FIRST DIVISION

DEVELOPMENT BANK OF
THEPHILIPPINES,
Petitioner,

- versus -

G.R. No. 163827

Present:
CORONA, C.J.,
Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
VILLARAMA, JR., and
SERENO, JJ.

HON. SILVERIO Q. CASTILLO and

Promulgated:
CRISTINA TRINIDAD ZARATE
ROMERO,
August 17, 2011
Respondents.
x--------------------------------------------------x

RESOLUTION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, seeking to set aside the July 21, 2003
Decision of the Court of Appeals (CA) in CA-G.R. SP No. 53825 dismissing
petitioners petition for certiorari.
The antecedents follow:
Corazon Zarate Romero and his brother Gonzalo Zarate co-owned a
property covered by Transfer Certificate of Title (TCT) No. 10070 of the Register
of
Deeds
of
Dagupan
City. The
subject
property,
located
in Dagupan City, Province of Pangasinan, is a 1,705-square-meter lot with a fourstorey hotel erected thereon.

It appears that sometime in 1975, Corazon and Gonzalo obtained a loan from
petitioner Development Bank of the Philippines (DBP). As collateral, they
executed a real estate mortgage over the subject property in favor of DBP. On the
alleged failure of the two borrowers to pay their amortizations, DBP foreclosed the
real estate mortgage on September 15, 1983. Purportedly, no redemption was made
within one year, and thus, DBP consolidated ownership over the subject property.
In March 1993, when Corazon passed away, her sole heir, her daughter
respondent Cristina Trinidad Zarate Romero, asserted ownership over the subject
property to the extent of one-half thereof. However, respondent discovered that the
property was already registered as early as June 13, 1989 in the name of DBP
under TCT No. 54142, with TCT No 10070 in the names of her mother and uncle
already cancelled.
Respondent filed before the Regional Trial Court (RTC) of Dagupan City a
complaint for reconveyance, quieting of title and damages with prayer for a
temporary restraining order (TRO) and writ of preliminary injunction to prevent
DBP from conducting any auction sale on the subject property during the pendency
of the case. Respondent claimed that her uncle and DBP conspired in committing
fraudulent acts relative to their true transaction and concealed the same from her
mother, thereby depriving her of her right of redemption.
The RTC, after hearing, issued on November 24, 1998, a TRO restraining
DBP from proceeding with its scheduled auction of the disputed property
on November 25, 1998. The dispositive portion of the trial courts order reads:
It appearing that plaintiff Cristina Trinidad Romero y Zarate is the sole
heir of the late Maria Corazon Zarate Romero[,] co-owner of the pro[-]indiviso of
the property covered by TCT No. 10070 which at present is carried in TCT
No. 54142 in the name of DBP[,] and to avoid irreparable damage that may arise
[from] the auction sale (public bidding) scheduled on November 25, 1998[,] this
Court hereby issues a Temporary Restraining Order (TRO) AGAINST
DEFENDANT Development Bank of the Philippines, Makati, Metro Manila from
proceeding [with] the scheduled auction sale (public bidding) on November 25,

1998 at defendants head office at SAM BCG for a period of twenty (20) days
from receipt of this order.
SO ORDERED.

DBP moved to lift the TRO arguing that it violates Section 2 of Presidential
Decree (P.D.) No. 385 which prohibits the issuance of a restraining order,
temporary or permanent, against government financing institutions like DBP to
enjoin any action taken pursuant to the mandatory foreclosure clause of the decree.
On December 14, 1998, the RTC denied DBPs motion to lift the TRO and
granted respondents plea for an injunctive writ. The pertinent portions of the trial
courts order reads:
To the honest evaluation of this Court what is unrestrainable is the right of
government financial institutions to foreclose mandatorily all loans with
arrearages including interest and charges amounting to at least twenty (20%)
percent of the total outstanding obligation.
xxxx
To allay the fears of the plaintiff and to avoid any irreparable damage that
may arise while the issues involved in the above case are still being resolved and
determined by the Court in the light of the evidence so f[a]r presented,
[considering that] there is a tendency on the part of the Development Bank of the
Philippines of continuing the acts complained of (auction sale/Public bidding) and
considering further [that] there [should] be no advantage given to one [party] to
the prejudice of the other while this case is still pending in Court, it is hereby
ordered that a WRIT of Preliminary Injunction be issued against defendant
Development Bank of the Philippines from conducting any auction sale of the
property involved in the above case (formerly covered by TCT No. 10070 and at
[present] covered by TCT No. 54142), upon posting of a BOND by the plaintiff in
the amount of P3 Million within five (5) days from receipt of this Order.

On even date, DBP moved to reconsider the December 14, 1998 Order and
at the same time sought the dismissal of respondents complaint on the sole ground
that the same states no cause of action.
On December 23, 1998, the writ of preliminary injunction was issued in
favor of respondent.

On March 8, 1999, the RTC denied DBPs motion for reconsideration of the
denial of its motion for the lifting of the TRO. The RTC likewise denied in the
same order DBPs motion to dismiss the complaint, and ordered DBP to file an
answer.
On March 23, 1999, DBP moved to reconsider the March 8, 1999 denial of
its motion to dismiss. But even before the RTC could resolve said motion, DBP
filed its Answer on April 5, 1999. A manifestation was later filed by DBP
indicating that the answer it filed was a mere cautionary measure or what is known
as an answer ad cautelam and thus without prejudice to any right of action it may
take and without any waiver of any of the grounds for the dismissal of the
complaint and any favorable resolution or order that a superior court may issue
hereinafter.
On April 20, 1999, the RTC issued an order denying DBPs motion for
reconsideration of its March 8, 1999 Order. The RTC in the same order emphasized
that DBP already filed an answer thereby rendering the motion to dismiss moot and
academic.
On June 23, 1999, DBP filed a petition for certiorari before the CA assailing
the following issuances of the RTC:
(1)

TRO dated November 24, 1998 (received by DBP on November 24,

1998) issued against DBP enjoining it from proceeding with the
scheduled auction sale of the disputed property;

(2)

Order dated December 14, 1998 (received by DBP on December 16,

1998) denying its motion to lift the TRO and granting the respondents
prayer for a writ of preliminary injunction;

(3)

Order dated March 8, 1999 (received by DBP on March 18, 1999)

denying DBPs motion to dismiss and motion for reconsideration of
the December 14, 1998 Order; and

(4)

Order dated April 20, 1999 (received by DBP on April 23, 1999)
denying DBPs motion for reconsideration of the March 8, 1999 order.

In its assailed decision, the CA dismissed the petition on procedural

grounds. It held that the petition questioning the first three orders was filed late as
the petition should have been filed within 60 days from receipt of the assailed
orders. The CA noted that as regards the third order, DBP was notified of the denial
of its motion for reconsideration of the December 14, 1998 Order on March 18,
1999 and thus only had until May 17, 1999 to question the same. The CA further
stated that DBPs subsequent filing of its Answer to the complaint rendered its
motion to dismiss moot and academic.
Hence, the present appeal.
DBP raises the following issues for this Courts consideration:
I. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING
THE ORDER OF THE COURT A QUO DENYING DBPS MOTION TO
DISMISS.
II. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN
AFFIRMING THE ORDER OF THE COURT A QUO ISSUING THE
TEMPORARY RESTRAINING ORDER AND THE PRELIMINARY
INJUNCTION AGAINST PETITIONER DBP.
III. WHETHER THE RULES OF PROCEDURE [SHOULD NOT] BE APPLIED
IN A VERY RIGID AND TECHNICAL SENSE SO AS NOT TO
FRUSTRATE THE PROMOTION OF SUBSTANTIAL JUSTICE.

DBP insists that it is evident from the face of the complaint that respondent
failed to state a cause of action. DBP contends that respondents allegation of
conspiracy between DBP and Gonzalo is bare and has no factual basis to stand

on. Further, DBP claims that respondent has no legal right over the subject
property as she did not inherit the same in the first place. At the time of death of
respondents mother, the property was not anymore owned by the latter and
therefore not part of her estate. Thus, respondent has no legal right over the
property and has no cause of action against DBP. And because she had no right to
the property, the issuance of the TRO and injunctive writ were likewise
improper. DBP also points to the following provisions of P.D. No. 385 that were
allegedly violated with the issuance of the TRO and injunctive writ:
SECTION 1. It shall be mandatory for government financial institutions,
after the lapse of sixty (60) days from the issuance of this Decree, to foreclose the
collaterals and/or securities for any loan, credit, accommodation, and/or
guarantees granted by them whenever the arrearages on such account, including
accrued interest and other charges, amount to at least twenty percent (20%) of the
total outstanding obligations, including interest and other charges, as appearing in
the books of account and/or related records of the financial institution
concerned. This shall be without prejudice to the exercise by the government
financial institutions of such rights and/or remedies available to them under their
respective contracts with their debtors, including the right to foreclose on loans,
credits, accommodations and/or guarantees on which the arrearages are less than
twenty percent (20%).
SEC. 2. No restraining order, temporary or permanent injunction shall be
issued by the court against any government financial institution in any action
taken by such institution in compliance with the mandatory foreclosure provided
in Section 1 hereof, whether such restraining order, temporary or permanent
injunction is sought by the borrower(s) or any third party or parties, except after
due hearing in which it is established by the borrower and admitted by the
government financial institution concerned that twenty percent (20%) of the
outstanding arrearages has been paid after the filing of foreclosure proceedings.
xxxx

Respondent, for her part, counters that the CA was correct in dismissing the
petition for certiorari for having been filed beyond the sixty (60)-day reglementary
period.Also, respondent contends that the provisions of P.D. No. 385 relating to the
proscription against the issuance of injunctive writs enjoining foreclosure sales are
not applicable in the instant case. She points out that what the RTC enjoined is not
an auction sale arising from the foreclosure of mortgage as the subject property had

long been foreclosed and title thereto consolidated in the name of DBP. Rather,
what the RTC enjoined was DBPs sale of the subject property through ordinary
public bidding which is not within the ambit of P.D. No. 385.
The petition should be denied.
As correctly ruled by the CA, the petition for certiorari assailing the orders
pertaining to the grant of the TRO and the writ of injunction were filed out of
time. Notice of the issuance of the TRO was received by DBP on the same day it
was granted, November 24, 1998; thus, the petition for certiorari should have been
filed not later than January 23, 1999. The denial of the motion for reconsideration
of the order granting the writ of injunction, on the other hand, was received by
DBP on March 18, 1999 and thus, it had only until May 17, 1999 to file the
petition for certiorari. DBP, however, filed its petition only on June 23, 1999.
As to DBPs motion to dismiss the complaint, we agree with the RTC and CA
that the same should be denied, but not for the reason cited by said courts that it
has been rendered moot and academic by DBPs filing of its answer but because the
same lacks merit. Contrary to DBPs submission, a perusal of the allegations of the
complaint clearly reveals respondents cause of action against DBP. The complaint
states,
xxxx
1.1 Plaintiff is the sole heir and successor-in-interest of the
late Ma. Corazon Zarate-Romero, who died intestate on 6 March
1993.
xxxx
3. During her lifetime, plaintiffs predecessor-in-interest was the erstwhile
owner pro-indiviso of that parcel of land, together with improvements, located in
Dagupan City, which property used to be covered by Transfer Certificate of Title
(TCT) No. 10070 of the Registry of Deeds of Dagupan City.

4. In or about the year 1975, defendant Zarate, who was co-owner of the
subject property, secured various personal loan obligations from the defendant
DBP in the aggregate amount of P2,000,000.00.
4.1 To secure such putative loan obligations of the
defendant Zarate, the latter, who wielded moral ascendancy over
his younger sister and herein plaintiffs predecessor-in-interest -Ma. Corazon Zarate-Romero, cajoled and prevailed upon the latter
to mortgage the entirety of the subject property in favor of
defendant DBP, including her one-half (1/2) pro-indiviso share in
the same.
4.2 Accordingly, defendant Zarate assured the plaintiffs
predecessor-in-interest that the mortgage would be for a brief
period only and that he (defendant Zarate) would forthwith pay and
settle in full all his personal loan obligations with the defendant
DBP to ensure that said mortgage is cancelled in the soonest time
possible.
5. At some point in time during the effectivity of the mortgage, however,
defendant Zarate apparently saw an opportunity to claim the entirety of the
subject property for himself, to the exclusion of plaintiffs predecessor-in-interest.
5.1 Emboldened by, and taking advantage of, the complete
trust and confidence reposed upon him by the plaintiffs
predecessor-in-interest anent the subject property, defendant Zarate
conspired with the defendant DBP for the ostensible foreclosure of
the subject property, with the end in view, however, of
subsequently reacquiring the same for himself as sole owner.
6. Pursuant to such sinister plot hatched by defendants, defendant DBP
foreclosed the subject property in September of 1983 and, thereafter, bought the
same for itself in the sum of P2,253,101.00 during the auction sale conducted by
the Deputy Sheriff of Pangasinan.
7. Significantly enough, and even before the lapse of the mortgagors right
of redemption over the subject property, the herein defendants entered into a Deed
of Conditional Sale over the same, with the defendant DBP as seller, and the
defendant Zarate as buyer.
7.1 Needless to state, all the aforedescribed dealings,
transactions and proceedings concerning the subject property -from its fraudulent foreclosure up to the highly anomalous
execution of the Deed of Conditional Sale over the same -- were
concealed from plaintiffs predecessor-in-interest and even from the
plaintiff herself after the death of her mother.
xxxx

A cause of action is the act or omission by which a party violates a right of

another. A complaint states a cause of action when it contains three essential
elements: (1) a right in favor of the plaintiff by whatever means and whatever law
it arises; (2) the correlative obligation of the defendant to respect such right; and
(3) the act or omission of the defendant violates the right of the plaintiff. If any of
these elements is absent, the complaint becomes vulnerable to a motion to dismiss
on the ground of failure to state a cause of action.
Evidently, all the above elements of a cause of action are alleged in the
complaint: (1) the legal right of the respondent over the subject property foreclosed
premised on the fact that she is the sole heir of one of the owners who is entitled to
the right of redemption; (2) the correlative obligation of defendant DBP, as the
foreclosing entity, to respect such right of redemption; and (3) the act or omission
of the defendant in violation of the legal right, i.e., the act of DBP and its codefendant Zarate to cause the ostensible foreclosure of the subject property and the
subsequent execution of a deed of conditional sale between the defendants even
prior to the lapse of redemption period to deprive respondents mother of her right
over the property.
WHEREFORE, the petition is DENIED for lack of merit. The Decision
dated July 21, 2003 of the Court of Appeals in CA-G.R. SP No. 53825
is AFFIRMED.
No costs.
SO ORDERED.

Republic of the Philippines

Supreme Court
Manila

FIRST DIVISION
CATALINA B. CHU,
THEANLYN B. CHU,
THEAN CHING LEE B.
CHU, THEAN LEEWN
B. CHU, and MARTIN
LAWRENCE B. CHU,
Petitioners,
- versus -

G.R. No. 156185

Present:
CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
PEREZ, JJ.

SPOUSES FERNANDO C.
CUNANAN and TRINIDAD
Promulgated:
N. CUNANAN, BENELDA
ESTATE DEVELOPMENT
CORPORATION, and
September 12, 2011
SPOUSES AMADO E.
CARLOS and GLORIA
A. CARLOS,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION
BERSAMIN, J.:
If two or more suits are instituted on the basis of the same cause of action,
the filing of one or a judgment upon the merits in any one is available as a ground
for the dismissal of the others.

We review the decision promulgated on November 19, 2002, whereby the

Court of Appeals (CA) dismissed the petitioners amended complaint in Civil Case
No. 12251 of the Regional Trial Court, Branch 41, in San Fernando City,
Pampanga (RTC) for being barred by res judicata.
Antecedents
On September 30, 1986, Spouses Manuel and Catalina Chu (Chus) executed
a deed of sale with assumption of mortgage involving their five parcels of land
situated in Saguin, San Fernando City, Pampanga, registered under Transfer
Certificate of Title (TCT) No. 198470-R, TCT No. 198471-R, TCT No. 198472-R,
TCT No. 198473-R, and TCT No. 199556-R, all of the Office of the Registry of
Deeds of the Province of Pampanga, in favor of Trinidad N. Cunanan (Cunanan)
for the consideration ofP5,161,090.00. They also executed a so-called side
agreement, whereby they clarified that Cunanan had paid only P1,000,000.00 to
the Chus despite the Chus, as vendors, having acknowledged
receiving P5,161,090.00; that the amount of P1,600,000.00 was to be paid directly
to Benito Co and to Security Bank and Trust Company (SBTC) in whose favor the
five lots had been mortgaged; and that Cunanan would pay the balance
of P2,561.90.00 within three months, with a grace period of one month subject to
3%/month interest on any remaining unpaid amount. The parties further stipulated
that the ownership of the lots would remain with the Chus as the vendors and
would be transferred to Cunanan only upon complete payment of the total
consideration and compliance with the terms of the deed of sale with assumption of
mortgage.
Thereafter, the Chus executed a special power of attorney authorizing
Cunanan to borrow P5,161,090.00 from any banking institution and to mortgage
the five lots as security, and then to deliver the proceeds to the Chus net of the
balance of the mortgage obligation and the downpayment.
Cunanan was able to transfer the title of the five lots to her name without the
knowledge of the Chus, and to borrow money with the lots as security without
paying the balance of the purchase price to the Chus. She later transferred two of
the lots to Spouses Amado and Gloria Carlos (Carloses) on July 29, 1987. As a
result, on March 18, 1988, the Chus caused the annotation of an unpaid vendors

lien on three of the lots. Nonetheless, Cunanan still assigned the remaining three
lots to Cool Town Realty on May 25, 1989 despite the annotation.
In February 1988, the Chus commenced Civil Case No. G-1936 in the RTC
to recover the unpaid balance from Spouses Fernando and Trinidad Cunanan
(Cunanans). Five years later, on April 19, 1993, the Chus amended the complaint to
seek the annulment of the deed of sale with assumption of mortgage and of the
TCTs issued pursuant to the deed, and to recover damages. They impleaded Cool
Town Realty and Development Corporation (Cool Town Realty), and the Office of
the Registry of Deeds of Pampanga as defendants in addition to the Cunanans.
Considering that the Carloses had meanwhile sold the two lots to Benelda
Estate Development Corporation (Benelda Estate) in 1995, the Chus further
amended the complaint in Civil Case No. G-1936 to implead Benelda Estate as
additional defendant. In due course, Benelda Estate filed its answer with a motion
to dismiss, claiming, among others, that the amended complaint stated no cause of
action because it had acted in good faith in buying the affected lots, exerting all
efforts to verify the authenticity of the titles, and had found no defect in them.
After the RTC denied its motion to dismiss, Benelda Estate assailed the denial
on certiorari in the CA, which annulled the RTCs denial for being tainted with
grave abuse of discretion and dismissed Civil Case No. G-1936 as against Benelda
Estate. On March 1, 2001, the Court upheld the dismissal of Civil Case No. G1936 in G.R. No. 142313 entitled Chu, Sr. v. Benelda Estate Development
Corporation.
On December 2, 1999, the Chus, the Cunanans, and Cool Town Realty
entered into a compromise agreement, whereby the Cunanans transferred to the
Chus their 50% share in all the parcels of land situated in Saguin, San Fernando,
Pampanga registered in the name of Cool Town Realty for and in consideration of
the full settlement of their case. The RTC approved the compromise agreement in a
partial decision dated January 25, 2000.
Thereafter, on April 30, 2001, the petitioners herein (i.e., Catalina Chu and
her children) brought another suit, Civil Case No. 12251, against the Carloses and
Benelda Estate, seeking the cancellation of the TCTs of the two lots in the name of
Benelda Estate, and the issuance of new TCTs in their favor, plus damages.

The petitioners amended their complaint in Civil Case No. 12251 on

February 4, 2002 to implead the Cunanans as additional defendants.
The Cunanans moved to dismiss the amended complaint based on two
grounds, namely: (a) bar by prior judgment, and (b) the claim or demand had been
paid, waived, and abandoned. Benelda Estate likewise moved to dismiss the
amended complaint, citing as grounds: (a) forum shopping; (b) bar by prior
judgment, and (c) failure to state a cause of action. On their part, the Carloses
raised affirmative defenses in their answer, namely: (a) the failure to state a cause
of action; (b) res judicata or bar by prior judgment; and (c) bar by statute of
limitations.
On April 25, 2002, the RTC denied both motions to dismiss, holding that the
amended complaint stated a cause of action against all the defendants; that the
action was not barred by res judicata because there was no identity of parties and
subject matter between Civil Case No.12251 and Civil Case No. G-1936; and that
the Cunanans did not establish that the petitioners had waived and abandoned their
claim or that their claim had been paid by virtue of the compromise agreement,
pointing out that the compromise agreement involved only the three parcels of land
registered in the name of Cool Town Realty.
The Cunanans sought reconsideration, but their motion was denied on May
31, 2002.
On September 2, 2002, the Cunanans filed a petition for certiorari in the CA
(SP-72558), assailing the RTCs denial of their motion to dismiss and motion for
reconsideration.
On November 19, 2002, the CA promulgated its decision, granting the
petition for certiorari and nullifying the challenged orders of the RTC. The CA
ruled that thecompromise agreement had ended the legal controversy between the
parties with respect to the cause of action arising from the deed of sale with
assumption of mortgagecovering all the five parcels of land; that Civil Case No. G1936 and Civil Case No.12251 involved the violation by the Cunanans of the same
legal right under the deed of sale with assumption of mortgage; and that the filing
of Civil Case No.12251 contravened the rule against splitting of a cause of action,
and rendered Civil Case No.12251 subject of a motion to dismiss based on bar
by res judicata. The CA disposed thusly:

WHEREFORE, premises considered, the present petition for certiorari is

hereby GIVEN DUE COURSE and the writ prayed for, accordingly GRANTED.
Consequently, the challenged Orders of the respondent court denying the motions
to dismiss are hereby ANNULLED and SET ASIDE and a new one is hereby
rendered DISMISSING the Amended Complaint in Civil Case No. 12251.
No costs.
SO ORDERED.

Hence, this appeal.

Issue
Was Civil Case No. 12251 barred by res judicata although the compromise
agreement did not expressly include Benelda Estate as a party and although
the compromise agreement made no reference to the lots now registered in Benelda
Estates name?
Ruling
We deny the petition for review.
I
The petitioners contend that the compromise agreement did not apply or extend to
the Carloses and Benelda Estate; hence, their Civil Case No. 12251 was not barred
by res judicata.
We disagree.
A compromise agreement is a contract whereby the parties, by making reciprocal
concessions, avoid a litigation or put an end to one already commenced. It
encompasses the objects specifically stated therein, although it may include other
objects by necessary implication, and is binding on the contracting parties, being
expressly acknowledged as a juridical agreement between them. It has the effect
and authority of res judicata upon the parties.

In the construction or interpretation of a compromise agreement, the intention of

the parties is to be ascertained from the agreement itself, and effect should be given
to that intention. Thus, the compromise agreement must be read as a whole.
The following pertinent portions of the compromise agreement indicate that
the parties intended to thereby settle all their claims against each other, to wit:
1. That the defendants SPOUSES TRINIDAD N.CUNANAN and
FERNANDO C.CUNANAN for and in consideration of the full settlement of
their case in the above-entitled case, hereby TRANSFER, DELIVER, and
CONVEY unto the plaintiffs all their rights, interest, benefits, participation,
possession and ownership which consists of FIFTY (50%) percent share on all the
parcels of land situated in Saguin, San Fernando Pampanga now registered in the
name of defendant, COOL TOWN REALTY & DEVELOPMENT
CORPORATION, as particularly evidenced by the corresponding Transfer
Certificates of Titles xxx
xxxx
6. That the plaintiffs and the defendant herein are waiving, abandoning,
surrendering, quitclaiming, releasing, relinquishing any and all their respective
claims against each other as alleged in the pleadings they respectively filed in
connection with this case. (bold emphasis supplied)

The intent of the parties to settle all their claims against each other is
expressed in the phrase any and all their respective claims against each other as
alleged in the pleadings they respectively filed in connection with this case, which
was broad enough to cover whatever claims the petitioners might assert based on
the deed of sale with assumption of mortgage.
There is no question that the deed of sale with assumption of
mortgage covered all the five lots, to wit:
WHEREAS, the VENDORS are willing to sell the above-described
properties and the VENDEE is willing to buy the same at FIFTY FIVE (P55.00)
PESOS, Philippine Currency, per square meter, or a total consideration of FIVE
MILLION ONE HUNDRED SIXTY ONE THOUSAND and NINETY
(P5,161,090.00) PESOS, Philippine Currency.

To limit the compromise agreement only to the three lots mentioned therein would
contravene the avowed objective of Civil Case No. G-1936 to enforce or to rescind

the entiredeed of sale with assumption of mortgage. Such interpretation is akin to

saying that the Cunanans separately sold the five lots, which is not the truth. For
one, Civil Case No. G-1936 did not demand separate amounts for each of the
purchased lots. Also, the compromise agreement did not state that the value being
thereby transferred to the petitioners by the Cunanans corresponded only to that of
the three lots.
Apparently, the petitioners were guilty of splitting their single cause of
action to enforce or rescind the deed of sale with assumption of mortgage. Splitting
a single cause of action is the act of dividing a single or indivisible cause of action
into several parts or claims and instituting two or more actions upon them. A single
cause of action or entire claim or demand cannot be split up or divided in order to
be made the subject of two or more different actions. Thus, Section 4, Rule 2 of
the Rules of Court expressly prohibits splitting of a single cause of action, viz:
Section 4. Splitting a single cause of action; effect of. If two or more suits
are instituted on the basis of the same cause of action, the filing of one or a
judgment upon the merits in any one is available as a ground for the dismissal of
the others. (4a)

The petitioners were not at liberty to split their demand to enforce or rescind
the deed of sale with assumption of mortgage and to prosecute piecemeal or
present only a portion of the grounds upon which a special relief was sought under
the deed of sale with assumption of mortgage, and then to leave the rest to be
presented in another suit; otherwise, there would be no end to litigation. Their
splitting violated the policy against multiplicity of suits, whose primary objective
was to avoid unduly burdening the dockets of the courts. Their contravention of the
policy merited the dismissal of Civil Case No. 12251 on the ground of bar by res
judicata.
Res judicata means a matter adjudged, a thing judicially acted upon or
decided; a thing or matter settled by judgment. The doctrine of res judicata is an
old axiom of law, dictated by wisdom and sanctified by age, and founded on the
broad principle that it is to the interest of the public that there should be an end to
litigation by the same parties over a subject once fully and fairly adjudicated. It has
been appropriately said that the doctrine is a rule pervading every well-regulated

system of jurisprudence, and is put upon two grounds embodied in various maxims
of the common law: the one, public policy and necessity, which makes it to the
interest of the State that there should be an end to litigation interest reipublicae ut
sit finis litium; the other, the hardship on the individual that he should be vexed
twice for one and the same cause nemo debet bis vexari pro una et eadem causa. A
contrary doctrine would subject the public peace and quiet to the will and neglect
of individuals and prefer the gratification of the litigious disposition on the part of
suitors to the preservation of the public tranquillity and happiness.
Under the doctrine of res judicata, a final judgment or decree on the merits
rendered by a court of competent jurisdiction is conclusive of the rights of the
parties or their privies in all later suits and on all points and matters determined in
the previous suit. The foundation principle upon which the doctrine rests is that the
parties ought not to be permitted to litigate the same issue more than once; that
when a right or fact has been judicially tried and determined by a court of
competent jurisdiction, so long as it remains unreversed, should be conclusive
upon the parties and those in privity with them in law or estate.
Yet, in order that res judicata may bar the institution of a subsequent action,
the following requisites must concur: (a) the former judgment must be final; (b) it
must have been rendered by a court having jurisdiction of the subject matter and
the parties; (c) it must be a judgment on the merits; and (d) there must be between
the first and second actions (i) identity of parties, (ii) identity of the subject matter,
and (iii) identity of cause of action.
The first requisite was attendant. Civil Case No. G-1936 was already
terminated under the compromise agreement, for the judgment, being upon a
compromise, was immediately final and unappealable. As to the second requisite,
the RTC had jurisdiction over the cause of action in Civil Case No. G-1936 for the
enforcement or rescission of the deed of sale with assumption of mortgage, which
was an action whose subject matter was not capable of pecuniary estimation. That
the compromise agreement explicitly settled the entirety of Civil Case No. G-1936
by resolving all the claims of the parties against each other indicated that the third
requisite was also satisfied.
But was there an identity of parties, of subject matter, and of causes of action
between Civil Case No.G-1936 and Civil Case No. 12251?

There is identity of parties when the parties in both actions are the same, or
there is privity between them, or they are successors-in-interest by title subsequent
to the commencement of the action litigating for the same thing and under the
same title and in the same capacity. The requirement of the identity of parties was
fully met, because the Chus, on the one hand, and the Cunanans, on the other hand,
were the parties in both cases along with their respective privies. The fact that the
Carloses and Benelda Estate, defendants in Civil Case No. 12251, were not parties
in the compromise agreement was inconsequential, for they were also the privies of
the Cunanans as transferees and successors-in-interest. It is settled that the absolute
identity of parties was not a condition sine qua non for res judicata to apply,
because a shared identity of interest sufficed. Mere substantial identity of parties,
or even community of interests between parties in the prior and subsequent cases,
even if the latter were not impleaded in the first case, was sufficient.
As to identity of the subject matter, both actions dealt with the properties
involved in the deed of sale with assumption of mortgage. Identity of the causes of
action was also met, because Case No. G-1936 and Civil Case No. 12251 were
rooted in one and the same cause of action the failure of Cunanan to pay in full the
purchase price of the five lots subject of the deed of sale with assumption of
mortgage. In other words, Civil Case No. 12251 reprised Civil Case No. G-1936,
the only difference between them being that the petitioners alleged in the former
that Benelda Estate was not also a purchaser for value and in good faith.
In fine, the rights and obligations of the parties vis--vis the five lots were all
defined and governed by the deed of sale with assumption of mortgage, the only
contract between them. That contract was single and indivisible, as far as they were
concerned. Consequently, the Chus could not properly proceed against the
respondents in Civil Case No. 12251, despite the silence of the compromise
agreement as to the Carloses and Benelda Estate, because there can only be one
action where the contract is entire, and the breach total, and the petitioners must
therein recover all their claims and damages. The Chus could not be permitted to

split up a single cause of action and make that single cause of action the basis of
several suits.
WHEREFORE, we deny the petition for review on certiorari, and affirm the
decision promulgated in CA-G.R. SP No. 72558.
The petitioners shall pay the costs of suit.
SO ORDERED

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 173297

March 6, 2013

STRONGHOLD INSURANCE COMPANY, INC., Petitioner,

vs.
TOMAS CUENCA, MARCELINA CUENCA, MILAGROS CUENCA, BRAMIE T. TAYACTAC, and
MANUEL D. MARANON, JR., Respondents.
DECISION
BERSAMIN, J.:
The personality of a corporation is distinct and separate from the personalities of its stockholders.
Hence, its stockholders are not themselves the real parties in interest to claim and recover
compensation for the damages arising from the wrongful attachment of its assets. Only the
corporation is the real party in interest for that purpose.
The Case
Stronghold Insurance Company, Inc. (Stronghold Insurance), a domestic insurance company, assails
the decision promulgated on January 31, 2006, whereby the Court of Appeals (CA) in CA-G.R. CV
No. 79145 affirmed the judgment rendered on April 28, 2003 by the Regional Trial Court in
Parafiaque City (RTC) holding Stronghold Insurance and respondent Manuel D. Marafion, Jr. jointly
and solidarily liable for damages to respondents Tomas Cuenca, Marcelina Cuenca, Milagros
Cuenca (collectively referred to as Cuencas), and Bramie Tayactac, upon the latters claims against
the surety bond issued by Stronghold Insurance for the benefit of Maraon.
Antecedents
On January 19, 1998, Maraon filed a complaint in the RTC against the Cuencas for the collection of
a sum of money and damages. His complaint, docketed as Civil Case No. 98-023, included an
application for the issuance of a writ of preliminary attachment. On January 26, 1998, the RTC
granted the application for the issuance of the writ of preliminary attachment conditioned upon the
posting of a bond of P1,000,000.00 executed in favor of the Cuencas. Less than a month later,
Maraon amended the complaint to implead Tayactac as a defendant.
On February 11, 1998, Maraon posted SICI Bond No. 68427 JCL (4) No. 02370 in the amount
of P1,000,000.00 issued by Stronghold Insurance. Two days later, the RTC issued the writ of
preliminary attachment. The sheriff served the writ, the summons and a copy of the complaint on the
Cuencas on the same day. The service of the writ, summons and copy of the complaint were made
on Tayactac on February 16, 1998.

Enforcing the writ of preliminary attachment on February 16 and February 17, 1998, the sheriff levied
upon the equipment, supplies, materials and various other personal property belonging to Arc
Cuisine, Inc. that were found in the leased corporate office-cum-commissary or kitchen of the
corporation.7 On February 19, 1998, the sheriff submitted a report on his proceedings, and filed an
ex parte motion seeking the transfer of the levied properties to a safe place. The RTC granted the ex
parte motion on February 23, 1998.
On February 25, 1998, the Cuencas and Tayactac presented in the RTC a Motion to Dismiss and to
Quash Writ of Preliminary Attachment on the grounds that: (1) the action involved intra-corporate
matters that were within the original and exclusive jurisdiction of the Securities and Exchange
Commission (SEC); and (2) there was another action pending in the SEC as well as a criminal
complaint in the Office of the City Prosecutor of Paraaque City.
On March 5, 1998, Maraon opposed the motion.
On August 10, 1998, the RTC denied the Motion to Dismiss and to Quash Writ of Preliminary
Attachment, stating that the action, being one for the recovery of a sum of money and damages, was
within its jurisdiction.
Under date of September 3, 1998, the Cuencas and Tayactac moved for the reconsideration of the
denial of their Motion to Dismiss and to Quash Writ of Preliminary Attachment, but the RTC denied
their motion for reconsideration on September 16, 1998.
Thus, on October 14, 1998, the Cuencas and Tayactac went to the CA on certiorari and prohibition to
challenge the August 10, 1998 and September 16, 1998 orders of the RTC on the basis of being
issued with grave abuse of discretion amounting to lack or excess of jurisdiction (C.A.-G.R. SP No.
49288).
On June 16, 1999, the CA promulgated its assailed decision in C.A.-G.R. SP No. 49288, granting the
petition. It annulled and set aside the challenged orders, and dismissed the amended complaint in
Civil Case No. 98-023 for lack of jurisdiction, to wit:
WHEREFORE, the Orders herein assailed are hereby ANNULLED AND SET ASIDE, and the
judgment is hereby rendered DISMISSING the Amended Complaint in Civil Case No. 98-023 of the
respondent court, for lack of jurisdiction.
SO ORDERED.
On December 27, 1999, the CA remanded to the RTC for hearing and resolution of the Cuencas and
Tayactacs claim for the damages sustained from the enforcement of the writ of preliminary
attachment.
On February 17, 2000 the sheriff reported to the RTC, as follows:

On the scheduled inventory of the properties (February 17, 2000) and to comply with the Resolution
of the Court of Appeals dated December 24, 1999 ordering the delivery of the attached properties to
the defendants, the proceedings thereon being:
1. With the assistance for (sic) the counsel of Cuencas, Atty. Pulumbarit, Atty. Ayo, defendant
Marcelina Cuenca, and two Court Personnel, Robertson Catorce and Danilo Abanto, went to
the warehouse where Mr. Maraon recommended for safekeeping the properties in which he
personally assured its safety, at No. 14, Marian II Street, East Service Road, Paraaque
Metro Manila.
2. That to our surprise, said warehouse is now tenanted by a new lessee and the properties
were all gone and missing.
3. That there are informations (sic) that the properties are seen at Contis Pastry & Bake
Shop owned by Mr. Maraon, located at BF Homes in Paraaque City.
On April 6, 2000, the Cuencas and Tayactac filed a Motion to Require Sheriff to Deliver Attached
Properties and to Set Case for Hearing, praying that: (1) the Branch Sheriff be ordered to
immediately deliver the attached properties to them; (2) Stronghold Insurance be directed to pay
them the damages being sought in accordance with its undertaking under the surety bond
for P1,000,0000.00; (3) Maraon be held personally liable to them considering the insufficiency of
the amount of the surety bond; (4) they be paid the total of P1,721,557.20 as actual damages
representing the value of the lost attached properties because they, being accountable for the
properties, would be turning that amount over to Arc Cuisine, Inc.; and (5) Maraon be made to
pay P200,000.00 as moral damages, P100,000.00 as exemplary damages, and P100,000.00 as
attorneys fees.
Stronghold Insurance filed its answer and opposition on April 13, 2000. In turn, the Cuencas and
Tayactac filed their reply on May 5, 2000.
On May 25, 2000, Maraon filed his own comment/opposition to the Motion to Require Sheriff to
Deliver Attached Properties and to Set Case for Hearing of the Cuencas and Tayactac, arguing that
because the attached properties belonged to Arc Cuisine, Inc. 50% of the stockholding of which he
and his relatives owned, it should follow that 50% of the value of the missing attached properties
constituted liquidating dividends that should remain with and belong to him. Accordingly, he prayed
that he should be required to return only P100,000.00 to the Cuencas and Tayactac.
On June 5, 2000, the RTC commanded Maraon to surrender all the attached properties to the RTC
through the sheriff within 10 days from notice; and directed the Cuencas and Tayactac to submit the
affidavits of their witnesses in support of their claim for damages.
On June 6, 2000, the Cuencas and Tayactac submitted their Manifestation and Compliance.
Ruling of the RTC

After trial, the RTC rendered its judgment on April 28, 2003, holding Maraon and Stronghold
Insurance jointly and solidarily liable for damages to the Cuencas and Tayactac, viz:
WHEREFORE, premises considered, as the defendants were able to preponderantly prove their
entitlement for damages by reason of the unlawful and wrongful issuance of the writ of attachment,
MANUEL D. MARAON, JR., plaintiff and defendant, Stronghold Insurance Company Inc., are found
to be jointly and solidarily liable to pay the defendants the following amount to wit:
(1) PhP1,000,000.00 representing the amount of the bond;
(2) PhP 100,000.00 as moral damages;
(3) PhP 50,000.00 as exemplary damages;
(4) Php 100,000.00 as attorneys fees; and
(5) To pay the cost of suit.
SO ORDERED.
Ruling of the CA
Only Stronghold Insurance appealed to the CA (C.A.-G.R. CV No. 79145), assigning the following
errors to the RTC, to wit:
I.
THE LOWER COURT ERRED IN ORDERING SURETY-APPELLANT TO PAY THE AMOUNT
OF P1,000,000.00 REPRESENTING THE AMOUNT OF THE BOND AND OTHER DAMAGES TO
THE DEFENDANTS.
II.
THE LOWER COURT ERRED IN NOT TAKING INTO ACCOUNT THE INDEMNITY AGREEMENT
(EXH. "2-SURETY") EXECUTED BY MANUEL D. MARAON, JR. IN FAVOR OF STRONGHOLD
WHEREIN HE BOUND HIMSELF TO INDEMNIFY STRONGHOLD OF WHATEVER AMOUNT IT
MAY BE HELD LIABLE ON ACCOUNT OF THE ISSUANCE OF THE ATTACHMENT BOND.
On January 31, 2006, the CA, finding no reversible error, promulgated its decision affirming the
judgment of the RTC.
Stronghold Insurance moved for reconsideration, but the CA denied its motion for reconsideration on
June 22, 2006.
Issues

Hence, this appeal by petition for review on certiorari by Stronghold Insurance, which submits that:
I.
THE COURT OF APPEALS COMMITTED GRAVE REVERSIBLE ERROR AND DECIDED
QUESTIONS OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND APPLICABLE
DECISIONS OF THE HONORABLE COURT CONSIDERING THAT THE COURT OF APPEALS
AFFIRMED THE ERRONEOUS DECISION OF THE TRIAL COURT HOLDING RESPONDENT
MARA[]ON AND PETITIONER STRONGHOLD JOINTLY AND SOLIDARILY LIABLE TO PAY THE
RESPONDENTS CUENCA, et al., FOR PURPORTED DAMAGES BY REASON OF THE ALLEGED
UNLAWFUL AND WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT, DESPITE THE FACT
THAT:
A) RESPONDENT CUENCA et al., ARE NOT THE OWNERS OF THE PROPERTIES
ATTACHED AND THUS, ARE NOT THE PROPER PARTIES TO CLAIM ANY PURPORTED
DAMAGES ARISING THEREFROM.
B) THE PURPORTED DAMAGES BY REASON OF THE ALLEGED UNLAWFUL AND
WRONGFUL ISSUANCE OF THE WRIT OF ATTACHMENT WERE CAUSED BY THE
NEGLIGENCE OF THE BRANCH SHERIFF OF THE TRIAL COURT AND HIS FAILURE TO
COMPLY WITH THE PROVISIONS OF THE RULES OF COURT PERTAINING TO THE
ATTACHMENT OF PROPERTIES.
C) THE TRIAL COURT GRAVELY ERRED WHEN IT HELD PETITIONER STRONGHOLD
TO BE SOLIDARILY LIABLE WITH RESPONDENT MARA[]ON TO RESPONDENTS
CUENCA et al., FOR MORAL DAMAGES, EXEMPLARY DAMAGES, ATTORNEYS FEES
AND COST OF SUIT DESPITE THE FACT THAT THE GUARANTY OF PETITIONER
STRONGHOLD PURSUANT TO ITS SURETY BOND IS LIMITED ONLY TO THE AMOUNT
OF P1,000,000.00.
II
IN ANY EVENT, THE DECISION OF THE COURT APPEALS SHOULD HAVE HELD RESPONDENT
MARA[]ON TO BE LIABLE TO INDEMNIFY PETITIONER STRONGHOLD FOR ALL PAYMENTS,
DAMAGES, COSTS, LOSSES, PENALTIES, CHARGES AND EXPENSES IT SUSTAINED IN
CONNECTION WITH THE INSTANT CASE, PURSUANT TO THE INDEMNITY AGREEMENT
ENTERED INTO BY PETITIONER STRONGHOLD AND RESPONDENT MARA[]ON.
On their part, the Cuencas and Tayactac counter:
A. Having actively participated in the trial and appellate proceedings of this case before the
Regional Trial Court and the Court of Appeals, respectively, petitioner Stronghold is legally
and effectively BARRED by ESTOPPEL from raising for the first time on appeal before this
Honorable Court a defense and/or issue not raised below.

B. Even assuming arguendo without admitting that the principle of estoppel is not applicable
in this instant case, the assailed Decision and Resolution find firm basis in law considering
that the writ of attachment issued and enforced against herein respondents has been
declared ILLEGAL, NULL AND VOID for having been issued beyond the jurisdiction of the
trial court.
C. There having been a factual and legal finding of the illegality of the issuance and
consequently, the enforcement of the writ of attachment, Maranon and his surety Stronghold,
consistent with the facts and the law, including the contract of suretyship they entered into,
are JOINTLY AND SEVERALLY liable for the damages sustained by herein respondents by
reason thereof.
D. Contrary to the allegations of Stronghold, its liability as surety under the attachment bond
without which the writ of attachment shall not issue and be enforced against herein
respondent if prescribed by law. In like manner, the obligations and liability on the attachment
bond are also prescribed by law and not left to the discretion or will of the contracting parties
to the prejudice of the persons against whom the writ was issued.
E. Contrary to the allegations of Stronghold, its liability for the damages sustained by herein
respondents is both a statutory and contractual obligation and for which, it cannot escape
accountability and liability in favor of the person against whom the illegal writ of attachment
was issued and enforced. To allow Stronghold to delay, excuse or exempt itself from liability
is unconstitutional, unlawful, and contrary to the basic tenets of equity and fair play.
F. While the liability of Stronghold as surety indeed covers the principal amount
of P1,000,000.00, nothing in the law and the contract between the parties limit or exempt
Stronghold from liability for other damages. Including costs of suit and interest.26
In his own comment,27
Maraon insisted that he could not be personally held liable under the attachment bond because the
judgment of the RTC was rendered without jurisdiction over the subject matter of the action that
involved an intra-corporate controversy among the stockholders of Arc Cuisine, Inc.; and that the
jurisdiction properly pertained to the SEC, where another action was already pending between the
parties.
Ruling
Although the question of whether the Cuencas and Tayactac could themselves recover damages
arising from the wrongful attachment of the assets of Arc Cuisine, Inc. by claiming against the bond
issued by Stronghold Insurance was not raised in the CA, we do not brush it aside because the
actual legal interest of the parties in the subject of the litigation is a matter of substance that has
jurisdictional impact, even on appeal before this Court.
The petition for review is meritorious.

There is no question that a litigation should be disallowed immediately if it involves a person without
any interest at stake, for it would be futile and meaningless to still proceed and render a judgment
where there is no actual controversy to be thereby determined. Courts of law in our judicial system
are not allowed to delve on academic issues or to render advisory opinions. They only resolve actual
controversies, for that is what they are authorized to do by the Fundamental Law itself, which
forthrightly ordains that the judicial power is wielded only to settle actual controversies involving
rights that are legally demandable and enforceable.
To ensure the observance of the mandate of the Constitution, Section 2, Rule 3 of the Rules of Court
requires that unless otherwise authorized by law or the Rules of Court every action must be
prosecuted or defended in the name of the real party in interest. Under the same rule, a real party in
interest is one who stands to be benefited or injured by the judgment in the suit, or one who is
entitled to the avails of the suit. Accordingly, a person , to be a real party in interest in whose name
an action must be prosecuted, should appear to be the present real owner of the right sought to be
enforced, that is, his interest must be a present substantial interest, not a mere expectancy, or a
future, contingent, subordinate, or consequential interest.
Where the plaintiff is not the real party in interest, the ground for the motion to dismiss is lack of
cause of action. controversy. Truly, a person having no material interest to protect cannot invoke the
jurisdiction of the court as the plaintiff in an action. Nor does a court acquire jurisdiction over a case
where the real party in interest is not present or impleaded.
The purposes of the requirement for the real party in interest prosecuting or defending an action at
law are: (a) to prevent the prosecution of actions by persons without any right, title or interest in the
case; (b) to require that the actual party entitled to legal relief be the one to prosecute the action; (c)
to avoid a multiplicity of suits; and (d) to discourage litigation and keep it within certain bounds,
pursuant to sound public policy. Indeed, considering that all civil actions must be based on a cause
of action, defined as the act or omission by which a party violates the right of another, the former as
the defendant must be allowed to insist upon being opposed by the real party in interest so that he is
protected from further suits regarding the same claim. Under this rationale, the requirement benefits
the defendant because "the defendant can insist upon a plaintiff who will afford him a setup providing
good res judicata protection if the struggle is carried through on the merits to the end."
The rule on real party in interest ensures, therefore, that the party with the legal right to sue brings
the action, and this interest ends when a judgment involving the nominal plaintiff will protect the
defendant from a subsequent identical action. Such a rule is intended to bring before the court the
party rightfully interested in the litigation so that only real controversies will be presented and the
judgment, when entered, will be binding and conclusive and the defendant will be saved from further
harassment and vexation at the hands of other claimants to the same demand.
But the real party in interest need not be the person who ultimately will benefit from the successful
prosecution of the action. Hence, to aid itself in the proper identification of the real party in interest,
the court should first ascertain the nature of the substantive right being asserted, and then must
determine whether the party asserting that right is recognized as the real party in interest under the
rules of procedure. Truly, that a party stands to gain from the litigation is not necessarily controlling.

It is fundamental that the courts are established in order to afford reliefs to persons whose rights or
property interests have been invaded or violated, or are threatened with invasion by others conduct
or acts, and to give relief only at the instance of such persons. The jurisdiction of a court of law or
equity may not be invoked by or for an individual whose rights have not been breached.
The remedial right or the remedial obligation is the persons interest in the controversy. The right of
the plaintiff or other claimant is alleged to be violated by the defendant, who has the correlative
obligation to respect the right of the former. Otherwise put, without the right, a person may not
become a party plaintiff; without the obligation, a person may not be sued as a party defendant;
without the violation, there may not be a suit. In such a situation, it is legally impossible for any
person or entity to be both plaintiff and defendant in the same action, thereby ensuring that the
controversy is actual and exists between adversary parties. Where there are no adversary parties
before it, the court would be without jurisdiction to render a judgment.
There is no dispute that the properties subject to the levy on attachment belonged to Arc Cuisine,
Inc. alone, not to the Cuencas and Tayactac in their own right. They were only stockholders of Arc
Cuisine, Inc., which had a personality distinct and separate from that of any or all of them. The
damages occasioned to the properties by the levy on attachment, wrongful or not, prejudiced Arc
Cuisine, Inc., not them. As such, only Arc Cuisine, Inc. had the right under the substantive law to
claim and recover such damages. This right could not also be asserted by the Cuencas and
Tayactac unless they did so in the name of the corporation itself. But that did not happen herein,
because Arc Cuisine, Inc. was not even joined in the action either as an original party or as an
intervenor.
The Cuencas and Tayactac were clearly not vested with any direct interest in the personal properties
coming under the levy on attachment by virtue alone of their being stockholders in Arc Cuisine, Inc.
Their stockholdings represented only their proportionate or aliquot interest in the properties of the
corporation, but did not vest in them any legal right or title to any specific properties of the
corporation. Without doubt, Arc Cuisine, Inc. remained the owner as a distinct legal person.
Given the separate and distinct legal personality of Arc Cuisine, Inc., the Cuencas and Tayactac
lacked the legal personality to claim the damages sustained from the levy of the formers properties.
According to Asset Privatization Trust v. Court of Appeals, even when the foreclosure on the assets
of the corporation was wrongful and done in bad faith the stockholders had no standing to recover
for themselves moral damages; otherwise, they would be appropriating and distributing part of the
corporations assets prior to the dissolution of the corporation and the liquidation of its debts and
liabilities. Moreover, in Evangelista v. Santos, Court, resolving whether or not the minority
stockholders had the right to bring an action for damages against the principal officers of the
corporation for their own benefit, said:
As to the second question, the complaint shows that the action is for damages resulting from
mismanagement of the affairs and assets of the corporation by its principal officer, it being alleged
that defendants maladministration has brought about the ruin of the corporation and the consequent
loss of value of its stocks. The injury complained of is thus primarily to the corporation, so that the
suit for the damages claimed should be by the corporation rather than by the stockholders (3
Fletcher, Cyclopedia of Corporation pp. 977-980). The stockholders may not directly claim those

damages for themselves for that would result in the appropriation by, and the distribution among
them of part of the corporate assets before the dissolution of the corporation and the liquidation of its
debts and liabilities, something which cannot be legally done in view of section 16 of the Corporation
Law, which provides:
No shall corporation shall make or declare any stock or bond dividend or any dividend whatsoever
except from the surplus profits arising from its business, or divide or distribute its capital stock or
property other than actual profits among its members or stockholders until after the payment of its
debts and the termination of its existence by limitation or lawful dissolution.
xxxx
In the present case, the plaintiff stockholders have brought the action not for the benefit of the
corporation but for their own benefit, since they ask that the defendant make good the losses
occasioned by his mismanagement and pay to them the value of their respective participation in the
corporate assets on the basis of their respective holdings. Clearly, this cannot be done until all
corporate debts, if there be any, are paid and the existence of the corporation terminated by the
limitation of its charter or by lawful dissolution in view of the provisions of section 16 of the
Corporation Law. (Emphasis ours)
It results that plaintiffs complaint shows no cause of action in their favor so that the lower court did
not err in dismissing the complaint on that ground.
While plaintiffs ask for remedy to which they are not entitled unless the requirement of section 16 of
the Corporation Law be first complied with, we note that the action stated in their complaint is
susceptible of being converted into a derivative suit for the benefit of the corporation by a mere
change in the prayer. Such amendment, however, is not possible now, since the complaint has been
filed in the wrong court, so that the same has to be dismissed.
That Maraon knew that Arc Cuisine, Inc. owned the properties levied on attachment but he still
excluded Arc Cuisine, Inc. from his complaint was of no consequence now. The Cuencas and
Tayactac still had no right of action even if the affected properties were then under their custody at
the time of the attachment, considering that their custody was only incidental to the operation of the
corporation.
It is true, too, that the Cuencas and Tayactac could bring in behalf of Arc Cuisine, Inc. a proper action
to recover damages resulting from the attachment. Such action would be one directly brought in the
name of the corporation. Yet, that was not true here, for, instead, the Cuencas and Tayactac
presented the claim in their own names.
In view of the outcome just reached, the Court deems it unnecessary to give any extensive
consideration to the remaining issues.
WHEREFORE, the Court GRANTS the petition for review; and REVERSES and SETS ASIDE the
decision of the Court of Appeals in CA-G.R. CV No. 79145 promulgated on January 31,2006.

No pronouncements on costs of suit.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 186993

August 22, 2012

THEODORE and NANCY ANG, represented by ELDRIGE MARVIN B. ACERON, Petitioners,

vs.
SPOUSES ALAN and EM ANG, Respondents.
VELASCO, JR.,*
LEONARDO-DE CASTRO, **
DECISION
REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
annul and set aside the Decision dated August 28, 2008 and the Resolution dated February 20,
2009 rendered by the Court of Appeals (CA) in CA-G.R. SP No. 101159. The assailed decision
annulled and set aside the Orders dated April 12, 2007 and August 27, 2007 issued by the Regional
Trial Court (RTC) of Quezon City, Branch 81 in Civil Case No. Q-06-58834.
The Antecedent Facts
On September 2, 1992, spouses Alan and Em Ang (respondents) obtained a loan in the amount of
Three Hundred Thousand U.S. Dollars (US$300,000.00) from Theodore and Nancy Ang
(petitioners). On even date, the respondents executed a promissory note in favor of the petitioners
wherein they promised to pay the latter the said amount, with interest at the rate of ten percent
(10%) per annum, upon demand. However, despite repeated demands, the respondents failed to
pay the petitioners.
Thus, on August 28, 2006, the petitioners sent the respondents a demand letter asking them to pay
their outstanding debt which, at that time, already amounted to Seven Hundred Nineteen Thousand,
Six Hundred Seventy-One U.S. Dollars and Twenty-Three Cents (US$719,671.23), inclusive of the
ten percent (10%) annual interest that had accumulated over the years. Notwithstanding the receipt
of the said demand letter, the respondents still failed to settle their loan obligation.
On August 6, 2006, the petitioners, who were then residing in Los Angeles, California, United States
of America (USA), executed their respective Special Powers of Attorney in favor of Attorney Eldrige
Marvin B. Aceron (Atty. Aceron) for the purpose of filing an action in court against the respondents.
On September 15, 2006, Atty. Aceron, in behalf of the petitioners, filed a Complaint for collection of
sum of money with the RTC of Quezon City against the respondents.

On November 21, 2006, the respondents moved for the dismissal of the complaint filed by the
petitioners on the grounds of improper venue and prescription. Insisting that the venue of the
petitioners action was improperly laid, the respondents asserted that the complaint against them
may only be filed in the court of the place where either they or the petitioners reside. They averred
that they reside in Bacolod City while the petitioners reside in Los Angeles, California, USA. Thus,
the respondents maintain, the filing of the complaint against them in the RTC of Quezon City was
improper.
The RTC Orders
On April 12, 2007, the RTC of Quezon City issued an Order which, inter alia, denied the
respondents motion to dismiss. In ruling against the respondents claim of improper venue, the court
explained that:
Attached to the complaint is the Special Power of Attorney x x x which clearly states that plaintiff
Nancy Ang constituted Atty. Eldrige Marvin Aceron as her duly appointed attorney-in-fact to
prosecute her claim against herein defendants. Considering that the address given by Atty. Aceron is
in Quezon City, hence, being the plaintiff, venue of the action may lie where he resides as provided
in Section 2, Rule 4 of the 1997 Rules of Civil Procedure.
The respondents sought reconsideration of the RTC Order dated April 12, 2007, asserting that there
is no law which allows the filing of a complaint in the court of the place where the representative,
who was appointed as such by the plaintiffs through a Special Power of Attorney, resides.
The respondents motion for reconsideration was denied by the RTC of Quezon City in its
Order dated August 27, 2007.
The respondents then filed with the CA a petition for certiorarialleging in the main that, pursuant to
Section 2, Rule 4 of the Rules of Court, the petitioners complaint may only be filed in the court of the
place where they or the petitioners reside. Considering that the petitioners reside in Los Angeles,
California, USA, the respondents assert that the complaint below may only be filed in the RTC of
Bacolod City, the court of the place where they reside in the Philippines.
The respondents further claimed that, the petitioners grant of Special Power of Attorney in favor of
Atty. Aceron notwithstanding, the said complaint may not be filed in the court of the place where Atty.
Aceron resides, i.e., RTC of Quezon City. They explained that Atty. Aceron, being merely a
representative of the petitioners, is not the real party in interest in the case below; accordingly, his
residence should not be considered in determining the proper venue of the said complaint.
The CA Decision
On August 28, 2008, the CA rendered the herein Decision, which annulled and set aside the Orders
dated April 12, 2007 and August 27, 2007 of the RTC of Quezon City and, accordingly, directed the
dismissal of the complaint filed by the petitioners. The CA held that the complaint below should have
been filed in Bacolod City and not in Quezon City. Thus:

As maybe clearly gleaned from the foregoing, the place of residence of the plaintiffs attorney-in-fact
is of no moment when it comes to ascertaining the venue of cases filed in behalf of the principal
since what should be considered is the residence of the real parties in interest, i.e., the plaintiff or the
defendant, as the case may be. Residence is the permanent home the place to which, whenever
absent for business or pleasure, one intends to return. Residence is vital when dealing with venue.
Plaintiffs, herein private respondents, being residents of Los Angeles, California, U.S.A., which is
beyond the territorial jurisdiction of Philippine courts, the case should have been filed in Bacolod City
where the defendants, herein petitioners, reside. Since the case was filed in Quezon City, where the
representative of the plaintiffs resides, contrary to Sec. 2 of Rule 4 of the 1997 Rules of Court, the
trial court should have dismissed the case for improper venue.
The petitioners sought a reconsideration of the Decision dated August 28, 2008, but it was denied by
the CA in its Resolution dated February 20, 2009.
Hence, the instant petition.
Issue
In the instant petition, the petitioners submit this lone issue for this Courts resolution:
WHETHER OR NOT THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR OF LAW
WHEN IT RULED THAT THE COMPLAINT MUST BE DISMISSED ON THE GROUND THAT
VENUE WAS NOT PROPERLY LAID.
The Courts Ruling
The petition is denied.
Contrary to the CAs disposition, the petitioners maintain that their complaint for collection of sum of
money against the respondents may be filed in the RTC of Quezon City. Invoking Section 3, Rule 3
of the Rules of Court, they insist that Atty. Aceron, being their attorney-in-fact, is deemed a real party
in interest in the case below and can prosecute the same before the RTC. Such being the case, the
petitioners assert, the said complaint for collection of sum of money may be filed in the court of the
place where Atty. Aceron resides, which is the RTC of Quezon City.
On the other hand, the respondents in their Comment assert that the petitioners are proscribed from
filing their complaint in the RTC of Quezon City. They assert that the residence of Atty. Aceron, being
merely a representative, is immaterial to the determination of the venue of the petitioners complaint.
The petitioners complaint should
have been filed in the RTC of
Bacolod City, the court of the place
where the respondents reside, and
not in RTC of Quezon City.

It is a legal truism that the rules on the venue of personal actions are fixed for the convenience of the
plaintiffs and their witnesses. Equally settled, however, is the principle that choosing the venue of an
action is not left to a plaintiffs caprice; the matter is regulated by the Rules of Court.
The petitioners complaint for collection of sum of money against the respondents is a personal
action as it primarily seeks the enforcement of a contract. The Rules give the plaintiff the option of
choosing where to file his complaint. He can file it in the place (1) where he himself or any of them
resides, or (2) where the defendant or any of the defendants resides or may be found. The plaintiff or
the defendant must be residents of the place where the action has been instituted at the time the
action is commenced.
However, if the plaintiff does not reside in the Philippines, the complaint in such case may only be
filed in the court of the place where the defendant resides. In Cohen and Cohen v. Benguet
Commercial Co., Ltd., this Court held that there can be no election as to the venue of the filing of a
complaint when the plaintiff has no residence in the Philippines. In such case, the complaint may
only be filed in the court of the place where the defendant resides. Thus:
Section 377 provides that actions of this character "may be brought in any province where the
defendant or any necessary party defendant may reside or be found, or in any province where the
plaintiff or one of the plaintiffs resides, at the election of the plaintiff." The plaintiff in this action has
no residence in the Philippine Islands. Only one of the parties to the action resides here. There can
be, therefore, no election by plaintiff as to the place of trial. It must be in the province where the
defendant resides. x x x. (Emphasis ours)
Here, the petitioners are residents of Los Angeles, California, USA while the respondents reside in
Bacolod City. Applying the foregoing principles, the petitioners complaint against the respondents
may only be filed in the RTC of Bacolod City the court of the place where the respondents reside.
The petitioners, being residents of Los Angeles, California, USA, are not given the choice as to the
venue of the filing of their complaint.
Thus, the CA did not commit any reversible error when it annulled and set aside the orders of the
RTC of Quezon City and consequently dismissed the petitioners complaint against the respondents
on the ground of improper venue.
In this regard, it bears stressing that the situs for bringing real and personal civil actions is fixed by
the Rules of Court to attain the greatest convenience possible to the litigants and their witnesses by
affording them maximum accessibility to the courts. And even as the regulation of venue is primarily
for the convenience of the plaintiff, as attested by the fact that the choice of venue is given to him, it
should not be construed to unduly deprive a resident defendant of the rights conferred upon him by
the Rules of Court.
Atty. Aceron is not a real party in
interest in the case below; thus, his
residence is immaterial to the venue
of the filing of the complaint.

Contrary to the petitioners claim, Atty. Aceron, despite being the attorney-in-fact of the petitioners, is
not a real party in interest in the case below. Section 2, Rule 3 of the Rules of Court reads:
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. (Emphasis ours)
Interest within the meaning of the Rules of Court means material interest or an interest in issue to be
affected by the decree or judgment of the case, as distinguished from mere curiosity about the
question involved. A real party in interest is the party who, by the substantive law, has the right
sought to be enforced.
Applying the foregoing rule, it is clear that Atty. Aceron is not a real party in interest in the case below
as he does not stand to be benefited or injured by any judgment therein. He was merely appointed
by the petitioners as their attorney-in-fact for the limited purpose of filing and prosecuting the
complaint against the respondents. Such appointment, however, does not mean that he is
subrogated into the rights of petitioners and ought to be considered as a real party in interest.
Being merely a representative of the petitioners, Atty. Aceron in his personal capacity does not have
the right to file the complaint below against the respondents. He may only do so, as what he did, in
behalf of the petitioners the real parties in interest. To stress, the right sought to be enforced in the
case below belongs to the petitioners and not to Atty. Aceron. Clearly, an attorney-in-fact is not a real
party in interest.
The petitioners reliance on Section 3, Rule 3 of the Rules of Court to support their conclusion that
Atty. Aceron is likewise a party in interest in the case below is misplaced. Section 3, Rule 3 of the
Rules of Court provides that:
Sec. 3. Representatives as parties. Where the action is allowed to be prosecuted and defended by
a representative or someone acting in a fiduciary capacity, the beneficiary shall be included in the
title of the case and shall be deemed to be the real property in interest. A representative may be a
trustee of an expert trust, a guardian, an executor or administrator, or a party authorized by law or
these Rules. An agent acting in his own name and for the benefit of an undisclosed principal may
sue or be sued without joining the principal except when the contract involves things belonging to the
principal. (Emphasis ours)
Nowhere in the rule cited above is it stated or, at the very least implied, that the representative is
likewise deemed as the real party in interest. The said rule simply states that, in actions which are
allowed to be prosecuted or defended by a representative, the beneficiary shall be deemed the real
party in interest and, hence, should be included in the title of the case.
Indeed, to construe the express requirement of residence under the rules on venue as applicable to
the attorney-in-fact of the plaintiff would abrogate the meaning of a "real party in interest", as defined
in Section 2 of Rule 3 of the 1997 Rules of Court vis--vis Section 3 of the same Rule.

On this score, the CA aptly observed that:

As may be unerringly gleaned from the foregoing provisions, there is nothing therein that expressly
allows, much less implies that an action may be filed in the city or municipality where either a
representative or an attorney-in-fact of a real party in interest resides. Sec. 3 of Rule 3 merely
provides that the name or names of the person or persons being represented must be included in
the title of the case and such person or persons shall be considered the real party in interest. In
other words, the principal remains the true party to the case and not the representative. Under the
plain meaning rule, or verba legis, if a statute is clear, plain and free from ambiguity, it must be given
its literal meaning and applied without interpretation. xxx (Citation omitted)
At this juncture, it bears stressing that the rules on venue, like the other procedural rules, are
designed to insure a just and orderly administration of justice or the impartial and even-handed
determination of every action and proceeding. Obviously, this objective will not be attained if the
plaintiff is given unrestricted freedom to choose the court where he may file his complaint or petition.
The choice of venue should not be left to the plaintiff's whim or caprice. He may be impelled by some
ulterior motivation in choosing to file a case in a particular court even if not allowed by the rules on
venue.
WHEREFORE, in consideration of the foregoing disquisitions, the petition is DENIED. The Decision
dated August 28, 2008 and Resolution dated February 20, 2009 rendered by the Court of Appeals in
CA-G.R. SP No. 101159 are AFFIRMED.
SO ORDERED.