of the case. And
the validity of the judgment cannot be anchored on mere suppositions or speculations, as
Respondent Court did.
Equally important, the finding of estoppel and laches by Respondent Court is not supported by
the evidence on record. The silence of petitioners can easily be explained by the fact that they
were not in the country during the pendency of the subject civil case. Such absence from the
country was never rebutted by private respondent. Even in the proceedings antecedent to
this case before us now, petitioners were merely represented by their attorney-in-fact.[61]
Moreover, they were not at all impleaded as parties in the judgment sought to be voided.
Neither were they properly served summons. The indelible fact is that they were completely
ignored.
In any event, we ruled in Alabang Development Corporation vs. Valenzuela[62] that no laches
attach when the judgment is null and void for want of jurisdiction:
The herein respondents attribute laches to the petitioners for not appealing from the order
of the lower court denying their motion to intervene and motion for new trial hence allowing
the said order/decision to become final. There is no laches nor finality of any decision to
speak of since the decision under question is herein pronounced null and void for having been
rendered without jurisdiction. Prescinding therefrom, as admitted by themselves in their
comment, the judgment of reconstitution is ineffective against the owners of lands covered
thereby who were not joined as parties in the proceeding. As the Court ruled in Bernal case on
the matter of intervention [fn: 93 SCRA at pp. 247, 248] a valid judgment cannot even be
rendered where there is want of indispensable parties such as petitioners who hold subsisting

Torrens Title to the properties in question and this aspect of the case commands the joinder
of indispensable parties to allow them to uphold their interests based upon the Torrens titles
they hold overrides any question of later intervention. Petitioners have precisely availed of
the proper, speedy and adequate remedy of the present special civil action of certiorari and
prohibition to annul and set aside for want of jurisdiction the decision and all proceedings of
respondent judge.
On the other hand, the doctrine of estoppel is predicated on and finds its roots in equity
which, broadly defined, is justice according to natural law and right. It is a principle intended
to prevent a clear case of injustice. The term is hardly separable from a waiver of right.
Estoppel, like laches, must be intentional and unequivocal, for when misapplied, it can easily
become a most convenient and effective means of injustice. Estoppel is a principle that, as a
rule, can be invoked only in highly exceptional and legitimate cases.[63] In Cruz vs. Court of
Appeals,[64] we reiterated the requisites of estoppel:
In Kalalo vs. Luz, [fn: 34 SCRA 337] We held that the essential elements of estoppel in respect
to the party claiming it are: (a) lack of knowledge and of the means of knowledge of the truth
as the facts in question; (b) reliance, in good faith, upon the conduct or statements of the
party to be estopped; and (c) action or inaction based thereon of such character as to change
the position or status of the party claiming the estoppel, to his injury, detriment, or prejudice.
The herein facts ineluctably show the absence of the first element in this case. Inasmuch as
there is no proof that petitioners had knowledge of the pending tenancy case filed by private
respondent, it is only fair that they should not be held in estoppel for failing to intervene in
and to question the jurisdiction of the trial court in Civil Case No. D-7240. Thus, private
respondent may not say that he was misled into believing that petitioners knew of the lease
contract and of the litigation of Civil Case No. D-7240. Undisputedly, from the evidence on
record, petitioners had no such knowledge.
Petitioners receipt of lease rentals cannot be used as proof of recognition of private
respondent as a caretaker-tenant. This issue was not raised in the lower court and is being
alleged for the first time before us. Well-settled is the doctrine that questions not raised in
the lower courts cannot be raised for the first time on appeal.[65]
Third Issue: Intervention as a Remedy of Petitioners

Petitioners contend that Respondent Court of Appeals erred when it ruled that their only
remedy was intervention during the execution stage of Civil Case No. D-7240. Inasmuch as
annulment of judgment could be made either collaterally or directly, petitioners insist that
their resort to direct action in annulling the Decision of the lower court should not be taken
against them.[66] Moreover, petitioners argue that in proceedings for execution of a final
decision or judgment, it is the ministerial duty of the court of origin to issue the writ.[67]
Petitioners add that because their action would result in the modification, alteration, and
annulment of the judgment, the specific provision of law that annulment of judgment of the
Regional Trial Court is within the exclusive jurisdiction of the Court of Appeals should
prevail.[68]
Private respondent counters that petitioners deliberately did not intervene to afford them
opportunity to question, as they now question, the validity of any decision to be rendered in
said case, x x x in the event of an adverse decision.[69]
We hold that intervention is not the only remedy to assail a void final judgment. There is no
procedural rule prescribing that petitioners intervention in the hearing for the issuance of a
writ is the only way to question a void final judgment. As already stated, petitioners were not
aware of such hearing. Besides, as already discussed, a direct action is available in assailing
final judgments grounded on extrinsic fraud, while a direct or a collateral action may be used
to show lack of jurisdiction.
The assailed Decision of Respondent Court of Appeals cites certain cases allowing intervention
as follows:[70]
A case in which an execution has been issued is regarded as still pending so that all
proceedings in the execution are proceedings in the suit. There is no question that the court
which rendered the judgment has a general supervisory control over its process of execution
and this power carries with it the right to determine every question of fact and law which may
be involved in the execution. (Suson vs. Court of Appeals, 172 SCRA 70, 75, citing Paman vs.
Severis, 115 SCRA 709; Seavan Carrier vs. GTI Sportswear, 137 SCRA 580)
These cases, which require intervention of parties who may be adversely affected by the
decision, are not applicable. In the cited Suson vs. Court of Appeals,[71] the parties, though
not impleaded, knew of the case and were in fact directed by the trial court to intervene, but

they refused to do so. These particular facts are absent in the instant case where, to repeat,
petitioners were abroad when Civil Case D-7240 was prosecuted.
In any event, as earlier pointed out, jurisprudence upholds the soundness of an independent
action to declare as null and void a judgment rendered without jurisdiction as in this case. In
Leonor vs. Court of Appeals, [72] Petitioner Virginia A. Leonor, through a petition for
certiorari, prohibition and mandamus x x x sought the nullification of both the decision dated
December 14, 1992 and the order dated February 24, 1993 of the trial court for having been
issued in excess of jurisdiction and/or with grave abuse of discretion.[73] We held in that case
that:[74]
A void judgment for want of jurisdiction is no judgment at all. It cannot be the source of any
right nor the creator of any obligation. All acts performed pursuant to it and all claims
emanating from it have no legal effect. Hence, it can never become final and any writ of
execution based on it is void: x x x it may be said to be a lawless thing which can be treated as
an outlaw and slain at sight, or ignored wherever and whenever it exhibits its head.
WHEREFORE, the petition for certiorari is GRANTED. The Decision of Respondent Court of
Appeals is hereby REVERSED and SET ASIDE. The decisions in Civil Case No. D-7240, AC- G.R.
SP-05237-CAR and G.R. No. L-71217 are ANNULLED and SET ASIDE for lack of jurisdiction. No
costs.
SO ORDERED.

Carandang vs Heirs of De Guzman

G.R. No. 160347
November 29, 2006
ARCADIO and MARIA LUISA CARANDANG, Petitioners,
vs.
HEIRS OF QUIRINO A. DE GUZMAN, namely: MILAGROS DE GUZMAN, VICTOR DE GUZMAN,
REYNALDO DE GUZMAN, CYNTHIA G. RAGASA and QUIRINO DE GUZMAN, JR., Respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari assailing the Court of Appeals Decision1 and
Resolution affirming the Regional Trial Court (RTC) Decision rendering herein petitioners
Arcadio and Luisa Carandang [hereinafter referred to as spouses Carandang] jointly and
severally liable for their loan to Quirino A. de Guzman.
The Court of Appeals summarized the facts as follows:
[Quirino de Guzman] and [the Spouses Carandang] are stockholders as well as corporate
officers of Mabuhay Broadcasting System (MBS for brevity), with equities at fifty four percent
(54%) and forty six percent (46%) respectively.
On November 26, 1983, the capital stock of MBS was increased, from P500,000 to P1.5 million
and P345,000 of this increase was subscribed by [the spouses Carandang]. Thereafter, on
March 3, 1989, MBS again increased its capital stock, from P1.5 million to P3 million, [the
spouses Carandang] yet again subscribed to the increase. They subscribed to P93,750 worth of
newly issued capital stock.
[De Guzman] claims that, part of the payment for these subscriptions were paid by him,
P293,250 for the November 26, 1983 capital stock increase and P43,125 for the March 3, 1989
Capital Stock increase or a total of P336,375. Thus, on March 31, 1992, [de Guzman] sent a
demand letter to [the spouses Carandang] for the payment of said total amount.
[The spouses Carandang] refused to pay the amount, contending that a pre-incorporation
agreement was executed between [Arcadio Carandang] and [de Guzman], whereby the latter

promised to pay for the stock subscriptions of the former without cost, in consideration for
[Arcadio Carandangs] technical expertise, his newly purchased equipment, and his skill in
repairing and upgrading radio/communication equipment therefore, there is no indebtedness
on their part [sic].
On June 5, 1992, [de Guzman] filed his complaint, seeking to recover the P336,375 together
with damages. After trial on the merits, the trial court disposed of the case in this wise:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of [de Guzman].
Accordingly, [the spouses Carandang] are ordered to jointly and severally pay [de Guzman], to
wit:
(1) P336,375.00 representing [the spouses Carandangs] loan to de Guzman;
(2) interest on the preceding amount at the rate of twelve percent (12%) per annum from June
5, 1992 when this complaint was filed until the principal amount shall have been fully paid;
(3) P20,000.00 as attorneys fees;
(4) Costs of suit.
The spouses Carandang appealed the RTC Decision to the Court of Appeals, which affirmed the
same in the 22 April 2003 assailed Decision:
WHEREFORE, in view of all the foregoing the assailed Decision is hereby AFFIRMED. No costs.2
The Motion for Reconsideration filed by the spouses Carandang was similarly denied by the
Court of Appeals in the 6 October 2003 assailed Resolution:
WHEREFORE, in view thereof, the motion for reconsideration is hereby DENIED and our
Decision of April 22, 2003, which is based on applicable law and jurisprudence on the matter is
hereby AFFIRMED and REITERATED.3
The spouses Carandang then filed before this Court the instant Petition for Review on
Certiorari, bringing forth the following issues:

I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN
FAILING TO STRICTLY COMPLY WITH SECTION 16, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
II.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN ITS FINDING
THAT THERE IS AN ALLEGED LOAN FOR WHICH PETITIONERS ARE LIABLE, CONTRARY TO
EXPRESS PROVISIONS OF BOOK IV, TITLE XI, OF THE NEW CIVIL CODE PERTAINING TO LOANS.
III.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING
THAT THE RESPONDENTS WERE ABLE TO DISCHARGE THEIR BURDEN OF PROOF, IN COMPLETE
DISREGARD OF THE REVISED RULES ON EVIDENCE.
IV.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED REVERSIBLE ERROR
WHEN IT FAILED TO APPLY SECTIONS 2 AND 7, RULE 3 OF THE 1997 RULES OF CIVIL
PROCEDURE.
V.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING
THAT THE PURPORTED LIABILITY OF PETITIONERS ARE JOINT AND SOLIDARY, IN VIOLATION OF
ARTICLE 1207 OF THE NEW CIVIL CODE.4
Whether or not the RTC Decision is void for failing to comply with Section 16, Rule 3 of the
Rules of Court
The spouses Carandang claims that the Decision of the RTC, having been rendered after the
death of Quirino de Guzman, is void for failing to comply with Section 16, Rule 3 of the Rules
of Court, which provides:
SEC. 16. Death of party; duty of counsel. Whenever a party to a pending action dies, and the
claim is not thereby extinguished, it shall be the duty of his counsel to inform the court within
thirty (30) days after such death of the fact thereof, and to give the name and address of his

legal representative or representatives. Failure of counsel to comply with this duty shall be a
ground for disciplinary action.
The heirs of the deceased may be allowed to be substituted for the deceased, without
requiring the appointment of an executor or administrator and the court may appoint a
guardian ad litem for the minor heirs.
The court shall forthwith order the legal representative or representatives to appear and be
substituted within a period of thirty (30) days from notice.
If no legal representative is named by the counsel for the deceased party, or if the one so
named shall fail to appear within the specified period, the court may order the opposing party,
within a specified time, to procure the appointment of an executor or administrator for the
estate of the deceased and the latter shall immediately appear for and on behalf of the
deceased. The court charges in procuring such appointment, if defrayed by the opposing party,
may be recovered as costs.
The spouses Carandang posits that such failure to comply with the above rule renders void the
decision of the RTC, in adherence to the following pronouncements in Vda. de Haberer v.
Court of Appeals5 and Ferreria v. Vda. de Gonzales6 :
Thus, it has been held that when a party dies in an action that survives and no order is issued
by the court for the appearance of the legal representative or of the heirs of the deceased in
substitution of the deceased, and as a matter of fact no substitution has ever been effected,
the trial held by the court without such legal representatives or heirs and the judgment
rendered after such trial are null and void because the court acquired no jurisdiction over the
persons of the legal representatives or of the heirs upon whom the trial and judgment would
be binding.7
In the present case, there had been no court order for the legal representative of the
deceased to appear, nor had any such legal representative appeared in court to be substituted
for the deceased; neither had the complainant ever procured the appointment of such legal
representative of the deceased, including appellant, ever asked to be substituted for the
deceased. As a result, no valid substitution was effected, consequently, the court never
acquired jurisdiction over appellant for the purpose of making her a party to the case and

making the decision binding upon her, either personally or as a representative of the estate of
her deceased mother.8
However, unlike jurisdiction over the subject matter which is conferred by law and is not
subject to the discretion of the parties,9 jurisdiction over the person of the parties to the case
may be waived either expressly or impliedly.10 Implied waiver comes in the form of either
voluntary appearance or a failure to object.11
In the cases cited by the spouses Carandang, we held that there had been no valid substitution
by the heirs of the deceased party, and therefore the judgment cannot be made binding upon
them. In the case at bar, not only do the heirs of de Guzman interpose no objection to the
jurisdiction of the court over their persons; they are actually claiming and embracing such
jurisdiction. In doing so, their waiver is not even merely implied (by their participation in the
appeal of said Decision), but express (by their explicit espousal of such view in both the Court
of Appeals and in this Court). The heirs of de Guzman had no objection to being bound by the
Decision of the RTC.
Thus, lack of jurisdiction over the person, being subject to waiver, is a personal defense which
can only be asserted by the party who can thereby waive it by silence.
It also pays to look into the spirit behind the general rule requiring a formal substitution of
heirs. The underlying principle therefor is not really because substitution of heirs is a
jurisdictional requirement, but because non-compliance therewith results in the undeniable
violation of the right to due process of those who, though not duly notified of the proceedings,
are substantially affected by the decision rendered therein.12 Such violation of due process
can only be asserted by the persons whose rights are claimed to have been violated, namely
the heirs to whom the adverse judgment is sought to be enforced.
Care should, however, be taken in applying the foregoing conclusions. In People v. Florendo,13
where we likewise held that the proceedings that took place after the death of the party are
void, we gave another reason for such nullity: "the attorneys for the offended party ceased to
be the attorneys for the deceased upon the death of the latter, the principal x x x."
Nevertheless, the case at bar had already been submitted for decision before the RTC on 4
June 1998, several months before the passing away of de Guzman on 19 February 1999.
Hence, no further proceedings requiring the appearance of de Guzmans counsel were
conducted before the promulgation of the RTC Decision. Consequently, de Guzmans counsel

cannot be said to have no authority to appear in trial, as trial had already ceased upon the
death of de Guzman.
In sum, the RTC Decision is valid despite the failure to comply with Section 16, Rule 3 of the
Rules of Court, because of the express waiver of the heirs to the jurisdiction over their
persons, and because there had been, before the promulgation of the RTC Decision, no further
proceedings requiring the appearance of de Guzmans counsel.
Before proceeding with the substantive aspects of the case, however, there is still one more
procedural issue to tackle, the fourth issue presented by the spouses Carandang on the noninclusion in the complaint of an indispensable party.
Whether or not the RTC should have dismissed the case for failure to state a cause of action,
considering that Milagros de Guzman, allegedly an indispensable party, was not included as a
party-plaintiff
The spouses Carandang claim that, since three of the four checks used to pay their stock
subscriptions were issued in the name of Milagros de Guzman, the latter should be considered
an indispensable party. Being such, the spouses Carandang claim, the failure to join Mrs. de
Guzman as a party-plaintiff should cause the dismissal of the action because "(i)f a suit is not
brought in the name of or against the real party in interest, a motion to dismiss may be filed
on the ground that the complaint states no cause of action."14
The Court of Appeals held:
We disagree. The joint account of spouses Quirino A de Guzman and Milagros de Guzman
from which the four (4) checks were drawn is part of their conjugal property and under both
the Civil Code and the Family Code the husband alone may institute an action for the recovery
or protection of the spouses conjugal property.
Thus, in Docena v. Lapesura [355 SCRA 658], the Supreme Court held that "x x x Under the
New Civil Code, the husband is the administrator of the conjugal partnership. In fact, he is the
sole administrator, and the wife is not entitled as a matter of right to join him in this endeavor.
The husband may defend the conjugal partnership in a suit or action without being joined by
the wife. x x x Under the Family Code, the administration of the conjugal property belongs to
the husband and the wife jointly. However, unlike an act of alienation or encumbrance where

the consent of both spouses is required, joint management or administration does not require
that the husband and wife always act together. Each spouse may validly exercise full power of
management alone, subject to the intervention of the court in proper cases as provided under
Article 124 of the Family Code. x x x."
The Court of Appeals is correct. Petitioners erroneously interchange the terms "real party in
interest" and "indispensable party." A real party in interest is the party who stands to be
benefited or injured by the judgment of the suit, or the party entitled to the avails of the
suit.15 On the other hand, an indispensable party is a party in interest without whom no final
determination can be had of an action,16 in contrast to a necessary party, which is one who is
not indispensable but who ought to be joined as a party if complete relief is to be accorded as
to those already parties, or for a complete determination or settlement of the claim subject of
the action.17
The spouses Carandang are indeed correct that "(i)f a suit is not brought in the name of or
against the real party in interest, a motion to dismiss may be filed on the ground that the
complaint states no cause of action."18 However, what dismissal on this ground entails is an
examination of whether the parties presently pleaded are interested in the outcome of the
litigation, and not whether all persons interested in such outcome are actually pleaded. The
latter query is relevant in discussions concerning indispensable and necessary parties, but not
in discussions concerning real parties in interest. Both indispensable and necessary parties are
considered as real parties in interest, since both classes of parties stand to be benefited or
injured by the judgment of the suit.
Quirino and Milagros de Guzman were married before the effectivity of the Family Code on 3
August 1988. As they did not execute any marriage settlement, the regime of conjugal
partnership of gains govern their property relations.19
All property acquired during the marriage, whether the acquisition appears to have been
made, contracted or registered in the name of one or both spouses, is presumed to be
conjugal unless the contrary is proved.20 Credits are personal properties,21 acquired during
the time the loan or other credit transaction was executed. Therefore, credits loaned during
the time of the marriage are presumed to be conjugal property.
Consequently, assuming that the four checks created a debt for which the spouses Carandang
are liable, such credits are presumed to be conjugal property. There being no evidence to the

contrary, such presumption subsists. As such, Quirino de Guzman, being a co-owner of specific
partnership property,22 is certainly a real party in interest. Dismissal on the ground of failure
to state a cause of action, by reason that the suit was allegedly not brought by a real party in
interest, is therefore unwarranted.
So now we come to the discussion concerning indispensable and necessary parties. When an
indispensable party is not before the court, the action should likewise be dismissed.23 The
absence of an indispensable party renders all subsequent actuations of the court void, for
want of authority to act, not only as to the absent parties but even as to those present.24 On
the other hand, the non-joinder of necessary parties do not result in the dismissal of the case.
Instead, Section 9, Rule 3 of the Rules of Court provides for the consequences of such nonjoinder:
Sec. 9. Non-joinder of necessary parties to be pleaded. Whenever in any pleading in which a
claim is asserted a necessary party is not joined, the pleader shall set forth his name, if known,
and shall state why he is omitted. Should the court find the reason for the omission
unmeritorious, it may order the inclusion of the omitted necessary party if jurisdiction over his
person may be obtained.
The failure to comply with the order for his inclusion, without justifiable cause, shall be
deemed a waiver of the claim against such party.
The non-inclusion of a necessary party does not prevent the court from proceeding in the
action, and the judgment rendered therein shall be without prejudice to the rights of such
necessary party.
Non-compliance with the order for the inclusion of a necessary party would not warrant the
dismissal of the complaint. This is an exception to Section 3, Rule 17 which allows the dismissal
of the complaint for failure to comply with an order of the court, as Section 9, Rule 3
specifically provides for the effect of such non-inclusion: it shall not prevent the court from
proceeding in the action, and the judgment rendered therein shall be without prejudice to the
rights of such necessary party. Section 11, Rule 3 likewise provides that the non-joinder of
parties is not a ground for the dismissal of the action.
Other than the indispensable and necessary parties, there is a third set of parties: the proforma parties, which are those who are required to be joined as co-parties in suits by or

against another party as may be provided by the applicable substantive law or procedural
rule.25 An example is provided by Section 4, Rule 3 of the Rules of Court:
Sec. 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided
by law.
Pro-forma parties can either be indispensable, necessary or neither indispensable nor
necessary. The third case occurs if, for example, a husband files an action to recover a
property which he claims to be part of his exclusive property. The wife may have no legal
interest in such property, but the rules nevertheless require that she be joined as a party.
In cases of pro-forma parties who are neither indispensable nor necessary, the general rule
under Section 11, Rule 3 must be followed: such non-joinder is not a ground for dismissal.
Hence, in a case concerning an action to recover a sum of money, we held that the failure to
join the spouse in that case was not a jurisdictional defect.26 The non-joinder of a spouse does
not warrant dismissal as it is merely a formal requirement which may be cured by
amendment.27
Conversely, in the instances that the pro-forma parties are also indispensable or necessary
parties, the rules concerning indispensable or necessary parties, as the case may be, should be
applied. Thus, dismissal is warranted only if the pro-forma party not joined in the complaint is
an indispensable party.
Milagros de Guzman, being presumed to be a co-owner of the credits allegedly extended to
the spouses Carandang, seems to be either an indispensable or a necessary party. If she is an
indispensable party, dismissal would be proper. If she is merely a necessary party, dismissal is
not warranted, whether or not there was an order for her inclusion in the complaint pursuant
to Section 9, Rule 3.
Article 108 of the Family Code provides:
Art. 108. The conjugal partnership shall be governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter or by
the spouses in their marriage settlements.
This provision is practically the same as the Civil Code provision it superceded:

Art. 147. The conjugal partnership shall be governed by the rules on the contract of
partnership in all that is not in conflict with what is expressly determined in this Chapter.
In this connection, Article 1811 of the Civil Code provides that "[a] partner is a co-owner with
the other partners of specific partnership property." Taken with the presumption of the
conjugal nature of the funds used to finance the four checks used to pay for petitioners stock
subscriptions, and with the presumption that the credits themselves are part of conjugal
funds, Article 1811 makes Quirino and Milagros de Guzman co-owners of the alleged credit.
Being co-owners of the alleged credit, Quirino and Milagros de Guzman may separately bring
an action for the recovery thereof. In the fairly recent cases of Baloloy v. Hular28 and Adlawan
v. Adlawan,29 we held that, in a co-ownership, co-owners may bring actions for the recovery
of co-owned property without the necessity of joining all the other co-owners as co-plaintiffs
because the suit is presumed to have been filed for the benefit of his co-owners. In the latter
case and in that of De Guia v. Court of Appeals,30 we also held that Article 487 of the Civil
Code, which provides that any of the co-owners may bring an action for ejectment, covers all
kinds of action for the recovery of possession.31
In sum, in suits to recover properties, all co-owners are real parties in interest. However,
pursuant to Article 487 of the Civil Code and relevant jurisprudence, any one of them may
bring an action, any kind of action, for the recovery of co-owned properties. Therefore, only
one of the co-owners, namely the co-owner who filed the suit for the recovery of the coowned property, is an indispensable party thereto. The other co-owners are not indispensable
parties. They are not even necessary parties, for a complete relief can be accorded in the suit
even without their participation, since the suit is presumed to have been filed for the benefit
of all co-owners.32
We therefore hold that Milagros de Guzman is not an indispensable party in the action for the
recovery of the allegedly loaned money to the spouses Carandang. As such, she need not have
been impleaded in said suit, and dismissal of the suit is not warranted by her not being a party
thereto.
Whether or not respondents were able to prove the loan sought to be collected from
petitioners

In the second and third issues presented by the spouses Carandang, they claim that the de
Guzmans failed to prove the alleged loan for which the spouses Carandang were held liable. As
previously stated, spouses Quirino and Milagros de Guzman paid for the stock subscriptions of
the spouses Carandang, amounting to P336,375.00. The de Guzmans claim that these
payments were in the form of loans and/or advances and it was agreed upon between the late
Quirino de Guzman, Sr. and the spouses Carandang that the latter would repay him.
Petitioners, on the other hand, argue that there was an oral pre-incorporation agreement
wherein it was agreed that Arcardio Carandang would always maintain his 46% equity
participation in the corporation even if the capital structures were increased, and that Quirino
de Guzman would personally pay the equity shares/stock subscriptions of Arcardio Carandang
with no cost to the latter.
On this main issue, the Court of Appeals held:
[The spouses Carandang] aver in its ninth assigned error that [the de Guzmans] failed to prove
by preponderance of evidence, either the existence of the purported loan or the non-payment
thereof.
Simply put, preponderance of evidence means that the evidence as a whole adduced by one
side is superior to that of the other. The concept of preponderance of evidence refers to
evidence that is of greater weight, or more convincing, than that which is offered in opposition
to it; it means probability of truth.
[The spouses Carandang] admitted that it was indeed [the de Guzmans] who paid their stock
subscriptions and their reason for not reimbursing the latter is the alleged pre-incorporation
agreement, to which they offer no clear proof as to its existence.
It is a basic rule in evidence that each party must prove his affirmative allegation. Thus, the
plaintiff or complainant has to prove his affirmative allegations in the complaints and the
defendant or respondent has to prove the affirmative allegations in his affirmative defenses
and counterclaims.33
The spouses Carandang, however, insist that the de Guzmans have not proven the loan itself,
having presented evidence only of the payment in favor of the Carandangs. They claim:

It is an undeniable fact that payment is not equivalent to a loan. For instance, if Mr. "A"
decides to pay for Mr. "Bs" obligation, that payment by Mr. "A" cannot, by any stretch of
imagination, possibly mean that there is now a loan by Mr. "B" to Mr. "A". There is a possibility
that such payment by Mr. "A" is purely out of generosity or that there is a mutual agreement
between them. As applied to the instant case, that mutual agreement is the pre-incorporation
agreement (supra) existing between Mr. de Guzman and the petitioners --- to the effect that
the former shall be responsible for paying stock subscriptions of the latter. Thus, when Mr. de
Guzman paid for the stock subscriptions of the petitioners, there was no loan to speak of, but
only a compliance with the pre-incorporation agreement.34
The spouses Carandang are mistaken. If indeed a Mr. "A" decides to pay for a Mr. "Bs"
obligation, the presumption is that Mr. "B" is indebted to Mr. "A" for such amount that has
been paid. This is pursuant to Articles 1236 and 1237 of the Civil Code, which provide:
Art. 1236. The creditor is not bound to accept payment or performance by a third person who
has no interest in the fulfillment of the obligation, unless there is a stipulation to the contrary.
Whoever pays for another may demand from the debtor what he has paid, except that if he
paid without the knowledge or against the will of the debtor, he can recover only insofar as
the payment has been beneficial to the debtor.
Art. 1237. Whoever pays on behalf of the debtor without the knowledge or against the will of
the latter, cannot compel the creditor to subrogate him in his rights, such as those arising from
a mortgage, guarantee, or penalty.
Articles 1236 and 1237 are clear that, even in cases where the debtor has no knowledge of
payment by a third person, and even in cases where the third person paid against the will of
the debtor, such payment would produce a debt in favor of the paying third person. In fact,
the only consequences for the failure to inform or get the consent of the debtor are the
following: (1) the third person can recover only insofar as the payment has been beneficial to
the debtor; and (2) the third person is not subrogated to the rights of the creditor, such as
those arising from a mortgage, guarantee or penalty.35
We say, however, that this is merely a presumption. By virtue of the parties freedom to
contract, the parties could stipulate otherwise and thus, as suggested by the spouses
Carandang, there is indeed a possibility that such payment by Mr. "A" was purely out of

generosity or that there was a mutual agreement between them. But such mutual agreement,
being an exception to presumed course of events as laid down by Articles 1236 and 1237,
must be adequately proven.
The de Guzmans have successfully proven their payment of the spouses Carandangs stock
subscriptions. These payments were, in fact, admitted by the spouses Carandang.
Consequently, it is now up to the spouses Carandang to prove the existence of the preincorporation agreement that was their defense to the purported loan.
Unfortunately for the spouses Carandang, the only testimony which touched on the existence
and substance of the pre-incorporation agreement, that of petitioner Arcardio Carandang, was
stricken off the record because he did not submit himself to a cross-examination of the
opposing party. On the other hand, the testimonies of Romeo Saavedra,36 Roberto S.
Carandang,37 Gertrudes Z. Esteban,38 Ceferino Basilio,39 and Ma. Luisa Carandang40 touched
on matters other than the existence and substance of the pre-incorporation agreement. So
aside from the fact that these witnesses had no personal knowledge as to the alleged
existence of the pre-incorporation agreement, the testimonies of these witnesses did not even
mention the existence of a pre-incorporation agreement.
Worse, the testimonies of petitioners Arcadio Carandang and Ma. Luisa Carandang even
contradicted the existence of a pre-incorporation agreement because when they were asked
by their counsel regarding the matter of the check payments made by the late Quirino A. de
Guzman, Sr. in their behalf, they said that they had already paid for it thereby negating their
own defense that there was a pre-incorporation agreement excusing themselves from paying
Mr. de Guzman the amounts he advanced or loaned to them. This basic and irrefutable fact
can be gleaned from their testimonies which the private respondents are quoting for easy
reference:
a. With respect to the testimony of Ma. Luisa Carandang
Q: Now, can you tell this Honorable Court how do you feel with respect to the Complaint of
the plaintiff in this case charging you that you paid for this year and asking enough to paid (sic)
your tax?
A: We have paid already, so, we are not liable for anything payment (sic).41
b. With respect to the testimony of Arcadio Carandang

"Q: How much?

A: P40,000.00 to P50,000.00 per month.
Q: The plaintiff also claimed thru witness Edgar Ragasa, that there were receipts issued for the
payment of your shares; which receipts were marked as Exhibits "G" to "L" (Plaintiff).
Im showing to you these receipts so marked by the plaintiff as their exhibits which were
issued in the name of Ma. Luisa Carandang, your wife; and also, Arcadio M. Carandang. Will
you please go over this Official Receipt and state for the records, who made for the payment
stated in these receipts in your name?
A: I paid for those shares."42
There being no testimony or documentary evidence proving the existence of the preincorporation agreement, the spouses Carandang are forced to rely upon an alleged admission
by the original plaintiff of the existence of the pre-incorporation agreement.
Petitioners claim that the late Quirino A. de Guzman, Sr. had admitted the existence of the
pre-incorporation agreement by virtue of paragraphs 13 and 14 of their Answer and paragraph
4 of private respondents Reply.
Paragraphs 13 and 14 of petitioners Answer dated 7 July 1992 state in full:
13. Sometime in November, 1973 or thereabout, herein plaintiff invited defendant Arcadio M.
Carandang to a joint venture by pooling together their technical expertise, equipments,
financial resources and franchise. Plaintiff proposed to defendant and mutually agreed on the
following:
1. That they would organize a corporation known as Mabuhay Broadcasting Systems, Inc.
2. Considering the technical expertise and talent of defendant Arcadio M. Carandang and his
new equipments he bought, and his skill in repairing and modifying radio/communication
equipments into high proficiency, said defendant would have an equity participation in the
corporation of 46%, and plaintiff 54% because of his financial resources and franchise.

3. That defendant would always maintain his 46% equity participation in the corporation even
if the capital structures are increased, and that plaintiff would personally pay the equity
shares/stock subscriptions of defendant with no cost to the latter.
4. That because of defendants expertise in the trade including the marketing aspects, he
would be the President and General Manager, and plaintiff the Chairman of the Board.
5. That considering their past and trustworthy relations, they would maintain such relations in
the joint venture without any mental reservation for their common benefit and success of the
business.
14. Having mutually agreed on the above arrangements, the single proprietorship of plaintiff
was immediately spun-off into a corporation now known as Mabuhay Broadcasting System,
Inc. The incorporators are plaintiff and his family members/nominees controlling jointly 54%
of the stocks and defendant Arcadio M. Carandang controlling singly 46% as previously
agreed.43
Meanwhile, paragraphs 3 and 4 of private respondents Reply dated 29 July 1992 state in full:
3. Plaintiffs admits the allegation in paragraph 13.1 of the Answer only insofar the plaintiff and
defendant Arcadio M. Carandang organized a corporation known as Mabuhay Broadcasting
Systems, Inc. Plaintiff specifically denies the other allegations in paragraph 13 of the Answer,
the same being devoid of any legal or factual bases. The truth of the matter is that defendant
Arcadio M. Carandang was not able to pay plaintiff the agreed amount of the lease for a
number of months forcing the plaintiff to terminate lease. Additionally, the records would
show that it was the defendant Arcadio M. Carandang who proposed a joint venture with the
plaintiff.
It appears that plaintiff agreed to the formation of the corporation principally because of a
directive of then President Marcos indicating the need to broaden the ownership of radio
broadcasting stations. The plaintiff owned the franchise, the radio transmitter, the antenna
tower, the building containing the radio transmitter and other equipment. Verily, he would be
placed in a great disadvantage if he would still have to personally pay for the shares of
defendant Arcadio M. Carandang.
4. Plaintiff admits the allegations in paragraph 14 of the Answer.44

In effect, the spouses Carandang are relying on the fact that Quirino de Guzman stated that he
admitted paragraph 14 of the Answer, which incidentally contained the opening clause
"(h)aving mutually agreed on the above arrangements, x x x."
Admissions, however, should be clear and unambiguous. This purported admission by Quirino
de Guzman reeks of ambiguity, as the clause "(h)aving mutually agreed on the above
arrangements," seems to be a mere introduction to the statement that the single
proprietorship of Quirino de Guzman had been converted into a corporation. If Quirino de
Guzman had meant to admit paragraph 13.3, he could have easily said so, as he did the other
paragraphs he categorically admitted. Instead, Quirino de Guzman expressly stated the
opposite: that "(p)laintiff specifically denies the other allegations of paragraph 13 of the
Answer."45 The Reply furthermore states that the only portion of paragraph 13 which Quirino
de Guzman had admitted is paragraph 13.1, and only insofar as it said that Quirino de Guzman
and Arcardio Carandang organized Mabuhay Broadcasting Systems, Inc.46
All the foregoing considered, we hold that Quirino de Guzman had not admitted the alleged
pre-incorporation agreement. As there was no admission, and as the testimony of Arcardio
Carandang was stricken off the record, we are constrained to rule that there was no preincorporation agreement rendering Quirino de Guzman liable for the spouses Carandangs
stock subscription. The payment by the spouses de Guzman of the stock subscriptions of the
spouses Carandang are therefore by way of loan which the spouses Carandang are liable to
pay.1wphi1
Whether or not the liability of the spouses Carandang is joint and solidary
Finally, the Court of Appeals also upheld the RTC Decision insofar as it decreed a solidary
liability. According to the Court of Appeals:
With regards (sic) the tenth assigned error, [the spouses Carandang] contend that:
"There is absolutely no evidence, testimonial or documentary, showing that the purported
obligation of [the spouses Carandang] is joint and solidary. x x x
"Furthermore, the purported obligation of [the spouses Carandang] does not at all qualify as
one of the obligations required by law to be solidary x x x."

It is apparent from the facts of the case that [the spouses Carandang] were married way
before the effectivity of the Family Code hence; their property regime is conjugal partnership
under the Civil Code.
It must be noted that for marriages governed by the rules of conjugal partnership of gains, an
obligation entered into by the husband and wife is chargeable against their conjugal
partnership and it is the partnership, which is primarily bound for its repayment. Thus, when
the spouses are sued for the enforcement of the obligation entered into by them, they are
being impleaded in their capacity as representatives of the conjugal partnership and not as
independent debtors, such that the concept of joint and solidary liability, as between them,
does not apply.
The Court of Appeals is correct insofar as it held that when the spouses are sued for the
enforcement of the obligation entered into by them, they are being impleaded in their
capacity as representatives of the conjugal partnership and not as independent debtors.
Hence, either of them may be sued for the whole amount, similar to that of a solidary liability,
although the amount is chargeable against their conjugal partnership property. Thus, in the
case cited by the Court of Appeals, Alipio v. Court of Appeals,48 the two sets of defendantspouses therein were held liable for P25,300.00 each, chargeable to their respective conjugal
partnerships.
WHEREFORE, the Decision of the Court of Appeals, affirming the judgment rendered against
the spouses Carandang, is hereby AFFIRMED with the following MODIFICATION: The spouses
Carandang are ORDERED to pay the following amounts from their conjugal partnership
properties:
(1) P336,375.00 representing the spouses Carandangs loan to Quirino de Guzman; and
(2) Interest on the preceding amount at the rate of twelve percent (12%) per annum from 5
June 1992 when the complaint was filed until the principal amount can be fully paid; and
(3) P20,000.00 as attorneys fees.
No costs.
SO ORDERED.

Lim Tan Hu vs Ramolete

G.R. No. L-40098 August 29, 1975
ANTONIO LIM TANHU, DY OCHAY, ALFONSO LEONARDO NG SUA and CO OYO, petitioners,
vs.
HON. JOSE R. RAMOLETE as Presiding Judge, Branch III, CFI, Cebu and TAN PUT, respondents.
Zosa, Zosa, Castillo, Alcudia & Koh for petitioners.
Fidel Manalo and Florido & Associates for respondents.

BARREDO, J.:
Petition for (1) certiorari to annul and set aside certain actuations of respondent Court of First
Instance of Cebu Branch III in its Civil Case No. 12328, an action for accounting of properties
and money totalling allegedly about P15 million pesos filed with a common cause of action
against six defendants, in which after declaring four of the said defendants herein petitioners,
in default and while the trial as against the two defendants not declared in default was in
progress, said court granted plaintiff's motion to dismiss the case in so far as the nondefaulted defendants were concerned and thereafter proceeded to hear ex-parte the rest of
the plaintiffs evidence and subsequently rendered judgment by default against the defaulted
defendants, with the particularities that notice of the motion to dismiss was not duly served
on any of the defendants, who had alleged a compulsory counterclaim against plaintiff in their
joint answer, and the judgment so rendered granted reliefs not prayed for in the complaint,
and (2) prohibition to enjoin further proceedings relative to the motion for immediate
execution of the said judgment.
Originally, this litigation was a complaint filed on February 9, 1971 by respondent Tan Put only
against the spouses-petitioners Antonio Lim Tanhu and Dy Ochay. Subsequently, in an
amended complaint dated September 26, 1972, their son Lim Teck Chuan and the other
spouses-petitioners Alfonso Leonardo Ng Sua and Co Oyo and their son Eng Chong Leonardo
were included as defendants. In said amended complaint, respondent Tan alleged that she "is
the widow of Tee Hoon Lim Po Chuan, who was a partner in the commercial partnership, Glory
Commercial Company ... with Antonio Lim Tanhu and Alfonso Ng Sua that "defendant Antonio

Lim Tanhu, Alfonso Leonardo Ng Sua, Lim Teck Chuan, and Eng Chong Leonardo, through fraud
and machination, took actual and active management of the partnership and although Tee
Hoon Lim Po Chuan was the manager of Glory Commercial Company, defendants managed to
use the funds of the partnership to purchase lands and building's in the cities of Cebu,
Lapulapu, Mandaue, and the municipalities of Talisay and Minglanilla, some of which were
hidden, but the description of those already discovered were as follows: (list of properties) ...;"
and that:
13. (A)fter the death of Tee Hoon Lim Po Chuan, the defendants, without liquidation continued
the business of Glory Commercial Company by purportedly organizing a corporation known as
the Glory Commercial Company, Incorporated, with paid up capital in the sum of P125,000.00,
which money and other assets of the said Glory Commercial Company, Incorporated are
actually the assets of the defunct Glory Commercial Company partnership, of which the
plaintiff has a share equivalent to one third (/ 3) thereof;
14. (P)laintiff, on several occasions after the death of her husband, has asked defendants of
the above-mentioned properties and for the liquidation of the business of the defunct
partnership, including investments on real estate in Hong Kong, but defendants kept on
promising to liquidate said properties and just told plaintiff to
15. (S)ometime in the month of November, 1967, defendants, Antonio Lim Tanhu, by means of
fraud deceit and misrepresentations did then and there, induce and convince the plaintiff to
execute a quitclaim of all her rights and interests, in the assets of the partnership of Glory
Commercial Company, which is null and void, executed through fraud and without any legal
effect. The original of said quitclaim is in the possession of the adverse party defendant
Antonio Lim Tanhu.
16. (A)s a matter of fact, after the execution of said quitclaim, defendant Antonio Lim Tanhu
offered to pay the plaintiff the amount P65,000.00 within a period of one (1) month, for which
plaintiff was made to sign a receipt for the amount of P65,000.00 although no such amount
was given and plaintiff was not even given a copy of said document;
17. (T)hereafter, in the year 1968-69, the defendants who had earlier promised to liquidate
the aforesaid properties and assets in favor among others of plaintiff and until the middle of
the year 1970 when the plaintiff formally demanded from the defendants the accounting of

real and personal properties of the Glory Commercial Company, defendants refused and
stated that they would not give the share of the plaintiff. (Pp. 36-37, Record.)
She prayed as follows:
WHEREFORE, it is most respectfully prayed that judgment be rendered:
a) Ordering the defendants to render an accounting of the real and personal properties of the
Glory Commercial Company including those registered in the names of the defendants and
other persons, which properties are located in the Philippines and in Hong Kong;
b) Ordering the defendants to deliver to the plaintiff after accounting, one third (/ 3) of the
total value of all the properties which is approximately P5,000,000.00 representing the just
share of the plaintiff;
c) Ordering the defendants to pay the attorney of the plaintiff the sum of Two Hundred Fifty
Thousand Pesos (P250,000.00) by way of attorney's fees and damages in the sum of One
Million Pesos (P1,000,000.00).
This Honorable Court is prayed for other remedies and reliefs consistent with law and equity
and order the defendants to pay the costs. (Page 38, Record.)
The admission of said amended complaint was opposed by defendants upon the ground that
there were material modifications of the causes of action previously alleged, but respondent
judge nevertheless allowed the amendment reasoning that:
The present action is for accounting of real and personal properties as well as for the recovery
of the same with damages.
An objective consideration of pars. 13 and 15 of the amended complaint pointed out by the
defendants to sustain their opposition will show that the allegations of facts therein are
merely to amplify material averments constituting the cause of action in the original
complaint. It likewise include necessary and indispensable defendants without whom no final
determination can be had in the action and in order that complete relief is to be accorded as
between those already parties.

Considering that the amendments sought to be introduced do not change the main causes of
action in the original complaint and the reliefs demanded and to allow amendments is the
rule, and to refuse them the exception and in order that the real question between the parties
may be properly and justly threshed out in a single proceeding to avoid multiplicity of actions.
(Page 40, Record.)
In a single answer with counterclaim, over the signature of their common counsel, defendants
denied specifically not only the allegation that respondent Tan is the widow of Tee Hoon
because, according to them, his legitimate wife was Ang Siok Tin still living and with whom he
had four (4) legitimate children, a twin born in 1942, and two others born in 1949 and 1965, all
presently residing in Hongkong, but also all the allegations of fraud and conversion quoted
above, the truth being, according to them, that proper liquidation had been regularly made of
the business of the partnership and Tee Hoon used to receive his just share until his death, as
a result of which the partnership was dissolved and what corresponded to him were all given
to his wife and children. To quote the pertinent portions of said answer:
AND BY WAY OF SPECIAL AND AFFIRMATIVE DEFENSES,
defendants hereby incorporate all facts averred and alleged in the answer, and further most
respectfully declare:
1. That in the event that plaintiff is filing the present complaint as an heir of Tee Hoon Lim Po
Chuan, then, she has no legal capacity to sue as such, considering that the legitimate wife,
namely: Ang Siok Tin, together with their children are still alive. Under Sec. 1, (d), Rule 16 of
the Revised Rules of Court, lack of legal capacity to sue is one of the grounds for a motion to
dismiss and so defendants prays that a preliminary hearing be conducted as provided for in
Sec. 5, of the same rule;
2. That in the alternative case or event that plaintiff is filing the present case under Art. 144 of
the Civil Code, then, her claim or demand has been paid, waived abandoned or otherwise
extinguished as evidenced by the 'quitclaim' Annex 'A' hereof, the ground cited is another
ground for a motion to dismiss (Sec. 1, (h), Rule 16) and hence defendants pray that a
preliminary hearing be made in connection therewith pursuant to Section 5 of the
aforementioned rule;

3. That Tee Hoon Lim Po Chuan was legally married to Ang Siok Tin and were blessed with the
following children, to wit: Ching Siong Lim and Ching Hing Lim (twins) born on February 16,
1942; Lim Shing Ping born on March 3, 1949 and Lim Eng Lu born on June 25, 1965 and
presently residing in Hongkong;
4. That even before the death of Tee Hoon Lim Po Chuan, the plaintiff was no longer his
common law wife and even though she was not entitled to anything left by Tee Hoon Lim Po
Chuan, yet, out of the kindness and generosity on the part of the defendants, particularly
Antonio Lain Tanhu, who, was inspiring to be monk and in fact he is now a monk, plaintiff was
given a substantial amount evidenced by the 'quitclaim' (Annex 'A');
5. That the defendants have acquired properties out of their own personal fund and certainly
not from the funds belonging to the partnership, just as Tee Hoon Lim Po Chuan had acquired
properties out of his personal fund and which are now in the possession of the widow and
neither the defendants nor the partnership have anything to do about said properties;
6. That it would have been impossible to buy properties from funds belonging to the
partnership without the other partners knowing about it considering that the amount taken
allegedly is quite big and with such big amount withdrawn the partnership would have been
insolvent;
7. That plaintiff and Tee Hoon Lim Po Chuan were not blessed with children who would have
been lawfully entitled to succeed to the properties left by the latter together with the widow
and legitimate children;
8. That despite the fact that plaintiff knew that she was no longer entitled to anything of the
shares of the late Tee Hoon Lim Po Chuan, yet, this suit was filed against the defendant who
have to interpose the following
COUNTERCLAIM
A. That the defendants hereby reproduced, by way of reference, all the allegations and
foregoing averments as part of this counterclaim; .
B. That plaintiff knew and was aware she was merely the common-law wife of Tee Hoon Lim
Po Chuan and that the lawful and legal is still living, together with the legitimate children, and

yet she deliberately suppressed this fact, thus showing her bad faith and is therefore liable for
exemplary damages in an amount which the Honorable Court may determine in the exercise
of its sound judicial discretion. In the event that plaintiff is married to Tee Hoon Lim Po Chuan,
then, her marriage is bigamous and should suffer the consequences thereof;
C. That plaintiff was aware and had knowledge about the 'quitclaim', even though she was not
entitled to it, and yet she falsely claimed that defendants refused even to see her and for filing
this unfounded, baseless, futile and puerile complaint, defendants suffered mental anguish
and torture conservatively estimated to be not less than P3,000.00;
D. That in order to defend their rights in court, defendants were constrained to engage the
services of the undersigned counsel, obligating themselves to pay P500,000.00 as attorney's
fees;
E. That by way of litigation expenses during the time that this case will be before this
Honorable Court and until the same will be finally terminated and adjudicated, defendants will
have to spend at least P5,000.00. (Pp. 44-47. Record.)
After unsuccessfully trying to show that this counterclaim is merely permissive and should be
dismissed for non-payment of the corresponding filing fee, and after being overruled by the
court, in due time, plaintiff answered the same, denying its material allegations.
On February 3, 1973, however, the date set for the pre-trial, both of the two defendantsspouses the Lim Tanhus and Ng Suas, did not appear, for which reason, upon motion of
plaintiff dated February 16, 1973, in an order of March 12, 1973, they were all "declared in
DEFAULT as of February 3, 1973 when they failed to appear at the pre-trial." They sought to
hive this order lifted thru a motion for reconsideration, but the effort failed when the court
denied it. Thereafter, the trial started, but at the stage thereof where the first witness of the
plaintiff by the name of Antonio Nuez who testified that he is her adopted son, was up for recross-examination, said plaintiff unexpectedly filed on October 19, 1974 the following simple
and unreasoned
MOTION TO DROP DEFENDANTS LIM TECK
CHUAN AND ENG CHONG LEONARDO

COMES now plaintiff, through her undersigned counsel, unto the Honorable Court most
respectfully moves to drop from the complaint the defendants Lim Teck Chuan and Eng Chong
Leonardo and to consider the case dismissed insofar as said defendants Lim Teck Chuan and
Eng Chong Leonardo are concerned.
WHEREFORE, it is most respectfully prayed of the Honorable Court to drop from the complaint
the defendants Lim Teck Chuan and Eng Chong Leonardo and to dismiss the case against them
without pronouncement as to costs. (Page 50, Record.)
which she set for hearing on December 21, 1974. According to petitioners, none of the
defendants declared in default were notified of said motion, in violation of Section 9 of Rule
13, since they had asked for the lifting of the order of default, albeit unsuccessfully, and as
regards the defendants not declared in default, the setting of the hearing of said motion on
October 21, 1974 infringed the three-day requirement of Section 4 of Rule 15, inasmuch as
Atty. Adelino Sitoy of Lim Teck Chuan was served with a copy of the motion personally only on
October 19, 1974, while Atty. Benjamin Alcudia of Eng Chong Leonardo was served by
registered mail sent only on the same date.
Evidently without even verifying the notices of service, just as simply as plaintiff had couched
her motion, and also without any legal grounds stated, respondent court granted the prayer of
the above motion thus:
ORDER
Acting on the motion of the plaintiff praying for the dismissal of the complaint as against
defendants Lim Teck Chuan and Eng Chong Leonardo.
The same is hereby GRANTED. The complaint as against defendant Lim Teck Chuan and Eng
Chong Leonardo is hereby ordered DISMISSED without pronouncement as to costs.
Simultaneously, the following order was also issued:
Considering that defendants Antonio Lim Tanhu and his spouse Dy Ochay as well as
defendants Alfonso Ng Sua and his spouse Co Oyo have been declared in default for failure to
appear during the pre-trial and as to the other defendants the complaint had already been
ordered dismissed as against them.

Let the hearing of the plaintiff's evidence ex-parte be set on November 20, 1974, at 8:30 A.M.
before the Branch Clerk of Court who is deputized for the purpose, to swear in witnesses and
to submit her report within ten (10) days thereafter. Notify the plaintiff.
SO ORDERED.
Cebu City, Philippines, October 21, 1974. (Page 52, Record.)
But, in connection with this last order, the scheduled ex-parte reception of evidence did not
take place on November 20, 1974, for on October 28, 1974, upon verbal motion of plaintiff,
the court issued the following self-explanatory order: .
Acting favorably on the motion of the plaintiff dated October 18, 1974, the Court deputized
the Branch Clerk of Court to receive the evidence of the plaintiff ex-parte to be made on
November 20, 1974. However, on October 28, 1974, the plaintiff, together with her witnesses,
appeared in court and asked, thru counsel, that she be allowed to present her evidence.
Considering the time and expenses incurred by the plaintiff in bringing her witnesses to the
court, the Branch Clerk of Court is hereby authorized to receive immediately the evidence of
the plaintiff ex-parte.
SO ORDERED.
Cebu City, Philippines, October 28, 1974. (Page 53. Record.)
Upon learning of these orders on October 23, 1973, the defendant Lim Teck Cheng, thru
counsel, Atty. Sitoy, filed a motion for reconsideration thereof, and on November 1, 1974,
defendant Eng Chong Leonardo, thru counsel Atty. Alcudia, filed also his own motion for
reconsideration and clarification of the same orders. These motions were denied in an order
dated December 6, 1974 but received by the movants only on December 23, 1974. Meanwhile,
respondent court rendered the impugned decision on December 20, 1974. It does not appear
when the parties were served copies of this decision.
Subsequently, on January 6, 1975, all the defendants, thru counsel, filed a motion to quash the
order of October 28, 1974. Without waiting however for the resolution thereof, on January 13,

1974, Lim Teck Chuan and Eng Chong Leonardo went to the Court of Appeals with a petition
for certiorari seeking the annulment of the above-mentioned orders of October 21, 1974 and
October 28, 1974 and decision of December 20, 1974. By resolution of January 24, 1975, the
Court of Appeals dismissed said petition, holding that its filing was premature, considering that
the motion to quash the order of October 28, 1974 was still unresolved by the trial court. This
holding was reiterated in the subsequent resolution of February 5, 1975 denying the motion
for reconsideration of the previous dismissal.
On the other hand, on January 20, 1975, the other defendants, petitioners herein, filed their
notice of appeal, appeal bond and motion for extension to file their record on appeal, which
was granted, the extension to expire after fifteen (15) days from January 26 and 27, 1975, for
defendants Lim Tanhu and Ng Suas, respectively. But on February 7, 1975, before the
perfection of their appeal, petitioners filed the present petition with this Court. And with the
evident intent to make their procedural position clear, counsel for defendants, Atty. Manuel
Zosa, filed with respondent court a manifestation dated February 14, 1975 stating that "when
the non-defaulted defendants Eng Chong Leonardo and Lim Teck Chuan filed their petition in
the Court of Appeals, they in effect abandoned their motion to quash the order of October 28,
1974," and that similarly "when Antonio Lim Tanhu, Dy Ochay, Alfonso Leonardo Ng Sua and
Co Oyo, filed their petition for certiorari and prohibition ... in the Supreme Court, they likewise
abandoned their motion to quash." This manifestation was acted upon by respondent court
together with plaintiffs motion for execution pending appeal in its order of the same date
February 14, 1975 this wise:
ORDER
When these incidents, the motion to quash the order of October 28, 1974 and the motion for
execution pending appeal were called for hearing today, counsel for the defendants-movants
submitted their manifestation inviting the attention of this Court that by their filing for
certiorari and prohibition with preliminary injunction in the Court of Appeals which was
dismissed and later the defaulted defendants filed with the Supreme Court certiorari with
prohibition they in effect abandoned their motion to quash.
IN VIEW HEREOF, the motion to quash is ordered ABANDONED. The resolution of the motion
for execution pending appeal shall be resolved after the petition for certiorari and prohibition
shall have been resolved by the Supreme Court.

SO ORDERED.
Cebu City, Philippines, February 14, 1975. (Page 216, Record.)
Upon these premises, it is the position of petitioners that respondent court acted illegally, in
violation of the rules or with grave abuse of discretion in acting on respondent's motion to
dismiss of October 18, 1974 without previously ascertaining whether or not due notice thereof
had been served on the adverse parties, as, in fact, no such notice was timely served on the
non-defaulted defendants Lim Teck Chuan and Eng Chong Leonardo and no notice at all was
ever sent to the other defendants, herein petitioners, and more so, in actually ordering the
dismissal of the case by its order of October 21, 1974 and at the same time setting the case for
further hearing as against the defaulted defendants, herein petitioners, actually hearing the
same ex-parte and thereafter rendering the decision of December 20, 1974 granting
respondent Tan even reliefs not prayed for in the complaint. According to the petitioners, to
begin with, there was compulsory counterclaim in the common answer of the defendants the
nature of which is such that it cannot be decided in an independent action and as to which the
attention of respondent court was duly called in the motions for reconsideration. Besides, and
more importantly, under Section 4 of Rule 18, respondent court had no authority to divide the
case before it by dismissing the same as against the non-defaulted defendants and thereafter
proceeding to hear it ex-parte and subsequently rendering judgment against the defaulted
defendants, considering that in their view, under the said provision of the rules, when a
common cause of action is alleged against several defendants, the default of any of them is a
mere formality by which those defaulted are not allowed to take part in the proceedings, but
otherwise, all the defendants, defaulted and not defaulted, are supposed to have but a
common fate, win or lose. In other words, petitioners posit that in such a situation, there can
only be one common judgment for or against all the defendant, the non-defaulted and the
defaulted. Thus, petitioners contend that the order of dismissal of October 21, 1974 should be
considered also as the final judgment insofar as they are concerned, or, in the alternative, it
should be set aside together with all the proceedings and decision held and rendered
subsequent thereto, and that the trial be resumed as of said date, with the defendants Lim
Teck Chuan and Eng Chong Leonardo being allowed to defend the case for all the defendants.
On the other hand, private respondent maintains the contrary view that inasmuch as
petitioners had been properly declared in default, they have no personality nor interest to
question the dismissal of the case as against their non-defaulted co-defendants and should
suffer the consequences of their own default. Respondent further contends, and this is the

only position discussed in the memorandum submitted by her counsel, that since petitioners
have already made or at least started to make their appeal, as they are in fact entitled to
appeal, this special civil action has no reason for being. Additionally, she invokes the point of
prematurity upheld by the Court of Appeals in regard to the above-mentioned petition therein
of the non-defaulted defendants Lim Teck Chuan and Eng Chong Leonardo. Finally, she argues
that in any event, the errors attributed to respondent court are errors of judgment and may be
reviewed only in an appeal.
After careful scrutiny of all the above-related proceedings, in the court below and mature
deliberation, the Court has arrived at the conclusion that petitioners should be granted relief,
if only to stress emphatically once more that the rules of procedure may not be misused and
abused as instruments for the denial of substantial justice. A review of the record of this case
immediately discloses that here is another demonstrative instance of how some members of
the bar, availing of their proficiency in invoking the letter of the rules without regard to their
real spirit and intent, succeed in inducing courts to act contrary to the dictates of justice and
equity, and, in some instances, to wittingly or unwittingly abet unfair advantage by ironically
camouflaging their actuations as earnest efforts to satisfy the public clamor for speedy
disposition of litigations, forgetting all the while that the plain injunction of Section 2 of Rule 1
is that the "rules shall be liberally construed in order to promote their object and to assist the
parties in obtaining not only 'speedy' but more imperatively, "just ... and inexpensive
determination of every action and proceeding." We cannot simply pass over the impression
that the procedural maneuvers and tactics revealed in the records of the case at bar were
deliberately planned with the calculated end in view of depriving petitioners and their codefendants below of every opportunity to properly defend themselves against a claim of more
than substantial character, considering the millions of pesos worth of properties involved as
found by respondent judge himself in the impugned decision, a claim that appears, in the light
of the allegations of the answer and the documents already brought to the attention of the
court at the pre-trial, to be rather dubious. What is most regrettable is that apparently, all of
these alarming circumstances have escaped respondent judge who did not seem to have
hesitated in acting favorably on the motions of the plaintiff conducive to the deplorable
objective just mentioned, and which motions, at the very least, appeared to be 'of highly
controversial' merit, considering that their obvious tendency and immediate result would be
to convert the proceedings into a one-sided affair, a situation that should be readily
condemnable and intolerable to any court of justice.

Indeed, a seeming disposition on the part of respondent court to lean more on the
contentions of private respondent may be discerned from the manner it resolved the attempts
of defendants Dy Ochay and Antonio Lim Tanhu to have the earlier order of default against
them lifted. Notwithstanding that Dy Ochay's motion of October 8, 1971, co-signed by her with
their counsel, Atty. Jovencio Enjambre (Annex 2 of respondent answer herein) was over the
jurat of the notary public before whom she took her oath, in the order of November 2, 1971,
(Annex 3 id.) it was held that "the oath appearing at the bottom of the motion is not the one
contemplated by the abovequoted pertinent provision (See. 3, Rule 18) of the rules. It is not
even a verification. (See. 6, Rule 7.) What the rule requires as interpreted by the Supreme
Court is that the motion must have to be accompanied by an affidavit of merits that the
defendant has a meritorious defense, thereby ignoring the very simple legal point that the
ruling of the Supreme Court in Ong Peng vs. Custodio, 1 SCRA 781, relied upon by His Honor,
under which a separate affidavit of merit is required refers obviously to instances where the
motion is not over oath of the party concerned, considering that what the cited provision
literally requires is no more than a "motion under oath." Stated otherwise, when a motion to
lift an order of default contains the reasons for the failure to answer as well as the facts
constituting the prospective defense of the defendant and it is sworn to by said defendant,
neither a formal verification nor a separate affidavit of merit is necessary.
What is worse, the same order further held that the motion to lift the order of default "is an
admission that there was a valid service of summons" and that said motion could not amount
to a challenge against the jurisdiction of the court over the person of the defendant. Such a
rationalization is patently specious and reveals an evident failure to grasp the import of the
legal concepts involved. A motion to lift an order of default on the ground that service of
summons has not been made in accordance with the rules is in order and is in essence verily
an attack against the jurisdiction of the court over the person of the defendant, no less than if
it were worded in a manner specifically embodying such a direct challenge.
And then, in the order of February 14, 1972 (Annex 6, id.) lifting at last the order of default as
against defendant Lim Tanhu, His Honor posited that said defendant "has a defense (quitclaim)
which renders the claim of the plaintiff contentious." We have read defendants' motion for
reconsideration of November 25, 1971 (Annex 5, id.), but We cannot find in it any reference to
a "quitclaim". Rather, the allegation of a quitclaim is in the amended complaint (Pars. 15-16,
Annex B of the petition herein) in which plaintiff maintains that her signature thereto was
secured through fraud and deceit. In truth, the motion for reconsideration just mentioned,
Annex 5, merely reiterated the allegation in Dy Ochay's earlier motion of October 8, 1971,

Annex 2, to set aside the order of default, that plaintiff Tan could be but the common law wife
only of Tee Hoon, since his legitimate wife was still alive, which allegation, His Honor held in
the order of November 2, 1971, Annex 3, to be "not good and meritorious defense". To top it
all, whereas, as already stated, the order of February 19, 1972, Annex 6, lifted the default
against Lim Tanhu because of the additional consideration that "he has a defense (quitclaim)
which renders the claim of the plaintiff contentious," the default of Dy Ochay was maintained
notwithstanding that exactly the same "contentions" defense as that of her husband was
invoked by her.
Such tenuous, if not altogether erroneous reasonings and manifest inconsistency in the legal
postures in the orders in question can hardly convince Us that the matters here in issue were
accorded due and proper consideration by respondent court. In fact, under the circumstances
herein obtaining, it seems appropriate to stress that, having in view the rather substantial
value of the subject matter involved together with the obviously contentious character of
plaintiff's claim, which is discernible even on the face of the complaint itself, utmost care
should have been taken to avoid the slightest suspicion of improper motivations on the part of
anyone concerned. Upon the considerations hereunder to follow, the Court expresses its grave
concern that much has to be done to dispel the impression that herein petitioners and their
co-defendants are being railroaded out of their rights and properties without due process of
law, on the strength of procedural technicalities adroitly planned by counsel and seemingly
unnoticed and undetected by respondent court, whose orders, gauged by their tenor and the
citations of supposedly pertinent provisions and jurisprudence made therein, cannot be said to
have proceeded from utter lack of juridical knowledgeability and competence.
1
The first thing that has struck the Court upon reviewing the record is the seeming alacrity with
which the motion to dismiss the case against non-defaulted defendants Lim Teck Chuan and
Eng Chong Leonardo was disposed of, which definitely ought not to have been the case. The
trial was proceeding with the testimony of the first witness of plaintiff and he was still under
re-cross-examination. Undoubtedly, the motion to dismiss at that stage and in the light of the
declaration of default against the rest of the defendants was a well calculated surprise move,
obviously designed to secure utmost advantage of the situation, regardless of its apparent
unfairness. To say that it must have been entirely unexpected by all the defendants, defaulted
and non-defaulted , is merely to rightly assume that the parties in a judicial proceeding can

never be the victims of any procedural waylaying as long as lawyers and judges are imbued
with the requisite sense of equity and justice.
But the situation here was aggravated by the indisputable fact that the adverse parties who
were entitled to be notified of such unanticipated dismissal motion did not get due notice
thereof. Certainly, the non-defaulted defendants had the right to the three-day prior notice
required by Section 4 of Rule 15. How could they have had such indispensable notice when the
motion was set for hearing on Monday, October 21, 1974, whereas the counsel for Lim Teck
Chuan, Atty. Sitoy was personally served with the notice only on Saturday, October 19, 1974
and the counsel for Eng Chong Leonardo, Atty. Alcudia, was notified by registered mail which
was posted only that same Saturday, October 19, 1974? According to Chief Justice Moran,
"three days at least must intervene between the date of service of notice and the date set for
the hearing, otherwise the court may not validly act on the motion." (Comments on the Rules
of Court by Moran, Vol. 1, 1970 ed. p. 474.) Such is the correct construction of Section 4 of
Rule 15. And in the instant case, there can be no question that the notices to the nondefaulted defendants were short of the requirement of said provision.
We can understand the over-anxiety of counsel for plaintiff, but what is incomprehensible is
the seeming inattention of respondent judge to the explicit mandate of the pertinent rule, not
to speak of the imperatives of fairness, considering he should have realized the far-reaching
implications, specially from the point of view he subsequently adopted, albeit erroneously, of
his favorably acting on it. Actually, he was aware of said consequences, for simultaneously
with his order of dismissal, he immediately set the case for the ex-parte hearing of the
evidence against the defaulted defendants, which, incidentally, from the tenor of his order
which We have quoted above, appears to have been done by him motu propio As a matter of
fact, plaintiff's motion also quoted above did not pray for it.
Withal, respondent court's twin actions of October 21, 1974 further ignores or is inconsistent
with a number of known juridical principles concerning defaults, which We will here take
occasion to reiterate and further elucidate on, if only to avoid a repetition of the unfortunate
errors committed in this case. Perhaps some of these principles have not been amply
projected and elaborated before, and such paucity of elucidation could be the reason why
respondent judge must have acted as he did. Still, the Court cannot but express its vehement
condemnation of any judicial actuation that unduly deprives any party of the right to be heard
without clear and specific warrant under the terms of existing rules or binding jurisprudence.
Extreme care must be the instant reaction of every judge when confronted with a situation

involving risks that the proceedings may not be fair and square to all the parties concerned.
Indeed, a keen sense of fairness, equity and justice that constantly looks for consistency
between the letter of the adjective rules and these basic principles must be possessed by
every judge, If substance is to prevail, as it must, over form in our courts. Literal observance of
the rules, when it is conducive to unfair and undue advantage on the part of any litigant
before it, is unworthy of any court of justice and equity. Withal, only those rules and
procedure informed, with and founded on public policy deserve obedience in accord with their
unequivocal language or words..
Before proceeding to the discussion of the default aspects of this case, however, it should not
be amiss to advert first to the patent incorrectness, apparent on the face of the record, of the
aforementioned order of dismissal of October 21, 1974 of the case below as regards nondefaulted defendants Lim and Leonardo. While it is true that said defendants are not
petitioners herein, the Court deems it necessary for a full view of the outrageous procedural
strategy conceived by respondent's counsel and sanctioned by respondent court to also make
reference to the very evident fact that in ordering said dismissal respondent court disregarded
completely the existence of defendant's counterclaim which it had itself earlier held if
indirectly, to be compulsory in nature when it refused to dismiss the same on the ground
alleged by respondent Tan that he docketing fees for the filing thereof had not been paid by
defendants.
Indeed, that said counterclaim is compulsory needs no extended elaboration. As may be noted
in the allegations hereof aforequoted, it arose out of or is necessarily connected with the
occurrence that is the subject matter of the plaintiff's claim, (Section 4, Rule 9) namely,
plaintiff's allegedly being the widow of the deceased Tee Hoon entitled, as such, to demand
accounting of and to receive the share of her alleged late husband as partner of defendants
Antonio Lim Tanhu and Alfonso Leonardo Ng Sua in Glory Commercial Company, the truth of
which allegations all the defendants have denied. Defendants maintain in their counterclaim
that plaintiff knew of the falsity of said allegations even before she filed her complaint, for she
had in fact admitted her common-law relationship with said deceased in a document she had
jointly executed with him by way of agreement to terminate their illegitimate relationship, for
which she received P40,000 from the deceased, and with respect to her pretended share in
the capital and profits in the partnership, it is also defendants' posture that she had already
quitclaimed, with the assistance of able counsel, whatever rights if any she had thereto in
November, 1967, for the sum of P25,000 duly receipted by her, which quitclaim was, however,
executed, according to respondent herself in her amended complaint, through fraud. And

having filed her complaint knowing, according to defendants, as she ought to have known,
that the material allegations thereof are false and baseless, she has caused them to suffer
damages. Undoubtedly, with such allegations, defendants' counterclaim is compulsory, not
only because the same evidence to sustain it will also refute the cause or causes of action
alleged in plaintiff's complaint, (Moran, supra p. 352) but also because from its very nature, it
is obvious that the same cannot "remain pending for independent adjudication by the court."
(Section 2, Rule 17.)
The provision of the rules just cited specifically enjoins that "(i)f a counterclaim has been
pleaded by a defendant prior to the service upon him of the plaintiff's motion to dismiss, the
action shall not be dismissed against the defendant's objection unless the counterclaim can
remain pending for independent adjudication by the court." Defendants Lim and Leonardo had
no opportunity to object to the motion to dismiss before the order granting the same was
issued, for the simple reason that they were not opportunity notified of the motion therefor,
but the record shows clearly that at least defendant Lim immediately brought the matter of
their compulsory counterclaim to the attention of the trial court in his motion for
reconsideration of October 23, 1974, even as the counsel for the other defendant, Leonardo,
predicated his motion on other grounds. In its order of December 6, 1974, however,
respondent court not only upheld the plaintiffs supposed absolute right to choose her
adversaries but also held that the counterclaim is not compulsory, thereby virtually making
unexplained and inexplicable 180-degree turnabout in that respect.
There is another equally fundamental consideration why the motion to dismiss should not
have been granted. As the plaintiff's complaint has been framed, all the six defendants are
charged with having actually taken part in a conspiracy to misappropriate, conceal and convert
to their own benefit the profits, properties and all other assets of the partnership Glory
Commercial Company, to the extent that they have allegedly organized a corporation, Glory
Commercial Company, Inc. with what they had illegally gotten from the partnership. Upon
such allegations, no judgment finding the existence of the alleged conspiracy or holding the
capital of the corporation to be the money of the partnership is legally possible without the
presence of all the defendants. The non-defaulted defendants are alleged to be stockholders
of the corporation and any decision depriving the same of all its assets cannot but prejudice
the interests of said defendants. Accordingly, upon these premises, and even prescinding from
the other reasons to be discussed anon it is clear that all the six defendants below, defaulted
and non-defaulted, are indispensable parties. Respondents could do no less than grant that
they are so on page 23 of their answer. Such being the case, the questioned order of dismissal

is exactly the opposite of what ought to have been done. Whenever it appears to the court in
the course of a proceeding that an indispensable party has not been joined, it is the duty of
the court to stop the trial and to order the inclusion of such party. (The Revised Rules of Court,
Annotated & Commented by Senator Vicente J. Francisco, Vol. 1, p. 271, 1973 ed. See also
Cortez vs. Avila, 101 Phil. 705.) Such an order is unavoidable, for the "general rule with
reference to the making of parties in a civil action requires the joinder of all necessary parties
wherever possible, and the joinder of all indispensable parties under any and all conditions,
the presence of those latter being a sine qua non of the exercise of judicial power." (Borlasa
vs. Polistico, 47 Phil. 345, at p. 347.) It is precisely " when an indispensable party is not before
the court (that) the action should be dismissed." (People v. Rodriguez, 106 Phil. 325, at p. 327.)
The absence of an indispensable party renders all subsequent actuations of the court null and
void, for want of authority to act, not only as to the absent parties but even as to those
present. In short, what respondent court did here was exactly the reverse of what the law
ordains it eliminated those who by law should precisely be joined.
As may he noted from the order of respondent court quoted earlier, which resolved the
motions for reconsideration of the dismissal order filed by the non-defaulted defendants, His
Honor rationalized his position thus:
It is the rule that it is the absolute prerogative of the plaintiff to choose, the theory upon
which he predicates his right of action, or the parties he desires to sue, without dictation or
imposition by the court or the adverse party. If he makes a mistake in the choice of his right of
action, or in that of the parties against whom he seeks to enforce it, that is his own concern as
he alone suffers therefrom. The plaintiff cannot be compelled to choose his defendants, He
may not, at his own expense, be forced to implead anyone who, under the adverse party's
theory, is to answer for defendant's liability. Neither may the Court compel him to furnish the
means by which defendant may avoid or mitigate their liability. (Vao vs. Alo, 95 Phil. 495496.)
This being the rule this court cannot compel the plaintiff to continue prosecuting her cause of
action against the defendants-movants if in the course of the trial she believes she can enforce
it against the remaining defendants subject only to the limitation provided in Section 2, Rule
17 of the Rules of Court. ... (Pages 6263, Record.)
Noticeably, His Honor has employed the same equivocal terminology as in plaintiff's motion of
October 18, 1974 by referring to the action he had taken as being "dismissal of the complaint

against them or their being dropped therefrom", without perceiving that the reason for the
evidently intentional ambiguity is transparent. The apparent idea is to rely on the theory that
under Section 11 of Rule 3, parties may be dropped by the court upon motion of any party at
any stage of the action, hence "it is the absolute right prerogative of the plaintiff to choose
the parties he desires to sue, without dictation or imposition by the court or the adverse
party." In other words, the ambivalent pose is suggested that plaintiff's motion of October 18,
1974 was not predicated on Section 2 of Rule 17 but more on Section 11 of Rule 3. But the
truth is that nothing can be more incorrect. To start with, the latter rule does not comprehend
whimsical and irrational dropping or adding of parties in a complaint. What it really
contemplates is erroneous or mistaken non-joinder and misjoinder of parties. No one is free to
join anybody in a complaint in court only to drop him unceremoniously later at the pleasure of
the plaintiff. The rule presupposes that the original inclusion had been made in the honest
conviction that it was proper and the subsequent dropping is requested because it has turned
out that such inclusion was a mistake. And this is the reason why the rule ordains that the
dropping be "on such terms as are just" just to all the other parties. In the case at bar, there
is nothing in the record to legally justify the dropping of the non-defaulted defendants, Lim
and Leonardo. The motion of October 18, 1974 cites none. From all appearances, plaintiff just
decided to ask for it, without any relevant explanation at all. Usually, the court in granting such
a motion inquires for the reasons and in the appropriate instances directs the granting of
some form of compensation for the trouble undergone by the defendant in answering the
complaint, preparing for or proceeding partially to trial, hiring counsel and making
corresponding expenses in the premises. Nothing of these, appears in the order in question.
Most importantly, His Honor ought to have considered that the outright dropping of the nondefaulted defendants Lim and Leonardo, over their objection at that, would certainly be unjust
not only to the petitioners, their own parents, who would in consequence be entirely
defenseless, but also to Lim and Leonardo themselves who would naturally correspondingly
suffer from the eventual judgment against their parents. Respondent court paid no heed at all
to the mandate that such dropping must be on such terms as are just" meaning to all
concerned with its legal and factual effects.
Thus, it is quite plain that respondent court erred in issuing its order of dismissal of October
21, 1974 as well as its order of December 6, 1974 denying reconsideration of such dismissal. As
We make this ruling, We are not oblivious of the circumstance that defendants Lim and
Leonardo are not parties herein. But such consideration is inconsequential. The fate of the
case of petitioners is inseparably tied up with said order of dismissal, if only because the order
of ex-parte hearing of October 21, 1974 which directly affects and prejudices said petitioners is

predicated thereon. Necessarily, therefore, We have to pass on the legality of said order, if We
are to decide the case of herein petitioners properly and fairly.
The attitude of the non-defaulted defendants of no longer pursuing further their questioning
of the dismissal is from another point of view understandable. On the one hand, why should
they insist on being defendants when plaintiff herself has already release from her claims? On
the other hand, as far as their respective parents-co-defendants are concerned, they must
have realized that they (their parents) could even be benefited by such dismissal because they
could question whether or not plaintiff can still prosecute her case against them after she had
secured the order of dismissal in question. And it is in connection with this last point that the
true and correct concept of default becomes relevant.
At this juncture, it may also be stated that the decision of the Court of Appeals of January 24,
1975 in G. R. No. SP-03066 dismissing the petition for certiorari of non-defaulted defendants
Lim and Leonardo impugning the order of dismissal of October 21, 1974, has no bearing at all
in this case, not only because that dismissal was premised by the appellate court on its holding
that the said petition was premature inasmuch as the trial court had not yet resolved the
motion of the defendants of October 28, 1974 praying that said disputed order be quashed,
but principally because herein petitioners were not parties in that proceeding and cannot,
therefore, be bound by its result. In particular, We deem it warranted to draw the attention of
private respondent's counsel to his allegations in paragraphs XI to XIV of his answer, which
relate to said decision of the Court of Appeals and which have the clear tendency to make it
appear to the Court that the appeals court had upheld the legality and validity of the
actuations of the trial court being questioned, when as a matter of indisputable fact, the
dismissal of the petition was based solely and exclusively on its being premature without in
any manner delving into its merits. The Court must and does admonish counsel that such
manner of pleading, being deceptive and lacking in candor, has no place in any court, much
less in the Supreme Court, and if We are adopting a passive attitude in the premises, it is due
only to the fact that this is counsel's first offense. But similar conduct on his part in the future
will definitely be dealt with more severely. Parties and counsel would be well advised to avoid
such attempts to befuddle the issues as invariably then will be exposed for what they are,
certainly unethical and degrading to the dignity of the law profession. Moreover, almost
always they only betray the inherent weakness of the cause of the party resorting to them.
2

Coming now to the matter itself of default, it is quite apparent that the impugned orders must
have proceeded from inadequate apprehension of the fundamental precepts governing such
procedure under the Rules of Court. It is time indeed that the concept of this procedural
device were fully understood by the bench and bar, instead of being merely taken for granted
as being that of a simple expedient of not allowing the offending party to take part in the
proceedings, so that after his adversary shall have presented his evidence, judgment may be
rendered in favor of such opponent, with hardly any chance of said judgment being reversed
or modified.
The Rules of Court contain a separate rule on the subject of default, Rule 18. But said rule is
concerned solely with default resulting from failure of the defendant or defendants to answer
within the reglementary period. Referring to the simplest form of default, that is, where there
is only one defendant in the action and he fails to answer on time, Section 1 of the rule
provides that upon "proof of such failure, (the court shall) declare the defendant in default.
Thereupon the court shall proceed to receive the plaintiff's evidence and render judgment
granting him such relief as the complaint and the facts proven may warrant." This last clause is
clarified by Section 5 which says that "a judgment entered against a party in default shall not
exceed the amount or be different in kind from that prayed for."
Unequivocal, in the literal sense, as these provisions are, they do not readily convey the full
import of what they contemplate. To begin with, contrary to the immediate notion that can be
drawn from their language, these provisions are not to be understood as meaning that default
or the failure of the defendant to answer should be "interpreted as an admission by the said
defendant that the plaintiff's cause of action find support in the law or that plaintiff is entitled
to the relief prayed for." (Moran, supra, p. 535 citing Macondary & Co. v. Eustaquio, 64 Phil.
466, citing with approval Chaffin v. McFadden, 41 Ark. 42; Johnson v. Pierce, 12 Ark. 599;
Mayden v. Johnson, 59 Ga. 105; People v. Rust, 292 111. 328; Ken v. Leopold 21 111. A. 163;
Chicago, etc. Electric R. Co. v. Krempel 116 111. A. 253.)
Being declared in default does not constitute a waiver of rights except that of being heard and
of presenting evidence in the trial court. According to Section 2, "except as provided in Section
9 of Rule 13, a party declared in default shall not be entitled to notice of subsequent
proceedings, nor to take part in the trial." That provision referred to reads: "No service of
papers other than substantially amended pleadings and final orders or judgments shall be
necessary on a party in default unless he files a motion to set aside the order of default, in
which event he shall be entitled to notice of all further proceedings regardless of whether the

order of default is set aside or not." And pursuant to Section 2 of Rule 41, "a party who has
been declared in default may likewise appeal from the judgment rendered against him as
contrary to the evidence or to the law, even if no petition for relief to set aside the order of
default has been presented by him in accordance with Rule 38.".
In other words, a defaulted defendant is not actually thrown out of court. While in a sense it
may be said that by defaulting he leaves himself at the mercy of the court, the rules see to it
that any judgment against him must be in accordance with law. The evidence to support the
plaintiff's cause is, of course, presented in his absence, but the court is not supposed to admit
that which is basically incompetent. Although the defendant would not be in a position to
object, elementary justice requires that, only legal evidence should be considered against him.
If the evidence presented should not be sufficient to justify a judgment for the plaintiff, the
complaint must be dismissed. And if an unfavorable judgment should be justifiable, it cannot
exceed in amount or be different in kind from what is prayed for in the complaint.
Incidentally, these considerations argue against the present widespread practice of trial
judges, as was done by His Honor in this case, of delegating to their clerks of court the
reception of the plaintiff's evidence when the defendant is in default. Such a Practice is wrong
in principle and orientation. It has no basis in any rule. When a defendant allows himself to be
declared in default, he relies on the faith that the court would take care that his rights are not
unduly prejudiced. He has a right to presume that the law and the rules will still be observed.
The proceedings are held in his forced absence, and it is but fair that the plaintiff should not be
allowed to take advantage of the situation to win by foul or illegal means or with inherently
incompetent evidence. Thus, in such instances, there is need for more attention from the
court, which only the judge himself can provide. The clerk of court would not be in a position
much less have the authority to act in the premises in the manner demanded by the rules of
fair play and as contemplated in the law, considering his comparably limited area of discretion
and his presumably inferior preparation for the functions of a judge. Besides, the default of
the defendant is no excuse for the court to renounce the opportunity to closely observe the
demeanor and conduct of the witnesses of the plaintiff, the better to appreciate their
truthfulness and credibility. We therefore declare as a matter of judicial policy that there being
no imperative reason for judges to do otherwise, the practice should be discontinued.
Another matter of practice worthy of mention at this point is that it is preferable to leave
enough opportunity open for possible lifting of the order of default before proceeding with
the reception of the plaintiff's evidence and the rendition of the decision. "A judgment by

default may amount to a positive and considerable injustice to the defendant; and the
possibility of such serious consequences necessitates a careful and liberal examination of the
grounds upon which the defendant may seek to set it aside." (Moran, supra p. 534, citing
Coombs vs. Santos, 24 Phil. 446; 449-450.) The expression, therefore, in Section 1 of Rule 18
aforequoted which says that "thereupon the court shall proceed to receive the plaintiff's
evidence etc." is not to be taken literally. The gain in time and dispatch should the court
immediately try the case on the very day of or shortly after the declaration of default is far
outweighed by the inconvenience and complications involved in having to undo everything
already done in the event the defendant should justify his omission to answer on time.
The foregoing observations, as may be noted, refer to instances where the only defendant or
all the defendants, there being several, are declared in default. There are additional rules
embodying more considerations of justice and equity in cases where there are several
defendants against whom a common cause of action is averred and not all of them answer
opportunely or are in default, particularly in reference to the power of the court to render
judgment in such situations. Thus, in addition to the limitation of Section 5 that the judgment
by default should not be more in amount nor different in kind from the reliefs specifically
sought by plaintiff in his complaint, Section 4 restricts the authority of the court in rendering
judgment in the situations just mentioned as follows:
Sec. 4. Judgment when some defendants answer, and other make difficult. When a
complaint states a common cause of action against several defendant some of whom answer,
and the others fail to do so, the court shall try the case against all upon the answer thus filed
and render judgment upon the evidence presented. The same proceeding applies when a
common cause of action is pleaded in a counterclaim, cross-claim and third-party claim.
Very aptly does Chief Justice Moran elucidate on this provision and the controlling
jurisprudence explanatory thereof this wise:
Where a complaint states a common cause of action against several defendants and some
appear to defend the case on the merits while others make default, the defense interposed by
those who appear to litigate the case inures to the benefit of those who fail to appear, and if
the court finds that a good defense has been made, all of the defendants must be absolved. In
other words, the answer filed by one or some of the defendants inures to the benefit of all the
others, even those who have not seasonably filed their answer. (Bueno v. Ortiz, L-22978, June
27, 1968, 23 SCRA 1151.) The proper mode of proceeding where a complaint states a common

cause of action against several defendants, and one of them makes default, is simply to enter
a formal default order against him, and proceed with the cause upon the answers of the
others. The defaulting defendant merely loses his standing in court, he not being entitled to
the service of notice in the cause, nor to appear in the suit in any way. He cannot adduce
evidence; nor can he be heard at the final hearing, (Lim Toco v. Go Fay, 80 Phil. 166.) although
he may appeal the judgment rendered against him on the merits. (Rule 41, sec. 2.) If the case
is finally decided in the plaintiff's favor, a final decree is then entered against all the
defendants; but if the suit should be decided against the plaintiff, the action will be dismissed
as to all the defendants alike. (Velez v. Ramas, 40 Phil. 787-792; Frow v. de la Vega, 15 Wal.
552,21 L. Ed. 60.) In other words the judgment will affect the defaulting defendants either
favorably or adversely. (Castro v. Pea, 80 Phil. 488.)
Defaulting defendant may ask execution if judgment is in his favor. (Castro v. Pea, supra.)
(Moran, Rules of Court, Vol. 1, pp. 538-539.)
In Castro vs. Pea, 80 Phil. 488, one of the numerous cases cited by Moran, this Court
elaborated on the construction of the same rule when it sanctioned the execution, upon
motion and for the benefit of the defendant in default, of a judgment which was adverse to
the plaintiff. The Court held:
As above stated, Emilia Matanguihan, by her counsel, also was a movant in the petition for
execution Annex 1. Did she have a right to be such, having been declared in default? In Frow
vs. De la Vega, supra, cited as authority in Velez vs. Ramas, supra, the Supreme Court of the
United States adopted as ground for its own decision the following ruling of the New York
Court of Errors in Clason vs. Morris, 10 Jons., 524:
It would be unreasonable to hold that because one defendant had made default, the plaintiff
should have a decree even against him, where the court is satisfied from the proofs offered by
the other, that in fact the plaintiff is not entitled to a decree. (21 Law, ed., 61.)
The reason is simple: justice has to be consistent. The complaint stating a common cause of
action against several defendants, the complainant's rights or lack of them in the
controversy have to be the same, and not different, as against all the defendant's although
one or some make default and the other or others appear, join issue, and enter into trial. For
instance, in the case of Clason vs. Morris above cited, the New York Court of Errors in effect
held that in such a case if the plaintiff is not entitled to a decree, he will not be entitled to it,

not only as against the defendant appearing and resisting his action but also as against the one
who made default. In the case at bar, the cause of action in the plaintiff's complaint was
common against the Mayor of Manila, Emilia Matanguihan, and the other defendants in Civil
Case No. 1318 of the lower court. The Court of First Instance in its judgment found and held
upon the evidence adduced by the plaintiff and the defendant mayor that as between said
plaintiff and defendant Matanguihan the latter was the one legally entitled to occupy the
stalls; and it decreed, among other things, that said plaintiff immediately vacate them.
Paraphrasing the New York Court of Errors, it would be unreasonable to hold now that
because Matanguihan had made default, the said plaintiff should be declared, as against her,
legally entitled to the occupancy of the stalls, or to remain therein, although the Court of First
Instance was so firmly satisfied, from the proofs offered by the other defendant, that the same
plaintiff was not entitled to such occupancy that it peremptorily ordered her to vacate the
stalls. If in the cases of Clason vs. Morris, supra, Frow vs. De la Vega, supra, and Velez vs.
Ramas, supra the decrees entered inured to the benefit of the defaulting defendants, there is
no reason why that entered in said case No. 1318 should not be held also to have inured to the
benefit of the defaulting defendant Matanguihan and the doctrine in said three cases plainly
implies that there is nothing in the law governing default which would prohibit the court from
rendering judgment favorable to the defaulting defendant in such cases. If it inured to her
benefit, it stands to reason that she had a right to claim that benefit, for it would not be a
benefit if the supposed beneficiary were barred from claiming it; and if the benefit
necessitated the execution of the decree, she must be possessed of the right to ask for the
execution thereof as she did when she, by counsel, participated in the petition for execution
Annex 1.
Section 7 of Rule 35 would seem to afford a solid support to the above considerations. It
provides that when a complaint states a common cause of action against several defendants,
some of whom answer, and the others make default, 'the court shall try the case against all
upon the answer thus filed and render judgment upon the evidence presented by the parties
in court'. It is obvious that under this provision the case is tried jointly not only against the
defendants answering but also against those defaulting, and the trial is held upon the answer
filed by the former; and the judgment, if adverse, will prejudice the defaulting defendants no
less than those who answer. In other words, the defaulting defendants are held bound by the
answer filed by their co-defendants and by the judgment which the court may render against
all of them. By the same token, and by all rules of equity and fair play, if the judgment should
happen to be favorable, totally or partially, to the answering defendants, it must
correspondingly benefit the defaulting ones, for it would not be just to let the judgment

produce effects as to the defaulting defendants only when adverse to them and not when
favorable.
In Bueno vs. Ortiz, 23 SCRA 1151, the Court applied the provision under discussion in the
following words:
In answer to the charge that respondent Judge had committed a grave abuse of discretion in
rendering a default judgment against the PC, respondents allege that, not having filed its
answer within the reglementary period, the PC was in default, so that it was proper for
Patanao to forthwith present his evidence and for respondent Judge to render said judgment.
It should be noted, however, that in entering the area in question and seeking to prevent
Patanao from continuing his logging operations therein, the PC was merely executing an order
of the Director of Forestry and acting as his agent. Patanao's cause of action against the other
respondents in Case No. 190, namely, the Director of Forestry, the District Forester of Agusan,
the Forest Officer of Bayugan, Agusan, and the Secretary of Agriculture and Natural Resources.
Pursuant to Rule 18, Section 4, of the Rules of Court, 'when a complaint states a common
cause of action against several defendants some of whom answer and the others fail to do so,
the court shall try the case against all upon the answer thus filed (by some) and render
judgment upon the evidence presented.' In other words, the answer filed by one or some of
the defendants inures to the benefit of all the others, even those who have not seasonably
filed their answer.
Indeed, since the petition in Case No. 190 sets forth a common cause of action against all of
the respondents therein, a decision in favor of one of them would necessarily favor the others.
In fact, the main issue, in said case, is whether Patanao has a timber license to undertake
logging operations in the disputed area. It is not possible to decide such issue in the negative,
insofar as the Director of Forestry, and to settle it otherwise, as regards the PC, which is
merely acting as agent of the Director of Forestry, and is, therefore, his alter ego, with respect
to the disputed forest area.
Stated differently, in all instances where a common cause of action is alleged against several
defendants, some of whom answer and the others do not, the latter or those in default
acquire a vested right not only to own the defense interposed in the answer of their codefendant or co-defendants not in default but also to expect a result of the litigation totally
common with them in kind and in amount whether favorable or unfavorable. The substantive
unity of the plaintiff's cause against all the defendants is carried through to its adjective phase

as ineluctably demanded by the homogeneity and indivisibility of justice itself. Indeed, since
the singleness of the cause of action also inevitably implies that all the defendants are
indispensable parties, the court's power to act is integral and cannot be split such that it
cannot relieve any of them and at the same time render judgment against the rest.
Considering the tenor of the section in question, it is to be assumed that when any defendant
allows himself to be declared in default knowing that his defendant has already answered, he
does so trusting in the assurance implicit in the rule that his default is in essence a mere
formality that deprives him of no more than the right to take part in the trial and that the
court would deem anything done by or for the answering defendant as done by or for him. The
presumption is that otherwise he would not -have seen to that he would not be in default. Of
course, he has to suffer the consequences of whatever the answering defendant may do or fail
to do, regardless of possible adverse consequences, but if the complaint has to be dismissed in
so far as the answering defendant is concerned it becomes his inalienable right that the same
be dismissed also as to him. It does not matter that the dismissal is upon the evidence
presented by the plaintiff or upon the latter's mere desistance, for in both contingencies, the
lack of sufficient legal basis must be the cause. The integrity of the common cause of action
against all the defendants and the indispensability of all of them in the proceedings do not
permit any possibility of waiver of the plaintiff's right only as to one or some of them, without
including all of them, and so, as a rule, withdrawal must be deemed to be a confession of
weakness as to all. This is not only elementary justice; it also precludes the concomitant
hazard that plaintiff might resort to the kind of procedural strategem practiced by private
respondent herein that resulted in totally depriving petitioners of every opportunity to defend
themselves against her claims which, after all, as will be seen later in this opinion, the record
does not show to be invulnerable, both in their factual and legal aspects, taking into
consideration the tenor of the pleadings and the probative value of the competent evidence
which were before the trial court when it rendered its assailed decision where all the
defendants are indispensable parties, for which reason the absence of any of them in the case
would result in the court losing its competency to act validly, any compromise that the plaintiff
might wish to make with any of them must, as a matter of correct procedure, have to await
until after the rendition of the judgment, at which stage the plaintiff may then treat the
matter of its execution and the satisfaction of his claim as variably as he might please.
Accordingly, in the case now before Us together with the dismissal of the complaint against
the non-defaulted defendants, the court should have ordered also the dismissal thereof as to
petitioners.

Indeed, there is more reason to apply here the principle of unity and indivisibility of the action
just discussed because all the defendants here have already joined genuine issues with
plaintiff. Their default was only at the pre-trial. And as to such absence of petitioners at the
pre-trial, the same could be attributed to the fact that they might not have considered it
necessary anymore to be present, since their respective children Lim and Leonardo, with
whom they have common defenses, could take care of their defenses as well. Anything that
might have had to be done by them at such pre-trial could have been done for them by their
children, at least initially, especially because in the light of the pleadings before the court, the
prospects of a compromise must have appeared to be rather remote. Such attitude of
petitioners is neither uncommon nor totally unjustified. Under the circumstances, to declare
them immediately and irrevocably in default was not an absolute necessity. Practical
considerations and reasons of equity should have moved respondent court to be more
understanding in dealing with the situation. After all, declaring them in default as respondent
court did not impair their right to a common fate with their children.
3
Another issue to be resolved in this case is the question of whether or not herein petitioners
were entitled to notice of plaintiff's motion to drop their co-defendants Lim and Leonardo,
considering that petitioners had been previously declared in default. In this connection, the
decisive consideration is that according to the applicable rule, Section 9, Rule 13, already
quoted above, (1) even after a defendant has been declared in default, provided he "files a
motion to set aside the order of default, he shall be entitled to notice of all further
proceedings regardless of whether the order of default is set aside or not" and (2) a party in
default who has not filed such a motion to set aside must still be served with all "substantially
amended or supplemented pleadings." In the instant case, it cannot be denied that petitioners
had all filed their motion for reconsideration of the order declaring them in default.
Respondents' own answer to the petition therein makes reference to the order of April 3,
1973, Annex 8 of said answer, which denied said motion for reconsideration. On page 3 of
petitioners' memorandum herein this motion is referred to as "a motion to set aside the order
of default." But as We have not been favored by the parties with a copy of the said motion,
We do not even know the excuse given for petitioners' failure to appear at the pre-trial, and
We cannot, therefore, determine whether or not the motion complied with the requirements
of Section 3 of Rule 18 which We have held to be controlling in cases of default for failure to
answer on time. (The Philippine-British Co. Inc. etc. et al. vs. The Hon. Walfrido de los Angeles
etc. et al., 63 SCRA 50.)

We do not, however, have here, as earlier noted, a case of default for failure to answer but
one for failure to appear at the pre-trial. We reiterate, in the situation now before Us, issues
have already been joined. In fact, evidence had been partially offered already at the pre-trial
and more of it at the actual trial which had already begun with the first witness of the plaintiff
undergoing re-cross-examination. With these facts in mind and considering that issues had
already been joined even as regards the defaulted defendants, it would be requiring the
obvious to pretend that there was still need for an oath or a verification as to the merits of the
defense of the defaulted defendants in their motion to reconsider their default. Inasmuch as
none of the parties had asked for a summary judgment there can be no question that the
issues joined were genuine, and consequently, the reason for requiring such oath or
verification no longer holds. Besides, it may also be reiterated that being the parents of the
non-defaulted defendants, petitioners must have assumed that their presence was
superfluous, particularly because the cause of action against them as well as their own
defenses are common. Under these circumstances, the form of the motion by which the
default was sought to be lifted is secondary and the requirements of Section 3 of Rule 18 need
not be strictly complied with, unlike in cases of default for failure to answer. We can thus hold
as We do hold for the purposes of the revival of their right to notice under Section 9 of Rule
13, that petitioner's motion for reconsideration was in substance legally adequate regardless
of whether or not it was under oath.
In any event, the dropping of the defendants Lim and Leonardo from plaintiff's amended
complaint was virtually a second amendment of plaintiffs complaint. And there can be no
doubt that such amendment was substantial, for with the elimination thereby of two
defendants allegedly solidarily liable with their co-defendants, herein petitioners, it had the
effect of increasing proportionally what each of the remaining defendants, the said
petitioners, would have to answer for jointly and severally. Accordingly, notice to petitioners
of the plaintiff's motion of October 18, 1974 was legally indispensable under the rule abovequoted. Consequently, respondent court had no authority to act on the motion, to dismiss,
pursuant to Section 6 of Rule 15, for according to Senator Francisco, "(t) he Rules of Court
clearly provide that no motion shall be acted upon by the Court without the proof of service of
notice thereof, together with a copy of the motion and other papers accompanying it, to all
parties concerned at least three days before the hearing thereof, stating the time and place for
the hearing of the motion. (Rule 26, section 4, 5 and 6, Rules of Court (now Sec. 15, new
Rules). When the motion does not comply with this requirement, it is not a motion. It presents
no question which the court could decide. And the Court acquires no jurisdiction to consider it.

(Roman Catholic Bishop of Lipa vs. Municipality of Unisan 44 Phil., 866; Manakil vs. Revilla, 42
Phil., 81.) (Laserna vs. Javier, et al., CA-G.R. No. 7885, April 22, 1955; 21 L.J. 36, citing Roman
Catholic Bishop of Lipa vs. Municipality of Unisan 44 Phil., 866; Manakil vs. Revilla, 42 Phil., 81.)
(Francisco. The Revised Rules of Court in the Philippines, pp. 861-862.) Thus, We see again,
from a different angle, why respondent court's order of dismissal of October 21, 1974 is fatally
ineffective.
4
The foregoing considerations notwithstanding, it is respondents' position that certiorari is not
the proper remedy of petitioners. It is contended that inasmuch as said petitioners have in fact
made their appeal already by filing the required notice of appeal and appeal bond and a
motion for extension to file their record on appeal, which motion was granted by respondent
court, their only recourse is to prosecute that appeal. Additionally, it is also maintained that
since petitioners have expressly withdrawn their motion to quash of January 4, 1975
impugning the order of October 28, 1974, they have lost their right to assail by certiorari the
actuations of respondent court now being questioned, respondent court not having been
given the opportunity to correct any possible error it might have committed.
We do not agree. As already shown in the foregoing discussion, the proceedings in the court
below have gone so far out of hand that prompt action is needed to restore order in the
entangled situation created by the series of plainly illegal orders it had issued. The essential
purpose of certiorari is to keep the proceedings in lower judicial courts and tribunals within
legal bounds, so that due process and the rule of law may prevail at all times and arbitrariness,
whimsicality and unfairness which justice abhors may immediately be stamped out before
graver injury, juridical and otherwise, ensues. While generally these objectives may well be
attained in an ordinary appeal, it is undoubtedly the better rule to allow the special remedy of
certiorari at the option of the party adversely affected, when the irregularity committed by the
trial court is so grave and so far reaching in its consequences that the long and cumbersome
procedure of appeal will only further aggravate the situation of the aggrieved party because
other untoward actuations are likely to materialize as natural consequences of those already
perpetrated. If the law were otherwise, certiorari would have no reason at all for being.
No elaborate discussion is needed to show the urgent need for corrective measures in the case
at bar. Verily, this is one case that calls for the exercise of the Supreme Court's inherent power
of supervision over all kinds of judicial actions of lower courts. Private respondent's procedural

technique designed to disable petitioners to defend themselves against her claim which
appears on the face of the record itself to be at least highly controversial seems to have so
fascinated respondent court that none would be surprised should her pending motion for
immediate execution of the impugned judgment receive similar ready sanction as her previous
motions which turned the proceedings into a one-sided affair. The stakes here are high. Not
only is the subject matter considerably substantial; there is the more important aspect that
not only the spirit and intent of the rules but even the basic rudiments of fair play have been
disregarded. For the Court to leave unrestrained the obvious tendency of the proceedings
below would be nothing short of wittingly condoning inequity and injustice resulting from
erroneous construction and unwarranted application of procedural rules.
5
The sum and total of all the foregoing disquisitions is that the decision here in question is
legally anomalous. It is predicated on two fatal malactuations of respondent court namely (1)
the dismissal of the complaint against the non-defaulted defendants Lim and Leonardo and (2)
the ex-parte reception of the evidence of the plaintiff by the clerk of court, the subsequent
using of the same as basis for its judgment and the rendition of such judgment.
For at least three reasons which We have already fully discussed above, the order of dismissal
of October 21, 1974 is unworthy of Our sanction: (1) there was no timely notice of the motion
therefor to the non-defaulted defendants, aside from there being no notice at all to herein
petitioners; (2) the common answer of the defendants, including the non-defaulted, contained
a compulsory counterclaim incapable of being determined in an independent action; and (3)
the immediate effect of such dismissal was the removal of the two non-defaulted defendants
as parties, and inasmuch as they are both indispensable parties in the case, the court
consequently lost the" sine qua non of the exercise of judicial power", per Borlasa vs. Polistico,
supra. This is not to mention anymore the irregular delegation to the clerk of court of the
function of receiving plaintiff's evidence. And as regards the ex-parte reception of plaintiff's
evidence and subsequent rendition of the judgment by default based thereon, We have seen
that it was violative of the right of the petitioners, under the applicable rules and principles on
default, to a common and single fate with their non-defaulted co-defendants. And We are not
yet referring, as We shall do this anon to the numerous reversible errors in the decision itself.
It is to be noted, however, that the above-indicated two fundamental flaws in respondent
court's actuations do not call for a common corrective remedy. We cannot simply rule that all

the impugned proceedings are null and void and should be set aside, without being faced with
the insurmountable obstacle that by so doing We would be reviewing the case as against the
two non-defaulted defendants who are not before Us not being parties hereto. Upon the
other hand, for Us to hold that the order of dismissal should be allowed to stand, as
contended by respondents themselves who insist that the same is already final, not only
because the period for its finality has long passed but also because allegedly, albeit not very
accurately, said 'non-defaulted defendants unsuccessfully tried to have it set aside by the
Court of Appeals whose decision on their petition is also already final, We would have to
disregard whatever evidence had been presented by the plaintiff against them and, of course,
the findings of respondent court based thereon which, as the assailed decision shows, are
adverse to them. In other words, whichever of the two apparent remedies the Court chooses,
it would necessarily entail some kind of possible juridical imperfection. Speaking of their
respective practical or pragmatic effects, to annul the dismissal would inevitably prejudice the
rights of the non-defaulted defendants whom We have not heard and who even respondents
would not wish to have anything anymore to do with the case. On the other hand, to include
petitioners in the dismissal would naturally set at naught every effort private respondent has
made to establish or prove her case thru means sanctioned by respondent court. In short, We
are confronted with a legal para-dilemma. But one thing is certain this difficult situations
has been brought about by none other than private respondent who has quite cynically
resorted to procedural maneuvers without realizing that the technicalities of the adjective law,
even when apparently accurate from the literal point of view, cannot prevail over the
imperatives of the substantive law and of equity that always underlie them and which have to
be inevitably considered in the construction of the pertinent procedural rules.
All things considered, after careful and mature deliberation, the Court has arrived at the
conclusion that as between the two possible alternatives just stated, it would only be fair,
equitable and proper to uphold the position of petitioners. In other words, We rule that the
order of dismissal of October 21, 1974 is in law a dismissal of the whole case of the plaintiff,
including as to petitioners herein. Consequently, all proceedings held by respondent court
subsequent thereto including and principally its decision of December 20, 1974 are illegal and
should be set aside.
This conclusion is fully justified by the following considerations of equity:
1. It is very clear to Us that the procedural maneuver resorted to by private respondent in
securing the decision in her favor was ill-conceived. It was characterized by that which every

principle of law and equity disdains taking unfair advantage of the rules of procedure in
order to unduly deprive the other party of full opportunity to defend his cause. The idea of
"dropping" the non-defaulted defendants with the end in view of completely incapacitating
their co-defendants from making any defense, without considering that all of them are
indispensable parties to a common cause of action to which they have countered with a
common defense readily connotes an intent to secure a one-sided decision, even improperly.
And when, in this connection, the obvious weakness of plaintiff's evidence is taken into
account, one easily understands why such tactics had to be availed of. We cannot directly or
indirectly give Our assent to the commission of unfairness and inequity in the application of
the rules of procedure, particularly when the propriety of reliance thereon is not beyond
controversy.
2. The theories of remedial law pursued by private respondents, although approved by His
Honor, run counter to such basic principles in the rules on default and such elementary rules
on dismissal of actions and notice of motions that no trial court should be unaware of or
should be mistaken in applying. We are at a loss as to why His Honor failed to see through
counsel's inequitous strategy, when the provisions (1) on the three-day rule on notice of
motions, Section 4 of Rule 15, (2) against dismissal of actions on motion of plaintiff when there
is a compulsory counterclaim, Section 2, Rule 17, (3) against permitting the absence of
indispensable parties, Section 7, Rule 3, (4) on service of papers upon defendants in default
when there are substantial amendments to pleadings, Section 9, Rule 13, and (5) on the unity
and integrity of the fate of defendants in default with those not in default where the cause of
action against them and their own defenses are common, Section 4, Rule 18, are so plain and
the jurisprudence declaratory of their intent and proper construction are so readily
comprehensible that any error as to their application would be unusual in any competent trial
court.
3. After all, all the malactuations of respondent court are traceable to the initiative of private
respondent and/or her counsel. She cannot, therefore, complain that she is being made to
unjustifiably suffer the consequences of what We have found to be erroneous orders of
respondent court. It is only fair that she should not be allowed to benefit from her own
frustrated objective of securing a one-sided decision.
4. More importantly, We do not hesitate to hold that on the basis of its own recitals, the
decision in question cannot stand close scrutiny. What is more, the very considerations
contained therein reveal convincingly the inherent weakness of the cause of the plaintiff. To

be sure, We have been giving serious thought to the idea of merely returning this case for a
resumption of trial by setting aside the order of dismissal of October 21, 1974, with all its
attendant difficulties on account of its adverse effects on parties who have not been heard,
but upon closer study of the pleadings and the decision and other circumstances extant in the
record before Us, We are now persuaded that such a course of action would only lead to more
legal complications incident to attempts on the part of the parties concerned to desperately
squeeze themselves out of a bad situation. Anyway, We feel confident that by and large, there
is enough basis here and now for Us to rule out the claim of the plaintiff.
Even a mere superficial reading of the decision would immediately reveal that it is littered on
its face with deficiencies and imperfections which would have had no reason for being were
there less haste and more circumspection in rendering the same. Recklessness in jumping to
unwarranted conclusions, both factual and legal, is at once evident in its findings relative
precisely to the main bases themselves of the reliefs granted. It is apparent therein that no
effort has been made to avoid glaring inconsistencies. Where references are made to codal
provisions and jurisprudence, inaccuracy and inapplicability are at once manifest. It hardly
commends itself as a deliberate and consciencious adjudication of a litigation which,
considering the substantial value of the subject matter it involves and the unprecedented
procedure that was followed by respondent's counsel, calls for greater attention and skill than
the general run of cases would.
Inter alia, the following features of the decision make it highly improbable that if We took
another course of action, private respondent would still be able to make out any case against
petitioners, not to speak of their co-defendants who have already been exonerated by
respondent herself thru her motion to dismiss:
1. According to His Honor's own statement of plaintiff's case, "she is the widow of the late Tee
Hoon Po Chuan (Po Chuan, for short) who was then one of the partners in the commercial
partnership, Glory Commercial Co. with defendants Antonio Lim Tanhu (Lim Tanhu, for short)
and Alfonso Leonardo Ng Sua (Ng Sua, for short) as co-partners; that after the death of her
husband on March 11, 1966 she is entitled to share not only in the capital and profits of the
partnership but also in the other assets, both real and personal, acquired by the partnership
with funds of the latter during its lifetime."
Relatedly, in the latter part of the decision, the findings are to the following effect: .

That the herein plaintiff Tan Put and her late husband Po Chuan married at the Philippine
Independent Church of Cebu City on December, 20, 1949; that Po Chuan died on March 11,
1966; that the plaintiff and the late Po Chuan were childless but the former has a foster son
Antonio Nuez whom she has reared since his birth with whom she lives up to the present;
that prior to the marriage of the plaintiff to Po Chuan the latter was already managing the
partnership Glory Commercial Co. then engaged in a little business in hardware at Manalili St.,
Cebu City; that prior to and just after the marriage of the plaintiff to Po Chuan she was
engaged in the drugstore business; that not long after her marriage, upon the suggestion of Po
Chuan the plaintiff sold her drugstore for P125,000.00 which amount she gave to her husband
in the presence of defendant Lim Tanhu and was invested in the partnership Glory Commercial
Co. sometime in 1950; that after the investment of the above-stated amount in the
partnership its business flourished and it embarked in the import business and also engaged in
the wholesale and retail trade of cement and GI sheets and under huge profits;
xxx xxx xxx
That the late Po Chuan was the one who actively managed the business of the partnership
Glory Commercial Co. he was the one who made the final decisions and approved the
appointments of new personnel who were taken in by the partnership; that the late Po Chuan
and defendants Lim Tanhu and Ng Sua are brothers, the latter two (2) being the elder brothers
of the former; that defendants Lim Tanhu and Ng Sua are both naturalized Filipino citizens
whereas the late Po Chuan until the time of his death was a Chinese citizen; that the three (3)
brothers were partners in the Glory Commercial Co. but Po Chuan was practically the owner of
the partnership having the controlling interest; that defendants Lim Tanhu and Ng Sua were
partners in name but they were mere employees of Po Chuan .... (Pp. 89-91, Record.)
How did His Honor arrive at these conclusions? To start with, it is not clear in the decision
whether or not in making its findings of fact the court took into account the allegations in the
pleadings of the parties and whatever might have transpired at the pre-trial. All that We can
gather in this respect is that references are made therein to pre-trial exhibits and to Annex A
of the answer of the defendants to plaintiff's amended complaint. Indeed, it was incumbent
upon the court to consider not only the evidence formally offered at the trial but also the
admissions, expressed or implied, in the pleadings, as well as whatever might have been
placed before it or brought to its attention during the pre-trial. In this connection, it is to be
regretted that none of the parties has thought it proper to give Us an idea of what took place

at the pre-trial of the present case and what are contained in the pre-trial order, if any was
issued pursuant to Section 4 of Rule 20.
The fundamental purpose of pre-trial, aside from affording the parties every opportunity to
compromise or settle their differences, is for the court to be apprised of the unsettled issues
between the parties and of their respective evidence relative thereto, to the end that it may
take corresponding measures that would abbreviate the trial as much as possible and the
judge may be able to ascertain the facts with the least observance of technical rules. In other
words whatever is said or done by the parties or their counsel at the pre- trial serves to put
the judge on notice of their respective basic positions, in order that in appropriate cases he
may, if necessary in the interest of justice and a more accurate determination of the facts,
make inquiries about or require clarifications of matters taken up at the pre-trial, before finally
resolving any issue of fact or of law. In brief, the pre-trial constitutes part and parcel of the
proceedings, and hence, matters dealt with therein may not be disregarded in the process of
decision making. Otherwise, the real essence of compulsory pre-trial would be insignificant
and worthless.
Now, applying these postulates to the findings of respondent court just quoted, it will be
observed that the court's conclusion about the supposed marriage of plaintiff to the deceased
Tee Hoon Lim Po Chuan is contrary to the weight of the evidence brought before it during the
trial and the pre-trial.
Under Article 55 of the Civil Code, the declaration of the contracting parties that they take
each other as husband and wife "shall be set forth in an instrument" signed by the parties as
well as by their witnesses and the person solemnizing the marriage. Accordingly, the primary
evidence of a marriage must be an authentic copy of the marriage contract. While a marriage
may also be proved by other competent evidence, the absence of the contract must first be
satisfactorily explained. Surely, the certification of the person who allegedly solemnized a
marriage is not admissible evidence of such marriage unless proof of loss of the contract or of
any other satisfactory reason for its non-production is first presented to the court. In the case
at bar, the purported certification issued by a Mons. Jose M. Recoleto, Bishop, Philippine
Independent Church, Cebu City, is not, therefore, competent evidence, there being absolutely
no showing as to unavailability of the marriage contract and, indeed, as to the authenticity of
the signature of said certifier, the jurat allegedly signed by a second assistant provincial fiscal
not being authorized by law, since it is not part of the functions of his office. Besides, inasmuch
as the bishop did not testify, the same is hearsay.

As regards the testimony of plaintiff herself on the same point and that of her witness Antonio
Nuez, there can be no question that they are both self-serving and of very little evidentiary
value, it having been disclosed at the trial that plaintiff has already assigned all her rights in
this case to said Nuez, thereby making him the real party in interest here and, therefore,
naturally as biased as herself. Besides, in the portion of the testimony of Nuez copied in
Annex C of petitioner's memorandum, it appears admitted that he was born only on March 25,
1942, which means that he was less than eight years old at the supposed time of the alleged
marriage. If for this reason alone, it is extremely doubtful if he could have been sufficiently
aware of such event as to be competent to testify about it.
Incidentally, another Annex C of the same memorandum purports to be the certificate of birth
of one Antonio T. Uy supposed to have been born on March 23, 1937 at Centro Misamis,
Misamis Occidental, the son of one Uy Bien, father, and Tan Put, mother. Significantly,
respondents have not made any adverse comment on this document. It is more likely,
therefore, that the witness is really the son of plaintiff by her husband Uy Kim Beng. But she
testified she was childless. So which is which? In any event, if on the strength of this
document, Nuez is actually the legitimate son of Tan Put and not her adopted son, he would
have been but 13 years old in 1949, the year of her alleged marriage to Po Chuan, and even
then, considering such age, his testimony in regard thereto would still be suspect.
Now, as against such flimsy evidence of plaintiff, the court had before it, two documents of
great weight belying the pretended marriage. We refer to (1) Exhibit LL, the income tax return
of the deceased Tee Hoon Lim Po Chuan indicating that the name of his wife was Ang Sick Tin
and (2) the quitclaim, Annex A of the answer, wherein plaintiff Tan Put stated that she had
been living with the deceased without benefit of marriage and that she was his "common-law
wife". Surely, these two documents are far more reliable than all the evidence of the plaintiff
put together.
Of course, Exhibit LL is what might be termed as pre-trial evidence. But it is evidence offered
to the judge himself, not to the clerk of court, and should have at least moved him to ask
plaintiff to explain if not rebut it before jumping to the conclusion regarding her alleged
marriage to the deceased, Po Chuan. And in regard to the quitclaim containing the admission
of a common-law relationship only, it is to be observed that His Honor found that "defendants
Lim Tanhu and Ng Sua had the plaintiff execute a quitclaim on November 29, 1967 (Annex "A",
Answer) where they gave plaintiff the amount of P25,000 as her share in the capital and

profits of the business of Glory Commercial Co. which was engaged in the hardware business",
without making mention of any evidence of fraud and misrepresentation in its execution,
thereby indicating either that no evidence to prove that allegation of the plaintiff had been
presented by her or that whatever evidence was actually offered did not produce persuasion
upon the court. Stated differently, since the existence of the quitclaim has been duly
established without any circumstance to detract from its legal import, the court should have
held that plaintiff was bound by her admission therein that she was the common-law wife only
of Po Chuan and what is more, that she had already renounced for valuable consideration
whatever claim she might have relative to the partnership Glory Commercial Co.
And when it is borne in mind that in addition to all these considerations, there are mentioned
and discussed in the memorandum of petitioners (1) the certification of the Local Civil
Registrar of Cebu City and (2) a similar certification of the Apostolic Prefect of the Philippine
Independent Church, Parish of Sto. Nio, Cebu City, that their respective official records
corresponding to December 1949 to December 1950 do not show any marriage between Tee
Hoon Lim Po Chuan and Tan Put, neither of which certifications have been impugned by
respondent until now, it stands to reason that plaintiff's claim of marriage is really unfounded.
Withal, there is still another document, also mentioned and discussed in the same
memorandum and unimpugned by respondents, a written agreement executed in Chinese, but
purportedly translated into English by the Chinese Consul of Cebu, between Tan Put and Tee
Hoon Lim Po Chuan to the following effect:
CONSULATE OF THE REPUBLIC OF CHINA Cebu City, Philippines
TRANSLATION
This is to certify that 1, Miss Tan Ki Eng Alias Tan Put, have lived with Mr. Lim Po Chuan alias
TeeHoon since 1949 but it recently occurs that we are incompatible with each other and are
not in the position to keep living together permanently. With the mutual concurrence, we
decided to terminate the existing relationship of common law-marriage and promised not to
interfere each other's affairs from now on. The Forty Thousand Pesos (P40,000.00) has been
given to me by Mr. Lim Po Chuan for my subsistence.
Witnesses:
Mr. Lim Beng Guan Mr. Huang Sing Se

Signed on the 10 day of the 7th month of the 54th year of the Republic of China
(corresponding to the year 1965).
(SGD) TAN KI ENG
Verified from the records. JORGE TABAR (Pp. 283-284, Record.)
Indeed, not only does this document prove that plaintiff's relation to the deceased was that of
a common-law wife but that they had settled their property interests with the payment to her
of P40,000.
In the light of all these circumstances, We find no alternative but to hold that plaintiff Tan
Put's allegation that she is the widow of Tee Hoon Lim Po Chuan has not been satisfactorily
established and that, on the contrary, the evidence on record convincingly shows that her
relation with said deceased was that of a common-law wife and furthermore, that all her
claims against the company and its surviving partners as well as those against the estate of the
deceased have already been settled and paid. We take judicial notice of the fact that the
respective counsel who assisted the parties in the quitclaim, Attys. H. Hermosisima and Natalio
Castillo, are members in good standing of the Philippine Bar, with the particularity that the
latter has been a member of the Cabinet and of the House of Representatives of the
Philippines, hence, absent any credible proof that they had allowed themselves to be parties
to a fraudulent document His Honor did right in recognizing its existence, albeit erring in not
giving due legal significance to its contents.
2. If, as We have seen, plaintiff's evidence of her alleged status as legitimate wife of Po Chuan
is not only unconvincing but has been actually overcome by the more competent and weighty
evidence in favor of the defendants, her attempt to substantiate her main cause of action that
defendants Lim Tanhu and Ng Sua have defrauded the partnership Glory Commercial Co. and
converted its properties to themselves is even more dismal. From the very evidence
summarized by His Honor in the decision in question, it is clear that not an iota of reliable
proof exists of such alleged misdeeds.
Of course, the existence of the partnership has not been denied, it is actually admitted
impliedly in defendants' affirmative defense that Po Chuan's share had already been duly
settled with and paid to both the plaintiff and his legitimate family. But the evidence as to the

actual participation of the defendants Lim Tanhu and Ng Sua in the operation of the business
that could have enabled them to make the extractions of funds alleged by plaintiff is at best
confusing and at certain points manifestly inconsistent.
In her amended complaint, plaintiff repeatedly alleged that as widow of Po Chuan she is
entitled to / 3 share of the assets and properties of the partnership. In fact, her prayer in said
complaint is, among others, for the delivery to her of such / 3 share. His Honor's statement of
the case as well as his findings and judgment are all to that same effect. But what did she
actually try to prove at the ex- parte hearing?
According to the decision, plaintiff had shown that she had money of her own when she
"married" Po Chuan and "that prior to and just after the marriage of the plaintiff to Po Chuan,
she was engaged in the drugstore business; that not long after her marriage, upon the
suggestion of Po Chuan, the plaintiff sold her drugstore for P125,000 which amount she gave
to her husband in the presence of Tanhu and was invested in the partnership Glory
Commercial Co. sometime in 1950; that after the investment of the above-stated amount in
the partnership, its business flourished and it embarked in the import business and also
engaged in the wholesale and retail trade of cement and GI sheets and under (sic) huge
profits." (pp. 25-26, Annex L, petition.)
To begin with, this theory of her having contributed of P125,000 to the capital of the
partnership by reason of which the business flourished and amassed all the millions referred
to in the decision has not been alleged in the complaint, and inasmuch as what was being
rendered was a judgment by default, such theory should not have been allowed to be the
subject of any evidence. But inasmuch as it was the clerk of court who received the evidence,
it is understandable that he failed to observe the rule. Then, on the other hand, if it was her
capital that made the partnership flourish, why would she claim to be entitled to only to / 3 of
its assets and profits? Under her theory found proven by respondent court, she was actually
the owner of everything, particularly because His Honor also found "that defendants Lim
Tanhu and Ng Sua were partners in the name but they were employees of Po Chuan that
defendants Lim Tanhu and Ng Sua had no means of livelihood at the time of their employment
with the Glory Commercial Co. under the management of the late Po Chuan except their
salaries therefrom; ..." (p. 27, id.) Why then does she claim only / 3 share? Is this an indication
of her generosity towards defendants or of a concocted cause of action existing only in her
confused imagination engendered by the death of her common-law husband with whom she

had settled her common-law claim for recompense of her services as common law wife for
less than what she must have known would go to his legitimate wife and children?
Actually, as may be noted from the decision itself, the trial court was confused as to the
participation of defendants Lim Tanhu and Ng Sua in Glory Commercial Co. At one point, they
were deemed partners, at another point mere employees and then elsewhere as partnersemployees, a newly found concept, to be sure, in the law on partnership. And the confusion is
worse comfounded in the judgment which allows these "partners in name" and "partnersemployees" or employees who had no means of livelihood and who must not have
contributed any capital in the business, "as Po Chuan was practically the owner of the
partnership having the controlling interest", / 3 each of the huge assets and profits of the
partnership. Incidentally, it may be observed at this juncture that the decision has made Po
Chuan play the inconsistent role of being "practically the owner" but at the same time getting
his capital from the P125,000 given to him by plaintiff and from which capital the business
allegedly "flourished."
Anent the allegation of plaintiff that the properties shown by her exhibits to be in the names
of defendants Lim Tanhu and Ng Sua were bought by them with partnership funds, His Honor
confirmed the same by finding and holding that "it is likewise clear that real properties
together with the improvements in the names of defendants Lim Tanhu and Ng Sua were
acquired with partnership funds as these defendants were only partners-employees of
deceased Po Chuan in the Glory Commercial Co. until the time of his death on March 11,
1966." (p. 30, id.) It Is Our considered view, however, that this conclusion of His Honor is based
on nothing but pure unwarranted conjecture. Nowhere is it shown in the decision how said
defendants could have extracted money from the partnership in the fraudulent and illegal
manner pretended by plaintiff. Neither in the testimony of Nuez nor in that of plaintiff, as
these are summarized in the decision, can there be found any single act of extraction of
partnership funds committed by any of said defendants. That the partnership might have
grown into a multi-million enterprise and that the properties described in the exhibits
enumerated in the decision are not in the names of Po Chuan, who was Chinese, but of the
defendants who are Filipinos, do not necessarily prove that Po Chuan had not gotten his share
of the profits of the business or that the properties in the names of the defendants were
bought with money of the partnership. In this connection, it is decisively important to consider
that on the basis of the concordant and mutually cumulative testimonies of plaintiff and
Nuez, respondent court found very explicitly that, and We reiterate:

xxx xxx xxx

That the late Po Chuan was the one who actively managed the business of the partnership
Glory Commercial Co. he was the one who made the final decisions and approved the
appointments of new Personnel who were taken in by the partnership; that the late Po Chuan
and defendants Lim Tanhu and Ng Sua are brothers, the latter to (2) being the elder brothers
of the former; that defendants Lim Tanhu and Ng Sua are both naturalized Filipino citizens
whereas the late Po Chuan until the time of his death was a Chinese citizen; that the three (3)
brothers were partners in the Glory Commercial Co. but Po Chuan was practically the owner of
the partnership having the controlling interest; that defendants Lim Tanhu and Ng Sua were
partners in name but they were mere employees of Po Chuan; .... (Pp. 90-91, Record.)
If Po Chuan was in control of the affairs and the running of the partnership, how could the
defendants have defrauded him of such huge amounts as plaintiff had made his Honor
believe? Upon the other hand, since Po Chuan was in control of the affairs of the partnership,
the more logical inference is that if defendants had obtained any portion of the funds of the
partnership for themselves, it must have been with the knowledge and consent of Po Chuan,
for which reason no accounting could be demanded from them therefor, considering that
Article 1807 of the Civil Code refers only to what is taken by a partner without the consent of
the other partner or partners. Incidentally again, this theory about Po Chuan having been
actively managing the partnership up to his death is a substantial deviation from the allegation
in the amended complaint to the effect that "defendants Antonio Lim Tanhu, Alfonso
Leonardo Ng Sua, Lim Teck Chuan and Eng Chong Leonardo, through fraud and machination,
took actual and active management of the partnership and although Tee Hoon Lim Po Chuan
was the manager of Glory Commercial Co., defendants managed to use the funds of the
partnership to purchase lands and buildings etc. (Par. 4, p. 2 of amended complaint, Annex B
of petition) and should not have been permitted to be proven by the hearing officer, who
naturally did not know any better.
Moreover, it is very significant that according to the very tax declarations and land titles listed
in the decision, most if not all of the properties supposed to have been acquired by the
defendants Lim Tanhu and Ng Sua with funds of the partnership appear to have been
transferred to their names only in 1969 or later, that is, long after the partnership had been
automatically dissolved as a result of the death of Po Chuan. Accordingly, defendants have no
obligation to account to anyone for such acquisitions in the absence of clear proof that they

had violated the trust of Po Chuan during the existence of the partnership. (See Hanlon vs.
Hansserman and. Beam, 40 Phil. 796.)
There are other particulars which should have caused His Honor to readily disbelieve plaintiffs'
pretensions. Nuez testified that "for about 18 years he was in charge of the GI sheets and
sometimes attended to the imported items of the business of Glory Commercial Co." Counting
18 years back from 1965 or 1966 would take Us to 1947 or 1948. Since according to Exhibit LL,
the baptismal certificate produced by the same witness as his birth certificate, shows he was
born in March, 1942, how could he have started managing Glory Commercial Co. in 1949 when
he must have been barely six or seven years old? It should not have escaped His Honor's
attention that the photographs showing the premises of Philippine Metal Industries after its
organization "a year or two after the establishment of Cebu Can Factory in 1957 or 1958" must
have been taken after 1959. How could Nuez have been only 13 years old then as claimed by
him to have been his age in those photographs when according to his "birth certificate", he
was born in 1942? His Honor should not have overlooked that according to the same witness,
defendant Ng Sua was living in Bantayan until he was directed to return to Cebu after the
fishing business thereat floundered, whereas all that the witness knew about defendant Lim
Teck Chuan's arrival from Hongkong and the expenditure of partnership money for him were
only told to him allegedly by Po Chuan, which testimonies are veritably exculpatory as to Ng
Sua and hearsay as to Lim Teck Chuan. Neither should His Honor have failed to note that
according to plaintiff herself, "Lim Tanhu was employed by her husband although he did not
go there always being a mere employee of Glory Commercial Co." (p. 22, Annex the decision.)
The decision is rather emphatic in that Lim Tanhu and Ng Sua had no known income except
their salaries. Actually, it is not stated, however, from what evidence such conclusion was
derived in so far as Ng Sua is concerned. On the other hand, with respect to Lim Tanhu, the
decision itself states that according to Exhibit NN-Pre trial, in the supposed income tax return
of Lim Tanhu for 1964, he had an income of P4,800 as salary from Philippine Metal Industries
alone and had a total assess sable net income of P23,920.77 that year for which he paid a tax
of P4,656.00. (p. 14. Annex L, id.) And per Exhibit GG-Pretrial in the year, he had a net income
of P32,000 for which be paid a tax of P3,512.40. (id.) As early as 1962, "his fishing business in
Madridejos Cebu was making money, and he reported "a net gain from operation (in) the
amount of P865.64" (id., per Exhibit VV-Pre-trial.) From what then did his Honor gather the
conclusion that all the properties registered in his name have come from funds malversed
from the partnership?

It is rather unusual that His Honor delved into financial statements and books of Glory
Commercial Co. without the aid of any accountant or without the same being explained by any
witness who had prepared them or who has knowledge of the entries therein. This must be
the reason why there are apparent inconsistencies and inaccuracies in the conclusions His
Honor made out of them. In Exhibit SS-Pre-trial, the reported total assets of the company
amounted to P2,328,460.27 as of December, 1965, and yet, Exhibit TT-Pre-trial, according to
His Honor, showed that the total value of goods available as of the same date was
P11,166,327.62. On the other hand, per Exhibit XX-Pre-trial, the supposed balance sheet of the
company for 1966, "the value of inventoried merchandise, both local and imported", as found
by His Honor, was P584,034.38. Again, as of December 31, 1966, the value of the company's
goods available for sale was P5,524,050.87, per Exhibit YY and YY-Pre-trial. Then, per Exhibit II3-Pre-trial, the supposed Book of Account, whatever that is, of the company showed its "cash
analysis" was P12,223,182.55. We do not hesitate to make the observation that His Honor,
unless he is a certified public accountant, was hardly qualified to read such exhibits and draw
any definite conclusions therefrom, without risk of erring and committing an injustice. In any
event, there is no comprehensible explanation in the decision of the conclusion of His Honor
that there were P12,223,182.55 cash money defendants have to account for, particularly when
it can be very clearly seen in Exhibits 11-4, 11-4- A, 11-5 and 11-6-Pre-trial, Glory Commercial
Co. had accounts payable as of December 31, 1965 in the amount of P4,801,321.17. (p. 15, id.)
Under the circumstances, We are not prepared to permit anyone to predicate any claim or
right from respondent court's unaided exercise of accounting knowledge.
Additionally, We note that the decision has not made any finding regarding the allegation in
the amended complaint that a corporation denominated Glory Commercial Co., Inc. was
organized after the death of Po Chuan with capital from the funds of the partnership. We note
also that there is absolutely no finding made as to how the defendants Dy Ochay and Co Oyo
could in any way be accountable to plaintiff, just because they happen to be the wives of Lim
Tanhu and Ng Sua, respectively. We further note that while His Honor has ordered defendants
to deliver or pay jointly and severally to the plaintiff P4,074,394.18 or / 3 of the
P12,223,182.55, the supposed cash belonging to the partnership as of December 31, 1965, in
the same breath, they have also been sentenced to partition and give / 3 share of the
properties enumerated in the dispositive portion of the decision, which seemingly are the very
properties allegedly purchased from the funds of the partnership which would naturally
include the P12,223,182.55 defendants have to account for. Besides, assuming there has not
yet been any liquidation of the partnership, contrary to the allegation of the defendants, then
Glory Commercial Co. would have the status of a partnership in liquidation and the only right

plaintiff could have would be to what might result after such liquidation to belong to the
deceased partner, and before this is finished, it is impossible to determine, what rights or
interests, if any, the deceased had (Bearneza vs. Dequilla 43 Phil. 237). In other words, no
specific amounts or properties may be adjudicated to the heir or legal representative of the
deceased partner without the liquidation being first terminated.
Indeed, only time and the fear that this decision would be much more extended than it is
already prevent us from further pointing out the inexplicable deficiencies and imperfections of
the decision in question. After all, what have been discussed should be more than sufficient to
support Our conclusion that not only must said decision be set aside but also that the action of
the plaintiff must be totally dismissed, and, were it not seemingly futile and productive of
other legal complications, that plaintiff is liable on defendants' counterclaims. Resolution of
the other issues raised by the parties albeit important and perhaps pivotal has likewise
become superfluous.
IN VIEW OF ALL THE FOREGOING, the petition is granted. All proceedings held in respondent
court in its Civil Case No. 12328 subsequent to the order of dismissal of October 21, 1974 are
hereby annulled and set aside, particularly the ex-parte proceedings against petitioners and
the decision on December 20, 1974. Respondent court is hereby ordered to enter an order
extending the effects of its order of dismissal of the action dated October 21, 1974 to herein
petitioners Antonio Lim Tanhu, Dy Ochay, Alfonso Leonardo Ng Sua and Co Oyo. And
respondent court is hereby permanently enjoined from taking any further action in said civil
case gave and except as herein indicated. Costs against private respondent.
Makalintal, C.J., Fernando, Aquino and Concepcion Jr., JJ., concur.

Lichauco vs Limjuco
G.R. No. L-6189
March 11, 1911
FAUSTINO LICHAUCO, for himself and in representation of his coheirs, EUGENIA LICHAUCO, ET
AL., plaintiffs-appellants,
vs.
TEODORO LIMJUCO and CATALINA GONZALO, defendants-appellees.
Felipe Agoncillo, for appellants.
Singson, Ledesma and Lim, for appellees.
MORELAND, J.:
This is an appeal from a judgment of the Court of First Instance of the city of Manila, Ho. A.S.
Crossfield presiding, dismissing plaintiff's complaint on the merits after trial.
The judgment in this case must be set aside and the cause returned to the trial court in order
that persons necessary to a complete determination of the action may be made parties.
The action is brought on the following instrument:
By virtue hereof, we will pay, jointly and severally, in Manila, twelve months from the date
hereof, to the order of Da. Cornelia Laochanco the sum of twenty-two hundred pesos in
current money, value received in cash from her for commercial operations.
Manila, 9th June, 1897.
(Signed) TEODORO LIMJUCO.
CATALINA GONZALO.
The action is brought by Faustino Lichauco for himself and as representative of Eugenia
Lichauco, Clara Lichauco, Julita Lichauco Luisa Lichauco, Crisanto Lichauco, Zacarias Lichauco,
Galo Lichauco and Timoteo Lichauco. The complaint alleges that the plaintiff, Faustino
Lichauco, together with his brothers and sisters, above-named, are the only heirs at law of
Cornelia Laochanco, who died intestate, owning the promissory note which is the basis of this
action, and that the said heirs are the owners of said note by virtue of such heirship.

There being no question of fact raised as to the ownership of said note, we will assume it to
have come into the hands of said heirs by due process of administration. (Quison vs. Salud, 12
Phil. Rep., 109.)
Section 114 of the Code of Civil Procedure reads as follows:
Parties to actions. Every action must be prosecuted in the name of the real party in interest.
But in the case of an assignment of a right of action, an action by the assignee shall be without
prejudice to any set-off or other defense existing at the time of or before notice of the
assignment; but this last provision shall not apply to a negotiable promissory note, or a draft
or a bill of exchange, transferred in good faith and upon good consideration before maturity.
And an executor or administrator or legal representative of a deceased person, or a trustee of
an express trust, or a person expressly authorized by law so to do, or a lawfully appointed
guardian of a person of unsound mind, or of a minor, may sue or be sued without joining with
him the person for whose benefit the action is prosecuted or defended.
Otherwise than as provided in this section, all persons having an interest in the subject of the
action and in obtaining the relief demanded shall be joined as plaintiffs.
Any person should be made a defendant who has or claims an interest in the controversy or
the subject matter thereof adverse to the plaintiff, or who is a necessary party to a complete
determination or settlement of the questions involved therein.
If any person having an interest in the subject of the action, and in obtaining the relief
demanded, refuses to join as plaintiff with those having a like interest, he may be made a
defendant, the fact of this interest and refusal to join being states in the complaint.
Section 122 of the same code provides:
Necessary parties. The court may determine any controversy between parties before it, if it
can be done without prejudice to the rights of others, or by preserving their rights for future
action; but when a complete determination of the controversy can not be had without the
presence of other parties, the court must order them to be brought in, and to that end may
order amended or supplemental pleadings, or a cross complaint, to be filed and summons
therein to be duly issued and served.

In the case of Rallonza vs. Evangelista (15 Phil. Rep., 531), the court said:
This is a suit for the recovery of land. It is said textually in the complaint, among other things,
"that both the plaintiffs and the defendants are so numerous that it is impossible for them to
appear at the trial; that the said Pablo Rallonza and Teodoro Evangelista are sufficient to
represent the interests of the rest of the plaintiffs and defendant's respectively." And in
accordance therewith the trial was continued in the name of the said Rallonza and Evangelista
only, though they both represented, as it appears, all the other interested parties, who were
very numerous, both plaintiffs and defendants, according to the statement contained in the
complaint.
xxx

xxx

xxx

In view of the premises established in the judgment, and which accord with the weight of the
evidence and the allegation made in the complaint that the parties interested in the lands in
litigation, both as plaintiffs and as defendants, are very numerous, it is evident that the suit
was improperly prosecuted and decided in the name of all the aforesaid interested parties to
whom reference is made, under the supposition that the latter were represented therein by
Pablo Rallonza and Teodoro Evangelista, respectively, the only ones who personally appeared
in their own right and in representation of the former at the trial.
The court then took up section 118 of the Code of Civil Procedure, which provides that where
parties are very numerous an action may be brought by one behalf of all, and after discussing
the provision of that section, said (pp. 533-534):
Whatever be the real meaning of those provisions, under the different aspects in which they
may be considered, we hold it to be certain and unquestionable that they ought not to and
can not apply to actions instituted, as in the present case, for the recovery of property. This
class of actions should always be promoted by the interested parties themselves and in the
name of all and each one of them, in order that, as stated in section 114 of the
aforementioned code of procedure, there may be determination or complete settlement of
the questions in litigation. He who considers himself entitled to a certain property can not be
ignorant as to who are his coowners, if he has any; and, knowing them, he can not neglect to
make them parties to the suit under the pretext that they are numerous. This sole
circumstance does not make their summons and appearance impossible when they are

personally known. In such a case, the reason or motive inspiring the provisions of section 118
would be lacking. The representation made by Pablo Rallonza, as plaintiff, and by Teodoro
Evangelista, as defendant, can not bind their respective coowners, as regards the results of the
trial, inasmuch as it is altogether illegal. The trial, considered from this point of view, was
essentially null and void from the beginning.
The judgment appealed from is set aside, and it is ordered that a new trial be held wherein
those interested in the lands in question shall be made parties either as plaintiffs or as
defendants. . . .
In the case of Araneta vs. Montelibano (14 Phil. Rep., 117) the court said (pp. 124-126);.
A serious objection exists as to parties against the form of the present action. The plaintiff
alleges in his complaint that Aniceto Montelibano died on the 20th of December, 1898,
intestate, leaving four minor children, called Bibiana, Maria, Rosario, and Raymundo. In the
present action, however, the plaintiff made defendants Braulio Montelibano, as tutor of said
minor children, Rosario, Raymundo, and Bibiana. The record does not show why Maria was
not made a party defendant. Until the contrary is shown, each of these heirs has an equal
interest in the property in question.
It would seem clear that the present action could not be concluded without having all the heirs
in court.
xxx

xxx

xxx

For the reason, therefore, that all of the heirs of the said Aniceto Montelibano were not made
parties in the present action, the judgment of the lower court is hereby revoked and the cause
is hereby remanded to the lower court, with permission on part of the plaintiff to amend his
complaint.
(See also Sanidad vs. Cabotaje, 5 Phil. Rep., 204; Garcia de Lara vs. Gonzales de Lara, 2 Phil.
Rep., 294.)
We can see little difference in principle between the cases above cited and the one at bar. The
reasoning in those cases applies equally to this case. It would be idle for this court to decide
the present case upon the merits. Its decision would be futile and ineffective. Any one of the

heirs might, the day following the decision of this court, institute an action against the
defendants upon the same promissory note and prosecute his action to final judgment, both
on trial and on appeal. If in that final judgment he were denied a right to recover, another one
of the heirs might, the next day, institute another action for exactly the same purposes; and so
on until the defendants had been brought into court upon the same cause of action as many
times as there were heirs who had an interest in the subject matter of the litigation as far as
possible. To this end it requires that every person who has an interest in the subject matter in
litigation shall be made a party to the action, that all rights may be adjudicated at the same
time.
The judgment must, therefore, be set aside, as aforesaid.
We believe, however, that, for the information of the parties interested in the subject matter
of this action and to the end that unnecesary litigation may be avoided, the opinion of the
court should be given upon the facts presented in this case. Knowing what our opinion is upon
these facts it is probable that the heirs will not care to pursue the litigation further unless,
which is somewhat unlikely, they are able to present new facts. We, therefore, proceed to a
consideration of the case upon the merits as presented by the record.
The defendants hope to succeed upon each one of two grounds, asserting (1) that the action
has prescribed, and (2) that the said cause of action has been the subject matter of a prior
final adjudication between the same parties.
We do not find it necessary to discuss or decide the second question presented by the
appellees, inasmuch as the cause must be resolved in their favor upon the ground first stated.
That the instrument in question upon which this action is brought is a commercial instrument
is indubitably established by this court in the case of El Banco Espaol-Filipino vs. Tan-Tongco
(13 Phil Rep., 628). In that case the promissory note read as follows:
Three months from this date I hereby promise to pay, in Manila, to the order of D. Geronimo
Jose, the sum of three thousand six hundred pesos, Mexican currency, value received in cash
for commercial transactions.
In deciding that case the court said:

Mercantile promissory notes. Neither the literal reading of article 532 of the Code of
Commerce, nor the principles governing the mercantile law now in force, require that a
promissory note, payable to order, be made between merchants, in order that said note may
be a mercantile one, as is required by said article 532 in connection with drafts.
Id. The law does not require that promissory notes, in order that they may be indorsed and
that the indorsement may be valid, the same as that of a bill of exchange, must be made
between merchants, especially if the said notes arise from a mercantile loan, in which case it is
only required that one of the contractors be a merchant, according to article 311 (Code of
Commerce).
Id. A promissory note arising from a mercantile loan, according to its literal reading and the
principles of the Code of Commerce, where the same is drawn to order, is perpetually
negotiable, transferable, and strictly mercantile, no other expression being necessary for the
purpose of showing that it arises from a commercial transaction within the meaning of article
532.
Section 38 of the Code of Civil Procedure reads as follows:
To what this chapter does not apply. This chapter shall not apply to actions already
commenced, or to cases wherein the right of action has already accrued; but the statutes in
force when the action or right of action accrued shall be applicable to such cases according to
the subject of the action and without regard to the form; nor shall this chapter apply in the
case of a continuing and subsisting trust, nor to an action by the vendee of real property in
possession thereof to obtain the conveyance of it: Provided, nevertheless, That all rights of
action which have already accrued, except those named in the last preceding paragraph, must
be vindicated by the commencement of an action or proceeding to enforce the same within
ten years after this Act comes into effect.
This court has held in numerous cases that the prescription of a cause of action arising before
the Code of Civil Procedure was operative is governed by the laws in force at the time the
cause of action arose. (Palacio vs. Sudario, 7 Phil., Rep., 275; Tubucon vs. Dalisay, 7 Phil. Rep.,
183; Magallanes vs. Caeta, 7 Phil. Rep., 161; Villaruz vs. Azarraga, 15 Phil. Rep., 108.) In the
latter case we said (p. 111):

It has been held by this court that the rule of prescription to be applied where the right of
action arose before the present code went into effect is that stated in the Civil Code or in the
laws in force prior to the Civil Code. (Araneta vs. Garrido, 5 Phil. Rep., 137.)
It is evident, therefore, that whether or not the action in the case at bar has prescribed
depends not upon the provisions of the Code of Civil Procedure but upon the laws in force
prior to the time said code became effective; and inasmuch as the instrument forming the
basis of the present cause of action is a commercial instrument, it is governed by the
provisions of the Commercial Code and not by those of the Civil Code.
Article 950 of the Commercial Code as follows:
Actions arising from drafts shall extinguish three years after they have fallen due, should they
have been protested or not.
A similar rule shall be applied to drafts and promissory notes of commerce, to checks, stubs,
and other instruments of draft or exchange, and to the dividends, coupons, and the amounts
of the amortization of obligations issued in accordance with this code.
The instrument in question being dated the 9th of June, 1897, and payable twelve months
after date, it would fall due on the 9th day of June, 1898. As a result the right to bring an
action upon it prescribed on the 9th day of June, 1901. This action was commenced on the 1st
day of December, 1908.
To avoid the results which would inevitably follow from these facts, the plaintiff alleges that
the defendant had always recognized the debt in question as alive and in force and that he
particularly did so in the year 1907 under the following circumstances: In that year the plaintiff
in this case began an action against the defendant in this case for the recovery of the amount
due upon the same promissory note which is the basis of the present action. During the
progress of that action in court, and, as it appears from the record of that action introduced in
evidence in this case, immediately after said action had been commenced, the defendant by a
writing offered to secure the debt in question by turning over to the plaintiff in that action,
also plaintiff in this, certain lands belonging to him, with the right to repurchase within four
years.

This act of the defendant is seized upon by the plaintiff as showing a recognition of the
existence of the debt under article 1973 of the Civil Code, which provides that
Prescription of actions is interrupted by their institution before the court, by extrajudicial
claim of the creditor, and by any act of acknowledgment of the debt by the debtor.
And under article 944 of the Commercial Code, which provides that
The prescription shall be interrupted through suit or any judicial proceeding brought against
the debtor, through the acknowledgment of the obligations, or through the renewal of the
instrument on which the right of the creditor is based.
There might be possibly be some legal basis for the contention of the plaintiff that act of the
defendant, above mentioned, during the pendency of the prior action, brought the case within
the provisions of the above-named articles, if it did not conclusively appear in the record that
such act of the defendant was for the purpose of compromising a pending litigation, it is not
an admission that anything was due and can not be used as evidence against the defendant.
Section 346 of the Code of Civil Procedure provides:
Offer of compromise. An offer of compromise is not an admission that anything is due, and
is not admissible in evidence.
In the case of City of Manila vs. Del Rosario (5 Phil. Rep., 227), the court said (pp. 229-230):
He stated that he signed the second document because the president of the municipal board,
Sr. Herrera, advised him to do so in order to avoid litigation with the city. His testimony in this
respect was not contradicted. We accordingly hold that the provisions of section 346 of the
Code of Civil Procedure are applicable to the case at bar in so far as they declare that an offer
of compromise is not admissible in evidence.
While the evidence as to whether or not the document tendered by the defendant to the
plaintiff as security for the payment of the debt in question was a recognition of the debt or an
offer of compromise is somewhat conflicting, we have no hesitation in finding, upon the facts,
that it was an offer of compromise. Testimony offered for the purpose of showing such a
recognition of a debt that has been quieted by the statute of limitations as imports a new
promise to pay, must be clear and explicit. In the case of Bell vs. Morrison (1 Peters, 351), Mr.

Justice Story fully discussed the subject, and after dealing with the importance of giving the
statute of limitations such support as to make it "what it was intended to be, emphatically, a
statute of repose," and "not designed merely to raise a presumption of payment of a just debt
from lapse of time;" and, repeating passages from the opinions in Clementson vs. Williams (8
Cranch., 72) and Wetzell vs. Bussard (11 Wheat., 309), said (p. 362):
We adhere to the doctrine thus stated, and think it the only exposition of the statute which is
consistent with its true object and import. If the bar is sought to be removed by the proof of a
new promise, that promise, as a new cause of action, ought to be proved in a clear and explicit
manner, and be in its terms unequivocal and determinate; and if any conditions are annexed,
they ought to be shown to be performed.
If there be no express promise, but a promise is to be raised by implication of law from the
acknowledgment of the party, such acknowledgment ought to contain an unqualified and
direct admission of a previous, subsisting debt, which the party is liable and willing to pay. If
there be the accompanying circumstances, which repel the presumption of a promise or
intention to pay; if the expressions be equivocal, vague and indeterminate, leading to no
certain conclusion, but at best to probable inferences, which may affect the different minds in
different ways, we think they ought not to go to a jury as evidence of new promise to revive
the cause of action. (Shepherd vs. Thompson, 122 U.S., 231, and the cases there cited.)
We find that it has not been proved by a fair preponderance of the evidence that the debt was
revived.
The judgment appealed from is hereby set aside and the cause returned to the court whence it
came, with directions, in case the above-named heirs, or any of them, desire to continue this
litigation, to enter an order bringing in all interested heirs as parties plaintiff or defendant, and
to require the necessary proceedings to make that order effective. No special finding as to
costs. So ordered.
Arellano, C.J., Mapa, Carson, and Trent, JJ., concur.

Cerezo vs Tuazon
G.R. No. 141538

March 23, 2004

HERMANA R. CEREZO, petitioner,

vs.
DAVID TUAZON, respondent.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari1 to annul the Resolution2 dated 21 October 1999 of
the Court of Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20 January 2000
denying the motion for reconsideration. The Court of Appeals denied the petition for
annulment of the Decision3 dated 30 May 1995 rendered by the Regional Trial Court of
Angeles City, Branch 56 ("trial court"), in Civil Case No. 7415. The trial court ordered petitioner
Hermana R. Cerezo ("Mrs. Cerezo") to pay respondent David Tuazon ("Tuazon") actual
damages, loss of earnings, moral damages, and costs of suit.
Antecedent Facts
Around noontime of 26 June 1993, a Country Bus Lines passenger bus with plate number NYA
241 collided with a tricycle bearing plate number TC RV 126 along Captain M. Palo Street, Sta.
Ines, Mabalacat, Pampanga. On 1 October 1993, tricycle driver Tuazon filed a complaint for
damages against Mrs. Cerezo, as owner of the bus line, her husband Attorney Juan Cerezo
("Atty. Cerezo"), and bus driver Danilo A. Foronda ("Foronda"). The complaint alleged that:
7. At the time of the incident, plaintiff [Tuazon] was in his proper lane when the secondnamed defendant [Foronda], being then the driver and person in charge of the Country Bus
with plate number NYA 241, did then and there willfully, unlawfully, and feloniously operate
the said motor vehicle in a negligent, careless, and imprudent manner without due regard to
traffic rules and regulations, there being a "Slow Down" sign near the scene of the incident,
and without taking the necessary precaution to prevent loss of lives or injuries, his negligence,
carelessness and imprudence resulted to severe damage to the tricycle and serious physical

injuries to plaintiff thus making him unable to walk and becoming disabled, with his thumb
and middle finger on the left hand being cut[.]4
On 1 October 1993, Tuazon filed a motion to litigate as a pauper. Subsequently, the trial court
issued summons against Atty. Cerezo and Mrs. Cerezo ("the Cerezo spouses") at the Makati
address stated in the complaint. However, the summons was returned unserved on 10
November 1993 as the Cerezo spouses no longer held office nor resided in Makati. On 18 April
1994, the trial court issued alias summons against the Cerezo spouses at their address in
Barangay Sta. Maria, Camiling, Tarlac. The alias summons and a copy of the complaint were
finally served on 20 April 1994 at the office of Atty. Cerezo, who was then working as Tarlac
Provincial Prosecutor. Atty. Cerezo reacted angrily on learning of the service of summons upon
his person. Atty. Cerezo allegedly told Sheriff William Canlas: "Punyeta, ano ang gusto mong
mangyari? Gusto mong hindi ka makalabas ng buhay dito? Teritoryo ko ito. Wala ka sa
teritoryo mo."5
The records show that the Cerezo spouses participated in the proceedings before the trial
court. The Cerezo spouses filed a comment with motion for bill of particulars dated 29 April
1994 and a reply to opposition to comment with motion dated 13 June 1994.6 On 1 August
1994, the trial court issued an order directing the Cerezo spouses to file a comment to the
opposition to the bill of particulars. Atty. Elpidio B. Valera ("Atty. Valera") of Valera and Valera
Law Offices appeared on behalf of the Cerezo spouses. On 29 August 1994, Atty. Valera filed
an urgent ex-parte motion praying for the resolution of Tuazons motion to litigate as a pauper
and for the issuance of new summons on the Cerezo spouses to satisfy proper service in
accordance with the Rules of Court.7
On 30 August 1994, the trial court issued an order resolving Tuazons motion to litigate as a
pauper and the Cerezo spouses urgent ex-parte motion. The order reads:
At the hearing on August 30, 1994, the plaintiff [Tuazon] testified that he is presently jobless;
that at the time of the filing of this case, his son who is working in Malaysia helps him and
sends him once in a while P300.00 a month, and that he does not have any real property.
Attached to the Motion to Litigate as Pauper are his Affidavit that he is unemployed; a
Certification by the Barangay Captain of his poblacion that his income is not enough for his
familys subsistence; and a Certification by the Office of the Municipal Assessor that he has no
landholding in the Municipality of Mabalacat, Province of Pampanga.

The Court is satisfied from the unrebutted testimony of the plaintiff that he is entitled to
prosecute his complaint in this case as a pauper under existing rules.
On the other hand, the Court denies the prayer in the Appearance and Urgent Ex-Parte Motion
requiring new summons to be served to the defendants. The Court is of the opinion that any
infirmity in the service of the summons to the defendant before plaintiff was allowed to
prosecute his complaint in this case as a pauper has been cured by this Order.
If within 15 days from receipt of this Order, the defendants do not question on appeal this
Order of this Court, the Court shall proceed to resolve the Motion for Bill of Particulars.8
On 27 September 1994, the Cerezo spouses filed an urgent ex-parte motion for
reconsideration. The trial court denied the motion for reconsideration.
On 14 November 1994, the trial court issued an order directing the Cerezo spouses to file their
answer within fifteen days from receipt of the order. The Cerezo spouses did not file an
answer. On 27 January 1995, Tuazon filed a motion to declare the Cerezo spouses in default.
On 6 February 1995, the trial court issued an order declaring the Cerezo spouses in default and
authorizing Tuazon to present his evidence. 9
On 30 May 1995, after considering Tuazons testimonial and documentary evidence, the trial
court ruled in Tuazons favor. The trial court made no pronouncement on Forondas liability
because there was no service of summons on him. The trial court did not hold Atty. Cerezo
liable as Tuazon failed to show that Mrs. Cerezos business benefited the family, pursuant to
Article 121(3) of the Family Code. The trial court held Mrs. Cerezo solely liable for the damages
sustained by Tuazon arising from the negligence of Mrs. Cerezos employee, pursuant to
Article 2180 of the Civil Code. The dispositive portion of the trial courts decision reads:
WHEREFORE, judgment is hereby rendered ordering the defendant Hermana Cerezo to pay
the plaintiff:
a) For Actual Damages

P69,485.35

1) Expenses for operation and medical Treatment

2) Cost of repair of the tricycle

b) For loss of earnings

39,921.00
c) For moral damages

43,300.00
d) And to pay the cost of the suit.

20,000.00

The docket fees and other expenses in the filing of this suit shall be lien on whatever judgment
may be rendered in favor of the plaintiff.
SO ORDERED.10
Mrs. Cerezo received a copy of the decision on 25 June 1995. On 10 July 1995, Mrs. Cerezo
filed before the trial court a petition for relief from judgment on the grounds of "fraud,
mistake or excusable negligence." Testifying before the trial court, both Mrs. Cerezo and Atty.
Valera denied receipt of notices of hearings and of orders of the court. Atty. Valera added that
he received no notice before or during the 8 May 1995 elections, "when he was a senatorial
candidate for the KBL Party, and very busy, using his office and residence as Party National
Headquarters." Atty. Valera claimed that he was able to read the decision of the trial court
only after Mrs. Cerezo sent him a copy.11
Tuazon did not testify but presented documentary evidence to prove the participation of the
Cerezo spouses in the case. Tuazon presented the following exhibits:
Exhibit 1

Sheriffs return and summons;

Exhibit 1-A

Alias summons dated April 20, 1994;

Exhibit 2

Comment with Motion;

Exhibit 3

Minutes of the hearing held on August 1, 1994;

Exhibit 3-A

Signature of defendants counsel;

Exhibit 4

Minutes of the hearing held on August 30, 1994;

Exhibit 4-A

Signature of the defendants counsel;

Exhibit 5

Appearance and Urgent Ex-Parte Motion;

Exhibit 6

Order dated November 14, 1994;

Exhibit 6-A

Postal certification dated January 13, 1995;

Exhibit 7

Order dated February [illegible];

Exhibit 7-A

Courts return slip addressed to Atty. Elpidio Valera;

Exhibit 7-B

Courts return slip addressed to Spouses Juan and Hermana Cerezo;

Exhibit 8

Decision dated May [30], 1995

Exhibit 8-A

Courts return slip addressed to defendant Hermana Cerezo;

Exhibit 8-B

Courts return slip addressed to defendants counsel, Atty. Elpidio Valera;

Exhibit 9

Order dated September 21, 1995;

Exhibit 9-A

Second Page of Exhibit 9;

Exhibit 9-B

Third page of Exhibit 9;

Exhibit 9-C

Fourth page of Exhibit 9;

Exhibit 9-D

Courts return slip addressed to Atty. Elpidio Valera;

and

Exhibit 9-E

Courts return slip addressed to plaintiffs counsel, Atty. Norman Dick de Guzman.12
On 4 March 1998, the trial court issued an order13 denying the petition for relief from
judgment. The trial court stated that having received the decision on 25 June 1995, the Cerezo
spouses should have filed a notice of appeal instead of resorting to a petition for relief from
judgment. The trial court refused to grant relief from judgment because the Cerezo spouses
could have availed of the remedy of appeal. Moreover, the Cerezo spouses not only failed to
prove fraud, accident, mistake or excusable negligence by conclusive evidence, they also failed
to prove that they had a good and substantial defense. The trial court noted that the Cerezo
spouses failed to appeal because they relied on an expected settlement of the case.
The Cerezo spouses subsequently filed before the Court of Appeals a petition for certiorari
under Section 1 of Rule 65. The petition was docketed as CA-G.R. SP No. 48132.14 The petition
questioned whether the trial court acquired jurisdiction over the case considering there was
no service of summons on Foronda, whom the Cerezo spouses claimed was an indispensable
party. In a resolution15 dated 21 January 1999, the Court of Appeals denied the petition for
certiorari and affirmed the trial courts order denying the petition for relief from judgment.
The Court of Appeals declared that the Cerezo spouses failure to file an answer was due to
their own negligence, considering that they continued to participate in the proceedings

without filing an answer. There was also nothing in the records to show that the Cerezo
spouses actually offered a reasonable settlement to Tuazon. The Court of Appeals also denied
Cerezo spouses motion for reconsideration for lack of merit.
The Cerezo spouses filed before this Court a petition for review on certiorari under Rule 45.
Atty. Cerezo himself signed the petition, docketed as G.R. No. 137593. On 13 April 1999, this
Court rendered a resolution denying the petition for review on certiorari for failure to attach
an affidavit of service of copies of the petition to the Court of Appeals and to the adverse
parties. Even if the petition complied with this requirement, the Court would still have denied
the petition as the Cerezo spouses failed to show that the Court of Appeals committed a
reversible error. The Courts resolution was entered in the Book of Entries and Judgments
when it became final and executory on 28 June 1999.16
Undaunted, the Cerezo spouses filed before the Court of Appeals on 6 July 1999 a petition for
annulment of judgment under Rule 47 with prayer for restraining order. Atty. Valera and Atty.
Dionisio S. Daga ("Atty. Daga") represented Mrs. Cerezo in the petition, docketed as CA-G.R. SP
No. 53572.17 The petition prayed for the annulment of the 30 May 1995 decision of the trial
court and for the issuance of a writ of preliminary injunction enjoining execution of the trial
courts decision pending resolution of the petition.
The Court of Appeals denied the petition for annulment of judgment in a resolution dated 21
October 1999. The resolution reads in part:
In this case, records show that the petitioner previously filed with the lower court a Petition
for Relief from Judgment on the ground that they were wrongfully declared in default while
waiting for an amicable settlement of the complaint for damages. The court a quo correctly
ruled that such petition is without merit. The defendant spouses admit that during the initial
hearing they appeared before the court and even mentioned the need for an amicable
settlement. Thus, the lower court acquired jurisdiction over the defendant spouses.
Therefore, petitioner having availed of a petition for relief, the remedy of an annulment of
judgment is no longer available. The proper action for the petitioner is to appeal the order of
the lower court denying the petition for relief.
Wherefore, the instant petition could not be given due course and should accordingly be
dismissed.

SO ORDERED.18
On 20 January 2000, the Court of Appeals denied the Cerezo spouses motion for
reconsideration.19 The Court of Appeals stated:
A distinction should be made between a courts jurisdiction over a person and its jurisdiction
over the subject matter of a case. The former is acquired by the proper service of summons or
by the parties voluntary appearance; while the latter is conferred by law.
Resolving the matter of jurisdiction over the subject matter, Section 19(1) of B[atas]
P[ambansa] 129 provides that Regional Trial Courts shall exercise exclusive original jurisdiction
in all civil actions in which the subject of the litigation is incapable of pecuniary estimation.
Thus it was proper for the lower court to decide the instant case for damages.
Unlike jurisdiction over the subject matter of a case which is absolute and conferred by law;
any defects [sic] in the acquisition of jurisdiction over a person (i.e., improper filing of civil
complaint or improper service of summons) may be waived by the voluntary appearance of
parties.
The lower court admits the fact that no summons was served on defendant Foronda. Thus,
jurisdiction over the person of defendant Foronda was not acquired, for which reason he was
not held liable in this case. However, it has been proven that jurisdiction over the other
defendants was validly acquired by the court a quo.
The defendant spouses admit to having appeared in the initial hearings and in the hearing for
plaintiffs motion to litigate as a pauper. They even mentioned conferences where attempts
were made to reach an amicable settlement with plaintiff. However, the possibility of
amicable settlement is not a good and substantial defense which will warrant the granting of
said petition.
xxx
Assuming arguendo that private respondent failed to reserve his right to institute a separate
action for damages in the criminal action, the petitioner cannot now raise such issue and
question the lower courts jurisdiction because petitioner and her husband have waived such

right by voluntarily appearing in the civil case for damages. Therefore, the findings and the
decision of the lower court may bind them.
Records show that the petitioner previously filed with the lower court a Petition for Relief
from Judgment on the ground that they were wrongfully declared in default while waiting for
an amicable settlement of the complaint for damages. The court a quo correctly ruled that
such petition is without merit, jurisdiction having been acquired by the voluntary appearance
of defendant spouses.
Once again, it bears stressing that having availed of a petition for relief, the remedy of
annulment of judgment is no longer available.
Based on the foregoing, the motion for reconsideration could not be given due course and is
hereby DENIED.
SO ORDERED.20
The Issues
On 7 February 2000, Mrs. Cerezo, this time with Atty. Daga alone representing her, filed the
present petition for review on certiorari before this Court. Mrs. Cerezo claims that:
1. In dismissing the Petition for Annulment of Judgment, the Court of Appeals assumes that
the issues raised in the petition for annulment is based on extrinsic fraud related to the denied
petition for relief notwithstanding that the grounds relied upon involves questions of lack of
jurisdiction.
2. In dismissing the Petition for Annulment, the Court of Appeals disregarded the allegation
that the lower court[s] findings of negligence against defendant-driver Danilo Foronda
[whom] the lower court did not summon is null and void for want of due process and
consequently, such findings of negligence which is [sic] null and void cannot become the basis
of the lower court to adjudge petitioner-employer liable for civil damages.
3. In dismissing the Petition for Annulment, the Court of Appeals ignored the allegation that
defendant-driver Danilo A. Foronda whose negligence is the main issue is an indispensable
party whose presence is compulsory but [whom] the lower court did not summon.

4. In dismissing the Petition for Annulment, the Court of Appeals ruled that assuming
arguendo that private respondent failed to reserve his right to institute a separate action for
damages in the criminal action, the petitioner cannot now raise such issue and question the
lower courts jurisdiction because petitioner [has] waived such right by voluntarily appearing
in the civil case for damages notwithstanding that lack of jurisdiction cannot be waived.21
The Courts Ruling
The petition has no merit. As the issues are interrelated, we shall discuss them jointly.
Remedies Available to a Party Declared in Default
An examination of the records of the entire proceedings shows that three lawyers filed and
signed pleadings on behalf of Mrs. Cerezo, namely, Atty. Daga, Atty. Valera, and Atty. Cerezo.
Despite their number, Mrs. Cerezos counsels failed to avail of the proper remedies. It is either
by sheer ignorance or by malicious manipulation of legal technicalities that they have
managed to delay the disposition of the present case, to the detriment of pauper litigant
Tuazon.
Mrs. Cerezo claims she did not receive any copy of the order declaring the Cerezo spouses in
default. Mrs. Cerezo asserts that she only came to know of the default order on 25 June 1995,
when she received a copy of the decision. On 10 July 1995, Mrs. Cerezo filed before the trial
court a petition for relief from judgment under Rule 38, alleging "fraud, mistake, or excusable
negligence" as grounds. On 4 March 1998, the trial court denied Mrs. Cerezos petition for
relief from judgment. The trial court stated that Mrs. Cerezo could have availed of appeal as a
remedy and that she failed to prove that the judgment was entered through fraud, accident,
mistake, or excusable negligence. Mrs. Cerezo then filed before the Court of Appeals a petition
for certiorari under Section 1 of Rule 65 assailing the denial of the petition for relief from
judgment. On 21 January 1999, the Court of Appeals dismissed Mrs. Cerezos petition. On 24
February 1999, the appellate court denied Mrs. Cerezos motion for reconsideration. On 11
March 1999, Mrs. Cerezo filed before this Court a petition for review on certiorari under Rule
45, questioning the denial of the petition for relief from judgment. We denied the petition and
our resolution became final and executory on 28 June 1999.

On 6 July 1999, a mere eight days after our resolution became final and executory, Mrs.
Cerezo filed before the Court of Appeals a petition for annulment of the judgment of the trial
court under Rule 47. Meanwhile, on 25 August 1999, the trial court issued over the objection
of Mrs. Cerezo an order of execution of the judgment in Civil Case No. 7415. On 21 October
1999, the Court of Appeals dismissed the petition for annulment of judgment. On 20 January
2000, the Court of Appeals denied Mrs. Cerezos motion for reconsideration. On 7 February
2000, Mrs. Cerezo filed the present petition for review on certiorari under Rule 45 challenging
the dismissal of her petition for annulment of judgment.
Lina v. Court of Appeals22 enumerates the remedies available to a party declared in default:
a) The defendant in default may, at any time after discovery thereof and before judgment, file
a motion under oath to set aside the order of default on the ground that his failure to answer
was due to fraud, accident, mistake or excusable negligence, and that he has a meritorious
defense (Sec. 3, Rule 18 [now Sec. 3(b), Rule 9]);
b) If the judgment has already been rendered when the defendant discovered the default, but
before the same has become final and executory, he may file a motion for new trial under
Section 1 (a) of Rule 37;
c) If the defendant discovered the default after the judgment has become final and executory,
he may file a petition for relief under Section 2 [now Section 1] of Rule 38; and
d) He may also appeal from the judgment rendered against him as contrary to the evidence or
to the law, even if no petition to set aside the order of default has been presented by him (Sec.
2, Rule 41). (Emphasis added)
Moreover, a petition for certiorari to declare the nullity of a judgment by default is also
available if the trial court improperly declared a party in default, or even if the trial court
properly declared a party in default, if grave abuse of discretion attended such declaration.23
Mrs. Cerezo admitted that she received a copy of the trial courts decision on 25 June 1995.
Based on this admission, Mrs. Cerezo had at least three remedies at her disposal: an appeal, a
motion for new trial, or a petition for certiorari.

Mrs. Cerezo could have appealed under Rule 4124 from the default judgment within 15 days
from notice of the judgment. She could have availed of the power of the Court of Appeals to
try cases and conduct hearings, receive evidence, and perform all acts necessary to resolve
factual issues raised in cases falling within its appellate jurisdiction.25
Mrs. Cerezo also had the option to file under Rule 3726 a motion for new trial within the
period for taking an appeal. If the trial court grants a new trial, the original judgment is
vacated, and the action will stand for trial de novo. The recorded evidence taken in the former
trial, as far as the same is material and competent to establish the issues, shall be used at the
new trial without retaking the same.27
Mrs. Cerezo also had the alternative of filing under Rule 6528 a petition for certiorari assailing
the order of default within 60 days from notice of the judgment. An order of default is
interlocutory, and an aggrieved party may file an appropriate special civil action under Rule
65.29 In a petition for certiorari, the appellate court may declare void both the order of
default and the judgment of default.
Clearly, Mrs. Cerezo had every opportunity to avail of these remedies within the reglementary
periods provided under the Rules of Court. However, Mrs. Cerezo opted to file a petition for
relief from judgment, which is available only in exceptional cases. A petition for relief from
judgment should be filed within the reglementary period of 60 days from knowledge of
judgment and six months from entry of judgment, pursuant to
Rule 38 of the Rules of Civil Procedure.30 Tuason v. Court of Appeals31 explained the nature
of a petition for relief from judgment:
When a party has another remedy available to him, which may either be a motion for new trial
or appeal from an adverse decision of the trial court, and he was not prevented by fraud,
accident, mistake or excusable negligence from filing such motion or taking such appeal, he
cannot avail himself of this petition. Indeed, relief will not be granted to a party who seeks
avoidance from the effects of the judgment when the loss of the remedy at law was due to his
own negligence; otherwise the petition for relief can be used to revive the right to appeal
which has been lost thru inexcusable negligence.

Evidently, there was no fraud, accident, mistake, or excusable negligence that prevented Mrs.
Cerezo from filing an appeal, a motion for new trial or a petition for certiorari. It was error for
her to avail of a petition for relief from judgment.
After our resolution denying Mrs. Cerezos petition for relief became final and executory, Mrs.
Cerezo, in her last ditch attempt to evade liability, filed before the Court of Appeals a petition
for annulment of the judgment of the trial court. Annulment is available only on the grounds
of extrinsic fraud and lack of jurisdiction. If based on extrinsic fraud, a party must file the
petition within four years from its discovery, and if based on lack of jurisdiction, before laches
or estoppel bars the petition. Extrinsic fraud is not a valid ground if such fraud was used as a
ground, or could have been used as a ground, in a motion for new trial or petition for relief
from judgment.32
Mrs. Cerezo insists that lack of jurisdiction, not extrinsic fraud, was her ground for filing the
petition for annulment of judgment. However, a party may avail of the remedy of annulment
of judgment under Rule 47 only if the ordinary remedies of new trial, appeal, petition for relief
from judgment, or other appropriate remedies are no longer available through no fault of the
party.33 Mrs. Cerezo could have availed of a new trial or appeal but through her own fault she
erroneously availed of the remedy of a petition for relief, which was denied with finality. Thus,
Mrs. Cerezo may no longer avail of the remedy of annulment.
In any event, the trial court clearly acquired jurisdiction over Mrs. Cerezos person. Mrs.
Cerezo actively participated in the proceedings before the trial court, submitting herself to the
jurisdiction of the trial court. The defense of lack of jurisdiction fails in light of her active
participation in the trial court proceedings. Estoppel or laches may also bar lack of jurisdiction
as a ground for nullity especially if raised for the first time on appeal by a party who
participated in the proceedings before the trial court, as what happened in this case.34
For these reasons, the present petition should be dismissed for utter lack of merit. The
extraordinary action to annul a final judgment is restricted to the grounds specified in the
rules. The reason for the restriction is to prevent this extraordinary action from being used by
a losing party to make a complete farce of a duly promulgated decision that has long become
final and executory. There would be no end to litigation if parties who have unsuccessfully
availed of any of the appropriate remedies or lost them through their fault could still bring an
action for annulment of judgment.35 Nevertheless, we shall discuss the issues raised in the
present petition to clear any doubt about the correctness of the decision of the trial court.

Mrs. Cerezos Liability and the Trial Courts Acquisition of Jurisdiction

Mrs. Cerezo contends that the basis of the present petition for annulment is lack of
jurisdiction. Mrs. Cerezo asserts that the trial court could not validly render judgment since it
failed to acquire jurisdiction over Foronda. Mrs. Cerezo points out that there was no service of
summons on Foronda. Moreover, Tuazon failed to reserve his right to institute a separate civil
action for damages in the criminal action. Such contention betrays a faulty foundation. Mrs.
Cerezos contention proceeds from the point of view of criminal law and not of civil law, while
the basis of the present action of Tuazon is quasi-delict under the Civil Code, not delict under
the Revised Penal Code.
The same negligent act may produce civil liability arising from a delict under Article 103 of the
Revised Penal Code, or may give rise to an action for a quasi-delict under Article 2180 of the
Civil Code. An aggrieved party may choose between the two remedies. An action based on a
quasi-delict may proceed independently from the criminal action.36 There is, however, a
distinction between civil liability arising from a delict and civil liability arising from a quasidelict. The choice of remedy, whether to sue for a delict or a quasi-delict, affects the
procedural and jurisdictional issues of the action.37
Tuazon chose to file an action for damages based on a quasi-delict. In his complaint, Tuazon
alleged that Mrs. Cerezo, "without exercising due care and diligence in the supervision and
management of her employees and buses," hired Foronda as her driver. Tuazon became
disabled because of Forondas "recklessness, gross negligence and imprudence," aggravated
by Mrs. Cerezos "lack of due care and diligence in the selection and supervision of her
employees, particularly Foronda."38
The trial court thus found Mrs. Cerezo liable under Article 2180 of the Civil Code. Article 2180
states in part:
Employers shall be liable for the damages caused by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in any
business or industry.
Contrary to Mrs. Cerezos assertion, Foronda is not an indispensable party to the case. An
indispensable party is one whose interest is affected by the courts action in the litigation, and

without whom no final resolution of the case is possible.39 However, Mrs. Cerezos liability as
an employer in an action for a quasi-delict is not only solidary, it is also primary and direct.
Foronda is not an indispensable party to the final resolution of Tuazons action for damages
against Mrs. Cerezo.
The responsibility of two or more persons who are liable for a quasi-delict is solidary.40 Where
there is a solidary obligation on the part of debtors, as in this case, each debtor is liable for the
entire obligation. Hence, each debtor is liable to pay for the entire obligation in full. There is
no merger or renunciation of rights, but only mutual representation.41 Where the obligation
of the parties is solidary, either of the parties is indispensable, and the other is not even a
necessary party because complete relief is available from either.42 Therefore, jurisdiction over
Foronda is not even necessary as Tuazon may collect damages from Mrs. Cerezo alone.
Moreover, an employers liability based on a quasi-delict is primary and direct, while the
employers liability based on a delict is merely subsidiary.43 The words "primary and direct,"
as contrasted with "subsidiary," refer to the remedy provided by law for enforcing the
obligation rather than to the character and limits of the obligation.44 Although liability under
Article 2180 originates from the negligent act of the employee, the aggrieved party may sue
the employer directly. When an employee causes damage, the law presumes that the
employer has himself committed an act of negligence in not preventing or avoiding the
damage. This is the fault that the law condemns. While the employer is civilly liable in a
subsidiary capacity for the employees criminal negligence, the employer is also civilly liable
directly and separately for his own civil negligence in failing to exercise due diligence in
selecting and supervising his employee. The idea that the employers liability is solely
subsidiary is wrong.45
The action can be brought directly against the person responsible (for another), without
including the author of the act. The action against the principal is accessory in the sense that it
implies the existence of a prejudicial act committed by the employee, but it is not subsidiary in
the sense that it can not be instituted till after the judgment against the author of the act or at
least, that it is subsidiary to the principal action; the action for responsibility (of the employer)
is in itself a principal action.46
Thus, there is no need in this case for the trial court to acquire jurisdiction over Foronda. The
trial courts acquisition of jurisdiction over Mrs. Cerezo is sufficient to dispose of the present
case on the merits.

In contrast, an action based on a delict seeks to enforce the subsidiary liability of the employer
for the criminal negligence of the employee as provided in Article 103 of the Revised Penal
Code. To hold the employer liable in a subsidiary capacity under a delict, the aggrieved party
must initiate a criminal action where the employees delict and corresponding primary liability
are established.47 If the present action proceeds from a delict, then the trial courts
jurisdiction over Foronda is necessary. However, the present action is clearly for the quasidelict of Mrs. Cerezo and not for the delict of Foronda.
The Cerezo spouses contention that summons be served anew on them is untenable in light
of their participation in the trial court proceedings. To uphold the Cerezo spouses contention
would make a fetish of a technicality.48 Moreover, any irregularity in the service of summons
that might have vitiated the trial courts jurisdiction over the persons of the Cerezo spouses
was deemed waived when the Cerezo spouses filed a petition for relief from judgment.49
We hold that the trial court had jurisdiction and was competent to decide the case in favor of
Tuazon and against Mrs. Cerezo even in the absence of Foronda. Contrary to Mrs. Cerezos
contention, Foronda is not an indispensable party to the present case. It is not even necessary
for Tuazon to reserve the filing of a separate civil action because he opted to file a civil action
for damages against Mrs. Cerezo who is primarily and directly liable for her own civil
negligence. The words of Justice Jorge Bocobo in Barredo v. Garcia still hold true today as
much as it did in 1942:
x x x [T]o hold that there is only one way to make defendants liability effective, and that is, to
sue the driver and exhaust his (the latters) property first, would be tantamount to compelling
the plaintiff to follow a devious and cumbersome method of obtaining relief. True, there is
such a remedy under our laws, but there is also a more expeditious way, which is based on the
primary and direct responsibility of the defendant under article [2180] of the Civil Code. Our
view of the law is more likely to facilitate remedy for civil wrongs, because the procedure
indicated by the defendant is wasteful and productive of delay, it being a matter of common
knowledge that professional drivers of taxis and other similar public conveyances do not have
sufficient means with which to pay damages. Why, then, should the plaintiff be required in all
cases to go through this roundabout, unnecessary, and probably useless procedure? In
construing the laws, courts have endeavored to shorten and facilitate the pathways of right
and justice.50

Interest at the rate of 6% per annum is due on the amount of damages adjudged by the trial
court.51 The 6% per annum interest shall commence from 30 May 1995, the date of the
decision of the trial court. Upon finality of this decision, interest at 12% per annum, in lieu of
6% per annum, is due on the amount of damages adjudged by the trial court until full
payment.
WHEREFORE, we DENY the instant petition for review. The Resolution dated 21 October 1999
of the Court of Appeals in CA-G.R. SP No. 53572, as well as its Resolution dated 20 January
2000 denying the motion for reconsideration, is AFFIRMED with the MODIFICATION that the
amount due shall earn legal interest at 6% per annum computed from 30 May 1995, the date
of the trial courts decision. Upon finality of this decision, the amount due shall earn interest at
12% per annum, in lieu of 6% per annum, until full payment.
SO ORDERED.