Beruflich Dokumente
Kultur Dokumente
"(14) That, indeed, FGU's cause of action which is not supported by any
document other than the self-serving 'Statement of Account' dated March 28,
1988 x x x
(15) That it should be noted that the cause of action of FGU is not the
enforcement of the Special Agent's Contract but the alleged 'cash accountabilities
which are not based on written agreement x x x.
x
(19) x x x A careful analysis of FGU's three-page complaint will show that its
cause of action is not for specific performance or enforcement of the Special
Agent's Contract rather, it is for the payment of the alleged cash accountabilities
incurred by defendant during the period form [sic] 1975 to 1986 which claim is
executory and has not been ratified. It is the established rule that unenforceable
contracts, like this purported money claim of FGU, cannot be sued upon or
enforced unless ratified, thus it is as if they have no effect. x x x."
To support the heading "Compulsory Counterclaim" in her answer and give the impression
that the counterclaim is compulsory appellant alleged that "FGU has unjustifiably failed to
remit to defendant despite repeated demands in gross violation of their Special Agent's
Contract x x x." The reference to said contract was included purposely to mislead. While on
one hand appellant alleged that appellee's cause of action had nothing to do with the Special
Agent's Contract, on the other hand, she claim that FGU violated said contract which gives
rise of [sic] her cause of action. Clearly, appellant's cash accountabilities cannot be the
offshoot of appellee's alleged violation of the aforesaid contract.
On 19 May 1999, the appellate court denied petitioner's motion for reconsideration, 13 giving rise to
the present petition.
Before going into the substantive issues, the Court shall first dispose of some procedural matters
raised by the parties. Petitioner claims that respondent is estopped from questioning her non-payment
of docket fees because it did not raise this particular issue when it filed its motion - the "Motion to
Strike out Answer With Compulsory Counterclaim And To Declare Defendant In Default" - with the
trial court; rather, it was only nine months after receiving petitioner's answer that respondent assailed
the trial court's lack of jurisdiction over petitioner's counterclaims based on the latter's failure to pay
docket fees.14 Petitioner's position is unmeritorious. Estoppel by laches arises from the negligence or
omission to assert a right within a reasonable time, warranting a presumption that the party entitled to
assert it either has abandoned or declined to assert it. 15 In the case at bar, respondent cannot be
considered as estopped from assailing the trial court's jurisdiction over petitioner's counterclaim since
this issue was raised by respondent with the trial court itself - the body where the action is pending even before the presentation of any evidence by the parties and definitely, way before any judgment
could be rendered by the trial court.
(21) That FGU is liable to pay the following just, valid and legitimate claims of defendant:
(a) the sum of at least P104,893.45 plus maximum interest thereon representing,
among others, direct commissions, profit commissions and contingent bonuses
legally due to defendant; and
(b) the minimum amount of P500,000.00 plus the maximum allowable interest
representing defendant's accumulated premium reserve for 1985 and previous
years,
which FGU has unjustifiably failed to remit to defendant despite repeated demands in gross
violation of their Special Agent's Contract and in contravention of the principle of law that
"every person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith."
(22) That as a result of the filing of this patently baseless, malicious and unjustified
Complaint, and FGU's unlawful, illegal and vindictive termination of their Special Agent's
Contract, defendant was unnecessarily dragged into this litigation and to defense [sic] her
side and assert her rights and claims against FGU, she was compelled to hire the services of
counsel with whom she agreed to pay the amount of P30,000.00 as and for attorney's fees
and stands to incur litigation expenses in the amount estimated to at least P20,000.00 and
for which FGU should be assessed and made liable to pay defendant.
(23) That considering further the malicious and unwarranted action of defendant in filing
this grossly unfounded action, defendant has suffered and continues to suffer from serious
anxiety, mental anguish, fright and humiliation. In addition to this, defendant's name, good
reputation and business standing in the insurance business as well as in the community
have been besmirched and for which FGU should be adjudged and made liable to pay
moral damages to defendant in the amount of P300,000.00 as minimum.
(24) That in order to discourage the filing of groundless and malicious suits like FGU's
Complaint, and by way of serving [as] an example for the public good, FGU should be
penalized and assessed exemplary damages in the sum of P100,000.00 or such amount as
the Honorable Court may deem warranted under the circumstances. 22
Tested against the abovementioned standards, petitioner's counterclaim for commissions, bonuses,
and accumulated premium reserves is merely permissive. The evidence required to prove petitioner's
claims differs from that needed to establish respondent's demands for the recovery of cash
accountabilities from petitioner, such as cash advances and costs of premiums. The recovery of
respondent's claims is not contingent or dependent upon establishing petitioner's counterclaim, such
that conducting separate trials will not result in the substantial duplication of the time and effort of
the court and the parties. One would search the records in vain for a logical connection between the
Petitioner asserts that the trial court should have declared respondent in default for having failed to
answer her counterclaim.30 Insofar as the permissive counterclaim of petitioner is concerned, there is
obviously no need to file an answer until petitioner has paid the prescribed docket fees for only then
shall the court acquire jurisdiction over such claim. 31 Meanwhile, the compulsory counterclaim of
petitioner for damages based on the filing by respondent of an allegedly unfounded and malicious suit
need not be answered since it is inseparable from the claims of respondent. If respondent were to
answer the compulsory counterclaim of petitioner, it would merely result in the former pleading the
same facts raised in its complaint.32
WHEREFORE, the assailed Decision of the Court of Appeals promulgated on 23 December 1998
and its 19 May 1999 Resolution are hereby MODIFIED. The compulsory counterclaim of petitioner
for damages filed in Civil Case No. 89-3816 is ordered REINSTATED. Meanwhile, the Regional
Trial Court of Makati (Branch 134) is ordered to require petitioner to pay the prescribed docket fees
for her permissive counterclaim (direct commissions, profit commissions, contingent bonuses and
accumulated premium reserves), after ascertaining that the applicable prescriptive period has not yet
set in.33
SO ORDERED.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a
claim not specified in the pleading, or if specified the same has been left for determination
by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall
be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien
and assess and collect the additional fee.
The above mentioned ruling in Sun Insurance has been reiterated in the recent case of Susan v. Court
of Appeals.28In Suson, the Court explained that although the payment of the prescribed docket fees is
a jurisdictional requirement, its non-payment does not result in the automatic dismissal of the case
provided the docket fees are paid within the applicable prescriptive or reglementary period. Coming
now to the case at bar, it has not been alleged by respondent and there is nothing in the records to
show that petitioner has attempted to evade the payment of the proper docket fees for her permissive
counterclaim. As a matter of fact, after respondent filed its motion to dismiss petitioner's
counterclaim based on her failure to pay docket fees, petitioner immediately filed a motion with the
trial court, asking it to declare her counterclaim as compulsory in nature and therefore exempt from
docket fees and, in addition, to declare that respondent was in default for its failure to answer her
counterclaim.29However, the trial court dismissed petitioner's counterclaim. Pursuant to this Court's
ruling in Sun Insurance, the trial court should have instead given petitioner a reasonable time, but in
no case beyond the applicable prescriptive or reglementary period, to pay the filing fees for her
permissive counterclaim.
January 7, 2008
difficulties affecting the supply of materials, thus forcing the parties to agree that KOGIES would be
deemed to have completely complied with the terms and conditions of the March 5, 1997 contract.
For the remaining balance of USD306,000 for the installation and initial operation of the plant,
PGSMC issued two postdated checks: (1) BPI Check No. 0316412 dated January 30, 1998 for PhP
4,500,000; and (2) BPI Check No. 0316413 dated March 30, 1998 for PhP 4,500,000. 5
When KOGIES deposited the checks, these were dishonored for the reason "PAYMENT STOPPED."
Thus, on May 8, 1998, KOGIES sent a demand letter6 to PGSMC threatening criminal action for
violation of Batas Pambansa Blg.22 in case of nonpayment. On the same date, the wife of PGSMCs
President faxed a letter dated May 7, 1998 to KOGIES President who was then staying at a Makati
City hotel. She complained that not only did KOGIES deliver a different brand of hydraulic press
from that agreed upon but it had not delivered several equipment parts already paid for.
On May 14, 1998, PGSMC replied that the two checks it issued KOGIES were fully funded but the
payments were stopped for reasons previously made known to KOGIES. 7
On June 1, 1998, PGSMC informed KOGIES that PGSMC was canceling their Contract dated March
5, 1997 on the ground that KOGIES had altered the quantity and lowered the quality of the
machineries and equipment it delivered to PGSMC, and that PGSMC would dismantle and transfer
the machineries, equipment, and facilities installed in the Carmona plant. Five days later, PGSMC
filed before the Office of the Public Prosecutor an Affidavit-Complaint forEstafa docketed as I.S. No.
98-03813 against Mr. Dae Hyun Kang, President of KOGIES.
On June 15, 1998, KOGIES wrote PGSMC informing the latter that PGSMC could not unilaterally
rescind their contract nor dismantle and transfer the machineries and equipment on mere imagined
violations by KOGIES. It also insisted that their disputes should be settled by arbitration as agreed
upon in Article 15, the arbitration clause of their contract.
On June 23, 1998, PGSMC again wrote KOGIES reiterating the contents of its June 1, 1998 letter
threatening that the machineries, equipment, and facilities installed in the plant would be dismantled
and transferred on July 4, 1998. Thus, on July 1, 1998, KOGIES instituted an Application for
Arbitration before the Korean Commercial Arbitration Board (KCAB) in Seoul, Korea pursuant to
Art. 15 of the Contract as amended.
On July 3, 1998, KOGIES filed a Complaint for Specific Performance, docketed as Civil Case No.
98-1178 against PGSMC before the Muntinlupa City Regional Trial Court (RTC). The RTC granted a
temporary restraining order (TRO) on July 4, 1998, which was subsequently extended until July 22,
1998. In its complaint, KOGIES alleged that PGSMC had initially admitted that the checks that were
stopped were not funded but later on claimed that it stopped payment of the checks for the reason that
"their value was not received" as the former allegedly breached their contract by "altering the
quantity and lowering the quality of the machinery and equipment" installed in the plant and failed to
After KOGIES filed a Supplemental Memorandum with Motion to Dismiss 13 answering PGSMCs
memorandum of July 22, 1998 and seeking dismissal of PGSMCs counterclaims, KOGIES, on
August 4, 1998, filed its Motion for Reconsideration14 of the July 23, 1998 Order denying its
application for an injunctive writ claiming that the contract was not merely for machinery and
facilities worth USD 1,224,000 but was for the sale of an "LPG manufacturing plant" consisting of
"supply of all the machinery and facilities" and "transfer of technology" for a total contract price of
USD 1,530,000 such that the dismantling and transfer of the machinery and facilities would result in
the dismantling and transfer of the very plant itself to the great prejudice of KOGIES as the still
unpaid owner/seller of the plant. Moreover, KOGIES points out that the arbitration clause under Art.
15 of the Contract as amended was a valid arbitration stipulation under Art. 2044 of the Civil Code
and as held by this Court in Chung Fu Industries (Phils.), Inc.15
In the meantime, PGSMC filed a Motion for Inspection of Things16 to determine whether there was
indeed alteration of the quantity and lowering of quality of the machineries and equipment, and
whether these were properly installed. KOGIES opposed the motion positing that the queries and
issues raised in the motion for inspection fell under the coverage of the arbitration clause in their
contract.
On September 21, 1998, the trial court issued an Order (1) granting PGSMCs motion for inspection;
(2) denying KOGIES motion for reconsideration of the July 23, 1998 RTC Order; and (3) denying
KOGIES motion to dismiss PGSMCs compulsory counterclaims as these counterclaims fell within
the requisites of compulsory counterclaims.
On October 2, 1998, KOGIES filed an Urgent Motion for Reconsideration 17 of the September 21,
1998 RTC Order granting inspection of the plant and denying dismissal of PGSMCs compulsory
counterclaims.
Ten days after, on October 12, 1998, without waiting for the resolution of its October 2, 1998 urgent
motion for reconsideration, KOGIES filed before the Court of Appeals (CA) a petition for
certiorari18 docketed as CA-G.R. SP No. 49249, seeking annulment of the July 23, 1998 and
September 21, 1998 RTC Orders and praying for the issuance of writs of prohibition, mandamus, and
preliminary injunction to enjoin the RTC and PGSMC from inspecting, dismantling, and transferring
the machineries and equipment in the Carmona plant, and to direct the RTC to enforce the specific
agreement on arbitration to resolve the dispute.
In the meantime, on October 19, 1998, the RTC denied KOGIES urgent motion for reconsideration
and directed the Branch Sheriff to proceed with the inspection of the machineries and equipment in
the plant on October 28, 1998.19
Thereafter, KOGIES filed a Supplement to the Petition20 in CA-G.R. SP No. 49249 informing the CA
about the October 19, 1998 RTC Order. It also reiterated its prayer for the issuance of the writs of
prohibition, mandamus and preliminary injunction which was not acted upon by the CA. KOGIES
asserted that the Branch Sheriff did not have the technical expertise to ascertain whether or not the
The alleged grave abuse of discretion of the respondent court equivalent to lack of jurisdiction in the
issuance of the two assailed orders coupled with the fact that there is no plain, speedy, and adequate
remedy in the ordinary course of law amply provides the basis for allowing the resort to a petition for
certiorari under Rule 65.
On July 17, 1998, at the time PGSMC filed its Answer incorporating its counterclaims against
KOGIES, it was not liable to pay filing fees for said counterclaims being compulsory in nature. We
stress, however, that effective August 16, 2004 under Sec. 7, Rule 141, as amended by A.M. No. 042-04-SC, docket fees are now required to be paid in compulsory counterclaim or cross-claims.
Neither do we think that KOGIES was guilty of forum shopping in filing the petition for certiorari.
Note that KOGIES motion for reconsideration of the July 23, 1998 RTC Order which denied the
issuance of the injunctive writ had already been denied. Thus, KOGIES only remedy was to assail
the RTCs interlocutory order via a petition for certiorari under Rule 65.
As to the failure to submit a certificate of forum shopping, PGSMCs Answer is not an initiatory
pleading which requires a certification against forum shopping under Sec. 5 24 of Rule 7, 1997
Revised Rules of Civil Procedure. It is a responsive pleading, hence, the courts a quo did not commit
reversible error in denying KOGIES motion to dismiss PGSMCs compulsory counterclaims.
While the October 2, 1998 motion for reconsideration of KOGIES of the September 21, 1998 RTC
Order relating to the inspection of things, and the allowance of the compulsory counterclaims has not
yet been resolved, the circumstances in this case would allow an exception to the rule that before
certiorari may be availed of, the petitioner must have filed a motion for reconsideration and said
motion should have been first resolved by the court a quo. The reason behind the rule is "to enable
the lower court, in the first instance, to pass upon and correct its mistakes without the intervention of
the higher court."30
The September 21, 1998 RTC Order directing the branch sheriff to inspect the plant, equipment, and
facilities when he is not competent and knowledgeable on said matters is evidently flawed and devoid
of any legal support. Moreover, there is an urgent necessity to resolve the issue on the dismantling of
the facilities and any further delay would prejudice the interests of KOGIES. Indeed, there is real and
imminent threat of irreparable destruction or substantial damage to KOGIES equipment and
machineries. We find the resort to certiorari based on the gravely abusive orders of the trial court sans
the ruling on the October 2, 1998 motion for reconsideration to be proper.
The Core Issue: Article 15 of the Contract
We now go to the core issue of the validity of Art. 15 of the Contract, the arbitration clause. It
provides:
Article 15. Arbitration.All disputes, controversies, or differences which may arise
between the parties, out of or in relation to or in connection with this Contract or for the
breach thereof, shall finally be settled by arbitration in Seoul, Korea in accordance with the
Commercial Arbitration Rules of the Korean Commercial Arbitration Board. The award
rendered by the arbitration(s) shall be final and binding upon both parties concerned.
(Emphasis supplied.)
Petitioner claims the RTC and the CA erred in ruling that the arbitration clause is null and void.
languages, the party shall supply a duly certified translation thereof into any of such
languages.
Among the pertinent features of RA 9285 applying and incorporating the UNCITRAL Model Law are
the following:
(1) The RTC must refer to arbitration in proper cases
SEC. 43. Recognition and Enforcement of Foreign Arbitral Awards Not Covered by the
New York Convention.The recognition and enforcement of foreign arbitral awards not
covered by the New York Convention shall be done in accordance with procedural rules to
be promulgated by the Supreme Court. The Court may, on grounds of comity and
reciprocity, recognize and enforce a non-convention award as a convention award.
Under Sec. 24, the RTC does not have jurisdiction over disputes that are properly the subject of
arbitration pursuant to an arbitration clause, and mandates the referral to arbitration in such cases,
thus:
SEC. 44. Foreign Arbitral Award Not Foreign Judgment.A foreign arbitral award when
confirmed by a court of a foreign country, shall be recognized and enforced as a foreign
arbitral award and not as a judgment of a foreign court.
SEC. 24. Referral to Arbitration.A court before which an action is brought in a matter
which is the subject matter of an arbitration agreement shall, if at least one party so requests
not later than the pre-trial conference, or upon the request of both parties thereafter, refer
the parties to arbitration unless it finds that the arbitration agreement is null and void,
inoperative or incapable of being performed.
(2) Foreign arbitral awards must be confirmed by the RTC
Foreign arbitral awards while mutually stipulated by the parties in the arbitration clause to be final
and binding are not immediately enforceable or cannot be implemented immediately. Sec. 35 43 of the
UNCITRAL Model Law stipulates the requirement for the arbitral award to be recognized by a
competent court for enforcement, which court under Sec. 36 of the UNCITRAL Model Law may
refuse recognition or enforcement on the grounds provided for. RA 9285 incorporated these provisos
to Secs. 42, 43, and 44 relative to Secs. 47 and 48, thus:
SEC. 42. Application of the New York Convention.The New York Convention shall
govern the recognition and enforcement of arbitral awards covered by said Convention.
The recognition and enforcement of such arbitral awards shall be filed with the Regional
Trial Court in accordance with the rules of procedure to be promulgated by the Supreme
Court. Said procedural rules shall provide that the party relying on the award or applying
for its enforcement shall file with the court the original or authenticated copy of the award
and the arbitration agreement. If the award or agreement is not made in any of the official
The applicant shall establish that the country in which foreign arbitration award was made
in party to the New York Convention.
xxxx
A foreign arbitral award, when confirmed by the Regional Trial Court, shall be enforced in
the same manner as final and executory decisions of courts of law of the Philippines
xxxx
SEC. 47. Venue and Jurisdiction.Proceedings for recognition and enforcement of an
arbitration agreement or for vacations, setting aside, correction or modification of an
arbitral award, and any application with a court for arbitration assistance and supervision
shall be deemed as special proceedings and shall be filed with the Regional Trial Court (i)
where arbitration proceedings are conducted; (ii) where the asset to be attached or levied
upon, or the act to be enjoined is located; (iii) where any of the parties to the dispute resides
or has his place of business; or (iv) in the National Judicial Capital Region, at the option of
the applicant.
SEC. 48. Notice of Proceeding to Parties.In a special proceeding for recognition and
enforcement of an arbitral award, the Court shall send notice to the parties at their address
of record in the arbitration, or if any part cannot be served notice at such address, at such
partys last known address. The notice shall be sent al least fifteen (15) days before the date
set for the initial hearing of the application.
It is now clear that foreign arbitral awards when confirmed by the RTC are deemed not as a judgment
of a foreign court but as a foreign arbitral award, and when confirmed, are enforced as final and
executory decisions of our courts of law.
set aside, reject, or vacate it. In this sense, what this Court held in Chung Fu Industries (Phils.), Inc.
relied upon by KOGIES is applicable insofar as the foreign arbitral awards, while final and binding,
do not oust courts of jurisdiction since these arbitral awards are not absolute and without exceptions
as they are still judicially reviewable. Chapter 7 of RA 9285 has made it clear that all arbitral awards,
whether domestic or foreign, are subject to judicial review on specific grounds provided for.
(4) Grounds for judicial review different in domestic and foreign arbitral awards
The differences between a final arbitral award from an international or foreign arbitral tribunal and an
award given by a local arbitral tribunal are the specific grounds or conditions that vest jurisdiction
over our courts to review the awards.
For foreign or international arbitral awards which must first be confirmed by the RTC, the grounds
for setting aside, rejecting or vacating the award by the RTC are provided under Art. 34(2) of the
UNCITRAL Model Law.
For final domestic arbitral awards, which also need confirmation by the RTC pursuant to Sec. 23 of
RA 87644 and shall be recognized as final and executory decisions of the RTC, 45 they may only be
assailed before the RTC and vacated on the grounds provided under Sec. 25 of RA 876. 46
(5) RTC decision of assailed foreign arbitral award appealable
Sec. 46 of RA 9285 provides for an appeal before the CA as the remedy of an aggrieved party in
cases where the RTC sets aside, rejects, vacates, modifies, or corrects an arbitral award, thus:
SEC. 46. Appeal from Court Decision or Arbitral Awards.A decision of the Regional
Trial Court confirming, vacating, setting aside, modifying or correcting an arbitral award
may be appealed to the Court of Appeals in accordance with the rules and procedure to be
promulgated by the Supreme Court.
The losing party who appeals from the judgment of the court confirming an arbitral award
shall be required by the appellate court to post a counterbond executed in favor of the
prevailing party equal to the amount of the award in accordance with the rules to be
promulgated by the Supreme Court.
Thereafter, the CA decision may further be appealed or reviewed before this Court through a petition
for review under Rule 45 of the Rules of Court.
PGSMC has remedies to protect its interests
Thus, while the RTC does not have jurisdiction over disputes governed by arbitration mutually agreed
upon by the parties, still the foreign arbitral award is subject to judicial review by the RTC which can
10
What this Court held in University of the Philippines v. De Los Angeles and reiterated in succeeding
cases,48 that the act of treating a contract as rescinded on account of infractions by the other
contracting party is valid albeit provisional as it can be judicially assailed, is not applicable to the
instant case on account of a valid stipulation on arbitration. Where an arbitration clause in a contract
is availing, neither of the parties can unilaterally treat the contract as rescinded since whatever
infractions or breaches by a party or differences arising from the contract must be brought first and
resolved by arbitration, and not through an extrajudicial rescission or judicial action.
The issues arising from the contract between PGSMC and KOGIES on whether the equipment and
machineries delivered and installed were properly installed and operational in the plant in Carmona,
Cavite; the ownership of equipment and payment of the contract price; and whether there was
substantial compliance by KOGIES in the production of the samples, given the alleged fact that
PGSMC could not supply the raw materials required to produce the sample LPG cylinders, are
matters proper for arbitration. Indeed, we note that on July 1, 1998, KOGIES instituted an
Application for Arbitration before the KCAB in Seoul, Korea pursuant to Art. 15 of the Contract as
amended. Thus, it is incumbent upon PGSMC to abide by its commitment to arbitrate.
Corollarily, the trial court gravely abused its discretion in granting PGSMCs Motion for Inspection
of Things on September 21, 1998, as the subject matter of the motion is under the primary
jurisdiction of the mutually agreed arbitral body, the KCAB in Korea.
In addition, whatever findings and conclusions made by the RTC Branch Sheriff from the inspection
made on October 28, 1998, as ordered by the trial court on October 19, 1998, is of no worth as said
Sheriff is not technically competent to ascertain the actual status of the equipment and machineries as
installed in the plant.
For these reasons, the September 21, 1998 and October 19, 1998 RTC Orders pertaining to the grant
of the inspection of the equipment and machineries have to be recalled and nullified.
Issue on ownership of plant proper for arbitration
Petitioner assails the CA ruling that the issue petitioner raised on whether the total contract price of
USD 1,530,000 was for the whole plant and its installation is beyond the ambit of a Petition for
Certiorari.
Petitioners position is untenable.
It is settled that questions of fact cannot be raised in an original action for certiorari. 49 Whether or not
there was full payment for the machineries and equipment and installation is indeed a factual issue
prohibited by Rule 65.
However, what appears to constitute a grave abuse of discretion is the order of the RTC in resolving
the issue on the ownership of the plant when it is the arbitral body (KCAB) and not the RTC which
has jurisdiction and authority over the said issue. The RTCs determination of such factual issue
constitutes grave abuse of discretion and must be reversed and set aside.
RTC has interim jurisdiction to protect the rights of the parties
Anent the July 23, 1998 Order denying the issuance of the injunctive writ paving the way for
PGSMC to dismantle and transfer the equipment and machineries, we find it to be in order
considering the factual milieu of the instant case.
Firstly, while the issue of the proper installation of the equipment and machineries might well be
under the primary jurisdiction of the arbitral body to decide, yet the RTC under Sec. 28 of RA 9285
has jurisdiction to hear and grant interim measures to protect vested rights of the parties. Sec. 28
pertinently provides:
SEC. 28. Grant of interim Measure of Protection.(a) It is not incompatible with an
arbitration agreement for a party to request, before constitution of the tribunal, from
a Court to grant such measure. After constitution of the arbitral tribunal and during
arbitral proceedings, a request for an interim measure of protection, or modification thereof,
may be made with the arbitral or to the extent that the arbitral tribunal has no power to
11
(b) Take action that would prevent, or refrain from taking action that is likely to cause,
current or imminent harm or prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied;
or
Art. 17 J of UNCITRAL Model Law on ICA also grants courts power and jurisdiction to issue interim
measures:
Article 17 J. Court-ordered interim measures
A court shall have the same power of issuing an interim measure in relation to arbitration
proceedings, irrespective of whether their place is in the territory of this State, as it has in
relation to proceedings in courts. The court shall exercise such power in accordance with its
own procedures in consideration of the specific features of international arbitration.
In the recent 2006 case of Transfield Philippines, Inc. v. Luzon Hydro Corporation, we were explicit
that even "the pendency of an arbitral proceeding does not foreclose resort to the courts for
provisional reliefs." We explicated this way:
As a fundamental point, the pendency of arbitral proceedings does not foreclose resort to
the courts for provisional reliefs. The Rules of the ICC, which governs the parties arbitral
dispute, allows the application of a party to a judicial authority for interim or conservatory
measures. Likewise, Section 14 of Republic Act (R.A.) No. 876 (The Arbitration Law)
recognizes the rights of any party to petition the court to take measures to safeguard and/or
conserve any matter which is the subject of the dispute in arbitration. In addition, R.A.
9285, otherwise known as the "Alternative Dispute Resolution Act of 2004," allows the
filing of provisional or interim measures with the regular courts whenever the arbitral
tribunal has no power to act or to act effectively.50
12
(3) The parties are hereby ORDERED to submit themselves to the arbitration of their dispute and
differences arising from the subject Contract before the KCAB; and
Secondly, considering that the equipment and machineries are in the possession of PGSMC, it has the
right to protect and preserve the equipment and machineries in the best way it can. Considering that
the LPG plant was non-operational, PGSMC has the right to dismantle and transfer the equipment
and machineries either for their protection and preservation or for the better way to make good use of
them which is ineluctably within the management discretion of PGSMC.
(4) PGSMC is hereby ALLOWED to dismantle and transfer the equipment and machineries, if it had
not done so, and ORDERED to preserve and maintain them until the finality of whatever arbitral
award is given in the arbitration proceedings.
Thirdly, and of greater import is the reason that maintaining the equipment and machineries in
Worths property is not to the best interest of PGSMC due to the prohibitive rent while the LPG plant
as set-up is not operational. PGSMC was losing PhP322,560 as monthly rentals or PhP3.87M for
1998 alone without considering the 10% annual rent increment in maintaining the plant.
SO ORDERED.
No pronouncement as to costs.
Fourthly, and corollarily, while the KCAB can rule on motions or petitions relating to the
preservation or transfer of the equipment and machineries as an interim measure, yet on hindsight, the
July 23, 1998 Order of the RTC allowing the transfer of the equipment and machineries given the
non-recognition by the lower courts of the arbitral clause, has accorded an interim measure of
protection to PGSMC which would otherwise been irreparably damaged.
Fifth, KOGIES is not unjustly prejudiced as it has already been paid a substantial amount based on
the contract. Moreover, KOGIES is amply protected by the arbitral action it has instituted before the
KCAB, the award of which can be enforced in our jurisdiction through the RTC. Besides, by our
decision, PGSMC is compelled to submit to arbitration pursuant to the valid arbitration clause of its
contract with KOGIES.
PGSMC to preserve the subject equipment and machineries
Finally, while PGSMC may have been granted the right to dismantle and transfer the subject
equipment and machineries, it does not have the right to convey or dispose of the same considering
the pending arbitral proceedings to settle the differences of the parties. PGSMC therefore must
preserve and maintain the subject equipment and machineries with the diligence of a good father of a
family51 until final resolution of the arbitral proceedings and enforcement of the award, if any.
WHEREFORE, this petition is PARTLY GRANTED, in that:
(1) The May 30, 2000 CA Decision in CA-G.R. SP No. 49249 is REVERSED and SET ASIDE;
(2) The September 21, 1998 and October 19, 1998 RTC Orders in Civil Case No. 98-117
are REVERSED and SET ASIDE;
G.R. No. 150241
November 4, 2004
13
File Complaint in Intervention.4 However, Eduardo allegedly did not immediately learn of the denial
of his motion to intervene.
On January 7, 1994, the trial court handed down its Decision in Civil Case No. 89-4506. Again,
Eduardo allegedly had no knowledge about the judgment or the subsequent appeal of said ruling.
On February 22, 1999, Eduardo, thru a different counsel, filed a Motion for Early Resolution of the
Motion for Leave to File Complaint in Intervention, which was raffled to Branch 140 of the Makati
City RTC. During the hearing of the motion, the trial court informed Eduardo that a Decision had
already been rendered in Civil Case No. 89-4506 by Branch 149 and the appeal from said judgment
had already been resolved by the Court of Appeals. Nonetheless, it directed the parties to file their
respective position papers. Concepcion filed an Opposition with Motion for Issuance of Writ of
Execution but she died on May 15, 1999, before her motion could be resolved.
In an Order5 dated September 27, 1999, Branch 140, denied Eduardos motion for want of merit,
pointing out that his Motion for Leave to File Complaint in Intervention had been dismissed
previously by Branch 149 in its Order dated February 19, 1990, without any Motion for
Reconsideration being filed from the aforesaid order of dismissal.
On September 30, 1999, the trial court granted the Motion for Writ of Execution.
Eduardo moved for reconsideration but this was denied on October 27, 1999. He then filed a Petition
for Relief dated January 30, 2000, raising denial of due process and fraud as his grounds since he
allegedly never received a copy of the Order of September 19, 1990, thus preventing him from
moving for reconsideration. In paragraphs 14 and 15 of the Petition for Relief, however, petitioner
admits he did receive an Order dated February 19, 1990.
In an Order dated April 6, 2000, the Regional Trial Court of Makati City, Branch 140, ruled on the
petition, as follows:
Finding no cogent reasons to reverse or set aside the [O]rders dated September 27, 1999
and October 27, 1999, the petition for relief filed by petitioner-intervenor Eduardo S.
Mercado praying that he be allowed to file complaint in intervention is hereby DENIED.
SO ORDERED.6
On May 18, 2000, petitioner moved for reconsideration of the foregoing Order but this was denied in
an Order dated September 26, 2000, a copy of which was received by petitioner on November 17,
2000.
In two separate Orders, both dated February 19, 1990, the trial court denied Armandos Motion to Lift
Order of Default and Motion for Admission of Answer as well as petitioners Motion for Leave to
14
petitioner received the Order denying the Motion for Reconsideration from the RTC on November
17, 2000. Instead of filing a petition for review with the appellate court within 15 days thereof or
until December 2, 2000, he filed a petition for certiorari by registered mail on January 16, 2001, but
belatedly made the payment of docket fees only on January 17, 2001. Noteworthy, petitioner did not
even attempt to explain why he was unable to file a petition for review within the reglementary
period.
Indeed, not infrequently, litigants and parties to a petition have invoked liberal construction of the
Rules of Court to justify lapses in its observance. Hopefully, it is not simply a cover-up of their own
neglect or sheer ignorance of procedure. While indeed this Court has on occasion set aside procedural
irregularities in the interest of justice, it must be stressed that liberality of construction of the rules
should not be a panacea for all procedural maladies. For this Court will not tolerate wanton disregard
of the procedural rules under the guise of liberal construction.
In any event, even if we were to disregard the procedural defects, we find that this petition must still
be dismissed as the appellate court did not commit any grave abuse of discretion amounting to want
or excess of jurisdiction in dismissing the petition for late payment of filing fees. Petitioner
undeniably paid his docket fees beyond the reglementary period of 60 days for filing a petition for
certiorari. Well settled is the rule that the court cannot acquire jurisdiction over the subject matter of a
case, unless the docket fees are paid.12 And where the filing of the initiatory pleading is not
accompanied by payment of the docket fees, the court may allow payment of the fee within a
reasonable time but in no case beyond the applicable prescriptive or reglementary period. 13
Thus, the Court of Appeals correctly dismissed the petition for certiorari pursuant to Rule 46, Section
314 in relation to Rule 65, Section 6 (2)15 of the 1997 Rules of Civil Procedure.
WHEREFORE, the instant petition is DISMISSED for lack of merit. The assailed Resolutions dated
February 23, 2001 and July 31, 2001 of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.
Petitioner should have availed of the ordinary appeal process such as a petition for review under Rule
45, within 15 days after notice of denial of his Motion for Reconsideration. Undoubtedly, petitioner
had already lost this remedy when he filed this special civil action on January 16, 2001. A Petition for
Certiorari cannot be a substitute for the lost or lapsed remedy of appeal, where such loss is
occasioned by the petitioners own neglect or error in the choice of remedies. 11 By his own account,
15
August 4, 2009
docketed as Civil Case No. 99-177, named as defendants Antonio, MBTC, the Sheriff of Makati City
and the Register of Deeds of Makati City. In it, Clarita alleged that the properties involved belonged
to her and Antonios conjugal partnership property as the same were acquired during their marriage
and that Antonio, with the connivance of a certain Belen G. Belen, had secured the registration
thereof in their names without her knowledge. She pointed out that Antonio and Belen then
mortgaged the properties to MBTC in 1993 likewise without her knowledge. She ascribed fault and
negligence to MBTC because it failed to consider that the properties given to it as security belonged
to her and Antonios conjugal partnership property. Accordingly, she prayed for reconveyance as well
as for payment of damages.8
MBTC filed a motion to dismiss the complaint on the ground, inter alia, of laches. With the denial of
its motion, MBTC filed a petition for certiorari before the Court of Appeals which was docketed as
CA-G.R. SP No. 55780. The Court of Appeals found merit in the petition and ordered the dismissal of
the complaint on the ground that the same was already barred by laches, pointing out that it had taken
Clarita 11 long years since the issuance of the TCTs on May 27, 1988 before she actually sought to
annul the mortgage contract.9 The decision had attained finality without a motion for reconsideration
being filed or an appeal being taken therefrom.
Subsequently, on April 17, 2002, Clarita instituted another action also before the RTC of Muntinlupa
City, Branch 25610 but this time for the declaration of nullity of the TCTs covering the same
properties and for reconveyance and damages. The complaint was docketed as Civil Case No. 02-079
and it impleaded Antonio, Belen, MBTC and the Registers of Deeds of Makati City and Muntinlupa
City as defendants. This constitutes the root of the two petitions at bar.
These two petitions for review on certiorari under Rule 45 separately filed by petitioners Antonio
Navarro and Clarita Navarro, respectively docketed as G.R. No. 165697 1 and G.R. No.
166481,2 assail the July 8, 2004 Decision3 of the Court of Appeals in CA-G.R. SP No. 76872 which
ordered the dismissal of the complaint filed by petitioner Clarita Navarro in Civil Case No. 02-079 -a case for declaration of nullity of title and for reconveyance and damages.
The said complaint was basically a reiteration of Claritas allegations in Civil Case No. 99-177.
Specifically, it alleged that the conjugal properties involved were fraudulently registered in the name
"Antonio N. Navarromarried to Belen B. Navarro" and that the mortgage on the properties were
likewise fraudulently secured by Antonio and Belen to acquire a loan from MBTC the proceeds of
which, however, did not inure to the benefit of the conjugal partnership. Accordingly, she prayed that
at least her one-half conjugal share in the properties be reconveyed to her without prejudice to
MBTCs rights against Antonio and Belen.11
Petitioners Antonio Navarro and Clarita Navarro were married on December 7, 1968. 4 During their
union, they acquired three parcels of land in Alabang, Muntinlupa City on which they built their
home. These pieces of land were covered by Transfer Certificate of Title (TCT) Nos. 155256, 155257
and 155258 issued by the Register of Deeds of Makati City. The TCTs, however, are registered in the
name of "Antonio N. Navarro married to Belen B. Navarro."5 Sometime in 1998, respondent
Metropolitan Bank and Trust Company (MBTC) had caused the judicial foreclosure of the real estate
mortgage which Antonio had earlier constituted on the subject properties as security for a loan he
allegedly obtained from MBTC. In December of that year, the properties were sold at public auction
where MBTC, as the lone bidder, 6 was issued a certificate of sale.7
MBTC moved to dismiss the complaint on the ground that it was already barred by the prior
judgment in Civil Case No. 99-177, and that Claritas claim had already been waived, abandoned and
extinguished.12 The trial court denied the motion to dismiss in its November 8, 2002 Order, noting
that the dismissal of Civil Case No. 99-177 did not constitute res judicata because a dismissal on
laches and failure to implead an indispensable party could never be a dismissal on the
merits.13 MBTC filed a motion for reconsideration, but it was denied for lack of merit in the trial
courts April 21, 2002 Order.14
Clarita brought before the Regional Trial Court (RTC) of Muntinlupa City, Branch 256 an action for
the declaration of nullity of the real estate mortgage and the foreclosure sale. The complaint,
Aggrieved, MBTC elevated the case to the Court of Appeals via a petition for certiorari and
prohibition with an application for temporary restraining order and writ of preliminary injunction,
attributing grave abuse of discretion to the trial court in denying its motion to dismiss. 15
16
20
Antonio and Clarita are now before this Court assailing the adverse decision of the Court of Appeals.
They believe that the Court of Appeals committed a reversible error in directing the dismissal of the
complaint in Civil Case No. 02-079.
Both Antonio and Clarita advance that it was error for the Court of Appeals to direct the dismissal of
the complaint in the present cases despite the fact that the prior dismissal of the complaint for
declaration of nullity of mortgage and foreclosure in Civil Case No. 99-177 was predicated on
Claritas failure to implead Belen as an indispensable party therein which, in effect, amounted to the
courts lack or jurisdiction to act on the parties present and absent. 21Additionally, Clarita posits that
the principle of laches is not applicable because an action to declare the nullity of a mortgage contract
is imprescriptible.22
MBTC, for its part, argues that because the decision of the Court of Appeals in CA-G.R. SP No.
55780 ordering the dismissal of Civil Case No. 99-177 had already become final, then the same
should bar the filing of Civil Case No. 02-079 inasmuch as the two cases raised identical causes of
action and issues and prayed for the same relief. 23 In particular, it also notes that Clarita had failed to
timely file a motion for reconsideration of the assailed decision and that the motion for
reconsideration filed by Antonio himself should not be considered to redound to Claritas benefit
since Antonio, in the complaint filed before the trial court, was impleaded as one of the defendants. 24
The petitions are utterly unmeritorious.
A perusal of the Court of Appeals decision in CA-G.R. SP No. 55780, which ordered the dismissal of
Civil Case No. 99-177, tells that the complaint therein was dismissed not on the ground of nonjoinder of Belen as an indispensable party, but rather on the ground of laches. Indeed, what is clear
from the said decision is that the dismissal of the case was due to Claritas unjustifiable neglect to
timely initiate the prosecution of her claim in court -- a conduct that warranted the presumption that
she, although entitled to assert a right, had resolved to abandon or declined to assert the same. 25
While the Court agrees that an action to declare the nullity of contracts is not barred by the statute of
limitations, the fact that Clarita was barred by laches from bringing such action at the first instance
has already been settled by the Court of Appeals in CA-G.R. SP No. 55780. At this point in the
proceedings, the Court can no longer rule on the applicability of the principle of laches vis--vis the
imprescriptibility of Claritas cause of action because the said decision is not the one on appeal before
us. But more importantly, the Court takes notice that the decision rendered in that case had already
become final without any motion for reconsideration being filed or an appeal being taken therefrom.
Thus, we are left with no other recourse than to uphold the immutability of the said decision.
No other procedural law principle is indeed more settled than that once a judgment becomes final, it
is no longer subject to change, revision, amendment or reversal, except only for correction of clerical
errors, or the making of nunc pro tunc entries which cause no prejudice to any party, or where the
judgment itself is void.26 The underlying reason for the rule is two-fold: (1) to avoid delay in the
administration of justice and thus make orderly the discharge of judicial business, and (2) to put
judicial controversies to an end, at the risk of occasional errors, inasmuch as controversies cannot be
allowed to drag on indefinitely and the rights and obligations of every litigant must not hang in
suspense for an indefinite period of time.27 As the Court declared in Yau v. Silverio,28
Litigation must end and terminate sometime and somewhere, and it is essential to an effective and
efficient administration of justice that, once a judgment has become final, the winning party be, not
through a mere subterfuge, deprived of the fruits of the verdict. Courts must therefore guard against
any scheme calculated to bring about that result. Constituted as they are to put an end to
controversies, courts should frown upon any attempt to prolong them.
Indeed, just as a losing party has the right to file an appeal within the prescribed period, the winning
party also has the correlative right to enjoy the finality of the resolution of his case by the execution
and satisfaction of the judgment. Any attempt to thwart this rigid rule and deny the prevailing litigant
his right to savor the fruit of his victory must immediately be struck down. 29 Thus, in Heirs of
Wenceslao Samper v. Reciproco-Noble,30 we had occasion to emphasize the significance of this rule,
to wit:
17
18
529,189.80
$1,544,984.40
5% as Attorney's Fees
$ 77,249.22
TOTAL ..
DECISION
$1,622,233.62
x 43_
TOTAL ..
It appears that sometime in 1995, petitioner Proton Pilipinas Corporation (Proton) availed of the
credit facilities of herein respondent, Banque Nationale de Paris (BNP). To guarantee the payment of
its obligation, its co-petitioners Automotive Corporation Philippines (Automotive), Asea One
Corporation (Asea) and Autocorp Group (Autocorp) executed a corporate guarantee 2 to the extent of
US$2,000,000.00. BNP and Proton subsequently entered into three trust receipt agreements dated
June 4, 1996,3 January 14, 1997,4 and April 24, 1997.5
COURT
Under the terms of the trust receipt agreements, Proton would receive imported passenger motor
vehicles and hold them in trust for BNP. Proton would be free to sell the vehicles subject to the
condition that it would deliver the proceeds of the sale to BNP, to be applied to its obligations to it. In
case the vehicles are not sold, Proton would return them to BNP, together with all the accompanying
documents of title.
Allegedly, Proton failed to deliver the proceeds of the sale and return the unsold motor vehicles.
Pursuant to the corporate guarantee, BNP demanded from Automotive, Asea and Autocorp the
payment of the amount of US$1,544,984.406 representing Proton's total outstanding obligations.
These guarantors refused to pay, however. Hence, BNP filed on September 7, 1998 before the Makati
Regional Trial Court (RTC) a complaint against petitioners praying that they be ordered to pay (1)
US$1,544,984.40 plus accrued interest and other related charges thereon subsequent to August 15,
1998 until fully paid and (2) an amount equivalent to 5% of all sums due from petitioners as
attorney's fees.
7
The Makati RTC Clerk of Court assessed the docket fees which BNP paid at P352,116.30 which was
computed as follows:8
P69,756,000.00
(roundoff)
JDF
P 69,756,000.00
P 69.606.000.00
- 150,000.00
x .003
69,606,000.00
208,818.00
x .002
+ 450.00
139,212.00
P 209,268.00
+ 150.00
P 139,362.00
LEGAL :
P139,362.00
+ 209,268.00
P348,630.00
x 1% = P3,486.30
P 139,362.00
First Cause of Action
Second Cause of Action
$ 844,674.07
171,120.53
+ 209,268.00
3,486.00
19
To the complaint, the defendants-herein petitioners filed on October 12, 1998 a Motion to
Dismiss9 on the ground that BNP failed to pay the correct docket fees to thus prevent the trial court
from acquiring jurisdiction over the case.10 As additional ground, petitioners raised prematurity of the
complaint, BNP not having priorly sent any demand letter.11
By Order12 of August 3, 1999, Branch 148 of the Makati RTC denied petitioners' Motion to Dismiss,
viz:
Resolving the first ground relied upon by the defendant, this court believes and so hold that
the docket fees were properly paid. It is the Office of the Clerk of Court of this station that computes
the correct docket fees, and it is their duty to assess the docket fees correctly, which they
did.1avvphi1.zw+
Even granting arguendo that the docket fees were not properly paid, the court cannot just dismiss the
case. The Court has not yet ordered (and it will not in this case) to pay the correct docket fees, thus
the Motion to dismiss is premature, aside from being without any legal basis.
As held in the case of National Steel Corporation vs. CA, G.R. No. 123215, February 2, 1999, the
Supreme Court said:
xxx
Although the payment of the proper docket fees is a jurisdictional requirement, the trial court may
allow the plaintiff in an action to pay the same within a reasonable time within the expiration of
applicable prescription or reglementary period. If the plaintiff fails to comply with this requirement,
the defendant should timely raise the issue of jurisdiction or else he would be considered in estoppel.
In the latter case, the balance between appropriate docket fees and the amount actually paid by the
plaintiff will be considered a lien or (sic) any award he may obtain in his favor.
As to the second ground relied upon by the defendants, in that a review of all annexes to the
complaint of the plaintiff reveals that there is not a single formal demand letter for defendants to
fulfill the terms and conditions of the three (3) trust agreements.
In this regard, the court cannot sustain the submission of defendant. As correctly pointed out by the
plaintiff, failure to make a formal demand for the debtor to pay the plaintiff is not among the legal
grounds for the dismissal of the case. Anyway, in the appreciation of the court, this is simply
evidentiary.
xxx
WHEREFORE, for lack of merit, the Motion to Dismiss interposed by the defendants is hereby
DENIED.13(Underscoring supplied)
Petitioners filed a motion for reconsideration14 of the denial of their Motion to Dismiss, but it was
denied by the trial court by Order15 of October 3, 2000.
Petitioners thereupon brought the case on certiorari and mandamus 16 to the Court of Appeals which,
by Decision17of July 25, 2001, denied it in this wise:
Section 7(a) of Rule 141 of the Rules of Court excludes interest accruing from the principal
amount being claimed in the pleading in the computation of the prescribed filing fees. The complaint
was submitted for the computation of the filing fee to the Office of the Clerk of Court of the Regional
Trial Court of Makati City which made an assessment that respondent paid accordingly. What the
Office of the Clerk of Court did and the ruling of the respondent Judge find support in the decisions
of the Supreme Court in Ng Soon vs. Alday and Tacay vs. RTC of Tagum, Davao del Norte. In the
latter case, the Supreme Court explicitly ruled that "where the action is purely for recovery of money
or damages, the docket fees are assessed on the basis of the aggregate amount claimed, exclusive
only of interests and costs."
Assuming arguendo that the correct filing fees was not made, the rule is that the court may allow a
reasonable time for the payment of the prescribed fees, or the balance thereof, and upon such
payment, the defect is cured and the court may properly take cognizance of the action unless in the
meantime prescription has set in and consequently barred the right of action. Here respondent Judge
did not make any finding, and rightly so, that the filing fee paid by private respondent was
insufficient.
On the issue of the correct dollar-peso rate of exchange, the Office of the Clerk of Court of the RTC
of Makati pegged it at P 43.21 to US$1. In the absence of any office guide of the rate of exchange
which said court functionary was duty bound to follow, the rate he applied is presumptively correct.
Respondent Judge correctly ruled that the matter of demand letter is evidentiary and does not form
part of the required allegations in a complaint. Section 1, Rule 8 of the 1997 Rules of Civil Procedure
pertinently provides:
"Every pleading shall contain in a methodical and logical form, a plain, concise and direct statement
of the ultimate facts on which the party pleading relies for his claim or defense, as the case may be,
omitted the statement of mere evidentiary facts."
Judging from the allegations of the complaint particularly paragraphs 6, 12, 18, and 23 where
allegations of imputed demands were made upon the defendants to fulfill their respective obligations,
annexing the demand letters for the purpose of putting up a sufficient cause of action is not required.
20
In Manchester Development Corporation vs. Court of Appeals, No. L-75919, May 7, 1987, 149
SCRA 562, this Court condemned the practice of counsel who in filing the original complaint omitted
from the prayer any specification of the amount of damages although the amount of over P78 million
is alleged in the body of the complaint. This Court observed that "(T)his is clearly intended for no
other purpose than to evade the payment of the correct filing fees if not to mislead the docket clerk, in
the assessment of the filing fee. This fraudulent practice was compounded when, even as this Court
had taken cognizance of the anomaly and ordered an investigation, petitioner through another counsel
filed an amended complaint, deleting all mention of the amount of damages being asked for in the
body of the complaint. xxx"
For the guidance of all concerned, the WARNING given by the court in the afore-cited case is
reproduced hereunder:
"The Court serves warning that it will take drastic action upon a repetition of this unethical practice.
To put a stop to this irregularity, henceforth all complaints, petitions, answers and other similar
pleadings should specify the amount of damages being prayed for not only in the body of the
pleading but also in the prayer, and said damages shall be considered in the assessment of the
filing fees in any case. Any pleading that fails to comply with this requirement shall not be
accepted nor admitted, or shall otherwise be expunged from the record.
The Court acquires jurisdiction over any case only upon the payment of the prescribed docket fee. An
amendment of the complaint or similar pleading will not thereby vest jurisdiction in the Court, much
less the payment of the docket fee based on the amount sought in the amended pleading. The ruling in
the Magaspi case (115 SCRA 193) in so far as it is inconsistent with this pronouncement is
overturned and reversed."
Strict compliance with this Circular is hereby enjoined.
Let this be circularized to all the courts hereinabove named and to the President and Board of
Governors of the Integrated Bar of the Philippines, which is hereby directed to disseminate this
Circular to all its members.
March 24, 1988.
(Sgd). CLAUDIO TEEHANKEE
Chief Justice
(Emphasis and underscoring supplied)
21
Where the action is purely for the recovery of money or damages, the docket fees are assessed on the
basis of the aggregate amount claimed, exclusive only of interests and costs.28 (Emphasis and
underscoring supplied),
it made an overpayment.
(c) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS EIGHT HUNDRED
FORTY FOUR THOUSAND SIX HUNDRED SEVENTY FOUR AND SEVEN CENTS (US$
844,674.07), plus accrued interests and other related charges thereon subsequent to August 15, 1998,
until fully paid; and (ii) an amount equivalent to 5% of all sums due from said Defendant, as and for
attorney's fees;
When Tacay was decided in 1989, the pertinent rule applicable was Section 5 (a) of Rule 141 which
provided for the following:
SEC. 5. Clerks of Regional Trial Courts. - (a) For filing an action or proceeding, or a permissive
counter-claim or cross-claim not arising out of the same transaction subject of the complaint, a thirdparty complaint and a complaint in intervention and for all services in the same, if the sum
claimed, exclusive of interest, of the value of the property in litigation, or the value of the estate,
is:
(d) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS ONE HUNDRED
TWENTY AND FIFTY THREE CENTS (US$171,120.53), plus accrued interests and other related
charges thereon subsequent to August 15, 1998 until fully paid; and (ii) an amount equivalent to 5%
of all sums due from said Defendant, as and for attorney's fees;
1.
2.
48.00
3.
64.00
(e) Defendant PROTON be ordered to pay the sum of (i) US DOLLARS FIVE HUNDRED
TWENTY NINE THOUSAND ONE HUNDRED EIGHTY NINE AND EIGHTY CENTS
(US$529,189.80), plus accrued interests and other related charges thereon subsequent to August 15,
1998 until fully paid; and (ii) an amount equivalent to 5% or all sums due from said Defendant, as
and for attorney's fees;
4.
80.00
5.
120.00
6.
160.00
7.
200.00
8.
9.
400.00
10.
64.00
40.00
5. On ALL THE CAUSES OF ACTION Defendants AUTOMOTIVE CORPORATION PHILIPPINES, ASEA ONE CORPORATION and
AUTOCORP GROUP to be ordered to pay Plaintiff BNP the aggregate sum of (i) US DOLLARS
ONE MILLION FIVE HUNDRED FORTY FOUR THOUSAND NINE HUNDRED EIGHTY
FOUR AND FORTY CENTS (US$1,544,984.40) (First through Third Causes of Action), plus
accrued interest and other related charges thereon subsequent to August 15, 1998 until fully paid; and
(ii) an amount equivalent to 5% of all sums due from said Defendants, as and for attorney's fees. 26
Moreover, respondent posits that the amount of US$1,544,984.40 represents not only the principal
but also interest and other related charges which had accrued as of August 15, 1998. Respondent goes
even further by suggesting that in light of Tacay v. Regional Trial Court of Tagum, Davao del
Norte27 where the Supreme Court held,
11.
P 32.00
4.00
If the case concerns real estate, the assessed value thereof shall be considered in computing the fees.
In case the value of the property or estate or the sum claim is less or more in accordance with the
appraisal of the court, the difference of fees shall be refunded or paid as the case may be.
22
The clerk of court should thus have assessed the filing fee by taking into consideration "the total sum
claimed,inclusive of interest, damages of whatever kind, attorney's fees, litigation expenses, and
costs, or the stated value of the property in litigation." Respondent's and the Court of Appeals'
reliance then on Tacay was not in order.
BY RESOLUTION OF THE COURT, DATED JUNE 28, 1994, PURSUANT TO SECTION 5 (5) OF
ARTICLE VIII OF THE CONSTITUTION, RULE 141, SECTION 7 (a) AND (d), and SECTION 8
(a) and (b) OF THE RULES OF COURT ARE HEREBY AMENDED TO READ AS FOLLOWS:
Neither was, for the same reason, the Court of Appeals' reliance on the 1989 case of Ng Soon v.
Alday,30 where this Court held:
RULE 141
LEGAL FEES
The failure to state the rate of interest demanded was not fatal not only because it is the Courts
which ultimately fix the same, but also because Rule 141, Section 5(a) of the Rules of Court,
itemizing the filing fees, speaks of "the sum claimed, exclusive of interest." This clearly implies
that the specification of the interest rate is not that indispensable.
xxx
Sec. 7. Clerks of Regional Trial Courts
Factually, therefore, not everything was left to "guesswork" as respondent Judge has opined. The
sums claimed were ascertainable, sufficient enough to allow a computation pursuant to Rule 141,
section 5(a).
(a) For filing an action or a permissive counterclaim or money claim against an estate not based on
judgment, or for filing with leave of court a third-party, fourth-party, etc. complaint, or a complaint in
intervention, and for all clerical services in the same, if the total sum claimed, inclusive of interest,
damages of whatever kind, attorney's fees, litigation expenses, and costs, or the stated value of
the property in litigation, is:
Furthermore, contrary to the position taken by respondent Judge, the amounts claimed need not be
initially stated with mathematical precision. The same Rule 141, section 5(a) (3rd paragraph),
allows an appraisal "more or less."31 Thus:
1.
P 400.00
2.
600.00
3.
5.00
xxx
"In case the value of the property or estate or the sum claimed is less or more in accordance with the
appraisal of the court, the difference of fee shall be refunded or paid as the case may be."
In other words, a final determination is still to be made by the Court, and the fees ultimately found to
be payable will either be additionally paid by the party concerned or refunded to him, as the case may
be. The above provision clearly allows an initial payment of the filing fees corresponding to the
estimated amount of the claim subject to adjustment as to what later may be proved.
(a) For each civil action or proceeding, where the value of the subject matter involved, or
the amount of the demand, inclusive of interest, damages or whatever kind, attorney's
fees, litigation expenses, and costs, is:
1.
2.
400.00
3.
850.00
P 120.00
Respecting the Court of Appeals' conclusion that the clerk of court did not err when he applied the
exchange rate of US $1 = P43.00 "[i]n the absence of any office guide of the rate of exchange which
said court functionary was duty bound to follow,[hence,] the rate he applied is presumptively
correct," the same does not lie. The presumption of regularity of the clerk of court's application of the
exchange rate is not conclusive.33 It is disputable.34 As such, the presumption may be overturned by
the requisite rebutting evidence.35 In the case at bar, petitioners have adequately proven with
23
1. It is not simply the filing of the complaint or appropriate initiatory pleading, but the
payment of the prescribed docket fee, that vests a trial court with jurisdiction over the
subject-matter or nature of the action. Where the filing of the initiatory pleading is not
accompanied by payment of the docket fee, the court may allow payment of the fee within
a reasonable time but in no case beyond the applicable prescriptive or reglementary period.
2. The same rule applies to permissive counterclaims, third-party claims and similar
pleadings, which shall not be considered filed until and unless the filing fee prescribed
therefor is paid. The court may also allow payment of said fee within a reasonable time but
also in no case beyond its applicable prescriptive or reglementary period.
3. Where the trial court acquires jurisdiction over a claim by the filing of the appropriate
pleading and payment of the prescribed filing fee but, subsequently, the judgment awards a
claim not specified in the pleading, or if specified the same has been left for determination
by the court, the additional filing fee therefor shall constitute a lien on the judgment. It shall
be the responsibility of the Clerk of Court or his duly authorized deputy to enforce said lien
and assess and collect the additional fee. 40 (Emphasis and underscoring supplied)
The principle in Manchester could very well be applied in the present case. The pattern and the intent
to defraud the government of the docket fee due it is obvious not only in the filing of the original
complaint but also in the filing of the second amended complaint.
The ruling in Sun Insurance Office was echoed in the 2005 case of Heirs of Bertuldo Hinog v. Hon.
Achilles Melicor:41
However, in Manchester, petitioner did not pay any additional docket fee until the case was decided
by this Court on May 7, 1987. Thus, in Manchester, due to the fraud committed on the
government, this Court held that the court a quo did not acquire jurisdiction over the case and
that the amended complaint could not have been admitted inasmuch as the original complaint
was null and void.
Plainly, while the payment of the prescribed docket fee is a jurisdictional requirement, even its nonpayment at the time of filing does not automatically cause the dismissal of the case, as long as the fee
is paid within the applicable prescriptive or reglementary period, more so when the party involved
demonstrates a willingness to abide by the rules prescribing such payment. Thus, when insufficient
filing fees were initially paid by the plaintiffs andthere was no intention to defraud the
government, the Manchester rule does not apply. (Emphasis and underscoring supplied; citations
omitted)
In the present case, a more liberal interpretation of the rules is called for considering
that, unlikeManchester, private respondent demonstrated his willingness to abide by the rules
by paying the additional docket fees as required. The promulgation of the decision
in Manchester must have had that sobering influence on private respondent who thus paid the
additional docket fee as ordered by the respondent court. It triggered his change of stance by
manifesting his willingness to pay such additional docket fee as may be ordered.
In the case at bar, respondent merely relied on the assessment made by the clerk of court which
turned out to be incorrect. Under the circumstances, the clerk of court has the responsibility of
reassessing what respondent must pay within the prescriptive period, failing which the complaint
merits dismissal.
Nevertheless, petitioners contend that the docket fee that was paid is still insufficient considering the
total amount of the claim. This is a matter which the clerk of court of the lower court and/or his duly
authorized docket clerk or clerk in charge should determine and, thereafter, if any amount is found
due, he must require the private respondent to pay the same.
Thus, the Court rules as follows:
Parenthetically, in the complaint, respondent prayed for "accrued interest subsequent to August 15,
1998 until fully paid." The complaint having been filed on September 7, 1998, respondent's claim
includes the interest from August 16, 1998 until such date of filing.
Respondent did not, however, pay the filing fee corresponding to its claim for interest from August
16, 1998 until the filing of the complaint on September 7, 1998. As priorly discussed, this is required
under Rule 141, as amended by Administrative Circular No. 11-94, which was the rule applicable at
the time. Thus, as the complaint currently stands, respondent cannot claim the interest from August
24
25
Purchase Price
38376
P 9,340,000.00
29918
P 28,000,000.00
38374
P 12,000,000.00
39232
P 1,600,000.00
39225
P 1,600,000.00
Petitioner could choose to pay off its indebtedness with individual or all five parcels of land; or it
could redeem said properties by paying respondents Tan and Obiedo the following prices for the
same, inclusive of interest and penalties:
TCT No.
Redemption Price
38376
P 25,328,939.00
29918
P 35,660,800.00
38374
P 28,477,600.00
39232
P 6,233,381.00
39225
P 6,233,381.00
In the event that petitioner is able to redeem any of the afore-mentioned parcels of land, the Deed of
Absolute Sale covering the said property shall be nullified and have no force and effect; and
respondents Tan and Obiedo shall then return the owners duplicate of the corresponding TCT to
petitioner and also execute a Deed of Discharge of Mortgage. However, if petitioner is unable to
redeem the parcels of land within the period agreed upon, respondents Tan and Obiedo could already
present the Deeds of Absolute Sale covering the same to the Office of the Register of Deeds for Naga
City so respondents Tan and Obiedo could acquire TCTs to the said properties in their names.
The Memorandum of Agreement further provided that should petitioner contest, judicially or
otherwise, any act, transaction, or event related to or necessarily connected with the said
Memorandum and the Deeds of Absolute Sale involving the five parcels of land, it would pay
respondents Tan and Obiedo P10,000,000.00 as liquidated damages inclusive of costs and attorneys
fees. Petitioner would likewise pay respondents Tan and Obiedo the condoned interests, surcharges
and penalties.10 Finally, should a contest arise from the Memorandum of Agreement, Mr. Ruben Sia
(Sia), President of petitioner corporation, personally assumes, jointly and severally with petitioner,
the latters monetary obligation to respondent Tan and Obiedo.
Respondent Atty. Tomas A. Reyes (Reyes) was the Notary Public who notarized the Memorandum of
Agreement dated 17 March 2005 between respondent Tan and Obiedo, on one hand, and petitioner,
on the other.
Pursuant to the Memorandum of Agreement, petitioner, represented by Mr. Sia, executed separate
Deeds of Absolute Sale,11 over the five parcels of land, in favor of respondents Tan and Obiedo. On
the blank spaces provided for in the said Deeds, somebody wrote the 3 rd of January 2006 as the date
of their execution. The Deeds were again notarized by respondent Atty. Reyes also on 3 January
2006.
Without payment having been made by petitioner on 31 December 2005, respondents Tan and Obiedo
presented the Deeds of Absolute Sale dated 3 January 2006 before the Register of Deeds of Naga City
on 8 March 2006, as a result of which, they were able to secure TCTs over the five parcels of land in
their names.
On 16 March 2006, petitioner filed before the RTC a Complaint 12 against respondents Tan, Obiedo,
and Atty. Reyes, for declaration of nullity of deeds of sales and damages, with prayer for the issuance
of a writ of preliminary injunction and/or temporary restraining order (TRO). The Complaint was
docketed as Civil Case No. 2006-0030.
26
(a) Restraining [herein respondents] Tan and Obiedo, their agents, privies or
representatives, from committing act/s tending to alienate the mortgaged properties from
the [herein petitioner] pending the resolution of the case, including but not limited to the
acts complained of in paragraph "14", above;
(b) Restraining the Register of Deeds of Naga City from entertaining moves by the
[respondents] to have [petitioners] certificates of title to the mortgaged properties
cancelled and changed/registered in [respondents] Tans and Obiedos names, and/or
released to them;
(c) After notice and hearing, that a writ of preliminary injunction be issued imposing the
same restraints indicated in the next preceding two paragraphs of this prayer; and
(d) After trial, judgment be rendered:
1. Making the injunction permanent;
2. Declaring the provision in the Memorandum of Agreement requiring the
[petitioner] to execute deed of sales (sic) in favor of the [respondents Tan and
Obiedo] as dacion en pago in the event of non-payment of the debt as pactum
commissorium;
3. Annulling the Deed[s] of Sale for TCT Nos. 29918, 38374, 38376, 39225 and
39232, all dated January 3, 2006, the same being in contravention of law;
4. Ordering the [respondents] jointly and solidarily to pay the [petitioner] actual
damages of at leastP300,000.00; attorneys fees in the amount of P100,000.00
plus P1,000.00 per court attendance of counsel as appearance fee; litigation
expenses in the amount of at least P10,000.00 and exemplary damages in the
amount of P300,000.00, plus the costs.
[Petitioner] further prays for such other reliefs as may be proper, just and equitable under the
premises.14
Upon filing its Complaint with the RTC on 16 March 2006, petitioner paid the sum of P13,644.25 for
docket and other legal fees, as assessed by the Office of the Clerk of Court. The Clerk of Court
initially considered Civil Case No. 2006-0030 as an action incapable of pecuniary estimation and
computed the docket and other legal fees due thereon according to Section 7(b)(1), Rule 141 of the
Rules of Court.
WHEREFORE, premises considered, it is most respectfully prayed of this Honorable Court that upon
the filing of this complaint, a 72-hour temporary restraining order be forthwith issued ex parte:
27
Thereafter, respondent Tan filed before the RTC an Omnibus Motion in which he contended that Civil
Case No. 2006-0030 involved real properties, the docket fees for which should be computed in
accordance with Section 7(a), not Section 7(b)(1), of Rule 141 of the Rules of Court, as amended by
A.M. No. 04-2-04-SC which took effect on 16 August 2004. Since petitioner did not pay the
appropriate docket fees for Civil Case No. 2006-0030, the RTC did not acquire jurisdiction over the
said case. Hence, respondent Tan asked the RTC to issue an order requiring petitioner to pay the
correct and accurate docket fees pursuant to Section 7(a), Rule 141 of the Rules of Court, as
amended; and should petitioner fail to do so, to deny and dismiss the prayer of petitioner for the
annulment of the Deeds of Absolute Sale for having been executed in contravention of the law or of
the Memorandum of Agreement as pactum commisorium.
As required by the RTC, the parties submitted their Position Papers on the matter. On 24 March 2006,
the RTC issued an Order17 granting respondent Tans Omnibus Motion. In holding that both petitioner
and respondent Tan must pay docket fees in accordance with Section 7(a), Rule 141 of the Rules of
Court, as amended, the RTC reasoned:
It must be noted that under paragraph (b) 2. of the said Section 7, it is provided that QUIETING OF
TITLE which is an action classified as beyond pecuniary estimation "shall be governed by paragraph
(a)". Hence, the filing fee in an action for Declaration of Nullity of Deed which is also classified as
beyond pecuniary estimation, must be computed based on the provision of Section 7(A) hereinabove, in part, quoted.
Since [herein respondent], Romeo Tan in his Answer has a counterclaim against the plaintiff, the
former must likewise pay the necessary filling (sic) fees as provided for under Section 7 (A) of
Amended Administrative Circular No. 35-2004 issued by the Supreme Court. 18
Consequently, the RTC decreed on the matter of docket/filing fees:
WHEREFORE, premises considered, the [herein petitioner] is hereby ordered to pay additional filing
fee and the [herein respondent], Romeo Tan is also ordered to pay docket and filing fees on his
counterclaim, both computed based on Section 7(a) of the Supreme Court Amended Administrative
Circular No. 35-2004 within fifteen (15) days from receipt of this Order to the Clerk of Court,
Regional Trial Court, Naga City and for the latter to compute and to collect the said fees
accordingly.19
Petitioner moved20 for the partial reconsideration of the 24 March 2006 Order of the RTC, arguing
that Civil Case No. 2006-0030 was principally for the annulment of the Deeds of Absolute Sale and,
as such, incapable of pecuniary estimation. Petitioner submitted that the RTC erred in applying
Section 7(a), Rule 141 of the Rules of Court, as amended, to petitioners first cause of action in its
Complaint in Civil Case No. 2006-0030.
28
Clearly, the petitioners complaint involves not only the annulment of the deeds of sale, but also the
recovery of the real properties identified in the said documents. In other words, the objectives of the
petitioner in filing the complaint were to cancel the deeds of sale and ultimately, to recover
possession of the same. It is therefore a real action.
Consequently, the additional docket fees that must be paid cannot be assessed in accordance with
Section 7(b). As a real action, Section 7(a) must be applied in the assessment and payment of the
proper docket fee.
Resultantly, there is no grave abuse of discretion amounting to lack or excess of jurisdiction on the
part of the court a quo. By grave abuse of discretion is meant capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, and mere abuse of discretion is not enough it must
be grave. The abuse must be grave and patent, and it must be shown that the discretion was exercised
arbitrarily and despotically.1avvphi1
Such a situation does not exist in this particular case. The evidence is insufficient to prove that the
court a quo acted despotically in rendering the assailed orders. It acted properly and in accordance
with law. Hence, error cannot be attributed to it. 25
Hence, the fallo of the Decision of the appellate court reads:
WHEREFORE, the petition for certiorari is DENIED. The assailed Orders of the court a quo are
AFFIRMED.26
Without seeking reconsideration of the foregoing Decision with the Court of Appeals, petitioner filed
its Petition for Review on Certiorari before this Court, with a lone assignment of error, to wit:
18. The herein petitioner most respectfully submits that the Court of Appeals committed a grave and
serious reversible error in affirming the assailed Orders of the Regional Trial Court which are clearly
contrary to the pronouncement of this Honorable Court in the case of Spouses De Leon v. Court of
Appeals, G.R. No. 104796, March 6, 1998, not to mention the fact that if the said judgment is
allowed to stand and not rectified, the same would result in grave injustice and irreparable damage to
herein petitioner in view of the prohibitive amount assessed as a consequence of said Orders. 27
In Manchester Development Corporation v. Court of Appeals, 28 the Court explicitly pronounced that
"[t]he court acquires jurisdiction over any case only upon the payment of the prescribed docket fee."
Hence, the payment of docket fees is not only mandatory, but also jurisdictional.
In Sun Insurance Office, Ltd. (SIOL) v. Asuncion,29 the Court laid down guidelines for the
implementation of its previous pronouncement in Manchester under particular circumstances, to wit:
29
In the Petition at bar, the RTC found, and the Court of Appeals affirmed, that petitioner did not pay
the correct amount of docket fees for Civil Case No. 2006-0030. According to both the trial and
appellate courts, petitioner should pay docket fees in accordance with Section 7(a), Rule 141 of the
Rules of Court, as amended. Consistent with the liberal tenor of Sun Insurance, the RTC, instead of
dismissing outright petitioners Complaint in Civil Case No. 2006-0030, granted petitioner time to
pay the additional docket fees. Despite the seeming munificence of the RTC, petitioner refused to pay
the additional docket fees assessed against it, believing that it had already paid the correct amount
before, pursuant to Section 7(b)(1), Rule 141 of the Rules of Court, as amended.
Relevant to the present controversy are the following provisions under Rule 141 of the Rules of
Court, as amended by A.M. No. 04-2-04-SC30 and Supreme Court Amended Administrative Circular
No. 35-200431 :
SEC. 7. Clerks of Regional Trial Courts.
(a) For filing an action or a permissive OR COMPULSORY counterclaim, CROSS-CLAIM, or
money claim against an estate not based on judgment, or for filing a third-party, fourth-party, etc.
complaint, or a complaint-in-intervention, if the total sum claimed, INCLUSIVE OF INTERESTS,
PENALTIES, SURCHARGES, DAMAGES OF WHATEVER KIND, AND ATTORNEYS FEES,
LITIGATIO NEXPENSES AND COSTS and/or in cases involving property, the FAIR MARKET
value of the REAL property in litigation STATED IN THE CURRENT TAX DECLARATION OR
CURRENT ZONAL VALUATION OF THE BUREAU OF INTERNAL REVENUE, WHICHEVER
IS HIGHER, OR IF THERE IS NONE, THE STATED VALUE OF THE PROPERTY IN
LITIGATION OR THE VALUE OF THE PERSONAL PROPERTY IN LITIGATION OR THE
30
possession of real property. Consequently, the basis for determining the correct docket fees shall be
the assessed value of the property, or the estimated value thereof as alleged in the complaint. But
since Mercedes Gochan failed to allege in their complaint the value of the real properties, the Court
found that the RTC did not acquire jurisdiction over the same for non-payment of the correct docket
fees.
Likewise, in Siapno v. Manalo,35 the Court disregarded the title/denomination of therein plaintiff
Manalos amended petition as one for Mandamus with Revocation of Title and Damages; and
adjudged the same to be a real action, the filing fees for which should have been computed based on
the assessed value of the subject property or, if there was none, the estimated value thereof. The
Court expounded in Siapno that:
In his amended petition, respondent Manalo prayed that NTAs sale of the property in dispute to
Standford East Realty Corporation and the title issued to the latter on the basis thereof, be declared
null and void. In a very real sense, albeit the amended petition is styled as one for "Mandamus with
Revocation of Title and Damages," it is, at bottom, a suit to recover from Standford the realty in
question and to vest in respondent the ownership and possession thereof. In short, the amended
petition is in reality an action in res or a real action. Our pronouncement in Fortune Motors (Phils.),
Inc. vs. Court of Appeals is instructive. There, we said:
A prayer for annulment or rescission of contract does not operate to efface the true objectives and
nature of the action which is to recover real property. (Inton, et al., v. Quintan, 81 Phil. 97, 1948)
An action for the annulment or rescission of a sale of real property is a real action. Its prime objective
is to recover said real property. (Gavieres v. Sanchez, 94 Phil. 760, 1954)
An action to annul a real estate mortgage foreclosure sale is no different from an action to annul a
private sale of real property. (Muoz v. Llamas, 87 Phil. 737, 1950).
While it is true that petitioner does not directly seek the recovery of title or possession of the property
in question, his action for annulment of sale and his claim for damages are closely intertwined with
the issue of ownership of the building which, under the law, is considered immovable property, the
recovery of which is petitioner's primary objective. The prevalent doctrine is that an action for the
annulment or rescission of a sale of real property does not operate to efface the fundamental and
prime objective and nature of the case, which is to recover said real property. It is a real action.
Unfortunately, and evidently to evade payment of the correct amount of filing fee, respondent Manalo
never alleged in the body of his amended petition, much less in the prayer portion thereof, the
assessed value of the subject res, or, if there is none, the estimated value thereof, to serve as basis for
the receiving clerk in computing and arriving at the proper amount of filing fee due thereon, as
required under Section 7 of this Courts en banc resolution of 04 September 1990 (Re: Proposed
Amendments to Rule 141 on Legal Fees).
31
Brushing aside the significance of Serrano, petitioner argues that said decision, rendered by the Third
Division of the Court, and not by the Court en banc, cannot modify or reverse the doctrine laid down
in Spouses De Leon v. Court of Appeals.39 Petitioner relies heavily on the declaration of this Court in
Spouses De Leon that an action for annulment or rescission of a contract of sale of real property is
incapable of pecuniary estimation.
The Court, however, does not perceive a contradiction between Serrano and the Spouses De Leon.
The Court calls attention to the following statement in Spouses De Leon: "A review of the
jurisprudence of this Court indicates that in determining whether an action is one the subject matter
of which is not capable of pecuniary estimation, this Court has adopted the criterion of first
ascertaining the nature of the principal action or remedy sought." Necessarily, the determination must
be done on a case-to-case basis, depending on the facts and circumstances of each. What petitioner
conveniently ignores is that in Spouses De Leon, the action therein that private respondents instituted
before the RTC was "solely for annulment or rescission" of the contract of sale over a real
property.40 There appeared to be no transfer of title or possession to the adverse party. Their complaint
simply prayed for:
1. Ordering the nullification or rescission of the Contract of Conditional Sale
(Supplementary Agreement) for having violated the rights of plaintiffs (private
respondents) guaranteed to them under Article 886 of the Civil Code and/or violation of the
terms and conditions of the said contract.
2. Declaring void ab initio the Deed of Absolute Sale for being absolutely simulated; and
Obviously, respondents complaint is a real action involving not only the recovery of real properties,
but likewise the cancellation of the titles thereto.
Considering that respondents complaint is a real action, the Rule requires that "the assessed value of
the property, or if there is none, the estimated value thereof shall be alleged by the claimant and shall
be the basis in computing the fees."
We note, however, that neither the "assessed value" nor the "estimated value" of the questioned
parcels of land were alleged by respondent in both his original and amended complaint. What he
stated in his amended complaint is that the disputed realties have a "BIR zonal valuation"
of P1,200.00 per square meter. However, the alleged "BIR zonal valuation" is not the kind of
valuation required by the Rule. It is the assessed value of the realty. Having utterly failed to comply
with the requirement of the Rule that he shall allege in his complaint the assessed value of his real
properties in controversy, the correct docket fee cannot be computed. As such, his complaint should
not have been accepted by the trial court. We thus rule that it has not acquired jurisdiction over the
present case for failure of herein respondent to pay the required docket fee. On this ground alone,
respondents complaint is vulnerable to dismissal.38
32
August 3, 2010
33
On October 26, 2007, VA Daniel T. Farias dismissed the case. 12 He found that the CA decision in
CA-G.R. SP No. 90596 is not yet final because of the pending appeal with this Court. He noted that
the CBA clearly authorized SLU to place its teaching employees on forced leave when they fail in the
evaluation for three (3) years within a five-year period, without a distinction on whether the three
years fall within one or two CBA periods. Cobarrubias received the VAs decision on November 20,
2007.13
On December 5, 2007, Cobarrubias filed with the CA a petition for review under Rule 43 of the Rules
of Court, but failed to pay the required filing fees and to attach to the petition copies of the material
portions of the record.14
Thus, on January 14, 2008, the CA dismissed the petition outright for Cobarrubias procedural
lapses.15Cobarrubias received the CA resolution, dismissing her petition, on January 31, 2008. 16
(a) Teaching employees who are retained for three (3) cumulative years in five (5) years shall be on
forced leave for one (1) regular semester during which period all benefits due them shall be
suspended.7
On February 15, 2008, Cobarrubias filed her motion for reconsideration, arguing that the ground cited
is technical. She, nonetheless, attached to her motion copies of the material portions of the record and
the postal money orders for P4,230.00. She maintained that the ends of justice and fair play are better
served if the case is decided on its merits. 17
SLU placed Cobarrubias on forced leave for the first semester of School Year (SY) 2007-2008 when
she failed the evaluation for SY 2002-2003, SY 2005-2006, and SY 2006-2007, with the rating of 85,
77, and 72.9 points, respectively, below the required rating of 87 points.
On July 30, 2008, the CA reinstated the petition. It found that Cobarrubias substantially complied
with the rules by paying the appeal fee in full and attaching the proper documents in her motion for
reconsideration.18
To reverse the imposed forced leave, Cobarrubias sought recourse from the CBAs grievance
machinery. Despite the conferences held, the parties still failed to settle their dispute, prompting
Cobarrubias to file a case for illegal forced leave or illegal suspension with the National Conciliation
and Mediation Board of the Department of Labor and Employment, Cordillera Administrative
Region, Baguio City. When circulation and mediation again failed, the parties submitted the issues
between them for voluntary arbitration before Voluntary Arbitrator (VA) Daniel T. Farias.
SLU insisted that the VA decision had already attained finality for Cobarrubias failure to pay the
docket fees on time.
Cobarrubias argued that the CA already resolved the forced leave issue in a prior case between the
parties, CA-G.R. SP No. 90596,8 ruling that the forced leave for teachers who fail their evaluation for
three (3) times within a five-year period should be coterminous with the CBA in force during the
same five-year period.9
SLU, for its part, countered that the CA decision in CA-G.R. SP No. 90596 cannot be considered in
deciding the present case since it is presently on appeal with this Court (G.R. No. 176717) 10 and, thus,
is not yet final. It argued that the forced leave provision applies irrespective of which CBA is
applicable, provided the employee fails her evaluation three (3) times in five (5) years. 11
The Voluntary Arbitrator Decision
The CA Decision
The CA brushed aside SLUs insistence on the finality of the VA decision and annulled it, declaring
that the "three (3) cumulative years in five (5) years" phrase in Section 7.7(a) of the 2006-2011 CBA
means within the five-year effectivity of the CBA. Thus, the CA ordered SLU to pay all the benefits
due Cobarrubias for the first semester of SY 2007-2008, when she was placed on forced leave. 19
When the CA denied20 the motion for reconsideration that followed,21 SLU filed the present petition
for review on certiorari.22
The Petition
SLU argues that the CA should not have reinstated the appeal since Cobarrubias failed to pay the
docket fees within the prescribed period, and rendered the VA decision final and executory. Even if
34
The rulings in these cases have been consistently reiterated in subsequent cases: Guevarra v. Court of
Appeals,34Pedrosa v. Spouses Hill,35 Gegare v. Court of Appeals,36 Lazaro v. Court of Appeals,37 Sps.
Manalili v. Sps. de Leon,38 La Salette College v. Pilotin,39 Saint Louis University v. Spouses
Cordero,40 M.A. Santander Construction, Inc. v. Villanueva,41 Far Corporation v.
Magdaluyo,42 Meatmasters Intl. Corp. v. Lelis Integrated Devt. Corp., 43Tamayo v. Tamayo,
Jr.,44 Enriquez v. Enriquez,45 KLT Fruits, Inc. v. WSR Fruits, Inc.,46 Tan v. Link,47 Ilusorio v. IlusorioYap,48 and most recently in Tabigue v. International Copra Export Corporation (INTERCO), 49 and
continues to be the controlling doctrine.
In the present case, Cobarrubias filed her petition for review on December 5, 2007, fifteen (15) days
from receipt of the VA decision on November 20, 2007, but paid her docket fees in full only after
seventy-two (72) days, when she filed her motion for reconsideration on February 15, 2008 and
attached the postal money orders for P4,230.00. Undeniably, the docket fees were paid late, and
without payment of the full docket fees, Cobarrubias appeal was not perfected within the
reglementary period.
Exceptions to the Rule on Payment of Appellate Court Docket Fees not applicable
Procedural rules do not exist for the convenience of the litigants; the rules were established primarily
to provide order to and enhance the efficiency of our judicial system. 50 While procedural rules are
liberally construed, the provisions on reglementary periods are strictly applied, indispensable as they
are to the prevention of needless delays, and are necessary to the orderly and speedy discharge of
judicial business.51
Viewed in this light, procedural rules are not to be belittled or dismissed simply because their nonobservance may have prejudiced a party's substantive rights; like all rules, they are required to be
followed. However, there are recognized exceptions to their strict observance, such as: (1) most
persuasive and weighty reasons; (2) to relieve a litigant from an injustice not commensurate with his
failure to comply with the prescribed procedure; (3) good faith of the defaulting party by immediately
paying within a reasonable time from the time of the default; (4) the existence of special or
compelling circumstances; (5) the merits of the case; (6) a cause not entirely attributable to the fault
or negligence of the party favored by the suspension of the rules; (7) a lack of any showing that the
review sought is merely frivolous and dilatory; (8) the other party will not be unjustly prejudiced
thereby; (9) fraud, accident, mistake or excusable negligence without the appellant's fault; (10)
peculiar, legal and equitable circumstances attendant to each case; (11) in the name of substantial
justice and fair play; (12) importance of the issues involved; and (13) exercise of sound discretion by
the judge, guided by all the attendant circumstances. 52 Thus, there should be an effort, on the part of
the party invoking liberality, to advance a reasonable or meritorious explanation for his/her failure to
comply with the rules.1avvphi1
In Cobarrubias' case, no such explanation has been advanced. Other than insisting that the ends
of justice and fair play are better served if the case is decided on its merits, Cobarrubias offered no
35
G.R. No.177425
36
the Supervising Draftsman of the National Housing Authority (NHA) who categorically stated that
the houses occupied by petitioners and their co-defendants were within the property of SLI per
NHAs survey. It rejected, on the other hand, petitioners and their co-defendants claim of title to the
property. For one, the fact that SLI had an existing MSA over the property as far back as 1969 could
not have been unknown to them. This is because several of the petitioners and their codefendants
filed Revocable Permit Applications over the same property which were denied on March 4, 1964,
precisely because the areas applied for were already included in SLIs MSA. For another, the
documentary evidence submitted by them consisted mostly of tax declarations and other documents
which were self-serving and could not be considered as conclusive evidence of ownership. Hence, the
RTC ruled:
Factual Antecedents
WHEREFORE, premises considered, judgment is hereby rendered
On February 26, 1996, respondent Southern Luzon Institute (SLI), an educational institution in
Bulan, Sorsogon, filed a Complaint7 for Recovery of Ownership and Possession with Damages
against petitioners Alonzo Gipa, Imelda Marollano, Juanito Ludovice, Demar Bitangcor, Virgilio
Gojit, Felipe Montalban and four others namely, Arturo Rogacion, Virgilio Gracela, Rosemarie
Alvarez and Rosita Montalban (Rosita). During trial, defendant Rosita executed a Special Power of
Attorney8 in favor of her sister Daisy M. Placer (Placer) authorizing the latter to represent her in the
case and to sign any and all papers in relation thereto.
SLI alleged that it is the absolute owner of a 7,516-squaremeter parcel of land situated in Brgy.
Poblacion, Bulan, Sorsogon covered by Original Certificate of Title (OCT) No. P-28928. However,
petitioners and their co-defendants who had been informally occupying a portion of the said property
refused to vacate the same despite demand. Hence, SLI sought that they be ordered to immediately
vacate the premises, turn over the same to SLI, and pay compensatory damages, attorneys fees and
cost of suit.
a) Declaring plaintiff-SLI as absolute owner of that portion of Lot 4705 containing an area
of SEVEN THOUSAND FIVE HUNDRED SIXTEEN (7,516) SQUARE METERS
covered by "Katibayan ng Orihinal na Titulo Blg. P-28928".
b) Ordering herein defendants to vacate and relinquish the portions of lot 4705 belonging to
the SLI that they are presently occupying illegally and to demolish the residential houses
existing thereon at their own expense.
c) To pay attorneys fee in the amount of Php10,000.00 jointly.
d) And to pay the costs.
SO ORDERED.11
In their Answer with Counterclaim, petitioners and their co-defendants asserted that they did not
heed SLIs demand to vacate as they believed that they have the right to stay on the said property.
They relied on their occupation thereof and that of their predecessors-in-interest which, according to
them, dates back to as early as 1950. Impugning SLIs claims, petitioners and their co-defendants
averred that SLI had not even for a single moment taken possession of the subject property and was
merely able to procure a title over the same thru fraud, bad faith and misrepresentation. By way of
counterclaim, they prayed that they be declared the lawful possessors of the property; that OCT No.
P-28928 be declared null and void; and, that SLI be ordered to pay them moral damages and
litigation expenses.
Ruling of the Regional Trial Court
Finding SLI to have proven its ownership of the property by preponderance of evidence, the RTC
rendered a Decision10 in its favor on January 5, 2005. The said court gave weight to SLIs
documentary evidence showing the grant of its Miscellaneous Sales Application (MSA) over the
subject property which became the basis for the issuance of title under its name, and the testimony of
Petitioners and their co-defendants filed a Notice of Appeal 12 which was granted by the RTC in its
Order13 of January 27, 2005.
Ruling of the Court of Appeals
The CA, however, dismissed the appeal in its Resolution14 of August 26, 2005 since it was not shown
that the appellate court docket fees and other lawful fees were paid. 15 Petitioners and their codefendants promptly filed a Motion for Reconsideration16 to which they attached a
Certification17 from the RTC that they paid the appeal fee in the amount ofP3,000.00 under Official
Receipt No. 18091130 dated January 25, 2005. In view of this, the CA granted the said motion and
consequently reinstated the appeal through a Resolution18 dated November 2, 2005.
Subsequently, however, the CA further required petitioners and their codefendants, through a Minute
Resolution19dated March 1, 2006,to remit within ten days from notice the amount of P30.00 for legal
37
Issue
Despite the lapse of nine months from their counsels receipt of the said resolution, petitioners and
their co-defendants, however, failed to comply with the CAs directive. Hence, the said court
dismissed the appeal through its Resolution21 of December 20, 2006in this wise:
Jurisprudence is replete that the nonpayment of the docket and other lawful fees within the
reglementary period as provided under Section 4 of Rule 41 of the Revised Rules of [C]ourt is a
ground for the dismissal of an appeal, as provided for under Section 1(c)[,] Rule 50 of the same Rule.
We quote:
SECTION 1. Grounds for dismissal of appeal. An appeal may be dismissed by the Court of
Appeals, on its own motion or on that of the appellee, on the following grounds:
xxx
xxx
xxx
c. Failure of the appellant to pay the docket and other lawful fees as provided in Section 4 of Rule 41;
xxx
xxxx
In the instant case, appellants were given sufficient time to complete the payment of the appeal fees.
Unfortunately, appellants still failed to comply with the said directive [despite the fact] that the
amount of P30.00 involved is very little. Hence, appellants failed to perfect their appeal for failure to
fully pay the appeal fees. They are deemed to have lost interest over the instant appeal. x x x x
WHEREFORE, premises considered, the instant Appeal is hereby DISMISSED.
SO ORDERED.22
Petitioners and their co-defendants filed a Motion for Reconsideration 23 invoking the principle of
liberality in the application of technical rules considering that they have paid the substantial amount
of P3,000.00 for docket and other legal fees and fell short only by the meager amount of P30.00.
Ascompliance, they attached to the said motion a postal money order in the sum of P30.00 payable to
the Clerk of Court of the CA.24
The CA, however, was not swayed, hence, the denial of the Motion for Reconsideration in its
Resolution25 of March 30, 2007.
Petitioners and Placer now file this Petition for Review on Certiorari raising the lone issue of:
It must, however, be noted at the outset that the caption of the present Petition includes Placer as one
of the petitioners. In fact, the other petitioners even authorized her to sign the verification and
certification of non-forum shopping in their behalf. 27 A review of the records, however, shows that
she was not one of the defendants before the RTC. Her only participation therein was that she
represented her sister Rosita as one of the defendants by virtue of a Special Power of Attorney which
the latter executed in her favor.28 Notably in the present Petition, Placer appears to have been
impleaded in her personal capacity and not as Rositas representative. This cannot be done. It bears
emphasizing that an appeal on certiorari, as in this case, is a continuation of the original suit. 29 Hence,
the parties in the original suit must also be the parties in such an appeal. 30 Placer, therefore, not being
a party in the complaint before the RTC has no personality to continue the same on appeal and cannot
be considered as a petitioner. At the most, her only role in this Petition was to sign the verification
and certification of non-forum shopping for and in behalf of petitioners.
The Parties Arguments
Initially, petitioners invoke the liberal application of technical rules 31 and contend that the fact that
only the amount ofP30.00 was not paid justifies relaxation of the same. Later in their
Reply,32 however, petitioners concede that the payment of docket fees is not a mere technicality.
Nevertheless, they point out that while full payment of docket fees is indispensable in the perfection
of an appeal, the same admits of exceptions.33 Their case falls under one of the exceptions, that is, in
the name of substantial justice and fair play. According to petitioners, the dismissal of their appeal for
failure to pay P30.00 runs counter to substantial justice and fair play as the same would deprive them
of their right to justice and render ineffective the amount of P3,000.00, which despite being indigents,
they undertook to pay. To support their case, petitioners cited Andrea Camposagrado v. Pablo
Camposagrado34 and Spouses Gutierrez v. Spouses Valiente35 wherein the Court excused the
insufficient payment of docket fees.1wphi1 Moreover, petitioners raise in the said Reply, albeit for
the first time, the argument that while Republic Act (RA) No. 9406 36 was still in existent at the time
their appeal was filed before the CA, Section 637 thereof which exempts PAO clients like themselves
from the payment of docket and other fees should be given retroactive application.
For its part, SLI argues that since petitioners appeal was not perfected due to insufficient payment of
docket and other legal fees, the January 5, 2005 Decision of the RTC had already become final and
executory. Further, the CA correctly dismissed petitioners appeal because aside from the fact that
petitioners failed to comply with the CAs directive to pay the lacking amount of P30.00 for a period
38
Here, petitioners concede that payment of the full amount of docket fees within the prescribed period
is not a mere technicality of law or procedure but a jurisdictional requirement. Nevertheless, they
want this Court to relax the application of the rule on the payment of the appeal fee in the name of
substantial justice and equity.
The liberality which petitioners pray for has already been granted to them by the CA at the outset. It
may be recalled that while petitioners paid a substantial part of the docket fees, they still failed to pay
the full amount thereof since their payment was short of P30.00.Based on the premise that the
questioned Decision of the RTC has already become final and executory due to non-perfection, the
CA could have dismissed the appeal outright. But owing to the fact that only the meager amount
of P30.00 was lacking and considering that the CA may opt not to proceed with the case until the
docket fees are paid,40 it still required petitioners, even if it was already beyond the reglementary
period, to complete their payment of the appeal fee within 10 days from notice. Clearly, the CA acted
conformably with the pronouncement made in Camposagrado, a case cited by petitioners, that "[a]
partys failure to pay the appellate docket fee within the reglementary period confers only a
discretionary and not a mandatory power to dismiss the proposed appeal. Such discretionary power
should be used in the exercise of the courts sound judgment in accordance with the tenets of justice
and fair play with great deal of circumspection, considering all attendant circumstances and must be
exercised wisely and prudently, never capriciously, with a view to substantial justice." 41
The CAs leniency over petitioners cause did not end there. Although they were given only 10 days
to remit theP30.00 deficiency, the said court allowed an even longer period of nine months to lapse,
apparently in the hope that petitioners compliance would be on its way. But as no payment was
remitted, it was constrained to finally dismiss the appeal for non-perfection. Surprisingly, petitioners
were again heard of when they filed a Motion for Reconsideration to which they attached a postal
money order of P30.00. Nevertheless, they did not offer any plausible explanation either as to why
they, at the start, failed to pay the correct docket fees or why they failed to comply with the CAs
directive for them to remit the P30.00-deficiency. Instead, they focused on begging the CA for
leniency, arguing that the meager amount of the deficiency involved justifies relaxation of the rules.
What is worse is that even if the CA already took note of the lack of such explanation in its
Resolution denying petitioners motion for reconsideration, petitioners, up to now, have not attempted
to tender one in this Petition and instead continue to capitalize on substantial justice, fair play and
equity to secure a reversal of the dismissal of their appeal. The Court cannot, therefore, help but
conclude that there is really no plausible reason behind the said omission.
Suffice it to say that "[c]oncomitant to the liberal interpretation of the rules of procedure should be an
effort on the part of the party invoking liberality to adequately explain his failure to abide by the
rules."42 Those who seek exemption from the application of the rule have the burden of proving the
existence of exceptionally meritorious reason warranting such departure. 43 Petitioners failure to
advance any explanation as to why they failed to pay the correct docket fees or to complete payment
of the same within the period allowed by the CA is thus fatal to their cause. Hence, a departure from
39
40
"An Order dated February 10, 1994 was issued by herein respondent Judge denying
petitioner Relucio's Motion to Dismiss on the ground that she is impleaded as a necessary
or indispensable party because some of the subject properties are registered in her name
and defendant Lopez, or solely in her name.
"Subsequently thereafter, petitioner Relucio filed a Motion for Reconsideration to the Order
of the respondent Judge dated February 10, 1994 but the same was likewise denied in the
Order dated May 31, 1994."3
On June 21, 1994, petitioner filed with the Court of Appeals a petition for certiorari assailing the trial
court's denial of her motion to dismiss.4
On May 31, 1996, the Court of Appeals promulgated a decision denying the petition. 5 On June 26,
1996, petitioner filed a motion for reconsideration. 6 However, on April 6, 1996, the Court of Appeals
denied petitioner's motion for reconsideration. 7
Hence, this appeal.8
The Issues
1. Whether respondent's petition for appointment as sole administratrix of the conjugal
property, accounting, etc. against her husband Alberto J. Lopez established a cause of
action against petitioner.
2. Whether petitioner's inclusion as party defendant is essential in the proceedings for a
complete adjudication of the controversy.9
The Court's Ruling
We grant the petition. We resolve the issues in seriatim.
First issue: whether a cause of action exists against petitioner in the proceedings below. "A cause of
action is an act or omission of one party the defendant in violation of the legal right of the
other."10 The elements of a cause of action are:
(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
41
Petitioner has nothing to do with the marriage between respondent Alberto J. Lopez. Hence, no cause
of action can exist against petitioner on this ground.
Respondent's alternative cause of action is for forfeiture of Alberto J. Lopez' share in the co-owned
property "acquired during his illicit relationship and cohabitation with [petitioner]" 15 and for the
"dissolution of the conjugal partnership of gains between him [Alberto J. Lopez] and the
[respondent]."
The third cause of action is essentially for forfeiture of Alberto J. Lopez' share in property co-owned
by him and petitioner. It does not involve the issue of validity of the co-ownership between Alberto J.
Lopez and petitioner. The issue is whether there is basis in law to forfeit Alberto J. Lopez' share, if
any there be, in property co-owned by him with petitioner.
Respondent's asserted right to forfeit extends to Alberto J. Lopez' share alone. Failure of Alberto J.
Lopez to surrender such share, assuming the trial court finds in respondent's favor, results in a breach
of an obligation to respondent and gives rise to a cause of action. 16 Such cause of action, however,
pertains to Alberto J. Lopez, not petitioner.
The respondent also sought support. Support cannot be compelled from a stranger.
The action in Special Proceedings M-3630 is, to use respondent Angelina M. Lopez' own words, one
by "an aggrieved wife against her husband."17 References to petitioner in the common and specific
allegations of fact in the complaint are merely incidental, to set forth facts and circumstances that
prove the causes of action alleged against Alberto J. Lopez.
Finally, as to the moral damages, respondent's claim for moral damages is against Alberto J. Lopez,
not petitioner.
To sustain a cause of action for moral damages, the complaint must have the character of an action
for interference with marital or family relations under the Civil Code.
A real party in interest is one who stands "to be benefited or injured by the judgment of the suit." 18 In
this case, petitioner would not be affected by any judgment in Special Proceedings M-3630.
If petitioner is not a real party in interest, she cannot be an indispensable party. An indispensable
party is one without whom there can be no final determination of an action. 19 Petitioner's participation
in Special Proceedings M-36-30 is not indispensable. Certainly, the trial court can issue a judgment
ordering Alberto J. Lopez to make an accounting of his conjugal partnership with respondent, and
give support to respondent and their children, and dissolve Alberto J. Lopez' conjugal partnership
with respondent, and forfeit Alberto J. Lopez' share in property co-owned by him and petitioner. Such
judgment would be perfectly valid and enforceable against Alberto J. Lopez.
42
43
On the other hand, appellants completely traverse appellee's claims and essentially argue
that appellee is selfishly asking for more than what he truly deserved as commission to the
prejudice of other agents who were more instrumental in the consummation of the sale.
Although appellants readily concede that it was appellee who first introduced Times Transit
Corp. to them, appellee was not designated by them as their exclusive real estate agent but
that in fact there were more or less eighteen (18) others whose collective efforts in the long
run dwarfed those of appellee's, considering that the first negotiation for the sale where
appellee took active participation failed and it was these other agents who successfully
brokered in the second negotiation. But despite this and out of appellants' "pure liberality,
beneficence and magnanimity", appellee nevertheless was given the largest cut in the
commission (P48,893.76), although on the principle ofquantum meruit he would have
certainly been entitled to less. So appellee should not have been heard to complain of
getting only a pittance when he actually got the lion's share of the commission and worse,
he should not have been allowed to get the entire commission. Furthermore, the purchase
price for the two lots was only P3.6 million as appearing in the deed of sale and not P7.05
million as alleged by appellee. Thus, even assuming that appellee is entitled to the entire
commission, he would only be getting 5% of the P3.6 million, or P180,000.00."
Ruling of the Court of Appeals
The Court of Appeals affirmed in toto the decision of the trial court.
First. The Court of Appeals found that Constante authorized Artigo to act as agent in the sale of two
lots in Cubao, Quezon City. The handwritten authorization letter signed by Constante clearly
established a contract of agency between Constante and Artigo. Thus, Artigo sought prospective
buyers and found Times Transit Corporation ("Times Transit" for brevity). Artigo facilitated the
negotiations which eventually led to the sale of the two lots. Therefore, the Court of Appeals decided
that Artigo is entitled to the 5% commission on the purchase price as provided in the contract of
agency.
Second. The Court of Appeals ruled that Artigo's complaint is not dismissible for failure to implead as
indispensable parties the other co-owners of the two lots. The Court of Appeals explained that it is not
necessary to implead the other co-owners since the action is exclusively based on a contract of
agency between Artigo and Constante.
Third. The Court of Appeals likewise declared that the trial court did not err in admitting parol
evidence to prove the true amount paid by Times Transit to the De Castros for the two lots. The Court
of Appeals ruled that evidencealiunde could be presented to prove that the actual purchase price
was P7.05 million and not P3.6 million as appearing in the deed of sale. Evidence aliunde is
admissible considering that Artigo is not a party, but a mere witness in the deed of sale between the
De Castros and Times Transit. The Court of Appeals explained that, "the rule that oral evidence is
inadmissible to vary the terms of written instruments is generally applied only in suits between
parties to the instrument and strangers to the contract are not bound by it." Besides, Artigo was not
44
An indispensable party is one whose interest will be affected by the court's action in the litigation,
and without whom no final determination of the case can be had. 7 The joinder of indispensable parties
is mandatory and courts cannot proceed without their presence. 8 Whenever it appears to the court in
the course of a proceeding that an indispensable party has not been joined, it is the duty of the court
to stop the trial and order the inclusion of such party.9
However, the rule on mandatory joinder of indispensable parties is not applicable to the instant case.
There is no dispute that Constante appointed Artigo in a handwritten note dated January 24, 1984 to
sell the properties of the De Castros for P23 million at a 5 percent commission. The authority was on
a first come, first serve basis. The authority reads in full:
"24 Jan. 84
This is to state that Mr. Francisco Artigo is authorized as our real estate broker in
connection with the sale of our property located at Edsa Corner New York & Denver,
Cubao, Quezon City.
Asking price P 23,000,000.00 with 5% commission as agent's fee.
C.C. de Castro
owner & representing
co-owners
45
Art. 1216. The creditor may proceed against any one of the solidary debtors or some or all
of them simultaneously. The demand made against one of them shall not be an obstacle to
those which may subsequently be directed against the others, so long as the debt has not
been fully collected.
Thus, the Court has ruled in Operators Incorporated vs. American Biscuit Co., Inc.13 that
To accept Constante's version of the story is to open the floodgates of fraud and deceit. A
seller could always pretend rejection of the offer and wait for sometime for others to renew
it who are much willing to accept a commission far less than the original broker. The
immorality in the instant case easily presents itself if one has to consider that the alleged
`second group' are the employees of the buyer, Times Transit and they have not bettered
the offer secured by Mr. Artigo for P7 million.
"x x x solidarity does not make a solidary obligor an indispensable party in a suit filed by
the creditor. Article 1216 of the Civil Code says that the creditor `may proceed against
46
Actions upon a written contract, such as a contract of agency, must be brought within ten years from
the time the right of action accrues.19 The right of action accrues from the moment the breach of right
or duty occurs. From this moment, the creditor can institute the action even as the ten-year
prescriptive period begins to run.20
The De Castros admit that Artigo's claim was filed within the ten-year prescriptive period. The De
Castros, however, still maintain that Artigo's cause of action is barred by laches. Laches does not
apply because only four years had lapsed from the time of the sale in June 1985. Artigo made a
demand in July 1985 and filed the action in court on May 29, 1989, well within the ten-year
prescriptive period. This does not constitute an unreasonable delay in asserting one's right. The Court
has ruled, "a delay within the prescriptive period is sanctioned by law and is not considered to be a
delay that would bar relief."21 In explaining that laches applies only in the absence of a statutory
prescriptive period, the Court has stated "Laches is recourse in equity. Equity, however, is applied only in the absence, never in
contravention, of statutory law. Thus, laches, cannot, as a rule, be used to abate a
collection suit filed within the prescriptive period mandated by the Civil Code." 22
Clearly, the De Castros' defense of laches finds no support in law, equity or jurisprudence.
Third issue: whether the determination of the purchase price was made in violation of the Rules
on Evidence
The De Castros want the Court to re-examine the probative value of the evidence adduced in the trial
court to determine whether the actual selling price of the two lots was P7.05 million and not P3.6
million. The De Castros contend that it is erroneous to base the 5 percent commission on a purchase
price of P7.05 million as ordered by the trial court and the appellate court. The De Castros insist that
the purchase price is P3.6 million as expressly stated in the deed of sale, the due execution and
authenticity of which was admitted during the trial.
The De Castros believe that the trial and appellate courts committed a mistake in considering
incompetent evidence and disregarding the best evidence and parole evidence rules. They claim that
the Court of Appeals erroneously affirmed sub silentio the trial court's reliance on the various
correspondences between Constante and Times Transit which were mere photocopies that do not
satisfy the best evidence rule. Further, these letters covered only the first negotiations between
Constante and Times Transit which failed; hence, these are immaterial in determining the final
purchase price.
The De Castros further argue that if there was an undervaluation, Artigo who signed as witness
benefited therefrom, and being equally guilty, should be left where he presently stands. They likewise
claim that the Court of Appeals erred in relying on evidence which were not offered for the purpose
considered by the trial court. Specifically, Exhibits "B", "C", "D" and "E" were not offered to prove
47
Law and jurisprudence support the award of moral damages and attorney's fees in favor of Artigo.
The award of damages and attorney's fees is left to the sound discretion of the court, and if such
discretion is well exercised, as in this case, it will not be disturbed on appeal. 25 Moral damages may
be awarded when in a breach of contract the defendant acted in bad faith, or in wanton disregard of
his contractual obligation.26 On the other hand, attorney's fees are awarded in instances where "the
defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's plainly valid, just
and demandable claim."27 There is no reason to disturb the trial court's finding that "the defendants'
lack of good faith and unkind treatment of the plaintiff in refusing to give his due commission
deserve censure." This warrants the award of P25,000.00 in moral damages and P 45,000.00 in
attorney's fees. The amounts are, in our view, fair and reasonable. Having found a buyer for the two
lots, Artigo had already performed his part of the bargain under the contract of agency. The De
Castros should have exercised fairness and good judgment in dealing with Artigo by fulfilling their
own part of the bargain - paying Artigo his 5 percent broker's commission based on the actual
purchase price of the two lots.
WHEREFORE, the petition is denied for lack of merit. The Decision of the Court of Appeals dated
May 4, 1994 in CA-G.R. CV No. 37996 is AFFIRMED in toto.
SO ORDERED.
August 6, 2002
48
(d) to pay attorneys fees in the amount of FIVE THOUSAND PESOS (P5,000.00) with
interest computed from the date of filing of the complaint;
(e) to relocate the boundaries to conform with the Commissioners Report, particularly,
Annexes "A" and "B" thereof, at the expense of the defendants. 3
As a result, in February 1998, the Deputy Sheriff of Quezon City directed petitioners, through
an alias writ of execution, to remove the house they constructed on the land they were occupying.
On April 2, 1998, petitioners received a Special Order dated March 30, 1998, from the trial court
stating as follows:
Before the Court for resolution is the "Ex-Parte Motion For The Issuance of A Writ of
Demolition," filed by plaintiff, through counsel, praying for the issuance of an Order
directing the Deputy Sheriff to cause the removal and/or demolition of the structures on the
plaintiffs property constructed by defendants and/or the present occupants. The
defendants-heirs of Herminigilda Pedro filed their comment on the said Motion.
Considering that the decision rendered in the instant case had become final and executory,
the Court, in its Order of November 14, 1997, directed the issuance of an alias writ of
execution for the enforcement of the said decision. However, despite the service of the said
writ to all the defendants and the present occupants of the subject property, they failed to
comply therewith, as per the Partial Sheriffs Return, dated February 9, 1998, issued by the
Deputy Sheriff of this branch of the Court. Thus, there is now a need to demolish the
structures in order to implement the said decision.
WHEREFORE, the defendants are hereby directed to remove, at their expense, all
constructions, including barbed wires and fences, which defendants constructed on
plaintiffs property, within fifteen (15) days from notice of this Order; otherwise, this Court
will issue a writ of demolition against them.
SO ORDERED.4
To prohibit Judge Vivencio Baclig of the Regional Trial Court of Quezon City from issuing a writ of
demolition and the Quezon City sheriff from implementing the alias writ of execution, petitioners
filed with the Court of Appeals a petition for prohibition with prayer for a restraining order and
preliminary injunction on April 17, 1998.5 Petitioners alleged that they bought the subject parcel of
land in good faith and for value, hence, they were parties in interest. Since they were not impleaded
in Civil Case No. Q-12918, the writ of demolition issued in connection therewith cannot be enforced
against them because to do so would amount to deprivation of property without due process of law.
49
In 1949, Benedicta Mangahas and Francisco Ramos occupied and built houses on the lot without the
PRCs consent. In 1959, PRC sold the lot to Remedios Magbanua. Mangahas and Ramos opposed
and instituted Civil Case No. C-120 to annul the sale and to compel PRC to execute a contract of sale
in their favor. The trial court dismissed the complaint and ordered Mangahas and Ramos to vacate the
lot and surrender possession thereof to Magbanua. The judgment became final and executory. When
Magbanua had paid for the land in full, PRC executed a deed of absolute sale in her favor and a new
title was consequently issued in her name. Magbanua then sought the execution of the judgment in
Civil Case No. C-120. This was opposed by petitioner Medina who alleged that she owned the houses
and lot subject of the dispute. She said that she bought the houses from spouses Ricardo and
Eufrocinia de Guzman, while she purchased the lot from the heirs of the late Don Mariano San Pedro
y Esteban. The latter held the land by virtue of a Titulo de Composicion Con El Estado Num. 4136,
dated April 29, 1894. In opposing the execution, Medina argued that the trial court did not acquire
jurisdiction over her, claiming that she was not a party in Civil Case No. C-120, thus, she could not
be considered as "a person claiming under" Ramos and Mangahas.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT UPHOLDING
PETITIONERS TITLE DESPITE THEIR BEING BUILDER IN GOOD FAITH AND
INNOCENT PURCHASER AND FOR VALUE.
III.
PETITIONERS ARE ENTITLED TO INJUNCTIVE RELIEF CONSIDERING THAT
THEY STAND TO SUFFER GRAVE AND IRREPARABLE INJURY IF ALIAS WRIT OF
EXECUTION AND THE SPECIAL ORDER ISSUED BY THE COURT A QUO IN CIVIL
CASE NO. Q-12918 FOR THE DEMOLITION OF ALL THE STRUCTURES ON THE
DISPUTED PROPERTY WERE ENFORCED AGAINST THE PETITIONERS WHO
WERE NOT EVEN GIVEN THEIR DAY IN COURT.7
For our resolution are the following issues: (1) whether the alias writ of execution may be enforced
against petitioners; and (2) whether petitioners were innocent purchasers for value and builders in
good faith.
On the first issue, petitioners claim that the alias writ of execution cannot be enforced against them.
They argue that the appellate court erred when it relied heavily on our ruling in Vda. de Medina vs.
Cruz8 in holding that petitioners are successors-in-interest of Mariano Lising, and as such, they can be
reached by the order of execution in Civil Case No. Q-12918 even though they were not impleaded as
parties thereto. Petitioners submit that Medina is not applicable in this case because the circumstances
therein are different from the circumstances in the present case.
In Medina, the property in dispute was registered under Land Registration Act No. 496 in 1916 and
Original Certificate of Title No. 868 was issued in the name of Philippine Realty Corporation (PRC).
When Medina reached this Court, we held that the decision in Civil Case No. C-120, which had long
become final and executory, could be enforced against petitioner even though she was not a party
thereto. We found that the houses on the subject lot were formerly owned by Mangahas and Ramos
who sold them to spouses de Guzman, who in turn sold them to Medina. Under the circumstances,
petitioner was privy to the two judgment debtors Mangahas and Ramos, and thus Medina could be
reached by the order of execution and writ of demolition issued against the two. As to the lot under
dispute, we sustained Magbanuas ownership over it, she being the holder of a Torrens title. We
declared that a Torrens title is generally conclusive evidence of ownership of the land referred to
therein, and a strong presumption exists that a Torrens title was regularly issued and valid. A Torrens
title is incontrovertible against any informacion possessoria, or other title existing prior to the
issuance thereof not annotated on the Torrens title. Moreover, persons dealing with property covered
by a Torrens certificate of title are not required to go beyond what appears on its face.
Medina markedly differs from the present case on major points. First, the petitioner
in Medina acquired the right over the houses and lot subject of the dispute after the original action
was commenced and became final and executory. In the present case, petitioners acquired the
lot before the commencement of Civil Case No. Q-12918. Second, the right over the disputed land of
the predecessors-in-interest of the petitioner in Medina was based on a title of doubtful authenticity,
allegedly a Titulo de Composicion Con El Estado issued by the Spanish Government in favor of one
Don Mariano San Pedro y Esteban, while the right over the land of the predecessors-in-interest of
herein petitioners is based on a fully recognized Torrens title. Third, petitioners in this case acquired
the registered title in their own names, while the petitioner in Medina merely relied on the title of her
predecessor-in-interest and tax declarations to prove her alleged ownership of the land.
We must stress that where a case like the present one involves a sale of a parcel of land under the
Torrens system, the applicable rule is that a person dealing with the registered property need not go
beyond the certificate of title; he can rely solely on the title and he is charged with notice only of such
burdens and claims as are annotated on the title. 9 It is our view here that the petitioners, spouses
50
the judgment therein and by writs of execution and demolition issued pursuant thereto. 16 In our view,
the spouses Victor and Honorata Orquiola have valid and meritorious cause to resist the demolition of
their house on their own titled lot, which is tantamount to a deprivation of property without due
process of law.1wphi1.nt
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals dated January 28,
1999, and its resolution dated December 29, 1999, in CA-G.R. SP No. 47422,
are REVERSED and SET ASIDE. Respondents are hereby enjoined from enforcing the decision in
Civil Case No. Q-12918 through a writ of execution and order of demolition issued against
petitioners. Costs against private respondent.
SO ORDERED.
The final question now is: could we consider petitioners builders in good faith? We note that this is
the first time that petitioners have raised this issue. As a general rule, this could not be done. Fair
play, justice, and due process dictate that parties should not raise for the first time on appeal issues
that they could have raised but never did during trial and even during proceedings before the Court of
Appeals.13 Nevertheless, we deem it proper that this issue be resolved now, to avoid circuitous
litigation and further delay in the disposition of this case. On this score, we find that petitioners are
indeed builders in good faith.
A builder in good faith is one who builds with the belief that the land he is building on is his, and is
ignorant of any defect or flaw in his title.14 As earlier discussed, petitioner spouses acquired the land
in question without knowledge of any defect in the title of Mariano Lising. Shortly afterwards, they
built their conjugal home on said land. It was only in 1998, when the sheriff of Quezon City tried to
execute the judgment in Civil Case No. Q-12918, that they had notice of private respondents adverse
claim. The institution of Civil Case No. Q-12918 cannot serve as notice of such adverse claim to
petitioners since they were not impleaded therein as parties.
As builders in good faith and innocent purchasers for value, petitioners have rights over the subject
property and hence they are proper parties in interest in any case thereon. 15 Consequently, private
respondents should have impleaded them in Civil Case No. Q-12918. Since they failed to do so,
petitioners cannot be reached by the decision in said case. No man shall be affected by any
proceeding to which he is a stranger, and strangers to a case are not bound by any judgment rendered
by the court. In the same manner, a writ of execution can be issued only against a party and not
against one who did not have his day in court. Only real parties in interest in an action are bound by
October 3, 2002
51
negligently failed to ascertain the genuineness or not (sic) of the title of the land mortgaged to it upon
the claim of ownership by the mortgagors. Furthermore, the matters alleged in the MOTION TO
DISMISS are all evidentiary which Defendants may substantiate at the appointed hours. 4
On April 7, 1997, Chinabank filed with the Court of Appeals a petition for certiorari with prayer for
the issuance of a writ of preliminary injunction and/or restraining order to enjoin enforcement of the
March 13, 1997 order and further action on the case. The Court of Appeals directed respondent Oliver
Two to file her comment and deferred action on the prayer for the issuance of the preliminary
injunction pending submission of the comment.
On June 30, 1997, respondent Oliver Two moved to declare petitioner Chinabank in default. She
pointed out that since petitioner received the order denying the motion to dismiss on March 21, 1997,
it had only until April 7, 1997 to file its answer to the complaint. However, until the filing of the
motion for default, no answer had been filed yet. The trial court granted the motion and declared
petitioner in default in its order dated July 17, 1997, thus:
Acting on the Motion To Declare Defendant Bank in Default, and finding the same to be legally
tenable is granted.
Accordingly, the Defendant Bank is declared in default as summons was served on It as early as
December 16, 1996, but until date they have not filed an Answer nor any responsive pleading and
instead, It filed a Motion to Dismiss, which was denied by this Court on March 13, 1997.
The filing of a CERTIORARI to question the Orders by this Court did not toll the period for
Defendants to answer the complaint.
Therefore, the reglementary period for the filing of responsive pleading has long expired.
Let the case be submitted for Decision based on the complaint.
It is SO ORDERED.5
Consequently, petitioner Chinabank filed a supplemental petition on August 11, 1997, seeking
annulment of the July 17, 1997 order. It argued that the special civil action for certiorari filed in the
Court of Appeals interrupted the proceedings before the trial court, thereby staying the period for
filing the answer.
On June 1, 1998, the Court of Appeals promulgated the assailed decision, finding no grave abuse of
discretion committed by the trial judge in ruling that the Rules of Court provided the manner of
impleading parties to a case and in suggesting that petitioner file an appropriate action to bring the
mortgagor within the courts jurisdiction. The appellate court said that Rule 6, Section 11 of the Rules
52
The Court of Appeals denied petitioners motion for reconsideration. Hence, this petition anchored on
the following grounds:
THE CASE OF CHURCH OF CHRIST VS. VALLESPIN, G.R. NO. 53726, AUGUST 15, 1988,
DOES NOT APPLY INASMUCH AS THE USE OF TERM "INDISPENSABLE PARTY" IN SAID
CASE WAS LOOSELY USED AND IN TRUTH WAS INTENDED TO MEAN "PARTIES-ININTEREST" AS CONTEMPLATED BY SECTION 2, RULE 3 OF THE RULES OF COURT.
I
SEC. 11, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE DOES NOT APPLY WHERE
THE PARTY WHO WAS NOT IMPLEADED IS AN INDISPENSABLE PARTY; INSTEAD,
SECTION 7, RULE 3 THEREOF, APPLIES.
II
THE MORTGAGOR MERCEDES M. OLIVER IS AN INDISPENSABLE PARTY UNDER
SECTION 7, RULE 3, OF THE 1997 RULES OF CIVIL PROCEDURE, AND MUST THEREFORE
INDISPENSABLY BE JOINED AS A PARTY-DEFENDANT.
III
RESPONDENTS CAUSE OF ACTION IS ANCHORED ON HER CLAIM AS THE REGISTERED
AND LAWFUL OWNER OF THE PROPERTY IN QUESTION AND THAT HER OWNERS
DUPLICATE COPY OF THE TITLE (ANNEX "A") IS THE TRUE AND GENUINE TITLE. THUS,
THE ACTION BEFORE THE HONORABLE COURT-A-QUO IS A LAND DISPUTE BETWEEN
TWO (2) PERSONS CLAIMING OWNERSHIP.
IV
THE ANNULMENT OF THE MORTGAGE AND THE CANCELLATION OF ANNEXES "B"
AND "C" AS PRAYED FOR IN THE COMPLAINT IN CIVIL CASE NO. 96-219 ARE
INEXTRICABLY INTERTWINED WITH THE ISSUE OF OWNERSHIP. HENCE, THE LATTER
MUST FIRST BE RESOLVED TO DETERMINE THE FORMER.
VI
VII
THE HONORABLE COURT OF APPEALS GRAVELY ERRED WHEN IT SANCTIONED THE
TRIAL COURTS ERROR IN DECLARING DEFENDANT CBC IN DEFAULT FOR FAILURE
TO FILE AN ANSWER, NOTWITHSTANDING THE SETTLED DOCTRINE THAT WHERE AN
INDISPENSABLE PARTY IS NOT IN COURT, THE TRIAL COURT SHOULD NOT PROCEED
BUT INSTEAD SHOULD DISMISS THE CASE.
VIII
THE DISMISSAL/WITHDRAWAL OF THE COMPLAINT AGAINST DEFENDANTS REGISTER
AND DEPUTY REGISTER OF DEEDS NECESSARILY GIVE RISE TO, AND BOLSTERS, THE
CONCLUSION THAT THE OWNERS DUPLICATE COPY OF TCT NO. S-50195 OF
MORTGAGOR MERCEDES M. OLIVER IS THE GENUINE AND AUTHENTIC COPY.6
For a clearer discussion of the issues in this controversy, we may state them as follows:
1. Is the mortgagor who goes by the name of Mercedes M. Oliver, herein called Oliver One,
an indispensable party in Civil Case No. 96219?
2. Should Section 7 Rule 3 of the 1997 Rules of Civil Procedure7 apply in this case?
3. Did the Court of Appeals err when it sustained the trial courts declaration that petitioner
was in default?
53
raise other defenses pertinent to the two of them. A party is also not indispensable if his presence
would merely permit complete relief between him and those already parties to the action, or will
simply avoid multiple litigation, as in the case of Chinabank and mortgagor Oliver One. 10 The latters
participation in this case will simply enable petitioner Chinabank to make its claim against her in this
case, and hence, avoid the institution of another action. Thus, it was the bank who should have filed a
third-party complaint or other action versus the mortgagor Oliver One.
As to the second issue, since mortgagor Oliver One is not an indispensable party, Section 7, Rule 3 of
the 1997 Rules of Civil Procedure, which requires compulsory joinder of indispensable parties in a
case, does not apply. Instead, it is Section 11, Rule 3, that applies. 11 Non-joinder of parties is not a
ground for dismissal of an action. Parties may be added by order of the court, either on its own
initiative or on motion of the parties.12 Hence, the Court of Appeals committed no error when it found
no abuse of discretion on the part of the trial court for denying Chinabanks motion to dismiss and,
instead, suggested that petitioner file an appropriate action against mortgagor Oliver One. A person
who is not a party to an action may be impleaded by the defendant either on the basis of liability to
himself or on the ground of direct liability to the plaintiff. 13
Now, the third issue, did the Court of Appeals err when it sustained the trial courts ruling that
petitioner Chinabank was in default? As found by the Court of Appeals, petitioner did not file its
answer, although it received the March 13, 1997 order denying the motion to dismiss. Instead,
petitioner filed a petition for certiorari under Rule 65 of the Rules of Court. Said petition, however,
does not interrupt the course of the principal case unless a temporary restraining order or writ of
preliminary injunction is issued.14 No such order or writ was issued in this case. Hence, Chinabank as
defendant below was properly declared in default by the trial court, after the 15-day period to file its
answer or other responsive pleading lapsed.
Lastly, were the withdrawal and consequent dismissal of the complaint against officials of the
Registry of Deeds conclusive of the authenticity of mortgagor Oliver Ones copy of TCT No. S50195? This is a question of fact, which is not a proper subject for review in this petition. Here, we
are limited only to questions of law,15 as a general rule. Petitioner failed to show that this case falls
under any of the exceptions to this rule. We need not tarry on this issue now.
WHEREFORE, the petition is DENIED for lack of merit. The assailed decision dated June 1, 1998
and the resolution dated September 30, 1998 of the Court of Appeals in CA-G.R. SP No. 43836 are
AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 176973
Further, a declaration of the mortgages nullity in this case will not necessarily prejudice mortgagor
Oliver One. The bank still needs to initiate proceedings to go after the mortgagor, who in turn can
54
As Paragas alleged, the amount remitted by Olympia to RCBC from September 2001 to May 25,
2002 reachedP82,978,543.00, representing the total net earnings from the pre-need plans, 30% of
which comprised the bonus points earned by the subscribers under the Pares-Pares program. The rest
was to be distributed among the four partners.
DECISION
In 2002, the state of affairs among the partners went sour upon Lobrins discovery that David failed
to remit to PPI the 30% cash equivalent of the bonus points.
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 seeking to annul and set aside the July 31,
2006 Decision1and the February 23, 2007 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP
No. 80942. The said issuances modified the July 21, 2003 Order3 of the Regional Trial Court, Branch
200, Las Pias City (RTC) in Civil Case No. LP-02-0165, a case for Declaratory Relief and Sum of
Money with Damages filed by petitioner David M. David (David) against Philam Plans Inc. (PPI),
Severo Henry G. Lobrin (Lobrin), respondent Federico M. Paragas, Jr. (Paragas), Rodelio S. Datoy
(Datoy), Rizal Commercial Banking Corporation, Paranaque Branch (RCBC), and Gerald P.S. Agarra
(Agarra).
The RTC Order resolved the Motion to Admit Supplemental Complaint filed by David and the Joint
Omnibus Motion4filed by David, Lobrin and Datoy. In the said Order, the RTC admitted the attached
supplemental complaint and approved the compromise agreement. 5 The questioned CA decision
nullified the approval by the RTC of the compromise agreement.
The Antecedents
Sometime in 1995, David, Paragas and Lobrin agreed to venture into a business in Hong Kong (HK).
They created Olympia International, Ltd. (Olympia)under HK laws. Olympia had offices in HK and
the Philippines. David handled the marketing aspect of the business while Lobrin and Datoy were in
charge of operations. In late1995, Olympia started with "selling, through catalogs, consumer products
such as appliances, furniture and electronic equipment to the OFWs in Hong Kong, to be delivered to
their addresses in the Philippines. They coined the name Kayang-Kaya for the venture." 6
In early 1998, Olympia became the exclusive general agent in HK of PPIs pre-need plans through
the General Agency Agreement. In late 2001, Olympia launched the Pares-Pares program by which
planholders would earn points with cash equivalents for successfully enlisting new subscribers. The
cash equivalents, in turn, would be used for the payment of monthly premiums of the planholders.
PPI authorized Olympia to accept the premium payments, including the cash equivalent of the bonus
points, and to remit the same, net of commissions, to PPI in the Philippines. The money from HK was
to be remitted through Olympias account in RCBC. In turn, Olympia was to pay the planholders
bonuses as well as the share of profits for the directors. 7 David was tasked to personally remit said
amounts to PPI as he was the only signatory authorized to transact on behalf of Olympia regarding
the RCBC accounts.
In a meeting held on June 1, 2002 in HK, David tried to explain his side, but no settlement was
reached.
Later, Lobrin discovered that only P19,302,902.13 remained of the P82,978,543.00 remitted from HK
to the RCBC account. As the Chairperson of Olympias Board of Directors (BOD),he demanded the
return of the entireP82,978,543.00.
On June 17, 2002, the BOD stripped David of his position as a director. It then informed RCBC of his
removal. In another letter, it also instructed RCBC to prohibit any transaction regarding the funds or
their withdrawal therefrom pending the determination of their rightful owner/s. Meanwhile, a WatchList Order was issued against David pursuant to the letter sent by Paragas counsel to the Bureau of
Immigration. As a result, he was prevented from boarding a flight to Singapore on June 29, 2002.
Constrained by these circumstances, David filed a complaint for Declaratory Relief, Sum of Money
and Damages before the RTC. He insisted on his entitlement to the commissions due under the
regular and Pares-Pares programs in his capacity as Principal Agent under the General Agency
Agreement with PPI; that he be allowed to hold the cash deposits of P19,302,902.00 to the extent
of P18,631,900.00 as a trust fund for the benefit of the subscribers of the Pares-Pares program; that
RCBC be ordered to recognize no other signatory relative to the said deposits except him; and that
Paragas, Lobrin and Datoy be held liable in an amount not less than P20,000,000.00, representing the
missing amount and/or unauthorized disbursements from the funds of Olympia, plus the payment of
moral damages, exemplary damages and attorneys fees.
Paragas and Lobrin filed their answers with compulsory Counterclaims 8 against David, to wit:
First Counterclaim - to mandate David to render an accounting of the amounts mentioned;
Second Counterclaim - to require David to turn over such books of accounts and other documents
owned by Olympia as well as all records pertaining to Olympias business transactions in the
Philippines;
Third Counterclaim - to make David pay the amount of P24,893,562.90 to Philam as cash bonuses of
the respective original subscribers;
55
WHEREAS, Olympia has passed a board resolution during the meeting of its Board of Directors held
in Hong Kong on 21 March 2003 constituting and appointing as such its herein Attorney-in-Fact for
the purposes stated in said resolution, a copy of which is hereto attached as Annex "A"; WHEREAS,
there is a pending case before Branch 200 of the Regional Trial Court of Las Pi[]as City docketed as
Civil Case No. LP-02-0165 ("the Case") and among the defendants in said Case are Henry G. Lobrin,
Federico M. Paragas, Jr. and Roberto S. Datoy who are presently directors of Olympia;
Sixth Counterclaim - to make David pay the amount of P10,000,000.00 as and by way of exemplary
damages; and
WHEREAS, the causes of action in the complaint in said Case against aforesaid Lobrin, Paragas, Jr.
and Datoy are in their capacity as shareholders/directors of Olympia, and likewise concern the
relationship and rights between DMD and Olympia International Ltd., including the status of the
latters operations and financial position;
Seventh Counterclaim - to hold David personally liable to pay Lobrin and Paragas the amount
of P1,000,000.00 as attorneys fees, plus such amount as may be proved during the trial as litigation
expenses and cost of suit.9
WHEREAS, another issue in said case is the respective rights of herein parties DMD and Olympia
under and pursuant to the General Agency Agreement (GAA) with Philam Plans Inc., ("PPI") dated
10 February 1998;
On March 5, 2003, David filed the supplemental complaint, with a manifestation that an amicable
settlement was struck with Lobrin and Datoy whereby they agreed to withdraw the complaint and
counterclaims against each other. On May 6, 2003, Lobrin and Olympia through their counsel,
confirmed that on March 26, 2003, they had arrived at a compromise. 10 The agreement clearly stated
that Lobrin was acting on Olympias behalf, on the basis of a resolution passed during the board
meeting held on March 21, 2003. The settlement reads:
WHEREAS, corollary to the issue of the GAA is the respective obligation of DMD and Olympia to
the planholders of PPI under the regular and pares pares program, specifically the binhing yaman and
pamilyaman benefits due to approximately 12,000 planholders of Philam Plans Inc. ("PPI") as per the
list attached to the complaint in said Case;
WHEREAS, both DMD and Olympia are desirous of settling the Case amicably under mutually
acceptable terms and conditions:
COMPROMISE AGREEMENT
NOW, THEREFORE, parties hereby agree as follows:
KNOW ALL MEN BY THESE PRESENTS:
This Agreement, entered into by and between:
DAVID M. DAVID, of legal age, married, Filipino and with address at 23 Pablo Roman Street, BF
Homes, Paranaque, hereinafter referred to as DMD;
-andOLYMPIA INTERNATIONAL LIMITED, a corporation organized and existing under the laws of
Hong Kong, with principal office at 13/F Li Dong Building, 7-11 Li Yuen Street East, Central, Hong
Kong, and herein represented by its Attorney-in-Fact, Henry G. Lobrin, and herein after referred to as
Olympia;
WITNESSETH: That
1. Olympia hereby waives its rights and interests to the trust fund presently in Account Nos.
1-214-25224-0, 07214108903-003 and 0000005292 with the Rizal Commercial Banking
Corporation ("RCBC") and Account No. 0301-01334-5 with the Equitable PCI Bank
pertaining to the cash benefits of the approximately 12,000 planholders of Philam Plans,
Inc., per the list attached to the complaint in the Case;
2. Olympia further agrees that the same shall be settled exclusively by DMD, subject to the
requirement that it shall be furnished a copy of the Statement of Benefits pertaining to each
planholder;
3. Olympia likewise no longer interposes any objection/opposition to the payment of the
cash benefits to the planholders from said trust funds, and shall make of record in the Case
the withdrawal of its opposition;
4. DMD shall drop as party Defendants from the Case Severo Henry G. Lobrin, Federico
M. Paragas, Jr. and Rodelio S. Datoy;
56
OLYMPIA
INTERNATIONAL
Ltd.
By:
HENRY G. LOBRIN
Attorney-in Fact
HENRY G. LOBRIN
In his personal capacity
[Emphases supplied]11
On May 15, 2003, David and Lobrin filed the Joint Omnibus Motion to formally inform the RTC of
the compromise agreement. They asserted the following:
2. Said agreement was executed between Plaintiff and Olympia, the latter being represented
by Defendant Lobrin as Olympias Attorney-in-Fact, pursuant to a resolution passed by a
majority vote during the board meeting held in Hong [Kong] on 21 March 2003 wherein
Defendants Lobrin, Paragas, Jr. and Datoy were all present, authorizing said Attorney-inFact to negotiate a compromise settlement regarding instant case, the payment of the
accrued benefits due the planholders of Philam Plan, Inc. under the regular and Pares-Pares
program as well as the disposition of the cash and other deposits with Rizal Commercial
Banking Corporation (RCBC) and other accounts in other banks. Said resolution is
appended to the Agreement as its Annex "A";
3. By virtue of said Agreement, Olympia no longer questions and hereby waives whatever
rights and interest it may have to the deposits constituting the trust fund pertaining to the
cash benefits of the approximately 12,000 planholders of Philam Plans Inc., per the list
attached to the complaint in instant case in Account Nos. 1-214-25224-0, 07214108903-003
and 0000005292 with RCBC and Account No. 0301-01334-5 with the Equitable-PCI Bank;
4. Olympia further withdraws its objection/opposition to the payment of the cash benefits to
the planholders from said trust funds which shall remain to be the sole
responsibility/accountability of Plaintiff, subject to the requirement that Olympia through
its authorized Attorney-in-Fact shall be furnished a copy of the Statement of Benefits
pertaining to each planholder;
5. As a consequence of the above, Defendants Severo Henry G. Lobrin, Federico M.
Paragas, Jr. and Rodelio S. Datoy shall be dropped as party defendants in instant case, to
which no objection will be interposed by Plaintiff, and the motion to declare Defendant
Datoy in default for failure to file his Answer is similarly withdrawn for having been
rendered moot and academic by the Agreement;
6. Olympia hereby withdraw[s] its First, Second and Third Compulsory Counterclaims
against herein Plaintiff considering that the legal and factual bases thereof are matters
which are exclusively the concern of Olympia as a corporation and have been the subject of
the Agreement;
7. Olympia likewise withdraws the Fourth, Fifth, Sixth and Seventh Compulsory
Counterclaim in so far as they refer to the claims pertaining to Defendants Paragas, Lobrin
and Datoy in their capacity as shareholders and/or directors of Olympia;
8. Defendant Lobrin likewise withdraws the Fourth, Fifth, Sixth and Seventh Compulsory
Counterclaim in so far as they refer to claims pertaining to him in his personal capacity;
57
David moved for reconsideration. In its February 23, 2007 Resolution, the CA denied his motion.
Hence, this petition.
GROUNDS OF THE PETITION
I. RESPONDENT COURT LACKEDAND/OR EXCEEDED ITS JURISDICTION WHEN
IT MODIFIED THE ORDER OF THE TRIAL COURT DATED JULY21, 2003, DESPITE
THE ASSIGNMENT OF ERROR BEINGSPECIFICALLY LIMITED TO THE ORDER
OF THE TRIAL COURT DATED SEPTEMBER 30, 2003 WHICH DENIED THE
MOTION FOR RECONSIDERATION FILED BY HEREIN PRIVATE RESPONDENT
II. OLYMPIA IS NOT A PARTY TO THE CASE BELOW, HENCE, THE DISMISSAL OF
THE COMPLAINT AND COMPULSORY COUNTERCLAIMS ARE PERSONAL IN
NATURE TO THE PARTIES AND IS WITHIN THE PURVIEW OF SECTION 2 OF
RULE 17
III. THERE IS DENIAL OF DUE PROCESS OF LAW WHEN RESPONDENT COURT
ANNULLED THE COMPROMISE AGREEMENT BASED ON UNSUBSTANTIATED
ALLEGATIONS OF FACT CONTAINED IN THE PETITION.16
In his reply,17 David limited his "discussion to the issue that still has a practical bearing on the case
below,"18 that is, whether or not the nullification of the Compromise Agreement similarly nullified the
dismissal of both the complaint as against the defendants xxx. 19
In the Resolution, dated February 16,2011, the Court gave due course to the petition and directed the
parties to file their respective memoranda.20 While Paragas was able to file his memorandum on May
16, 2011, Davids memorandum was dispensed with in a resolution, dated June 19, 2013, for his
failure to file one within the extended period granted by the Court. 21 Position of David
David charges the CA with grave abuse of discretion in dispensing a relief more than what Paragas
prayed for. According to David, the CA exceeded its jurisdiction when it annulled the compromise
agreement despite the fact that the assignment of error in the petition of Paragas before the CA was
limited only to the review of the correctness of the RTCs September 30, 2003 Order denying the
motion for reconsideration and not the July 21, 2003 Order approving the compromise agreement. In
other words, David is of the view that because Paragas did not assail the July 21, 2003 Order, the
same should not have been modified by the CA.
He further insists that the CA should not have annulled the compromise agreement because the July
21, 2003 RTC Order did not refer to the approval of the compromise agreement, but to the agreement
of the parties to dismiss the claims and counterclaims against each other. In support of this position,
David takes refuge in the RTC statement that the parties had the right to "amicably settle their issues
even if subject compromise agreement had not been entered into." To him, it was not the
58
In this case, while it is true that Paragas petition for certiorari before the CA only assailed the
subsequent order of the RTC denying his August 15, 2003 Motion for Reconsideration, he did pray in
the said motion for reconsideration that it set aside and reverse its approval of the Joint Omnibus
Motion. The prayer reads:
WHEREFORE, it is respectfully prayed of this Honorable Court that the Order dated 21 July 2003 be
MODIFIED to SET ASIDE and REVERSE the approval of the Joint Omnibus Motion dated 15 May
2003 and a new one be issued DENYING said motion.25
Obviously, the resolution of his motion for reconsideration necessarily involved the July 21, 2003
Order of the RTC as it was indispensable and inextricably linked with the September 30, 2003 Order
being assailed.
59
It is very clear from the order of July 21, 2003 that the agreement being referred to as having been
approved is not the Compromise Agreement but the agreement of the parties to dismiss the claims
and counterclaims against each other. This is obvious when the order stated that it is within the right
of the parties to amicably settle the issues even if subject Compromise Agreement had not been
entered into. Clearly, it was not the Compromise Agreement that was approved, because precisely it
involved Olympia, but the underlying agreement between the parties to withdraw their claims against
each other which are personal to them in nature. As noted by the trial court, even without the
Compromise Agreement, parties could still settle the case amicably and withdraw the claims against
one another which is precisely what the parties did. 29
Verily, a judicially approved compromise agreement, in order to be binding upon the litigants with the
force and effect of a judgment, must have been executed by them. In this case, the compromise
agreement was signed by David in his capacity as the complainant in the civil case, and Olympia,
through Lobrin as its agent. The agreement made plain that the terms and conditions the "parties"
were to follow were agreed upon by David and Olympia. Datoy and Paragas never appeared to have
agreed to such terms for it was Olympia, despite not being a party to the civil case, which was a party
to the agreement. Despite this, David claims that the concessions were made by Olympia on behalf of
the non-signatory parties and such should be binding on them.
David must note that Olympia is a separate being, or at least should be treated as one distinct from
the personalities of its owners, partners or even directors. Under the doctrine of processual
presumption, this Court has to presume that Hong Kong laws is the same as that of the Philippines
particularly with respect to the legal characterization of Olympias legal status as an artificial person.
Elementary is the rule that under Philippine corporate and partnership laws, a corporation or a
partnership possesses a personality separate from that of its incorporators or partners. Olympia
should, thus, be accorded the status of an artificial being at least for the purpose of this controversy.
In his complaint, David raised three causes of action. The first one dealt with the alleged omission on
the part of the other venture partners to respect his right, being Olympias beneficial owner and PPIs
principal agent under the GAA, over the income generated from the sale PPIs pre-need plans. The
second dealt with his right over all amounts that the venture partners disbursed in excess of those
authorized by him, under the premise that he remained Olympias beneficial owner. The third dealt
with the acts of the venture partners in causing undue humiliation and shame when he was prevented
from boarding his Singapore-bound plane pursuant to the Watch-List Order issued by the Bureau of
Immigration at the behest of a letter sent by the counsel of Paragas. Accordingly, David prayed that
the RTC:
On that basis, Olympias interest should be detached from those of directors Paragas, Lobrin, Datoy,
and even David. Their (individual directors) interest are merely indirect, contingent and inchoate.
Because Olympias involvement in the compromise was not the same as that of the other parties who
were, in the first place, never part of it, the compromise agreement could not have the force and effect
of a judgment binding upon the litigants, specifically Datoy and Paragas. Conversely, the judicially
approved withdrawal of the claims on the basis of that compromise could not be given effect for such
agreement did not concern the parties in the civil case.
David, nevertheless, points out that the validity of the dismissal of the claims and counterclaims must
remain on the argument that the compromise agreement was made in their personal capacities
inasmuch as he filed the complaint against Paragas, Lobrin and Datoy also in their personal
capacities. He draws support from the Answer with Compulsory Counterclaims 28 filed by Paragas and
Lobrin. The counterclaims against him did not involve Olympia, save for the demand to render an
accounting as well as to turn over the books of account and records pertaining to the latter. David,
thus, stated:
While David repeatedly claims that his complaint against Paragas, Lobrin and Datoy was personal in
character, a review of the causes of action raised by him in his complaint shows that it primarily
involved Olympia. As defined, a cause of action is an act or omission by which a party violates a
right of another. It requires the existence of a legal right on the part of the plaintiff, a correlative
obligation of the defendant to respect such right and an act or omission of such defendant in violation
of the plaintffss rights.30
a. Declare him as the one entitled to the commission due under the regular and Pares-Pares programs
net of the agents commission in his capacity as Principal Agent under the General Agency
Agreement with Philam Plans, Inc.;
b. Hold the cash deposits of P19,302,902.00 to the extent of P18,631,900.00 as a trust fund for the
benefit of the subscribers of the Pares-Pares Program and validly held in trust by [him];
c. Order Defendant RCBC to recognize no other signatory to said deposits except [him].
x x x x31
Essentially, David was asking for judicial determination of his rights over Olympias revenues, funds
in the RCBC bank accounts and the amounts used and expended by Olympia through the acts of its
60
cannot be said either to have consented to the judicial approval of the compromise, much less waived
substantial rights, because it was never a party in the proceedings.
Moreover, Olympias absence did not confer upon the RTC the jurisdiction or authority to hear and
resolve the whole controversy.1wphi1 This lack of authority on the part of the RTC which flows
from the absence of Olympia, being an indispensable party, necessarily negates any binding effect of
the subject judicially-approved compromise agreement.
Time and again, the Court has held that 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 to those present. The failure to implead an indispensable party is not a mere procedural matter.
Rather, it brings to fore the right of a disregarded party to its constitutional rights to due process.
Having Olympia's interest being subjected to a judicially-approved agreement, absent any
participation in the proceeding leading to the same, is procedurally flawed. It is unfair for being
violative of its right to due process. In fine, a holding that is based on a compromise agreement that
springs from a void proceeding for want of jurisdiction over the person of an indispensable party can
never become binding, final nor executory and it may be "ignored wherever and whenever it exhibits
its head."35
Lest it be misunderstood, after the remand of this case to the R TC, the parties can still enter into a
compromise agreement on matters which are personal to them. That is their absolute right. They can
dismiss their claims and counterclaims against each other, but the dismissal should not be dependent
or contingent on a compromise agreement, one signatory to which is not a party. It should not also
involve or affect the rights of Olympia, the non-party, unless it is properly impleaded as one.
Needless to state, a judicial determination of the rights of Olympia, when it is not a party, would
necessarily affect the rights of its shareholders or partners, like Paragas, without due process of law.
WHEREFORE, the petition is DENIED. The July 31, 2006 Decision of the Court of Appeals and its
February 23, 2007 Resolution in CA-G.R. SP No. 80942 are hereby AFFIRMED.
SO ORDERED.
61
Initially, the municipal officers moved for the outright dismissal of the complaint, which was denied,
thus constraining them to file their respective answers. For its part, LBP asserted, inter alia, that
Cacayuran did not have any cause of action since he was not privy to the loan agreements entered
into by LBP and the Municipality.16
During the pendency of the proceedings, the construction of the Agoo Peoples Center was
completed. Later on, the Sangguniang Bayan passed Municipal Ordinance No. 02-2007 17 declaring
the area where such building stood as patrimonial property of the Municipality.18 The RTC Ruling
Before the Court are the following motions: (a) the Motion for Reconsideration 1 dated May 22, 2013,
filed by petitioner Land Bank of the Philippines (LBP) assailing the Decision 2 dated April 17, 2013 of
the Court (April 17, 2013 Decision), which upheld the Decision3 dated March 26, 2010 of the Court
of Appeals (CA) in CA-G.R. CV. No. 89732 affirming with modification the Decision 4 dated April
10, 2007 of the Regional Trial Court of Agoo, La Union, Branch 31 in Civil Case No. A-2473; (b) the
Motion for Leave to Intervene with Pleading-in-Intervention Attached 5dated July 8, 2013, filed by the
Municipality of Agoo, La Union (Municipality) praying that it be allowed to intervene in this case;
and (c) the Motion for Reconsideration-in-Intervention6 dated July 8, 2013, filed by the Municipality
seeking that the Court set aside its April 17, 2013 Decision and promulgate a new one in its stead
dismissing the case (subject motions).
In a Decision19 dated April 10, 2007, the RTC declared the Subject Loans null and void, finding that
the resolutions approving the procurement of the same were passed in a highly irregular manner and
thus, ultra vires. As such, it pronounced that the Municipality was not bound by the Subject Loans
and that the municipal officers should, instead, be held personally liable for the same. Further, it ruled
that since the Plaza Lot is a property for public use, it cannot be used as collateral for the Subject
Loans.20
The Facts
The CA Ruling
The instant case arose from two (2) loans (Subject Loans) entered into by the Municipality with LBP
in order to finance the Redevelopment Plan of the Agoo Public Plaza (Public Plaza). Through
Resolution Nos. 68-20057 and 139-2005,8 the Sangguniang Bayan of the Municipality (Sangguniang
Bayan) authorized its then-Mayor Eufranio Eriguel (Mayor Eriguel) to enter into a P4,000,000.00loan with LBP, the proceeds of which were used to construct ten (10) kiosks at the Public Plaza.
Around a year later, the SB issued Resolution Nos. 58-20069 and 128-2006,10this time authorizing
Mayor Eriguel to obtain a P28,000,000.00-loan from LBP for the construction of a commercial center
named "Agoo Peoples Center" within the premises of the Public Plaza. In order to secure the Subject
Loans, the Municipality used as collateral, among others, a 2,323.75-square meter lot situated at the
south eastern portion of the Public Plaza (Plaza Lot). 11
In a Decision24 dated March 26, 2010, the CA affirmed the ruling of the RTC, with modification
excluding then-Vice Mayor Antonio Eslao from personal liability arising from the Subject Loans. It
held that: (a) Cacayuran had locus standi to file the instant complaint, considering that he is a resident
of the Municipality and the issue at hand involved public interest of transcendental importance; (b)
Resolution Nos. 68-2005, 138-2005, 58-2006, 126-2006 were invalidly passed due to noncompliance with certain provisions of Republic Act No. 7160, 25 otherwise known as the Local
Government Code of 1991 (LGC); (c) the Plaza Lot is property of public dominion, and thus, cannot
be used as collateral; and (d) the procurement of the Subject Loans were ultra vires acts for having
been entered into without proper authority and that the collaterals used therefor constituted improper
disbursement of public funds.26
However, a group of residents, led by respondent Eduardo M. Cacayuran (Cacayuran), opposed the
redevelopment of the Public Plaza, as well as the funding therefor thru the Subject Loans, claiming
that these were "highly irregular, violative of the law, and detrimental to public interests, and will
result to wanton desecration of the [Public Plaza]."12Further, Cacayuran requested the municipal
officers to furnish him with the various documents relating to the Public Plazas redevelopment,
which, however, went unheeded.13 Thus, Cacayuran, invoking his right as a taxpayer, filed a
Complaint14 against LBP and various officers of the Municipality, including Mayor Eriguel (but
excluding the Municipality itself as party-defendant), assailing the validity of the aforesaid loan
agreements and praying that the commercialization of the Public Plaza be enjoined. 15
Dissatisfied, LBP filed a petition for review on certiorari 27 before this Court.
Aggrieved, LBP and the municipal officers appealed21 to the CA. However, the appeal of the
municipal officers was deemed abandoned and dismissed for their failure to file an appellants brief
despite due notice.22 Thus, only LBPs appeal was given due course by the CA. 23
62
his legal presence as a party to the proceeding is an absolute necessity. In his absence, there cannot be
a resolution of the dispute of the parties before the court which is effective, complete, or
equitable."37 Thus, 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.38
Nevertheless, it must be stressed that the failure to implead any indispensable party to a suit does not
necessarily result in the outright dismissal of the complaint.1wphi1 In Heirs of Mesina v. Heirs of
Fian, Sr.,39 the Court definitively explained that in instances of non-joinder of indispensable parties,
the proper remedy is to implead them and not to dismiss the case:
The non-joinder of indispensable parties is not a ground for the dismissal of an action. At any stage of
a judicial proceeding and/or at such times as are just, parties may be added on the motion of a party
or on the initiative of the tribunal concerned. If the plaintiff refuses to implead an indispensable party
despite the order of the court, that court may dismiss the complaint for the plaintiffs failure to
comply with the order. The remedy is to implead the non-party claimed to be
indispensable.40 (Emphases and underscoring supplied)
In this case, a judicious review of the records reveals that Cacayurans complaint against LBP and the
municipal officers primarily prays that the commercialization of the Public Plaza been joined and
also, that the Subject Loans be declared null and void for having been unlawfully entered into by the
said officers. However, Cacayuran failed to implead in his complaint the Municipality, a real party-ininterest41 and an indispensable party that stands to be directly affected by any judicial resolution on
the case, considering that: (a) the contracting parties to the Subject Loans are LBP and the
Municipality; and (b) the Municipality owns the Public Plaza as well as the improvements
constructed thereon, including the Agoo Peoples Center. As the Municipality aptly points out: 42
3. To recapitulate: The case had its beginnings in the two (2) Loans obtained by [the Municipality]
from [LBP]and by the Board Resolutions passed and adopted by the Sangguniang Bayan of Agoo, La
Union, together with the Mayor and Vice-Mayor of the Municipality.
xxxx
3d. The two (2) Loans were covered and evidenced by separate Loan Agreements and
Mortgage/Assignment Documents. The parties which entered into and executed the covering
documents were [LBP] as lender and [the Municipality] as borrower.
3e. When the construction was about 40% complete, [Cacayuran] as a taxpayer filed the case against
the: (i) Mayor; (ii) Vice-Mayor; and (iii) Ten (10) Members [of] the Sangguniang Bayan [of] Agoo,
La Union, as defendants. [The Municipality] was excluded, and was not impleaded as a defendant in
the case.
63
PROCEED with the resolution of the case on the merits WITH DISPATCH.
SO ORDERED.
xxxx
3k. Without having to say so, the RTC dispositions as affirmed with modification by the CA Decision
which, in turn was affirmed by the SC Decision must not be binding upon [the Municipality], the real
party-in-interest, the indispensable party in fact, not impleaded as defendant in this case. 43 (Emphases
and underscoring supplied).
The Court observes that it is only now that the issue of the Municipalitys exclusion from the instant
case, despite its status as an indispensable party, became apparent. This recent finding may be
credited to the fact that the initial parties before the Court, i.e., LBP and Cacayuran, have dissimilar
interests from that of the Municipality, and, hence, had no incentive to raise the issue of the latters
status as an indispensable party. On the one hand, Cacayurans interest to the case is centered on the
declaration of nullity of the Subject Loans, as well as the enjoinment of the commercialization of the
Public Plaza; and on the other hand, LBPs interest to the case is anchored on its capacity as creditor
to the Subject Loans. To the mind of the Court, the municipal officers would have been in the best
position to raise this issue; however, they were unable to do so because their appeal before the CA
was deemed abandoned for their failure to file an appellants brief on time.
Be that as it may, the Court is not precluded from taking cognizance of the Municipalitys status as an
indispensable party even at this stage of the proceedings. Indeed, the presence of indispensable
parties is necessary to vest the court with jurisdiction 44 and, corollarily, the issue on jurisdiction may
be raised at any stage of the proceedings. 45Thus, as it has now come to the fore that any resolution of
this case would not be possible and, hence, not attain any real finality due to the non-joinder of the
Municipality, the Court is constrained to set aside all subsequent actuations of the courts a quo in this
case, including that of the Courts, and remand the case all the way back to the RTC for the inclusion
of all indispensable parties to the case and its immediate disposition on the merits. 46 With this, the
propriety of the Municipalitys present intervention is now mooted.
WHEREFORE, the subject motions are PARTLY GRANTED. The Decision dated April 17, 2013 of
the Court, which upheld the Decision dated March 26, 2010 of the Court of Appeals in CA-G.R. CV.
No. 89732 affirming with modification the Decision dated April 10, 2007 of the Regional Trial Court
of Agoo, La Union, Branch 31 in Civil Case No. A-2473 is hereby SET ASIDE. Accordingly, the
instant case is REMANDED to the court a quo, which is hereby DIRECTED to order respondent
Eduardo M. Cacayuran to implead all indispensable parties and thereafter,
64
On February 28, 2001, Labor Arbiter Cresencio G. Ramos, Jr., rendered judgment 5 declaring 7J as
employer of respondents.6 The arbiter also found 7J guilty of illegal dismissal7 and ordered to
reinstate respondents,8 pay P2,374,710.00 as backwages, P713,648.00 as 13th month pay and
P117,000.00 as service incentive leave pay.9
Respondents appealed to the National Labor Relations Commission (NLRC) praying that Lotte be
declared as their direct employer because 7J is merely a labor-only contractor. In its decision 10 dated
April 24, 2002, the NLRC found no cogent reason to disturb the findings of the labor arbiter and
affirmed its ruling that 7J is the employer of respondents and solely liable for their claims.
Respondents motion for reconsideration was denied by the NLRC in a resolution dated June 18,
2002.
YNARES-SANTIAGO, J.:
This petition for review on certiorari1 assails the July 9, 2004 decision2 of the Court of Appeals in
CA-G.R. SP No. 72732 and its November 26, 2004 resolution3 denying reconsideration thereof.
The established facts of this case are as follows:
Private respondent (petitioner herein) Lotte Phils., Inc. (Lotte) is a domestic corporation. Petitioners
(respondents herein) are among those who were hired and assigned to the confectionery facility
operated by private respondent.
On December 14, 1995 and yearly thereafter until the year 2000 7J Maintenance and Janitorial
Services ("7J") entered into a contract with private respondent to provide manpower for needed
maintenance, utility, janitorial and other services to the latter. In compliance with the terms and
conditions of the service contract, and to accommodate the needs of private respondent for
personnel/workers to do and perform "piece works," petitioners, among others, were hired and
assigned to private respondent as repackers or sealers.
However, either in October, 1999 or on February 9, 2000, private respondent dispensed with their
services allegedly due to the expiration/termination of the service contract by respondent with 7J.
They were either told "hwag muna kayong pumasok at tatawagan na lang kung may gawa"; or were
asked to wait "pag magrereport sila sa trabaho." Unfortunately, petitioners were never called back to
work again.
Aggrieved, petitioners lodged a labor complaint against both private respondent Lotte and 7J, for
illegal dismissal, regularization, payment of corresponding backwages and related employment
benefits, 13th month pay, service incentive leave, moral and exemplary damages and attorneys fees
based on total judgment award.4
Undaunted, they filed a petition for certiorari in the Court of Appeals11 against the NLRC and Lotte,
insisting that their employer is Lotte and not 7J.
Lotte, however, denied that respondents were its employees. It prayed that the petition be dismissed
for failure to implead 7J who is a party interested in sustaining the proceedings in court, pursuant to
Section 3, Rule 46 of the Revised Rules of Civil Procedure.
On July 9, 2004, the Court of Appeals reversed and set aside the rulings of the Labor Arbiter and the
NLRC. In its decision, the Court of Appeals declared Lotte as the real employer of respondents and
that 7J who engaged in labor-only contracting was merely the agent of Lotte. Respondents who
performed activities directly related to Lottes business were its regular employees under Art. 280 of
the Labor Code. As such, they must be accorded security of tenure and their services terminated only
on "just" and "authorized" causes.
Lottes motion for reconsideration was denied, hence this petition, on the following issues:
8. Whether or not petitioner herein had the burden of proof to establish before the proceedings in the
Court of Appeals that 7J Maintenance and Janitorial Service was not a labor-only contractor.
8.1. Whether or not the Petition in CA-G.R. SP No. 72732 is dismissible for failure to comply with
Section 3, Rule 46 in relation to Section 5, Rule 65 of the 1997 Rules of Civil Procedure. 12
We first resolve the procedural issue raised by petitioner. Lotte asserts that 7J is an indispensable
party and should have been impleaded in respondents petition in the Court of Appeals. It claims that
the petition before the Court of Appeals was dismissible for failure to comply with Section 3, 13 Rule
46 in relation to Section 514 of Rule 65 of the Revised Rules of Civil Procedure.
Petitioners contention is tenable.
65
66
April 4, 2011
to respondents claim, petitioner maintained that they failed to pay the balance of P28,000 on
September 1990 to thus constrain him to accept installment payments totaling P9,100.
After the case was submitted for decision or on January 31, 2001, 2 petitioner passed away. The
records do not show that petitioners counsel informed Branch 1 of the Bataan RTC, where the
complaint was lodged, of his death and that proper substitution was effected in accordance with
Section 16, Rule 3, Rules of Court.3
By Decision of February 25, 2001,4 the trial court ruled in favor of respondents, disposing as follows:
On July 10, 1990, Domingo Carabeo (petitioner) entered into a contract denominated as "Kasunduan
sa Bilihan ng Karapatan sa Lupa"1 (kasunduan) with Spouses Norberto and Susan Dingco
(respondents) whereby petitioner agreed to sell his rights over a 648 square meter parcel of
unregistered land situated in Purok III, Tugatog, Orani, Bataan to respondents for P38,000.
Respondents tendered their initial payment of P10,000 upon signing of the contract, the remaining
balance to be paid on September 1990.
1. The defendant to sell his right over 648 square meters of land pursuant to the contract
dated July 10, 1990 by executing a Deed of Sale thereof after the payment of P18,900 by
the plaintiffs;
2. The defendant to pay the costs of the suit.
Respondents were later to claim that when they were about to hand in the balance of the purchase
price, petitioner requested them to keep it first as he was yet to settle an on-going "squabble" over the
land.
SO ORDERED.5
Nevertheless, respondents gave petitioner small sums of money from time to time which
totaled P9,100, on petitioners request according to them; due to respondents inability to pay the
amount of the remaining balance in full, according to petitioner.
By the herein challenged Decision dated July 20, 2009, 6 the Court of Appeals affirmed that of the
trial court.
By respondents claim, despite the alleged problem over the land, they insisted on petitioners
acceptance of the remaining balance of P18,900 but petitioner remained firm in his refusal, proffering
as reason therefor that he would register the land first.
Sometime in 1994, respondents learned that the alleged problem over the land had been settled and
that petitioner had caused its registration in his name on December 21, 1993 under Transfer
Certificate of Title No. 161806. They thereupon offered to pay the balance but petitioner declined,
drawing them to file a complaint before the Katarungan Pambarangay. No settlement was reached,
however, hence, respondent filed a complaint for specific performance before the Regional Trial
Court (RTC) of Balanga, Bataan.
Petitioner countered in his Answer to the Complaint that the sale was void for lack of object certain,
the kasunduan not having specified the metes and bounds of the land. In any event, petitioner alleged
that if the validity of the kasunduan is upheld, respondents failure to comply with their reciprocal
obligation to pay the balance of the purchase price would render the action premature. For, contrary
Petitioners motion for reconsideration having been denied by Resolution of January 8, 2010, the
present petition for review was filed by Antonio Carabeo, petitioners son, 7 faulting the appellate
court:
(A)
in holding that the element of a contract, i.e., an object certain is present in this case.
(B)
in considering it unfair to expect respondents who are not lawyers to make judicial
consignation after herein petitioner allegedly refused to accept payment of the balance of
the purchase price.
(C)
67
In the present case, respondents are pursuing a property right arising from the kasunduan, whereas
petitioner is invoking nullity of the kasunduan to protect his proprietary interest. Assuming arguendo,
however, that the kasunduan is deemed void, there is a corollary obligation of petitioner to return the
money paid by respondents, and since the action involves property rights, 12 it survives.1avvphi1
It bears noting that trial on the merits was already concluded before petitioner died. Since the trial
court was not informed of petitioners death, it may not be faulted for proceeding to render judgment
without ordering his substitution. Its judgment is thus valid and binding upon petitioners legal
representatives or successors-in-interest, insofar as his interest in the property subject of the action is
concerned.13
In another vein, the death of a client immediately divests the counsel of authority. 14 Thus, in filing a
Notice of Appeal, petitioners counsel of record had no personality to act on behalf of the already
deceased client who, it bears reiteration, had not been substituted as a party after his death. The trial
courts decision had thereby become final and executory, no appeal having been perfected.
xxxx
Na ako ay may isang partial na lupa na matatagpuan sa Purok 111, Tugatog, Orani Bataan, na may
sukat na 27 x 24 metro kuwadrado, ang nasabing lupa ay may sakop na dalawang punong santol at
isang punong mangga, kayat ako ay nakipagkasundo sa mag-asawang Norby Dingco at Susan
Dingco na ipagbili sa kanila ang karapatan ng nasabing lupa sa halagang P38,000.00.
SO ORDERED.
x x x x (underscoring supplied)
That the kasunduan did not specify the technical boundaries of the property did not render the sale a
nullity. The requirement that a sale must have for its object a determinate thing is satisfied as long as,
at the time the contract is entered into, the object of the sale is capable of being made determinate
without the necessity of a new or further agreement between the parties. 9 As the above-quoted portion
of the kasunduan shows, there is no doubt that the object of the sale is determinate.
Clutching at straws, petitioner proffers lack of spousal consent. This was raised only on appeal,
hence, will not be considered, in the present case, in the interest of fair play, justice and due process. 10
Respecting the argument that petitioners death rendered respondents complaint against him
dismissible, Bonilla v. Barcena11 enlightens:
The question as to whether an action survives or not depends on the nature of the action and the
damage sued for. In the causes of action which survive, the wrong complained [of] affects primarily
and principally property and property rights, the injuries to the person being merely incidental, while
in the causes of action which do not survive, the injury complained of is to the person, the property
and rights of property affected being incidental. (emphasis and underscoring supplied)
68
"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 ofP5,000.00 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
"a) declaring the Deed of Absolute Sale (Exh. D) and Kasunduan (Exhibit B), to be a sale with
right of repurchase;
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 theKasunduan 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
"b) ordering the plaintiff to pay the defendants the sum of P9,000.00 by way of repurchasing the land
in question;
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
"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;
The Issues
"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
69
"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
70
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 isres judicata.42
Applicability of Res Judicata
Evidently, the heirs of Pedro Joaquin voluntary appeared and participated in the case. We stress that
the appellate court had ordered33 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.
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.43The 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
Second Issue:
Failure to Support Allegation
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
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.
71
3. That for the cause of action against defendant ROGER NAVARRO, it is hereby stated
that on August 8, 1997, the said defendant leased [from] plaintiff a certain motor vehicle
which is more particularly described as follows
Make/Type FUSO WITH MOUNTED CRANE
Serial No. FK416K-51680
Motor No. 6D15-338735
Plate No. GHK-378
BRION, J.:
1
This is a petition for review on certiorari that seeks to set aside the Court of Appeals (CA)
Decision2 dated October 16, 2001 and Resolution3 dated May 29, 2002 in CA-G.R. SP. No. 64701.
These CA rulings affirmed the July 26, 20004 and March 7, 20015 orders of the Regional Trial Court
(RTC), Misamis Oriental, Cagayan de Oro City, denying petitioner Roger V. Navarros (Navarro)
motion to dismiss.
BACKGROUND FACTS
On September 12, 1998, respondent Karen T. Go filed two complaints, docketed as Civil Case Nos.
98-599 (first complaint)6 and 98-598 (second complaint),7 before the RTC for replevin and/or sum of
money with damages against Navarro. In these complaints, Karen Go prayed that the RTC issue writs
of replevin for the seizure of two (2) motor vehicles in Navarros possession.
The first complaint stated:
1. That plaintiff KAREN T. GO is a Filipino, of legal age, married to GLENN O. GO, a
resident of Cagayan de Oro City and doing business under the trade name KARGO
ENTERPRISES, an entity duly registered and existing under and by virtue of the laws of
the Republic of the Philippines, which has its business address at Bulua, Cagayan de Oro
City; that defendant ROGER NAVARRO is a Filipino, of legal age, a resident of 62
Dolores Street, Nazareth, Cagayan de Oro City, where he may be served with summons and
other processes of the Honorable Court; that defendant "JOHN DOE" whose real name and
address are at present unknown to plaintiff is hereby joined as party defendant as he may be
the person in whose possession and custody the personal property subject matter of this suit
may be found if the same is not in the possession of defendant ROGER NAVARRO;
2. That KARGO ENTERPRISES is in the business of, among others, buying and selling
motor vehicles, including hauling trucks and other heavy equipment;
72
THE PETITION
Navarro alleges that even if the lease agreements were in the name of Kargo Enterprises, since it did
not have the requisite juridical personality to sue, the actual parties to the agreement are himself and
Glenn Go. Since it was Karen Go who filed the complaints and not Glenn Go, she was not a real
party-in-interest and the complaints failed to state a cause of action.
Navarro posits that the RTC erred when it ordered the amendment of the complaint to include Glenn
Go as a co-plaintiff, instead of dismissing the complaint outright because a complaint which does not
state a cause of action cannot be converted into one with a cause of action by a mere amendment or a
supplemental pleading. In effect, the lower court created a cause of action for Karen Go when there
was none at the time she filed the complaints.
Even worse, according to Navarro, the inclusion of Glenn Go as co-plaintiff drastically changed the
theory of the complaints, to his great prejudice. Navarro claims that the lower court gravely abused
its discretion when it assumed that the leased vehicles are part of the conjugal property of Glenn and
Karen Go. Since Karen Go is the registered owner of Kargo Enterprises, the vehicles subject of the
complaint are her paraphernal properties and the RTC gravely erred when it ordered the inclusion of
Glenn Go as a co-plaintiff.
Navarro likewise faults the lower court for setting the trial of the case in the same order that required
Karen Go to amend her complaints, claiming that by issuing this order, the trial court violated Rule
10 of the Rules.
Even assuming the complaints stated a cause of action against him, Navarro maintains that the
complaints were premature because no prior demand was made on him to comply with the provisions
of the lease agreements before the complaints for replevin were filed.
Lastly, Navarro posits that since the two writs of replevin were issued based on flawed complaints,
the vehicles were illegally seized from his possession and should be returned to him immediately.
Karen Go, on the other hand, claims that it is misleading for Navarro to state that she has no real
interest in the subject of the complaint, even if the lease agreements were signed only by her husband,
Glenn Go; she is the owner of Kargo Enterprises and Glenn Go signed the lease agreements merely
as the manager of Kargo Enterprises. Moreover, Karen Go maintains that Navarros insistence that
Kargo Enterprises is Karen Gos paraphernal property is without basis. Based on the law and
jurisprudence on the matter, all property acquired during the marriage is presumed to be conjugal
property. Finally, Karen Go insists that her complaints sufficiently established a cause of action
against Navarro. Thus, when the RTC ordered her to include her husband as co-plaintiff, this was
merely to comply with the rule that spouses should sue jointly, and was not meant to cure the
complaints lack of cause of action.
73
thus, expressly pointing to KARGO ENTERPRISES as the principal that Glenn O. Go represented. In
other words, by the express terms of this Lease Agreement, Glenn Go did sign the agreement only as
the manager of Kargo Enterprises and the latter is clearly the real party to the lease agreements.
As Navarro correctly points out, Kargo Enterprises is a sole proprietorship, which is neither a natural
person, nor a juridical person, as defined by Article 44 of the Civil Code:
The 1997 Rules of Civil Procedure requires that every action must be prosecuted or defended in the
name of the real party-in-interest, i.e., the party who stands to be benefited or injured by the judgment
in the suit, or the party entitled to the avails of the suit. 15
Interestingly, although Navarro admits that Karen Go is the registered owner of the business name
Kargo Enterprises, he still insists that Karen Go is not a real party-in-interest in the case. According
to Navarro, while the lease contracts were in Kargo Enterprises name, this was merely a trade name
without a juridical personality, so the actual parties to the lease agreements were Navarro and Glenn
Go, to the exclusion of Karen Go.
As a corollary, Navarro contends that the RTC acted with grave abuse of discretion when it ordered
the inclusion of Glenn Go as co-plaintiff, since this in effect created a cause of action for the
complaints when in truth, there was none.
We do not find Navarros arguments persuasive.
The central factor in appreciating the issues presented in this case is the business name Kargo
Enterprises. The name appears in the title of the Complaint where the plaintiff was identified as
"KAREN T. GO doing business under the name KARGO ENTERPRISES," and this identification
was repeated in the first paragraph of the Complaint. Paragraph 2 defined the business KARGO
ENTERPRISES undertakes. Paragraph 3 continued with the allegation that the defendant "leased
from plaintiff a certain motor vehicle" that was thereafter described. Significantly, the Complaint
specifies and attaches as its integral part the Lease Agreement that underlies the transaction between
the plaintiff and the defendant. Again, the name KARGO ENTERPRISES entered the picture as this
Lease Agreement provides:
This agreement, made and entered into by and between:
GLENN O. GO, of legal age, married, with post office address at xxx, herein referred to as the
LESSOR-SELLER; representing KARGO ENTERPRISES as its Manager,
xxx
(2) Other corporations, institutions and entities for public interest or purpose, created by
law; their personality begins as soon as they have been constituted according to law;
(3) Corporations, partnerships and associations for private interest or purpose to which the
law grants a juridical personality, separate and distinct from that of each shareholder,
partner or member.
Thus, pursuant to Section 1, Rule 3 of the Rules,16 Kargo Enterprises cannot be a party to a civil
action. This legal reality leads to the question: who then is the proper party to file an action based on
a contract in the name of Kargo Enterprises?
We faced a similar question in Juasing Hardware v. Mendoza, 17 where we said:
Finally, there is no law authorizing sole proprietorships like petitioner to bring suit in court. The law
merely recognizes the existence of a sole proprietorship as a form of business organization conducted
for profit by a single individual, and requires the proprietor or owner thereof to secure licenses and
permits, register the business name, and pay taxes to the national government. It does not vest
juridical or legal personality upon the sole proprietorship nor empower it to file or defend an action in
court.
Thus, the complaint in the court below should have been filed in the name of the owner of Juasing
Hardware. The allegation in the body of the complaint would show that the suit is brought by such
person as proprietor or owner of the business conducted under the name and style Juasing Hardware.
The descriptive words "doing business as Juasing Hardware" may be added to the title of the case, as
is customarily done.18 [Emphasis supplied.]
This conclusion should be read in relation with Section 2, Rule 3 of the Rules, which states:
SEC. 2. Parties in interest. A real party in interest is the party who stands to be benefited or injured
by the judgment in the suit, or the party entitled to the avails of the suit. Unless otherwise authorized
74
Article 124 of the Family Code, on the administration of the conjugal property, provides:
Art. 124. The administration and enjoyment of the conjugal partnership property shall belong
to both spouses jointly. In case of disagreement, the husbands decision shall prevail, subject to
recourse to the court by the wife for proper remedy, which must be availed of within five years from
the date of the contract implementing such decision.
xxx
This provision, by its terms, allows either Karen or Glenn Go to speak and act with authority in
managing their conjugal property, i.e., Kargo Enterprises. No need exists, therefore, for one to obtain
the consent of the other before performing an act of administration or any act that does not dispose of
or encumber their conjugal property.
We find it significant that the business name Kargo Enterprises is in the name of Karen T. Go, 19 who
described herself in the Complaints to be "a Filipino, of legal age, married to GLENN O. GO, a
resident of Cagayan de Oro City, and doing business under the trade name KARGO
ENTERPRISES."20 That Glenn Go and Karen Go are married to each other is a fact never brought in
issue in the case. Thus, the business name KARGO ENTERPRISES is registered in the name of a
married woman, a fact material to the side issue of whether Kargo Enterprises and its properties are
paraphernal or conjugal properties. To restate the parties positions, Navarro alleges that Kargo
Enterprises is Karen Gos paraphernal property, emphasizing the fact that the business is registered
solely in Karen Gos name. On the other hand, Karen Go contends that while the business is
registered in her name, it is in fact part of their conjugal property.
Under Article 108 of the Family Code, the conjugal partnership is governed by the rules on the
contract of partnership in all that is not in conflict with what is expressly determined in this Chapter
or by the spouses in their marriage settlements. In other words, the property relations of the husband
and wife shall be governed primarily by Chapter 4 on Conjugal Partnership of Gains of the Family
Code and, suppletorily, by the spouses marriage settlement and by the rules on partnership under the
Civil Code. In the absence of any evidence of a marriage settlement between the spouses Go, we look
at the Civil Code provision on partnership for guidance.
The registration of the trade name in the name of one person a woman does not necessarily lead
to the conclusion that the trade name as a property is hers alone, particularly when the woman is
married. By law, all property acquired during the marriage, whether the acquisition appears to have
been made, contracted or registered in the name of one or both spouses, is presumed to be conjugal
unless the contrary is proved.21 Our examination of the records of the case does not show any proof
that Kargo Enterprises and the properties or contracts in its name are conjugal. If at all, only the bare
allegation of Navarro to this effect exists in the records of the case. As we emphasized in Castro v.
Miat:22
Petitioners also overlook Article 160 of the New Civil Code. It provides that "all property of the
marriage is presumed to be conjugal partnership, unless it be prove[n] that it pertains exclusively to
the husband or to the wife." This articledoes not require proof that the property was acquired
with funds of the partnership. The presumption applies even when the manner in which the
property was acquired does not appear.23 [Emphasis supplied.]
Thus, for purposes solely of this case and of resolving the issue of whether Kargo Enterprises as a
sole proprietorship is conjugal or paraphernal property, we hold that it is conjugal property.
A rule on partnership applicable to the spouses circumstances is Article 1811 of the Civil Code,
which states:
Art. 1811. A partner is a co-owner with the other partners of specific partnership property.
The incidents of this co-ownership are such that:
(1) A partner, subject to the provisions of this Title and to any agreement between the partners, has an
equal right with his partners to possess specific partnership property for partnership purposes;
xxx
Under this provision, Glenn and Karen Go are effectively co-owners of Kargo Enterprises and the
properties registered under this name; hence, both have an equal right to seek possession of these
properties. Applying Article 484 of the Civil Code, which states that "in default of contracts, or
special provisions, co-ownership shall be governed by the provisions of this Title," we find further
support in Article 487 of the Civil Code that allows any of the co-owners to bring an action in
ejectment with respect to the co-owned property.
75
thereto. The other co-owners are not indispensable parties. They are not even necessary parties, for a
complete relief can be accorded in the suit even without their participation, since the suit is presumed
to have been filed for the benefit of all co-owners. 25 [Emphasis supplied.]
Under this ruling, either of the spouses Go may bring an action against Navarro to recover possession
of the Kargo Enterprises-leased vehicles which they co-own. This conclusion is consistent with
Article 124 of the Family Code, supporting as it does the position that either spouse may act on
behalf of the conjugal partnership, so long as they do not dispose of or encumber the property in
question without the other spouses consent.
On this basis, we hold that since Glenn Go is not strictly an indispensable party in the action to
recover possession of the leased vehicles, he only needs to be impleaded as a pro-forma party to the
suit, based on Section 4, Rule 4 of the Rules, which states:
Section 4. Spouses as parties. Husband and wife shall sue or be sued jointly, except as provided by
law.
Non-joinder of indispensable parties not ground to dismiss action
Even assuming that Glenn Go is an indispensable party to the action, we have held in a number of
cases26 that the misjoinder or non-joinder of indispensable parties in a complaint is not a ground for
dismissal of action. As we stated in Macababbad v. Masirag: 27
Rule 3, Section 11 of the Rules of Court provides that neither misjoinder nor nonjoinder of parties is
a ground for the dismissal of an action, thus:
Sec. 11. Misjoinder and non-joinder of parties. Neither misjoinder nor non-joinder of parties is
ground for dismissal of an action. Parties may be dropped or added by order of the court on motion of
any party or on its own initiative at any stage of the action and on such terms as are just. Any claim
against a misjoined party may be severed and proceeded with separately.
In Domingo v. Scheer, this Court held that the proper remedy when a party is left out is to implead
the indispensable party at any stage of the action. The court, either motu proprio or upon the motion
of a party, may order the inclusion of the indispensable party or give the plaintiff opportunity to
amend his complaint in order to include indispensable parties. If the plaintiff to whom the order to
include the indispensable party is directed refuses to comply with the order of the court, the
complaint may be dismissed upon motion of the defendant or upon the court's own motion. Only
upon unjustified failure or refusal to obey the order to include or to amend is the action dismissed.
In these lights, the RTC Order of July 26, 2000 requiring plaintiff Karen Go to join her husband as a
party plaintiff is fully in order.
76
WHEREFORE, premises considered, we DENY the petition for review for lack of merit. Costs
against petitioner Roger V. Navarro.
In arguing that prior demand is required before an action for a writ of replevin is filed, Navarro
apparently likens a replevin action to an unlawful detainer.
SO ORDERED.
For a writ of replevin to issue, all that the applicant must do is to file an affidavit and bond, pursuant
to Section 2, Rule 60 of the Rules, which states:
Sec. 2. Affidavit and bond.
The applicant must show by his own affidavit or that of some other person who personally knows the
facts:
(a) That the applicant is the owner of the property claimed, particularly describing it, or
is entitled to the possession thereof;
(b) That the property is wrongfully detained by the adverse party, alleging the cause of
detention thereof according to the best of his knowledge, information, and belief;
(c) That the property has not been distrained or taken for a tax assessment or a fine pursuant
to law, or seized under a writ of execution or preliminary attachment, or otherwise placed
under custodia legis, or if so seized, that it is exempt from such seizure or custody; and
(d) The actual market value of the property.
The applicant must also give a bond, executed to the adverse party in double the value of the property
as stated in the affidavit aforementioned, for the return of the property to the adverse party if such
return be adjudged, and for the payment to the adverse party of such sum as he may recover from the
applicant in the action.
We see nothing in these provisions which requires the applicant to make a prior demand on the
possessor of the property before he can file an action for a writ of replevin. Thus, prior demand is not
a condition precedent to an action for a writ of replevin.
More importantly, Navarro is no longer in the position to claim that a prior demand is necessary, as he
has already admitted in his Answers that he had received the letters that Karen Go sent him,
demanding that he either pay his unpaid obligations or return the leased motor vehicles. Navarros
position that a demand is necessary and has not been made is therefore totally unmeritorious.
G.R. No. 166920
77
January 1998
Dear Mr. Schonfeld,
Letter of Employment
DECISION
CALLEJO, SR., J.:
Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court of the
Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 76563. The CA decision reversed the
Resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029319-01,
which, in turn, affirmed the Decision of the Labor Arbiter in NLRC NCR Case No. 30-12-04787-00
dismissing the complaint of respondent Klaus K. Schonfeld.
The antecedent facts are as follows:
Respondent is a Canadian citizen and was a resident of New Westminster, British Columbia, Canada.
He had been a consultant in the field of environmental engineering and water supply and sanitation.
Pacicon Philippines, Inc. (PPI) is a corporation duly established and incorporated in accordance with
the laws of the Philippines. The primary purpose of PPI was to engage in the business of providing
specialty and technical services both in and out of the Philippines. 2 It is a subsidiary of Pacific
Consultants International of Japan (PCIJ). The president of PPI, Jens Peter Henrichsen, who was also
the director of PCIJ, was based in Tokyo, Japan. Henrichsen commuted from Japan to Manila and
vice versa, as well as in other countries where PCIJ had business.
This Letter of Employment with the attached General Conditions of Employment constitutes the
agreement under which you will be engaged by our Company on the terms and conditions defined
hereunder. In case of any discrepancies or contradictions between this Letter of Employment and the
General Conditions of Employment, this Letter of Employment will prevail.
You will, from the date of commencement, be ["seconded"] to our subsidiary Pacicon Philippines,
Inc. in Manila, hereinafter referred as Pacicon. Pacicon will provide you with a separate contract,
which will define that part of the present terms and conditions for which Pacicon is responsible. In
case of any discrepancies or contradictions between the present Letter of Employment and the
contract with Pacicon Philippines, Inc. or in the case that Pacicon should not live up to its obligations,
this Letter of Employment will prevail.
1. Project Country: The Philippines with possible short-term assignments in other countries.
2. Duty Station: Manila, the Philippines.
3. Family Status: Married.
4. Position: Sector Manager, Water and Sanitation.
In 1997, PCIJ decided to engage in consultancy services for water and sanitation in the Philippines.
In October 1997, respondent was employed by PCIJ, through Henrichsen, as Sector Manager of PPI
in its Water and Sanitation Department. However, PCIJ assigned him as PPI sector manager in the
Philippines. His salary was to be paid partly by PPI and PCIJ.
On January 7, 1998, Henrichsen transmitted a letter of employment to respondent in Canada,
requesting him to accept the same and affix his conformity thereto. Respondent made some revisions
in the letter of employment and signed the contract. 3 He then sent a copy to Henrichsen. The letter of
employment reads:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Tokyo 7
78
As required by Rule XIV (Employment of Aliens) of the Omnibus Rules Implementing the Labor
Code, PPI applied for an Alien Employment Permit (Permit) for respondent before the Department of
Labor and Employment (DOLE). It appended respondents contract of employment to the
application.1awphi1.net
On February 26, 1999, the DOLE granted the application and issued the Permit to respondent. It
reads:
Republic of the Philippines
Department of Labor & Employment
National Capital Region
(Sgd.)
Klaus Schonfeld
ADDRESS: 27/F Rufino Pacific Towers Bldg., Ayala Ave., Makati City
PERMIT
Respondent arrived in the Philippines and assumed his position as PPI Sector Manager. He was
accorded the status of a resident alien.
Respondent received his compensation from PPI for the following periods: February to June 1998,
November to December 1998, and January to August 1999. He was also reimbursed by PPI for the
79
Petitioners filed a Motion to Dismiss the complaint on the following grounds: (1) the Labor Arbiter
had no jurisdiction over the subject matter; and (2) venue was improperly laid. It averred that
respondent was a Canadian citizen, a transient expatriate who had left the Philippines. He was
employed and dismissed by PCIJ, a foreign corporation with principal office in Tokyo, Japan. Since
respondents cause of action was based on his letter of employment executed in Tokyo, Japan dated
January 7, 1998, under the principle of lex loci contractus, the complaint should have been filed in
Tokyo, Japan. Petitioners claimed that respondent did not offer any justification for filing his
complaint against PPI before the NLRC in the Philippines. Moreover, under Section 12 of the
General Conditions of Employment appended to the letter of employment dated January 7, 1998,
complainant and PCIJ had agreed that any employment-related dispute should be brought before the
London Court of Arbitration. Since even the Supreme Court had already ruled that such an agreement
on venue is valid, Philippine courts have no jurisdiction. 13
Respondent opposed the Motion, contending that he was employed by PPI to work in the Philippines
under contract separate from his January 7, 1998 contract of employment with PCIJ. He insisted that
his employer was PPI, a Philippine-registered corporation; it is inconsequential that PPI is a whollyowned subsidiary of PCIJ because the two corporations have separate and distinct personalities; and
he received orders and instructions from Henrichsen who was the president of PPI. He further
insisted that the principles of forum non conveniens and lex loci contractus do not apply, and that
although he is a Canadian citizen, Philippine Labor Laws apply in this case.
Respondent adduced in evidence the following contract of employment dated January 9, 1998 which
he had entered into with Henrichsen:
Mr. Klaus K. Schonfeld
II-365 Ginger Drive
New Westminster, B.C.
Canada V3L 5L5
Manila 9 January, 1998
80
Henrichsen under the letterhead of PCIJ in Japan. 16 The letter of employment dated January 9, 1998
which respondent relies upon did not bear his (respondents) signature nor that of Henrichsen.
On August 2, 2001, the Labor Arbiter rendered a decision granting petitioners Motion to Dismiss.
The dispositive portion reads:
WHEREFORE, finding merit in respondents Motion to Dismiss, the same is hereby granted. The
instant complaint filed by the complainant is dismissed for lack of merit.
SO ORDERED.17
The Labor Arbiter found, among others, that the January 7, 1998 contract of employment between
respondent and PCIJ was controlling; the Philippines was only the "duty station" where Schonfeld
was required to work under the General Conditions of Employment. PCIJ remained respondents
employer despite his having been sent to the Philippines. Since the parties had agreed that any
differences regarding employer-employee relationship should be submitted to the jurisdiction of the
court of arbitration in London, this agreement is controlling.
On appeal, the NLRC agreed with the disquisitions of the Labor Arbiter and affirmed the latters
decision in toto.18
10. Mobilization Travel: Mobilization travel will be from New Westminster, B.C., Canada.
Respondent then filed a petition for certiorari under Rule 65 with the CA where he raised the
following arguments:
This letter is send (sic) to you in duplicate; we kindly request you to sign and return one copy to us.
I
Yours sincerely,
Pacicon Philippines, Inc.
Jens Peter Henrichsen
President14
According to respondent, the material allegations of the complaint, not petitioners defenses,
determine which quasi-judicial body has jurisdiction. Section 21 of the Arbitration Clause in the
General Conditions of Employment does not provide for an exclusive venue where the complaint
against PPI for violation of the Philippine Labor Laws may be filed. Respondent pointed out that PPI
had adopted two inconsistent positions: it was first alleged that he should have filed his complaint in
Tokyo, Japan; and it later insisted that the complaint should have been filed in the London Court of
Arbitration.15
In their reply, petitioners claimed that respondents employer was PCIJ, which had exercised
supervision and control over him, and not PPI. Respondent was dismissed by PPI via a letter of
81
A motion for the reconsideration of the above decision was filed by PPI and Henrichsen, which the
appellate court denied for lack of merit. 23
In the present recourse, PPI and Henrichsen, as petitioners, raise the following issues:
I
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT AN EMPLOYMENT
RELATIONSHIP EXISTED BETWEEN PETITIONERS AND RESPONDENT DESPITE THE
UNDISPUTED FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD
BY A FOREIGN CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD,
AND WAS MERELY "SECONDED" TO PETITIONERS SINCE HIS WORK ASSIGNMENT WAS
IN MANILA.
II
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE LABOR ARBITER A
QUO HAS JURISDICTION OVER RESPONDENTS CLAIM DESPITE THE UNDISPUTED
FACT THAT RESPONDENT, A FOREIGN NATIONAL, WAS HIRED ABROAD BY A FOREIGN
CORPORATION, EXECUTED HIS EMPLOYMENT CONTRACT ABROAD, AND HAD
AGREED THAT ANY DISPUTE BETWEEN THEM "SHALL BE FINALLY SETTLED BY THE
COURT OF ARBITRATION IN LONDON."24
Petitioners fault the CA for reversing the findings of the Labor Arbiter and the NLRC. Petitioners
aver that the findings of the Labor Arbiter, as affirmed by the NLRC, are conclusive on the CA. They
maintain that it is not within the province of the appellate court in a petition for certiorari to review
the facts and evidence on record since there was no conflict in the factual findings and conclusions of
the lower tribunals. Petitioners assert that such findings and conclusions, having been made by
agencies with expertise on the subject matter, should be deemed binding and conclusive. They
contend that it was the PCIJ which employed respondent as an employee; it merely seconded him to
petitioner PPI in the Philippines, and assigned him to work in Manila as Sector Manager. Petitioner
PPI, being a wholly-owned subsidiary of PCIJ, was never the employer of respondent.
Petitioners assert that the January 9, 1998 letter of employment which respondent presented to prove
his employment with petitioner PPI is of doubtful authenticity since it was unsigned by the purported
parties. They insist that PCIJ paid respondents salaries and only coursed the same through petitioner
PPI. PPI, being its subsidiary, had supervision and control over respondents work, and had the
responsibilities of monitoring the "daily administration" of respondent. Respondent cannot rely on the
pay slips, expenses claim forms, and reimbursement memoranda to prove that he was an employee of
petitioner PPI because these documents are of doubtful authenticity.
SO ORDERED.22
82
compel a contrary conclusion if such evidence had been properly appreciated, the factual findings of
such tribunals cannot be given great respect and finality.28
Inexplicably, the Labor Arbiter and the NLRC ignored the documentary evidence which respondent
appended to his pleadings showing that he was an employee of petitioner PPI; they merely focused
on the January 7, 1998 letter of employment and Section 21 of the General Conditions of
Employment.
Petitioner PPI applied for the issuance of an AEP to respondent before the DOLE. In said application,
PPI averred that respondent is its employee. To show that this was the case, PPI appended a copy of
respondents employment contract. The DOLE then granted the application of PPI and issued the
permit.
It bears stressing that under the Omnibus Rules Implementing the Labor Code, one of the
requirements for the issuance of an employment permit is the employment contract. Section 5, Rule
XIV (Employment of Aliens) of the Omnibus Rules provides:
SECTION 1. Coverage. This rule shall apply to all aliens employed or seeking employment in the
Philippines and the present or prospective employers.
SECTION 2. Submission of list. All employers employing foreign nationals, whether resident or
non-resident, shall submit a list of nationals to the Bureau indicating their names, citizenship, foreign
and local address, nature of employment and status of stay in the Philippines.
SECTION 3. Registration of resident aliens. All employed resident aliens shall register with the
Bureau under such guidelines as may be issued by it.
SECTION 4. Employment permit required for entry. No alien seeking employment, whether as a
resident or non-resident, may enter the Philippines without first securing an employment permit from
the Ministry. If an alien enters the country under a non-working visa and wishes to be employed
thereafter, he may only be allowed to be employed upon presentation of a duly approved employment
permit.
SECTION 5. Requirements for employment permit applicants. The application for an employment
permit shall be accompanied by the following:
(a) Curriculum vitae duly signed by the applicant indicating his educational background,
his work experience and other data showing that he possesses technical skills in his trade or
profession.
83
We agree with the conclusion of the CA that there was an employer-employee relationship between
petitioner PPI and respondent using the four-fold test. Jurisprudence is firmly settled that whenever
the existence of an employment relationship is in dispute, four elements constitute the reliable
yardstick: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power
of dismissal; and (d) the employers power to control the employees conduct. It is the so-called
"control test" which constitutes the most important index of the existence of the employer-employee
relationshipthat is, whether the employer controls or has reserved the right to control the employee
not only as to the result of the work to be done but also as to the means and methods by which the
same is to be accomplished. Stated otherwise, an employer-employee relationship exists where the
person for whom the services are performed reserves the right to control not only the end to be
achieved but also the means to be used in reaching such end. 29 We quote with approval the following
ruling of the CA:
[T]here is, indeed, substantial evidence on record which would erase any doubt that the respondent
company is the true employer of petitioner. In the case at bar, the power to control and supervise
petitioners work performance devolved upon the respondent company. Likewise, the power to
terminate the employment relationship was exercised by the President of the respondent company. It
is not the letterhead used by the company in the termination letter which controls, but the person who
exercised the power to terminate the employee. It is also inconsequential if the second letter of
employment executed in the Philippines was not signed by the petitioner. An employer-employee
relationship may indeed exist even in the absence of a written contract, so long as the four elements
mentioned in the Mafinco case are all present. 30
The settled rule on stipulations regarding venue, as held by this Court in the vintage case of
Philippine Banking Corporation v. Tensuan,31 is that while they are considered valid and enforceable,
venue stipulations in a contract do not, as a rule, supersede the general rule set forth in Rule 4 of the
Revised Rules of Court in the absence of qualifying or restrictive words. They should be considered
merely as an agreement or additional forum, not as limiting venue to the specified place. They are not
exclusive but, rather permissive. If the intention of the parties were to restrict venue, there must be
accompanying language clearly and categorically expressing their purpose and design that actions
between them be litigated only at the place named by them. 32
In the instant case, no restrictive words like "only," "solely," "exclusively in this court," "in no other
court save ," "particularly," "nowhere else but/except ," or words of equal import were stated in
the contract.33 It cannot be said that the court of arbitration in London is an exclusive venue to bring
forth any complaint arising out of the employment contract.
Petitioners contend that respondent should have filed his Complaint in his place of permanent
residence, or where the PCIJ holds its principal office, at the place where the contract of employment
was signed, in London as stated in their contract. By enumerating possible venues where respondent
could have filed his complaint, however, petitioners themselves admitted that the provision on venue
in the employment contract is indeed merely permissive.
84
85
abandoned or extinguished apart from the respondents' contention that the properties had been
subjected to expropriation by the City of Manila. 8
BERSAMIN, J.:
An action to recover the deficiency after extrajudicial foreclosure of a real property mortgage is a
personal action because it does not affect title to or possession of real property, or any interest therein.
On November 4, 2003, the respondents moved for reconsideration, reiterating their grounds earlier
made in their motion to dismiss. 9
In turn, the petitioner adopted its comment/opposition to the motion to dismiss. 10
The Case
This appeal is taken by the petitioner to overturn the decision promulgated on March 31,
2006,1 whereby the Court of Appeals (CA) set aside the orders issued by the Regional Trial Court,
Branch 60, in Makati City (Makati RTC) on October 17, 2003 2 and February 1, 2005 3 dismissing
The respondents then filed their reply, 11 in which they raised for the first time their objection on the
ground of improper venue. They contended that the action for the recovery of the deficiency, being a
supplementary action of the extrajudicial foreclosure proceedings, was a real action that should have
been brought in the Manila RTC because Manila was the place where the properties were located. 12
their action against the respondents to recover the deficiency after the extrajudicial foreclosure of
their mortgage (Civil Case No.03-450) on the ground of improper venue.
On February 1, 2005, the Makati RTC denied the respondents' motion for reconsideration for its lack
of merit; and held on the issue of improper venue that:
Antecedents
On August 22, 1996, the City of Manila filed a complaint against the respondents for the
expropriation of five parcels of land located in Tondo, Manila and registered in the name of
respondent Teresita Yujuico. Two of the parcels of land, covered by Transfer Certificate of Title
(TCT) No. 261331 and TCT No. 261332, were previously mortgaged to Citytrust Banking
Corporation, the petitioner's predecessor-in-interest, under a First Real Estate Mortgage Contract. 4On
June 30, 2000, the Regional Trial Court in Manila (Manila RTC) rendered its judgment declaring the
five parcels of land expropriated for public use. The judgment became final and executory on January
28, 2001 and was entered in the book of entries of judgment on March 23, 2001. 5 The petitioner
subsequently filed a Motion to Intervene in Execution with Partial Opposition to Defendant's Request
to Release, but the RTC denied the motion for having been "filed out of time." Hence, the petitioner
decided to extrajudicially foreclose the mortgage constituted on the two parcels of land subject of the
respondents' loan. After holding the public auction, the sheriff awarded the two lots to the petitioner
as the highest bidder at P10, 000, 000.00. 6
Claiming a deficiency amounting to Pl8, 522155.42, the pet1t1oner sued the respondents to recover
such deficiency in the Makati RTC (Civil Case No. 03-450).1wphi1 The respondents moved to
dismiss the complaint on several grounds, namely: that the suit was barred by res judicata; that the
complaint stated no cause of action; and that the plaintiffs claim had been waived, abandoned, or
extinguished. 7
In its order issued on October 17, 2003, the Makati RTC denied the respondents' motion to dismiss,
ruling that there was no res judicata; that the complaint stated a sufficient cause of action to recover
the deficiency; and that there was nothing to support the claim that the obligation had been
It would be improper for this Court to dismiss the plaintiffs complaint on the ground of improper
venue, assuming that the venue is indeed improperly laid, since the said ground was not raised in the
defendant's Motion to Dismiss. On this point, it was held in the case of Malig, et al. vs. Bush, L
22761, May 31, 1969 that "an action cannot be dismissed on a ground not alleged in the motion
therefore even if said ground, e.g., prescription, is provided in Rule 16. 13
Decision of the CA
Not satisfied, the respondents assailed the orders dated October 1 7, 2003 and February 1, 2005 by
petition for certiorari.14 They submitted for consideration by the CA the following issues, namely:
x x x (WHETHER OR NOT) RESPONDENT TRIAL COURT COMMITTED GRAVE ABUSE OF
DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT ISSUED
ITS ASSAILED ORDERS CONSIDERING THAT:
A THE COMPLAINT A QUO IS BARRED BY RES JUDICATA.
B. THE COMPLAINT STATED NO CAUSE OF ACTION.
C. PRIVATE RESPONDENT'S CLAIM HAS BEEN WAIVED, ABANDONED OR
OTHERWISE EXTINGUISHED.
D. VENUE WAS IMPROPERLY LAID. 15
86
87
SECOND DIVISION
G.R. No. 161417
February 8, 2007
88
On February 22, 2000, respondent bank filed a complaint for foreclosure of mortgage against the
spouses Ernesto and Teresa Biaco before the RTC of Misamis Oriental. Summons was served to the
spouses Biaco through Ernesto at his office (Export and Industry Bank) located at Jofelmor Bldg.,
Mortola Street, Cagayan de Oro City.
DECISION
TINGA, J.:
Petitioner, Ma. Teresa Chaves Biaco, seeks a review of the Decision 1 of the Court of Appeals in CAG.R. No. 67489 dated August 27, 2003, which denied her petition for annulment of judgment, and the
Resolution2 dated December 15, 2003 which denied her motion for reconsideration.
The facts as succinctly stated by the Court of Appeals are as follows:
Ernesto Biaco is the husband of petitioner Ma. Teresa Chaves Biaco. While employed in the
Philippine Countryside Rural Bank (PCRB) as branch manager, Ernesto obtained several loans from
the respondent bank as evidenced by the following promissory notes:
Feb. 17, 1998
P 65,000.00
30,000.00
May 6, 1998
60,000.00
350,000.00
155,000.00
Sept. 8, 1998
40,000.00
Sept. 8, 1998
120,000.00
As security for the payment of the said loans, Ernesto executed a real estate mortgage in favor of the
bank covering the parcel of land described in Original Certificate of Title (OCT) No. P-14423. The
real estate mortgages bore the signatures of the spouses Biaco.
When Ernesto failed to settle the above-mentioned loans on its due date, respondent bank through
counsel sent him a written demand on September 28, 1999. The amount due as of September 30,
1999 had already reached ONE MILLION EIGHTY THOUSAND SIX HUNDRED SEVENTY SIX
AND FIFTY CENTAVOS (P1,080,676.50).
The written demand, however, proved futile.
Ernesto received the summons but for unknown reasons, he failed to file an answer. Hence, the
spouses Biaco were declared in default upon motion of the respondent bank. The respondent bank
was allowed to present its evidence ex parte before the Branch Clerk of Court who was then
appointed by the court as Commissioner.
Arturo Toring, the branch manager of the respondent bank, testified that the spouses Biaco had been
obtaining loans from the bank since 1996 to 1998. The loans for the years 1996-1997 had already
been paid by the spouses Biaco, leaving behind a balance of P1,260,304.33 representing the 1998
loans. The amount being claimed is inclusive of interests, penalties and service charges as agreed
upon by the parties. The appraisal value of the land subject of the mortgage is only P150,000.00 as
reported by the Assessors Office.
Based on the report of the Commissioner, the respondent judge ordered as follows:
WHEREFORE, judgment is hereby rendered ordering defendants spouses ERNESTO R. BIACO and
MA. THERESA [CHAVES] BIACO to pay plaintiff bank within a period of not less than ninety (90)
days nor more than one hundred (100) days from receipt of this decision the loan of ONE MILLION
TWO HUNDRED SIXTY THOUSAND THREE HUNDRED FOUR PESOS and THIRTY THREE
CENTAVOS (P1,260,304.33) plus litigation expenses in the amount of SEVEN THOUSAND SIX
HUNDRED FORTY PESOS (P7,640.00) and attorneys fees in the amount of TWO HUNDRED
FIFTY TWO THOUSAND THIRTY PESOS and FORTY THREE CENTAVOS (P252,030.43) and
cost of this suit.
In case of non-payment within the period, the Sheriff of this Court is ordered to sell at public auction
the mortgaged Lot, a parcel of registered land (Lot 35802, Cad. 237 {Lot No. 12388-B, Csd-10002342-D}), located at Gasi, Laguindingan, Misamis Oriental and covered by TCT No. P-14423 to
satisfy the mortgage debt, and the surplus if there be any should be delivered to the defendants
spouses ERNESTO and MA. THERESA [CHAVES] BIACO. In the event however[,] that the
proceeds of the auction sale of the mortgage[d] property is not enough to pay the outstanding
obligation, the defendants are ordered to pay any deficiency of the judgment as their personal
liability.
SO ORDERED.
On July 12, 2000, the sheriff personally served the above-mentioned judgment to Ernesto Biaco at his
office at Export and Industry Bank. The spouses Biaco did not appeal from the adverse decision of
the trial court. On October 13, 2000, the respondent bank filed an ex parte motion for execution to
89
Her motion for reconsideration having been denied, petitioner filed the instant Petition for
Review,4 asserting that even if the action is quasi in rem, personal service of summons is essential in
order to afford her due process. The substituted service made by the sheriff at her husbands office
cannot be deemed proper service absent any explanation that efforts had been made to personally
serve summons upon her but that such efforts failed. Petitioner contends that extrinsic fraud was
perpetrated not so much by her husband, who did not inform her of the judicial foreclosure
proceedings, but by the sheriff who allegedly connived with her husband to just leave a copy of the
summons intended for her at the latters office.
Petitioner further argues that the deficiency judgment is a personal judgment which should be deemed
void for lack of jurisdiction over her person.
Respondent PCRB filed its Comment,5 essentially reiterating the appellate courts ruling. Respondent
avers that service of summons upon the defendant is not necessary in actions quasi in rem it being
sufficient that the court acquire jurisdiction over the res. As regards the alleged conspiracy between
petitioners husband and the sheriff, respondent counters that this is a new argument which cannot be
raised for the first time in the instant petition.
We required the parties to file their respective memoranda in the Resolution 6 dated August 18, 2004.
Accordingly, petitioner filed her Memorandum7 dated October 10, 2004, while respondent filed its
Memorandum for Respondent8dated September 9, 2004.
Annulment of judgment is a recourse equitable in character, allowed only in exceptional cases as
where there is no available or other adequate remedy. Jurisprudence and Sec. 2, Rule 47 of the 1997
Rules of Civil Procedure (Rules of Court) provide that judgments may be annulled only on grounds
of extrinsic fraud and lack of jurisdiction or denial of due process. 9
Petitioner asserts that extrinsic fraud consisted in her husbands concealment of the loans which he
obtained from respondent PCRB; the filing of the complaint for judicial foreclosure of mortgage;
service of summons; rendition of judgment by default; and all other proceedings which took place
until the writ of garnishment was served.10
Extrinsic fraud exists when there is a fraudulent act committed by the prevailing party outside of the
trial of the case, whereby the defeated party was prevented from presenting fully his side of the case
by fraud or deception practiced on him by the prevailing party.11 Extrinsic fraud is present where
the unsuccessful party had been prevented from exhibiting fully his case, by fraud or deception
practiced on him by his opponent, as by keeping him away from court, a false promise of a
compromise; or where the defendant never had knowledge of the suit, being kept in ignorance by the
acts of the plaintiff; or where an attorney fraudulently or without authority assumes to represent a
party and connives at his defeat; or where the attorney regularly employed corruptly sells out his
clients interest to the other side. The overriding consideration is that the fraudulent scheme of
the prevailing litigant prevented a party from having his day in court.12
90
There is a dimension to this case though that needs to be delved into. Petitioner avers that she was not
personally served summons. Instead, summons was served to her through her husband at his office
without any explanation as to why the particular surrogate service was resorted to. The Sheriffs
Return of Service dated March 21, 2000 states:
Moreover, petitioners allegation that her signature on the promissory notes was forged does not
evince extrinsic fraud. It is well-settled that the use of forged instruments during trial is not extrinsic
fraud because such evidence does not preclude the participation of any party in the proceedings. 13
xxxx
The question of whether the trial court has jurisdiction depends on the nature of the
action, i.e., whether the action isin personam, in rem, or quasi in rem. The rules on service of
summons under Rule 14 of the Rules of Court likewise apply according to the nature of the action.
An action in personam is an action against a person on the basis of his personal liability. An action in
rem is an action against the thing itself instead of against the person. An action quasi in rem is one
wherein an individual is named as defendant and the purpose of the proceeding is to subject his
interest therein to the obligation or lien burdening the property.14
In an action in personam, jurisdiction over the person of the defendant is necessary for the court to
validly try and decide the case. In a proceeding in rem or quasi in rem, jurisdiction over the person of
the defendant is not a prerequisite to confer jurisdiction on the court provided that the court acquires
jurisdiction over the res. Jurisdiction over the res is acquired either (1) by the seizure of the property
under legal process, whereby it is brought into actual custody of the law; or (2) as a result of the
institution of legal proceedings, in which the power of the court is recognized and made effective. 15
Nonetheless, summons must be served upon the defendant not for the purpose of vesting the court
with jurisdiction but merely for satisfying the due process requirements. 16
A resident defendant who does not voluntarily appear in court, such as petitioner in this case, must be
personally served with summons as provided under Sec. 6, Rule 14 of the Rules of Court. If she
cannot be personally served with summons within a reasonable time, substituted service may be
effected (1) by leaving copies of the summons at the defendants residence with some person of
suitable age and discretion then residing therein, or (2) by leaving the copies at defendants office or
regular place of business with some competent person in charge thereof in accordance with Sec. 7,
Rule 14 of the Rules of Court.
In this case, the judicial foreclosure proceeding instituted by respondent PCRB undoubtedly vested
the trial court with jurisdiction over the res. A judicial foreclosure proceeding is an action quasi in
rem. As such, jurisdiction over the person of petitioner is not required, it being sufficient that the trial
court is vested with jurisdiction over the subject matter.
That on March 16, 2000, the undersigned served the copies of Summons, complaint and its annexes
to the defendants Sps. Ernesto R. & Ma. Teresa Ch. Biaco thru Ernesto R. Biaco[,] defendant of the
above-entitled case at his office EXPORT & INDUSTRY BANK, Jofelmore Bldg.[,] Mortola St.,
Cagayan de Oro City and he acknowledged receipt thereof as evidenced with his signature appearing
on the original copy of the Summons.17 [Emphasis supplied]
Without ruling on petitioners allegation that her husband and the sheriff connived to prevent
summons from being served upon her personally, we can see that petitioner was denied due process
and was not able to participate in the judicial foreclosure proceedings as a consequence. The violation
of petitioners constitutional right to due process arising from want of valid service of summons on
her warrants the annulment of the judgment of the trial court.
There is more, the trial court granted respondent PCRBs ex-parte motion for deficiency judgment
and ordered the issuance of a writ of execution against the spouses Biaco to satisfy the remaining
balance of the award. In short, the trial court went beyond its jurisdiction over the res and rendered a
personal judgment against the spouses Biaco. This cannot be countenanced.1awphil.net
In Sahagun v. Court of Appeals,18 suit was brought against a non-resident defendant, Abelardo
Sahagun, and a writ of attachment was issued and subsequently levied on a house and lot registered
in his name. Claiming ownership of the house, his wife, Carmelita Sahagun, filed a motion to
intervene. For failure of plaintiff to serve summons extraterritorially upon Abelardo, the complaint
was dismissed without prejudice.
Subsequently, plaintiff filed a motion for leave to serve summons by publication upon Abelardo. The
trial court granted the motion. Plaintiff later filed an amended complaint against Abelardo, this time
impleading Carmelita and Rallye as additional defendants. Summons was served on Abelardo
through publication in the Manila Evening Post. Abelardo failed to file an answer and was declared in
default. Carmelita went on certiorari to the Court of Appeals assailing as grave abuse of discretion the
declaration of default of Abelardo. The Court of Appeals dismissed the petition and denied
reconsideration.
In her petition with this Court, Carmelita raised the issue of whether the trial court acquired
jurisdiction over her husband, a non-resident defendant, by the publication of summons in a
newspaper of general circulation in the Philippines. The Court sustained the correctness of
extrajudicial service of summons by publication in such newspaper.
91
July 4, 2008
92
its possession to petitioner without need of a judicial order; and (3) respondent's refusal to do so will
entitle petitioner to take immediate possession of the property.12
Respondent failed to repurchase the property within the stipulated period. As a result, petitioner filed,
on June 5, 1998, a complaint for specific performance or recovery of possession, for sum of money,
for consolidation of ownership and damages against respondent and other unnamed persons before
the RTC of Olongapo City.
In his complaint,13 petitioner alleged, among others, that after respondent failed to repurchase the
subject realty, he caused the registration of the deed of sale with the Register of Deeds and the
transfer of the tax declarations in his name; that respondent failed to pay the capital gains taxes and
update the real estate taxes forcing him to pay said amounts in the sum of P71,129.05
and P11,993.72, respectively; and that respondent violated the terms of the deed when she, as well as
the other unnamed persons, refused to vacate the subject property despite repeated demands. 14
Petitioner prayed before the RTC that an order be issued in his favor directing respondents to: (1)
surrender the possession of the property; (2) pay P150,000.00 for the reasonable compensation for its
use from March 7, 1997 to June 7, 1998, plus P10,000.00 per month afterward; (3) pay the amount
advanced by petitioner, to wit: P71,129.05 and P11,993.72 for the payment of capital gains tax and
real estate taxes, respectively; and P70,000.00 for attorney's fees.15
On June 16, 1998, petitioner filed an amended complaint, 16 reiterating his previous allegations but
with the added prayer for consolidation of ownership pursuant to Article 1607 of the Civil Code. 17
On the other hand, respondents controverted the allegations in the complaint and averred in their
Answer,18 among others, that plaintiff had no cause of action inasmuch as respondent Unangst signed
the subject deed of sale under duress and intimidation employed by petitioner and his cohorts; that,
assuming that her consent was freely given, the contract of sale was simulated and fictitious since the
vendor never received the stipulated consideration; that the sale should be construed as an equitable
mortgage pursuant to Articles 1602 and 1604 of the Civil Code because of its onerous conditions and
shockingly low consideration; that their indebtedness in the form of arrears in car rentals merely
amounts to P90,000.00; and that the instant action was premature as plaintiff had not yet consolidated
ownership over the property. Defendants counterclaimed for moral damages in the amount
ofP500,000.00 and attorney's fees in the amount of P50,000.00, plus P500.00 per appearance.19
On July 29, 2004, after due proceedings, the RTC rendered a decision in favor of petitioner, disposing
as follows:
WHEREFORE, judgment is rendered finding the Deed of Sale with Right to Repurchase
(Exh. "C") as, indeed, a document of sale executed by the defendant in favor of the plaintiff
covering the parcel of land house (sic) situated at Lot 3-B, Blk. 10, Waterdam Road,
Gordon Heights, Olongapo City, declared under Tax Declaration Nos. 004-7756R and
93
On the other hand, petitioner insisted, among others, that although the petition for relief of
respondents was filed on time, the proper filing fees for said petition were paid beyond the 60-day
reglementary period. He posited that jurisdiction is acquired by the court over the action only upon
full payment of prescribed docket fees.31
The ownership of the said property is properly consolidated in the name of the plaintiff.
CA Disposition
The defendant is further ordered to pay to the plaintiff the amount of P10,000.00 a month
from March 7, 1997 up to the time possession of the lot and house is restored to the
plaintiff representing the reasonable value for the use of the property; the amount
of P71,129.05 representing the payment made by the plaintiff on the capital gain taxes and
the further amount of P70,000.00 for attorney's fees and the costs of suit.
SO ORDERED.20
Respondents failed to interpose a timely appeal. However, on September 10, 2004, respondent
Unangst filed a petition for relief pursuant to Section 38 of the 1997 Rules on Civil Procedure. She
argued that she learned of the decision of the RTC only on September 6, 2004 when she received a
copy of the motion for execution filed by petitioner.21
Petitioner, on the other hand, moved for the dismissal of respondent's petition on the ground that the
latter paid an insufficient sum of P200.00 as docket fees.22
It appears that respondent Unangst initially paid P200.00 as docket fees as this was the amount
assessed by the Clerk of Court of the RTC.23 Said amount was insufficient as the proper filing fees
amount to P1,715.00. Nevertheless, the correct amount was subsequently paid by said respondent on
February 22, 2005.24
In their comment,25 respondents countered that they should not be faulted for paying deficient docket
fees as it was due to an erroneous assessment of the Clerk of Court. 26
The RTC granted the petition for relief. Subsequently, it directed respondents to file a notice of appeal
within twenty-four (24) hours from receipt of the order.27 Accordingly, on February 23, 2005,
respondents filed their notice of appeal.28
Respondents contended before the CA that the RTC erred in: (1) not annulling the deed of sale with
right to repurchase; (2) declaring that the deed of sale with right to repurchase is a real contract of
sale; (3) ordering the consolidation of ownership of the subject property in the name of
petitioner.29 They argued that respondent Unangst's consent to the deed of sale with right to
repurchase was procured under duress and that even assuming that her consent was freely given, the
contract partakes of the nature of an equitable mortgage. 30
In a Decision32 dated April 7, 2006, the CA reversed and set aside the RTC judgment. 33 The
dispositive part of the appellate court's decision reads, thus:
IN VIEW OF ALL THE FOREGOING, the instant appeal is hereby GRANTED, the
challenged Decision dated July 29, 2004 hereby (sic) REVERSED and SET ASIDE, and a
new one entered declaring the Deed of Sale With Right Of Repurchase dated February 4,
1997 as an equitable mortgage. No cost.
SO ORDERED.34
The CA declared that the Deed of Sale with Right of Repurchase executed by the parties was an
equitable mortgage. On the procedural aspect pertaining to the petition for relief filed by respondent
Unangst, the CA ruled that "the trial court, in opting to apply the rules liberally, cannot be faulted for
giving due course to the questioned petition for relief which enabled appellants to interpose the
instant appeal."35 It ratiocinated:
Appellee recognizes the timely filing of appellants' petition for relief to be able to appeal
judgment but nonetheless points out that the proper filing fees were paid beyond the 60-day
reglementary period. Arguing that the court acquires jurisdiction over the action only upon
full payment of the prescribed docket fees, he submits that the trial court erred in granting
appellants' petition for relief despite the late payment of the filing fees.
While this Court is fully aware of the mandatory nature of the requirement of payment of
appellate docket fee, the High Court has recognized that its strict application is qualified by
the following: first, failure to pay those fees within the reglementary period allows only
discretionary, not automatic, dismissal; second, such power should be used by the court in
conjunction with its exercise of sound discretion in accordance with the tenets of justice
and fair play, as well as with a great deal of circumspection in consideration of all attendant
circumstances (Meatmasters International Corporation v. Lelis Integrated Development
Corporation, 452 SCRA 626 [2005], citing La Salette College v. Pilotin, 418 SCRA 380
[2003]).
Applied in the instant case, the docket fees were admittedly paid only on February 22,
2005, or a little less than two (2) months after the period for filing the petition lapsed. Yet,
this matter was sufficiently explained by appellants. The records bear out that appellants
94
of the purchase price; (e) the vendor binds himself to pay taxes on the thing sold; and, (f) in
any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation
(Legaspi, supra;Martinez v. Court of Appeals, 358 SCRA 38 [2001]).
For the presumption of an equitable mortgage to arise under Article 1602, two (2) requisites
must concur: (a) that the parties entered into a contract denominated as a contract of sale;
and, (b) that their intention was to secure an existing debt by way of a mortgage. Any of the
circumstance laid out in Article 1602, not the concurrence nor an overwhelming number of
the circumstances therein enumerated, suffices to construe a contract of sale to be one of
equitable mortgage (Lorbes v. Court of Appeals, 351 SCRA 716 [2001]).
Applying the foregoing considerations in the instant case, there is hardly any doubt that the
true intention of the parties is that the transaction shall secure the payment of a debt. It is
not contested that before executing the subject deed, Unangst and Salak were under police
custody and were sorely pressed for money. Such urgent prospect of prolonged detention
helps explain why appellants would subscribe to an agreement like the deed in the instant
case. This might very well explain appellants' insistence that Unangst was not truly free
when she signed the questioned deed. Besides, there is no gainsaying that when appellee
allowed appellants to retain possession of the realty sold for 30 days, as part of the
agreement, that period of time surely signaled a time allotted to Salak and Unangst, as
debtors, within which to pay their mortgage indebtedness.
The High Court, in several cases involving similar situations, has declared that "while it
was true that plaintiffs were aware of the contents of the contracts, the preponderance of the
evidence showed, however, that they signed knowing that said contracts did not express
their real intention, and if they did so notwithstanding this, it was due to the urgent
necessity of obtaining funds. Necessitous men are not, truly speaking, free men; but to
answer a present emergency, will submit to any terms that the crafty may impose upon
them" (Lorbes, ibid.; Reyes v. Court of Appeals, 339 SCRA 97 [2000]; Lao v. Court of
Appeals, 275 SCRA 237 [1997]; Zamora v. Court of Appeals, 260 SCRA 10
[1996]; Labasan v. Lacuesta, 86 SCRA 16 [1978]).
After all, Article 1602(6) provides that a contract of sale with right to repurchase is
presumed to be an equitable mortgage in any other case where it may be fairly inferred that
the real intention of the parties is that the transaction shall secure the payment of a debt or
the performance of any obligation. In fine, a careful review of the records convincingly
shows that the obtaining facts in this case qualify the controversial agreement between the
parties as an equitable mortgage under Article 1602 of the New Civil Code. 38
Issues
95
the interest of justice. It is always within the power of this Court to suspend its own rules, or to
except a particular case from their operation, whenever the purposes of justice require it. 44
(a) The Honorable Court of Appeals committed grave error in finding that the respondent
perfected an appeal via Petition for Relief To Be Able To Appeal Judgment even when the
proper docket fees were paid beyond the period prescribed to bring such action under
Section 3 of Rule 38 of the 1997 Rules of Civil Procedure in relation to the
pronouncements by the Honorable Court in the cases of Philippine Rabbit Bus Lines, Inc. v.
Arciaga [148 SCRA 433], Philippine Pryce Assurance Corp. v. Court of Appeals [148
SCRA 433] and Sun Insurance Office, Ltd. v. Asuncion [170 SCRA 274].
In not a few instances, the Court relaxed the rigid application of the rules of procedure to afford the
parties the opportunity to fully ventilate their cases on the merits. This is in line with the timehonored principle that cases should be decided only after giving all parties the chance to argue their
causes and defenses.45 For, it is far better to dispose of a case on the merit which is a primordial end,
rather than on a technicality, if it be the case, that may result in injustice. 46 The emerging trend in the
rulings of this Court is to afford every party-litigant the amplest opportunity for the proper and just
determination of his cause, free from the constraints of technicalities. 47
(b) The Honorable Court of Appeals erred on a question of law in reversing the Decision of
the Court a quo finding the Deed of Sale with Right to Repurchase a document of sale
executed by the respondent in favor of the petitioner and in further holding such contract as
one of equitable mortgage.39
As early as 1946, in Segovia v. Barrios,48 the Court ruled that where an appellant in good faith paid
less than the correct amount for the docket fee because that was the amount he was required to pay by
the clerk of court, and he promptly paid the balance, it is error to dismiss his appeal because "(e)very
citizen has the right to assume and trust that a public officer charged by law with certain duties knows
his duties and performs them in accordance with law. To penalize such citizen for relying upon said
officer in all good faith is repugnant to justice."49
Our Ruling
On the first issue, petitioner contends that respondents' "Petition for Relief to Be Able to Appeal
Judgment," which paved the way for the allowance of respondents' appeal of the RTC decision, was
filed within the prescriptive period but the proper docket fees for it were belatedly paid. 40 He thus
posits that the RTC did not acquire jurisdiction over said petition. Having no jurisdiction, the RTC
could not have allowed respondents to appeal.
On this issue, respondent counters that the belated payment of proper docket fees was not due to their
fault but to the improper assessment by the Clerk of Court. Respondent asserts the ruling of the CA
that the court may extend the time for the payment of the docket fees if there is a justifiable reason
for the failure to pay the correct amount. Moreover, respondent argues that petitioner failed to contest
the RTC Order dated February 21, 2004 that allowed the payment of supplementary docket fees.
Petitioner failed to file a motion for reconsideration or a petition for certiorari to the higher court to
question said order.
We agree with respondents. Their failure to pay the correct amount of docket fees was due to a
justifiable reason.
The right to appeal is a purely statutory right. Not being a natural right or a part of due process, the
right to appeal may be exercised only in the manner and in accordance with the rules provided
therefor.41 For this reason, payment of the full amount of the appellate court docket and other lawful
fees within the reglementary period is mandatory and jurisdictional. 42 Nevertheless, as this Court
ruled in Aranas v. Endona,43 the strict application of the jurisdictional nature of the above rule on
payment of appellate docket fees may be mitigated under exceptional circumstances to better serve
Technicality and procedural imperfections should thus not serve as bases of decisions. 50 In that way,
the ends of justice would be better served. For, indeed, the general objective of procedure is to
facilitate the application of justice to the rival claims of contending parties, bearing always in mind
that procedure is not to hinder but to promote the administration of justice. 51
We go now to the crux of the petition. Should the deed of sale with right to repurchase executed by
the parties be construed as an equitable mortgage? This is the pivotal question here.
According to petitioner, the deed should not be construed as an equitable mortgage as it does not fall
under any of the instances mentioned in Article 1602 of the Civil Code where the agreement can be
construed as an equitable mortgage. He added that the "language and terms of the Deed of Sale with
Right to Repurchase executed by respondent in favor of the petition are clear and unequivocal. Said
contract must be construed with its literal sense."52
We cannot agree.
Respondent is correct in alleging that the deed of sale with right to repurchase qualifies as an
equitable mortgage under Article 1602. She merely secured the payment of the unpaid car rentals and
the amount advanced by petitioner to Jojo Lee.
The transaction between the parties is one of equitable mortgage and not a sale with right to purchase
as maintained by petitioners. Article 1602 of the New Civil Code provides that the contract is
presumed to be an equitable mortgage in any of the following cases:
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Where in a contract of sale with pacto de retro, the vendor remains in possession, as a lessee or
otherwise, the contract shall be presumed to be an equitable mortgage. 57 The reason for the
presumption lies in the fact that in a contract of sale with pacto de retro, the legal title to the property
is immediately transferred to the vendee, subject to the vendor's right to redeem. Retention, therefore,
by the vendor of the possession of the property is inconsistent with the vendee's acquisition of the
right of ownership under a true sale.58 It discloses, in the alleged vendee, a lack of interest in the
property that belies the truthfulness of the sale a retro. 59
Third, it is likewise undisputed that the deed was executed by reason of: (1) the alleged indebtedness
of Salak to petitioner, that is, car rental payments; and (2) respondent's own obligation to petitioner,
that is, reimbursement of what petitioner paid to the mortgagee, Jojo Lee. Fact is, the purchase price
stated in the deed was the amount of the indebtedness of both respondent and Salak to petitioner.60
Apparently, the deed purports to be a sale with right to purchase. However, since it was executed in
consideration of the aforesaid loans and/or indebtedness, said contract is indubitably an equitable
mortgage. The rule is firmly settled that whenever it is clearly shown that a deed of sale with pacto
de retro, regular on its face, is given as security for a loan, it must be regarded as an equitable
mortgage.61
The above-mentioned circumstances preclude the Court from declaring that the parties intended the
transfer of the property from one to the other by way of sale. They are more than sufficient to show
that the true intention of the parties is to secure the payment of said debts. Verily, an equitable
mortgage under paragraphs 2 and 6 of Article 1602 exists here. Settled is the rule that to create the
presumption enunciated by Article 1602, the existence of one circumstance is enough. 62
Moreover, under Article 1603 of the Civil Code it is provided that: "(i)n case of doubt, a contract
purporting to be a sale with right to repurchase shall be construed as an equitable mortgage." In this
case, We have no doubt that the transaction between the parties is that of a loan secured by said
property by way of mortgage.
In Lorbes v. Court of Appeals,63 the Court held that:
The decisive factor in evaluating such agreement is the intention of the parties, as shown
not necessarily by the terminology used in the contract but by all the surrounding
circumstances, such as the relative situation of the parties at that time, the attitude, acts,
conduct, declarations of the parties, the negotiations between them leading to the deed, and
generally, all pertinent facts having a tendency to fix and determine the real nature of their
design and understanding. As such, documentary and parol evidence may be submitted and
admitted to prove the intention of the parties.
Sales with rights to repurchase, as defined by the Civil Code, are not favored. We will not construe
instruments to be sales with a right to repurchase, with the stringent and onerous effects which follow,
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