Civil Procedure - Judge Elma Wagan

ASSIGNMENT CIVIL PROCEDURE SECTIONS 3B, D, F

General Principles 1. Jurisdiction
2. Jurisdiction of Courts - B.P. 129, as amended by R.A. 7691 - SC Administrative
Matter No. 09-94 - SC Circular No. 21-99 - SC Circular No. 7-88
I. CASES on Jurisdiction (First Set)
1. Navales v. Abaya 441 SCRA 393
2. Ceroferr Realty Corp. vs. CA G.R. 139539 2-5-02
3. Lee vs. Presiding Judge G.R. 68789 11-10-86
4. Ignacio vs. CFI L-27897 10-29-71
5. Marciana Serdoncillo v. Benolirao G.R. 118328 10-8-98
6. Tinitigan v. Tinitigan 100 SCRA 619
7. Amigo v. C.A. 253 SCRA 382
8. Tijam v. Sibonghanay L-21450 4-15-68
9. Calimlim v. Ramirez 204 Phil 25 1982
10. Francel Realty Corp. v. Sycip G.R. 154684 9-8-05
11. Venancio Figuerroa v. People G.R. 147406 7-17-08
12. Manchester v. C.A. G.R. L-75919 5-7-87
13. Sun Insurance v. Asuncion G.R. 79937-38 2-13-89
14. Tacay v. RTC G.R. 88075-77 12-20-89
15. Ayala Corp. v. Madayag G.R. 88421 1-30-90
16. Phil First Insurance Co. v Pyramid Logistics G.R. 165147 7-9-08
17. Lapitan v. Scandia 24 SCRA 479
18. De Leon v. C.A. G.R. No. 104796 3-6-98
II. CAUSE OF ACTION
19. Pioneer v. Guiandez G.R. 156848 10-11-07

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 156848

October 11, 2007

PIONEER INTERNATIONAL, LTD., petitioner,

vs.
HON. TEOFILO GUADIZ, JR., in his capacity as Presiding Judge of
Regional Trial Court, Branch 147, Makati City, and ANTONIO D.
TODARO, respondents.

DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari 1 of the Decision2 dated 27
September 2001 and of the Resolution3dated 14 January 2003 of the Court
of Appeals (appellate court) in CA-G.R. SP No. 54062. The Decision
affirmed the Orders4 dated 4 January 19995 and 3 June 19996 of Branch 147
of the Regional Trial Court of Makati City (trial court) in Civil Case No. 98124. The trial court denied the motion to dismiss filed by Pioneer
International, Ltd. (PIL)7 in its special appearance.
The Facts
On 16 January 1998, Antonio D. Todaro (Todaro) filed a complaint for sum
of money and damages with preliminary attachment against PIL, Pioneer
Concrete Philippines, Inc. (PCPI), Pioneer Philippines Holdings, Inc.
(PPHI), John G. McDonald (McDonald), and Philip J. Klepzig (Klepzig).
PIL and its co-defendants were served copies of the summons and of the
complaint at PPHI and PCPIs office in Alabang, Muntinlupa, through
Cecille L. De Leon (De Leon), who was Klepzigs Executive Assistant.
Todaro alleged that PIL is a corporation duly organized under Australian
laws, while PCPI and PPHI are corporations duly organized under
Philippine laws. PIL is engaged in the ready-mix and concrete aggregates
business and has established a presence worldwide. PIL established PPHI as
the holding company of the stocks of its operating company in the
Philippines, PCPI. McDonald is the Chief Executive Officer of PILs Hong
Kong office while Klepzig is the President and Managing Director of PPHI
and PCPI. For his part, Todaro further alleged that he was the managing
director of Betonval Readyconcrete, Inc. (Betonval) from June 1975 up to
his resignation in February 1996.
Before Todaro filed his complaint, there were several meetings and
exchanges of letters between Todaro and the officers of Pioneer Concrete
(Hong Kong) Limited, Pioneer Concrete Group HK, PPHI, and PIL.
According to Todaro, PIL contacted him in May 1996 and asked if he could
join it in establishing a pre-mixed concrete plant and in overseeing its
operations in the Philippines. Todaro confirmed his availability and
expressed interest in joining PIL. Todaro met with several of PILs
representatives and even gave PIL the names of three of his subordinates in
Betonval whom he would like to join him in PIL.

Todaro attached nine letters, marked as Annexes "A" to "I," to his complaint.
Annex "A"8 shows that on 15 July 1996, Todaro, under the letterhead of Ital
Tech Distributors, Inc., sent a letter to Max Lindsay (Lindsay) of Pioneer
Concrete (Hong Kong) Limited. Todaro wrote that "[m]y aim is to run again
a ready-mix concrete company in the Philippines and not to be a part-time
consultant. Otherwise, I could have charged your company with a much
higher fee."
Annex "B"9 shows that on 4 September 1996, Lindsay, under the letterhead
of Pioneer Concrete (Hong Kong) Limited, responded by fax to Todaros
faxed letter to McDonald and proposed that Todaro "join Pioneer on a
retainer basis for 2 to 3 months on the understanding that [Todaro] would
become a permanent employee if as we expect, our entry proceeds." The
faxed letter to McDonald referred to by Lindsay is not found in the rolloand
was not attached to Todaros complaint.
Annex "C"10 shows that on the same date as that of Annex "B," Todaro,
under the letterhead of Ital Tech Distributors, Inc., faxed another letter to
Lindsay of Pioneer Concrete (Hong Kong) Limited. Todaro asked for a
formal letter addressed to him about the proposed retainer. Todaro requested
that the letter contain a statement on his remuneration package and on his
permanent employment "with PIONEER once it has established itself on a
permanent basis in the Philippines."
Annex "D"11 shows that Todaro, under the letterhead of Ital Tech
Distributors, Inc., sent a letter to McDonald of PIL. Todaro confirmed the
following to McDonald:
1. That I am accepting the proposal of PIONEER INTL. as a
consultant for three (3) months, starting October 1, 1996, with a
retainer fee of U.S. $15,000.00 per month;
2. That after three (3) months consultancy, I should be employed by
PIONEER INTL., on a permanent basis, as its Managing Director or
CEO in the Philippines. Remuneration package will be mutually
agreed upon by PIONEER and the undersigned;
3. That Gino Martinel and the Sales Manager Jun Ong, will be hired
as well, on a permanent basis, by PIONEER as soon as the company
is established. Salary, likewise, will be accepted by both PIONEER
and the respective parties.
Annex "E"12 is a faxed letter dated 18 November 1996 of McDonald, under
the letterhead of Pioneer Concrete Group HK, to Todaro of Ital Tech
Distributors, Inc. The first three paragraphs of McDonalds letter read:

Further to our recent meeting in Hong Kong, I am now able to

confirm my offer to engage you as a consultant to Pioneer
International Ltd. Should Pioneer proceed with an investment in the
Philippines, then Pioneer would offer you a position to manage the
premixed concrete operations.
Pioneer will probably be in a position to make a decision on
proceeding with an investment by mid January 97.
The basis for your consultancy would be:

Monthly fee USD 15,000 per month billed on monthly

basis and payable 15 days from billing date.
Additional pre-approved expenses to be reimbursed.
Driver and secretarial support-basis for reimbursement
of this to be agreed.
Arrangement to commence from 1st November 96,
reflecting your contributions so far and to continue until
Pioneer makes a decision.

Annex "F"13 shows Todaros faxed reply, under the letterhead of Ital Tech
Distributors, Inc., to McDonald of Pioneer Concrete Group HK dated 19
November 1996. Todaro confirmed McDonalds package concerning the
consultancy and reiterated his desire to be the manager of Pioneers
Philippine business venture.
Annex "G"14 shows Todaros faxed reply, under the letterhead of Ital Tech
Distributors, Inc., to McDonald of PIL dated 8 April 1997. Todaro informed
McDonald that he was willing to extend assistance to the Pioneer
representative from Queensland. The tenor of the letter revealed that Todaro
had not yet occupied his expected position.
Annex "H"15 shows Klepzigs letter, under the letterhead of PPHI, to Todaro
dated 18 September 1997. Klepzigs message reads:
It has not proven possible for this company to meet with your
expectations regarding the conditions of your providing Pioneer with
consultancy services. This, and your refusal to consider my terms of
offer of permanent employment, leave me no alternative but to
withdraw these offers of employment with this company.
As you provided services under your previous agreement with our
Pioneer Hong Kong office during the month of August, I will see that
they pay you at the previous rates until the end of August. They have
authorized me on behalf of Pioneer International Ltd. to formally

advise you that the agreement will cease from August 31 st as per our
previous discussions.
Annex "I"16 shows the letter dated 20 October 1997 of K.M. Folwell
(Folwell), PILs Executive General Manager of Australia and Asia, to
Todaro. Folwell confirmed the contents of Klepzigs 18 September 1997
letter. Folwells message reads:
Thank you for your letter to Dr. Schubert dated 29th September 1997
regarding the alleged breach of contract with you. Dr. Schubert has
asked me to investigate this matter.
I have discussed and examined the material regarding your
association with Pioneer over the period from mid 1996 through to
September 1997.
Clearly your consultancy services to Pioneer Hong Kong are well
documented and have been appropriately rewarded. However, in
regard to your request and expectation to be given permanent
employment with Pioneer Philippines Holdings, Inc. I am
informed that negotiations to reach agreement on appropriate terms
and conditions have not been successful.
The employment conditions you specified in your letter to John
McDonald dated 11th September are well beyond our expectations.
Mr. Todaro, I regret that we do not wish to pursue our association
with you any further. Mr. Klepzig was authorized to terminate this
association and the letter he sent to you dated 18 th September has my
support.
Thank you for your involvement with Pioneer. I wish you all the best
for the future. (Emphasis added)
PIL filed, by special appearance, a motion to dismiss Todaros complaint.
PILs co-defendants, PCPI, PPHI, and Klepzig, filed a separate motion to
dismiss.17 PIL asserted that the trial court has no jurisdiction over PIL
because PIL is a foreign corporation not doing business in the Philippines.
PIL also questioned the service of summons on it. Assuming arguendo that
Klepzig is PILs agent in the Philippines, it was not Klepzig but De Leon
who received the summons for PIL. PIL further stated that the National
Labor Relations Commission (NLRC), and not the trial court, has
jurisdiction over the subject matter of the action. It claimed that assuming
that the trial court has jurisdiction over the subject matter of the action, the
complaint should be dismissed on the ground of forum non-

conveniens. Finally, PIL maintained that the complaint does not state a cause
of action because there was no perfected contract, and no personal judgment
could be rendered by the trial court against PIL because PIL is a foreign
corporation not doing business in the Philippines and there was improper
service of summons on PIL.
Todaro filed a Consolidated Opposition dated 26 August 1998 to refute PILs
assertions. PIL filed, still by special appearance, a Reply on 2 October 1998.
The Ruling of the Trial Court
On 4 January 1999, the trial court issued an order 18 which ruled in favor of
Todaro. The trial court denied the motions to dismiss filed by PIL, PCPI,
PPHI, and Klepzig.
The trial court stated that the merits of a motion to dismiss a complaint for
lack of cause of action are tested on the strength of the allegation of facts in
the complaint. The trial court found that the allegations in the complaint
sufficiently establish a cause of action. The trial court declared that Todaros
cause of action is based on an alleged breach of a contractual obligation and
an alleged violation of Articles 19 and 21 of the Civil Code. Therefore, the
cause of action does not lie within the jurisdiction of the NLRC but with the
trial court.
The trial court also asserted its jurisdiction over PIL, holding that PIL did
business in the Philippines when it entered into a contract with Todaro.
Although PIL questions the service of summons on Klepzig, whom PIL
claims is not its agent, the trial court ruled that PIL failed to adduce evidence
to prove its contention. Finally, on the issue of forum non-conveniens, the
trial court found that it is more convenient to hear and decide the case in the
Philippines because Todaro resides in the Philippines and the contract
allegedly breached involves employment in the Philippines.
PIL filed an urgent omnibus motion for the reconsideration of the trial
courts 4 January 1999 order and for the deferment of filing its answer.
PCPI, PPHI, and Klepzig likewise filed an urgent omnibus motion. Todaro
filed a consolidated opposition, to which PIL, PCPI, PPHI, and Klepzig filed
a joint reply. The trial court issued an order 19 on 3 June 1999 denying the
motions of PIL, PCPI, PPHI, and Klepzig. The trial court gave PIL, PCPI,
PPHI, and Klepzig 15 days within which to file their respective answers.
PIL did not file an answer before the trial court and instead filed a petition
for certiorari before the appellate court.
The Ruling of the Appellate Court

The appellate court denied PILs petition and affirmed the trial courts
ruling in toto. The dispositive portion of the appellate courts decision reads:
WHEREFORE, premises considered, the present petition for
certiorari is hereby DENIED DUE COURSE and accordingly
DISMISSED. The assailed Orders dated January 4, 1999 and June 3,
1999 of the Regional Trial Court of Makati City, Branch 147, in Civil
Case No, 98-124 are hereby AFFIRMED in toto.
SO ORDERED.20
On 14 January 2003, the appellate court dismissed 21 PILs motion for
reconsideration for lack of merit. The appellate court stated that PILs
motion raised no new substantial or weighty arguments that could impel the
appellate court from departing or overturning its previous decision. PIL then
filed a petition for review on certiorari before this Court.
The Issues
PIL raised the following issues before this Court:
A. [The trial court] did not and cannot acquire jurisdiction over the
person of [PIL] considering that:
A.1. [PIL] is a foreign corporation "not doing business" in the
Philippines.
A.2. Moreover, the complaint does not contain appropriate
allegations of ultimate facts showing that [PIL] is doing or
transacting business in the Philippines.
A.3. Assuming arguendo that jurisdiction may be acquired over
the person of [PIL], [the trial court] still failed to acquire
jurisdiction since summons was improperly served on [PIL].
B. [Todaro] does not have a cause of action and the complaint fails to
state a cause of action. Jurisprudence is settled in that in resolving a
motion to dismiss, a court can consider all the pleadings filed in the
case, including annexes, motions and all evidence on record.
C. [The trial court] did not and cannot acquire jurisdiction over the
subject matter of the complaint since the allegations contained therein
indubitably show that [Todaro] bases his claims on an alleged breach
of an employment contract. Thus, exclusive jurisdiction is vested with
the [NLRC].

D. Pursuant to the principle of forum non-conveniens, [the trial court]

committed grave abuse of discretion when it took cognizance of the
case.22
The Ruling of the Court
The petition has partial merit. We affirm with modification the rulings of the
trial and appellate courts. Apart from the issue on service of summons, the
rulings of the trial and appellate courts on the issues raised by PIL are
correct.
Cause of Action
Section 2, Rule 2 of the 1997 Rules of Civil Procedure states that a cause of
action is the act or omission by which a party violates a right of another.
The general rule is that the allegations in a complaint are sufficient to
constitute a cause of action against the defendants if, admitting the
facts alleged, the court can render a valid judgment upon the same in
accordance with the prayer therein. A cause of action exists if the
following elements are present, namely: (1) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is
created; (2) an obligation on the part of the named defendant to
respect or not to violate such right; and (3) an act or omission on the
part of such defendant violative of the right of the plaintiff or
constituting a breach of the obligation of the defendant to the plaintiff
for which the latter may maintain an action for recovery of damages. 23
In the present case, the summary of Todaros allegations states that PIL,
PCPI, PPHI, McDonald, and Klepzig did not fulfill their contractual
obligation to employ Todaro on a permanent basis in PILs Philippine office.
Todaros allegations are thus sufficient to establish a cause of action. We
quote with approval the trial courts ruling on this matter:
On the issue of lack of cause of action It is well-settled that the
merits of a motion to dismiss a complaint for lack of cause of action
is tested on the strength of the allegations of fact contained in the
complaint and no other (De Jesus, et al. vs. Belarmino, et al., 95 Phil.
366 [1954]). This Court finds that the allegations of the complaint,
specifically paragraphs 13-33 thereof, paragraphs 30-33 alleging as
follows:
"30. All of the acts set forth in the foregoing have been done
with the knowledge, consent and/or approval of the defendants
who acted in concert and/or in conspiracy with one another.

31. Under the circumstances, there is a valid contract entered

into between [Todaro] and the Pioneer Group, whereby, among
others, the Pioneer Group would employ [Todaro], on a
permanent basis, to manage and operate the ready-mix
concrete operations, if the Pioneer Group decides to invest in
the Philippines.
32. The Pioneer Group has decided to invest in the Philippines.
The refusal of the defendants to comply with the Pioneer
Groups undertaking to employ [Todaro] to manage their
Philippine ready-mix operations, on a permanent basis, is a
direct breach of an obligation under a valid and perfected
contract.
33. Alternatively, assuming without conceding, that there was
no contractual obligation on the part of the Pioneer Group to
employ [Todaro] on a permanent basis, in their Philippine
operations, the Pioneer Group and the other defendants did not
act with justice, give [Todaro] his due and observe honesty and
good faith and/or they have willfully caused injury to [Todaro]
in a manner that is contrary to morals, good customs, and
public policy, as mandated under Arts. 19 and 21 of the New
Civil Code."
sufficiently establish a cause of action for breach of contract and/or
violation of Articles 19 and 21 of the New Civil Code. Whether or not
these allegations are true is immaterial for the court cannot inquire
into the truth thereof, the test being whether, given the allegations of
fact in the complaint, a valid judgment could be rendered in
accordance with the prayer in the complaint. 24
It should be emphasized that the presence of a cause of action rests on the
sufficiency, and not on the veracity, of the allegations in the complaint. The
veracity of the allegations will have to be examined during the trial on the
merits. In resolving a motion to dismiss based on lack of cause of action, the
trial court is limited to the four corners of the complaint and its annexes. It is
not yet necessary for the trial court to examine the truthfulness of the
allegations in the complaint. Such examination is proper during the trial on
the merits.
Forum Non-Conveniens
The doctrine of forum non-conveniens requires an examination of the
truthfulness of the allegations in the complaint. Section 1, Rule 16 of the
1997 Rules of Civil Procedure does not mention forum non-conveniens as a

ground for filing a motion to dismiss. The propriety of dismissing a case

based on forum non-conveniensrequires a factual determination; hence, it is
more properly considered a matter of defense. While it is within the
discretion of the trial court to abstain from assuming jurisdiction on this
ground, the trial court should do so only after vital facts are established to
determine whether special circumstances require the courts desistance. 25
Jurisdiction over PIL
PIL questions the trial courts exercise of jurisdiction over it on two levels.
First, that PIL is a foreign corporation not doing business in the Philippines
and because of this, the service of summons on PIL did not follow the
mandated procedure. Second, that Todaros claims are based on an alleged
breach of an employment contract so Todaro should have filed his complaint
before the NLRC and not before the trial court.
Transacting Business in the Philippines and
Service of Summons
The first level has two sub-issues: PILs transaction of business in the
Philippines and the service of summons on PIL. Section 12, Rule 14 of the
1997 Rules of Civil Procedure provides the manner by which summons may
be served upon a foreign juridical entity which has transacted business in the
Philippines. Thus:
Service upon foreign private juridical entity. When the defendant is
a foreign juridical entity which has transacted business in the
Philippines, service may be made on its resident agent designated in
accordance with law for that purpose, or, if there be no such agent, on
the government official designated by law to that effect, or any of its
officers or agents within the Philippines.
As to the first sub-issue, PIL insists that its sole act of "transacting" or
"doing business" in the Philippines consisted of its investment in PPHI.
Under Philippine law, PILs mere investment in PPHI does not constitute
"doing business." However, we affirm the lower courts ruling and declare
that, based on the allegations in Todaros complaint, PIL was doing business
in the Philippines when it negotiated Todaros employment with PPHI.
Section 3(d) of Republic Act No. 7042, Foreign Investments Act of 1991,
states:
The phrase "doing business" shall include
soliciting orders, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or
distributors domiciled in the Philippines or who in any calendar year

stay in the country for a period or periods totaling one hundred eighty
[180] days or more; participating in the management, supervision or
control of any domestic business, firm, entity or corporation in the
Philippines; and any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplate to that
extent the performance of acts or works, or the exercise of some
of the functions normally incident to, and in progressive
prosecution of commercial gain or of the purpose and object of
the business organization: Provided, however, That the phrase
"doing business" shall not be deemed to include mere investment as a
shareholder by a foreign entity in domestic corporations duly
registered to do business, and/or the exercise of rights as such
investor; nor having a nominee director or officer to represent its
interests in such corporation; nor appointing a representative or
distributor domiciled in the Philippines which transacts business in its
own name and for its own account; (Emphases added)
PILs alleged acts in actively negotiating to employ Todaro to run its premixed concrete operations in the Philippines, which acts are hypothetically
admitted in PILs motion to dismiss, are not mere acts of a passive investor
in a domestic corporation. Such are managerial and operational acts in
directing and establishing commercial operations in the Philippines. The
annexes that Todaro attached to his complaint give us an idea on the extent
of PILs involvement in the negotiations regarding Todaros employment. In
Annex "E," McDonald of Pioneer Concrete Group HK confirmed his offer
to engage Todaro as a consultant of PIL. In Annex "F," Todaro accepted the
consultancy. In Annex "H," Klepzig of PPHI stated that PIL authorized him
to tell Todaro about the cessation of his consultancy. Finally, in Annex "I,"
Folwell of PIL wrote to Todaro to confirm that "Pioneer" no longer wishes
to be associated with Todaro and that Klepzig is authorized to terminate this
association. Folwell further referred to a Dr. Schubert and to Pioneer Hong
Kong. These confirmations and references tell us that, in this instance, the
various officers and companies under the Pioneer brand name do not work
independently of each other. It cannot be denied that PIL had knowledge of
and even authorized the non-implementation of Todaros alleged permanent
employment. In fact, in the letters to Todaro, the word "Pioneer" was used to
refer not just to PIL alone but also to all corporations negotiating with
Todaro under the Pioneer name.
As further proof of the interconnection of the various Pioneer corporations
with regard to their negotiations with Todaro, McDonald of Pioneer
Concrete Group HK confirmed Todaros engagement as consultant of PIL
(Annex "E") while Folwell of PIL stated that Todaro rendered consultancy
services to Pioneer HK (Annex "I"). In this sense, the various Pioneer
corporations were not acting as separate corporations. The behavior of the

various Pioneer corporations shoots down their defense that the corporations
have separate and distinct personalities, managements, and operations. The
various Pioneer corporations were all working in concert to negotiate an
employment contract between Todaro and PPHI, a domestic corporation.
Finally, the phrase "doing business in the Philippines" in the former version
of Section 12, Rule 14 now reads "has transacted business in the
Philippines." The scope is thus broader in that it is enough for the
application of the Rule that the foreign private juridical entity "has
transacted business in the Philippines."26
As to the second sub-issue, the purpose of summons is not only to acquire
jurisdiction over the person of the defendant, but also to give notice to the
defendant that an action has been commenced against it and to afford it an
opportunity to be heard on the claim made against it. The requirements of
the rule on summons must be strictly followed; otherwise, the trial court will
not acquire jurisdiction over the defendant.
When summons is to be served on a natural person, service of summons
should be made in person on the defendant. 27 Substituted service is resorted
to only upon the concurrence of two requisites: (1) when the defendant
cannot be served personally within a reasonable time and (2) when there is
impossibility of prompt service as shown by the statement in the proof of
service in the efforts made to find the defendant personally and that such
efforts failed.28
The statutory requirements of substituted service must be followed strictly,
faithfully, and fully, and any substituted service other than by the statute is
considered ineffective. Substituted service is in derogation of the usual
method of service. It is a method extraordinary in character and may be used
only as prescribed and in the circumstances authorized by the statute. 29 The
need for strict compliance with the requirements of the rule on summons is
also exemplified in the exclusive enumeration of the agents of a domestic
private juridical entity who are authorized to receive summons.
At present, Section 11 of Rule 14 provides that when the defendant is a
domestic private juridical entity, service may be made on the "president,
managing partner, general manager, corporate secretary, treasurer, or inhouse counsel." The previous version of Section 11 allowed for the service
of summons on the "president, manager, secretary, cashier, agent, or any of
its directors." The present Section 11 qualified "manager" to "general
manager" and "secretary" to "corporate secretary." The present Section 11
also removed "cashier, agent, or any of its directors" from the exclusive
enumeration.

When summons is served on a foreign juridical entity, there are three

prescribed ways: (1) service on its resident agent designated in accordance
with law for that purpose, (2) service on the government official designated
by law to receive summons if the corporation does not have a resident agent,
and (3) service on any of the corporations officers or agents within the
Philippines.30
In the present case, service of summons on PIL failed to follow any of the
prescribed processes. PIL had no resident agent in the Philippines. Summons
was not served on the Securities and Exchange Commission (SEC), the
designated government agency,31 since PIL is not registered with the SEC.
Summons for PIL was served on De Leon, Klepzigs Executive Assistant.
Klepzig is PILs "agent within the Philippines" because PIL authorized
Klepzig to notify Todaro of the cessation of his consultancy (Annexes "H"
and "I").32 The authority given by PIL to Klepzig to notify Todaro implies
that Klepzig was likewise authorized to receive Todaros response to PILs
notice. Todaro responded to PILs notice by filing a complaint before the
trial court.
However, summons was not served personally on Klepzig as agent of PIL.
Instead, summons was served on De Leon, Klepzigs Executive Assistant. In
this instance, De Leon was not PILs agent but a mere employee of Klepzig.
In effect, the sheriff33 resorted to substituted service. For symmetry, we
apply the rule on substituted service of summons on a natural person and we
find that no reason was given to justify the service of PILs summons on De
Leon.
Thus, we rule that PIL transacted business in the Philippines and Klepzig
was its agent within the Philippines. However, there was improper service of
summons on PIL since summons was not served personally on Klepzig.
NLRC Jurisdiction
As to the second level, Todaro prays for payment of damages due him
because of PILs non-implementation of Todaros alleged employment
agreement with PPHI. The appellate court stated its ruling on this matter,
thus:
It could not be denied that there was no existing contract yet to speak
of between PIONEER INTL. and [Todaro]. Since there was an
absence of an employment contract between the two parties, this
Court is of the opinion and so holds that no employer-employee
relationship actually exists. Record reveals that all that was agreed
upon by [Todaro] and the Pioneer Concrete, acting in behalf of
PIONEER INTL., was the confirmation of the offer to engage the

services of the former as consultant of PIONEER INTL. (Rollo, p.

132). The failure on the part of PIONEER INTL. to abide by the said
agreement, which was duly confirmed by PIONEER INTL., brought
about a breach of an obligation on a valid and perfected agreement.
There being no employer-employee relationship established between
[PIL] and [Todaro], it could be said that the instant case falls within
the jurisdiction of the regular courts of justice as the money claim of
[Todaro] did not arise out of or in connection with [an] employeremployee relationship.34
Todaros employment in the Philippines would not be with PIL but with
PPHI as stated in the 20 October 1997 letter of Folwell. Assuming the
existence of the employment agreement, the employer-employee
relationship would be between PPHI and Todaro, not between PIL and
Todaro. PILs liability for the non-implementation of the alleged
employment agreement is a civil dispute properly belonging to the regular
courts. Todaros causes of action as stated in his complaint are, in addition to
breach of contract, based on "violation of Articles 19 and 21 of the New
Civil Code" for the "clear and evident bad faith and malice" 35 on the part of
defendants. The NLRCs jurisdiction is limited to those enumerated under
Article 217 of the Labor Code.36
WHEREFORE, the petition is PARTIALLY GRANTED. The Decision
dated 27 September 2001 and the Resolution dated 14 January 2003 of the
appellate court are AFFIRMED with the MODIFICATION that there was
improper service of summons on Pioneer International, Ltd. The case is
remanded to the trial court for proper service of summons and trial. No
costs.
SO ORDERED

19-A. Galicia v. Manlinquez G.R. 155785 4-13-08

G.R. No. 155785

April 13, 2007

SIMPLICIO GALICIA, for himself, and as Attorney-in-Fact of

ROSALIA G. TORRE, PAQUITO GALICIA, NELLIE GALICIA,
LETICIA G. MAESTRO and CLARO GALICIA, Petitioners,
vs.
LOURDES MANLIQUEZ vda. de MINDO and LILIA RICO
MINANO, Respondents.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari seeking to annul and
set aside the Decision1 of the Court of Appeals (CA) dated January 14, 2002
in CA-G.R. SP No. 58834 and its Resolution2 of October 21, 2002 denying
petitioners Motion for Reconsideration.
The present case originated from a complaint filed with the Regional Trial
Court (RTC) of Odiongan, Romblon by herein petitioners, in their capacity
as heirs of Juan Galicia (Juan), against Milagros Rico-Glori (Milagros) and
her tenants Dominador Musca and Alfonso Fallar, Jr. for Recovery of
Possession and Ownership, Annulment of Title, Documents and Other
Papers. The case is docketed as Civil Case No. OD-306.
In their Complaint, petitioners contended that their predecessor, Juan, was
the true and lawful owner of a parcel of land situated in Concepcion Sur,
Sta. Maria, Romblon known as Lot No. 139 and containing an area of
5.5329 hectares, the same having been declared in his name under various
tax declarations the latest of which being Tax Declaration No. 0037, Series
of 1994; after years of possession of the said land, Juan was driven away
from the property through force by the heirs of a certain Ines Ramirez (Ines),
one of whom is defendant Milagros; because of poverty and lack of
knowledge, Juan was not able to assert his right to the said property but he
informed his children that they own the above-described parcel of land; and
the continuous possession of the property by Milagros and her codefendants, tenants has further deprived herein petitioners of their right over
the same.
Defendants denied the allegations of petitioners in their complaint asserting
that Juan was not the owner and never took possession of the disputed lot.
They also contended that the subject property was part of a larger parcel of

land which was acquired by Ines, Milagross predecessor-in-interest in 1947

from a certain Juan Galicha who is a different person from Juan Galicia.
During the scheduled pre-trial conference on May 21, 1997, none of the
defendants appeared. They filed a motion for postponement of the pre-trial
conference but it was belatedly received by the trial court. As a
consequence, defendants were declared in default. Herein petitioners, as
plaintiffs, were then allowed to present evidence ex parte.
On December 2, 1997, the RTC rendered judgment with the following
dispositive portion:
WHEREFORE, premises considered, and by preponderance of evidence,
judgment is hereby rendered in favor of the plaintiffs and against the
defendants:
1. Declaring plaintiffs as the true and absolute owner of the property
subject of the case and particularly described in paragraph II of the
complaint;
2. Affirming and confirming the validity and legality of plaintiffs
ownership over the property;
3. Ordering defendants to vacate the land adverted to in paragraph II
of the complaint;
4. For the defendants to respect plaintiffs' peaceful possession and
ownership of the land aforesaid; and
5. To pay the costs.
SO ORDERED.3
On December 15, 1997, the RTC received a Motion for Leave of Court to
Intervene with an attached Answer-in-Intervention filed by the compulsory
heirs of Ines, among whom are herein respondents, who are also co-heirs of
defendant Milagros. The intervenors contended that the subject parcel of
land forms part of the estate of Ines which is yet to be partitioned among
them; an intestate proceeding is presently pending in the RTC of Odiongan,
Romblon, Branch 81; the outcome of Civil Case No. OD-306, one way or
the other, would adversely affect their interest; their rights would be better
protected in the said civil case; and their intervention would not unduly
delay, or in any way prejudice the rights of the original parties.
In its Order of December 23, 1997, the RTC denied the said motion to
intervene on the ground that it has already rendered judgment and under

Section 2, Rule 19 of the Rules of Court, the motion to intervene should

have been filed before rendition of judgment by the trial court.
Meanwhile, the defendants in Civil Case No. OD-306 filed an appeal with
the CA. Their Notice of Appeal was filed on February 27, 1998. On June 23,
1999, the CA issued a Resolution dismissing the appeal for failure of the
defendants-appellants to file their brief within the extended period granted
by the appellate court. On August 13, 1999, the abovementioned CA
Resolution became final and executory.
Subsequently, the trial court issued a writ of execution dated March 3, 2000.
On May 23, 2000, herein respondents filed a petition for annulment of
judgment with the CA anchored on grounds of lack of jurisdiction over their
persons and property and on extrinsic fraud.
On January 14, 2002, the CA promulgated the presently assailed Decision
with the following dispositive portion:
WHEREFORE, the present petition is hereby GRANTED. The Decision
dated December 2, 1997 and Writ of Execution dated March 3, 2000 of
Branch 82 of the Regional Trial Court of Odiongan, Romblon are hereby
ANNULLED and SET ASIDE.
SO ORDERED.4
Herein petitioners filed a Motion for Reconsideration but it was denied by
the CA in its Resolution5 dated October 21, 2002.
Hence, the instant petition for review based on the following assignment of
errors:
1. THAT THE COURT OF APPEALS COMMITTED SERIOUS
ERROR OF LAW IN ANNULLING AND SETTING ASIDE THE
DECISION DATED 2 DECEMBER 1997 AND WRIT OF
EXECUTION DATED 3 MARCH 2000 OF BRANCH 82 OF THE
REGIONAL TRIAL COURT OF ODIONGAN, ROMBLON FOR
LACK OF JURISDICTION OVER THE PERSONS OF
PETITIONERS (NOW RESPONDENTS IN THE ABOVEENTITLED CASE), A DECISION NOT IN ACCORD WITH LAW
OR WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT.
2. THAT THE COURT OF APPEALS COMMITTED SERIOUS
ERROR OF LAW IN NOT DISMISSING THE PETITION FOR

ANNULMENT OF JUDGMENT ON THE GROUND OF

ESTOPPEL ON THE PART OF THE PETITIONERS IN CA-G.R.
SP. NO. 58834.6
As to their first assigned error, petitioners invoke the principle that
jurisdiction over the person is acquired by the voluntary appearance of a
party in court and his submission to its authority. Applying this rule in the
present case, petitioners argue that by filing their Motion for Leave to
Intervene in the RTC, herein respondents voluntarily submitted themselves
to the authority of the trial court, hence placing themselves under its
jurisdiction; that by filing the said Motion, they recognized the authority of
the court to hear and decide not only their Motion but the case itself; and
that by acting on their Motion, the court actually exercised jurisdiction over
the persons of petitioners.
With respect to their second assigned error, petitioners contend that by
respondents voluntary submission to the jurisdiction of the trial court they
are already estopped in denying the authority of the court which they
invoked when they filed their Motion. Petitioners also contend that
respondents had several opportunities to raise the issue of the courts lack of
jurisdiction over their persons but they remained silent and did not pursue
the remedies available to them for an unreasonable length of time; hence,
they are now barred by laches from questioning the courts jurisdiction.
On the other hand, respondents counter that the CA did not err in setting
aside the trial court's decision on the ground that defendants, as
indispensable parties, were not joined in the complaint. Respondents argue
that the CA correctly held that when an indispensable party is not before the
court then the action should be dismissed because the absence of such
indispensable party renders all subsequent actions of the court null and void
for want of authority to act not only as against him but even as against those
present.
Respondents also aver that even assuming that herein petitioners were the
true owners of the subject land, they have lost such ownership by extinctive
prescription because respondents and their predecessors had been in
uninterrupted adverse possession of the subject lot for more than 40 years.
As such, they had become the owners thereof by acquisitive prescription.
The petition lacks merit but the CA Decision will have to be modified in the
interest of substantial justice and for the orderly administration of justice, as
will be shown forthwith.
It is true that the allowance and disallowance of a motion to intervene is
addressed to the sound discretion of the court hearing the case. 7 However,

jurisprudence is replete with cases wherein the Court ruled that a motion to
intervene may be entertained or allowed even if filed after judgment was
rendered by the trial court, especially in cases where the intervenors are
indispensable parties.8 In Pinlac v. Court of Appeals, this Court held:
The rule on intervention, like all other rules of procedure, is intended to
make the powers of the Court fully and completely available for justice. It is
aimed to facilitate a comprehensive adjudication of rival claims overriding
technicalities on the timeliness of the filing thereof. Indeed, in exceptional
cases, the Court has allowed intervention notwithstanding the rendition of
judgment by the trial court.9
Since it is not disputed that herein respondents are compulsory heirs of Ines
who stand to be affected by the judgment of the trial court, the latter should
have granted their Motion to Intervene and should have admitted their
Answer-in-Intervention.
Section 7, Rule 3 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
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.10 It is precisely when an
indispensable party is not before the court that the action should be
dismissed.11 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.12 The
evident aim and intent of the Rules regarding the joinder of indispensable
and necessary parties is a complete determination of all possible issues, not
only between the parties themselves but also as regards to other persons who
may be affected by the judgment.13 A valid judgment cannot even be
rendered where there is want of indispensable parties. 141^wphi1.net
As to the question of whether the trial court acquired jurisdiction over the
persons of herein respondents, the Court has held that the filing of motions
seeking affirmative relief, such as, to admit answer, for additional time to
file answer, for reconsideration of a default judgment, and to lift order of
default with motion for reconsideration, are considered voluntary
submission to the jurisdiction of the court. 15 Hence, in the present case,
when respondents filed their Motion for Leave to Intervene, attaching
thereto their Answer-in-Intervention, they have effectively submitted
themselves to the jurisdiction of the court and the court, in turn, acquired
jurisdiction over their persons. But this circumstance did not cure the fatal
defect of non-inclusion of respondents as indispensable parties in the

complaint filed by petitioner. It must be emphasized that respondents were

not able to participate during the pre-trial much less present evidence in
support of their claims. In other words, the court acquired jurisdiction over
the persons of herein respondents only when they filed their Motion for
Leave to Intervene with the RTC. Prior to that, they were strangers to Civil
Case No. OD-306.
It is basic that no man shall be affected by any proceeding to which he is a
stranger, and strangers to a case are not bound by judgment rendered by the
court.16 In the present case, respondents and their co-heirs are adversely
affected by the judgment rendered by the trial court considering their
ostensible ownership of the property. It will be the height of inequity to
declare herein petitioners as owners of the disputed lot without giving
respondents the opportunity to present any evidence in support of their claim
that the subject property still forms part of the estate of their deceased
predecessor and is the subject of a pending action for partition among the
compulsory heirs. Much more, it is tantamount to a violation of the
constitutional guarantee that no person shall be deprived of property without
due process of law.171vvphi1.nt
This Court held in Metropolitan Bank and Trust Company v. Alejo that:
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. 18
In the absence of herein respondents and their co-heirs who are
indispensable parties, the trial court had in the first place no authority to act
on the case. Thus, the judgment of the trial court was null and void due to
lack of jurisdiction over indispensable parties. 19 The CA correctly annulled
the RTC Decision and writ of execution.
As to the timeliness of the petition for annulment of judgment filed with the
CA, Section 3, Rule 47 of the Rules of Court provides that a petition for
annulment of judgment based on extrinsic fraud must be filed within four
years from its discovery; and if based on lack of jurisdiction, before it is
barred by laches or estoppel.
The principle of laches or "stale demands" ordains that the failure or neglect,
for an unreasonable and unexplained length of time, to do that which by
exercising due diligence could or should have been done earlier, or the
negligence or omission to assert a right within a reasonable time, warrants a

presumption that the party entitled to assert it either has abandoned it or

declined to assert it.20
There is no absolute rule as to what constitutes laches or staleness of
demand; each case is to be determined according to its particular
circumstances.21 The question of laches is addressed to the sound discretion
of the court and, being an equitable doctrine, its application is controlled by
equitable considerations.22 It cannot be used to defeat justice or perpetrate
fraud and injustice.23 It is the better rule that courts, under the principle of
equity, will not be guided or bound strictly by the statute of limitations or
the doctrine of laches when to do so, manifest wrong or injustice would
result.24
In the present case, the CA found no evidence to show when respondents
acquired knowledge of the complaint that petitioners filed with the RTC.
Moreover, the Court finds that herein respondents' right to due process is the
overriding consideration in allowing them to intervene in Civil Case No.
OD-306.
Petitioners also fault herein respondents for their failure to avail of other
remedies before filing a petition for annulment of judgment with the CA.
Petitioners cited the remedies enumerated by the RTC in its Order of
December 23, 1997. However, the Court notes that the remedies enumerated
therein refer to those available to a party who has been declared in default.
In the present case, herein respondents could not have been declared in
default, and thus could not have availed of these remedies, because they
never became parties to Civil Case No. OD-306.
The settled rule is that a judgment rendered or final order issued by the RTC
without jurisdiction is null and void and may be assailed any time either
collaterally or in a direct action or by resisting such judgment or final order
in any action or proceeding whenever it is invoked, unless barred by
laches.25 Indeed, jurisprudence upholds the soundness of an independent
action to declare as null and void a judgment rendered without jurisdiction
as in this case.26
As a result of and in consonance with the foregoing discussions, the
complaint filed by herein petitioners with the trial court should have been
dismissed at the outset, in the absence of indispensable parties.
Inevitably, the following questions come to mind: what happens to the
original defendants who were declared as in default and judgment by default
was rendered against them? What happens to the final and executory
dismissal of the appeal of the defaulted defendants by the CA?

It is an accepted rule of procedure for this Court to strive to settle the entire
controversy in a single proceeding, leaving no root or branch to bear the
seeds of future litigation.27
In concurrence therewith, the Court makes the following observations:
To dismiss the complaint of herein petitioners for non-inclusion of herein
respondents as indispensable parties, the former would have no other
recourse but to file anew a complaint against the latter and the original
defendants. This would not be in keeping with the Court's policy of
promoting a just and inexpensive disposition of a case. It is best that the
complaint remains which is deemed amended by the admission of the
Answer-in-Intervention of the indispensable parties.
The trial courts declaration of the defendants as in default in Civil Case No.
OD-306 for their failure to attend the pre-trial conference and the
consequent final and executory judgment by default, are altogether void and
of no effect considering that the RTC acted without jurisdiction from the
very beginning because of non-inclusion of indispensable parties. The Court
reiterates the ruling in Metropolitan Bank and Trust Company that 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. 28
Parties are reverted back to the stage where all the defendants have filed
their respective Answers.
WHEREFORE, the petition is DENIED. The assailed Decision and
Resolution of the Court of Appeals areAFFIRMED with
MODIFICATION to the effect that the Regional Trial Court of Odiongan,
Romblon, Branch 82 is ordered to GRANT the Motion for Leave to
Intervene of respondents and their other co-heirs,ADMIT their Answer-inIntervention, MAINTAIN the Answer of original defendants, and from
there toPROCEED with Civil Case No. OD-306 in accordance with the
Rules of Court.
Costs against petitioners.

III. PARTIES TO CIVIL ACTION

20. Spouses De La Cruz v. Juaquin G.R. 162788 7-28-09
[G.R. No. 162788. July 28, 2005]
Spouses JULITA DE LA CRUZ and FELIPE DE LA CRUZ, petitioners, vs.
PEDRO JOAQUIN, respondent.
DECISION
PANGANIBAN, J.:
The Rules require the legal representatives of a dead litigant to be substituted as
parties to a litigation. This requirement is necessitated by due process. Thus, when
the rights of the legal representatives of a decedent are actually recognized and
protected, noncompliance or belated formal compliance with the Rules cannot affect
the validity of the promulgated decision. After all, due process had thereby been
satisfied.
The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the
August 26, 2003 Decision[2] and the March 9, 2004 Resolution[3] of the Court of
Appeals (CA) in CA-GR CV No. 34702. The challenged Decision disposed as
follows:
WHEREFORE, the foregoing considered, the appeal is DISMISSED and the assailed
decision accordingly AFFIRMED in toto. No costs.[4]
On the other hand, the trial courts affirmed Decision disposed as follows:
WHEREFORE, judgment is hereby rendered:
a) declaring the Deed of Absolute Sale (Exh. D) and Kasunduan (Exhibit B), to
be a sale with right of repurchase;
b) ordering the plaintiff to pay the defendants the sum of P9,000.00 by way of
repurchasing the land in question;
c) ordering the defendants to execute a deed of reconveyance of said land in favor
of the plaintiff after the latter has paid them the amount of P9,000.00 to repurchase
the land in question;
d) ordering the defendants to yield possession of the subject land to the plaintiff
after the latter has paid them the amount of P9,000.00 to repurchase the property
from them; and
e) ordering the defendants to pay the plaintiff the amount of P10,000.00 as actual
and compensatory damages; the amount of P5,000[.00] as exemplary damages; the
amount of P5,000.00 as expenses of litigation and the amount of P5,000.00 by way of
attorneys fees.[5]
The Facts
The case originated from a Complaint for the recovery of possession and ownership,
the cancellation of title, and damages, filed by Pedro Joaquin against petitioners in the
Regional Trial Court of Baloc, Sto. Domingo, Nueva Ecija.[6] Respondent alleged that
he had obtained a loan from them in the amount of P9,000 on June 29, 1974, payable
after five (5) years; that is, on June 29, 1979. To secure the payment of the obligation,
he supposedly executed a Deed of Sale in favor of petitioners. The Deed was for a
parcel of land in Pinagpanaan, Talavera, Nueva Ecija, covered by TCT No. T-111802.
The parties also executed another document entitled Kasunduan. [7]
Respondent claimed that the Kasunduan showed the Deed of Sale to be actually an
equitable mortgage.[8] Spouses De la Cruz contended that this document was merely

an accommodation to allow the repurchase of the property until June 29, 1979, a right
that he failed to exercise.[9]
On April 23, 1990, the RTC issued a Decision in his favor. The trial court declared
that the parties had entered into a sale with a right of repurchase.[10] It further held that
respondent had made a valid tender of payment on two separate occasions to exercise
his right of repurchase.[11] Accordingly, petitioners were required to reconvey the
property upon his payment.[12]
Ruling of the Court of Appeals
Sustaining the trial court, the CA noted that petitioners had given respondent the right
to repurchase the property within five (5) years from the date of the sale or until June
29, 1979. Accordingly, the parties executed the Kasunduan to express the terms and
conditions of their actual agreement.[13] The appellate court also found no reason to
overturn the finding that respondent had validly exercised his right to repurchase the
land.[14]
In the March 9, 2004 Resolution, the CA denied reconsideration and ordered a
substitution by legal representatives, in view of respondents death on December 24,
1988.[15]
Hence, this Petition.[16]
The Issues
Petitioners assign the following errors for our consideration:
I.
Public Respondent Twelfth Division of the Honorable Court of Appeals
seriously erred in dismissing the appeal and affirming in toto the Decision of the trial
court in Civil Case No. SD-838;
II.
Public Respondent Twelfth Division of the Honorable Court of Appeals
likewise erred in denying [petitioners] Motion for Reconsideration given the facts
and the law therein presented.[17]
Succinctly, the issues are whether the trial court lost jurisdiction over the case upon
the death of Pedro Joaquin, and whether respondent was guilty of forum shopping.[18]
The Courts Ruling
The Petition has no merit.
First Issue:
Jurisdiction
Petitioners assert that the RTCs Decision was invalid for lack of jurisdiction.[19] They
claim that respondent died during the pendency of the case. There being no
substitution by the heirs, the trial court allegedly lacked jurisdiction over the
litigation.[20]
Rule on Substitution
When a party to a pending action dies and the claim is not extinguished,[21] the Rules
of Court require a substitution of the deceased. The procedure is specifically
governed by Section 16 of Rule 3, which reads thus:
Section 16. Death of a 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 said 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 rule on the substitution of parties was crafted to protect every partys right to due
process.[22] The estate of the deceased party will continue to be properly represented in
the suit through the duly appointed legal representative.[23] Moreover, no adjudication
can be made against the successor of the deceased if the fundamental right to a day in
court is denied.[24]
The Court has nullified not only trial proceedings conducted without the appearance
of the legal representatives of the deceased, but also the resulting judgments.[25] In
those instances, the courts acquired no jurisdiction over the persons of the legal
representatives or the heirs upon whom no judgment was binding.[26]
This general rule notwithstanding, a formal substitution by heirs is not necessary
when they themselves voluntarily appear, participate in the case, and present evidence
in defense of the deceased.[27] These actions negate any claim that the right to due
process was violated.
The Court is not unaware of Chittick v. Court of Appeals,[28] in which the failure of the
heirs to substitute for the original plaintiff upon her death led to the nullification of
the trial courts Decision. The latter had sought to recover support in arrears and her
share in the conjugal partnership. The children who allegedly substituted for her
refused to continue the case against their father and vehemently objected to their
inclusion as parties.[29] Moreover, because he died during the pendency of the case,
they were bound to substitute for the defendant also. The substitution effectively
merged the persons of the plaintiff and the defendant and thus extinguished the
obligation being sued upon.[30]
Clearly, the present case is not similar, much less identical, to the factual milieu
of Chittick.
Strictly speaking, the rule on the substitution by heirs is not a matter of jurisdiction,
but a requirement of due process. Thus, when due process is not violated, as when the
right of the representative or heir is recognized and protected, noncompliance or
belated formal compliance with the Rules cannot affect the validity of a promulgated
decision.[31] Mere failure to substitute for a deceased plaintiff is not a sufficient ground
to nullify a trial courts decision. The alleging party must prove that there was an
undeniable violation of due process.
Substitution in
the Instant Case
The records of the present case contain a Motion for Substitution of Party Plaintiff
dated February 15, 2002, filed before the CA. The prayer states as follows:
WHEREFORE, it is respectfully prayed that the Heirs of the deceased plaintiffappellee as represented by his daughter Lourdes dela Cruz be substituted as partyplaintiff for the said Pedro Joaquin.
It is further prayed that henceforth the undersigned counsel[32] for the heirs of Pedro
Joaquin be furnished with copies of notices, orders, resolutions and other pleadings at
its address below.
Evidently, the heirs of Pedro Joaquin voluntary appeared and participated in the case.
We stress that the appellate court had ordered[33] his legal representatives to appear
and substitute for him. The substitution even on appeal had been ordered correctly.

In all proceedings, the legal representatives must appear to protect the interests of the
deceased.[34] After the rendition of judgment, further proceedings may be held, such as
a motion for reconsideration or a new trial, an appeal, or an execution.[35]
Considering the foregoing circumstances, the Motion for Substitution may be deemed
to have been granted; and the heirs, to have substituted for the deceased, Pedro
Joaquin. There being no violation of due process, the issue of substitution cannot be
upheld as a ground to nullify the trial courts Decision.
Second Issue:
Forum Shopping
Petitioners also claim that respondents were guilty of forum shopping, a fact that
should have compelled the trial court to dismiss the Complaint.[36] They claim that
prior to the commencement of the present suit on July 7, 1981, respondent had filed a
civil case against petitioners on June 25, 1979. Docketed as Civil Case No. SD-742
for the recovery of possession and for damages, it was allegedly dismissed by the
Court of First Instance of Nueva Ecija for lack of interest to prosecute.
Forum Shopping Defined
Forum shopping is the institution of two or more actions or proceedings involving the
same parties for the same cause of action, either simultaneously or successively, on
the supposition that one or the other court would make a favorable disposition.
[37]
Forum shopping may be resorted to by a party against whom an adverse judgment
or order has been issued in one forum, in an attempt to seek a favorable opinion in
another, other than by an appeal or a special civil action for certiorari.[38]
Forum shopping trifles with the courts, abuses their processes, degrades the
administration of justice, and congests court dockets.[39] Willful and deliberate
violation of the rule against it is a ground for the summary dismissal of the case; it
may also constitute direct contempt of court.[40]
The test for determining the existence of forum shopping is whether the elements
of litis pendentia are present, or whether a final judgment in one case amounts to res
judicata in another.[41] We note, however, petitioners claim that the subject matter of
the present case has already been litigated and decided. Therefore, the applicable
doctrine is res judicata.[42]
Applicability of Res Judicata
Under res judicata, a final judgment or decree on the merits 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.[43] The term literally
means a matter adjudged, judicially acted upon, or settled by judgment.[44] The
principle bars a subsequent suit involving the same parties, subject matter, and cause
of action. Public policy requires that controversies must be settled with finality at a
given point in time.
The elements of res judicata are as follows: (1) the former judgment or order must be
final; (2) it must have been rendered on the merits of the controversy; (3) the court
that rendered it must have had jurisdiction over the subject matter and the parties; and
(4) there must have been -- between the first and the second actions -- an identity of
parties, subject matter and cause of action.[45]
Failure to Support Allegation
The onus of proving allegations rests upon the party raising them.[46] As to the matter
of forum shopping and res judicata, petitioners have failed to provide this Court with
relevant and clear specifications that would show the presence of an identity of
parties, subject matter, and cause of action between the present and the earlier suits.
They have also failed to show whether the other case was decided on the merits.

Instead, they have made only bare assertions involving its existence without reference
to its facts. In other words, they have alleged conclusions of law without stating any
factual or legal basis. Mere mention of other civil cases without showing the identity
of rights asserted and reliefs sought is not enough basis to claim that respondent is
guilty of forum shopping, or that res judicata exists.[47]
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution
are AFFIRMED. Costs against petitioners.
SO ORDERED.

20-A. Columbia Pictures Inc. v. CA G.R. 110318 8-28-96

G.R. No. 110318 August 28, 1996
COLUMBIA PICTURES, INC., ORION PICTURES CORPORATION, PARAMOUNT
PICTURES CORPORATION, TWENTIETH CENTURY FOX FILM CORPORATION,
UNITED ARTISTS CORPORATION, UNIVERSAL CITY STUDIOS, INC., THE WALT
DISNEY COMPANY, and WARNER BROTHERS, INC., petitioners,
vs.
COURT OF APPEALS, SUNSHINE HOME VIDEO, INC. and DANILO A.
PELINDARIO, respondents.

REGALADO, J.:p
Before us is a petition for review on certiorari of the decision of the Court of
Appeals 1 promulgated on July 22, 1992 and its resolution 2 of May 10, 1993 denying
petitioners' motion for reconsideration, both of which sustained the order 3 of the
Regional Trial Court, Branch 133, Makati, Metro Manila, dated November 22, 1988 for
the quashal of Search Warrant No. 87-053 earlier issued per its own order 4 on
September 5, 1988 for violation of Section 56 of Presidential Decree No. 49, as
amended, otherwise known as the "Decree on the Protection of Intellectual Property."
The material facts found by respondent appellate court are as follows:
Complainants thru counsel lodged a formal complaint with the National
Bureau of Investigation for violation of PD No. 49, as amended, and
sought its assistance in their anti-film piracy drive. Agents of the NBI and
private researchers made discreet surveillance on various video
establishments in Metro Manila including Sunshine Home Video Inc.
(Sunshine for brevity), owned and operated by Danilo A. Pelindario with
address at No. 6 Mayfair Center, Magallanes, Makati, Metro Manila.
On November 14, 1987, NBI Senior Agent Lauro C. Reyes applied for a
search warrant with the court a quo against Sunshine seeking the
seizure, among others, of pirated video tapes of copyrighted films all of
which were enumerated in a list attached to the application; and,
television sets, video cassettes and/or laser disc recordings equipment
and other machines and paraphernalia used or intended to be used in the
unlawful exhibition, showing, reproduction, sale, lease or disposition of
videograms tapes in the premises above described. In the hearing of the
application, NBI Senior Agent Lauro C. Reyes, upon questions by the
court a quo, reiterated in substance his averments in his affidavit. His
testimony was corroborated by another witness, Mr. Rene C. Baltazar.
Atty. Rico V. Domingo's deposition was also taken. On the basis of the
affidavits and depositions of NBI Senior Agent Lauro C. Reyes, Rene C.
Baltazar and Atty. Rico V. Domingo, Search Warrant No. 87-053 for
violation of Section 56 of PD No. 49, as amended, was issued by the
court a quo.
The search warrant was served at about 1:45 p.m. on December 14,
1987 to Sunshine and/or their representatives. In the course of the search
of the premises indicated in the search warrant, the NBI Agents found and
seized various video tapes of duly copyrighted motion pictures/films
owned or exclusively distributed by private complainants, and machines,

equipment, television sets, paraphernalia, materials, accessories all of

which were included in the receipt for properties accomplished by the
raiding team. Copy of the receipt was furnished and/or tendered to Mr.
Danilo A. Pelindario, registered owner-proprietor of Sunshine Home
Video.
On December 16, 1987, a "Return of Search Warrant" was filed with the
Court.
A "Motion To Lift the Order of Search Warrant" was filed but was later
denied for lack of merit (p. 280, Records).
A Motion for reconsideration of the Order of denial was filed. The court a
quo granted the said motion for reconsideration and justified it in this
manner:
It is undisputed that the master tapes of the copyrighted
films from which the pirated films were allegedly copies
(sic), were never presented in the proceedings for the
issuance of the search warrants in question. The orders of
the Court granting the search warrants and denying the
urgent motion to lift order of search warrants were,
therefore, issued in error. Consequently, they must be set
aside. (p. 13, Appellant's Brief) 5
Petitioners thereafter appealed the order of the trial court granting private
respondents' motion for reconsideration, thus lifting the search warrant which it
had theretofore issued, to the Court of Appeals. As stated at the outset, said
appeal was dismissed and the motion for reconsideration thereof was denied.
Hence, this petition was brought to this Court particularly challenging the validity
of respondent court's retroactive application of the ruling in 20th Century Fox Film
Corporation vs. Court of Appeals, et al., 6 in dismissing petitioners' appeal and
upholding the quashal of the search warrant by the trial court.
I
Inceptively, we shall settle the procedural considerations on the matter of and the
challenge to petitioners' legal standing in our courts, they being foreign
corporations not licensed to do business in the Philippines.
Private respondents aver that being foreign corporations, petitioners should have
such license to be able to maintain an action in Philippine courts. In so
challenging petitioners' personality to sue, private respondents point to the fact
that petitioners are the copyright owners or owners of exclusive rights of
distribution in the Philippines of copyrighted motion pictures or films, and also to
the appointment of Atty. Rico V. Domingo as their attorney-in-fact, as being
constitutive of "doing business in the Philippines" under Section 1 (f)(1) and (2),
Rule 1 of the Rules of the Board of Investments. As foreign corporations doing
business in the Philippines, Section 133 of Batas Pambansa Blg. 68, or the
Corporation Code of the Philippines, denies them the right to maintain a suit in
Philippine courts in the absence of a license to do business. Consequently, they
have no right to ask for the issuance of a search warrant. 7
In refutation, petitioners flatly deny that they are doing business in the
Philippines, 8 and contend that private respondents have not adduced evidence to
prove that petitioners are doing such business here, as would require them to be

licensed by the Securities and Exchange Commission, other than averments in the
quoted portions of petitioners' "Opposition to Urgent Motion to Lift Order of Search
Warrant" dated April 28, 1988 and Atty. Rico V. Domingo's affidavit of December 14,
1987. Moreover, an exclusive right to distribute a product or the ownership of such
exclusive right does not conclusively prove the act of doing business nor establish the
presumption of doing business. 9

The Corporation Code provides:

Sec. 133. Doing business without a license. No foreign corporation
transacting business in the Philippines without a license, or its successors
or assigns, shall be permitted to maintain or intervene in any action, suit
or proceeding in any court or administrative agency of the Philippines; but
such corporation may be sued or proceeded against before Philippine
courts or administrative tribunals on any valid cause of action recognized
under Philippine laws.
The obtainment of a license prescribed by Section 125 of the Corporation Code is
not a condition precedent to the maintenance of any kind of action in Philippine
courts by a foreign corporation. However, under the aforequoted provision, no
foreign corporation shall be permitted to transact business in the Philippines, as
this phrase is understood under the Corporation Code, unless it shall have the
license required by law, and until it complies with the law intransacting business
here, it shall not be permitted to maintain any suit in local courts. 10 As thus
interpreted, any foreign corporation not doing business in the Philippines may
maintain an action in our courts upon any cause of action, provided that the subject
matter and the defendant are within the jurisdiction of the court. It is not the absence
of the prescribed license but "doing business" in the Philippines without such license
which debars the foreign corporation from access to our courts. In other words,
although a foreign corporation is without license to transact business in the
Philippines, it does not follow that it has no capacity to bring an action. Such license
is not necessary if it is not engaged in business in the Philippines. 11
Statutory provisions in many jurisdictions are determinative of what constitutes
"doing business" or "transacting business" within that forum, in which case said
provisions are controlling there. In others where no such definition or qualification
is laid down regarding acts or transactions failing within its purview, the question
rests primarily on facts and intent. It is thus held that all the combined acts of a
foreign corporation in the State must be considered, and every circumstance is
material which indicates a purpose on the part of the corporation to engage in
some part of its regular business in the State. 12
No general rule or governing principles can be laid down as to what constitutes
"doing" or "engaging in" or "transacting" business. Each case must be judged in
the light of its own peculiar environmental circumstances. 13 The true tests,
however, seem to be whether the foreign corporation is continuing the body or
substance of the business or enterprise for which it was organized or whether it has
substantially retired from it and turned it over to another. 14
As a general proposition upon which many authorities agree in principle, subject
to such modifications as may be necessary in view of the particular issue or of
the terms of the statute involved, it is recognized that a foreign corporation is
"doing," "transacting," "engaging in," or "carrying on" business in the State when,
and ordinarily only when, it has entered the State by its agents and is there
engaged in carrying on and transacting through them some substantial part of its
ordinary or customary business, usually continuous in the sense that it may be

distinguished from merely casual, sporadic, or occasional transactions and

isolated acts. 15
The Corporation Code does not itself define or categorize what acts constitute
doing or transacting business in the Philippines. Jurisprudence has, however,
held that the term implies a continuity of commercial dealings and arrangements,
and contemplates, to that extent, the performance of acts or works or the
exercise of some of the functions normally incident to or in progressive
prosecution of the purpose and subject of its organization. 16
This traditional case law definition has evolved into a statutory definition, having
been adopted with some qualifications in various pieces of legislation in our
jurisdiction.
For instance, Republic Act No. 5455 17 provides:
Sec. 1. Definitions and scope of this Act. (1) . . . ; and the phrase
"doing business" shall include soliciting orders, purchases, service
contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors who are domiciled in the
Philippines or who in any calendar year stay in the Philippines for a period
or periods totalling one hundred eighty days or more; participating in the
management, supervision or control of any domestic business firm, entity
or corporation in the Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements, and contemplate to
that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization.
Presidential Decree No. 1789, 18 in Article 65 thereof, defines "doing business" to
include soliciting orders, purchases, service contracts, opening offices, whether called
"liaison" offices or branches; appointing representatives or distributors who are
domiciled in the Philippines or who in any calendar year stay in the Philippines for a
period or periods totalling one hundred eighty days or more; participating in the
management, supervision or control of any domestic business firm, entity or
corporation in the Philippines, and any other act or acts that imply a continuity of
commercial dealings or arrangements and contemplate to that extent the
performance of acts or works, or the exercise of some of the functions normally
incident to, and in progressive prosecution of, commercial gain or of the purpose and
object of the business organization.
The implementing rules and regulations of said presidential decree conclude the
enumeration of acts constituting "doing business" with a catch-all definition, thus:
Sec. 1(g). "Doing Business" shall be any act or combination of acts
enumerated in Article 65 of the Code. In particular "doing business"
includes:
xxx xxx xxx
(10) Any other act or acts which imply a continuity of commercial dealings
or arrangements, and contemplate to that extent the performance of acts
or works, or the exercise of some of the functions normally incident to, or
in the progressive prosecution of, commercial gain or of the purpose and
object of the business organization.

Finally, Republic Act No. 7042 19 embodies such concept in this wise:
Sec. 3. Definitions. As used in this Act:
xxx xxx xxx
(d) the phrase "doing business shall include soliciting orders, service
contracts, opening offices, whether called "liaison" offices or branches;
appointing representatives or distributors domiciled in the Philippines or
who in any calendar year stay in the country for a period or periods
totalling one hundred eight(y) (180) days or more; participating in the
management, supervision or control of any domestic business, firm, entity
or corporation in the Philippines; and any other act or acts that imply a
continuity of commercial dealings or arrangements, and contemplate to
that extent the performance of acts or works, or the exercise of some of
the functions normally incident to, and in progressive prosecution of,
commercial gain or of the purpose and object of the business
organization: Provided, however, That the phrase "doing business" shall
not be deemed to include mere investment as a shareholder by a foreign
entity in domestic corporations duly registered to do business, and/or the
exercise of rights as such investor; nor having a nominee director or
officer to represent its interests in such corporation; nor appointing a
representative or distributor domiciled in the Philippines which transacts
business in its own name and for its own account.
Based on Article 133 of the Corporation Code and gauged by such statutory
standards, petitioners are not barred from maintaining the present action. There
is no showing that, under our statutory or case law, petitioners are doing,
transacting, engaging in or carrying on business in the Philippines as would
require obtention of a license before they can seek redress from our courts. No
evidence has been offered to show that petitioners have performed any of the
enumerated acts or any other specific act indicative of an intention to conduct or
transact business in the Philippines.
Accordingly, the certification issued by the Securities and Exchange
Commission 20 stating that its records do not show the registration of petitioner film
companies either as corporations or partnerships or that they have been licensed to
transact business in the Philippines, while undeniably true, is of no consequence to
petitioners' right to bring action in the Philippines. Verily, no record of such registration
by petitioners can be expected to be found for, as aforestated, said foreign film
corporations do not transact or do business in the Philippines and, therefore, do not
need to be licensed in order to take recourse to our courts.
Although Section 1(g) of the Implementing Rules and Regulations of the Omnibus
Investments Code lists, among others
(1) Soliciting orders, purchases (sales) or service contracts. Concrete and
specific solicitations by a foreign firm, or by an agent of such foreign firm,
not acting independently of the foreign firm amounting to negotiations or
fixing of the terms and conditions of sales or service contracts, regardless
of where the contracts are actually reduced to writing, shall constitute
doing business even if the enterprise has no office or fixed place of
business in the Philippines. The arrangements agreed upon as to
manner, time and terms of delivery of the goods or the transfer of title
thereto is immaterial. A foreign firm which does business through the
middlemen acting in their own names, such as indentors, commercial

brokers or commission merchants, shall not be deemed doing business in

the Philippines. But such indentors, commercial brokers or commission
merchants shall be the ones deemed to be doing business in the
Philippines.
(2) Appointing a representative or distributor who is domiciled in the
Philippines, unless said representative or distributor has an independent
status, i.e., it transacts business in its name and for its own account, and
not in the name or for the account of a principal. Thus, where a foreign
firm is represented in the Philippines by a person or local company which
does not act in its name but in the name of the foreign firm, the latter is
doing business in the Philippines.
as acts constitutive of "doing business," the fact that petitioners are admittedly
copyright owners or owners of exclusive distribution rights in the Philippines of
motion pictures or films does not convert such ownership into an indicium of
doing business which would require them to obtain a license before they can sue
upon a cause of action in local courts.
Neither is the appointment of Atty. Rico V. Domingo as attorney-in-fact of
petitioners, with express authority pursuant to a special power of attorney, inter
alia
To lay criminal complaints with the appropriate authorities and to provide
evidence in support of both civil and criminal proceedings against any
person or persons involved in the criminal infringement of copyright or
concerning the unauthorized importation, duplication, exhibition or
distribution of any cinematographic work(s) films or video cassettes
of which . . . is the owner of copyright or the owner of exclusive rights of
distribution in the Philippines pursuant to any agreement(s) between . . .
and the respective owners of copyright in such cinematographic work(s),
to initiate and prosecute on behalf of . . . criminal or civil actions in the
Philippines against any person or persons unlawfully distributing,
exhibiting, selling or offering for sale any films or video cassettes of which
. . . is the owner of copyright or the owner of exclusive rights of
distribution in the Philippines pursuant to any agreement(s) between . . .
and the respective owners of copyright in such works. 21
tantamount to doing business in the Philippines. We fail to see how exercising
one's legal and property rights and taking steps for the vigilant protection of said
rights, particularly the appointment of an attorney-in-fact, can be deemed by and
of themselves to be doing business here.
As a general rule, a foreign corporation will not be regarded as doing business in
the State simply because it enters into contracts with residents of the State,
where such contracts are consummated outside the State. 22 In fact, a view is taken
that a foreign corporation is not doing business in the State merely because sales of
its product are made there or other business furthering its interests is transacted
there by an alleged agent, whether a corporation or a natural person, where such
activities are not under the direction and control of the foreign corporation but are
engaged in by the alleged agent as an independent business. 23
It is generally held that sales made to customers in the State by an independent
dealer who has purchased and obtained title from the corporation to the products
sold are not a doing of business by the corporation. 24Likewise, a foreign
corporation which sells its products to persons styled "distributing agents" in the

State, for distribution by them, is not doing business in the State so as to render it
subject to service of process therein, where the contract with these purchasers is that
they shall buy exclusively from the foreign corporation such goods as it manufactures
and shall sell them at trade prices established by it. 25

It has moreover been held that the act of a foreign corporation in engaging an
attorney to represent it in a Federal court sitting in a particular State is not doing
business within the scope of the minimum contact test. 26 With much more reason
should this doctrine apply to the mere retainer of Atty. Domingo for legal protection
against contingent acts of intellectual piracy.
In accordance with the rule that "doing business" imports only acts in furtherance
of the purposes for which a foreign corporation was organized, it is held that the
mere institution and prosecution or defense of a suit, particularly if the transaction
which is the basis of the suit took place out of the State, do not amount to the
doing of business in the State. The institution of a suit or the removal thereof is
neither the making of a contract nor the doing of business within a constitutional
provision placing foreign corporations licensed to do business in the State under
the same regulations, limitations and liabilities with respect to such acts as
domestic corporations. Merely engaging in litigation has been considered as not
a sufficient minimum contact to warrant the exercise of jurisdiction over a foreign
corporation. 27
As a consideration aside, we have perforce to comment on private respondents'
basis for arguing that petitioners are barred from maintaining suit in the
Philippines. For allegedly being foreign corporations doing business in the
Philippines without a license, private respondents repeatedly maintain in all their
pleadings that petitioners have thereby no legal personality to bring an action
before Philippine Courts. 28
Among the grounds for a motion to dismiss under the Rules of Court
are lack of legal capacity to sue 29 and that the complaint states no cause of
action. 30 Lack of legal capacity to sue means that the plaintiff is not in the exercise of
his civil rights, or does not have the necessary qualification to appear in the case, or
does not have the character or representation he claims. 31 On the other hand, a case
is dismissible for lack of personality to sue upon proof that the plaintiff is not the real
party in interest, hence grounded on failure to state a cause of action. 32 The term
"lack of capacity to sue" should not be confused with the term "lack of personality to
sue." While the former refers to a plaintiff's general disability to sue, such as on
account of minority, insanity, incompetence, lack of juridical personality or any other
general disqualifications of a party, the latter refers to the fact that the plaintiff is not
the real party in interest. Correspondingly, the first can be a ground for a motion to
dismiss based on the ground of lack of legal capacity to sue; 33 whereas the second
can be used as a ground for a motion to dismiss based on the fact that the complaint,
on the face thereof, evidently states no cause of action. 34
Applying the above discussion to the instant petition, the ground available for
barring recourse to our courts by an unlicensed foreign corporation doing or
transacting business in the Philippines should properly be "lack of capacity to
sue," not "lack of personality to sue." Certainly, a corporation whose legal rights
have been violated is undeniably such, if not the only, real party in interest to
bring suit thereon although, for failure to comply with the licensing requirement, it
is not capacitated to maintain any suit before our courts.
Lastly, on this point, we reiterate this Court's rejection of the common procedural
tactics of erring local companies which, when sued by unlicensed foreign
corporations not engaged in business in the Philippines, invoke the latter's

supposed lack of capacity to sue. The doctrine of lack of capacity to sue based
on failure to first acquire a local license is based on considerations of public
policy. It was never intended to favor nor insulate from suit unscrupulous
establishments or nationals in case of breach of valid obligations or violation of
legal rights of unsuspecting foreign firms or entities simply because they are not
licensed to do business in the country. 35
II
We now proceed to the main issue of the retroactive application to the present
controversy of the ruling in20th Century Fox Film Corporation vs. Court of
Appeals, et al., promulgated on August 19, 1988, 36 that for the determination of
probable cause to support the issuance of a search warrant in copyright infringement
cases involving videograms, the production of the master tape for comparison with
the allegedly pirate copies is necessary.
Petitioners assert that the issuance of a search warrant is addressed to the
discretion of the court subject to the determination of probable cause in
accordance with the procedure prescribed therefore under Sections 3 and 4 of
Rule 126. As of the time of the application for the search warrant in question, the
controlling criterion for the finding of probable cause was that enunciated
in Burgos vs. Chief of Staff 37 stating that:
Probable cause for a search warrant is defined as such facts and
circumstances which would lead a reasonably discreet and prudent man
to believe that an offense has been committed and that the objects
sought in connection with the offense are in the place sought to be
searched.
According to petitioners, after complying with what the law then required, the
lower court determined that there was probable cause for the issuance of a
search warrant, and which determination in fact led to the issuance and service
on December 14, 1987 of Search Warrant No. 87-053. It is further argued that
any search warrant so issued in accordance with all applicable legal
requirements is valid, for the lower court could not possibly have been expected
to apply, as the basis for a finding of probable cause for the issuance of a search
warrant in copyright infringement cases involving videograms, a pronouncement
which was not existent at the time of such determination, on December 14, 1987,
that is, the doctrine in the 20th Century Fox case that was promulgated only on
August 19, 1988, or over eight months later.
Private respondents predictably argue in support of the ruling of the Court of
Appeals sustaining the quashal of the search warrant by the lower court on the
strength of that 20th Century Fox ruling which, they claim, goes into the very
essence of probable cause. At the time of the issuance of the search warrant
involved here, although the 20th Century Fox case had not yet been decided,
Section 2, Article III of the Constitution and Section 3, Rule 126 of the 1985 Rules
on Criminal Procedure embodied the prevailing and governing law on the matter.
The ruling in 20th Century Fox was merely an application of the law on probable
cause. Hence, they posit that there was no law that was retrospectively applied,
since the law had been there all along. To refrain from applying the 20th Century
Fox ruling, which had supervened as a doctrine promulgated at the time of the
resolution of private respondents' motion for reconsideration seeking the quashal
of the search warrant for failure of the trial court to require presentation of the
master tapes prior to the issuance of the search warrant, would have constituted
grave abuse of discretion. 38

Respondent court upheld the retroactive application of the 20th Century

Fox ruling by the trial court in resolving petitioners' motion for reconsideration in
favor of the quashal of the search warrant, on this renovated thesis:
And whether this doctrine should apply retroactively, it must be noted that
in the 20th Century Fox case, the lower court quashed the earlier search
warrant it issued. On certiorari, the Supreme Court affirmed the quashal
on the ground among others that the master tapes or copyrighted films
were not presented for comparison with the purchased evidence of the
video tapes to determine whether the latter is an unauthorized
reproduction of the former.
If the lower court in the Century Fox case did not quash the warrant, it is
Our view that the Supreme Court would have invalidated the warrant just
the same considering the very strict requirement set by the Supreme
Court for the determination of "probable cause" in copyright infringement
cases as enunciated in this 20th Century Fox case. This is so because,
as was stated by the Supreme Court in the said case, the master tapes
and the pirated tapes must be presented for comparison to satisfy the
requirement of "probable cause." So it goes back to the very existence of
probable
cause. . . . 39
Mindful as we are of the ramifications of the doctrine of stare decisis and the
rudiments of fair play, it is our considered view that the 20th Century Fox ruling
cannot be retroactively applied to the instant case to justify the quashal of Search
Warrant No. 87-053. Herein petitioners' consistent position that the order of the
lower court of September 5, 1988 denying therein defendants' motion to lift the
order of search warrant was properly issued, there having been satisfactory
compliance with the then prevailing standards under the law for determination of
probable cause, is indeed well taken. The lower court could not possibly have
expected more evidence from petitioners in their application for a search warrant
other than what the law and jurisprudence, then existing and judicially accepted,
required with respect to the finding of probable cause.
Article 4 of the Civil Code provides that "(l)aws shall have no retroactive effect,
unless the contrary is provided. Correlatively, Article 8 of the same Code declares
that "(j)udicial decisions applying the laws or the Constitution shall form part of
the legal system of the Philippines."
Jurisprudence, in our system of government, cannot be considered as an
independent source of law; it cannot create law. 40 While it is true that judicial
decisions which apply or interpret the Constitution or the laws are part of the legal
system of the Philippines, still they are not laws. Judicial decisions, though not laws,
are nonetheless evidence of what the laws mean, and it is for this reason that they
are part of the legal system of the Philippines. 41Judicial decisions of the Supreme
Court assume the same authority as the statute
itself. 42
Interpreting the aforequoted correlated provisions of the Civil Code and in light of
the above disquisition, this Court emphatically declared in Co vs. Court of
Appeals, et al. 43 that the principle of prospectivity applies not only to original or
amendatory statutes and administrative rulings and circulars, but also, and properly
so, to judicial decisions. Our holding in the earlier case of People vs. Jabinal 44 echoes
the rationale for this judicial declaration,viz.:

Decisions of this Court, although in themselves not laws, are nevertheless

evidence of what the laws mean, and this is the reason why under Article
8 of the New Civil Code, "Judicial decisions applying or interpreting the
laws or the Constitution shall form part of the legal system." The
interpretation upon a law by this Court constitutes, in a way, a part of the
law as of the date that the law was originally passed, since this Court's
construction merely establishes the contemporaneous legislative intent
that the law thus construed intends to effectuate. The settled rule
supported by numerous authorities is a restatement of the legal maxim
"legis interpretatio legis vim obtinet" the interpretation placed upon the
written law by a competent court has the force of law. . . . , but when a
doctrine of this Court is overruled and a different view is adopted, the new
doctrine should be applied prospectively, and should not apply to parties
who had relied on the old doctrine and acted on the faith thereof . . . .
(Emphasis supplied).
This was forcefully reiterated in Spouses Benzonan vs. Court of Appeals, et
al., 45 where the Court expounded:
. . . . But while our decisions form part of the law of the land, they are also
subject to Article 4 of the Civil Code which provides that "laws shall have
no retroactive effect unless the contrary is provided." This is expressed in
the familiar legal maxim lex prospicit, non respicit, the law looks forward
not backward. The rationale against retroactivity is easy to perceive. The
retroactive application of a law usually divests rights that have already
become vested or impairs the obligations of contract and hence, is
unconstitutional (Francisco v. Certeza, 3 SCRA 565 [1961]). The same
consideration underlies our rulings giving only prospective effect to
decisions enunciating new doctrines. . . . .
The reasoning behind Senarillos vs. Hermosisima 46 that judicial interpretation of a
statute constitutes part of the law as of the date it was originally passed, since the
Court's construction merely establishes the contemporaneous legislative intent that
the interpreted law carried into effect, is all too familiar. Such judicial doctrine does
not amount to the passage of a new law but consists merely of a construction or
interpretation of a pre-existing one, and that is precisely the situation obtaining in this
case.
It is consequently clear that a judicial interpretation becomes a part of the law as
of the date that law was originally passed, subject only to the qualification that
when a doctrine of this Court is overruled and a different view is adopted, and
more so when there is a reversal thereof, the new doctrine should be applied
prospectively and should not apply to parties who relied on the old doctrine and
acted in good faith. 47 To hold otherwise would be to deprive the law of its quality of
fairness and justice then, if there is no recognition of what had transpired prior to such
adjudication. 48
There is merit in petitioners' impassioned and well-founded argumentation:
The case of 20th Century Fox Film Corporation vs. Court of Appeals, et
al., 164 SCRA 655 (August 19, 1988) (hereinafter 20th Century Fox) was
inexistent in December of 1987 when Search Warrant 87-053 was issued
by the lower court. Hence, it boggles the imagination how the lower court
could be expected to apply the formulation of 20th Century Fox in finding
probable cause when the formulation was yet non-existent.

xxx xxx xxx

In short, the lower court was convinced at that time after conducting
searching examination questions of the applicant and his witnesses that
"an offense had been committed and that the objects sought in
connection with the offense (were) in the place sought to be searched"
(Burgos v. Chief of Staff, et al., 133 SCRA 800). It is indisputable,
therefore, that at the time of the application, or on December 14, 1987,
the lower court did not commit any error nor did it fail to comply with any
legal requirement for the valid issuance of search warrant.
. . . (W)e believe that the lower court should be considered as having
followed the requirements of the law in issuing Search Warrant No. 87053. The search warrant is therefore valid and binding. It must be noted
that nowhere is it found in the allegations of the Respondents that the
lower court failed to apply the law as then interpreted in 1987. Hence, we
find it absurd that it is (sic) should be seen otherwise, because it is simply
impossible to have required the lower court to apply a formulation which
will only be defined six months later.
Furthermore, it is unjust and unfair to require compliance with legal and/or
doctrinal requirements which are inexistent at the time they were
supposed to have been complied with.
xxx xxx xxx
. . . If the lower court's reversal will be sustained, what encouragement
can be given to courts and litigants to respect the law and rules if they
can expect with reasonable certainty that upon the passage of a new rule,
their conduct can still be open to question? This certainly breeds
instability in our system of dispensing justice. For Petitioners who took
special effort to redress their grievances and to protect their property
rights by resorting to the remedies provided by the law, it is most unfair
that fealty to the rules and procedures then obtaining would bear but fruits
of
injustice. 49
Withal, even the proposition that the prospectivity of judicial decisions imports
application thereof not only to future cases but also to cases still ongoing or not
yet final when the decision was promulgated, should not be countenanced in the
jural sphere on account of its inevitably unsettling repercussions. More to the
point, it is felt that the reasonableness of the added requirement in 20th Century
Fox calling for the production of the master tapes of the copyrighted films for
determination of probable cause in copyright infringement cases needs revisiting
and clarification.
It will be recalled that the 20th Century Fox case arose from search warrant
proceedings in anticipation of the filing of a case for the unauthorized sale or
renting out of copyrighted films in videotape format in violation of Presidential
Decree No. 49. It revolved around the meaning of probable cause within the
context of the constitutional provision against illegal searches and seizures, as
applied to copyright infringement cases involving videotapes.
Therein it was ruled that

The presentation of master tapes of the copyrighted films from which the
pirated films were allegedly copied, was necessary for the validity of
search warrants against those who have in their possession the pirated
films. The petitioner's argument to the effect that the presentation of the
master tapes at the time of application may not be necessary as these
would be merely evidentiary in nature and not determinative of whether or
not a probable cause exists to justify the issuance of the search warrants
is not meritorious. The court cannot presume that duplicate or copied
tapes were necessarily reproduced from master tapes that it owns.
The application for search warrants was directed against video tape
outlets which allegedly were engaged in the unauthorized sale and
renting out of copyrighted films belonging to the petitioner pursuant to
P.D. 49.
The essence of a copyright infringement is the similarity or at least
substantial similarity of the purported pirated works to the copyrighted
work. Hence, the applicant must present to the court the copyrighted films
to compare them with the purchased evidence of the video tapes
allegedly pirated to determine whether the latter is an unauthorized
reproduction of the former. This linkage of the copyrighted films to the
pirated films must be established to satisfy the requirements of probable
cause. Mere allegations as to the existence of the copyrighted films
cannot serve as basis for the issuance of a search warrant.
For a closer and more perspicuous appreciation of the factual antecedents
of 20th Century Fox, the pertinent portions of the decision therein are quoted
hereunder, to wit:
In the instant case, the lower court lifted the three questioned search
warrants against the private respondents on the ground that it acted on
the application for the issuance of the said search warrants and granted it
on the misrepresentations of applicant NBI and its witnesses that
infringement of copyright or a piracy of a particular film have been
committed. Thus the lower court stated in its questioned order dated
January 2, 1986:
According to the movant, all three witnesses during the
proceedings in the application for the three search
warrants testified of their own personal knowledge. Yet,
Atty. Albino Reyes of the NBI stated that the counsel or
representative of the Twentieth Century Fox Corporation
will testify on the video cassettes that were pirated, so that
he did not have personal knowledge of the alleged piracy.
The witness Bacani also said that the video cassettes
were pirated without stating the manner it was pirated and
that it was Atty. Domingo that has knowledge of that fact.
On the part of Atty. Domingo, he said that the re-taping of
the allegedly pirated tapes was from master tapes
allegedly belonging to the Twentieth Century Fox,
because, according to him it is of his personal knowledge.
At the hearing of the Motion for Reconsideration, Senior
NBI Agent Atty. Albino Reyes testified that when the
complaint for infringement was brought to the NBI, the

master tapes of the allegedly pirated tapes were shown to

him and he made comparisons of the tapes with those
purchased by their man Bacani. Why the master tapes or
at least the film reels of the allegedly pirated tapes were
not shown to the Court during the application gives some
misgivings as to the truth of that bare statement of the NBI
agent on the witness stand.
Again as the application and search proceedings is a
prelude to the filing of criminal cases under PD 49, the
copyright infringement law, and although what is required
for the issuance thereof is merely the presence of
probable cause, that probable cause must be satisfactory
to the Court, for it is a time-honored precept that
proceedings to put a man to task as an offender under our
laws should be interpreted in strictissimi juris against the
government and liberally in favor of the alleged offender.
xxx xxx xxx
This doctrine has never been overturned, and as a matter
of fact it had been enshrined in the Bill of Rights in our
1973 Constitution.
So that lacking in persuasive effect, the allegation that
master tapes were viewed by the NBI and were compared
to the purchased and seized video tapes from the
respondents' establishments, it should be dismissed as
not supported by competent evidence and for that matter
the probable cause hovers in that grey debatable twilight
zone between black and white resolvable in favor of
respondents herein.
But the glaring fact is that "Cocoon," the first video tape
mentioned in the search warrant, was not even duly
registered or copyrighted in the Philippines. (Annex C of
Opposition p. 152 record.) So, that lacking in the requisite
presentation to the Court of an alleged master tape for
purposes of comparison with the purchased evidence of
the video tapes allegedly pirated and those seized from
respondents, there was no way to determine whether
there really was piracy, or copying of the film of the
complainant Twentieth Century Fox.
xxx xxx xxx
The lower court, therefore, lifted the three (3) questioned search warrants
in the absence of probable cause that the private respondents violated
P.D. 49. As found out by the court, the NBI agents who acted as
witnesses did not have personal knowledge of the subject matter of their
testimony which was the alleged commission of the offense by the private
respondents. Only the petitioner's counsel who was also a witness during
the application for the issuance of the search warrants stated that he had
personal knowledge that the confiscated tapes owned by the private
respondents were pirated tapes taken from master tapes belonging to the
petitioner. However, the lower court did not give much credence to his

testimony in view of the fact that the master tapes of the allegedly pirated
tapes were not shown to the court during the application (Emphasis ours).
The italicized passages readily expose the reason why the trial court therein
required the presentation of the master tapes of the allegedly pirated films in
order to convince itself of the existence of probable cause under the factual
milieu peculiar to that case. In the case at bar, respondent appellate court itself
observed:
We feel that the rationale behind the aforequoted doctrine is that the
pirated copies as well as the master tapes, unlike the other types of
personal properties which may be seized, were available for presentation
to the court at the time of the application for a search warrant to
determine the existence of the linkage of the copyrighted films with the
pirated ones. Thus, there is no reason not the present them (Emphasis
supplied ). 50
In fine, the supposed pronunciamento in said case regarding the necessity for the
presentation of the master tapes of the copyrighted films for the validity of search
warrants should at most be understood to merely serve as a guidepost in
determining the existence of probable cause in copyright infringement
cases where there is doubt as to the true nexus between the master tape and the
pirated copies. An objective and careful reading of the decision in said case could
lead to no other conclusion than that said directive was hardly intended to be a
sweeping and inflexible requirement in all or similar copyright infringement cases.
Judicial dicta should always be construed within the factual matrix of their
parturition, otherwise a careless interpretation thereof could unfairly fault the
writer with the vice of overstatement and the reader with the fallacy of undue
generalization.
In the case at bar, NBI Senior Agent Lauro C. Reyes who filed the application for
search warrant with the lower court following a formal complaint lodged by
petitioners, judging from his affidavit 51 and his deposition, 52did testify on matters
within his personal knowledge based on said complaint of petitioners as well as his
own investigation and surveillance of the private respondents' video rental shop.
Likewise, Atty. Rico V. Domingo, in his capacity as attorney-in-fact, stated in his
affidavit 53 and further expounded in his deposition 54 that he personally knew of the
fact that private respondents had never been authorized by his clients to reproduce,
lease and possess for the purpose of selling any of the copyrighted films.
Both testimonies of Agent Reyes and Atty. Domingo were corroborated by Rene
C. Baltazar, a private researcher retained by Motion Pictures Association of
America, Inc. (MPAA, Inc.), who was likewise presented as a witness during the
search warrant proceedings. 55 The records clearly reflect that the testimonies of the
abovenamed witnesses were straightforward and stemmed from matters within their
personal knowledge. They displayed none of the ambivalence and uncertainty that
the witnesses in the 20th Century Fox case exhibited. This categorical forthrightness
in their statements, among others, was what initially and correctly convinced the trial
court to make a finding of the existence of probable cause.
There is no originality in the argument of private respondents against the validity
of the search warrant, obviously borrowed from 20th Century Fox, that petitioners'
witnesses NBI Agent Lauro C. Reyes, Atty. Rico V. Domingo and Rene C.
Baltazar did not have personal knowledge of the subject matter of their
respective testimonies and that said witnesses' claim that the video tapes were
pirated, without stating the manner by which these were pirated, is a conclusion
of fact without basis. 56 The difference, it must be pointed out, is that the records in

the present case reveal that (1) there is no allegation of misrepresentation, much less
a finding thereof by the lower court, on the part of petitioners' witnesses; (2) there is
no denial on the part of private respondents that the tapes seized were illegitimate
copies of the copyrighted ones not have they shown that they were given any
authority by petitioners to copy, sell, lease, distribute or circulate, or at least, to offer
for sale, lease, distribution or circulation the said video tapes; and (3) a discreet but
extensive surveillance of the suspected area was undertaken by petitioners'
witnesses sufficient to enable them to execute trustworthy affidavits and depositions
regarding matters discovered in the course thereof and of which they have personal
knowledge.

It is evidently incorrect to suggest, as the ruling in 20th Century Fox may appear
to do, that in copyright infringement cases, the presentation of master tapes of
the copyrighted films is always necessary to meet the requirement of probable
cause and that, in the absence thereof, there can be no finding of probable cause
for the issuance of a search warrant. It is true that such master tapes are object
evidence, with the merit that in this class of evidence the ascertainment of the
controverted fact is made through demonstrations involving the direct use of the
senses of the presiding magistrate. 57 Such auxiliary procedure, however, does not
rule out the use of testimonial or documentary evidence, depositions, admissions or
other classes of evidence tending to prove the factum probandum, 58 especially where
the production in court of object evidence would result in delay, inconvenience or
expenses out of proportion to its evidentiary value. 59
Of course, as a general rule, constitutional and statutory provisions relating to
search warrants prohibit their issuance except on a showing of probable cause,
supported by oath or affirmation. These provisions prevent the issuance of
warrants on loose, vague, or doubtful bases of fact, and emphasize the purpose
to protect against all general searches. 60 Indeed, Article III of our Constitution
mandates in Sec. 2 thereof that no search warrant shall issue except upon probable
cause to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and particularly
describing the place to be searched and the things to be seized; and Sec. 3 thereof
provides that any evidence obtained in violation of the preceding section shall be
inadmissible for any purpose in any proceeding.
These constitutional strictures are implemented by the following provisions of
Rule 126 of the Rules of Court:
Sec. 3. Requisites for issuing search warrant. A search warrant shall
not issue but upon probable cause in connection with one specific offense
to be determined personally by the judge after examination under oath or
affirmation of the complainant and the witnesses he may produce, and
particularly describing the place to be searched and the things to be
seized.
Sec. 4. Examination of complainant; record. The judge must, before
issuing the warrant, personally examine in the form of searching
questions and answers, in writing and under oath the complainant and
any witnesses he may produce on facts personally known to them and
attach to the record their sworn statements together with any affidavits
submitted.
Sec. 5. Issuance and form of search warrant. If the judge is thereupon
satisfied of the existence of facts upon which the application is based, or
that there is probable cause to believe that they exist, he must issue the

warrant, which must be substantially in the form prescribed by these

Rules.
The constitutional and statutory provisions of various jurisdictions requiring a
showing of probable cause before a search warrant can be issued are mandatory
and must be complied with, and such a showing has been held to be an
unqualified condition precedent to the issuance of a warrant. A search warrant not
based on probable cause is a nullity, or is void, and the issuance thereof is, in
legal contemplation, arbitrary. 61 It behooves us, then, to review the concept of
probable cause, firstly, from representative holdings in the American jurisdiction from
which we patterned our doctrines on the matter.
Although the term "probable cause" has been said to have a well-defined
meaning in the law, the term is exceedingly difficult to define, in this case, with
any degree of precision; indeed, no definition of it which would justify the
issuance of a search warrant can be formulated which would cover every state of
facts which might arise, and no formula or standard, or hard and fast rule, may be
laid down which may be applied to the facts of every situation. 62 As to what acts
constitute probable cause seem incapable of definition. 63 There is, of necessity, no
exact test. 64
At best, the term "probable cause" has been understood to mean a reasonable
ground of suspicion, supported by circumstances sufficiently strong in themselves
to warrant a cautious man in the belief that the person accused is guilty of the
offense with which he is charged; 65 or the existence of such facts and
circumstances as would excite an honest belief in a reasonable mind acting on all the
facts and circumstances within the knowledge of the magistrate that the charge made
by the applicant for the warrant is true. 66
Probable cause does not mean actual and positive cause, nor does it import
absolute certainty. The determination of the existence of probable cause is not
concerned with the question of whether the offense charged has been or is being
committed in fact, or whether the accused is guilty or innocent, but only whether
the affiant has reasonable grounds for his belief. 67 The requirement is less than
certainty or proof , but more than suspicion or possibility. 68
In Philippine jurisprudence, probable cause has been uniformly defined as such
facts and circumstances which would lead a reasonable, discreet and prudent
man to believe that an offense has been committed, and that the objects sought
in connection with the offense are in the place sought to be searched. 69 It being
the duty of the issuing officer to issue, or refuse to issue, the warrant as soon as
practicable after the application therefor is filed, 70 the facts warranting the conclusion
of probable cause must be assessed at the time of such judicial determination by
necessarily using legal standards then set forth in law and jurisprudence, and not
those that have yet to be crafted thereafter.
As already stated, the definition of probable cause enunciated
in Burgos, Sr. vs. Chief of Staff, et al., supra,vis-a-vis the provisions of Sections 3
and 4 of Rule 126, were the prevailing and controlling legal standards, as they
continue to be, by which a finding of probable cause is tested. Since the propriety
of the issuance of a search warrant is to be determined at the time of the
application therefor, which in turn must not be too remote in time from the
occurrence of the offense alleged to have been committed, the issuing judge, in
determining the existence of probable cause, can and should logically look to the
touchstones in the laws theretofore enacted and the decisions already
promulgated at the time, and not to those which had not yet even been conceived
or formulated.

It is worth noting that neither the Constitution nor the Rules of Court attempt to
define probable cause, obviously for the purpose of leaving such matter to the
court's discretion within the particular facts of each case. Although the
Constitution prohibits the issuance of a search warrant in the absence of
probable cause, such constitutional inhibition does not command the legislature
to establish a definition or formula for determining what shall constitute probable
cause. 71 Thus, Congress, despite its broad authority to fashion standards of
reasonableness for searches and seizures, 72 does not venture to make such a
definition or standard formulation of probable cause, nor categorize what facts and
circumstances make up the same, much less limit the determination thereof to and
within the circumscription of a particular class of evidence, all in deference to judicial
discretion and probity. 73
Accordingly, to restrict the exercise of discretion by a judge by adding a particular
requirement (the presentation of master tapes, as intimated by 20th Century Fox)
not provided nor implied in the law for a finding of probable cause is beyond the
realm of judicial competence or statesmanship. It serves no purpose but to stultify
and constrict the judicious exercise of a court's prerogatives and to denigrate the
judicial duty of determining the existence of probable cause to a mere ministerial
or mechanical function. There is, to repeat, no law or rule which requires that the
existence of probable cause is or should be determined solely by a specific kind
of evidence. Surely, this could not have been contemplated by the framers of the
Constitution, and we do not believe that the Court intended the statement in 20th
Century Fox regarding master tapes as the dictum for all seasons and reasons in
infringement cases.
Turning now to the case at bar, it can be gleaned from the records that the lower
court followed the prescribed procedure for the issuance of a search warrant: (1)
the examination under oath or affirmation of the complainant and his witnesses,
with them particularly describing the place to be searched and the things to be
seized; (2) an examination personally conducted by the judge in the form of
searching questions and answers, in writing and under oath of the complainant
and witnesses on facts personally known to them; and, (3) the taking of sworn
statements, together with the affidavits submitted, which were duly attached to
the records.
Thereafter, the court a quo made the following factual findings leading to the
issuance of the search warrant now subject of this controversy:
In the instant case, the following facts have been established: (1)
copyrighted video tapes bearing titles enumerated in Search Warrant No.
87-053 were being sold, leased, distributed or circulated, or offered for
sale, lease, distribution, or transferred or caused to be transferred by
defendants at their video outlets, without the written consent of the private
complainants or their assignee; (2) recovered or confiscated from
defendants' possession were video tapes containing copyrighted motion
picture films without the authority of the complainant; (3) the video tapes
originated from spurious or unauthorized persons; and (4) said video
tapes were exact reproductions of the films listed in the search warrant
whose copyrights or distribution rights were owned by complainants.
The basis of these facts are the affidavits and depositions of NBI Senior
Agent Lauro C. Reyes, Atty. Rico V. Domingo, and Rene C. Baltazar.
Motion Pictures Association of America, Inc. (MPAA) thru their counsel,
Atty. Rico V. Domingo, filed a complaint with the National Bureau of
Investigation against certain video establishments one of which is
defendant, for violation of PD No. 49 as amended by PD No. 1988. Atty.

Lauro C. Reyes led a team to conduct discreet surveillance operations on

said video establishments. Per information earlier gathered by Atty.
Domingo, defendants were engaged in the illegal sale, rental, distribution,
circulation or public exhibition of copyrighted films of MPAA without its
written authority or its members. Knowing that defendant Sunshine Home
Video and its proprietor, Mr. Danilo Pelindario, were not authorized by
MPAA to reproduce, lease, and possess for the purpose of selling any of
its copyrighted motion pictures, instructed his researcher, Mr. Rene
Baltazar to rent two video cassettes from said defendants on October 21,
1987. Rene C. Baltazar proceeded to Sunshine Home Video and rented
tapes containing Little Shop of Horror. He was issued rental slip No.
26362 dated October 21, 1987 for P10.00 with a deposit of P100.00.
Again, on December 11, 1987, the returned to Sunshine Home Video and
rented Robocop with rental slip No. 25271 also for P10.00: On the basis
of the complaint of MPAA thru counsel, Atty. Lauro C. Reyes personally
went to Sunshine Home Video at No. 6 Mayfair Center, Magallanes
Commercial Center, Makati. His last visit was on December 7, 1987.
There, he found the video outlet renting, leasing, distributing video
cassette tapes whose titles were copyrighted and without the authority of
MPAA.
Given these facts, a probable cause exists. . . . 74
The lower court subsequently executed a volte-face, despite its prior detailed and
substantiated findings, by stating in its order of November 22, 1988 denying
petitioners' motion for reconsideration and quashing the search warrant that
. . . The two (2) cases have a common factual milieu; both involve alleged
pirated copyrighted films of private complainants which were found in the
possession or control of the defendants. Hence, the necessity of the
presentation of the master tapes from which the pirated films were
allegedly copied is necessary in the instant case, to establish the
existence of probable cause. 75
Being based solely on an unjustifiable and improper retroactive application of the
master tape requirement generated by 20th Century Fox upon a factual situation
completely different from that in the case at bar, and without anything more, this
later order clearly defies elemental fair play and is a gross reversible error. In fact,
this observation of the Court in La Chemise Lacoste, S.A. vs. Fernandez, et
al., supra, may just as easily apply to the present case:
A review of the grounds invoked . . . in his motion to quash the search
warrants reveals the fact that they are not appropriate for quashing a
warrant. They are matters of defense which should be ventilated during
the trial on the merits of the case. . . .
As correctly pointed out by petitioners, a blind espousal of the requisite of
presentation of the master tapes in copyright infringement cases, as the prime
determinant of probable cause, is too exacting and impracticable a requirement
to be complied with in a search warrant application which, it must not be
overlooked, is only an ancillary proceeding. Further, on realistic considerations, a
strict application of said requirement militates against the elements of secrecy
and speed which underlie covert investigative and surveillance operations in
police enforcement campaigns against all forms of criminality, considering that
the master tapes of a motion picture required to be presented before the court
consists of several reels contained in circular steel casings which, because of

their bulk, will definitely draw attention, unlike diminutive objects like video tapes
which can be easily concealed. 76 With hundreds of titles being pirated, this onerous
and tedious imposition would be multiplied a hundredfold by judicial fiat, discouraging
and preventing legal recourses in foreign jurisdictions.
Given the present international awareness and furor over violations in large scale
of intellectual property rights, calling for transnational sanctions, it bears calling to
mind the Court's admonition also in La Chemise Lacoste, supra, that
. . . . Judges all over the country are well advised to remember that court
processes should not be used as instruments to, unwittingly or otherwise,
aid counterfeiters and intellectual pirates, tie the hands of the law as it
seeks to protect the Filipino consuming public and frustrate executive and
administrative implementation of solemn commitments pursuant to
international conventions and treaties.
III
The amendment to Section 56 of Presidential Decree No. 49 by Presidential
Decree No. 1987, 77 which should here be publicized judicially, brought about the
revision of its penalty structure and enumerated additional acts considered violative of
said decree on intellectual property, namely, (1) directly or indirectly transferring or
causing to be transferred any sound recording or motion picture or other audio-visual
works so recorded with intent to sell, lease, publicly exhibit or cause to be sold,
leased or publicly exhibited, or to use or cause to be used for profit such articles on
which sounds, motion pictures, or other audio-visual works are so transferred without
the written consent of the owner or his assignee; (2) selling, leasing, distributing,
circulating, publicly exhibiting, or offering for sale, lease, distribution, or possessing
for the purpose of sale, lease, distribution, circulation or public exhibition any of the
abovementioned articles, without the written consent of the owner or his assignee;
and, (3) directly or indirectly offering or making available for a fee, rental, or any other
form of compensation any equipment, machinery, paraphernalia or any material with
the knowledge that such equipment, machinery, paraphernalia or material will be
used by another to reproduce, without the consent of the owner, any phonograph
record, disc, wire, tape, film or other article on which sounds, motion pictures or other
audio-visual recordings may be transferred, and which provide distinct bases for
criminal prosecution, being crimes independently punishable under Presidential
Decree No. 49, as amended, aside from the act of infringing or aiding or abetting
such infringement under Section 29.
The trial court's finding that private respondents committed acts in blatant
transgression of Presidential Decree No. 49 all the more bolsters its findings of
probable cause, which determination can be reached even in the absence of
master tapes by the judge in the exercise of sound discretion. The executive
concern and resolve expressed in the foregoing amendments to the decree for
the protection of intellectual property rights should be matched by corresponding
judicial vigilance and activism, instead of the apathy of submitting to technicalities
in the face of ample evidence of guilt.
The essence of intellectual piracy should be essayed in conceptual terms in order
to underscore its gravity by an appropriate understanding thereof. Infringement of
a copyright is a trespass on a private domain owned and occupied by the owner
of the copyright, and, therefore, protected by law, and infringement of copyright,
or piracy, which is a synonymous term in this connection, consists in the doing by
any person, without the consent of the owner of the copyright, of anything the
sole right to do which is conferred by statute on the owner of the copyright. 78

A copy of a piracy is an infringement of the original, and it is no defense that the

pirate, in such cases, did not know what works he was indirectly copying, or did
not know whether or not he was infringing any copyright; he at least knew that
what he was copying was not his, and he copied at his peril. In determining the
question of infringement, the amount of matter copied from the copyrighted work
is an important consideration. To constitute infringement, it is not necessary that
the whole or even a large portion of the work shall have been copied. If so much
is taken that the value of the original is sensibly diminished, or the labors of the
original author are substantially and to an injurious extent appropriated by
another, that is sufficient in point of law to constitute a
piracy. 79 The question of whether there has been an actionable infringement of a
literary, musical, or artistic work in motion pictures, radio or television being one of
fact, 80 it should properly be determined during the trial. That is the stage calling for
conclusive or preponderating evidence, and not the summary proceeding for the
issuance of a search warrant wherein both lower courts erroneously require the
master tapes.
In disregarding private respondent's argument that Search Warrant No. 87-053 is
a general warrant, the lower court observed that "it was worded in a manner that
the enumerated seizable items bear direct relation to the offense of violation of
Sec. 56 of PD 49 as amended. It authorized only the seizur(e) of articles used or
intended to be used in the unlawful sale, lease and other unconcerted acts in
violation of PD 49 as amended. . . . 81
On this point, Bache and Co., (Phil.), Inc., et al. vs. Ruiz, et al., 82 instructs and
enlightens:
A search warrant may be said to particularly describe the things to be
seized when the description therein is as specific as the circumstances
will ordinarily allow (People vs. Rubio, 57 Phil. 384); or when the
description expresses a conclusion of fact not of law by which the
warrant officer may be guided in making the search and seizure (idem.,
dissent of Abad Santos, J.,); or when the things described are limited to
those which bear direct relation to the offense for which the warrant is
being issued (Sec 2, Rule 126, Revised Rules of Court). . . . If the articles
desired to be seized have any direct relation to an offense committed, the
applicant must necessarily have some evidence, other than those articles,
to prove the said offense; and the articles subject of search and seizure
should come in handy merely to strengthen such evidence. . . .
On private respondents' averment that the search warrant was made applicable
to more than one specific offense on the ground that there are as many offenses
of infringement as there are rights protected and, therefore, to issue one search
warrant for all the movie titles allegedly pirated violates the rule that a search
warrant must be issued only in connection with one specific offense, the lower
court said:
. . . . As the face of the search warrant itself indicates, it was issued for
violation of Section 56, PD 49 as amended only. The specifications
therein (in Annex A) merely refer to the titles of the copyrighted motion
pictures/films belonging to private complainants which defendants were in
control/possession for sale, lease, distribution or public exhibition in
contravention of Sec. 56, PD 49 as amended. 83
That there were several counts of the offense of copyright infringement and the
search warrant uncovered several contraband items in the form of pirated video

tapes is not to be confused with the number of offenses charged. The search
warrant herein issued does not violate the one-specific-offense rule.
It is pointless for private respondents to insist on compliance with the registration
and deposit requirements under Presidential Decree No. 49 as prerequisites for
invoking the court's protective mantle in copyright infringement cases. As
explained by the court below:
Defendants-movants contend that PD 49 as amended covers only
producers who have complied with the requirements of deposit and notice
(in other words registration) under Sections 49 and 50 thereof. Absent
such registration, as in this case, there was no right created, hence, no
infringement under PD 49 as amended. This is not well-taken.
As correctly pointed out by private complainants-oppositors, the
Department of Justice has resolved this legal question as far back as
December 12, 1978 in its Opinion No. 191 of the then Secretary of Justice
Vicente Abad Santos which stated that Sections 26 and 50 do not apply
to cinematographic works and PD No. 49 "had done away with the
registration and deposit of cinematographic works" and that "even without
prior registration and deposit of a work which may be entitled to protection
under the Decree, the creator can file action for infringement of its rights".
He cannot demand, however, payment of damages arising from
infringement. The same opinion stressed that "the requirements of
registration and deposit are thus retained under the Decree, not as
conditions for the acquisition of copyright and other rights, but as
prerequisites to a suit for damages". The statutory interpretation of the
Executive Branch being correct, is entitled (to) weight and respect.
xxx xxx xxx
Defendants-movants maintain that complainant and his witnesses led the
Court to believe that a crime existed when in fact there was none. This is
wrong. As earlier discussed, PD 49 as amended, does not require
registration and deposit for a creator to be able to file an action for
infringement of his rights. These conditions are merely pre-requisites to
an action for damages. So, as long as the proscribed acts are shown to
exist, an action for infringement may be initiated. 84
Accordingly, the certifications 85 from the Copyright Section of the National Library,
presented as evidence by private respondents to show non-registration of some of
the films of petitioners, assume no evidentiary weight or significance whatsoever.
Furthermore, a closer review of Presidential Decree No. 49 reveals that even with
respect to works which are required under Section 26 thereof to be registered
and with copies to deposited with the National Library, such as books, including
composite and cyclopedic works, manuscripts, directories and gazetteers; and
periodicals, including pamphlets and newspapers; lectures, sermons, addresses,
dissertations prepared for oral delivery; and letters, the failure to comply with said
requirements does not deprive the copyright owner of the right to sue for
infringement. Such non-compliance merely limits the remedies available to him
and subjects him to the corresponding sanction.
The reason for this is expressed in Section 2 of the decree which prefaces its
enumeration of copyrightable works with the explicit statement that "the rights
granted under this Decree shall, from the moment of creation, subsist with

respect to any of the following classes of works." This means that under the
present state of the law, the copyright for a work is acquired by an intellectual
creator from the moment of creation even in the absence of registration and
deposit. As has been authoritatively clarified:
The registration and deposit of two complete copies or reproductions of
the work with the National Library within three weeks after the first public
dissemination or performance of the work, as provided for in Section 26
(P.D. No. 49, as amended), is not for the purpose of securing a copyright
of the work, but rather to avoid the penalty for non-compliance of the
deposit of said two copies and in order to recover damages in an
infringement suit. 86
One distressing observation. This case has been fought on the basis of, and its
resolution long delayed by resort to, technicalities to a virtually abusive extent by
private respondents, without so much as an attempt to adduce any credible
evidence showing that they conduct their business legitimately and fairly. The fact
that private respondents could not show proof of their authority or that there was
consent from the copyright owners for them to sell, lease, distribute or circulate
petitioners' copyrighted films immeasurably bolsters the lower court's initial
finding of probable cause. That private respondents are licensed by the
Videogram Regulatory Board does not insulate them from criminal and civil
liability for their unlawful business practices. What is more deplorable is that the
reprehensible acts of some unscrupulous characters have stigmatized the
Philippines with an unsavory reputation as a hub for intellectual piracy in this part
of the globe, formerly in the records of the General Agreement on Tariffs and
Trade and, now, of the World Trade Organization. Such acts must not be glossed
over but should be denounced and repressed lest the Philippines become an
international pariah in the global intellectual community.
WHEREFORE, the assailed judgment and resolution of respondent Court of
Appeals, and necessarily inclusive of the order of the lower court dated
November 22, 1988, are hereby REVERSED and SET ASIDE. The order of the
court a quo of September 5, 1988 upholding the validity of Search Warrant No.
87-053 is hereby REINSTATED, and said court is DIRECTED to take and
expeditiously proceed with such appropriate proceedings as may be called for in
this case. Treble costs are further assessed against private respondents.
SO ORDERED.
Narvasa, C.J., Padilla, Davide, Jr., Romero, Melo, Puno, Vitug, Kapunan, Mendoza,
Francisco, Hermosisima, Jr., Panganiban and Torres, Jr., JJ., concur.
Bellosillo, J., took no part

IV. VENUE
21. Westmont v. Samaniego 482 SCRA 611 (2006)

G.R. Nos. 146653-54

February 20, 2006

WESTMONT PHARMACEUTICALS, INC., UNITED

LABORATORIES, INC., and/or JOSE YAO CAMPOS, CARLOS
EJERCITO, ERNESTO SALAZAR, ELIEZER SALAZAR, JOSE
SOLIDUM, JR.,Petitioners,
vs.
RICARDO C. SAMANIEGO, Respondent.
x---------------x
G.R. Nos. 147407-08

February 20, 2006

RICARDO C. SAMANIEGO, Petitioner,

vs.
WESTMONT PHARMACEUTICALS, INC. and UNITED
LABORATORIES, INC., Respondents.
DECISION
SANDOVAL-GUTIERREZ, J.:
Before us are consolidated petitions for review on certiorari under Rule 45
of the 1997 Rules of Civil Procedure, as amended, filed by both contending
parties assailing the Decision1 dated January 8, 2001 and the
Resolution2 dated March 9, 2001 rendered by the Court of Appeals in CAG.R. SP No. 60400.
The factual antecedents as borne by the records are:
On May 5, 1998, Ricardo C. Samaniego filed with the Office of the Labor
Arbiter, Regional Arbitration Branch (RAB) No. II, Tuguegarao City,
Cagayan, a complaint for illegal dismissal and damages against Westmont
Pharmaceuticals, Inc. (Westmont) and United Laboratories, Inc. (Unilab),
herein Respondents. Also impleaded as respondents are Unilabs officers,
Jose Yao Campos, Carlos Ejercito, Ernesto Salazar, Eliezer Salazar, and Jose
Solidum, Jr.
The complaint alleges that Unilab initially hired Samaniego as Professional
Service Representative of its marketing arm, Westmont. Later, Unilab
promoted him as Senior Business Development Associate and assigned him

in Isabela as Acting District Manager of Westmont and Chairman of Unilab

Special Projects. In August 1995, he was transferred to Metro Manila
pending investigation of his subordinate and physicians of Region II
involved in a sales discount and Rx trade-off controversy. He was then
placed under "floating status" and assigned to perform duties not connected
with his position, like fetching at the airport physicians coming from the
provinces; making deposits in banks; fetching field men and doing
messengerial works. His transfer to Metro Manila resulted in the diminution
of his salary as his per diem was reduced from P13,194.00 to P2,299.00
only.
On June 26, 1998, Westmont and Unilab filed a motion to dismiss
Samaniegos complaint on the ground of improper venue and lack of cause
of action. They argued that the complaint should have been filed with the
National Labor Relations Commission (NLRC) in Manila, not with the
Office of the Labor Arbiter in Tuguegarao City, Cagayan; and that the action
should only be against Westmont, Samaniegos employer.
Samaniego filed an Opposition to the motion to which Westmont and Unilab
filed a Reply.
On August 13, 1998, the Labor Arbiter denied the motion to dismiss, citing
Section 1, Rule IV of the NLRC New Rules of Procedure. This provision
allows the Labor Arbiter to order a change of venue in meritorious cases.
The Labor Arbiter then set the case for preliminary conference during which
Westmont and Unilab expressly reserved their right to contest the order
denying their motion to dismiss.
On September 3, 1998, Westmont and Unilab filed with the NLRC an
Urgent Petition to Change or Transfer Venue. On the same date, they filed
with the Office of the Labor Arbiter in Cagayan a Motion to Suspend
Proceedings in view of the pendency of their petition for change or transfer
of venue in the NLRC.
On September 8, 1998, the Labor Arbiter issued an Order directing the
parties to submit their respective position papers and supporting documents
within twenty (20) days from notice, after which the case shall be deemed
submitted for decision.
On September 22, 1998, the NLRC, acting on the petition to change venue,
directed the Labor Arbiter to forward to the NLRC the records of the case.
The Labor Arbiter retained the complete duplicate original copies of the
records and set the case for hearing. Westmont and Unilab repeatedly filed
motions for cancellation of the scheduled dates of hearing on the ground that

their petition for change of venue has remained unresolved. They did not file
their position papers nor did they attend the hearing. Thus, the Labor Arbiter
considered the case submitted for Decision based on the records and the
evidence submitted by Samaniego.
On December 16, 1998, the Labor Arbiter rendered a Decision finding that
Samaniego was "illegally and unjustly dismissed constructively" and
ordering his reinstatement to his former position without loss of seniority
rights and privileges; and payment of his full backwages from the date of his
dismissal from the service up to the date of his actual reinstatement, as well
as per diem differential, profit share, and actual, moral and exemplary
damages, plus 10% attorneys fees.
On January 21, 1999, Westmont and Unilab interposed an appeal to the
NLRC. In its Resolution dated August 31, 1999, the NLRC dismissed the
petition for change of venue, holding that when the cause of action arose,
Samaniegos workplace was in Isabela over which the Labor Arbiter in
Cagayan has jurisdiction; and that the Labor Arbiters Decision is not
appealable.
In the same Resolution, the NLRC declared the Labor Arbiters Decision
null and void, finding that:
x x x the Executive Labor Arbiter below only allowed the transmittal of the
official records of the instant case to the Commission. Throwing caution into
the wind, he retained complete duplicate original copies of the same,
conducted further proceedings and rendered his now contested Decision
despite the pendency of the appeal-treated Urgent Petition for Change of
Venue.
As a consequence, respondents-appellants were deprived of their
opportunity to be heard and defend themselves on the issues raised in the
instant case. They were therefore denied of their right to due process of law
in violation of Section 1, Article III of the Constitution which provides: "No
person shall be deprived of his....property without due process of law."
The dispositive portion of the NLRC Resolution reads:
WHEREFORE, premises considered, the main Appeal and Motion to Quash
are hereby PARTIALLY GRANTED and the appeal-treated Petition for
Change of Venue DISMISSED for lack of jurisdiction and/or merit.
Accordingly, the Decision appealed from is declared NULL and VOID and
the Order appealed from SUSTAINED insofar as the denial of the Motion to
Dismiss is concerned. The entire records of the instant case are DIRECTED
to be immediately remanded to the Executive Labor Arbiter of origin for

immediate conduct of further proceeding. The respondents-appellants are

DIRECTED to pay complainant-appellee the amount of Two Hundred
Thirty Thousand Seven Hundred Twenty Pesos and Thirty Centavos
(P230,720.30) representing his salary from January 1, 1999 to August 31,
1999, the date of issuance of this Resolution less any salary collected by him
by way of execution pending appeal.
SO ORDERED.
The parties separately filed their motions for reconsideration but were both
denied by the NLRC in its Resolution dated June 27, 2000.
On January 8, 2001, the Court of Appeals, acting on the parties petitions
for certiorari, rendered its Decision setting aside the NLRC Resolutions and
affirming with modification the Labor Arbiters Decision in the sense that
the award of moral damages was reduced from P5,000,000.00
to P500,000.00; and the exemplary damages from P1,000,000.00
to P300,000.00, thus:
xxx
While this Court concurs with the ruling of the Executive Labor Arbiter that
there was constructive dismissal committed against Ricardo Samaniego, this
Court finds the award on moral and exemplary damages unconscionable.
xxx
WHEREFORE, the NLRCs resolutions dated August 31, 1999 and June 27,
2000 are hereby SET ASIDE. The decision of the Executive Labor Arbiter
dated December 16, 1998 is REINSTATED and AFFIRMED in all respect
except with the following modification: the moral and exemplary damages
are reduced to P500,000.00 and P300,000.00, respectively.
SO ORDERED.
Hence, these consolidated petitions for review on certiorari filed by the
opposing parties.
In their petition, Westmont and Unilab allege that the Court of Appeals erred
in denying their motion to dismiss by reason of improper venue and in
sustaining the Labor Arbiters Decision declaring that Samaniego was
constructively dismissed; and that they were denied due process.
For his part, Samaniego maintains that the Court of Appeals did not err in its
ruling. However, he claims that the Appellate Court should not have reduced
the Labor Arbiters award for moral and exemplary damages.

The petition to change or transfer venue filed by Westmont and Unilab with
the NLRC is not the proper remedy to assail the Labor Arbiters Order
denying their motion to dismiss. Such Order is merely interlocutory,
hence, not appealable. Section 3, Rule V of the Rules of Procedure of the
NLRC, as amended, provides:
SECTION 3. Motion to Dismiss. On or before the date set for the
conference, the respondent may file a motion to dismiss. Any motion to
dismiss on the ground of lack of jurisdiction, improper venue, or that the
cause of action is barred by prior judgment, prescription or forum
shopping, shall be immediately resolved by the Labor Arbiter by a
written order. An order denying the motion to dismiss or suspending its
resolution until the final determination of the case is not appealable.
In Indiana Aerospace University v. Commission on Higher Education,3 we
held:
An order denying a motion to dismiss is interlocutory, and so the proper
remedy in such a case is to appeal after a decision has been rendered.
Assuming that the petition to change or transfer venue is the proper remedy,
still we find that the Court of Appeals did not err in sustaining the Labor
Arbiters Order denying the motion to dismiss.
Section 1(a), Rule IV of the NLRC Rules of Procedure, as amended,
provides:1avvphil.net
SECTION 1. Venue. (a) All cases which Labor Arbiters have authority to
hear and decide may be filed in the Regional Arbitration Branch having
jurisdiction over the workplace of the complainant/petitioner.
For purposes of venue, workplace shall be understood as the place or
locality where the employee is regularly assigned when the cause of action
arose. It shall include the place where the employee is supposed to report
back after a temporary detail, assignment or travel. In the case of field
employees, as well as ambulant or itinerant workers, their workplace is
where they are regularly assigned, or where they are supposed to regularly
receive their salaries/wages or work instructions from and report the results
of their assignment to, their employers.
In Sulpicio Lines, Inc. v. NLRC,4 we held:
The question of venue essentially relates to the trial and touches more upon
the convenience of the parties, rather than upon the substance and merits of
the case. Our permissive rules underlying provisions on venue are intended

to assure convenience for the plaintiff and his witnesses and to promote the
ends of justice. This axiom all the more finds applicability in cases
involving labor and management because of the principle, paramount in our
jurisdiction, that the State shall afford full protection to labor.
xxx
This provision is obviously permissive, for the said section uses the word
"may," allowing a different venue when the interests of substantial justice
demand a different one. In any case, as stated earlier, the Constitutional
protection accorded to labor is a paramount and compelling factor, provided
the venue chosen is not altogether oppressive to the employer.
Here, it is undisputed that Samaniegos regular place of assignment was in
Isabela when he was transferred to Metro Manila or when the cause of
action arose. Clearly, the Appellate Court was correct in affirming the Labor
Arbiters finding that the proper venue is in the RAB No. II at Tuguegarao
City, Cagayan.
On the contention of Westmont and Unilab that they were denied due
process, well settled is the rule that theessence of due process is simply an
opportunity to be heard or, as applied to administrative proceedings, an
opportunity to explain ones side or an opportunity to seek a reconsideration
of the action or ruling complained of. The requirement of due process in
labor cases before a Labor Arbiter is satisfied when the parties are given
the opportunity to submit their position papers to which they are
supposed to attach all the supporting documents or documentary evidence
that would prove their respective claims, in the event the Labor Arbiter
determines that no formal hearing would be conducted or that such hearing
was not necessary.5
As shown by the records, the Labor Arbiter gave Westmont and Unilab, not
only once, but thrice, the opportunity to submit their position papers and
supporting affidavits and documents. But they were obstinate. Clearly, they
were not denied their right to due process.
The ultimate issue for our resolution is whether the Court of Appeals erred
in holding that Samaniego was constructively dismissed by Westmont and
Unilab.
To recapitulate, Samaniego claims that upon his reassignment and/or
transfer to Metro Manila, he was placed on "floating status" and directed to
perform functions not related to his position. For their part, Westmont and
Unilab explain that his transfer is based on a sound business judgment, a
management prerogative.

In constructive dismissal, the employer has the burden of proving that the
transfer of an employee is for just and valid grounds, such as genuine
business necessity. The employer must be able to show that the transfer is
not unreasonable, inconvenient, or prejudicial to the employee. It must not
involve a demotion in rank or a diminution of salary and other benefits. If
the employer cannot overcome this burden of proof, the employees transfer
shall be tantamount to unlawful constructive dismissal. 6
Westmont and Unilab failed to discharge this burden. Samaniego was
unceremoniously transferred from Isabela to Metro Manila. We hold that
such transfer is economically and emotionally burdensome on his part. He
was constrained to maintain two residences one for himself in Metro
Manila, and the other for his family in Tuguegarao City, Cagayan. Worse,
immediately after his transfer to Metro Manila, he was placed "on floating
status" and was demoted in rank, performing functions no longer
supervisory in nature.
There may also be constructive dismissal if an act of clear insensibility or
disdain by an employer becomes so unbearable on the part of the employee
that it could foreclose any choice by him except to forego his continued
employment.7 This was what happened to Samaniego. Thus, he is entitled to
reinstatement without loss of seniority rights, full backwages, inclusive of
allowances, and other benefits or their monetary equivalent,computed from
the time his compensation was withheld from him up to the time of his
actual reinstatement.8
However, the circumstances obtaining in this case do not warrant the
reinstatement of Samaniego. Antagonism caused a severe strain in the
relationship between him and his employer. A more equitable disposition
would be an award of separation pay equivalent to at least one month pay, or
one month pay for every year of service, whichever is higher (with a fraction
of at least six [6 months being considered as one [1 whole year), 9 in addition
to his full backwages, allowances and other benefits. 10
Records show that Samaniego was employed from October 1982 to May 27,
1998,11 or for sixteen (16) years and seven (7) months, with a monthly salary
of P25,000.00. Hence, he is entitled to a separation pay ofP425,000.00.
WHEREFORE, the assailed Decision and Resolution of the Court of
Appeals in CA-G.R. SP No. 60400 and CA-G.R. SP No. 60478
are AFFIRMED, with MODIFICATION in the sense that Westmont and
Unilab are ordered to pay Samaniego his separation pay equivalent
to P425,000.00, plus his full backwages, and other privileges and benefits,
or their monetary equivalent, from the time of his dismissal up to his

supposed actual reinstatement. The award for moral and exemplary damages
is deleted.
Costs against Westmont and Unilab.
SO ORDERED

22. Unimasters v. CA G.R. 119657 2-7-07

[G.R. No. 119657. February 7, 1997]

UNIMASTERS CONGLOMERATION, INC., petitioner, vs.

COURT OF APPEALS and KUBOTA AGRI-MACHINERY
PHILIPPINES, INC.,respondents.
DECISION
NARVASA, C.J.:

The appellate proceeding at bar turns upon the interpretation of a

stipulation in a contract governing venue of actions thereunder
arising.
On October 28, 1988 Kubota Agri-Machinery Philippines, Inc.
(hereafter, simply KUBOTA) and Unimasters Conglomeration, Inc.
(hereafter, simply UNIMASTERS) entered into a "Dealership
Agreement for Sales and Services" of the former's products in Samar
and Leyte Provinces. The contract contained, among others:
[1]

1)
a stipulation reading: "** All suits arising out of this Agreement shall
be filed with / in the proper Courts of Quezon City," and
2)
a provision binding UNIMASTERS to obtain (as it did in fact obtain)
a credit line with Metropolitan Bank and Trust Co.-Tacloban Branch in the
amount of P2,000,000.00 to answer for its obligations to KUBOTA.
Some five years later, or more precisely on December 24, 1993,
UNIMASTERS filed an action in the Regional Trial Court of Tacloban
City against KUBOTA, a certain Reynaldo Go, and Metropolitan Bank
and
Trust
Company-Tacloban
Branch
(hereafter,
simply
METROBANK) for damages for breach of contract, and injunction
with prayer for temporary restraining order. The action was docketed
as Civil Case No. 93-12-241 and assigned to Branch 6.
On the same day the Trial Court issued a restraining order
enjoining METROBANK from "authorizing or effecting payment of any
alleged obligation of ** (UNIMASTERS) to defendant ** KUBOTA
arising out of or in connection with purchases made by defendant Go
against the credit line caused to be established by ** (UNIMASTERS)
for and in the amount of P2 million covered by defendant
METROBANK ** or by way of charging ** (UNIMASTERS) for any

amount paid and released to defendant ** (KUBOTA) by the Head

Office of METROBANK in Makati, Metro-Manila **." The Court also
set the application for preliminary injunction for hearing on January
10, 1994 at 8:30 o'clock in the morning.
On January 4, 1994 KUBOTA filed two motions. One prayed for
dismissal of the case on the ground of improper venue (said motion
being set for hearing on January 11, 1994). The other prayed for the
transfer of the injunction hearing to January 11, 1994 because its
counsel was not available on January 10 due to a prior commitment
before another court.
KUBOTA claims that notwithstanding that its motion to transfer
hearing had been granted, the Trial Court went ahead with the
hearing on the injunction incident on January 10, 1994 during which it
received the direct testimony of UNIMASTERS' general manager,
Wilford Chan; that KUBOTA's counsel was "shocked" when he
learned of this on the morning of the 11th, but was nonetheless
instructed to proceed to cross-examine the witness; that when said
counsel remonstrated that this was unfair, the Court reset the hearing
to the afternoon of that same day, at which time Wilford Chan was
recalled to the stand to repeat his direct testimony. It appears that
cross-examination of Chan was then undertaken by KUBOTA's
lawyer with the "express reservation that ** (KUBOTA was) not
(thereby) waiving and/or abandoning its motion to dismiss;" and that
in the course of the cross-examination, exhibits (numbered from 1 to
20) were presented by said attorney who afterwards submitted a
memorandum in lieu of testimonial evidence.
[2]

On January 13, 1994, the Trial Court handed down an Order

authorizing the issuance of the preliminary injunction prayed for, upon
a bond of P2,000,000.00. And on February 3, 1994, the same Court
promulgated an Order denying KUBOTA's motion to dismiss. Said
the Court:
[3]

"The plaintiff UNIMASTERS Conglomeration is holding its

principal place of business in the City of Tacloban while the
defendant ** (KUBOTA) is holding its principal place of business in
Quezon City. The proper venue therefore pursuant to Rules of Court
would either be Quezon City or Tacloban City at the election of the
plaintiff. Quezon City and Manila (sic), as agreed upon by the
parties in the Dealership Agreement, are additional places other than
the place stated in the Rules of Court. The filing, therefore, of this
complaint in the Regional Trial Court in Tacloban City is proper."
Both orders were challenged as having been issued with grave
abuse of discretion by KUBOTA in a special civil action

of certiorari and prohibition filed with the Court of Appeals, docketed

as CA-G.R. SP No. 33234. It contended, more particularly, that (1)
the RTC had "no jurisdiction to take cognizance of **
(UNIMASTERS') action considering that venue was improperly laid,"
(2) UNIMASTERS had in truth "failed to prove that it is entitled to the
** writ of preliminary injunction;" and (3) the RTC gravely erred "in
denying the motion to dismiss."
[4]

The Appellate Court agreed with KUBOTA that -- in line with the
Rules of Court and this Court's relevant rulings -- the stipulation
respecting venue in its Dealership Agreement with UNIMASTERS did
in truth limit the venue of all suits arising thereunder only and
exclusively to "the proper courts of Quezon City." The Court also
held that the participation of KUBOTA's counsel at the hearing on the
injunction incident did not in the premises operate as a waiver or
abandonment of its objection to venue; that assuming that KUBOTA's
standard printed invoices provided that the venue of actions
thereunder should be laid at the Court of the City of Manila, this was
inconsequential since such provision would govern "suits or legal
actions between petitioner and its buyers" but not actions under the
Dealership Agreement between KUBOTA and UNIMASTERS, the
venue of which was controlled by paragraph No. 7 thereof; and that
no impediment precludes issuance of a TRO or injunctive writ by the
Quezon City RTC against METROBANK-Tacloban since the same
"may be served on the principal office of METROBANK in Makati and
would be binding on and enforceable against, METROBANK branch
in Tacloban."
[5]

[6]

[7]

After its motion for reconsideration of that decision was turned

down by the Court of Appeals, UNIMASTERS appealed to this
Court. Here, it ascribes to the Court of Appeals several errors which
it believes warrant reversal of the verdict, namely:
[8]

1)
"in concluding, contrary to decisions of this ** Court, that the
agreement on venue between petitioner (UNIMASTERS) and private
respondent (KUBOTA) limited to the proper courts of Quezon City the
venue of any complaint filed arising from the dealership agreement between
** (them);"
2)
"in ignoring the rule settled in Philippine Banking Corporation vs.
Tensuan, that 'in the absence of qualifying or restrictive words, venue
stipulations in a contract should be considered merely as agreement on
additional forum, not as limiting venue to the specified place;" and in
concluding, contrariwise, that the agreement in the case at bar "was the same
as the agreement on venue in the Gesmundo case," and therefore,
the Gesmundo case was controlling; and
[9]

3)
"in concluding, based solely on the self-serving narration of **
(KUBOTA that its) participation in the hearing for the issuance of a **
preliminary injunction did not constitute waiver of its objection to venue."
The issue last mentioned, of whether or not the participation by
the lawyer of KUBOTA at the injunction hearing operated as a waiver
of its objection to venue, need not occupy the Court too long. The
record shows that when KUBOTA's counsel appeared before the Trial
Court in the morning of January 11, 1994 and was then informed that
he should cross-examine UNIMASTERS' witness, who had testified
the day before, said counsel drew attention to the motion to dismiss
on the ground of improper venue and insistently attempted to argue
the matter and have it ruled upon at the time; and when the Court
made known its intention (a) "to (resolve first the) issue (of) the
injunction then rule on the motion to dismiss," and (b) consequently
its desire to forthwith conclude the examination of the witness on the
injunction incident, and for that purpose reset the hearing in the
afternoon of that day, the 11th, so that the matter might be resolved
before the lapse of the temporary restraining order on the 13th,
KUBOTA's lawyer told the Court: "Your Honor, we are not waiving our
right to submit the Motion to Dismiss." It is plain that under these
circumstances, no waiver or abandonment can be imputed to
KUBOTA.
[10]

The essential question really is that posed in the first and second
assigned errors, i.e., what construction should be placed on the
stipulation in the Dealership Agreement that "(a)ll suits arising out of
this Agreement shall be filed with/in the proper Courts of Quezon
City."
Rule 4 of the Rules of Court sets forth the principles generally
governing the venue of actions, whether real or personal, or involving
persons who neither reside nor are found in the Philippines or
otherwise. Agreements on venue are explicitly allowed. "By written
agreement of the parties the venue of an action may be changed or
transferred from one province to another." Parties may by stipulation
waive the legal venue and such waiver is valid and effective being
merely a personal privilege, which is not contrary to public policy or
prejudicial to third persons. It is a general principle that a person
may renounce any right which the law gives unless such renunciation
would be against public policy.
[11]

[12]

Written stipulations as to venue may be restrictive in the sense

that the suit may be filed only in the place agreed upon, or merely
permissive in that the parties may file their suit not only in the place
agreed upon but also in the places fixed by law (Rule 4,

specifically). As in any other agreement, what is essential is the

ascertainment of the intention of the parties respecting the matter.
Since convenience is the raison d'etre of the rules of venue, it is
easy to accept the proposition that normally, venue stipulations
should be deemed permissive merely, and that interpretation should
be adopted which most serves the parties' convenience. In other
words, stipulations designating venues other than those assigned by
Rule 4 should be interpreted as designed to make it more convenient
for the parties to institute actions arising from or in relation to their
agreements; that is to say, as simply adding to or expanding the
venues indicated in said Rule 4.
[13]

On the other hand, because restrictive stipulations are in

derogation of this general policy, the language of the parties must be
so clear and categorical as to leave no doubt of their intention to limit
the place or places, or to fix places other than those indicated in Rule
4, for their actions. This is easier said than done, however, as an
examination of precedents involving venue covenants will
immediately disclose.
In at least thirteen (13) cases, this Court construed the venue
stipulations involved as merely permissive. These are:
1.
Polytrade Corporation v. Blanco, decided in 1969. In this case, the
venue stipulation was as follows:
[14]

"The parties agree to sue and be sued in the Courts of Manila."

This Court ruled that such a provision "does not preclude the filing of suits
in the residence of the plaintiff or the defendant. The plain meaning is that
the parties merely consented to be sued in Manila. Qualifying or restrictive
words which would indicate that Manila and Manila alone is the venue are
totally absent therefrom. It simply is permissive. The parties solely agreed
to add the courts of Manila as tribunals to which they may resort. They did
not waive their right to pursue remedy in the courts specifically mentioned
in Section 2(b) of Rule 4."
The Polytrade doctrine was reiterated expressly or implicitly in subsequent
cases, numbering at least ten (10).
2.
Nicolas v. Reparations Commission, decided in 1975. In this case,
the stipulation on venue read:
[15]

"** (A)ll legal actions arising out of this contract ** may be brought in and
submitted to the jurisdiction of the proper courts in the City of Manila."

This Court declared that the stipulation does not clearly show the intention
of the parties to limit the venue of the action to the City of Manila only. "It
must be noted that the venue in personal actions is fixed for the convenience
of the plaintiff and his witnesses and to promote the ends of justice. We
cannot conceive how the interest of justice may be served by confining
the situs of the action to Manila, considering that the residences or offices of
all the parties, including the situs of the acts sought to be restrained or
required to be done, are all within the territorial jurisdiction of Rizal. **
Such agreements should be construed reasonably and should not be applied
in such a manner that it would work more to the inconvenience of the parties
without promoting the ends of justice."
3.
Lamis Ents. v. Lagamon, decided in 1981. Here, the stipulation in the
promissory note and the chattel mortgage specifed Davao City as the venue.
[16]

The Court, again citing Polytrade, stated that the provision "does not
preclude the filing of suits in the residence of plaintiff or defendant under
Section 2(b), Rule 4, Rules of Court, in the absence of qualifying or
restrictive words in the agreement which would indicate that the place
named is the only venue agreed upon by the parties. The stipulation did not
deprive ** (the affected party) of his right to pursue remedy in the court
specifically mentioned in Section 2(b) of Rule 4, Rules of
Court. Renuntiato non praesumitur."
4.
Capati v. Ocampo, decided in 1982. In this case, the provision of the
contract relative to venue was as follows:
[17]

" ** (A)ll actions arising out, or relating to this contract may be instituted in
the Court of First Instance of the City of Naga."
The Court ruled that the parties "did not agree to file their suits solely and
exclusively with the Court of First Instance of Naga;" they "merely agreed
to submit their disputes to the said court without waiving their right to seek
recourse in the court specifically indicated in Section 2 (b), Rule 4 of the
Rules of Court."
5.
Western Minolco v. Court of Appeals, decided in 1988. Here, the
provision governing venue read:
[18]

"The parties stipulate that the venue of the actions referred to in Section
12.01 shall be in the City of Manila."
The court restated the doctrine that a stipulation in a contract fixing a
definite place for the institution of an action arising in connection therewith,
does not ordinarily supersede the general rules set out in Rule 4, and should

be construed merely as an agreement on an additional forum, not as limiting

venue to the specified place.
6.
Moles v. Intermediate Appellate Court, decided in 1989. In this
proceeding, the Sales Invoice of a linotype machine stated that the proper
venue should be Iloilo.
[19]

This Court held that such an invoice was not the contract of sale of the
linotype machine in question; consequently the printed provisions of the
invoice could not have been intended by the parties to govern the sale of the
machine, especially since said invoice was used for other types of
transactions. This Court said: "It is obvious that a venue stipulation, in
order to bind the parties, must have been intelligently and deliberately
intended by them to exclude their case from the reglementary rules on
venue. Yet, even such intended variance may not necessarily be given
judicial approval, as, for instance, where there are no restrictive or
qualifying words in the agreement indicating that venue cannot be laid in
any place other than that agreed upon by the parties, and in contracts of
adhesion."
7.
[20]

Hongkong and Shanghai Banking Corp. v. Sherman, decided in 1989.

Here the stipulation on venue read:

" ** (T)his guarantee and all rights, obligations and liabilities arising
hereunder shall be construed and determined under and may be enforced in
accordance with the laws of the Republic of Singapore. We hereby agree
that the Courts in Singapore shall have jurisdiction over all disputes arising
under this guarantee **."
This Court held that due process dictates that the stipulation be liberally
construed. The parties did not thereby stipulate that only the courts of
Singapore, to the exclusion of all the others, had jurisdiction. The clause in
question did not operate to divest Philippine courts of jurisdiction.
8.
Nasser v. Court of Appeals, decided in 1990, in which the venue
stipulation in the promissory notes in question read:
[21]

" ** (A)ny action involving the enforcement of this contract shall be brought
within the City of Manila, Philippines."
The Court's verdict was that such a provision does not as a rule supersede
the general rule set out in Rule 4 of the Rules of Court, and should be
construed merely as an agreement on an additional forum, not as limiting
venue to the specified place.

9.
Surigao Century Sawmill Co., Inc. v. Court of Appeals, decided in
1993: In this case, the provision concerning venue was contained in a
contract of lease of a barge, and read as follows:
[22]

" ** (A)ny disagreement or dispute arising out of the lease shall be settled
by the parties in the proper court in the province of Surigao del Norte."
The venue provision was invoked in an action filed in the Regional Trial
Court of Manila to recover damages arising out of marine subrogation based
on a bill of lading. This Court declared that since the action did not refer to
any disagreement or dispute arising out of the contract of lease of the barge,
the venue stipulation in the latter did not apply; but that even assuming the
contract of lease to be applicable, a statement in a contract as to venue does
not preclude the filing of suits at the election of the plaintiff where no
qualifying or restrictive words indicate that the agreed place alone was the
chosen venue.
10. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc.,
Circle Financial Corporation, et al., decided in 1993. Here, the stipulation
on venue was contained in promissory notes and read as follows:
[23]

"I/We hereby expressly submit to the jurisdiction of the courts of Valenzuela

any legal action which may arise out of this promissory note."
This Court held the stipulation to be merely permissive since it did not lay
the venue in Valenzuela exclusively or mandatorily. The plain or ordinary
import of the stipulation is the grant of authority or permission to bring suit
in Valenzuela; but there is not the slightest indication of an intent to bar suit
in other competent courts. The Court stated that there is no necessary or
customary connection between the words "any legal action" and an intent
strictly to limit permissible venue to the Valenzuela courts. Moreover, since
the venue stipulations include no qualifying or exclusionary terms, express
reservation of the right to elect venue under the ordinary rules was
unnecessary in the case at bar. The Court made clear that "to the
extent Bautista and Hoechst Philippines are inconsistent with Polytrade
(an en banc decision later in time than Bautista) and subsequent cases
reiterating Polytrade, Bautista and Hoechst Philippines have been rendered
obsolete by thePolytrade line of cases."
11. Philippine Banking Corporation v. Hon. Salvador Tensuan, etc.,
Brinell Metal Works Corp., et al., decided in 1994: In this case the subject
promissory notes commonly contained a stipulation reading:
[24]

"I/we expressly submit to the jurisdiction of the courts of Manila, any legal
action which may arise out of this promissory note."

the Court restated the rule in Polytrade that venue stipulations in a contract,
absent any qualifying or restrictive words, should be considered merely as
an agreement on additional forum, not limiting venue to the specified
place. They are not exclusive, but rather, permissive. For to restrict venue
only to that place stipulated in the agreement is a construction purely based
on technicality; on the contrary, the stipulation should be liberally
construed. The Court stated: "The later cases of Lamis Ents v.
Lagamon [108 SCRA 1981], Capati v. Ocampo [113 SCRA 794
[1982], Western Minolco v. Court of Appeals [167 SCRA 592 [1988], Moles
v. Intermediate Appellate Court [169 SCRA 777 [1989], Hongkong and
Shanghai Banking Corporation v. Sherman [176 SCRA 331], Nasser v.
Court of Appeals [191 SCRA 783 [1990] and just recently, Surigao Century
Sawmill Co. v. Court of Appeals [218 SCRA 619 [1993], all treaded the path
blazed byPolytrade. The conclusion to be drawn from all these is that the
more recent jurisprudence shall properly be deemed modificatory of the old
ones."
The lone dissent observed: "There is hardly any question that a stipulation of
contracts of adhesion, fixing venue to a specified place only, is void for, in
such cases, there would appear to be no valid and free waiver of the venue
fixed by the Rules of Courts. However, in cases where both parties freely
and voluntarily agree on a specified place to be the venue of actions, if any,
between them, then the only considerations should be whether the waiver
(of the venue fixed by the Rules of Court) is against public policy and
whether the parties would suffer, by reason of such waiver, undue hardship
and inconvenience; otherwise, such waiver of venue should be upheld as
binding on the parties. The waiver of venue in such cases is sanctioned by
the rules on jurisdiction."
Still other precedents adhered to the same principle.
12. Tantoco v. Court of Appeals, decided in 1977. Here, the parties
agreed in their sales contracts that the courts of Manila shall have
jurisdiction over any legal action arising out of their transaction. This Court
held that the parties agreed merely to add the courts of Manila as tribunals to
which they may resort in the event of suit, to those indicated by the law: the
courts either of Rizal, of which private respondent was a resident, or of
Bulacan, where petitioner resided.
[25]

13. Sweet Lines, Inc. v. Teves, promulgated in 1987. In this case, a

similar stipulation on venue, contained in the shipping ticket issued by
Sweet Lines, Inc. (as Condition 14) -[26]

" ** that any and all actions arising out or the condition and provisions of
this ticket, irrespective of where it is issued, shall be filed in the competent
courts in the City of Cebu"
-- was declared unenforceable, being subversive of public policy. The Court
explained that the philosophy on transfer of venue of actions is the
convenience of the plaintiffs as well as his witnesses and to promote the
ends of justice; and considering the expense and trouble a passenger residing
outside of Cebu City would incur to prosecute a claim in the City of Cebu,
he would most probably decide not to file the action at all.
On the other hand, in the cases hereunder mentioned,
stipulations on venue were held to be restrictive, or mandatory.
1.
Bautista vs. De Borja, decided in 1966. In this case, the contract
provided that in case of any litigation arising therefrom or in connection
therewith, the venue of the action shall be in the City of Manila. This Court
held that without either party reserving the right to choose the venue of
action as fixed by law, it can reasonably be inferred that the parties intended
to definitely fix the venue of the action, in connection with the contract sued
upon in the proper courts of the City of Manila only, notwithstanding that
neither party is a resident of Manila.
[27]

2.
Gesmundo v. JRB Realty Corporation, decided in 1994. Here the
lease contract declared that
[28]

" ** (V)enue for all suits, whether for breach hereof or damages or any
cause between the LESSOR and LESSEE, and persons claiming under each,
** (shall be) the courts of appropriate jurisdiction in Pasay City. . ."
This Court held that: "(t)he language used leaves no room for
interpretation. It clearly evinces the parties' intent to limit to the 'courts of
appropriate jurisdiction of Pasay City' the venue for all suits between the
lessor and the lessee and those between parties claiming under them. This
means a waiver of their right to institute action in the courts provided for in
Rule 4, sec. 2(b)."
3.
Hoechst Philippines, Inc. v. Torres, decided much earlier, in 1978,
involved a strikingly similar stipulation, which read:
[29]

" ** (I)n case of any litigation arising out of this agreement, the venue of
any action shall be in the competent courts of the Province of Rizal."

This Court held: "No further stipulations are necessary to elicit the thought
that both parties agreed that any action by either of them would be filed only
in the competent courts of Rizal province exclusively."
4.
Villanueva v. Mosqueda, decided in 1982. In this case, it was
stipulated that if the lessor violated the contract of lease he could be sued in
Manila, while if it was the lessee who violated the contract, the lessee could
be sued in Masantol, Pampanga. This Court held that there was an
agreement concerning venue of action and the parties were bound by their
agreement. "The agreement as to venue was not permissive but mandatory."
[30]

5.
Arquero v. Flojo, decided in 1988. The condition respecting venue -that any action against RCPI relative to the transmittal of a telegram must be
brought in the courts of Quezon City alone -- was printed clearly in the
upper front portion of the form to be filled in by the sender. This Court held
that since neither party reserved the right to choose the venue of action as
fixed by Section 2 [b], Rule 4, as is usually done if the parties mean to retain
the right of election so granted by Rule 4, it can reasonably be inferred that
the parties intended to definitely fix the venue of action, in connection with
the written contract sued upon, in the courts of Quezon City only.
[31]

An analysis of these precedents reaffirms and emphasizes the soundness of

the Polytrade principle. Of the essence is the ascertainment of the parties'
intention in their agreement governing the venue of actions between
them. That ascertainment must be done keeping in mind that convenience is
the foundation of venue regulations, and that that construction should be
adopted which most conduces thereto. Hence, the invariable construction
placed on venue stipulations is that they do not negate but merely
complement or add to the codal standards of Rule 4 of the Rules of
Court. In other words, unless the parties make very clear, by employing
categorical and suitably limiting language, that they wish the venue of
actions between them to be laid only and exclusively at a definite place, and
to disregard the prescriptions of Rule 4, agreements on venue are not to be
regarded as mandatory or restrictive, but merely permissive, or
complementary of said rule. The fact that in their agreement the parties
specify only one of the venues mentioned in Rule 4, or fix a place for their
actions different from those specified by said rule, does not, without more,
suffice to characterize the agreement as a restrictive one. There must, to
repeat, be accompanying language clearly and categorically expressing their
purpose and design that actions between them be litigated only at the place
named by them, regardless of the general precepts of Rule 4; and any
doubt or uncertainty as to the parties' intentions must be resolved against
giving their agreement a restrictive or mandatory aspect. Any other rule
would permit of individual, subjective judicial interpretations without stable
standards, which could well result in precedents in hopeless inconsistency.
[32]

The record of the case at bar discloses that UNIMASTERS has its principal
place of business in Tacloban City, and KUBOTA, in Quezon City. Under
Rule 4, the venue of any personal action between them is "where the
defendant or any of the defendants resides or may be found, or where the
plaintiff or any of the plaintiffs resides, at the election of the plaintiff." In
other words, Rule 4 gives UNIMASTERS the option to sue KUBOTA for
breach of contract in the Regional Trial Court of either Tacloban City or
Quezon City.
[33]

But the contract between them provides that " ** All suits arising out of this
Agreement shall be filed with/in the proper Courts of Quezon City," without
mention of Tacloban City. The question is whether this stipulation had the
effect of effectively eliminating the latter as an optional venue and limiting
litigation between UNIMASTERS and KUBOTA only and exclusively to
Quezon City.
In light of all the cases above surveyed, and the general postulates distilled
therefrom, the question should receive a negative answer. Absent additional
words and expressions definitely and unmistakably denoting the parties'
desire and intention that actions between them should be ventilated only at
the place selected by them, Quezon City -- or other contractual provisions
clearly evincing the same desire and intention -- the stipulation should be
construed, not as confining suits between the parties only to that one place,
Quezon City, but as allowing suits either in Quezon City or Tacloban City, at
the option of the plaintiff (UNIMASTERS in this case).
One last word, respecting KUBOTA's theory that the Regional Trial Court
had "no jurisdiction to take cognizance of ** (UNIMASTERS') action
considering that venue was improperly laid." This is not an accurate
statement of legal principle. It equates venue with jurisdiction; but venue
has nothing to do with jurisdiction, except in criminal actions. This is
fundamental. The action at bar, for the recovery of damages in an amount
considerably in excess of P20,000.00, is assuredly within the jurisdiction of
a Regional Trial Court. Assuming that venue were improperly laid in the
Court where the action was instituted, the Tacloban City RTC, that would be
a procedural, not a jurisdictional impediment -- precluding ventilation of the
case before that Court of wrong venuenotwithstanding that the subject
matter is within its jurisdiction. However, if the objection to venue is
waived by the failure to set it up in a motion to dismiss, the RTC would
proceed in perfectly regular fashion if it then tried and decided the action.
[34]

[35]

[36]

This is true also of real actions. Thus, even if a case "affecting title to, or for
recovery of possession, or for partition or condemnation of, or foreclosure of
mortgage on, real property" were commenced in a province or city other
than that "where the property or any part thereof lies," if no objection is
[37]

[38]

seasonably made in a motion to dismiss, the objection is deemed waived,

and the Regional Trial Court would be acting entirely within its competence
and authority in proceeding to try and decide the suit.
[39]

WHEREFORE, the appealed judgment of the Court of Appeals is

REVERSED, the Order of the Regional Trial Court of Tacloban City,
Branch 6, dated February 3, 1994, is REINSTATED and AFFIRMED,
and said Court is DIRECTED to forthwith proceed with Civil Case No.
93-12-241 in due course.
SO ORDERED.

23. Lantin v. Lantin 499 SCRA 718

V. COUNTERCLAIM
24. Lafarge Cement v. Continental Cement G.R. 155173 11-23-04
25. Alday v. FGU G.R. 138822 1-23-01
26. Cruz-Agam v. Santiago-Lagman G.R. 139018 4-11-05
27. Antonio v. Sayman 631 SCRA 471
VI. PLEADINGS
28. Mactan Cebu International Airport v. Heirs of Minoza G.R. 186045 2-2-11
29. Vallacar Transit v. Catubig G.R. 175512 5-30-11
30. Altres v. Empleo G.R. 180986 12-10-08
31. Spouses De Guzman, Jr. V. Ocbon G.R. 169292 4-13-11
32. UST v. Surla 294 SCRA 382
VII. SUMMONS
33. Imelda Manotoc v. CA G.R. 130794 Aug. 16, 2006
34. Tan et al. v. Dela Vega G.R. 168809 Mar. 10, 2006
35. Heirs of Valeriano Concha Sr. et al. v. Sps. Lumocso G.R. 158121 Dec. 12, 2007
36. Metropolitan Bank & Trust Co. v. Alejo G.R. 141970 Sept. 10, 2001
37. Ancheta v. Ancheta G.R. 145370 March 4, 2004
38. Alamayri v. Pabale G.R. 151243 April 30, 2008
39. Santos v. PNOC G.R. 170943
VIII. MOTION TO DISMISS
40. Evangelista v. Santiago G.R. 157447 April 29, 2005
41. Villaluz v. Ligon 468 SCRA 486
IX. JUDGMENT ON THE PLEADINGS/ SUMMONS JUDGMENT

42. Tan v. De La Vega 484 SCRA 538

EDWARD ROCO TAN

and EDWIN ROCO TAN,
Petitioners,

G.R. No. 168809

Present:

Panganiban, C.J.
(Chairperson),
- versus Ynares-Santiago,
Austria-Martinez,
Callejo, Sr., and
Chico-Nazario, JJ.
BENIGNO DE LA VEGA, ANGELA
TUASON STALEY and ANTONIO
Promulgated:
PEREZ Y TUASON,
Respondents.
March 10, 2006
x
---------------------------------------------------------------------------------------x

DECISION
YNARES-SANTIAGO, J.:
Assailed in this petition for review is the February 3, 2005
Decision[1] of the Court of Appeals in CA-G.R. CV No. 79957, which
affirmed the March 21, 2003 Order [2] of the Regional Trial Court of Pasig
City, Branch 264, granting the motion for judgment on the pleadings filed
by respondents in Civil Case No. 62269. Likewise questioned is the
appellate courts July 6, 2005 Resolution [3] which denied petitioners
motion for reconsideration.
The undisputed facts show that on August 3, 1992, respondents
filed a complaint for quieting of title and for declaration of nullity of
Free Patent No. 495269, Original Certificate of Title (OCT) No. 711 and
Transfer Certificate of Title (TCT) No. 186516, against the heirs of
Macario Mencias (defendant heirs), namely, Aquilina Mencias, Aurora M.
Gabat, Merlyn M. Cadete, Myrna M. Quirante; and the Secretary of the
Department of Environment and Natural Resources, the Director of the

Land Management Bureau and the Register of Deeds of Marikina. The

complaint was later amended to implead herein petitioner purchasers of
the disputed lot and to nullify TCT No. 272191 issued in their name.
The Amended Complaint averred that respondents are the coowners of a 159,576 square meter parcel of land located in Marikina,
Rizal, Metro Manila and covered by TCT No. 257152, issued on June 20,
1969. Said title was a transfer from TCT No. 22395 in the name of J.
Antonio Araneta as trustee of the children of Angela I. Tuason. Among
the lots covered by TCT No. 257152 is the controverted Lot 89
containing an area of 54,197 square meters.[4]
Sometime in April 1992, respondents learned that the defendant
heirs are causing the ejectment of the occupants of a 29,945 square meter
portion of Lot 89; and that Macario Mencias was able to obtain Free
Patent No. 495269 on July 31, 1971, and OCT No. 711 on August 11,
1971, over said portion. Upon Macario's death, OCT No. 711 was
canceled and TCT No. 186516 was issued to the defendant heirs on July
5, 1990.[5] By virtue of a Deed of Sale inscribed on November 14, 1994,
TCT No. 186516 was further cancelled and TCT No. 271604 was issued
on the same date in favor of New Atlantis Real Estate & Development,
Inc., (Corporation) represented by its President, Victor C. Salvador,
Jr. The questioned lot was thereafter sold by the Corporation to
petitioners. TCT No. 271604 was thus cancelled and in lieu thereof, TCT
No. 272191 was issued to petitioners on November 17, 1994.[6]
Respondents contended that Macarios OCT No. 711 and its
derivative titles-TCT No. 186516, in the name of defendant heirs and
petitioners TCT NO. 272191, are void because the area they cover is
entirely within their (respondents) land, specifically, Lot 89, as shown by
the notation in the said titles, i.e., This survey is covered by F.P.A. No.
(III-1) 4496; and This survey is entirely inside No. 89, II4755.[7] Respondents further averred that since the controverted lot is
already a private land, the Director of Lands and the Secretary of
Agriculture and Natural Resources, had no jurisdiction to approve
Macarios application and to issue Free Patent No. 495269. The
pendency of this action was allegedly inscribed in the defendant heirs

title (TCT No. 186516) on August 4, 1992 and carried over to the
petitioners' TCT No. 272191.[8]
In their Answer,[9] the defendant heirs contended that Lot 89 was
never part of respondents TCT No. 257152 which originated from OCT
No. 730. Respondents own exhibits, i.e., the documents purportedly
issued by the Bureau of Lands (Exhibits E and F), show that Lot 89
was covered by OCT No. 734 and not OCT No. 730. Defendant heirs
further stated that respondents TCT No. 257152 was issued in lieu of
TCT No. 22395 which is a mere reconstitution of TCT No. 45046. Upon
verification with the Register of Deeds of Rizal, TCT No. 45046, covers a
different parcel of land situated in San Juan, Rizal, and measuring about
356 square meters only. The defendant heirs also raised the defenses of
laches and prescription.
On the other hand, petitioners asserted, inter alia, that they are
purchasers in good faith and for value and that they have no knowledge
of any defect in the title of the Corporation from whom they purchased
the controverted lot. The notice of lis pendens alleged to have been
inscribed in TCT No. 186516 on August 4, 1992 does not appear in the
Corporations title, TCT No. 271604 nor in their title, TCT No.
272191. Absent said notice, petitioners claim that they cannot be charged
with knowledge of any defect in the Corporation's title. Neither does the
note This survey is covered by F.P.A. No. (III-1) 4496; and This
survey is entirely inside No. 89, II-4755, serve as sufficient warning to
third persons because said notes do not indicate that the property is
covered by another title.[10]
For failure to file their Answer, defendant Aurora M. Gabat,
public defendants Secretary of the Department of Environment and
Natural Resources, Director of Land Management Bureau and the
Register of Deeds of Marikina,[12] were declared in default.
[11]

On March 4, 2003, respondents filed a motion for judgment on the

pleadings which was granted by the trial court. It was held that the
disputed lot is within Lot 89 covered by respondents TCT No. 257152,
issued on June 20, 1969. Said lot therefore became a private land long
before the Free Patent was issued to Macario on July 31, 1971. Hence,

the titles derived or issued on the basis of said Free Patent are void
because Public Land Act applies only to public lands and not private
lands. On the theory that the spring cannot rise higher than its source, the
trial court concluded that petitioners cannot be purchasers in good faith
considering that their title was derived from Macario who acquired the
property by virtue of a void title. It further ruled that petitioners defense
of good faith must fail because they were forewarned of the notice
indicating that the questioned lot is inside Lot 89. The dispositive portion
of the March 21, 2003 order, reads:
WHEREFORE, premises considered, Plaintiffs
[respondents herein] Motion is hereby Granted and judgment
rendered as follows:
1.
Plaintiffs Transfer Certificate of Title (TCT)
No. 257152 is declared valid and superior to defendants
[petitioners] TCT No. 272191;
2.
Free Patent No. 495269 issued by then
Secretary of Environment and Natural Resources to Macario
Mencias on July 21, 1971 is declared null and void;
3.
Original Certificate of Title (OCT) No. 711,
Transfer Certificate of Title (TCT) No. 271604/T-1358 and
Transfer Certificate of Title (TCT) No. 272191, TCT No.
186516 and TCT No. 272191, all derivatives [sic] title of Free
Patent 495269 issued by Registry of Deeds of Marikina, are
also declared null and void;
4.
The Bureau of Lands and Land Registration
Administration are directed to enter into their technical files
the findings in this order;
5.
The Registry of Deeds of Marikina is directed to
cancel Transfer Certificate of Title (TCT) NO. 272191 in the
names of Edward and Edwin Roco Tan.
SO ORDERED.[13]

Petitioners appealed to the Court of Appeals which affirmed the

assailed order of the trial court. They filed a motion for reconsideration
but was denied in a resolution dated July 6, 2005.

Hence, this petition.

The sole issue for resolution is whether a judgment on the
pleadings is proper in the instant case.
Section 1, Rule 34 of the Rules of Court, states:
SECTION 1. Judgment on the pleadings. Where an
answer fails to tender an issue, or otherwise admits the material
allegations of the adverse partys pleading, the court may, on
motion of that party, direct judgment on such pleading. x x x.

Where a motion for judgment on the pleadings is filed, the

essential question is whether there are issues generated by the
pleadings. In a proper case for judgment on the pleadings, there is no
ostensible issue at all because of the failure of the defending partys
answer to raise an issue.[14] The answer would fail to tender an issue, of
course, if it does not deny the material allegations in the complaint or
admits said material allegations of the adverse partys pleadings by
confessing the truthfulness thereof and/or omitting to deal with them at
all. Now, if an answer does in fact specifically deny the material
averments of the complaint and/or asserts affirmative defenses
(allegations of new matter which, while admitting the material allegations
of the complaint expressly or impliedly, would nevertheless prevent or
bar recovery by the plaintiff), a judgment on the pleadings would
naturally be improper.[15]
In this case, we find that the trial court erred in rendering judgment
on the pleadings because the pleadings filed by the parties generated
ostensible
issues
that
necessitate
the
presentation
of
evidence. Respondents action for declaration of nullity of Free Patent
No. 495269 and the titles derived therefrom is based on their claim that
the lot titled in the name of petitioners, is a portion of a bigger tract of
land previously titled in the name of their (respondents) predecessors-ininterest. The documents presented in support thereof were the photocopy
of respondents TCT No. 257152 which shows that the land it covers,
including lot 89, originated from OCT No. 730; and photocopies of the
documents alleged to have been issued by the Bureau of Lands and

confirming that the disputed lot is a portion of respondents Lot

89. Pertinent portions of the Amended Complaint, state:
5.
Sometime in early April, 1992, plaintiff de la
Vega was informed by one of the occupants of the abovedescribed lot No. 89 that the heirs of Macario Mencias, the
defendants herein, were causing the ejectment of said
occupants and claiming to be the owners of an area of 29,945
sq. ms. (sic) which is within, or part of, Lot No. 89 covered by
plaintiffs T.C.T. No. 257152. It was only then that the
plaintiffs heard of Macario Mencias and of his encroaching
into plaintiffs Lot 89.
6.
The plaintiffs later learned that, unknown to
them, Macario Mencias had applied with the then Bureau of
Lands for, and obtained on 31 July 1971, Free Patent No.
495269 which was granted under the signature of the then
Secretary of Agriculture and Natural Resources and covering
an area of 29,945 sq. ms. (sic) as described in Plan F (III-1)
4496-D. On 11 August 1971, Original Certificate of Title No.
711 (Rizal) was issued to him based on the said Free Patent,
and upon his death, said OCT No. 711 was cancelled and
transferred to his heirs, the defendants herein, to whom T.C.T.
No. 186516 (Marikina) was issued on 5 July 1990. The
plaintiffs were never notified of said application of Mencias for
free patent nor of the issuance of Free Patent No. 495269 and
OCT No. 711 to him and T.C.T. No. 186515 to his heirs, the
defendants herein. Photocopies of OCT No. 711, which
incorporated Free Patent No. 495269, and T.C.T. No. 186516
are hereto appended as Annexes B and C, respectively.
xxxx
8.
A letter dated 29 October 1971 of Mr. Amando A.
Salvador as Chief of the Survey Division of the then Bureau of
Lands and addressed to Macario Mencias, 1st Indorsement,
dated 15 February 1974, signed by Mr. Daniel C. Florida as
Acting Chief of the Legal Division of the Bureau of Lands, a
report dated 17 December 1976 by Mr. Jose B. Isidro as
Hearing Officer addressed to the Director of Lands, and the 1st
Indorsement, dated 3 January 1977, also addressed to the
Director of Lands by Mr. Claudio C. Batiles as the District
Land Officer, photocopies of which are appended hereto as
Annexes D, E, F and G, respectively, unequivocally

confirmed that the area of 29,945 sq. ms. (sic) covered by the
Free Patent based on Plan F (III-1) 4496-D and issued to
Macario Mencias was entirely inside Lot 89 of Plan II-4755,
which was covered by T.C.T. No. 22395 in the name of J
Antonio Araneta, Trustee of the children Angela I. Tauson,
and since 20 June 1969, by T.C.T. No. 257152 in the plaintiffs
names.
9.
There can be no doubt that the area of 29,945 sq.
ms. (sic) covered by Free Patent No. 495269, which was
incorporated in OCT No. 711 issued to Macario Mencias, was
within Lot 89 of Plan II-4755 covered by T.C.T. No. 22395
and, since 20 June 1969, by T.C.T. No. 2597152 (sic) in the
plaintiffs names, because the technical description of said area
embodied in the said Free Patent itself and in OCT No. 711
disclosed the following information:
NOTE: This survey is covered by F.P.A. No.
(III-1) 4496.
This survey is entirely inside No. 89, II-4755
(See Annex B hereof). (See Annex B hereof).
10. In fact the very same notes were carried over in
T.C.T. No. 186516 issued to the heirs of Mencias, the
defendants herein, thus forewarning all those who dealt or may
have dealt with the private defendants regarding the area
therein described that there was something anomalous in said
title (See Annex C hereof).
xxxx
14. The records of the Registry of Deeds of Marikina,
Metro Manila, disclosed that TCT No. 186516, Annex C,
was cancelled and T.C.T. No. 271604, covering the same
parcel of land covered by T.C.T. No. 186516, was issued on
November 14, 1994 by the Register of Deeds of Marikina, Mr.
Artemio B. Caa, to the New Atlantis Real Eastate & Dev., Inc.
represented by its President, Victor C. Salvador, Jr., based on a
sale in its favor inscribed on the same date; and that T.C.T. No.
271604 was thereupon cancelled and in lieu thereof T.C.T. No.
272191 was issued by the said Register of Deeds to private
defendants Edward and Edwin Roco Tan on November 17,
1994 based on a sale in their favor inscribed on the same
date. A photocopy of T.C.T. No. 272191 is hereto attached as
Annex H.

xxxx
16. Neither New Atlantis Real Estate & Dev. Inc., nor
Edward Roco Tan and Edwin Roco Tan could claim to be
purchasers in good faith not only because their titles are void
and inexistent and could not possibly have any legal effect
whatsoever but also because the NOTE cited in paragraphs 9
and 10 above, which likewise appears on T.C.T. No. 272191
itself, discloses the very basis for its nullity.
17. The notice of the pendency of this action (Notice
of Lis Pendens) was duly inscribed on T.C.T. No. 186516 on
August 4, 1992 under Entry No. 274711, which notice has been
carried over to T.C.T. No. 272191, a photocopy of which is
hereto appended as Annex H.
x x x x.[16]

The foregoing averments were specifically denied by defendant

heirs who raised, among others, the affirmative defense that respondents
TCT No. 22395 is void and that lot 89 is not found inside respondents
land. Thus
11. Lot 89 was never a part of the Mariquina Estate
as shown in subdivision plan PSD 29965 as surveyed in
December, 1950 up to June, 1951. This fact is also certified by
the Office of the Register of Deeds of Rizal as early as 1967, a
photo copy of said certification is hereto attached as Annex
1;
12. Plaintiffs own exhibits (Annexes E, F, in
relation to Annex A) show that lot 89 was never part of
Original Certificate of Title (O.C.T.) No. 730 from which
plaintiffs alleged title was derived (T.C.T. No. 257152, Annex
A). In Annexes E and F, Lot No. 89 of II-4755 is
covered by O.C.T. No. 734 and not 730;
13. T.C. T. No. 257152 is spurious, falsified, hence,
null and void. This certificate of title was issued in lieu of
T.C.T. No. 22395/T 389 as per Annex A of the
Complaint. T.C.T. No. 22395/T 389 was in turn issued in lieu
of T.C.T. No. 45046 as shown in a document (T.C.T. No.
22395) hereto attached as Annex 2;

14. It also appears that T.C.T. No. 22395 is a mere

reconstitution of a lost/destroyed T.C.T. No. 45046 as shown
on page 3 of T.C.T. No. 257152;
15. Upon verification with the Office of the Register
of Deeds of Rizal, T.C.T. No. 45046 covered a different parcel
of land situated in San Juan, Rizal and measuring about 356
square meters only, photo copy of which is hereto attached as
Annex 3 hereof;
x x x x.[17]

Petitioners asserted, inter alia, the affirmative defense of good faith

and denied the material allegations of the complaint relating to the origin
of the title of respondents; and the latters claim that Lot 89 is covered by
TCT No. 257152. Pertinent portions of the Answer state:
In further support of the Specific Denials and
Affirmative Allegations herein set forth, and by way of
Affirmative Defenses, defendants allege:
xxxx
4.2 Defendants are innocent purchasers for value of
the subject property. They had no knowledge, actual or
constructive, of the alleged defect in their title, Transfer
Certificate of Title No. 272191, or of the title of their
predecessor-in-interest, the Corporation.
4.2.1 Plaintiff's (sic) notice of lis pendens alleged to
have been duly inscribed on TCT No. 186516 on August 4,
1992 under Entry No, 274711 did not appear or was not
annotated on the corporations title, TCT No. 271604, which
was issued on November 14, 1994 or long after the alleged
inscription was made on the said title. Attached and made
integral part hereof as Annex A is a copy of Corporation's
title, TCT No. 271604.
4.2.2 Neither did said inscription appear or annotated
on defendants title, TCT No. 272191, which was issued on 17
November 1994. Attached and made integral part hereof as
Annex B is a copy of TCT No. 272191.

4.2.3 It bears stressing that if the said inscription was

duly made on 4 August 1992 as plaintiffs alleged, the same
would have been annotated on TCT Nos. 271604 and 272191
which were issued long after the said entry was allegedly
made. Obviously, if said entry does appear today on TCT No.
272191, it was made only recently or at the earliest, after the
latter title was issued on 17 November 1994. But certainly said
entry could not have been possibly made on 4 August 1992.
4.2.4 With the absence of the notice of lis pendens,
defendants could not be charged with notice of any defect in
their title No. 272191 nor their status as innocent purchasers
for value be adversely affected by the same.
4.2.5 Neither does the note, this survey is covered by
F.P.A. No. (III-1) 4496; This survey is entirely inside No. 89 II4755. serve as sufficient notice to defendants of any defect in
their title. Said note does not indicate or disclose that the
subject property is covered by another title.
4.2.6 Moreover, the fact that the subject property was
covered by TCT No. 271604 duly issued by the Registry of
Deeds in the name of the corporation without any
encumbrance, liens or adverse claims annotated thereon
negates any possibility that the subject property belongs to any
person other than the corporation.[18]

It is clear from the foregoing that the pleadings filed in the instant
case generated the following issues: (1) whether respondents TCT No.
257152 is valid; (2) whether Lot 89 is covered by TCT No. 257152; and
(3) whether petitioners are purchasers in good faith. This is clearly not a
proper case for judgment on the pleadings considering that the Answers
tendered factual issues. The trial court rendered a summary judgment on
March 21, 2003 and not a judgment on the pleadings.
In Narra Integrated Corporation v. Court of Appeals,[19] the Court
explained the distinction between a proper case of summary judgment
and judgment on the pleadings, in this wise:
The existence or appearance of ostensible issues in the
pleadings, on the one hand, and their sham or fictitious
character, on the other, are what distinguish a proper case for

summary judgment from one for a judgment on the pleadings.

In a proper case for judgment on the pleadings, there is no
ostensible issue at all because of the failure of the defending
partys answer to raise an issue. On the other hand, in the case
of a summary judgment, issues apparently exist i.e. facts are
asserted in the complaint regarding which there is as yet no
admission, disavowal or qualification; or specific denials or
affirmative defenses are in truth set out in the answerbut the
issues thus arising from the pleadings are sham, fictitious or
not genuine, as shown by affidavits, depositions, or
admissions. x x x.

In any case, a summary judgment is likewise not warranted in this

case as there are genuine issues which call for a full blown trial. A
genuine issue is an issue of fact which requires the presentation of
evidence as distinguished from a sham, fictitious, contrived or false
claim. When the facts as pleaded appear uncontested or undisputed, then
there is no real or genuine issue or question as to the facts, and summary
judgment is called for. The party who moves for summary judgment has
the burden of demonstrating clearly the absence of any genuine issue of
fact, or that the issue posed in the complaint is patently unsubstantial so
as not to constitute a genuine issue for trial. Trial courts have limited
authority to render summary judgments and may do so only when there is
clearly no genuine issue as to any material fact. When the facts as
pleaded by the parties are disputed or contested, proceedings for
summary judgment cannot take the place of trial.[20]
In the instant case, presentation of evidence is necessary to
determine the validity of TCT No. 22395 from which respondents title
(TCT No. 257152) was derived. As alleged by defendant heirs, TCT No.
22395 was a mere reconstitution of TCT No. 45046, which per
verification from the Register of Deeds of Rizal pertain to a different
piece of land measuring only about 356 square meters and located in San
Juan, Rizal. These allegations were never refuted by respondents, hence,
they cannot be simply brushed aside by the trial court.
Moreover, even assuming that the title of respondents
predecessors-in-interest (TCT No. 22395) is valid, the evidence at this
stage is still insufficient to sustain the conclusion of the trial court that
Lot 89 is inside respondents land now covered by TCT No. 257152. The

title appended by respondents in their complaint is a mere

photocopy. Likewise, the document allegedly issued by the Bureau of
Lands and presented by respondents to prove that Lot 89 is inside their
land are also mere photocopies and not authenticated by said
office. Furthermore, the title referred in the said documents as the origin
of TCT No. 257152, is a different title, that is OCT No. 734 and not OCT
No. 730. There is thus a need to present evidence to settle the issues in a
full blown trial.
If the evidence show that the Free Patent and the OCT issued to
petitioners predecessors-in-interest is valid and or Lot 89 is not inside
TCT No. 257152, then judgment should be rendered in favor of
petitioners; and whether the latter acted in good or bad faith will no
longer be a decisive issue in this case. On the other hand, if the title of
petitioners predecessors-in-interest is declared void, the defense of good
faith may still be available to petitioners who claim to be purchasers in
good faith and for value. The rule is that a void title may be the source
of a valid title in the hands of an innocent purchaser for value. [21] An
innocent purchaser for value is one who buys the property of another,
without notice that some other person has a right to, or interest in, such
property and pays a full and fair price for the same at the time of such
purchase, or before he has notice of the claims or interest of some other
person in the property.[22]
Since good faith is always presumed, [23] it was premature for the
trial court to conclude that petitioners are not purchasers in good
faith. Note that the complaint did not state that the notice of the pendency
of this action was inscribed in the title of the Corporation from whom
petitioners purchased the property. Petitioners even denied the presence
of said inscription in their own title and in the title of the Corporation.
[24]
Neither the presence of the notation This survey is covered by F.P.A.
No. (III-1) 4496; and This survey is entirely inside No. 89, II-4755, in
the title of the Corporation automatically make petitioners purchasers in
bad faith. In the absence of other evidence to explain said notation, bad
faith, which is never presumed, cannot be charged against
petitioners. The notation that the disputed lot is covered by Free Patent
Application No. (III-1) 4496, will not place the title in dubious light
because the same is the number of the application for Free Patent of

Macario Mencias,[25] petitioners predecessor-in-interest. The same is true

with respect to the notation in the title that the questioned lot is inside Lot
89. Considering that the title presented is a mere photocopy and that the
notes appearing thereon do not indicate that the subject property is
covered by any title, the trial court should have directed the parties to
substantiate their respective allegations instead of rendering
judgment. Indeed, in determining the propriety of rendering a motion for
summary judgment, the lower court should take that view of the evidence
most favorable to the party against whom it is directed, giving such party
the benefit of all favorable inferences.[26]
In sum, we find that respondents failed to prove that presentation
of evidence may be dispensed with in the present controversy. The
instant case is neither a proper case for rendition of judgment on the
pleadings nor of summary judgment. A full blown trial should therefore
be conducted to resolve the issues raised by the parties.
WHEREFORE, in view of all the foregoing, the petition
isGRANTED and the February 3, 2005 Decision and the July 6, 2005
Resolution of the Court of Appeals in CA-G.R. CV No. 79957
areREVERSED and SET ASIDE. Let the records of this case be
remanded to the Regional Trial Court of Pasig City, Branch 264 for
further proceedings.

43. Narra Integrated Corp. v. CA G.R. 137915 Nov. 15, 2000

NARRA INTEGRATED CORPORATION, petitioner, vs. THE

COURT OF APPEALS and NC INDUSTRIAL TRADE,
INC.,respondents.
DECISION
GONZAGA-REYES, J.:

Before us is a petition for review on certiorari of the decision of the Court of

Appeals[1] in C.A. G.R. CV No. 54397, which affirmed the partial decision dated June
28, 1995 of the Regional Trial Court[2] declaring petitioner to be liable to private
respondent in the amount of P1,485,776.93, attorneys fees of P10,000.00 and costs of
suit.
The factual antecedents of the case, as found by the Court of Appeals, are as
follows:

Sometime in November 1991, Narra Integrated Corporation contracted

from NC Industrial Trade, Inc., manpower services and materials for the
agreed consideration hereinbelow indicated, to wit:
A. Supply of Labor, trader, tools, `equipment and supervision necessary to complete
the installation, lay-out, testing and commissioning of one (1) lot ELECTRICAL
POWER DISTRIBUTION SYSTEM for the factory of Kyung-Il Philippines at
the construction site located in Dasmarinas, Cavite - - - - - - P3,683,710.00
B. For the supply of labor trades, tools, equipment and supervision necessary for
piping installation, spotting and positioning of WASTE WATER TREATMENT
PLANT EQUIPMENT AND MACHINERIES FOR KYUNG-IL PHILIPPINES
at
Dasmarinas,
Cavite
----------------------P1,344,100.00
C. For the supply of labor, materials, tools, consumables and supervision necessary
for FABRICATION DELIVERY AND INSTALLATION OF ONE (1) LOT
CATWALK RAILINGS AND LADDER at Waste Water Treatment Project - - - - P1,485,776.93

The abovestated undertakings are evidenced by the following Sales Invoices

issued by NC Industrial Trade, Inc., viz: Invoice Nos. 106 and 107,
respectively dated June 13 and August 11, 1992 for the first project; Invoice
Nos. 105 and 108, respectively dated June 13 and August 11, 1992 for the
second undertaking; and Invoice No. 103, dated May 25, 1992 for the third
project. For failure of Narra Integrated Corporation to pay a balance
totaling P1,485,776.93 out of the consideration agreed upon for the
aforesaid contracts, NC Industrial Trade, Inc. caused a demand letter dated
October 24, 1992 to be sent to the former.

Claiming that Narra Integrated Corporation refused to heed its demand letter
as aforesaid, and based on the foregoing factual antecedents and the
actionable documents evidencing the same, NC Industrial Trade Inc. filed its
complaint for a sum of money and damages. xxx
xxx

Having been duly served with summons, the defendant Narra Integrated
Corporation filed its answer alleging, among other matters, that it merely
hired the plaintiff as a sub-contractor in the project it was doing for KyungIl Philippines, Inc.; that in the aforesaid capacity, plaintiff was aware that its
payments were subject to the progress payments made by the project owner
(Kyung-Il) to the defendant; that it has, itself, not been paid by Kyung-Il
Philippines, Inc. on account of supposed defects in the works done in the
project, including those done by the plaintiff; and, that the latter was
apprised of the situation and, along with its other sub-contractors,
had agreed that the defendant be first allowed to pursue payment from
Kyung-Il Philippines, Inc. Contending that the plaintiff had no cause of
action against it and that the case was prematurely filed, the defendant
prayed for the dismissal of the complaint and the grant of its counterclaims
for moral and exemplary damages, attorneys fees and litigation expenses.
On the ground that it still had an outstanding balance in the sum of
P4,102,661.01 from the project owner and that it would not have been hailed
into the instant suit by the plaintiff had its demands for payment of the
works already completed under the premises were heeded, Narra Integrated
Corporation in turn filed a third-party complaint against Kyung-Il
Philippines, Inc. xxx
xxx

After the trial courts denial of the motion to dismiss it filed on the ground
of improper service of summons, the third-party defendant Kyung-Il
Philippines, Inc. filed another motion to dismiss for failure of the
defendant/third-party plaintiff to attach a certification of non-forum
shopping to the third-party complaint, and the said pleadings supposed
inadmissibility and impropriety. Over the opposition of the defendant/thirdparty plaintiff Narra Integrated Corp., the motion was granted by the trial
court dismissing the third-party complaint in its order of October 18,
1993. However, the said order of the dismissal was set aside by the lower
court upon the defendant/third-party plaintiffs motion for
reconsideration and subsequent compliance with Supreme Court Circular
No. 28-91.
With the denial of its motion seeking the reconsideration of the order that
reinstated the third party complaint, the third-party defendant filed its

answer, specifically denying the material allegations of the

said pleading. As affirmative defenses, it alleged, among other matters, that
despite the fact that it was the one who drew the contracts between them, the
defendant/third-party plaintiff violated the same by failing to submit
adequate performance bond, incurring substantial delays, hiring
subcontractors without prior approval and submitting defective, if not
substandard, construction work. The third-party defendant sought the
dismissal of the third-party complaint and prayed for liquidated, moral and
exemplary damages, attorneys fees and litigation expenses.
The issues thus joined, the court a quo set the case for pre-trial. Alleging
that the answer filed by the defendant/third party plaintiff did not tender an
issue on account of the said partys admission of the material allegations of
the complaint and the actionable documents attached thereto, the plaintiff
filed a motion for summary judgment. The defendant/third-party plaintiff
interposed its opposition thereto. Nevertheless, the motion was granted by
the trial court in the partial decision which is the subject matter of the instant
appeal xxx[3] (citations omitted)
Petitioner appealed the Partial Decision[4] dated June 25, 1995 of the trial court to
the Court of Appeals. The appellate court upheld the judgment of the trial court in its
Decision[5]dated November 27, 1998. The Motion for Reconsideration filed by
petitioner was likewise denied by the Court of Appeals in a Resolution [6]dated March
12, 1999.
Hence, this petition for review on certiorari where petitioner raises the following
arguments[7]
I.

THE HONORABLE COURT OF APPEALS GROSSLY ERRED IN

AFFIRMING THE LOWER COURTS ERRONEOUS DECISION
ALLOWING A JUDGMENT ON THE PLEADINGS WHERE THERE
ARE IN FACT GENUINE ISSUES RAISED IN PETITIONERS
ANSWER THAT WOULD NECESSITATE A TRIAL OR HEARING ON
THE MERITS UPON ITS MISTAKEN PERCEPTION THAT THE
ALLEGATIONS THEREOF MERELY GAVE A REASON, NOT
JUSTIFICATION, OF ITS FAILURE TO PAY EVEN AS IT FURTHER
FAILED TO TAKE INTO ACCOUNT THAT THE MATTER OF THE
COMPLETION OF THE PROJECT IS STILL THE SUBJECT MATTER
OF THE LITIGATION PENDING BEFORE THE LOWER COURT.
II.

THE HONORABLE COURT OF APPEALS, BY DISREGARDING THE

GLARING AND APPARENT EXISTENCE OF CONTENTIOUS ISSUES
RAISED BY PETITIONER-APPELLANT IN ITS ANSWER FILED

BEFORE THE REGIONAL TRIAL COURT, AND AFFIRMING THE

LOWER COURTS PARTIAL DECISION RENDERED WITHOUT
AWAITING THE RESULTS OF THE THIRD PARTY COMPLAINT
WHICH PETITIONERS FILED WITH LEAVE OF COURT AGAINST
THE PROJECT OWNER, KYUNGI, PHILS. INC., WHICH RULING IN
EFFECT DEPARTED FROM THE USUAL COURSE OF JUDICIAL
PROCEEDINGS AND HAS DECIDED THE ISSUES RAISED BY
PETITIONER-APPELLANT IN A WAY NOT IN ACCORD WITH LAW
AND WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT.
We affirm the decision of the Court of Appeals.
At the onset, we note that the petitioner, as shown in its assignment of errors, is
guilty of the usual error of equating a summary judgment with a judgment on the
pleadings. While the petitioner makes mention of the lower courts promulgation of a
judgment on the pleadings, we have gone over the records and it is clear that what the
trial court actually rendered was a summary judgment.
The existence or appearance of ostensible issues in the pleadings, on the one
hand, and their sham or fictitious character, on the other, are what distinguish a proper
case for summary judgment[8] from one for a judgment on the pleadings [9]. In a proper
case for judgment on the pleadings, there is no ostensible issue at all because of the
failure of the defending partys answer to raise an issue. On the other hand, in the
case of a summary judgment, issues apparently exist i.e. facts are asserted in the
complaint regarding which there is as yet no admission, disavowal or qualification; or
specific denials or affirmative defenses are in truth set out in the answer but the
issues thus arising from the pleadings are sham, fictitious or not genuine, as shown by
affidavits, depositions, or admissions. In other words, a judgment on the pleadings is
a judgment on the facts as pleaded, while a summary judgment is a judgment on the
facts as summarily proven by affidavits, depositions, or admissions.[10]
As such, even if the answer does tender issues and therefore a judgment on the
pleadings is not proper a summary judgment may still be rendered on the plaintiff's
motion if he can show that the issues thus tendered are not genuine, sham, fictitious,
contrived, set up in bad faith, or patently unsubstantial. [11] The trial court can
determine whether there is a genuine issue on the basis of the pleadings, admissions,
documents, affidavits and/or counter-affidavits submitted by the parties to the court.[12]
In the instant case, the answer[13]submitted by the petitioner in Civil Case No. 923567 appears on its face to tender issues. The answer purports to deal with each of
the material allegations of the complaint[14], and either specifically denies, partially
admits, or professes lack of knowledge or information to form a belief as to
them. The answer likewise sets up affirmative defenses.
A cursory reading of petitioners answer in the trial court would therefore, show
that it does ostensibly raise issues. The question that must be answered then is
whether or not these issues are sham or fictitious so as to justify a summary
judgment?[15] In answering this question, the trial court may rely on the pleadings,
admissions, affidavits, and documents submitted by the private respondent in support
of his Motion for Partial Summary Judgment[16] These include the affidavits of

petitioners own General Manager and of private respondents President and the Letter
Contract dated November 6, 1991[17] between petitioner and private respondent.
To begin with, petitioner, in its Answer, does not deny that it entered into the
November 6, 1991 letter-contract with private respondent for the supply of labor,
trader, tools, equipment and supervision necessary for the installation of an electrical
power distribution system, waste water treatment plant, and catwalk railings and
ladder. Neither did it specifically deny the invoices issued by private respondent
which show the various amounts owed by it to private respondent. Finally, petitioner
did not dispute the unpaid balance of P1,485,776.93 which it still allegedly owes
private respondent.
Petitioner insists, however, that there are genuine issues raised in its Answer
which require a full-blown trial on the merits. Specifically, petitioner claims that
paragraphs 7 to 10 of the Answer clearly allege that the project undertaken by
respondent is subject to the acceptance by the project owner, Kyung-Il Phils., Inc.
and/or by the petitioner, as General Contractor. Paragraphs 7 to 10 of the Answer is
quoted hereunder, as follows:

7. As one of the numerous subcontractors of defendant in Kyungil,

Dasmarinas, Cavite Project, Defendant, before entering into the subcontractor agreement, was well aware of the fact that:
a) their billings are subject to progress payments which, before its release to
plaintiff, must follow certain requirements of inspection, approval and/or
certification from defendants and the project owners representatives;
b) progress payments on plaintiffs progress billings shall be subject to the
progress payments of the project owner to the principal contractor,
defendant herein;
c) payments of its progress billings to defendant is subject to the project
owners acceptance of the works done by the principal contractor defendant
herein which necessarily includes acceptance of plaintiffs works as it is
defendants sub-contractor;
8. Unfortunately, defendant herein, the principal contractor of the project,
has not been paid up to the present time by the project owner despite
numerous oral as well as written demands served on it.
9. The project owner, faced with defendants demand letters for payment of
the contract price which include the balance of plaintiffs claim against the
defendant, alleged and continues to allege defects in the works of the
defendant, including those of the plaintiff herein as the basis of its refusal to
pay defendant the balance of its contract price;
10. The plaintiff is very much aware of the situation and that one of the
works alleged by Kyungil to be defective are those of the plaintiff. Several

meetings and conferences were held by the defendant with its subcontractors
who likewise remain unpaid, and it was decided, by consensus, that
defendant, as the principal contractor, pursue its demand for payment by the
project owner, Kyungil Philippines, Inc, for itself and in behalf of the
contractors;[18]
On these alleged special and affirmative defenses, we agree with the trial court
and the Court of Appeals that, rather than tendering genuine issues, these allegations
merely give an unjustified reason for petitioners failure to pay the undisputed balance
owing to private respondent. We note with approval the following pronouncement of
the Court of Appeals:

It will be noted that rather than tendering genuine issues insofar as the
complaint is concerned, the foregoing allegations merely give a reason an
unjustified one at that for the appellants failure to pay the undisputed
balance owing to the plaintiff-appellee. The fact that the appellant is not
thereby excused is evident from its own allegations charging the plaintiffappellee (herein-respondent) only with awareness of not consent to the
supposed payment scheme it had entered into with the third-party defendantappellee. Absent any allegation indicating the appellees privity and/or
consent to the contract between the appellant and the third-party defendantappellee, we find no reason to disturb the partial judgment the court a quo
rendered in the premises. In the case of D.D. Comendador Construction
Corp. vs. Sayo (118 SCRA 590), summary judgment was pronounced proper
where the defense interposed was the supposed understanding between the
parties that payment will proceed from the defendants own collectibles
which, as in the instant case, is belied by the document evidencing the
transaction sued upon.[19]
Petitioner insists however, that these allegations do not merely set up an
unjustified reason for its failure to pay the balance due to private respondent. For one
thing, petitioner argues that its Answer puts into issue the question of whether or not
there has been a final acceptance on its part of the work done by private
respondents. Petitioner claims that this is a genuine issue and is supported by
paragraph XIII of the letter-contract between petitioner and private respondent which
provides, as follows:

The letter contract shall be terminated upon the completion and acceptance
of the work by the GENERAL CONTRACTOR. Any partial payment prior
to the termination does not waive the right of the GENERAL
CONTRACTOR to have the SUB-CONTRACTOR correct deficiencies or
defects subsequently found or become evident. xxx [20]
Admittedly, by the terms of the written contract, there is a need for the
acceptance by herein petitioner, as General Contractor, of the work undertaken by the
private respondent before payment can be made. However, the issue of whether or

not there has been an acceptance in the instant case can be resolved without the need
for a lengthy trial.
At the onset, we note that the terms of the written contract do not specify what
form the acceptance of the project should take. As such, the same can be inferred and
implied from the actions of petitioner regarding the work undertaken by private
respondent. In this regard, petitioners own General Manager, Mr. Francisco Overall,
in an affidavit which formed part of petitioners third-party complaint against KyungIl Phils., Inc and which was attached to private respondents Motion for Partial
Summary Judgment, admitted that the construction/project had been fully completed
since May 1992 and that Kyung-Il had been in full operation and use (sic) of all the
facilities constructed by Narra under the Construction Contract since said date. [21] It is
clear from this statement that petitioner has already regarded the work done on the
project as fully complete. As such, the logical inference is that petitioner has already
accepted the portions of the project undertaken by private respondent, otherwise, it
would not have turned over the same to Kyung-Il, Phils., Inc. Having thus accepted
and turned-over the work done by private respondent to Kyung-Il Phils., Inc., we see
no reason why petitioner should not pay private respondent the unpaid balance due to
the latter.
Petitioner likewise claims that the answer puts into issue the alleged need for the
final acceptance by the project-owner, Kyung-Il Phils., Inc. of the projects undertaken
by private respondent. Allegedly, this is supported by paragraph II (b) of the contract
which reads, as follows:

The ten percent (10%) retention shall be released to the SUBCONTRACTOR sixty (60) days after the final acceptance of the project and
after the SUB-CONTRACTOR has submitted an affidavit or undertaking
under oath that all salaries/wages and allowances due his
employees/workers in the project have been paid to their full and complete
satisfaction.[22]
We are not persuaded. It is axiomatic that contracts take effect only between the
parties who execute them.[23] The paragraph cited by petitioner speaks only of the
acceptance of the project and the submission of an affidavit or undertaking as
prerequisites before the 10% retention can be released. As the contract is only
between the petitioner and private respondent and no mention is made of the project
owner, Kyung-Il, Phils., Inc., it follows that the acceptance referred to is the
acceptance by petitioner itself. Considering that, as previously discussed, petitioner
has already accepted the project undertaken by private respondent and respondent,
further, has previously submitted the required affidavit/undertaking [24], there is no
more reason for petitioner to hold on to the 10% retention amount.
Finally, petitioner questions the propriety of the promulgation of a summary
judgment considering that it has also filed a third-party complaint against the Project
Manager, Kyung-Il, Phils., Inc. for indemnity or contribution in respect of
respondents claim.
This issue is not one of first impression. We have previously held that a trial
court may render a judgment on the pleadings even if there is pending before the same
court, a third-party complaint. Thus:

Utassco claims that the trial court should have withheld judgment on the
pleadings until after the third-party action brought by Utassco against the
owner of Lanuza Lumber on the indemnity agreement executed between
them, had gone forward to judgment. The third party complaint could, of
course, have been proceeded quite separately from the principal action
between PNB and Utassco. Indeed there was no reason at all why the trial
court should have deferred rendering judgment on the pleadings in the
principal action, considering that the PNB was not interested at all in the
outcome of the third party complaint. Under Section 12, Rule 6 of the
Revised Rules of Court, the purpose of a third party complaint is to enable a
defending party to obtain contribution, indemnity, subrogation or other relief
from a person not a party to the action. Thus, notwithstanding the judgment
of the pleadings, Utassco could still proceed with the prosecution of its third
party complaint.[25]
Although the quoted decision deals with a judgment on the pleadings, we see no
reason why the same cannot be applied in the instant case involving a summary
judgment. In the case at bench, private respondent is likewise not interested in the
outcome of the third-party complaint which petitioner filed against the third-party
respondent, Kyung-Il Phils., Inc. Petitioner, as third-party plaintiff, is suing Kyung-Il
Phils., Inc. on the basis of its own contracts [26] with the latter. It must be stressed that
these contracts are only between petitioner and Kyung-Il Phils. and, in fact, no
mention is made of private respondent in these contracts, either as a party or a subcontractor. As such, the third-party complaint could proceed quite separately from the
principal action between petitioner and private respondent. Consequently, there was
no reason for the trial court to defer rendering a summary judgment until the
resolution of the third-party complaint.
Under the circumstances herein set forth, there are clearly no substantial triable
issues in the instant case. The fitness and propriety of a summary judgment cannot
therefore, be disputed.
WHEREFORE, the decision of the Court of Appeals dated November 27, 1998
is hereby AFFIRMED. The instant petition is DENIED for lack of merit.
SO ORDERED.
Melo, (Chairman), Vitug, and Panganiban, JJ., concur

X. EXECUTION
44. Ong v. Sps. Tating G.R. L-61042
G.R. No. L-61042 April 15, 1987
HECTOR L. ONG, petitioner,
vs.
MARILYN TATING AND ROBERT TATING, ET AL., respondents.

NARVASA, J.:
The issue in this case concerns the jurisdiction of an inferior Court to take cognizance of
a motion impugning the sheriff's authority to execute a final judgment in an ejectment
case which commands payment of rentals in arrears against personalty claimed as
theirs by persons formerly residing in the leased premises together with the evicted
defendant-lessee.
An action of desahucio was instituted in the City Court of Quezon City by petitioner Ong
against his lessee, Evangeline Roces. 1 This in time culminated in a judgment by the Court of First Instance
(Branch XVIII) 2 disposing of the case as follows:
WHEREFORE, premises considered, the judgment of the City Court is
set aside and in lieu thereof judgment is rendered ordering defendant
Evangeline Roces and all persons claiming under her to vacate plaintiff's
premises located at 169-D, Tolentino St., San Francisco del Monte,
Quezon City; to pay rentals in arrears in the sum of P10,920.00 as of
September 1978 and P260.00 a month from October 1978 until the
premises are vacated with interest at 12% per annum; P1,000.00 as
attomey's fees and the costs. 3
The decision became final and executory, no appeal having been taken therefrom; and in
due course, the records of the case were remanded to the City Court.
On Ong's application, the City Court directed execution of the judgment. Accordingly, the
sheriff cleared the premises of its occupants, which included Anacleto Tating
(Evangeline's stepfather and lawyer), Marilyn Tating (Anacleto's wife), and Robert
Tating. 4
The sheriff also levied on certain chattels found in the place: a "Citizen" stereo set; a
"Sanyo" television set; a "Frigidaire" refrigerator; and a "Hitachi" electric desk fan. Marilyn
and Robert Tating sought to retrieve these appliances from the sheriff, alleging that the
articles belonged to them and not to the lessee, Evangeline Roces. 5 To this end, Robert
filed with the sheriff a "Third Party Claim" dated September 13, 1979 as regards the "Citizen"
stereo set; and Marilyn, a similar claim with respect to the other chattels. 6 When these proved
unavailing, they filed with the City Court Identical applications dated September 17, 1979,
entitled "Urgent Motion for Suspension of Sheriff Sale and for Release of Properties
Wrongfully Levied Upon on Execution," in which they set out their respective titles to the
goods and prayed that the execution sale thereof scheduled on September 19, 1979 be

abated and that, after hearing, said goods be released to them as the true and lawful owners
thereof. 7

To neutralize the Tatings' moves, and so that the execution sale might proceed as
scheduled, Ong posted two (2) surety bonds 8 to indemnify the sheriff for any liability for
damages. 9 But by Order dated September 19, 1979 the City Court restrained the sale and set
the Tatings' motions for hearing. 10
What Ong did was to present an "Omnibus Opposition, etc. " dated October 2,
1979, 11 contending that the Tatings' motions should have been filed with the Court of First Instance since it was the
latter's decision which was being executed; and that, in any event, the Tatings' remedy was "to file an action for damages
against the indemnity bonds after the auction sale. " He also theorized that

* * Atty. Tating, and the third party claimants having stayed in the
premises and having enjoyed the same should be required to pay the
back rentals, attorney's fees and sheriff's and legal expenses (and should
not) escape by avoiding paying any amount as stated in the judgment. *
* 12
Ong later filed a "Motion to Inhibit" dated January 9, 1980, which the City Court denied by
Order dated January 23, 1980. The Court also directed Ong's counsel to explain certain
apparently contumacious statements in the motion. The Order reads as follows:
ORDER
Considering the Motion to Inhibit filed by the plaintiff, dated January 9,
1980, and the Manifestation filed by the third party claimants, Marilyn
Tating and Robert Tating, dated January 16, 1980, this Court finds the
motion without merit and hereby resolves to deny it.
Furthermore, Atty. Manuel E. Yuzon, counsel for the plaintiff, is hereby
ordered to explain in writing within ten (10) days from notice hereof why
he should not be cited for indirect contempt of court for stating in his
Motion to Inhibit that if this Court 'proceeds to hear and resolve the thirdparty claims, it is foregone conclusion that the third-party claimants will
surely win and the plaintiff will lose,' thereby casting aspersions on the
integrity of this Court and degrading the administration of justice.
In the meantime, let the continuation of the hearing of the motion for
suspension of sheriff's sale etc. be set for February 11, 1980, at 9:00
o'clock in the morning.
SO ORDERED. 13
Ong promptly initiated proceedings to negate this Order. He filed with the Court of First
Instance on February 7, 1980 a petition for certiorari and prohibition, with application for
preliminary injunction. 14 Acting thereon, the Court (Branch IX) promulgated an Order dated April 2, 1980 directing
the maintenance of the status quo and commanding that the City Court refrain "from hearing and deciding the third party
claims and the urgent motion for suspension of Sheriff's Sale, etc. until the resolution of the injunction * *. 15 It afterwards
rendered a decision, dated December 15, 1981, 16 pertinently reading as follows:

The issue in this petition boils down to this should the third-party claims
be heard and decided by the lower court.
While it is true that the respondents Marilyn and Robert Tating were not
parties in the ejectment case because the lease was between the
petitioner and Evangeline Roces, they stayed with her and the decision of

the appellate court covered them as it ordered "Evangeline Roces and all
persons claiming under her to vacate plaintiff's premises" ... Besides, the
procedure followed by said private respondents in vindicating their rights
over the four (4) levied appliances is not the one sanctioned by law for
they should have filed a separate and independent action making parties
the deputy sheriff and the petitioner and making them responsible for the
execution (Santos et al., vs. Hon. Mojica, L-19618, Feb. 28, 1964).
WHEREUPON, premises considered, the petitioner Hector L. Ong is
entitled to relief. The decision of Branch XVIII of the CFI Quezon City
which is final and executory, stands.
The preliminary injunction issued on April 2, 1980 is hereby ordered
permanent. 17
The Tatings appealed to the Court of Appeals by "a petition for review filed * * on March
1, 1982. 18 In its decision, promulgated on June 23, 1982, after due proceedings, 19 the Court of Appeals expressed
puzzlement why the matter of the execution and related incidents were passed upon by the lower court, when the only issue
was the correctness of the City Judge's refusal to inhibit, himself. 20 It dismissed the petition, and sent the case

back to the City Court for further proceedings." Said the Court:

It is a puzzle to Us why the hearing went out of bounds. Instead of

determining merely the propriety of the order of denial of the motion to
inhibit, the parties and the Court of First Instance * * went into the merits
of the propriety of the execution of the decision of the City Court, the
auction sale of the appliances claimed by the Tatings, the levy,the third
party claim,the indemnity bond, and the motion to suspend the sale and
the filling of the sheriffs bond matters which are properly only to be
treated in a separate proceeding.
From the records,We see that if at all the matter of execution of the
decision ** (etc.) were mentioned,it was merely to give a background to
the motion to inhibit Judge Laquio, Jr. from proceeding to take further
participation in the incident of the execution ** and the incident stemming
therefrom.
The propriety of the denial of the motion to inhibit was lost in the maze of
the irrelevant facts and incidents taken during the hearing of this case in
the court below.
A thorough review of the decision of the Court of First Instance * * Branch
IX, in this certiorari case shows that the Presiding Judge * * erroneously
treated the pleadings before it in Civil Case No. 29245. Thus, We are
constrained to set the same aside and remand the case to the City Court
presided over by Judge Laquio, Jr. for further proceedings. Principally,
We rule the denial of the motion for Judge Laquio, Jr. to inhibit himself
from the ejectment case No. 28309, Quezon City Court, was well taken.
The petition assailing the order of denial which is the main issue in Civil
Case No. 29245 is without merit. * * 21
Ong is now before this Court, praying for the reversal of the decision of the Court of
Appeals, and the perpetual inhibition of the City Judge "from further hearing and deciding
the (Tatings') third-party claims." 22
It will not do to dismiss the petition as the IAC did by declaring that the only issue
involved is the propriety of the City Judge's denial of the motion for his inhibition, and

pronouncing the denial to be correct. Not only is such a limitation of the issues disputed
by Ong, but the resolution of the single point would leave unanswered several other
nagging questions. The opportunity to resolve those questions having been presented,
the Court will do precisely that, to the end that the controversy may be expeditiously laid
to rest,
Three theories are advocated by Ong, namely:
1. From the decision of the Court of First Instance (Branch IX) on his petition for certiorari
and prohibition, the Tatings' remedy was appeal (by writ of error), not a petition for review,
to the Court of Appeals.
2. The City Court lost jurisdiction to hear and determine the Tatings' third-party claims
upon the filing by him (Ong) of the bonds prescribed by Section 17, Rule 39, the purpose
of which is precisely to hold the sheriff free from liability for damages for proceeding with
the execution sale despite said third- party claims.
3. Corollarily, the Tatings' remedy was to file a separate suit to recover against said
bonds posted by Ong, whatever damages might be suffered by them by reason of the
effectuation of the execution sale. 23
Ong is correct in arguing that the mode of appeal to the Court of Appeals available to the
Tatings from the adverse judgment of the CFI in the action of certiorari and prohibition
instituted by him, was not by "petition for review" under Section 22 of B.P. Blg., 129 24 but
an ordinary appeal (by writ of error) under Rule 41, Rules of Court and Section 39, of B.P. Blg.
129 (also, Section 20 of the Interim Rules) A "petition for review" is the correct mode of appeal
from a judgment rendered by a CFI (RTC) in the exercise of appellate jurisdiction i.e., when it
decides a case appealed to it from the inferior court. In such a case, the appeal is not a
matter of right, its acceptance being discretionary on the Court of Appeals, which "may give it
due course only when the petition shows prima facie that the lower court has committed an
error of fact or law that will warrant a reversal or modification of the decision or judgment
sought to be reviewed." On the other hand, when a CFI (RTC) adjudicates a case in the
exercise of its original jurisdiction, the correct mode of elevating the judgment to the Court of
Appeals is by ordinary appeal, or appeal by writ of error, involving merely the filing of a notice
of appeal except only if the appeal is taken in special proceedings and other cases wherein
multiple appeals are allowed under the law, in which event the filing of a record on appeal is
additionally required. 25 Of course, when the appeal would involve purely questions of law or
any of the other cases (except criminal cases as stated hereunder) specified in Section 5(2),
Article X of the Constitution,26 it should be taken to the Supreme Court by petition for review
on certiorari in accordance with Rules 42 and 45 of the Rules of Court. 27 However, in criminal
cases in which the penalty imposed is death or life imprisonment, the appeal to the Supreme
Court is by ordinary appeal on both questions of fact and law. In cases where the death
penalty is imposed, there is an automatic review by the Supreme Court. (Sec. 3 of the 1985
Rules on Criminal Procedure)
The mode by which the Tatings thus brought up to the Court of Appeals the adverse
judgment of the CFI i.e., by petition for review was erroneous. This aspect of the
case apparently escaped the Appellate Court's attention; it did not treat of it at all. This is
however of no moment. The need of finally resolve this case makes this defect
inconsequential. In any event, the defect has been waived, no issue concerning it having
been raised in the proceedings before the Court of Appeals. 28
Ong's second contention that the posting by him of a bond to indemnify the sheriff for
damages for proceeding with an execution sale despite the existence of third-party
claims on the property levied on (pursuant to Section 17, Rule 39) caused the Trial Court
to lose jurisdiction to deal with the third-party claimants' plea for relief against what they
deemed to be an act of trespass by the sheriff is incorrect.

Certain it is that the Trial Court has plenary jurisdiction over the proceedings for the
enforcement of its judgments. It has undeniable competence to act on motions for
execution (whether execution be a matter of right or discretionary upon the Court), issue
and quash writs, determine if property is exempt from execution, or fix the value of
property claimed by third persons so that a bond equal to such value may be posted by a
judgment creditor to indemnify the sheriff against liability for damages, resolve questions
involving redemption, examine the judgment debtor and his debtors, and otherwise
perform such other acts as may be necessary or incidental to the carrying out of its
decisions. It may and should exercise control and supervision over the sheriff and other
court officers and employees taking part in the execution proceedings, and correct them
in the event that they should err in the discharge of their functions.
Now, it is axiomatic that money judgments are enforceable only against property
unquestionably belonging to the judgment debtor. One man's goods shall not be sold for
another man's debts, as the saying goes. 29 Therefore, the sheriff acts properly only when
he subjects to execution property undeniably belonging to the judgment debtor. But to the
extent that he levies on assets of a third person, in which the judgment debtor has no interest,
to that extent he acts as a trespasser, and to that extent he is amenable to control and
correction by the Court. 30
When the sheriff thus seizes property of a third person in which the judgment debtor
holds no right or interest, and so incurs in error, the supervisory power of the Court which
has authorized execution may be invoked by the third person. Upon due application by
the third person, and after summary hearing, the Court may command that the property
be released from the mistaken levy and restored to the rightful owner or possessor. What
the Court can do in these instances however is limited to a determination of whether the
sheriff has acted rightly or wrongly in the performance of his duties in the execution of the
judgment, more specifically, if he has indeed taken hold of property not belonging to the
judgment debtor. The Court does not and cannot pass upon the question of title to the
property, with any character of finality. It can treat of that matter only in so far as may be
necessary to decide if the Sheriff has acted correctly or not. 31 The Court can require the
sheriff to restore the property to the claimant's possession if warranted by the evidence. If the
claimant's proofs do not however persuade the Court of his title or right of possession thereof,
the claim will of course be denied.
This remedy is not that of intervention, which is dealt with in Rule 12 of the Rules of
Court, and may be availed of only before or during trial, not thereafter, and certainly not
when judgment is executory. It is rather simply an invocation of the Court's power of
supervision and control over the actuations of its officers and employees to the end that it
be assured that these conform to the law. 32
Independently of the recourse just indicated, and even before or without availment
thereof, the person who claims that his property has been wrongfully seized by resort to
the remedy known as terceria set out in Section 17, Rule 39 of the Rules of Court, viz:
SEC. 17. Proceedings where property claimed by third person. If
property levied on be claimed by any other person than the judgment
debtor or his agent, and such person make an affidavit of his title thereto
or right to the possession thereof, stating the grounds of such right or title,
and serve the same upon the officer making the levy, and a copy thereof
upon the judgment creditor, the officer shag not be bound to keep the
property, unless such judgment creditor or his agent, on demand of the
officer, indemnify the officer against such claim by a bond in a sum not
greater than the value of the property levied on. In case of disagreement
as to such value, the same shall be determined by the court issuing the
writ of execution.

The officer is not liable for damages, for the taking or keeping of the
property, to any third-party claimant unless a claim is made by the latter
and unless an action for damages is brought by him against the officer
within one hundred twenty (120) days from the date of the filing of the
bond. But nothing herein contained shall prevent such claimant or any
third person from vindicating his claim to the property by any proper
action.
xxx xxx xxx
The remedies just mentioned are without prejudice to "any proper action" that a thirdparty claimant may deem suitable, to vindicate "his claim to the property." Such a "proper
action," in the context of Section 17 of Rule 39, has been held to refer to an action
distinct and separate from that in which the judgment is being enforced.
Such a "proper action" is, quite obviously, entirely distinct from the explicitly described in
Section 17 of Rule 39, i.e., "an action for damages ** brought (by a third-party claimant)
against the officer within one hundred twenty (120) days from the date of the filing of the
bond ** for the taking or keeping of the property" subject of the terceria. Quite obviously,
too, this "proper action" would have for its object the recovery of the possession of the
property seized by the sheriff, as well as damages resulting from the allegedly wrongful
seizure and detention thereof despite the third-party claim; and it may be brought against
the sheriff, of course, and such other parties as may be alleged to have wrongful with the
sheriff in the supposedly wrongful execution proceedings, such as the judgment creditor
himself. And such a "proper action," as above pointed out, is and should be an entirety
separate and distinct action from that in which execution has issued, if instituted by a
stranger to the latter suit. 33
** (C)onstruing Section 17 of Rule 39 of the Revised Rules of Court, the
rights of third-party claimant over certain properties levied upon by the
sheriff to satisfy the judgment should not be decided in the action where
the third- party claims have been presented, but in the separate action
instituted by the claimants.
This is evident from the very nature of the proceedings. In Herald
Publishing, supra. We intimated that the levy by the sheriff of a property
by virtue of a writ of attachment may be considered as made under
authority of the court only when the property levied upon unquestionably
belongs to the defendant. If he attaches properties other than those of the
defendant, he acts beyond the acts of his authority. Otherwise stated, the
court issuing a writ of execution is supposed to enforce its authority only
over properties of the judgment debtor, and should a third party appear to
claim the property levied upon by the sheriff, the procedure laid down by
the Rules is that such claim should be the subject of a separate and
independent action.
As we explained in the Quebral case (Quebral v. Garduno, 67 Phil., 316),
since the third-party claimant is not one of the parties to the action, she
could not strictly speaking, appeal from the order denying her claim, but
should file a separate reivindicatory action against the execution creditor
or the purchaser of her property after the sale at public auction, or a
complaint for damages against the bond filed by the judgment creditor in
favor of the sheriff.
We reiterated this in Potenciano v. Dineros, et al. (97 Phil. 196;
Agricultural Credit Administration v. Lasam 28 SCRA 1098) when We

ruled that "such reivindicatory action is reserved to the third-party

claimant by Section 15 of Rule 39 despite disapproval of his claim by the
court itself (Planas v. Madriga 94 Phil. 754, Lara v. Bayona, G.R. No. L7920, decided May 10, 1955)." This rule is dictated by reasons -of
convenience, as "intervention is more likely to inject confusion into the
issues between the parties in the case *** with which the third-party
claimant has nothing to do and thereby retard instead of facilitate the
prompt dispatch of the controversy which is the underlying objective of
the rules of pleading and practice" ( Herald Publishing, supra, p. 101).
Besides, intervention may not be permitted after trial has been concluded
and a final judgment rendered in the case. 34
In such separate action, the court may issue a writ of preliminary injunction against the
sheriff enjoining him from proceeding with the execution sale. 34-A
Upon the other hand, if the claim of impropriety on the part of the sheriff in the execution
proceedings is made by a party to the action, not a stranger thereto, any relief therefrom
may be applied for with, and obtained from, only the executing court; and this is true even
if a new party has been impleaded in the Suit. 35
In any case, Ong's claim that the filing of the judgment creditor's bond operated to divest
the Court of jurisdiction to control and supervise the conduct of the execution sale must
be rejected. That bond had absolutely no effect on the Court's jurisdiction. It was merely
"equivalent to the personal interference of the indemnitor and his bondsmen in the
course of the proceeding by directing or requesting the sheriff to hold and sell the goods
as if they were the property of the defendants in attachment. In doing this they (the
indemnitor and his bondsmen) assume the direction and control of the sheriff's future
action so far as it constitutes a trespass; and they become to that extent the principals
and he their agent in the transaction. This makes them responsible for the continuance of
the wrongful possession and for the sale and conversion of the goods; in other words, for
all the real damages which plaintiff sustains (Love Joy vs. Murray, 70 U.S. 129). 36
Ong's third theory that the Tatings' remedy in the event of the denial of their
application for relief by the Trial Court is a separate action for recovery of possession of
the goods by them claimed plus damages for wrongful detention is correct and should
be sustained, in line with the doctrine in Bayer, supra, 37 and the other cases which followed
it. 38
As regards the matter of the inhibition of the City Court Judge, the incident has been
correctly determined by the Court of Appeals. No proper ground exists to disqualify His
Honor from continuing to act in Civil Case No. 28309.
One last issue remains, and that is, whether the Tatings, who were living with Evangeline
Roces in the premises lease by the latter from Ong, are hable for the payment of rentals
in arrears jointly or solidarily with said Evangeline Roces. They are not. They were never
impleaded as parties and never served with summons in the suit for ejectment initiated
by Ong against Evangeline Roces. The Court therefore never acquired jurisdiction over
them. And while the judgment against Evangeline Roces, in so far as it decrees her
ouster from the leased premises, may be enforced not only against her but also against
"any person or persons claiming under" her 39 that judgment, in so far as it directs payment
of money by way of arrearages in rents, is not binding on the Tatings and definitely not
enforceable against them.
WHEREFORE, the petition is dismissed for lack of merit. The case shall be remanded to
the Metropolitan Trial Court at Quezon City which shall forthwith resolve the Tatings'

pending motions in Civil Case No. 28309, consistently with the principles herein set forth.
Costs against petitioner.
SO ORDERED.
Yap (Chairman), Melencio-Herrera, Cruz, Feliciano, Gancayco and Sarmiento, JJ.,
concur.

45. Ching v. CA G.R. 124642

SECOND DIVISION

[G.R. No. 124642. February 23, 2004]

ALFREDO CHING and ENCARNACION CHING, petitioners, vs. THE HON.

COURT
OF
APPEALS
and
ALLIED
BANKING
CORPORATION, respondents.
DECISION
CALLEJO, SR., J.:

This petition for review, under Rule 45 of the Revised Rules of Court, assails the
Decision of the Court of Appeals (CA) dated November 27, 1995 in CA-G.R. SP No.
33585, as well as the Resolution on April 2, 1996 denying the petitioners motion for
reconsideration. The impugned decision granted the private respondents petition
for certiorari and set aside the Orders of the trial court dated December 15, 1993 and
February 17, 1994 nullifying the attachment of 100,000 shares of stocks of the Citycorp
Investment Philippines under the name of petitioner Alfredo Ching.
[1]

[2]

[3]

[4]

The following facts are undisputed:

On September 26, 1978, the Philippine Blooming Mills Company, Inc. (PBMCI)
obtained a loan of P9,000,000.00 from the Allied Banking Corporation (ABC). By virtue
of this loan, the PBMCI, through its Executive Vice-President Alfredo Ching, executed a
promissory note for the said amount promising to pay on December 22, 1978 at an
interest rate of 14% per annum. As added security for the said loan, on September 28,
1978, Alfredo Ching, together with Emilio Taedo and Chung Kiat Hua, executed a
continuing guaranty with the ABC binding themselves to jointly and severally guarantee
the payment of all the PBMCI obligations owing the ABC to the extent of P38,000,000.00.
The loan was subsequently renewed on various dates, the last renewal having been
made on December 4, 1980.
[5]

[6]

[7]

Earlier, on December 28, 1979, the ABC extended another loan to the PBMCI in the
amount of P13,000,000.00 payable in eighteen months at 16% interest per annum. As in
the previous loan, the PBMCI, through Alfredo Ching, executed a promissory note to
evidence the loan maturing on June 29, 1981. This was renewed once for a period of one
month.
[8]

[9]

The PBMCI defaulted in the payment of all its loans. Hence, on August 21, 1981,
the ABC filed a complaint for sum of money with prayer for a writ of preliminary
attachment against the PBMCI to collect the P12,612,972.88 exclusive of interests,
penalties and other bank charges. Impleaded as co-defendants in the complaint were
Alfredo Ching, Emilio Taedo and Chung Kiat Hua in their capacity as sureties of the
PBMCI.
The case was docketed as Civil Case No. 142729 in the Regional Trial Court of
Manila, Branch XVIII. In its application for a writ of preliminary attachment, the ABC
averred that the defendants are guilty of fraud in incurring the obligations upon which the
present action is brought in that they falsely represented themselves to be in a financial
position to pay their obligation upon maturity thereof. Its supporting affidavit
stated, inter alia, that the [d]efendants have removed or disposed of their properties, or
[are] ABOUT to do so, with intent to defraud their creditors.
[10]

[11]

[12]

[13]

On August 26, 1981, after an ex-parte hearing, the trial court issued an Order
denying the ABCs application for a writ of preliminary attachment. The trial court
decreed that the grounds alleged in the application and that of its supporting affidavit are
all conclusions of fact and of law which do not warrant the issuance of the writ prayed
for. On motion for reconsideration, however, the trial court, in an Order dated September
14, 1981, reconsidered its previous order and granted the ABCs application for a writ of
preliminary attachment on a bond of P12,700,000. The order, in relevant part, stated:
[14]

With respect to the second ground relied upon for the grant of the writ of preliminary attachment
ex-parte, which is the alleged disposal of properties by the defendants with intent to defraud
creditors as provided in Sec. 1(e) of Rule 57 of the Rules of Court, the affidavits can only barely
justify the issuance of said writ as against the defendant Alfredo Ching who has allegedly bound
himself jointly and severally to pay plaintiff the defendant corporations obligation to the plaintiff
as a surety thereof.
WHEREFORE, let a writ of preliminary attachment issue as against the defendant Alfredo Ching
requiring the sheriff of this Court to attach all the properties of said Alfredo Ching not
exceeding P12,612,972.82 in value, which are within the jurisdiction of this Court and not exempt
from execution upon, the filing by plaintiff of a bond duly approved by this Court in the sum of
Twelve Million Seven Hundred Thousand Pesos (P12,700,000.00) executed in favor of the
defendant Alfredo Ching to secure the payment by plaintiff to him of all the costs which may be
adjudged in his favor and all damages he may sustain by reason of the attachment if the court shall
finally adjudge that the plaintiff was not entitled thereto.
SO ORDERED.

[15]

Upon the ABCs posting of the requisite bond, the trial court issued a writ of
preliminary attachment. Subsequently, summonses were served on the defendants,
save Chung Kiat Hua who could not be found.
[16]

Meanwhile, on April 1, 1982, the PBMCI and Alfredo Ching jointly filed a petition for
suspension of payments with the Securities and Exchange Commission (SEC), docketed
as SEC Case No. 2250, at the same time seeking the PBMCIs rehabilitation.
[17]

On July 9, 1982, the SEC issued an Order placing the PBMCIs business, including
its assets and liabilities, under rehabilitation receivership, and ordered that all actions for
claims listed in Schedule A of the petition pending before any court or tribunal are
hereby suspended in whatever stage the same may be until further orders from the
Commission. The ABC was among the PBMCIs creditors named in the said schedule.
[18]

Subsequently, on January 31, 1983, the PBMCI and Alfredo Ching jointly filed a
Motion to Dismiss and/or motion to suspend the proceedings in Civil Case No. 142729
invoking the PBMCIs pending application for suspension of payments (which Ching cosigned) and over which the SEC had already assumed jurisdiction. On February 4,
1983, the ABC filed its Opposition thereto.
[19]

[20]

In the meantime, on July 26, 1983, the deputy sheriff of the trial court levied on
attachment the 100,000 common shares of Citycorp stocks in the name of Alfredo Ching.
[21]

Thereafter, in an Order dated September 16, 1983, the trial court partially granted
the aforementioned motion by suspending the proceedings only with respect to the
PBMCI. It denied Chings motion to dismiss the complaint/or suspend the proceedings
and pointed out that P.D. No. 1758 only concerns the activities of corporations,
partnerships and associations and was never intended to regulate and/or control
activities of individuals. Thus, it directed the individual defendants to file their answers.
[22]

Instead of filing an answer, Ching filed on January 14, 1984 a Motion to Suspend
Proceedings on the same ground of the pendency of SEC Case No. 2250. This motion
met the opposition from the ABC.
[23]

[24]

On January 20, 1984, Taedo filed his Answer with counterclaim and cross-claim.
Ching eventually filed his Answer on July 12, 1984.
[25]

On October 25, 1984, long after submitting their answers, Ching filed an Omnibus
Motion, again praying for the dismissal of the complaint or suspension of the
proceedings on the ground of the July 9, 1982 Injunctive Order issued in SEC Case No.
2250. He averred that as a surety of the PBMCI, he must also necessarily benefit from
the defenses of his principal. The ABC opposed Chings omnibus motion.
[26]

Emilio Y. Taedo, thereafter, filed his own Omnibus Motion praying for the dismissal
of the complaint, arguing that the ABC had abandoned and waived its right to proceed
against the continuing guaranty by its act of resorting to preliminary attachment.
[27]

On December 17, 1986, the ABC filed a Motion to Reduce the amount of his
preliminary attachment bond from P12,700,000 to P6,350,000. Alfredo Ching opposed
the motion, but on April 2, 1987, the court issued an Order setting the incident for further
hearing on May 28, 1987 at 8:30 a.m. for the parties to adduce evidence on the actual
value of the properties of Alfredo Ching levied on by the sheriff.
[28]

[29]

[30]

On March 2, 1988, the trial court issued an Order granting the motion of the ABC
and rendered the attachment bond of P6,350,000.
[31]

On November 16, 1993, Encarnacion T. Ching, assisted by her husband Alfredo

Ching, filed a Motion to Set Aside the levy on attachment. She allegedinter alia that the
100,000 shares of stocks levied on by the sheriff were acquired by her and her husband
during their marriage out of conjugal funds after the Citycorp Investment Philippines was
established in 1974. Furthermore, the indebtedness covered by the continuing
guaranty/comprehensive suretyship contract executed by petitioner Alfredo Ching for the
account of PBMCI did not redound to the benefit of the conjugal partnership. She,
likewise, alleged that being the wife of Alfredo Ching, she was a third-party claimant
entitled to file a motion for the release of the properties. She attached therewith a copy
of her marriage contract with Alfredo Ching.
[32]

[33]

The ABC filed a comment on the motion to quash preliminary attachment and/or
motion to expunge records, contending that:
2.1
The supposed movant, Encarnacion T. Ching, is not a party to this present case; thus, she
has no personality to file any motion before this Honorable Court;
2.2
Said supposed movant did not file any Motion for Intervention pursuant to Section 2,
Rule 12 of the Rules of Court;
2.3
Said Motion cannot even be construed to be in the nature of a Third-Party Claim
conformably with Sec. 14, Rule 57 of the Rules of Court.
3.
Furthermore, assuming in gracia argumenti that the supposed movant has the required
personality, her Motion cannot be acted upon by this Honorable Court as the above-entitled case is
still in the archives and the proceedings thereon still remains suspended. And there is no previous
Motion to revive the same.
[34]

The ABC also alleged that the motion was barred by prescription or by laches
because the shares of stocks were in custodia legis.
During the hearing of the motion, Encarnacion T. Ching adduced in evidence her
marriage contract to Alfredo Ching to prove that they were married on January 8, 1960;
the articles of incorporation of Citycorp Investment Philippines dated May 14, 1979;
and, the General Information Sheet of the corporation showing that petitioner Alfredo
Ching was a member of the Board of Directors of the said corporation and was one of its
top twenty stockholders.
[35]

[36]

On December 10, 1993, the Spouses Ching filed their Reply/Opposition to the
motion to expunge records.
Acting on the aforementioned motion, the trial court issued on December 15, 1993
an Order lifting the writ of preliminary attachment on the shares of stocks and ordering
the sheriff to return the said stocks to the petitioners. The dispositive portion reads:
[37]

WHEREFORE, the instant Motion to Quash Preliminary Attachment, dated November 9, 1993, is
hereby granted. Let the writ of preliminary attachment subject matter of said motion, be quashed
and lifted with respect to the attached 100,000 common shares of stock of Citycorp Investment
Philippines in the name of the defendant Alfredo Ching, the said shares of stock to be returned to
him and his movant-spouse by Deputy Sheriff Apolonio A. Golfo who effected the levy thereon on
July 26, 1983, or by whoever may be presently in possession thereof.
SO ORDERED.

[38]

The plaintiff Allied Banking Corporation filed a motion for the reconsideration of the
order but denied the same on February 17, 1994. The petitioner bank forthwith filed a
petition for certiorari with the CA, docketed as CA-G.R. SP No. 33585, for the nullification
of the said order of the court, contending that:
1.

The respondent Judge exceeded his authority thereby acted without jurisdiction in
taking cognizance of, and granting a Motion filed by a complete stranger to the
case.

2.

The respondent Judge committed a grave abuse of discretion in lifting the writ of
preliminary attachment without any basis in fact and in law, and contrary to
established jurisprudence on the matter.
[39]

On November 27, 1995, the CA rendered judgment granting the petition and setting
aside the assailed orders of the trial court, thus:
WHEREFORE, premises considered, the petition is GRANTED, hereby setting aside the
questioned orders (dated December 15, 1993 and February 17, 1994) for being null and void.
SO ORDERED.

[40]

The CA sustained the contention of the private respondent and set aside the
assailed orders. According to the CA, the RTC deprived the private respondent of its
right to file a bond under Section 14, Rule 57 of the Rules of Court. The petitioner
Encarnacion T. Ching was not a party in the trial court; hence, she had no right of action
to have the levy annulled with a motion for that purpose. Her remedy in such case was
to file a separate action against the private respondent to nullify the levy on the 100,000
Citycorp shares of stocks. The court stated that even assuming that Encarnacion T.
Ching had the right to file the said motion, the same was barred by laches.
Citing Wong v. Intermediate Appellate Court, the CA ruled that the presumption in
Article 160 of the New Civil Code shall not apply where, as in this case, the petitionerspouses failed to prove the source of the money used to acquire the shares of stock. It
held that the levied shares of stocks belonged to Alfredo Ching, as evidenced by the fact
that the said shares were registered in the corporate books of Citycorp solely under his
name. Thus, according to the appellate court, the RTC committed a grave abuse of its
discretion amounting to excess or lack of jurisdiction in issuing the assailed orders. The
petitioners motion for reconsideration was denied by the CA in a Resolution dated April
2, 1996.
[41]

The petitioner-spouses filed the instant petition for review on certiorari, asserting that
the RTC did not commit any grave abuse of discretion amounting to excess or lack of
jurisdiction in issuing the assailed orders in their favor; hence, the CA erred in reversing
the same. They aver that the source of funds in the acquisition of the levied shares of
stocks is not the controlling factor when invoking the presumption of the conjugal nature
of stocks under Art. 160, and that such presumption subsists even if the property is
registered only in the name of one of the spouses, in this case, petitioner Alfredo Ching.
According to the petitioners, the suretyship obligation was not contracted in the pursuit
of the petitioner-husbands profession or business. And, contrary to the ruling of the CA,
where conjugal assets are attached in a collection suit on an obligation contracted by the
husband, the wife should exhaust her motion to quash in the main case and not file a
separate suit. Furthermore, the petitioners contend that under Art. 125 of the Family
Code, the petitioner-husbands gratuitous suretyship is null and void ab initio, and that
the share of one of the spouses in the conjugal partnership remains inchoate until the
dissolution and liquidation of the partnership.
[42]

[43]

[44]

[45]

[46]

[47]

In its comment on the petition, the private respondent asserts that the CA correctly
granted its petition for certiorari nullifying the assailed order. It contends that the CA
correctly relied on the ruling of this Court in Wong v. Intermediate Appellate
Court. Citing Cobb-Perez v. Lantin and G-Tractors, Inc. v. Court of Appeals, the private
respondent alleges that the continuing guaranty and suretyship executed by petitioner
Alfredo Ching in pursuit of his profession or business. Furthermore, according to the
private respondent, the right of the petitioner-wife to a share in the conjugal partnership
property is merely inchoate before the dissolution of the partnership; as such, she had no
right to file the said motion to quash the levy on attachment of the shares of stocks.
The issues for resolution are as follows: (a) whether the petitioner-wife has the right
to file the motion to quash the levy on attachment on the 100,000 shares of stocks in the
Citycorp Investment Philippines; (b) whether or not the RTC committed a grave abuse of
its discretion amounting to excess or lack of jurisdiction in issuing the assailed orders.
On the first issue, we agree with the petitioners that the petitioner-wife had the right
to file the said motion, although she was not a party in Civil Case No. 142729.
[48]

In Ong v. Tating, we held that the sheriff may attach only those properties of the
defendant against whom a writ of attachment has been issued by the court. When the
sheriff erroneously levies on attachment and seizes the property of a third person in
which the said defendant holds no right or interest, the superior authority of the court
which has authorized the execution may be invoked by the aggrieved third person in the
same case. Upon application of the third person, the court shall order a summary
hearing for the purpose of determining whether the sheriff has acted rightly or wrongly in
the performance of his duties in the execution of the writ of attachment, more specifically
if he has indeed levied on attachment and taken hold of property not belonging to the
plaintiff. If so, the court may then order the sheriff to release the property from the
erroneous levy and to return the same to the third person. In resolving the motion of the
third party, the court does not and cannot pass upon the question of the title to the
property with any character of finality. It can treat the matter only insofar as may be
necessary to decide if the sheriff has acted correctly or not. If the claimants proof does
not persuade the court of the validity of the title, or right of possession thereto, the claim
will be denied by the court. The aggrieved third party may also avail himself of the
remedy of terceria by executing an affidavit of his title or right of possession over the
property levied on attachment and serving the same to the office making the levy and the
adverse party. Such party may also file an action to nullify the levy with damages
resulting from the unlawful levy and seizure, which should be a totally separate and
distinct action from the former case. The above-mentioned remedies are cumulative and
any one of them may be resorted to by one third-party claimant without availing of the
other remedies.
[49]

[50]

In this case, the petitioner-wife filed her motion to set aside the levy on attachment of
the 100,000 shares of stocks in the name of petitioner-husband claiming that the said
shares of stocks were conjugal in nature; hence, not liable for the account of her husband
under his continuing guaranty and suretyship agreement with the PBMCI. The petitionerwife had the right to file the motion for said relief.
On the second issue, we find and so hold that the CA erred in setting aside and
reversing the orders of the RTC. The private respondent, the petitioner in the CA, was
burdened to prove that the RTC committed a grave abuse of its discretion amounting to
excess or lack of jurisdiction. The tribunal acts without jurisdiction if it does not have the
legal purpose to determine the case; there is excess of jurisdiction where the tribunal,
being clothed with the power to determine the case, oversteps its authority as determined
by law. There is grave abuse of discretion where the tribunal acts in a capricious,
whimsical, arbitrary or despotic manner in the exercise of its judgment and is equivalent
to lack of jurisdiction.
[51]

It was incumbent upon the private respondent to adduce a sufficiently strong

demonstration that the RTC acted whimsically in total disregard of evidence material to,
and even decide of, the controversy before certiorari will lie. A special civil action for
certiorari is a remedy designed for the correction of errors of jurisdiction and not errors of
judgment. When a court exercises its jurisdiction, an error committed while so engaged
does not deprive it of its jurisdiction being exercised when the error is committed.
[52]

After a comprehensive review of the records of the RTC and of the CA, we find and
so hold that the RTC did not commit any grave abuse of its discretion amounting to
excess or lack of jurisdiction in issuing the assailed orders.
Article 160 of the New Civil Code provides that all the properties acquired during the
marriage are presumed to belong to the conjugal partnership, unless it be proved that it
pertains exclusively to the husband, or to the wife. In Tan v. Court of Appeals, we held
that it is not even necessary to prove that the properties were acquired with funds of the
partnership. As long as the properties were acquired by the parties during the marriage,
they are presumed to be conjugal in nature. In fact, even when the manner in which the
properties were acquired does not appear, the presumption will still apply, and the
properties will still be considered conjugal. The presumption of the conjugal nature of the
properties acquired during the marriage subsists in the absence of clear, satisfactory and
convincing evidence to overcome the same.
[53]

[54]

In this case, the evidence adduced by the petitioners in the RTC is that the 100,000
shares of stocks in the Citycorp Investment Philippines were issued to and registered in
its corporate books in the name of the petitioner-husband when the said corporation was
incorporated on May 14, 1979. This was done during the subsistence of the marriage of
the petitioner-spouses. The shares of stocks are, thus, presumed to be the conjugal
partnership property of the petitioners. The private respondent failed to adduce evidence
that the petitioner-husband acquired the stocks with his exclusive money. The barefaced
fact that the shares of stocks were registered in the corporate books of Citycorp
Investment Philippines solely in the name of the petitioner-husband does not constitute
proof that the petitioner-husband, not the conjugal partnership, owned the same. The
private respondents reliance on the rulings of this Court in Maramba v.
Lozano and Associated Insurance & Surety Co., Inc. v. Banzon is misplaced. In
the Maramba case, we held that where there is no showing as to when the property was
acquired, the fact that the title is in the wifes name alone is determinative of the
ownership of the property. The principle was reiterated in the Associated Insurance case
where the uncontroverted evidence showed that the shares of stocks were acquired
during the marriage of the petitioners.
[55]

[56]

[57]

[58]

Instead of fortifying the contention of the respondents, the ruling of this Court
in Wong v. Intermediate Appellate Court buttresses the case for the petitioners. In that
case, we ruled that he who claims that property acquired by the spouses during their
marriage is not conjugal partnership property but belongs to one of them as his personal
[59]

property is burdened to prove the source of the money utilized to purchase the same. In
this case, the private respondent claimed that the petitioner-husband acquired the shares
of stocks from the Citycorp Investment Philippines in his own name as the owner
thereof. It was, thus, the burden of the private respondent to prove that the source of the
money utilized in the acquisition of the shares of stocks was that of the petitionerhusband alone. As held by the trial court, the private respondent failed to adduce
evidence to prove this assertion.
The CA, likewise, erred in holding that by executing a continuing guaranty and
suretyship agreement with the private respondent for the payment of the PBMCI loans,
the petitioner-husband was in the exercise of his profession, pursuing a legitimate
business. The appellate court erred in concluding that the conjugal partnership is liable
for the said account of PBMCI under Article 161(1) of the New Civil Code.
Article 161(1) of the New Civil Code (now Article 121[2 and 3] of the Family Code of
the Philippines) provides:
[60]

Art. 161. The conjugal partnership shall be liable for:

(1) All debts and obligations contracted by the husband for the benefit of the conjugal
partnership, and those contracted by the wife, also for the same purpose, in the cases where she
may legally bind the partnership.
The petitioner-husband signed the continuing guaranty and suretyship agreement as
security for the payment of the loan obtained by the PBMCI from the private respondent
in the amount of P38,000,000. In Ayala Investment and Development Corp. v. Court of
Appeals, this Court ruled that the signing as surety is certainly not an exercise of an
industry or profession. It is not embarking in a business. No matter how often an
executive acted on or was persuaded to act as surety for his own employer, this should
not be taken to mean that he thereby embarked in the business of suretyship or
guaranty.
[61]

For the conjugal partnership to be liable for a liability that should appertain to the
husband alone, there must be a showing that some advantages accrued to the
spouses. Certainly, to make a conjugal partnership responsible for a liability that should
appertain alone to one of the spouses is to frustrate the objective of the New Civil Code
to show the utmost concern for the solidarity and well being of the family as a unit. The
husband, therefore, is denied the power to assume unnecessary and unwarranted risks
to the financial stability of the conjugal partnership.
[62]

In this case, the private respondent failed to prove that the conjugal partnership of
the petitioners was benefited by the petitioner-husbands act of executing a continuing
guaranty and suretyship agreement with the private respondent for and in behalf of
PBMCI. The contract of loan was between the private respondent and the PBMCI, solely
for the benefit of the latter. No presumption can be inferred from the fact that when the
petitioner-husband entered into an accommodation agreement or a contract of surety, the
conjugal partnership would thereby be benefited. The private respondent was burdened
to establish that such benefit redounded to the conjugal partnership.
[63]

It could be argued that the petitioner-husband was a member of the Board of

Directors of PBMCI and was one of its top twenty stockholders, and that the shares of
stocks of the petitioner-husband and his family would appreciate if the PBMCI could be
rehabilitated through the loans obtained; that the petitioner-husbands career would be
enhanced should PBMCI survive because of the infusion of fresh capital. However,
these are not the benefits contemplated by Article 161 of the New Civil Code. The
benefits must be those directly resulting from the loan. They cannot merely be a byproduct or a spin-off of the loan itself.
[64]

This is different from the situation where the husband borrows money or receives
services to be used for his own business or profession. In the Ayalacase, we ruled that it
is such a contract that is one within the term obligation for the benefit of the conjugal
partnership. Thus:
(A) If the husband himself is the principal obligor in the contract, i.e., he directly received the
money and services to be used in or for his own business or his own profession, that contract falls
within the term obligations for the benefit of the conjugal partnership. Here, no actual
benefit may be proved. It is enough that the benefit to the family is apparent at the time of the
signing of the contract. From the very nature of the contract of loan or services, the family stands
to benefit from the loan facility or services to be rendered to the business or profession of the
husband. It is immaterial, if in the end, his business or profession fails or does not
succeed. Simply stated, where the husband contracts obligations on behalf of the family business,
the law presumes, and rightly so, that such obligation will redound to the benefit of the conjugal
partnership.
[65]

The Court held in the same case that the rulings of the Court in Cobb-Perezand GTractors, Inc. are not controlling because the husband, in those cases, contracted the
obligation for his own business. In this case, the petitioner-husband acted merely as a
surety for the loan contracted by the PBMCI from the private respondent.
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and
Resolution of the Court of Appeals are SET ASIDE AND REVERSED. The assailed
orders of the RTC are AFFIRMED.
SO ORDERED.

XI. APPEALS
46. Neypes v. CA G.R. 141524
DOMINGO NEYPES, LUZ
FAUSTINO, ROGELIO FAUSTINO,
LOLITO VICTORIANO, JACOB
OBANIA AND DOMINGO
CABACUNGAN,
Petitioners,

- versus -

G.R. No. 141524

Present :
DAVIDE, JR., C.J.
PUNO,
PANGANIBAN,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
CALLEJO, SR.,
AZCUNA,
TINGA,
CHICO-NAZARIO and
GARCIA, JJ.

HON. COURT OF APPEALS, HEIRS

OF BERNARDO DEL MUNDO,
namely: FE, CORAZON, JOSEFA,
SALVADOR and CARMEN, all
surnamed DEL MUNDO, LAND BANK
OF THE PHILIPPINES AND HON.
ANTONIO N. ROSALES, Presiding
Judge, Branch 43, Regional Trial
Court, Roxas, Oriental Mindoro,
Respondents. Promulgated :

September 14, 2005

x-----------------------------------------x
DECISION
CORONA, J.:

Petitioners Domingo Neypes, Luz Faustino, Rogelio Faustino, Lolito

Victoriano, Jacob Obania and Domingo Cabacungan filed an action for
annulment of judgment and titles of land and/or reconveyance and/or
reversion with preliminary injunction before the Regional Trial Court,

Branch 43, of Roxas, Oriental Mindoro, against the Bureau of Forest

Development, Bureau of Lands, Land Bank of the Philippines and the
heirs of Bernardo del Mundo, namely, Fe, Corazon, Josefa, Salvador and
Carmen.
In the course of the proceedings, the parties (both petitioners and
respondents) filed various motions with the trial court. Among these were:
(1) the motion filed by petitioners to declare the respondent heirs, the
Bureau of Lands and the Bureau of Forest Development in default and (2)
the motions to dismiss filed by the respondent heirs and the Land Bank of
the Philippines, respectively.
In an order dated May 16, 1997, the trial court, presided by public
respondent Judge Antonio N. Rosales, resolved the foregoing motions as
follows: (1) the petitioners motion to declare respondents Bureau of Lands
and Bureau of Forest Development in default was granted for their failure to
file an answer, but denied as against the respondent heirs of del Mundo
because the substituted service of summons on them was improper; (2) the
Land Banks motion to dismiss for lack of cause of action was denied
because there were hypothetical admissions and matters that could be
determined only after trial, and (3) the motion to dismiss filed by respondent
heirs of del Mundo, based on prescription, was also denied because there
were factual matters that could be determined only after trial.[1]
The respondent heirs filed a motion for reconsideration of the order
denying their motion to dismiss on the ground that the trial court could very
well resolve the issue of prescription from the bare allegations of the
complaint itself without waiting for the trial proper.

In an order[2] dated February 12, 1998, the trial court dismissed

petitioners complaint on the ground that the action had already prescribed.
Petitioners allegedly received a copy of the order of dismissal on March 3,
1998 and, on the 15th day thereafter or on March 18, 1998, filed a motion for
reconsideration. On July 1, 1998, the trial court issued another order
dismissing the motion for reconsideration [3]which petitioners received on July
22, 1998. Five days later, on July 27, 1998, petitioners filed a notice of
appeal[4] and paid the appeal fees on August 3, 1998.
On August 4, 1998, the court a quo denied the notice of appeal,
holding that it was filed eight days late. [5] This was received by petitioners on
July 31, 1998. Petitioners filed a motion for reconsideration but this too was
denied in an order dated September 3, 1998.[6]
Via a petition for certiorari and mandamus under Rule 65 of the 1997
Rules of Civil Procedure, petitioners assailed the dismissal of the notice of
appeal before the Court of Appeals.
In the appellate court, petitioners claimed that they had seasonably
filed their notice of appeal. They argued that the 15-day reglementary period
to appeal started to run only on July 22, 1998 since this was the day
they received the final order of the trial court denying their motion for
reconsideration. When they filed their notice of appeal on July 27,
1998, only five days had elapsed and they were well within the reglementary
period for appeal.[7]
On September 16, 1999, the Court of Appeals (CA) dismissed the
petition.

It ruled that the 15-day period to appeal should have been

reckoned from March 3, 1998 or the day they received the February 12,

1998 order dismissing their complaint. According to the appellate court, the
order was the final order appealable under the Rules. It held further:
Perforce the petitioners tardy appeal was correctly dismissed for
the (P)erfection of an appeal within the reglementary period and in the
manner prescribed by law is jurisdictional and non-compliance with such
legal requirement is fatal and effectively renders the judgment final and
executory.[8]

Petitioners filed a motion for reconsideration of the aforementioned

decision. This was denied by the Court of Appeals on January 6, 2000.
In this present petition for review under Rule 45 of the Rules,
petitioners ascribe the following errors allegedly committed by the appellate
court:

I
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE
PETITIONERS PETITION FOR CERTIORARI AND MANDAMUS AND IN
AFFIRMING THE ORDER OF THE HON. JUDGE ANTONIO N.
ROSALES WHICH DISMISSED THE PETITIONERS APPEAL IN CIVIL
CASE NO. C-36 OF THE REGIONAL TRIAL COURT, BRANCH 43,
ROXAS, ORIENTAL MINDORO, EVEN AFTER THE PETITIONERS HAD
PAID THE APPEAL DOCKET FEES.
II
THE HONORABLE COURT OF APPEALS LIKEWISE ERRED IN
RULING AND AFFIRMING THE DECISION OR ORDER OF THE
RESPONDENT HON. ANTONIO M. ROSALES THAT PETITIONERS
APPEAL WAS FILED OUT OF TIME WHEN PETITIONERS RECEIVED
THE LAST OR FINAL ORDER OF THE COURT ON JULY 22, 1998 AND
FILED THEIR NOTICE OF APPEAL ON JULY 27, 1998 AND PAID THE
APPEAL DOCKET FEE ON AUGUST 3, 1998.
III
THE HONORABLE COURT OF APPEALS FURTHER ERRED IN
RULING THAT THE WORDS FINAL ORDER IN SECTION 3, RULE 41,
OF THE 1997 RULES OF CIVIL PROCEDURE WILL REFER TO THE
[FIRST] ORDER OF RESPONDENT JUDGE HON. ANTONIO M.
MORALES DATED FEBRUARY 12, 1998 INSTEAD OF THE LAST AND
FINAL ORDER DATED JULY 1, 1998 COPY OF WHICH WAS
RECEIVED BY PETITIONERS THROUGH COUNSEL ON JULY 22,
1998.

IV.
THE HONORABLE COURT OF APPEALS FINALLY ERRED IN FINDING
THAT THE DECISION IN THE CASE OF DENSO, INC. V. IAC, 148
SCRA 280, IS APPLICABLE IN THE INSTANT CASE THEREBY
IGNORING THE PECULIAR FACTS AND CIRCUMSTANCES OF THIS
CASE AND THE FACT THAT THE SAID DECISION WAS RENDERED
PRIOR TO THE ENACTMENT OF THE 1997 RULES OF CIVIL
PROCEDURE.[9]

The foregoing issues essentially revolve around the period within which
petitioners should have filed their notice of appeal.
First and foremost, the right to appeal is neither a natural right nor a
part of due process. It is merely a statutory privilege and may be exercised
only in the manner and in accordance with the provisions of law. Thus, one
who seeks to avail of the right to appeal must comply with the requirements
of the Rules. Failure to do so often leads to the loss of the right to appeal.
[10]

The period to appeal is fixed by both statute and procedural rules. BP

129,[11] as amended, provides:

Sec. 39. Appeals. The period for appeal from final orders,
resolutions, awards, judgments, or decisions of any court in all these
cases shall be fifteen (15) days counted from the notice of the final order,
resolution, award, judgment, or decision appealed from. Provided,
however, that in habeas corpus cases, the period for appeal shall be (48)
forty-eight hours from the notice of judgment appealed from. x x x

Rule 41, Section 3 of the 1997 Rules of Civil Procedure states:

SEC. 3. Period of ordinary appeal. The appeal shall be taken
within fifteen (15) days from the notice of the judgment or final order
appealed from. Where a record on appeal is required, the appellant shall
file a notice of appeal and a record on appeal within thirty (30) days from
the notice of judgment or final order.
The period to appeal shall be interrupted by a timely motion for
new trial or reconsideration. No motion for extension of time to file a
motion for new trial or reconsideration shall be allowed. (emphasis
supplied)

Based on the foregoing, an appeal should be taken within 15 days

from the notice of judgment or final order appealed from. A final judgment or
order is one that finally disposes of a case, leaving nothing more for the
court to do with respect to it. It is an adjudication on the merits which,
considering the evidence presented at the trial, declares categorically what
the rights and obligations of the parties are; or it may be an order or
judgment that dismisses an action.[12]
As already mentioned, petitioners argue that the order of July 1, 1998
denying their motion for reconsideration should be construed as the final
order, not the February 12, 1998 order which dismissed their complaint.
Since

they

received

their

copy

of

the

denial

of

their

motion

for

reconsideration only on July 22, 1998, the 15-day reglementary period to

appeal had not yet lapsed when they filed their notice of appeal on July 27,
1998.
What therefore should be deemed as the final order, receipt of which
triggers the start of the 15-day reglementary period to appeal

the

February 12, 1998 order dismissing the complaint or the July 1, 1998 order
dismissing the MR?
In the recent case of Quelnan v. VHF Philippines, Inc.,[13] the trial court
declared

petitioner Quelnan non-suited

and

accordingly

dismissed

his

complaint. Upon receipt of the order of dismissal, he filed an omnibus

motion to set it aside. When the omnibus motion was filed, 12 days of the
15-day period to appeal the order had lapsed. He later on received another
order, this time dismissing his omnibus motion. He then filed his notice of
appeal. But this was likewise dismissed for having been filed out of time.
The court a quo ruled that petitioner should have appealed within 15
days after the dismissal of his complaint since this was the final order that

was appealable under the Rules. We reversed the trial court and declared
that it was the denial of the motion for reconsideration of an order of
dismissal of a complaint which constituted the final order as it was what
ended the issues raised there.
This pronouncement was reiterated in the more recent case of Apuyan
v. Haldeman et al.[14] where we again considered the order denying petitioner
Apuyans motion for reconsideration as the final order which finally disposed
of the issues involved in the case.
Based on the aforementioned cases, we sustain petitioners view
that the order dated July 1, 1998 denying their motion for reconsideration was
the final ordercontemplated in the Rules.
We now come to the next question: if July 1, 1998 was the start of the
15-day reglementary period to appeal, did petitioners in fact file their notice
of appeal on time?
Under Rule 41, Section 3, petitioners had 15 days fromnotice of
judgment or final order to appeal the decision of the trial court. On the
15th day of the original appeal period (March 18, 1998), petitioners did not
file a notice of appeal but instead opted to file a motion for reconsideration.
According to the trial court, the MR only interrupted the running of the 15day appeal period.[15] It ruled that petitioners, having filed their MR on the
last day of the 15-day reglementary period to appeal, had only one (1) day
left to file the notice of appeal upon receipt of the notice of denial of their
MR. Petitioners, however, argue that they were entitled under the Rules to
a fresh period of 15 days from receipt of the final order or the order
dismissing their motion for reconsideration.

In Quelnan and Apuyan,

both

petitioners

filed

motion

for

reconsideration of the decision of the trial court. We ruled there that they
only had the remaining time of the 15-day appeal period to file the notice of
appeal. We consistently applied this rule in similar cases, [16] premised on the
long-settled doctrine that the perfection of an appeal in the manner and
within the period permitted by law is not only mandatory but also
jurisdictional.[17] The rule is also founded on deep-seated considerations of
public policy and sound practice that, at risk of occasional error, the
judgments and awards of courts must become final at some definite time
fixed by law.[18]
Prior to the passage of BP 129, Rule 41, Section 3 of the 1964 Revised
Rules of Court read:
Sec. 3. How appeal is taken. Appeal maybe taken by serving
upon the adverse party and filing with the trial court within thirty (30)
days from notice of order or judgment, a notice of appeal, an appeal
bond, and a record on appeal. The time during which a motion to set
aside the judgment or order or for new trial has been pending shall be
deducted, unless such motion fails to satisfy the requirements of Rule 37.
But where such motion has been filed during office hours of the
last day of the period herein provided, the appeal must be perfected
within the day following that in which the party appealing received notice
of the denial of said motion.[19] (emphasis supplied)

According to the foregoing provision, the appeal period previously

consisted of 30 days. BP 129, however, reduced this appeal period to 15
days.

In

the

deliberations

Reorganization[20] that

drafted

BP

of

the

129,

Committee

the raison

on

Judicial

etre behind

the

amendment was to shorten the period of appeal[21] and enhance the

efficiency and dispensation of justice. We have since required strict
observance of this reglementary period of appeal. Seldom have we condoned
late filing of notices of appeal,[22] and only in very exceptional instances to
better serve the ends of justice.

In National Waterworks and Sewerage Authority and Authority v.

Municipality of Libmanan,[23] however, we declared that appeal is an essential
part of our judicial system and the rules of procedure should not be applied
rigidly. This Court has on occasion advised the lower courts to be cautious
about not depriving a party of the right to appeal and that every party
litigant should be afforded the amplest opportunity for the proper and just
disposition of his cause, free from the constraint of technicalities.
In de la Rosa v. Court of Appeals,[24] we stated that, as a rule, periods
which require litigants to do certain acts must be followed unless, under
exceptional circumstances, a delay in the filing of an appeal may be excused
on grounds of substantial justice. There, we condoned the delay incurred by
the appealing party due to strong considerations of fairness and justice.
In setting aside technical infirmities and thereby giving due course to
tardy appeals, we have not been oblivious to or unmindful of the
extraordinary situations that merit liberal application of the Rules. In those
situations where technicalities were dispensed with, our decisions were not
meant to undermine the force and effectivity of the periods set by law. But
we hasten to add that in those rare cases where procedural rules were not
stringently applied, there always existed a clear need to prevent the
commission of a grave injustice. Our judicial system and the courts have
always tried to maintain a healthy balance between the strict enforcement of
procedural laws and the guarantee that every litigant be given the full
opportunity for the just and proper disposition of his cause.[25]
The Supreme Court may promulgate procedural rules in all courts.
[26]

It has the sole prerogative to amend, repeal or even establish new rules for

a more simplified and inexpensive process, and the speedy disposition of

cases. In the rules governing appeals to it and to the Court of Appeals,

particularly Rules 42,[27] 43[28] and 45,[29] the Court allows extensions of time,
based on justifiable and compelling reasons, for parties to file their appeals.
These extensions may consist of 15 days or more.
To standardize the appeal periods provided in the Rules and to afford
litigants fair opportunity to appeal their cases, the Court deems it practical
to allow a fresh period of 15 days within which to file the notice of appeal in
the Regional Trial Court, counted from receipt of the order dismissing a
motion for a new trial or motion for reconsideration. [30]
Henceforth, this fresh period rule shall also apply to Rule 40
governing appeals from the Municipal Trial Courts to the Regional Trial
Courts; Rule 42 on petitions for review from the Regional Trial Courts to the
Court of Appeals; Rule 43 on appeals from quasi-judicial agencies [31] to the
Court of Appeals and Rule 45 governing appeals by certiorari to the Supreme
Court.[32] The new rule aims to regiment or make the appeal period uniform,
to be counted from receipt of the order denying the motion for new trial,
motion for reconsideration (whether full or partial) or any final order or
resolution.
We thus hold that petitioners seasonably filed their notice of appeal
within the fresh period of 15 days, counted from July 22, 1998 (the date of
receipt

of

notice

denying

their

motion

for

reconsideration).

This

pronouncement is not inconsistent with Rule 41, Section 3 of the Rules

which states that the appeal shall be taken within 15 days from notice of
judgment or final order appealed from. The use of the disjunctive word or
signifies disassociation and independence of one thing from another. It
should, as a rule, be construed in the sense in which it ordinarily implies.
Hence, the use of or in the above provision supposes that the notice of

[33]

appeal may be filed within 15 days from the notice of judgment or within 15
days from notice of the final order, which we already determined to refer to
the July 1, 1998 order denying the motion for a new trial or reconsideration.
Neither does this new rule run counter to the spirit of Section 39 of
BP 129 which shortened the appeal period from 30 days to 15 days to hasten
the disposition of cases. The original period of appeal (in this case March 318, 1998) remains and the requirement for strict

compliance still

applies. The fresh period of 15 days becomes significant only when a

party opts to file a motion for new trial or motion for reconsideration. In this
manner, the trial court which rendered the assailed decision is given another
opportunity to review the case and, in the process, minimize and/or rectify
any error of judgment. While we aim to resolve cases with dispatch and to
have judgments of courts become final at some definite time, we likewise
aspire to deliver justice fairly.
In this case, the new period of 15 days eradicates the confusion as to
when the 15-day appeal period should be counted from receipt of notice of
judgment (March 3, 1998) or from receipt of notice of final order appealed
from (July 22, 1998).
To recapitulate, a party litigant may either file his notice of appeal
within 15 days from receipt of the Regional Trial Courts decision or file it
within 15 days from receipt of the order (the final order) denying his motion
for new trial or motion for reconsideration. Obviously, the new 15-day period
may be availed of only if either motion is filed; otherwise, the decision
becomes final and executory after the lapse of the original appeal period
provided in Rule 41, Section 3.
Petitioners here filed their notice of appeal on July 27, 1998 or five
days from receipt of the order denying their motion for reconsideration on

July 22, 1998. Hence, the notice of appeal was well within the fresh appeal
period of 15 days, as already discussed.[34]
We deem it unnecessary to discuss the applicability ofDenso
(Philippines), Inc. v. IAC[35] since the Court of Appeals never even referred to it
in its assailed decision.
WHEREFORE, the petition is hereby GRANTED and the assailed
decision of the Court of Appeals REVERSED andSET ASIDE. Accordingly,
let the records of this case be remanded to the Court of Appeals for further
proceedings.
No costs.
SO ORDERED.

47. Augusto v. Judge Rios G.R. 131794

48. Sps. De Los Santos v. Vda De Mangubat G.R. 149508

49. Madrigal Transport v. Lapanady Holding G.R. 156067

XII. ANNULMENT OF JUDGMENT

50. Ancheta v. Ancheta G.R. 145370 March 4, 2004
51. Republic v. Heirs of Sancho Magdalo G.R. 137857
XIII. KATARUNGANG PAMBARANGAY
52. Vidal v. Escueta G.R. 167228

9-11-2000